EXHIBIT 99
AGREEMENT AND PLAN OF MERGER
between
OHIO STATE FINANCIAL SERVICES, INC.
and
ADVANCE FINANCIAL BANCORP
dated as of April 18, 2001
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................................................................1
ARTICLE II
THE MERGER.............................................................................................6
2.1 The Corporate Merger and Subsequent Events.................................................6
2.2 Effective Time; Closing....................................................................6
2.3 Treatment of Capital Stock.................................................................6
2.4 Shareholder Rights; Stock Transfers........................................................7
2.5 Options and Restricted Stock...............................................................7
2.6 Exchange Procedures........................................................................7
2.7 Dissenting Shares..........................................................................9
2.8 Additional Actions.........................................................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER..............................................................10
3.1 Capital Structure.........................................................................10
3.2 Organization, Standing and Authority of Seller............................................10
3.3 Ownership of Seller Subsidiaries..........................................................10
3.4 Organization, Standing and Authority of Seller Subsidiaries...............................11
3.5 Authorized and Effective Agreement........................................................11
3.6 Securities Documents and Regulatory Reports...............................................12
3.7 Financial Statements......................................................................13
3.8 Material Adverse Change...................................................................13
3.9 Environmental Matters.....................................................................13
3.10 Tax Matters...............................................................................14
3.11 Legal Proceedings.........................................................................15
3.12 Compliance with Laws......................................................................15
3.13 Certain Information.......................................................................15
3.14 Employee Benefit Plans....................................................................16
3.15 Certain Contracts.........................................................................17
3.16 Brokers and Finders.......................................................................18
3.17 Insurance.................................................................................18
3.18 Properties................................................................................18
3.19 Labor.....................................................................................19
3.20 Allowance for Loan Losses.................................................................19
3.21 Material Interests of Certain Persons.....................................................19
3.22 Fairness Opinion..........................................................................19
3.23 Disclosures...............................................................................19
3.24 No Undisclosed Liabilities................................................................20
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3.25 Loan Portfolio............................................................................20
3.26 Investment Portfolio......................................................................20
3.27 Interest Rate Risk Management Instruments.................................................20
3.28 Interim Events............................................................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................21
4.1 Organization, Standing and Authority of Buyer.............................................21
4.2 Ownership of Buyer Subsidiaries...........................................................21
4.3 Organization, Standing and Authority of Buyer Subsidiaries................................21
4.4 Authorized and Effective Agreement........................................................22
4.5 Securities Documents and Regulatory Reports...............................................23
4.6 Financial Statements......................................................................23
4.7 Material Adverse Change...................................................................24
4.8 Legal Proceeding..........................................................................24
4.9 Certain Information.......................................................................24
4.10 Brokers and Finders.......................................................................24
4.11 Disclosures...............................................................................25
4.12 Financial Resources.......................................................................25
4.13 State Takeover Statutes...................................................................25
ARTICLE V
COVENANTS.............................................................................................25
5.1 Reasonable Best Efforts...................................................................25
5.2 Shareholder Meeting.......................................................................25
5.3 Regulatory Matters........................................................................26
5.4 Investigation and Confidentiality.........................................................27
5.5 Press Releases............................................................................27
5.6 Business of the Parties...................................................................28
5.7 Certain Actions...........................................................................31
5.8 Current Information.......................................................................31
5.9 Indemnification; Insurance................................................................31
5.10 Employees and Employee Benefit Plans......................................................32
5.11 Company Merger............................................................................34
5.12 Bank Merger...............................................................................34
5.13 Organization of Merger Sub................................................................34
5.14 Conforming Entries........................................................................35
5.15 Integration of Policies...................................................................35
5.16 Disclosure Supplements....................................................................36
5.17 Failure to Fulfill Conditions.............................................................36
5.18 Environmental Reports.....................................................................36
5.19 Transaction Expenses of Seller............................................................37
5.20 Success Bonus Plan........................................................................37
5.21 Advisory Directors After the Company Merger...............................................37
5.22 Voting Agreement..........................................................................37
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ARTICLE VI
CONDITIONS PRECEDENT..................................................................................38
6.1 Conditions Precedent - Buyer and Seller...................................................38
6.2 Conditions Precedent - Seller.............................................................38
6.3 Conditions Precedent - Buyer..............................................................39
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT.....................................................................40
7.1 Termination...............................................................................40
7.2 Effect of Termination.....................................................................41
7.3 Survival of Representations, Warranties and Covenants.....................................43
7.4 Waiver....................................................................................43
7.5 Amendment or Supplement...................................................................43
ARTICLE VIII
MISCELLANEOUS.........................................................................................43
8.1 Entire Agreement..........................................................................43
8.2 No Assignment.............................................................................44
8.3 Notices...................................................................................44
8.4 Alternative Structure.....................................................................45
8.5 Interpretation............................................................................45
8.6 Counterparts..............................................................................45
8.7 Governing Law.............................................................................45
8.8 Severability..............................................................................45
8.9 Standard of Materiality...................................................................46
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AGREEMENT AND PLAN OF MERGER
WHEREAS, the Boards of Directors of Buyer and Seller (all terms as defined
in Article I hereof) have determined to consummate certain business combination
transactions subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of such inducements and of the mutual
covenants and agreements contained herein, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Agreement" shall mean this Agreement and Plan of Merger dated as of April
2001 between Buyer and Seller.
"Bank Merger" shall mean the contemplated merger of Seller Bank into Buyer
Bank, with Buyer Bank surviving.
"Buyer" shall mean Advance Financial Bancorp, a Delaware corporation.
"Buyer Bank" shall mean Advance Financial Savings Bank, a Federal-chartered
stock savings bank and wholly owned subsidiary of Buyer.
"Buyer Financial Statements" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of Buyer as of June 30, 2000 and
1999 and the consolidated income statements and statements of changes in equity
and cash flows (including related notes and schedules, if any) of Buyer for each
of the three years ended June 30, 2000, 1999 and 1998, as filed by Buyer in its
Securities Documents, and (ii) the consolidated balance sheets (including
related notes and schedules, if any) of Buyer and the consolidated income
statements and statements of changes in equity and cash flows (including related
notes and schedules, if any) of Buyer included in Securities Documents filed by
Buyer with respect to the periods ended subsequent to June 30, 2000.
"Cause" shall mean termination because of the employee's personal
dishonesty in the conduct of his duties, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist order.
"Certificate" shall mean any certificate which prior to the Effective Time
represented shares of Seller Common Stock.
"Certificate of Merger" shall mean the certificate of merger to be filed
with the Ohio Secretary of State with respect to the Corporate Merger and the
Company Merger and with the Delaware Secretary of State with respect to the
Company Merger.
"Closing" shall mean the closing of the Corporate Merger at a time and
place reasonably selected by Buyer following the satisfaction or waiver of all
conditions to the Corporate Merger.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Merger" shall mean the contemplated Merger of the Surviving
Corporation into Buyer, with Buyer surviving.
"Corporate Merger" shall mean the merger of Merger Sub into Seller, with
Seller surviving.
"CRA" shall mean the Community Reinvestment Act.
"Department" shall mean the Ohio Department of Commerce, Division of
Financial Institutions.
"Dissenting Shares" shall mean any shares of Seller Common Stock whose
holder becomes entitled to the payment of the fair value of such shares under
the OGCL.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the time of the filing of the Certificate of
Merger for the Corporate Merger , or such later time as may be specified in the
Certificate of Merger.
"Environmental Claim" shall mean any written notice from any Governmental
Entity or third party alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on, or resulting from the presence, or release into the
environment, of any Materials of Environmental Concern.
"Environmental Laws" shall mean any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Governmental
Entity relating to (i) the protection, preservation or restoration of the
environment (including air, water vapor, surface water, groundwater, drinking
water supply, surface soil, subsurface soil, plant and animal life or any other
natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Materials of Environment Concern. The term Environmental Law
includes (i) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. ss.9601, et seq; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. ss.6901, et seq; the Clean Air Act, as
amended, 42 U.S.C. ss.7401, et seq; the Federal Water
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Pollution Control Act, as amended, 33 U.S.C. ss.1251, et seq; the Toxic
Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq; the Emergency
Planning and Community Right to Know Act, 42 U.S.C. ss.1101, et seq; the Safe
Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable state and
local laws, and (ii) any common law (including common law that may impose strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of or exposure to any Materials
of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall mean an exchange agent designated by Buyer, who
shall be reasonably acceptable to Seller.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"FHLB" shall mean the Federal Home Loan Bank of Pittsburgh for the Buyer
Bank and the Federal Home Loan Bank of Cincinnati for the Seller Bank.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"include" shall mean "include without limitation."
"Insider Loans" shall mean loans from Seller or any Seller Subsidiary to
any executive officer or director of Seller, any Seller Subsidiary or any
associate or related interest of any such person.
"IRS" shall mean the Internal Revenue Service or any successor thereto.
"Material Adverse Effect" shall mean, with respect to any Party, any effect
that is material and adverse to the financial condition, results of operations
or business of that Party and its Subsidiaries taken as whole, or that
materially impairs the ability of any Party to consummate the Merger, provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in laws and regulations or interpretations thereof that are
generally applicable to the banking or savings industries, (b) changes in GAAP
that are generally applicable to the banking or savings industries, (c) expenses
incurred in connection with the transactions contemplated hereby, (d) actions or
omissions of a party (or any of its Subsidiaries) taken with the prior informed
written consent of the other party or parties in contemplation of the
transactions contemplated hereby, or
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(e) changes attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest rates.
"Materials of Environmental Concern" shall mean pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the Corporate Merger, the other transactions
contemplated by this Agreement, the Company Merger and the Bank Merger.
"Merger Consideration" shall mean $16.00 in cash without interest for each
share of Seller Common Stock.
"Merger Sub" shall mean an Ohio corporation to be organized as a subsidiary
of Buyer.
"Merger Sub Common Stock" shall mean the common stock of Merger Sub.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OGCL" shall mean the Ohio General Corporation Law, as amended.
"Parties" shall mean Buyer and Seller.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed in a disclosure schedule
delivered on or prior to the date hereof by the disclosing Party to the other
Party specifically referring to the appropriate section of this Agreement and
describing in reasonable detail the matters contained therein.
"Proxy Statement" shall mean the proxy statement to be delivered to
shareholders of Seller in connection with the solicitation of their approval of
this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Seller" shall mean Ohio State Financial Services, Inc., an Ohio
corporation.
"Seller Bank" shall mean Bridgeport Savings and Loan Association, an
Ohio-chartered savings and loan association and wholly owned subsidiary of
Seller.
"Seller Common Stock" shall mean the common stock, no par value per share,
of Seller.
"Seller Defined Benefit Plan" shall mean any Seller Employee Plan
constituting an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA.
"Seller Employee Plans" shall mean all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of Seller, or any
Seller Subsidiary, whether written or oral.
"Seller ESOP" shall mean the employee stock ownership plan of Seller, as in
effect as of the date hereof.
"Seller Financial Statements" shall mean (i) the consolidated statements of
financial condition (including related notes and schedules, if any) of Seller as
of December 31, 2000 and 1999 and the consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) of Seller for each of the three years ended December 31, 2000, 1999 and
1998 as filed by Seller in its Securities Documents, and (ii) the consolidated
statements of financial condition of Seller (including related notes and
schedules, if any) and the consolidated statements of income, shareholders'
equity and cash flows (including related notes and schedules, if any) of Seller
included in the Securities Documents filed by Seller with respect to the periods
ended subsequent to December 31, 2000.
"Seller Options" shall mean options to purchase shares of Seller Common
Stock issued pursuant to Seller's Stock Option Plan.
"Seller Restricted Stock" shall mean Seller Common Stock subject to
restrictions pursuant to Seller's Recognition and Retention Plan.
"SLHCA" shall mean the Savings and Loan Holding Company Act.
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"Subsidiary" and "Significant Subsidiary" shall have the meanings set forth
in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" shall mean Seller after the Corporate Merger.
"Surviving Corporation Common Stock" shall mean the shares of common stock
of the Surviving Corporation.
ARTICLE II
THE MERGER
2.1 The Corporate Merger and Subsequent Events
------------------------------------------
(a) Subject to the terms and conditions of this Agreement, at the Effective
Time, Merger Sub shall be merged into Seller in accordance with the provisions
of Section 1701.78 of the OGCL and the separate corporate existence of Merger
Sub shall cease. Seller shall be the Surviving Corporation of the Corporate
Merger, and shall continue its corporate existence under the laws of the State
of Ohio. The name of the Surviving Corporation shall be as stated in the
Articles of Incorporation of Seller immediately prior to the Effective Time.
Immediately following the Corporate Merger, (i) the Surviving Corporation shall
merge into Buyer, with Buyer surviving and (ii) the Seller Bank shall merge with
Buyer Bank, with Buyer Bank surviving.
(b) The Articles of Incorporation and Code of Regulations of Seller as in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation and Code of Regulations of the Surviving Corporation.
(c) The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation.
2.2 Effective Time; Closing
-----------------------
The Corporate Merger shall become effective at the Effective Time. The
Certificate of Merger shall be filed as soon after the Closing as is
practicable.
2.3 Treatment of Capital Stock
--------------------------
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Corporate Merger and without any action on the
part of any shareholder:
(a) each outstanding share of Merger Sub Common Stock shall automatically
convert into a share of Surviving Corporation Common Stock;
(b) each share of Buyer's common stock shall continue unchanged as the same
share of Buyer's common stock; and
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(c) each share of Seller Common Stock issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares) shall, by virtue of
the Corporate Merger and without any action of any kind by any person or entity,
be converted into the right to receive the Merger Consideration; provided,
however, that each share of Seller Common Stock which is owned beneficially or
of record by Seller (including treasury shares) or Buyer or any of their
respective Subsidiaries (other than shares held in a fiduciary capacity for the
benefit of third parties or as a result of debts previously contracted) shall be
canceled and retired without consideration or conversion.
2.4 Shareholder Rights; Stock Transfers
-----------------------------------
At the Effective Time, holders of Seller Common Stock shall cease to be and
shall have no rights as shareholders of Seller, other than to receive the Merger
Consideration for each share of Seller Common Stock held. After the Effective
Time, there shall be no transfers on the stock transfer books of Seller or the
Surviving Corporation of shares of Seller Common Stock and if Certificates are
presented for transfer after the Effective Time, they shall be delivered to
Buyer or the Exchange Agent for cancellation against delivery of the Merger
Consideration. No interest shall be paid on the Merger Consideration.
2.5 Options and Restricted Stock
----------------------------
At the Effective Time, each outstanding Seller Option granted to an
eligible individual (an "Optionee") under the Seller's Stock Option Plan shall
be converted into a right to receive the Merger Consideration less the
applicable option exercise price per share, less applicable federal and state
tax withholding obligations of the Optionee.
At the Effective Time, each holder of an unvested share of Seller
Restricted Stock under the Seller's Recognition and Retention Plan shall be
entitled to receive an amount of compensation equal to the Merger Consideration
for each such share of Seller Restricted Stock subject to applicable federal and
state tax withholding obligations of the Seller together with accumulated but
undistributed dividends on such Seller Restricted Stock. In addition, any cash
held by the Seller's Recognition and Retention Plan after the Effective Time
that has been expensed or accrued not attributable to a grantee shall be
distributed to all current grantees in proportion to their awards as determined
by the Seller's committee subject to applicable federal and state withholding
obligations of Seller.
2.6 Exchange Procedures
-------------------
(a) No later than five (5) business days following the Effective Time,
Buyer shall cause the Exchange Agent to mail or make available to each holder of
record of any Certificate a notice and letter of transmittal disclosing the
effectiveness of the Corporate Merger and the procedure for exchanging
Certificates for the Merger Consideration. Such letter of transmittal shall
specify that delivery shall be effected and risk of loss and title shall pass
only upon proper delivery of Certificates to the Exchange Agent.
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(b) At the Effective Time, Buyer shall deliver to the Exchange Agent an
amount of cash equal to the aggregate Merger Consideration.
(c) Each holder of any outstanding Certificate (other than holders of
Dissenting Shares) who surrenders such Certificate to the Exchange Agent will,
upon acceptance thereof by the Exchange Agent, be entitled to the Merger
Consideration for each share represented by such Certificate. The Exchange Agent
shall accept Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange in
accordance with normal exchange practices. Each outstanding Certificate which is
not surrendered to the Exchange Agent shall, except as otherwise herein
provided, evidence ownership of only the right to receive the Merger
Consideration for each share represented by such Certificate.
(d) The Exchange Agent shall not be obligated to deliver the Merger
Consideration until the holder surrenders a Certificate as provided in this
Section 2.6, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Exchange Agent. If any check is to be issued in a name other than that in which
the Certificate is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed or accompanied by
an executed form of assignment separate from the Certificate and otherwise in
proper form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
check in any name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(e) Any portion of the cash delivered to the Exchange Agent by Buyer
pursuant to Section 2.6(b) that remains unclaimed by the shareholders of Seller
for six months after the Closing Date shall be delivered by the Exchange Agent
to Buyer. Any shareholders of Seller who have not theretofore complied with
Section 2.6(c) shall thereafter look only to Buyer for the Merger Consideration.
If outstanding Certificates are not surrendered or the payment for them is not
claimed prior to the date on which such payment would otherwise escheat to or
become the property of any Governmental Entity, the unclaimed items shall, to
the extent permitted by abandoned property and any other applicable law, become
the property of Buyer (and to the extent not in its possession shall be
delivered to it), free and clear of all claims or interest of any person
previously entitled to such property. Neither the Exchange Agent nor any party
to this Agreement shall be liable to any holder of Seller Common Stock
represented by any Certificate for any consideration paid to a public official
pursuant to applicable abandoned property, escheat or similar laws. Buyer and
the Exchange Agent shall be entitled to rely upon the stock transfer books of
Seller to establish the identity of those persons entitled to receive the Merger
Consideration, which books shall be conclusive with respect thereto. In the
event of a dispute with respect to ownership of Seller Common Stock represented
by any Certificate, Buyer and the Exchange Agent shall be entitled to deposit
any Merger Consideration represented thereby in escrow with an independent third
party and thereafter be relieved with respect to any claims thereto.
(f) Buyer shall be entitled to deduct and withhold from consideration
otherwise payable pursuant to this Agreement to any holder of Certificates, such
amounts as it is required to deduct and
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withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Buyer, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Certificates in respect
of which such deduction and withholding was made.
2.7 Dissenting Shares
-----------------
(a) Any holders of Dissenting Shares shall be entitled to payment for such
shares only to the extent permitted by and in accordance with the provisions of
the OGCL; provided, however, that if, in accordance with the OGCL, any holder of
Dissenting Shares shall forfeit such right to payment of the fair value of such
shares, such shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to receive the
Merger Consideration. Dissenting Shares shall not, after the Effective Time, be
entitled to vote for any purpose or receive any dividends or other distributions
and shall be entitled only to such rights as are afforded in respect of
Dissenting Shares pursuant to the OGCL.
(b) Seller shall give Buyer (i) prompt notice of any written objections to
the Corporate Merger and any written demands for the payment of the fair value
of any shares, withdrawals of such demands, and any other instruments served
pursuant to the OGCL received by Seller and (ii) the opportunity to participate
in all negotiations and proceedings with respect to such demands under the OGCL.
Seller shall not voluntarily make any payment with respect to any demands for
payment of fair value and shall not, except with the prior written consent of
Buyer, settle or offer to settle any such demands.
2.8 Additional Actions
------------------
If, at any time after the Effective Time, Buyer shall consider that any
further assignments or assurances in law or any other acts are necessary or
desirable to (i) vest, perfect or confirm, of record or otherwise, in Buyer its
right, title or interest in, to or under any of the rights, properties or assets
of Seller acquired or to be acquired by Buyer as a result of, or in connection
with, the Merger, or (ii) otherwise carry out the purposes of this Agreement,
Seller and its proper officers and directors shall be deemed to have granted to
Buyer an irrevocable power of attorney to execute and deliver all such proper
deeds, assignments and assurances in law and to do all acts necessary or proper
to vest, perfect or confirm title to and possession of such rights, properties
or assets in Buyer and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of Buyer are fully authorized in the name
of Seller or otherwise to take any and all such action.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, except as Previously
Disclosed:
3.1 Capital Structure
-----------------
The authorized capital stock of Seller consists of 3,000,000 shares of
Seller Common Stock. As of the date hereof, 495,398 shares of Seller Common
Stock are outstanding (including 15,578 shares of Seller Restricted Stock held
by Seller's Recognition and Retention Plan), and 138,770 shares of Seller Common
Stock are held in treasury. All outstanding shares of Seller Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Seller Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except for (i)
Seller Options to acquire not more than 60,555 shares of Seller Common Stock as
of the date hereof, a schedule of which has been Previously Disclosed, and (ii)
8,768 unvested shares of Seller Restricted Stock as of the date hereof, a
schedule of which has been Previously Disclosed, there are no Rights authorized,
issued or outstanding with respect to the capital stock of Seller as of the date
hereof.
3.2 Organization, Standing and Authority of Seller
----------------------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification. Seller is a savings and loan holding company under the SLHCA and
subject to the regulation and supervision by the OTS and the Department. Seller
has heretofore delivered to Buyer true and complete copies of the Articles of
Incorporation and Code of Regulations of Seller as in effect as of the date
hereof.
3.3 Ownership of Seller Subsidiaries
--------------------------------
Seller has Previously Disclosed the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect Seller Subsidiary and identified
Seller Bank as its only Significant Subsidiary. Except for (x) capital stock of
Seller Subsidiaries, (y) securities and other interests held in a fiduciary
capacity and beneficially owned by third parties or taken in consideration of
debts previously contracted and (z) securities and other interests which are
Previously Disclosed, Seller does not own or have the right to acquire, directly
or indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, bank, savings association, partnership,
joint venture or other organization, other than investment securities
representing not more than 5% of any entity. The outstanding shares of capital
stock or other ownership interests of each Seller Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly owned by Seller free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind
whatsoever. No rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of
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Seller Subsidiaries and there are no agreements, understandings or commitments
relating to the right of Seller to vote or to dispose of such capital stock or
other ownership interests.
3.4 Organization, Standing and Authority of Seller Subsidiaries
-----------------------------------------------------------
The Seller Subsidiary is a savings association, corporation or partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized with full power and authority to own or
lease all of its properties and assets and to carry on its business as now
conducted, and the Seller Subsidiary is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification. The deposit accounts of Seller Bank are insured by the SAIF to
the maximum extent permitted by the FDIA and Seller Bank has paid all deposit
insurance premiums and assessments required by the FDIA and the regulations
thereunder. Seller has heretofore delivered to Buyer true and complete copies of
the Articles of Incorporation, as amended and restated, and Constitution of
Seller Bank as in effect as of the date hereof.
3.5 Authorized and Effective Agreement
----------------------------------
(a) Seller has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals and
the approval of Seller's shareholders of this Agreement and subject to the
amendment of the Amended Articles of Incorporation of Seller Bank with respect
to acquisitions of more than 10% of the outstanding shares of Seller Bank) to
perform all of its respective obligations hereunder. The execution and delivery
of this Agreement and the completion of the transactions contemplated hereby
have been deemed advisable by the Board and duly authorized and approved by all
necessary corporate action in respect thereof on the part of Seller, except for
the approval of this Agreement by Seller's shareholders. This Agreement has been
duly and validly executed and delivered by Seller and, assuming due
authorization, execution and delivery by Buyer, constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles and except to the extent such enforceability may be
limited by laws relating to safety and soundness of insured depository
institutions as set forth in 12 USC 1818(6) or by the appointment of a
conservator by the FDIC.
(b) Neither the execution and delivery of this Agreement nor completion of
the transactions contemplated hereby, nor compliance by Seller with any of the
provisions hereof and subject to the amendment of the Amended Articles of
Incorporation of Seller Bank with respect to acquisitions of more than 10% of
the outstanding shares of Seller Bank (i) does or will conflict with or result
in a breach of any provisions of the Articles of Incorporation or Code of
Regulations of Seller or the equivalent documents of any Seller Subsidiary, (ii)
violate, conflict with or result in a breach of any term, condition or provision
of, or constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of Seller
or any Seller Subsidiary pursuant to, any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
11
obligation to which Seller or any Seller Subsidiary is a party, or by which any
of their respective properties or assets may be bound or affected, or (iii)
subject to receipt of all required governmental and shareholder approvals,
violates any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller or any Seller Subsidiary.
(c) To the best knowledge of Seller and subject to the amendment of the
Amended Articles of Incorporation of Seller Bank with respect to acquisitions of
more than 10% of the outstanding shares of Seller Bank, except for (i) the
filing of applications and notices with and the approvals of the OTS and the
FDIC, (ii) the filing of applications with the Department and the approvals of
the Department, (iii) the filing and clearance of the Proxy Statement relating
to the meeting of shareholders of Seller to be held pursuant to Section 5.2
hereof with the SEC, (iv) the approval of this Agreement and the transactions
contemplated hereby by the requisite vote of the shareholders of Seller, (v) the
filing of the Certificate of Merger with the Secretary of State of the State of
Ohio in connection with the Corporate Merger and the Company Merger, (vi) the
filing of Articles of Combination with the OTS and Certificate of Merger with
the Secretary of State of Ohio in connection with the Bank Merger (vii) the
filing of Certificate of Merger with the Secretary of the State of Delaware in
connection with the Company Merger, and (viii) review of the Merger by the DOJ
under federal antitrust laws, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of Seller or Seller Bank in connection with (x) the execution and
delivery by Seller of this Agreement and the completion of the transactions
contemplated hereby, or (y) the Merger.
(d) Except as Previously Disclosed, as of the date hereof, neither Seller
nor Seller Bank is aware of any reasons relating to Seller or Seller Bank
(including CRA compliance) why all consents and approvals shall not be procured
from all Governmental Entities having jurisdiction over the Merger as shall be
necessary for the completion of the Merger and the continuation by Buyer after
the Effective Time of the business of each of Seller and Seller Bank,
respectively, as such business is carried on immediately prior to the Effective
Time, free of any conditions or requirements which could materially impair the
value of Seller or Seller Bank to Buyer.
3.6 Securities Documents and Regulatory Reports
-------------------------------------------
(a) Since September 26, 1997, Seller has timely filed with the SEC and the
NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities Laws
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Since September 26, 1997, each of Seller and Seller Bank has duly filed
with the OTS and the Department and any other applicable federal or state
banking authority, as the case may be, the reports required to be filed under
applicable laws and regulations and such reports were in all material respects
complete and accurate and in compliance with the requirements of applicable laws
and regulations. In connection with the most recent examinations of Seller and
Seller Bank by the OTS, FDIC, and the Department, neither Seller nor Seller Bank
was required to correct or change
12
any action, procedure or proceeding which Seller or Seller Bank believes has not
been corrected or changed as required.
3.7 Financial Statements
--------------------
(a) Seller has previously delivered or made available to Buyer accurate and
complete copies of the Seller Financial Statements, which are accompanied by the
audit reports of S.R. ▇▇▇▇▇▇▇▇▇, ▇.▇., independent certified public accountants
with respect to Seller. The Seller Financial Statements, as well as the Seller
Financial Statements to be delivered pursuant to Section 5.8 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of Seller as of the respective dates set forth therein, and the
consolidated income, changes in shareholders' equity and cash flows of Seller
for the respective periods or as of the respective dates set forth therein.
(b) Each of the Seller Financial Statements referred to in Section 3.7(a)
has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of Seller have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of Seller and the
Seller Subsidiaries are being maintained in compliance with applicable legal and
accounting requirements, and such books and records accurately reflect all
dealings and transactions in respect of the business, assets, liabilities and
affairs of Seller and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the Seller Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transactions contemplated by this Agreement, neither Seller
nor any Seller Subsidiary has any liabilities, whether absolute, accrued,
contingent or otherwise.
3.8 Material Adverse Change
-----------------------------------
Since December 31, 2000 or as Previously Disclosed, (i) Seller and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses in connection with this
Agreement and the transactions contemplated hereby) and (ii) no event has
occurred or circumstance arisen that, in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect on Seller.
3.9 Environmental Matters
---------------------
(a) Seller and its Subsidiaries are in compliance with all Environmental
Laws. Neither Seller nor any Seller Subsidiary has received any communication
alleging that Seller or any Seller Subsidiary is not in such compliance and, to
the best knowledge of Seller, there are no present circumstances that would
prevent or interfere with the continuation of such compliance.
(b) None of the properties owned, leased or operated by Seller or a Seller
Subsidiary has been or is in violation of or liable under any Environmental Law.
13
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Law against Seller or a Seller Subsidiary or against any person or entity whose
liability for any Environmental Claim Seller or a Seller Subsidiary has or may
have retained or assumed either contractually or by operation of law.
(d) Except in the ordinary course of its loan underwriting activities, and
except as Previously Disclosed, Seller has not conducted any environmental
studies during the past five years with respect to any properties owned by it or
a Seller Subsidiary as of the date hereof.
3.10 Tax Matters
-----------
(a) Seller and its Subsidiaries have timely filed all federal, state and
local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law to
be filed by them (including estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all material taxes for any
subsequent periods ending on or prior to the Effective Time. Neither Seller nor
any Seller Subsidiary will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by Seller and its Subsidiaries are complete and accurate in all material
respects. Neither Seller nor any Seller Subsidiary is delinquent in the payment
of any tax, assessment or governmental charge or has requested any extension of
time within which to file any tax returns in respect of any fiscal year or
portion thereof. The federal, state and local income tax returns of Seller and
its Subsidiaries have been audited by the applicable tax authorities for all
periods ended through 1997 (or are closed to examination due to the expiration
of the applicable statute of limitations) and no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against Seller or any Subsidiary as a result of such
audits or otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to Seller or any Subsidiary to extend the
period of limitations for the assessment or collection of any tax. Except as
previously disclosed in Schedule 3.10(b), as of the date hereof, no audit,
examination or deficiency or refund litigation with respect to any such return
is pending or, to the best of Seller's knowledge, threatened.
(c) Neither Seller nor any Seller Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes other than the
agreement between Seller and Seller Bank Previously Disclosed, (ii) is required
to include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by Seller or any
Subsidiary (nor does Seller have any knowledge that the IRS has proposed any
such adjustment or change of
14
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
3.11 Legal Proceedings
-----------------
Except as Previously Disclosed in Schedule 3.11, there are no actions,
suits, claims, governmental investigations or proceedings instituted, pending
or, to the best knowledge of Seller, that are unasserted or threatened against
Seller or any of its Subsidiaries or against any asset, interest or right of
Seller or any of its Subsidiaries, or against any officer, director or employee
of any of them. Neither Seller nor any Seller Subsidiary is a party to any
order, judgment or decree that would have a Material Adverse Effect.
3.12 Compliance with Laws
--------------------
(a) Each of Seller and the Seller Subsidiaries has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, all Governmental Entities that are required
in order to permit it to carry on its business as it is presently being
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and will not be adversely affected by
virtue of the completion of the Merger; and to the best knowledge of Seller, no
suspension or cancellation of any of the same is threatened.
(b) Except as Previously Disclosed, neither Seller nor any Seller
Subsidiary is in violation of its respective Articles of Incorporation,
Constitution or Code of Regulations, or of any applicable federal, state or
local law or ordinance or any order, rule or regulation of any Governmental
Entity (including all banking (including all regulatory capital requirements),
truth-in- lending, usury, fair credit reporting, consumer protection,
securities, municipal securities, safety, health, zoning, anti-discrimination,
antitrust, and wage and hour laws, ordinances, orders, rules and regulations),
or in default with respect to any order, writ, injunction or decree of any
court, or in default under any order, license, regulation or demand of any
Governmental Entity; and neither Seller nor any Seller Subsidiary has received
any notice or communication from any Governmental Entity asserting that Seller
or any Seller Subsidiary is in violation of any of the foregoing. Neither Seller
nor any Seller Subsidiary is subject to any regulatory or supervisory cease and
desist order, agreement, written directive, memorandum of understanding or
written commitment (other than those of general applicability to savings banks
or holding companies thereof issued by Governmental Entities), and neither of
them has received any written communication requesting that it enter into any of
the foregoing.
3.13 Certain Information
-------------------
None of the information relating to Seller and its Subsidiaries supplied or
to be supplied by them for inclusion in the Proxy Statement, as of the date such
Proxy Statement is mailed to shareholders of Seller and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
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 under
which
15
they were made, not misleading, provided that information as of a later date
shall be deemed to modify information as of an earlier date.
3.14 Employee Benefit Plans
----------------------
(a) Seller has Previously Disclosed all Seller Employee Plans and has
heretofore delivered to Buyer accurate and complete copies of each (including
amendments and agreements relating thereto) together with, in the case of
tax-qualified plans, (i) the most recent actuarial and financial reports
prepared with respect thereto, (ii) the most recent annual reports filed with
any Governmental Entity with respect thereto, and (iii) all rulings and
determination letters and any open requests for rulings or letters that pertain
thereto.
(b) None of Seller, any Seller Subsidiary, any Seller Defined Benefit Plan
or, to the best of Seller's knowledge, any fiduciary of a Seller Defined Benefit
Plan, has incurred any material liability to the PBGC or the IRS with respect to
any Seller Defined Benefit Plan. To the best of Seller's knowledge, no
reportable event under Section 4043(b) of ERISA has occurred with respect to any
Seller Defined Benefit Plan.
(c) Neither Seller nor any Seller Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the IRS with
respect to each Seller Defined Benefit Plan or Seller Employee Plans, including
Seller ESOP, which is intended to qualify under Section 401 of the Code to the
effect that such Seller Defined Benefit Plan and Seller Employee Plans,
including Seller ESOP, is qualified under Section 401 of the Code, and the trust
associated with such Seller Defined Benefit Plan and Seller Employee Plans,
including Seller ESOP, is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of Seller's knowledge, is threatened to
be revoked, and Seller does not know of any ground on which such revocation may
be based. Neither Seller nor any Seller Subsidiary has any liability under any
such Seller Defined Benefit Plan and Seller Employee Plans, including Seller
ESOP, that is not reflected in the Seller Financial Statements, other than
liabilities incurred in the ordinary course of business in connection therewith
subsequent to the date thereof.
(e) No transaction prohibited by Section 406 of ERISA (and not exempt under
Section 408 of ERISA or Section 4975 of the Code or pursuant to a class or
administrative exemption granted under those sections) has occurred with respect
to any Seller Employee Plan which would result in the imposition, directly or
indirectly, of an excise tax under Section 4975 of the Code or otherwise have a
Material Adverse Effect on Seller.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Seller Employee Plan or ERISA;
except as disclosed in the Seller Financial Statements, no accumulated funding
deficiency
16
(as defined in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, exists with respect to any Seller Defined Benefit Plan, and there is no
"unfunded current liability" (as defined in Section 412 of the Code) with
respect to any Seller Defined Benefit Plan.
(g) The Seller Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations. All contributions required
to be made to Seller Employee Plans at the date hereof have been made, and all
contributions required to be made to Seller Employee Plans as of the Effective
Time will have been made as of such date.
(h) There are no pending or, to the best knowledge of Seller, threatened
claims (other than routine claims for benefits) by, on behalf of or against any
of Seller Employee Plans or any trust related thereto or any fiduciary thereof.
(i) Neither Seller nor any Seller Subsidiary has made any payments, or is
or has been a party to any agreement or any Seller Employee Plan, that under any
circumstances could obligate it or its successor to make payments or deemed
payments, that (i) are not or will not be deductible because of Sections 162(m)
or 280G of the Code or (ii) require Buyer or any Buyer Subsidiary to record any
charge or expense therefor (or any tax gross-up payments) for financial
reporting purposes on a post-acquisition basis.
3.15 Certain Contracts
-----------------
(a) Except as Previously Disclosed, neither Seller nor any Subsidiary is a
party to, is bound or affected by, receives, or is obligated to pay, benefits
under (i) any agreement, arrangement or commitment, including any agreement,
indenture or other instrument, relating to the borrowing of money by Seller or a
Subsidiary (other than in the case of Seller Bank deposits, FHLB advances,
federal funds purchased and securities sold under agreements to repurchase in
the ordinary course of business) or the guarantee by Seller or a Subsidiary of
any obligation, other than by Seller Bank in the ordinary course of its banking
business, (ii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election or retention in office of
any present or former director, officer or employee of Seller or a Subsidiary,
(iii) any agreement, arrangement or understanding (other than as set forth in
this Agreement) pursuant to which any payment (whether of severance pay or
otherwise) became or may become due to any director, officer or employee of
Seller or a Subsidiary upon execution of this Agreement or upon or following
completion of the transactions contemplated by this Agreement (either alone or
in connection with the occurrence of any additional acts or events); (iv) any
agreement, arrangement or understanding pursuant to which Seller or a Subsidiary
is obligated to indemnify any director, officer, employee or agent of Seller or
a Subsidiary, other than as set forth in Seller Employee Plans and in the
Articles of Incorporation, Code of Regulations or other governing documents of
Seller and its Subsidiaries; (v) any agreement, arrangement or understanding to
which Seller or a Subsidiary is a party or by which any of the same is bound
which limits the freedom of Seller or a Subsidiary to compete in any line of
business or with any person; (vi) any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory
17
order or decree with or by the OTS, the FDIC, the Department, or any other
regulatory agency; or (vii) any agreement, arrangement or understanding which
would be required to be filed as an exhibit to Seller's Annual Report on Form
10-KSB under the Exchange Act and which has not been so filed.
(b) Neither Seller nor any Seller Subsidiary is in default or in
non-compliance under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party or by which its
assets, business or operations may be bound or affected, whether entered into in
the ordinary course of business or otherwise and whether written or oral, and
there has not occurred any event that with the lapse of time or the giving of
notice, or both, would constitute such a default or non-compliance.
3.16 Brokers and Finders
-------------------
Except for a Previously Disclosed agreement with ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇,
Inc. ("KBW") neither Seller nor any Seller Subsidiary nor any of their
respective directors, officers or employees, has employed any broker or finder
or incurred any liability for any broker or finder fees or commissions in
connection with the transactions contemplated hereby.
3.17 Insurance
---------
Each of Seller and its Subsidiaries is insured for reasonable amounts with
financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. The Seller has Previously Disclosed copies of
Seller's insurance policies to the Buyer.
3.18 Properties
----------
All real and personal property owned by Seller or its Subsidiaries or
presently used by any of them in its respective business is in good condition
(ordinary wear and tear excepted) and is sufficient to carry on the business of
Seller and its Subsidiaries in the ordinary course of business consistent with
their past practices. Seller has good and marketable title free and clear of all
liens, encumbrances, charges, defaults or equities (other than equities of
redemption under applicable foreclosure laws) to all of its properties and
assets, real and personal, except (i) liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are de minimis in character, amount or
extent and (iv) as reflected in the Seller Financial Statements. All real and
personal property which is material to Seller's business on a consolidated basis
and leased or licensed by Seller or a Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
All improved real property owned by Seller or its Subsidiaries is in compliance
with all applicable zoning laws.
18
3.19 Labor
-----
No work stoppage involving Seller or a Subsidiary is pending or, to the
best knowledge of Seller, threatened. Neither Seller nor a Subsidiary is
involved in or, to the best knowledge of Seller, threatened with or affected by,
any labor dispute, arbitration, lawsuit or administrative proceeding involving
the employees of Seller or a Subsidiary. Employees of Seller and Seller
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and to
the best of Seller's knowledge, there have been no efforts to unionize or
organize any employees of Seller or any Seller Subsidiaries during the past five
years.
3.20 Allowance for Loan Losses
-------------------------
The allowance for loan losses reflected on Seller's consolidated statement
of financial condition included in the Seller Financial Statements is, and will
be in the case of subsequently delivered Seller Financial Statements, in the
opinion of Seller's management, adequate in all material respects as of their
respective dates under the requirements of GAAP to provide for reasonably
anticipated losses on outstanding loans, net of recoveries. The real estate
owned reflected in the Seller Financial Statements is, and will be in the case
of subsequently delivered Seller Financial Statements, carried at the lower of
cost or fair value, less estimated costs to sell, as required by GAAP.
3.21 Material Interests of Certain Persons
-------------------------------------
(a) No officer or director of Seller, any Seller Subsidiary or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) or
related interest of any such person has any material interest in any material
contract or property (real or personal, tangible or intangible), used in, or
pertaining to, the business of Seller or any Subsidiary of Seller.
(b) There are no Insider Loans as of the date hereof, except for those
disclosed in Schedule 3.21(b).
3.22 Fairness Opinion
----------------
Seller has received an opinion from KBW to the effect that, as of the date
hereof, the Merger Consideration to be received by shareholders of Seller
pursuant to this Agreement is fair, from a financial point of view, to such
shareholders.
3.23 Disclosures
-----------
None of the representations and warranties of Seller or any of the written
information or documents furnished or to be furnished by Seller to Buyer in
connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
19
3.24 No Undisclosed Liabilities
--------------------------
Except as Previously Disclosed, Seller and its Subsidiaries do not have any
liability, whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
taxes (and there is no past or present fact, situation, circumstance, condition
or other basis for any present or future action, suit or proceeding, hearing,
charge, complaint, claim or demand against Seller or its Subsidiaries giving
rise to any such liability) required in accordance with generally accepted
accounting principles to be reflected in an audited consolidated balance sheet
of Seller, except and to the extent (i) reflected, disclosed or provided for in
the Seller Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transactions contemplated by this Agreement.
3.25 Loan Portfolio
--------------
(i) All loans and discounts shown on the Seller Financial Statements or
which were entered into after the date of the most recent balance sheet included
in the Seller Financial Statements were and shall be made for good, valuable and
adequate consideration in the ordinary course of the business of Seller and its
Subsidiaries, in accordance with sound banking practices, and are not subject to
any known defenses, set-offs or counter-claims, including any such as are
afforded by usury or truth in lending laws, except as may be provided by
bankruptcy, solvency or similar laws or by general principles of equity, (ii)
the notes or other evidence of indebtedness evidencing such loans in all forms
of pledges, mortgages and other collateral documents and security agreements are
and shall be in force, valid, true and genuine and what they purport to be, and
(iii) except as Previously Disclosed, Seller and its Subsidiaries have complied
and shall prior to the Effective Time comply with all laws and regulations
relating to such loans.
3.26 Investment Portfolio
--------------------
All investment securities held by Seller or its Subsidiaries, as reflected
in the consolidated balance sheets of Seller included in the Seller Financial
Statements, are carried in accordance with GAAP, specifically including but not
limited to, FAS 115.
3.27 Interest Rate Risk Management Instruments
-----------------------------------------
Seller has Previously Disclosed all interest rate swaps, caps, floors,
option agreements or other interest rate risk management arrangements or
agreements, whether entered into for the account of Seller or its Subsidiaries
or for the account of a customer of Seller or one of its Subsidiaries. All such
arrangements and agreements were entered into in the ordinary course of business
and in accordance with prudent banking practice and applicable rules,
regulations and policies and with counter parties believed to be financially
responsible at the time and are legal, valid and binding obligations of Seller
or one of its Subsidiaries in force in accordance with their terms (subject to
the provisions of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws effecting the enforceability of creditors rights
generally from time to time and effect, and equitable principles relating to the
granting of specific performance and other equitable remedies as
20
a matter of judicial discretion), and are in full force and effect. Seller and
its Subsidiaries have duly performed all of their obligations thereunder to the
extent that such obligations to perform have accrued; and, to Seller's
knowledge, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
3.28 Interim Events
--------------
Since December 31, 2000, except as Previously Disclosed, neither Seller nor
its Subsidiaries have paid or declared any dividend or made any other
distribution to shareholders or taken any action which if taken after the date
hereof would require the prior written consent of Buyer pursuant to Section 5.6
hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows, except as Previously
Disclosed:
4.1 Organization, Standing and Authority of Buyer
---------------------------------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and Buyer is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification. Buyer is a savings and loan holding company under the SLHCA and
subject to the regulations of the OTS. Buyer has heretofore delivered to Seller
true and complete copies of the Articles of Incorporation and Bylaws of Buyer as
in effect as of the date hereof.
4.2 Ownership of Buyer Subsidiaries
-------------------------------
Buyer has Previously Disclosed the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect Buyer Subsidiary and identified
Buyer Bank as its only Significant Subsidiary. The outstanding shares of capital
stock or other ownership interests of each Buyer Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly owned by Buyer free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind
whatsoever. No Rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of Buyer Subsidiaries and there are
no agreements, understandings or commitments relating to the right of Buyer to
vote or to dispose of such capital stock or other ownership interests.
4.3 Organization, Standing and Authority of Buyer Subsidiaries
----------------------------------------------------------
The Buyer Subsidiary is a savings bank, corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized, with full
21
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and the Buyer Subsidiary is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such licensing or qualification. The deposit accounts of Buyer
Bank are insured by the FDIC to the maximum extent permitted by the FDIA and
Buyer Bank has paid all deposit insurance premiums and assessments required by
the FDIA and the regulations thereunder. Buyer has heretofore delivered to
Seller true and complete copies of the Charter and Bylaws of Buyer Bank as in
effect as of the date hereof.
4.4 Authorized and Effective Agreement
----------------------------------
(a) Buyer has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals) to
perform all of its respective obligations hereunder. The execution and delivery
of this Agreement and the completion of the transactions contemplated hereby
have been deemed advisable by the Boards of Directors of Buyer and Buyer Bank
and duly authorized and approved by all necessary corporate action in respect
thereof on the part of Buyer and Buyer Bank.. This Agreement has been duly and
validly executed and delivered by Buyer and, assuming due authorization,
execution and delivery by Seller, constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(b) Neither the execution and delivery of this Agreement nor completion of
the transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof (i) does or will conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of Buyer or the equivalent
documents of any Buyer Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of Buyer or any Buyer Subsidiary pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Buyer or any Buyer
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental approvals, violates any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer or any Buyer Subsidiary.
(c) To the best knowledge of Buyer, except for (i) the filing of
applications and notices with and the approvals of the OTS and the FDIC, (ii)
the filing of applications with the Department and the approvals of the
Department, (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Ohio in connection with the Corporate Merger and the
Company Merger, (iv) the filing of a Certificate of Merger with the Secretary of
State of the State of Delaware in connection with the Company Merger, (v) the
filing of Articles of Combination with the OTS and Certificate of Merger with
the Secretary of State of Ohio in connection with the Bank Merger, and (vi)
review of the Merger by the DOJ under federal antitrust laws, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the
22
part of Buyer, Merger Sub or Buyer Bank in connection with (x) the execution and
delivery by Buyer of this Agreement, and the completion of the transactions
contemplated hereby, or (y) the Merger. Buyer as sole shareholder of Buyer Bank
has taken all necessary shareholder action to approve the Bank Merger.
(d) As of the date hereof, neither Buyer nor Buyer Bank is aware of any
reasons relating to Buyer or Buyer Bank (including CRA compliance) why all
consents and approvals shall not be procured from all Governmental Entities
having jurisdiction over the Merger as shall be necessary for completion of the
Merger and continuation by Buyer after the Effective Time of the business of
each of Seller and Seller Bank, respectively, as such business is carried on
immediately prior to the Effective Time, free of any conditions or requirements
which could impair the value of Seller or Seller Bank to Buyer.
4.5 Securities Documents and Regulatory Reports
-------------------------------------------
(a) Since January 1, 1998, Buyer has timely filed with the SEC and the NASD
all Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respects with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Each of Buyer and Buyer Bank has since January 1, 1998, duly filed with
the OTS, FDIC and any other applicable federal banking authority, as the case
may be, the reports required to be filed under applicable laws and regulations
and such reports were in all material respects complete and accurate and in
compliance with the requirements of applicable laws and regulations. In
connection with the most recent examinations of Buyer and Buyer Bank by the OTS
and FDIC, neither Buyer nor Buyer Bank was required to correct or change any
action, procedure or proceeding which Buyer or Buyer Bank believes has not been
corrected or changed as required.
4.6 Financial Statements
--------------------
(a) Buyer has previously delivered or made available to Seller accurate and
complete copies of the Buyer Financial Statements, which are accompanied by the
audit reports of S.R. ▇▇▇▇▇▇▇▇▇, ▇.▇., independent certified public accountants
with respect to Buyer. The Buyer Financial Statements fairly present and will
fairly present, as the case may be, the consolidated financial condition of
Buyer as of the respective dates set forth therein, and the consolidated income,
changes in equity and cash flows of Buyer for the respective periods or as of
the respective dates set forth therein.
(b) Each of the Buyer Financial Statements referred to in Section 4.6(a)
has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of Buyer have been conducted in accordance with generally accepted
auditing standards. The books and records of Buyer and the Buyer Subsidiaries
are being maintained in compliance with applicable legal and accounting
requirements, and all such
23
books and records accurately reflect all dealings and transactions in respect of
the business, assets, liabilities and affairs of Buyer and its Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for in the
Buyer Financial Statements, (ii) of liabilities since incurred in the ordinary
course of business and (iii) of liabilities incurred in connection with
completion of the transaction contemplated by this Agreement, neither Buyer nor
any Buyer Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise.
4.7 Material Adverse Change
-----------------------
Since December 31, 2000, (i) Buyer and its Subsidiary have conducted their
respective businesses in the ordinary and usual course (excluding the incurrence
of expenses in connection with this Agreement and the transactions contemplated
hereby) and (ii) no event has occurred or circumstance arisen that, in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
Buyer.
4.8 Legal Proceeding
----------------
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Buyer, that are
unasserted or threatened against Buyer or of its Subsidiary or against any
asset, interest or right of Buyer or of its Subsidiary, or against any officer,
director or employee of any of them. Neither Buyer nor any Buyer Subsidiary is a
party to any order, judgment or decree.
4.9 Certain Information
-------------------
None of the information relating to Buyer and its Subsidiary supplied or to
be supplied by them for inclusion in the Proxy Statement, as of the date such
Proxy Statement is mailed to shareholders of Seller and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
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 under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date.
4.10 Brokers and Finders
-------------------
Neither Buyer nor any Buyer Subsidiary, nor any of their respective
directors, officers or employees, has employed any broker or finder or incurred
any liability for any broker or finder fees or commissions in connection with
the transactions contemplated hereby.
24
4.11 Disclosures
-----------
None of the representations and warranties of Buyer or any of the written
information or documents furnished or to be furnished by Buyer to Seller in
connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
4.12 Financial Resources
-------------------
Buyer has the financial wherewithal and has, or will have prior to the
Effective Time, sufficient internal funds to perform its obligations under this
Agreement. Buyer and Buyer Bank are, and will be immediately following the
Merger, in material compliance with all applicable capital, debt and financial
and non-financial regulations of state and federal banking agencies having
jurisdiction over them.
4.13 State Takeover Statutes
-----------------------
Neither Buyer nor any Buyer Subsidiary beneficially own any Seller common
stock. Neither Buyer nor any Buyer Subsidiary is now, and has not been during
the three years prior to the date of this Agreement, an "interested shareholder"
of Seller within the meaning of OGCL Section 1704.01(c)(8).
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
-----------------------
Subject to the terms and conditions of this Agreement, each of Seller and
Buyer (i) shall use its reasonable best efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary
or advisable under applicable laws and regulations so as to permit and otherwise
enable completion of the Merger as promptly as reasonably practicable, and (ii)
shall cooperate fully with each other to that end. If necessary to complete Bank
Merger, Seller shall cause Seller Bank to amend its Articles of Incorporation
and/or Constitution to facilitate the completion of the Bank Merger.
5.2 Shareholder Meeting
-------------------
Seller shall take all action necessary to file the Proxy Statement within
45 days of the date of this Agreement and to properly call and convene a meeting
of its shareholders as soon as practicable after the date hereof to consider and
vote upon this Agreement and the transactions contemplated hereby. The Board of
Directors of Seller will recommend that the shareholders of Seller approve this
Agreement and the transactions contemplated hereby, provided that the Board
25
of Directors of Seller may fail to make such recommendation, or withdraw, modify
or change any such recommendation, if such Board of Directors, after having
consulted with and considered the advice of outside counsel, has determined that
the making of such recommendation, or the failure to withdraw, modify or change
such recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 Regulatory Matters
------------------
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Proxy Statement relating to the meeting of
shareholders of Seller to be held pursuant to Section 5.2 of this Agreement.
Each of Buyer and Seller shall use its reasonable best efforts to have the Proxy
Statement approved for mailing in definitive form as promptly as practicable and
thereafter Seller shall promptly mail to its shareholders the Proxy Statement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file within 45 days after the
date hereof or as soon thereafter as is reasonably practicable, all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement. Buyer and Seller shall have the right to review in advance, and to
the extent practicable each will consult with the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or 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. The parties hereto agree that they will use their
reasonable best efforts to cause the Closing Date to occur by September 30,
2001.
(c) Buyer and Seller shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors and
officers, the shareholders of Seller and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of Buyer, Buyer Bank, Merger Sub, Seller or
Seller Bank to any Governmental Entity in connection with the transactions
contemplated hereby.
(d) Buyer and Seller shall promptly furnish each other with copies of
written communications received by Buyer or Seller, as the case may be, or any
of their respective Subsidiaries from, or delivered by any of the foregoing to,
any Governmental Entity in respect of the transactions contemplated hereby.
26
5.4 Investigation and Confidentiality
---------------------------------
(a) The Seller shall permit the Buyer and its representatives reasonable
access to its properties and personnel, and shall disclose and make available to
the Buyer, upon the Buyer's reasonable request, all books, papers and records
relating to the assets, stock ownership, properties, operations, obligations and
liabilities of Seller and Seller Subsidiaries, including, but not limited to,
all books of account (including the general ledger), tax records, minute books
of meetings of boards of directors (and any committees thereof) and
shareholders, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the Buyer may have a reasonable interest,
provided that such access and any such reasonable request shall be reasonably
related to the transactions contemplated hereby and, in the reasonable opinion
of the Seller providing such access, not unduly interfere with normal
operations. The Seller and its Subsidiaries shall make their respective
directors, officers, employees and agents and authorized representatives
(including counsel and independent public accountants) available to confer with
the Buyer and its representatives, provided that such access shall be reasonably
related to the transactions contemplated hereby and shall not unduly interfere
with normal operations. Representatives of Buyer or Buyer Bank shall be given
notice of and shall be entitled to attend meetings of the Boards of Directors of
Seller and Seller Bank after the date hereof, provided, that the Chairman of
such meetings shall be entitled to exclude such representatives of Buyer or
Buyer Bank from discussions at such meetings, if the Board of Directors
determines, consistent with the exercise of its fiduciary duties, that it is in
the best interests of Seller and its shareholders to exclude such
representatives.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until completion of
the transactions contemplated hereby and, if such transactions shall not occur,
the party receiving the information shall either destroy or return to the party
which furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The obligation to
keep such information confidential shall continue for five years from the date
the proposed transactions are abandoned but shall not apply to (i) any
information which (x) the party receiving the information can establish was
already in its possession prior to the disclosure thereof by the party
furnishing the information; (y) was then generally known to the public; or (z)
became known to the public through no fault of the party receiving the
information; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction, provided that the
party which is the subject of any such legal requirement or order shall use its
best efforts to give the other party at least ten business days prior notice
thereof.
5.5 Press Releases
--------------
Buyer and Seller agree they will not issue any press release related to
this Agreement or the transactions contemplated hereby, without first consulting
with the other party as to the form and substance of public disclosures which
may relate to the transactions contemplated by this
27
Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
5.6 Business of the Parties
-----------------------
(a) 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 Buyer, Seller and its Subsidiary
shall carry on their respective businesses in the ordinary course consistent
with past practice. During such period, Seller also will use all reasonable
efforts to (x) preserve its business organization and that of Seller Bank
intact, (y) keep available to itself and Buyer the present services of the
employees of Seller and Seller Bank and (z) preserve for itself and Buyer the
goodwill of the customers of Seller and Seller Bank and others with whom
business relationships exist. Without limiting the generality of the foregoing,
except with the prior written consent of Buyer, which consent shall not be
unreasonably withheld, or as expressly contemplated hereby, between the date
hereof and the Effective Time, Seller shall not, and shall cause each Seller
Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of Seller Common Stock except for one regular
quarterly cash dividend at a rate per share of Seller Common Stock not
in excess of $0.07 per share to be paid on or about May 15, 2001;
provided, however, that nothing contained herein shall be deemed to
affect the ability of a Subsidiary to pay dividends on its capital
stock to Seller;
(ii) issue any shares of its capital stock other than upon
exercise of Seller Options referred to in Section 3.1 hereof; issue,
grant, modify or authorize any Rights; purchase any shares of Seller
Common Stock; or effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(iii) amend its Articles of Incorporation, Code of Regulations,
Constitution or similar organizational documents, unless such
amendment shall be necessary to complete the Corporate Merger, Company
Merger, or Bank Merger; impose, or suffer the imposition, on any share
of stock or other ownership interest held by Seller in a Subsidiary of
any lien, charge or encumbrance or permit any such lien, charge or
encumbrance to exist; or waive or release any material right or cancel
or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance
to, or provide any other new employee benefit or incentive to, any of
its directors, officers or employees, except as may be required by
law;
(v) enter into or, except as may be required by law and for
amendments contemplated by Section 5.10 hereof, modify any Seller
Employee Plan or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust
28
agreement related thereto, in respect of any of its directors,
officers or employees; or make any contributions to any Seller Defined
Benefit Plan, Seller 401(k) Plan or the Seller ESOP (other than as
required by law or regulation or in a manner and amount consistent
with past practices or as required by the Plan documents);
(vi) originate or purchase any loan in excess of $250,000 with
respect to loans secured by one- to four-family properties and in
excess of $300,000 with respect to loans secured by commercial
properties;
(vii) enter into (w) any transaction, agreement, arrangement or
commitment not made in the ordinary course of business, (x) any
agreement, indenture or other instrument relating to the borrowing of
money by Seller or a Subsidiary or guarantee by Seller or any Seller
Subsidiary of any such obligation, except in the case of Seller Bank
for deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of business
consistent with past practice, (y) any agreement, arrangement or
commitment relating to the employment of an employee or consultant, or
amend any such existing agreement, arrangement or commitment, provided
that Seller and Seller Bank may employ an employee in the ordinary
course of business if the employment of such employee is terminable by
Seller or Seller Bank at will without liability, other than as
required by law; or (z) any contract, agreement or understanding with
a labor union;
(viii) change its method of accounting in effect for the year
ended December 31, 2000, except as required by changes in laws or
regulations or GAAP, or change any of its methods of reporting income
and deductions for federal income tax purposes from those employed in
the preparation of its federal income tax return for such year, except
as required by changes in laws or regulations;
(ix) except as Previously Disclosed, make any expenditures in
excess of $5,000 individually or $10,000 in the aggregate, other than
(a) in the ordinary course of business, (b) in connection with the
transactions contemplated by this Agreement, (c) pursuant to binding
commitments that have been Previously Disclosed and are existing on
the date hereof, and (d) expenditures necessary to maintain existing
assets in good repair; or enter into any new lease or lease renewal of
real property or any new lease or lease renewal of personal property
providing for annual payments exceeding $5,000;
(x) file any applications or make any contract with respect to
branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) control over or any equity interest
in any business or entity;
29
(xii) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or
rights or requiring the consent of any party to the transfer and
assignment of any such assets or rights;
(xiii) except as necessitated in the reasonable opinion of Seller
due to changes in interest rates, and in accordance with safe and
sound banking practices, change or modify in any material respect any
of its lending or investment policies, except to the extent required
by law or an applicable regulatory authority;
(xiv) except as necessitated in the reasonable opinion of Seller
due to changes in interest rates, and in accordance with safe and
sound banking practices, enter into any futures contract, option
contract, interest rate caps, interest rate floors, interest rate
exchange agreement or other agreement for purposes of hedging the
exposure of its interest-earning assets and interest-bearing
liabilities to changes in market rates of interest;
(xv) take any action that would result in any of the
representations and warranties of Seller contained in this Agreement
not to be true and correct in any material respect at the Effective
Time or that would cause any of the conditions of Sections 6.1 or 6.3
hereof not to be satisfied;
(xvi) take any action that would materially impede or delay the
completion of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to perform its covenants and agreements
under this Agreement; or
(xvii) materially increase or decrease the rate of interest paid
on time deposits, or on certificates of deposit, except in a manner
and pursuant to policies consistent with past practices or to reflect
changes in market interest rates; or
(xviii) agree to do any of the foregoing.
(b) Seller shall promptly notify Buyer in writing of the occurrence of any
matter or event known to and directly involving Seller, which would not include
any changes in conditions that affect the banking industry generally, that would
have, either individually or in the aggregate, a Material Adverse Effect on
Seller.
(c) Except with the prior written consent of Seller or as expressly
contemplated hereby, between the date hereof and the Effective Time, Buyer shall
not, and shall cause each Buyer Subsidiary not to:
(i) take any action that would result in any of the
representations and warranties of Buyer contained in this Agreement
not to be true and correct in any material respect at the Effective
Time or that would cause any of the conditions of Sections 6.1 or 6.2
hereof not to be satisfied;
30
(ii) take any action that would materially impede or delay the
completion of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to perform its covenants and agreements
under this Agreement; or
(iii) agree to do any of the foregoing.
5.7 Certain Actions
---------------
Seller shall not, and shall cause each Seller Subsidiary not to, solicit or
encourage inquiries or proposals with respect to, furnish any information
relating to, or participate in any negotiations or discussions concerning, any
acquisition, purchase of all or a substantial portion of the assets of, or any
equity interest in, Seller or a Subsidiary (other than with Buyer or an
affiliate thereof), provided, however, that the Board of Directors of Seller may
furnish such information or participate in such negotiations or discussions if
such Board of Directors, after having consulted with and considered the written
opinion of outside counsel, has determined that the failure to do the same is
likely to constitute a breach of fiduciary duties of such directors under
applicable law. Seller will promptly inform Buyer orally and in writing of any
such request for information or of any such negotiations or discussions, as well
as instruct its and its Subsidiaries' directors, officers, representatives and
agents to refrain from taking any action prohibited by this Section.
5.8 Current Information
-------------------
During the period from the date hereof to the Effective Time, Seller shall,
upon the request of Buyer, cause one or more of its designated representatives
to confer on a monthly or more frequent basis with representatives of Buyer
regarding Seller's financial condition, operations and business and matters
relating to the completion of the transactions contemplated hereby. As soon as
reasonably available, but in no event more than two business days after filing,
Seller will deliver to Buyer all reports filed by it under the Exchange Act
subsequent to the date hereof. Seller also will deliver to Buyer each thrift
financial report or similar report filed by it with the OTS or the Department
concurrently with the filing of such call report. Within fifteen (15) days after
the end of each month, Seller will deliver to Buyer an unaudited consolidated
balance sheet and an unaudited consolidated statement of income, without related
notes, for such month prepared in accordance with GAAP.
5.9 Indemnification; Insurance
--------------------------
(a) From and after the Effective Time, Buyer agrees for a period of six
years, to indemnify and hold harmless the past and present directors and
officers of Seller and its Subsidiaries (the "Indemnified Parties") for all acts
or omissions occurring at or prior to the Effective Time to the same extent such
persons are indemnified and held harmless under the respective Articles of
Incorporation, Code of Regulations or Constitution of Seller and its Subsidiary
in the form in effect at the date of this Agreement, and such duties and
obligations shall continue in full force and effect for so long as they would
(but for the Merger) otherwise survive and continue in full force and effect.
Without limiting the foregoing, all limitations of liability existing in favor
of the Indemnified Parties in the Articles of Incorporation, Code of Regulations
or Constitution of Seller or any Seller
31
Subsidiary as of the date hereof, to the extent permissible under applicable law
as of the date hereof, arising out of matters existing or occurring at or prior
to the Effective Time, shall survive the Merger and shall continue in full force
and effect. Buyer will provide, or cause to be provided, for a period of not
less than three years from the Effective Time, an insurance and indemnification
policy that provides the officers and directors of Seller and its Subsidiaries
immediately prior to the Effective Time coverage no less favorable than as
currently provided by Seller to such officers and directors, to the extent such
insurance may be purchased or kept in full force without any material increase
in the cost of the premium currently paid by Buyer for its directors' and
officers' liability insurance (provided that if such insurance is not available
without such a material increase, Buyer will substitute or cause Seller to
substitute therefor to the extent available at a cost not in excess of 150% of
the current annual premium cost of Seller's existing directors and officers'
insurance, single premium tail coverage with policy limits equal to Seller's
existing annual coverage limits). At the request of Buyer, Seller shall use
reasonable efforts to procure the insurance coverage referred to in the
preceding sentence prior to the Effective Time.
(b) In the event that Buyer or any of its respective 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 all or substantially all of its properties and assets to any
person, then, and in each such case the successors and assigns of such entity
shall assume the obligations set forth in this Section, which obligations are
expressly intended to be for the irrevocable benefit of, and shall be
enforceable by, each director and officer covered hereby.
5.10 Employees and Employee Benefit Plans
------------------------------------
(a) Former full-time employees of Seller or Seller Bank who remain employed
by Buyer or Buyer Bank after the Effective Date will be eligible to participate
in the Buyer's employee stock ownership plan on January 1, 2003 or such earlier
date required by Section 410(b)(6)(C) of the Code and applicable regulations
("Entry Date"), with credit for years of service with Seller or any of its
Subsidiaries for the purpose of eligibility and vesting on and after the Entry
Date (but not for the purposes of accrual of benefits or allocation of employer
contributions). Former full-time employees of Seller or Seller Bank who remain
employed by Buyer or Buyer Bank will be eligible to participate in the Buyer's
benefit plans, other than the Buyer's employee stock ownership plan, on the
earliest date permitted by such plan, with credit for years of service with
Seller or any of its Subsidiaries for the purpose of eligibility and vesting
(but not for the purpose of accrual of benefits or allocation of employer
contributions). Buyer shall use its best efforts to cause any and all
pre-existing condition limitations (to the extent such limitations did not apply
to a pre-existing condition under Seller Employee Plan) and eligibility waiting
periods under group health plans to be waived with respect to such participants
and their eligible dependents.
(b) To the extent that Buyer or a Buyer Subsidiary terminates the
employment of any Seller or Seller Bank employee other than for Cause within one
year following the Effective Time, Buyer shall, or shall cause a Buyer
Subsidiary to, provide severance benefits in a cash amount equal to such
employee's regular salary for a one-week period (as in effect immediately prior
to the Effective Time) multiplied by the total number of whole years of such
employee's employment (up to a maximum of 10 years) at Seller, Buyer and any
Subsidiary of either; provided, however, that
32
in no event shall Buyer or a Buyer Subsidiary have any obligation to provide
severance benefits to any Seller or Seller Bank employee whose termination of
employment occurs due to resignation or to discharge for Cause or who is
entitled to severance benefits or the equivalent thereof under the terms of any
other compensation plan or individual contract with Seller or Seller Bank.
(c) It is acknowledged that Seller Bank currently has outstanding an
employment agreement with ▇▇▇ ▇▇▇▇▇▇▇ ("Employment Agreement"). In accordance
with the terms of the Employment Agreement, on the Effective Date, Seller Bank
will pay ▇▇▇ ▇▇▇▇▇▇▇ a lump sum payment provided for under such Employment
Agreement, but in no event in excess of the amount equal to the maximum amount
permissible tax deductible under Section 280G of the Code.
(d) In the sole discretion of Buyer or a Buyer Subsidiary, as applicable,
payments made by it in full and complete satisfaction of obligations of Seller
or Seller Bank under any Seller Employee Plan (other than any Seller Employee
Plan that is subject to ERISA) or under Section 5.10(c) shall be subject to the
recipient's delivery to Buyer or a Buyer Subsidiary, as applicable, of (i) a
written acknowledgment signed by such recipient that the payment or payments and
benefits to be made to him or her is in full and complete satisfaction of all
liabilities and obligations thereunder of Seller, Seller Bank, Buyer or any
Buyer Subsidiary, and each of their respective affiliates, directors, officers,
employees and agents, and (ii) a release by such recipient of all such parties
from further liability in connection with the particular Seller Employee Plan or
this Agreement, as applicable.
(e) Subject to the Code and relevant regulations, as of the Effective Time
or as soon as practicable thereafter, the loan to the Seller ESOP shall be
repaid in full with the cash consideration received from Buyer for the
unallocated shares of Seller Common Stock held in the Seller ESOP in the amount
equal to the Merger Consideration multiplied by the number of unallocated shares
of Seller Common Stock held by the Seller ESOP, and any unallocated portion of
the consideration remaining after such repayment shall be allocated to the
Seller ESOP accounts of the employees of Seller and its Subsidiaries in
accordance with the terms of the Seller ESOP as amended. As of the Effective
Time, the Seller ESOP shall be terminated. The current administrator of the
Seller ESOP, or another administrator selected by Buyer (subject to consultation
with Seller ESOP's then current trustee), shall continue to administer the
Seller ESOP subsequent to the Effective Time, and the current Trustee of the
Seller ESOP, or such other trustee(s) selected by Buyer (subject to consultation
with Seller ESOP's then current trustee) or the administrators, shall continue
to be the Trustee subsequent to the Effective Time. Buyer agrees not to amend
the Seller ESOP subsequent to the Effective Time in any manner that would change
or expand the class of persons entitled to receive benefits under the Seller
ESOP. The Parties agree that the Seller ESOP shall be amended to the extent
necessary to receive a favorable determination letter from the IRS as to the tax
qualified status of the Seller ESOP upon its termination under Section 401(a)
and 4975(e)(7) of the Code (the "Final Determination Letter"). Following the
receipt of the Final Determination Letter, distributions of the account balances
under the Seller ESOP shall be made to the ESOP Participants. From and after the
date hereof, in anticipation of such termination and distribution, Buyer and
Seller prior to the Effective Time, and Buyer after the Effective Time, shall
use their best efforts to apply for and obtain a favorable Final Determination
Letter from the IRS. In the event that Buyer and Seller, prior to the Effective
Time, and Buyer after the Effective Time, reasonably determine that the Seller
ESOP
33
cannot obtain a favorable Final Determination Letter, or that the amounts held
therein cannot be so applied, allocated or distributed without causing the
Seller ESOP to lose its tax qualified status, Seller prior to the Effective Time
and Buyer after the Effective Time shall take such action as they may reasonably
determine is necessary to obtain a favorable Final Determination Letter from the
IRS and for the distribution of account balances to the ESOP Participants,
provided that the assets of the Seller ESOP shall be held or paid solely for the
benefit of the ESOP Participants and provided further that in no event shall any
portion of the amounts held in the Seller ESOP revert, directly or indirectly,
to Seller or any affiliate thereof, or to Buyer or any affiliate thereof unless
required by the IRS as a condition to the issuance of a favorable Final
Determination Letter. All ESOP Participants shall fully vest and have a
nonforfeitable interest in their accounts under the Seller ESOP determined as of
the termination date.
(f) Seller shall take all necessary steps to cause the Seller Defined
Benefit Plan to be terminated no later than the end of the plan year in which
the Merger occurs and will take all steps to terminate the employer's
participation in the Seller Defined Benefit Plan and liquidate the Seller
Defined Benefit Plan as expeditiously as possible and in a manner that will not
result in the imposition of any underfunding liability or responsibility upon
Buyer or any of its Subsidiaries; provided, that Seller shall not terminate the
Seller Defined Benefit Plan without approval from the Buyer if the Seller
Defined Benefit Plan has an outstanding underfunded liability. The Parties agree
that the Seller Defined Benefit Plan shall be amended to the extent necessary to
receive a favorable determination letter from the IRS as to the tax qualified
status of the Seller Defined Benefit Plan upon its termination under Section
401(a) of the Code.
(g) On or before the Effective Time, Seller shall take all steps necessary
to cause the 401(k) plan maintained by Seller to be terminated, subject to
applicable limitations under the Code.
5.11 Company Merger
--------------
Buyer and Seller shall take, and shall cause their Subsidiaries to take,
all necessary and appropriate actions to make it possible for the Company Merger
to be authorized, agreed to, and accomplished immediately after the Corporate
Merger, or at such other time as may be determined by Buyer in its sole
discretion.
5.12 Bank Merger
-----------
Buyer and Seller shall take, and shall cause their Subsidiaries to take,
all necessary and appropriate actions to make it possible for the Bank Merger to
be authorized, agreed to, and accomplished immediately after the Corporate
Merger, or at such other time thereafter as may be determined by Buyer in its
sole discretion.
5.13 Organization of Merger Sub
--------------------------
Buyer shall cause Merger Sub to be organized under the OGCL as soon as
practicable hereafter. Following the organization, the Board of Directors of
Merger Sub shall approve this Agreement and the transactions contemplated
hereby, whereupon Merger Sub shall become a party
34
to, and be bound by, this Agreement, and Buyer shall approve this Agreement in
its capacity as the sole stockholder of Merger Sub.
5.14 Conforming Entries
------------------
(a) Seller recognizes that Buyer may have adopted different loan, accrual
and reserve policies (including loan classifications and levels of reserves for
possible loan losses). Subject to applicable laws, from and after the date of
this Agreement to the Effective Time, Seller and Buyer shall consult and
cooperate with each other with respect to conforming the loan, accrual and
reserve policies of Seller and the Seller Subsidiaries to those policies of
Buyer, as specified in each case in writing to Seller, based upon such
consultation and subject to the conditions in Section 5.14(c) below.
(b) Subject to applicable laws and regulations, Seller and Buyer shall
consult and cooperate with each other with respect to determining, as specified
in a written notice from Buyer to Seller, based upon such consultation and
subject to the conditions in Section 5.14(c) below, the amount and the timing
for recognizing for financial accounting purposes Seller's expenses of the
Merger and the restructuring charges relating to or to be incurred in connection
with the Merger.
(c) Subject to applicable laws and regulations, Seller shall (i) establish
and take such reserves and accruals at such time as Buyer shall reasonably
request to conform Seller's loan, accrual and reserve policies to Buyer's
policies, and (ii) establish and take such accruals, reserves and charges in
order to implement such policies and to recognize for financial accounting
purposes such expenses of the Merger and restructuring charges related to or to
be incurred in connection with the Merger, in each case at such times as are
reasonably requested by Buyer; provided, however, that on the date such
reserves, accruals and charges are to be taken, Buyer shall certify to Seller
that all conditions to Buyer's obligation to consummate the Merger set forth in
Sections 6.1 and 6.3 hereof (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing or otherwise
to be dated at the Effective Time, the delivery of which shall continue to be
conditions to Buyer's obligation to consummate the Merger) have been satisfied
or waived; and provided, further, that Seller shall not be required to take any
such action that is not consistent with GAAP and regulatory accounting
principles.
(d) No reserves, accruals or charges taken in accordance with this Section
5.14 may be a basis to assert a violation of a breach of a representation,
warranty or covenant of Seller herein.
5.15 Integration of Policies
-----------------------
During the period from the date hereof to the Effective Time, Seller and
Seller Bank shall, and shall cause their directors, officers and employees to,
and shall make all reasonable efforts to cause their respective data processing
service providers to, cooperate and assist Buyer in connection with an
electronic and systematic conversion of all applicable data regarding Seller to
Buyer's system of electronic data processing, provided, however, that no such
conversion shall occur until the Effective Time. In furtherance of the
foregoing, Seller shall make reasonable arrangements
35
during normal business hours to permit representatives of Buyer to train Seller
and Seller Bank employees in Buyer's system of electronic data processing.
5.16 Disclosure Supplements
----------------------
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in materials Previously Disclosed to the
other party or which is necessary to correct any information in such materials
which has been rendered materially inaccurate thereby; no such supplement or
amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.17 Failure to Fulfill Conditions
-----------------------------
In the event that either of the Parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated may
not be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party. Each Party will promptly inform the other Party
of any facts applicable to it that would be likely to prevent or materially
delay approval of the Merger by any Governmental Entity or third party or which
would otherwise prevent or materially delay completion of such transactions.
5.18 Environmental Reports
---------------------
Seller shall have furnished to Buyer before the date of this Agreement any
environmental reports related to any property owned or being used by Seller.
Buyer, at its sole discretion, may obtain, as soon as reasonably practical, but
not later than 30 days after the date hereof (or within ten days after the
acquisition of lease of any real property acquired or leased after the date
hereof), a report of a phase one environmental investigation on real property
owned or leased by Seller or its Subsidiaries (but excluding space in office or
retail and similar establishments leased by Seller or its subsidiaries for
automatic teller machines or bank branch facilities or other office uses where
the space leased comprises less than 20% of the total space leased to all
tenants of such property). If required by the phase one investigation in Buyer's
reasonable opinion, Seller shall provide to Buyer, within 40 days of the receipt
by Seller of the request of Buyer therefor, a report of a phase two
investigation on properties requiring such additional study. Buyer shall have 5
business days to request Seller to obtain a phase two investigation report.
Buyer shall have 5 business days from the receipt of any such phase two
investigation report to notify Seller of any dissatisfaction with the contents
of such report. Should the cost of taking all remedial or other corrective
actions and measures (i) required by applicable law or reasonably likely to be
required by applicable law, or (ii) recommended or suggested by such report or
reports or prudent in light of serious life, health or safety concerns, in the
aggregate, exceed the sum of $150,000 as reasonably estimated by an
environmental expert retained for such purpose by Buyer and reasonably
acceptable to Seller, or if the cost of such actions and measures cannot be so
reasonably estimated by such expert to be such amount or less with any
reasonable degree of certainty, then Buyer shall have the right pursuant to
36
Section 7.1 hereof, for a period of ten business days following receipt of such
estimate or indication that the cost of such actions and measures can not be so
reasonably estimated, to terminate this Agreement, which shall be Buyer's sole
remedy in such event. The costs of the phase one and phase two investigations,
if any, shall be paid by Buyer.
5.19 Transaction Expenses of Seller
------------------------------
(a) For planning purposes, the Seller (as Previously Disclosed) has
provided Buyer with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by the Seller in connection with the
Agreement based on facts and circumstances then currently known, including the
fees and expenses of counsel, accountants, investment bankers and other
professionals. The Seller shall use its best efforts to maintain expenses with
the budget.
(b) Promptly after the execution of this Agreement, the Seller shall ask
all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements within 30 days. The Seller
shall accrue and/or pay all of such amounts as soon as possible.
(c) The Seller shall cause its professionals to render monthly invoices
within 30 days after the end of each month. The Seller shall advise the Buyer
monthly of all out-of-pocket expenses which the Seller has incurred in
connection with the Agreement.
(d) The Seller, in reasonable consultation with the Buyer, shall make all
arrangements with respect to the printing and mailing of the Proxy Statement.
5.20 Success Bonus Plan
------------------
Buyer and Seller will jointly develop a "Success Bonus Plan" which will
provide for payment of a bonus to certain employees of Seller Bank who are not
party to an employment contract for remaining as employees of Seller Bank from
the date hereof to one month after Effective Time.
5.21 Advisory Directors After the Company Merger
-------------------------------------------
Buyer agrees to take all action necessary to appoint all of the individual
non-employee directors of Seller Bank (that is, the President will not be a
member), effective as of the Effective Time, to an advisory board for a period
of at least one year. Buyer shall pay the members of the advisory board a fee of
$500 per month, which is the current board fee of Seller Bank. Subject to the
fiduciary duty of the Board of Directors of Buyer, Buyer will consider the
appointment of individuals to an advisory board for additional periods at a fee
to be determined.
5.22 Voting Agreements
-----------------
At least a majority of the Seller's directors, including the President,
will enter into a voting agreement, a form of which is attached as Exhibit 5.22,
hereto at the time the Seller and Buyer enter into this Agreement.
37
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Buyer and Seller
---------------------------------------
The respective obligations of Buyer and Seller to effect the transactions
contemplated hereby shall be subject to satisfaction of the following conditions
at or prior to the Closing Date.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and completion of the Corporate Merger shall have been duly
and validly taken by Buyer, Merger Sub and Seller, including adoption of this
Agreement by the requisite vote of the shareholders of Seller.
(b) All approvals and consents from any Governmental Entity the approval or
consent of which is required for the completion of the Corporate Merger shall
have been received and all statutory waiting periods in respect thereof shall
have expired; and Buyer, Buyer Bank, Seller and Seller Bank shall have procured
all other approvals, consents and waivers of each person (other than the
Governmental Entities referred to above) whose approval, consent or waiver is
necessary to the completion of the Corporate Merger and the failure of which to
obtain would have the effects set forth in the following proviso clause;
provided, however, that no approval or consent referred to in this Section
6.1(b) shall be deemed to have been received if it shall include any nonstandard
condition or requirement that, in the aggregate, would so materially reduce the
economic or business benefits of the transactions contemplated by this Agreement
to Buyer that had such condition or requirement been known, Buyer, in its
reasonable judgment, would not have entered into this Agreement.
(c) None of Buyer, Buyer Bank, Merger Sub, Seller or Seller Bank shall be
subject to any statute, rule, regulation, injunction or other order or decree
which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
completion of the Corporate Merger.
(d) No proceeding initiated by any Governmental Entity seeking an order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the completion of the Corporate
Merger shall be pending.
6.2 Conditions Precedent - Seller
-----------------------------
The obligations of Seller to effect the transactions contemplated hereby
shall be subject to satisfaction of the following conditions at or prior to the
Closing Date unless waived by Seller pursuant to Section 7.4 hereof.
(a) The representations and warranties of Buyer set forth in Article IV
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, or on the date when made in the case of a representation and warranty
which specifically relates to an earlier date.
38
(b) Buyer shall have performed in all material respects all obligations and
complied with all covenants required to be performed and complied with by it
pursuant to this Agreement on or prior to the Closing Date.
(c) Buyer shall have delivered to Seller a certificate, dated the date of
the Closing and signed by its President and Chief Executive Officer and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.2(a) and 6.2(b) have been satisfied.
(d) Buyer shall have furnished Seller with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.2 as such conditions relate to Buyer
as Seller may reasonably request.
(e) Seller shall have received an opinion of counsel of Buyer, dated the
Closing Date, in form and substance reasonably satisfactory to Seller,
substantially to the effect set forth in Exhibit 6.2(e) hereto.
(f) Seller shall have received a written fairness opinion of KBW dated the
date of this Agreement and as of a date reasonably proximate to the date of the
Proxy Statement, to the effect that the Merger Consideration is fair to the
shareholders of Seller from a financial point of view.
6.3 Conditions Precedent - Buyer
----------------------------
The obligations of Buyer to effect the transactions contemplated hereby
shall be subject to satisfaction of the following conditions at or prior to the
Effective Time unless waived by Buyer pursuant to Section 7.4 hereof.
(a) The representations and warranties of Seller set forth in Article III
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, or on the date when made in the case of a representation and warranty
which specifically relates to an earlier date.
(b) Seller shall have performed in all material respects all obligations
and complied with all covenants required to be performed and complied with by it
pursuant to this Agreement on or prior to the Closing Date.
(c) Seller shall have delivered to Buyer a certificate, dated the date of
the Closing and signed by its President and Chief Executive Officer and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.3(a) and 6.3(b) have been satisfied.
(d) Seller shall have furnished Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to Seller
as Buyer may reasonably request.
(e) No more than 15% the outstanding shares of Seller Common Stock shall be
Dissenting Shares.
39
(f) Buyer shall have received an opinion of counsel to Seller, dated the
Closing Date, in form and substance reasonably satisfactory to Buyer,
substantially to the effect set forth in Exhibit 6.3(f) hereto.
(g) Seller shall have provided Buyer with an accounting of all merger
related expenses incurred by it through the Closing Date, including a good faith
estimate of such expenses incurred but as to which invoices have not been
submitted as of the Closing Date. The merger related expenses of Seller other
than printing expenses (which are within the control of Buyer), shall be
reasonable, taking into account normal and customary billing rates, fees and
expenses for similar transactions.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
-----------
This Agreement may be terminated:
(a) at any time on or prior to the Closing Date, by the mutual consent in
writing of the parties hereto;
(b) at any time on or prior to the Closing Date, by Buyer in writing if
Seller has, or by Seller in writing if Buyer has, breached any covenant or
undertaking contained herein or any representation or warranty contained herein,
unless such breach has been cured within 30 days after written notice of such
breach;
(c) at any time, by either Buyer or Seller in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary to
consummate the Corporate Merger is denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such 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 7(c)(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 completion of the Corporate Merger;
(d) at any time, by either Buyer or Seller in writing, if the shareholders
of Seller do not approve this Agreement after a vote taken thereon at a meeting
duly called for such purpose (or at any adjournment thereof) unless the failure
of such occurrence shall be due to the failure of the party seeking to terminate
to perform or observe in any material respect its agreements set forth herein to
be performed or observed by such party at or before the Closing Date; and
40
(e) by either Buyer or Seller in writing if the Effective Time has not
occurred by the close of business on December 31, 2001, provided that this right
to terminate shall not be available to any party whose failure to perform an
obligation in breach of such party's obligations under this Agreement has been
the cause of, or resulted in, the failure of the Corporate Merger to be
consummated by such date.
(f) by Buyer to the extent provided by Section 5.18, by giving timely
written notice thereof to Seller.
For purposes of this Section 7.1, termination by Buyer also shall be deemed
to be termination on behalf of the Merger Sub.
7.2 Effect of Termination
---------------------
(a) Each of the Parties shall bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel, provided that notwithstanding
anything to the contrary contained in this Agreement, neither Buyer nor Seller
shall be released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.
(b) As a means of compensating the parties for the substantial direct and
indirect monetary and other costs incurred and to be incurred in connection with
this Agreement and the transactions contemplated hereby, the Seller agrees that
if this Agreement is terminated by the Buyer in accordance with Section 7.1(b)
the Seller will upon demand pay to Buyer or Buyer Bank in immediately available
funds all reasonable expenses of Buyer and Buyer Bank in an amount not to exceed
$200,000. Buyer agrees that if this Agreement is terminated by Seller in
accordance with Section 7.1(b), the Buyer will upon demand pay to Seller in
immediately available funds all reasonable expenses of Seller and Seller Bank in
an amount not to exceed $200,000. For purposes of this Section 7.2(b), the
expenses of a party shall include all reasonable out-of-pocket expenses of that
party (including all fees and expenses of counsel, accountants, financial
advisors and consultants to that party) incurred by it or on its behalf in
connection with the consummation of the transactions contemplated by this
Agreement.
If this Agreement is terminated by the Buyer or Seller in accordance with
Section 7.1(d) or (e) and prior to such termination a Termination Event, as
defined in paragraph (c) of this Section 7.2, shall have occurred, the Seller
will upon demand pay to Buyer or Buyer Bank in immediately available funds
$400,000, inclusive of any other amounts that may otherwise be due and payable
in accordance with Section 7.2 hereunder; provided however, no such payment
shall be due or payable hereunder prior to the Seller and/or the Seller Bank
either (1) receiving a publicly announced bona fide offer from a third party
prior to the Seller's shareholder meeting and subsequently failing to receive
shareholder approval of the Agreement and entering into a definitive written
agreement with such third party within 18 months after the Seller's shareholder
meeting, (2) the Seller and/or Seller Bank entering into a written definitive
agreement with a third party with respect to a Takeover
41
Proposal either prior to the meeting of the shareholders of Seller to approve
the Agreement or within 18 months after termination of the Agreement or (3)
within such 18-month period any third-party acquires 25% or more of the Seller
Common Stock. "Takeover Proposal" shall mean any proposal, other than as
contemplated by this Agreement, for a merger or other business combination
involving the Seller or any Seller Subsidiary or for the acquisition of a ten
percent (10%) or greater equity interest in Seller or any Seller Subsidiary, or
for the purchase, lease or other acquisition of a substantial portion of the
assets of Seller or any Seller Subsidiary (other than loans or securities sold
in the ordinary course of business).
(c) For purposes of this Agreement, a Termination Event shall mean either
of the following:
(i) The Seller or any Seller Subsidiary, without
having received Buyer's prior written consent, shall have entered into a written
agreement to engage in a Takeover Proposal with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Exchange Act, and the rules and regulations
thereunder) other than Buyer or any affiliate of Buyer (the term "affiliate" for
purposes of this Agreement having the meaning assigned thereto in Rule 405 under
the Securities Act) or the Board of Directors of the Seller shall have
recommended that the shareholders of the Seller approve or accept any Takeover
Proposal with any person other than Buyer or any affiliate of Buyer; or
(ii) After a bona fide written proposal is made by
any person other than Buyer or any affiliate of Buyer to the Seller or its
shareholders to engage in a Takeover Proposal and is publicly disclosed, either
(A) the Seller shall have breached any covenant or obligation contained in this
Agreement and such breach would entitle Buyer to terminate this Agreement, or
(B) the holders of Seller Common Stock shall not have approved this Agreement at
the Seller's shareholder meeting described in Section 5.2 of this Agreement, a
proxy statement has not been mailed to the holders of Seller Common Stock as a
result of the Board of Directors' exercise of its fiduciary duties as set forth
in Section 5.2 of this Agreement, such shareholder meeting shall not have been
held in a timely manner or shall have been postponed, delayed or enjoined prior
to termination of this Agreement except as a result of a judicial or
administrative proceeding or the Seller's Board of Directors shall have (i)
withdrawn or modified in a manner materially adverse to Buyer the recommendation
of the Seller's Board of Directors with respect to this Agreement, or announced
or disclosed to any third party its intention to do so or (ii) failed to
recommend, in the case of a tender offer or exchange offer for the Seller Common
Stock, against acceptance of such tender offer or exchange offer to its
shareholders or takes no position with respect to acceptance of such tender
offer or exchange offer by its stockholders.
(d) In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality set forth in Section 5.4(b) and this
Section 7.2, shall survive any such termination and (ii) a termination pursuant
to Section 7.1(b), (c), (d), or (e) shall not relieve the breaching party from
any liability or damages arising out of its willful breach of any provision of
this Agreement giving rise to such termination.
42
7.3 Survival of Representations, Warranties and Covenants
-----------------------------------------------------
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including the
covenants set forth in Sections 2.6, 2.8, 5.9, and 5.10 hereof), provided that
no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive Buyer or Seller (or any director,
officer or controlling person of either thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including any shareholder or former shareholder of either Buyer or Seller.
7.4 Waiver
------
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of Seller) extend the time for the performance of any of the
obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement or any document delivered pursuant hereto, (ii) compliance
with any of the covenants, undertakings or agreements of the other party, (iii)
to the extent permitted by law, satisfaction of any of the conditions precedent
to its obligations contained herein or (iv) the performance by the other party
of any of its obligations set forth herein, provided that any such waiver
granted, or any amendment or supplement pursuant to Section 7.5 hereof executed
after shareholders of Seller have approved this Agreement, shall not modify
either the amount or form of the consideration to be provided hereby to the
holders of Seller Common Stock upon completion of the Corporate Merger or
otherwise materially adversely affect such shareholders without the approval of
the shareholders who would be so affected.
7.5 Amendment or Supplement
-----------------------
This Agreement may be amended or supplemented at any time by mutual
agreement of the Parties hereto, subject to the proviso to Section 7.4 hereof.
Any such amendment or supplement must be in writing and authorized by or under
the direction of the Board of Directors of each of the Parties hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement
----------------
This Agreement contains the entire agreement among the Parties with respect
to the transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein and therein. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the Parties hereto and their
respective successors. Nothing in this Agreement, expressed or implied, is
intended to confer
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upon any party, other than the Parties hereto, and their respective successors,
any rights, remedies, obligations or liabilities other than as set forth in
Sections 5.9, 5.10, 5.20 and 5.21 hereof.
8.2 No Assignment
-------------
None of the Parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.3 Notices
-------
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to Buyer:
Advance Financial Bancorp
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a required copy to:
▇▇▇▇▇▇▇ Spidi & ▇▇▇▇▇, PC
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
If to Seller:
Ohio State Financial Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇, President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
44
With a required copy to:
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
8.4 Alternative Structure
---------------------
Notwithstanding any provision of this Agreement to the contrary, Buyer may,
with the written consent of Seller, which shall not be unreasonably withheld, at
any time modify the structure of the acquisition of Seller set forth herein,
provided that (i) the consideration to be paid to the holders of Seller Common
Stock is not thereby changed in kind or reduced in amount as a result of such
modification and (ii) such modification will not materially delay or jeopardize
receipt of any required approvals of Governmental Entities or any other
condition to the obligations of Buyer set forth in Sections 6.1 and 6.3 hereof.
8.5 Interpretation
--------------
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.6 Counterparts
------------
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.7 Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of West Virginia applicable to agreements made and entirely to
be performed within such jurisdiction.
8.8 Severability
------------
Any term, provision, covenant or restriction contained in this Agreement
held to be invalid, void or unenforceable, shall be ineffective to the extent of
such invalidity, voidness or unenforceability, but neither the remaining terms,
provisions, covenants or restrictions contained in this Agreement nor the
validity or enforceability thereof in any other jurisdiction shall be affected
or impaired thereby. Any term, provision, covenant or restriction contained in
this Agreement that is so found to be so broad as to be unenforceable shall be
interpreted to be as broad as is enforceable.
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8.9 Standard of Materiality
-----------------------
No representation or warranty shall be deemed untrue or incorrect, and no
Party shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, event or circumstance, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
has had or is reasonably likely to have a Material Adverse Effect on the Party
making such representation or warranty.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
OHIO STATE FINANCIAL SERVICES, INC.
Attest:
/s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/▇▇▇ ▇▇▇▇▇▇▇
-------------------------------- --------------------------------
Secretary ▇▇▇ ▇▇▇▇▇▇▇, President
ADVANCE FINANCIAL BANCORP
Attest:
/s/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------- --------------------------------
Secretary ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
47