As filed with the Securities and Exchange Commission on March 11, 2002
Registration No. 333-81960
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
AMENDMENT NO. 1 TO FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
FINANCIAL INSTITUTIONS, INC.
(Exact name of registrant as specified in its charter)
New York 6022 16-0816610
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation Classification Code Number) Identification No.)
or organization)
220 Liberty Street
Warsaw, New York 14569
585-786-1100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
John R. Koelmel
Senior Vice President and Chief Administrative Officer
220 Liberty Street
Warsaw, New York 14569
Telephone No.: 585-786-1100/Facsimile No.: 585-786-1108
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------
Copies To:
Nixon Peabody LLP
1300 Clinton Square
Rochester, New York 14604
Attention: Bruce J. Baker, Esq.
Jay S. Mumford, Esq.
Telephone No. 585-263-1000/Facsimile No. 585-263-1600
-------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement and
all other conditions to the merger referred to herein have been satisfied or
waived.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
- ---------------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- -------------------------------- ----------------- ------------------- --------------------------- ------------------
Proposed Proposed Maximum
Title of Each Class of Amount to be Maximum Aggregate Offering Amount of
Securities to be Registered Registered Offering Price Price Registration Fee
Per Security
- -------------------------------- ----------------- ------------------- --------------------------- ------------------
Common Stock, par value $.01 75,000 shares $28.31 (1) $2,123,250 (1) $201.70 (2)
per share
- -------------------------------- ----------------- ------------------- --------------------------- ------------------
(1) Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities
Act, and calculated pursuant to Rule 457(c) under the Securities Act on the basis of the average of the high and
low sale prices of the Common Stock reported on the NASDAQ National Market on March 4, 2002.
(2) $178.48 Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
Prospectus dated March 13, 2002
[Financial Institutions, Inc.'s Logo]
PROSPECTUS
75,000 shares
FINANCIAL INSTITUTIONS, INC.
Common Stock
--------------------
This prospectus covers 75,000 shares of Financial Institutions, Inc.
common stock that we are offering to you as a shareholder of the Bank of Avoca
in exchange for your shares of common stock of Bank of Avoca.
Financial Institutions is not soliciting your proxy. You are invited to
a special meeting of shareholders of the Bank of Avoca on March 28, 2002 at 1:30
p.m. local time at the Avoca United Methodist Church Building. At this meeting
you will be asked to vote on the merger of the Bank of Avoca with and into a
wholly owned subsidiary of Financial Institutions, Inc.
If the merger is approved, you will receive shares of common stock of
Financial Institutions, Inc., and possibly cash, in exchange for your Bank of
Avoca common stock. The aggregate consideration will be determined as follows:
(i) if the average sales price of Financial Institutions common stock, meaning
the average of the daily closing prices per share on the NASDAQ National Market
for the 30 trading days immediately prior to the closing, is equal to or greater
than $20, the aggregate number of shares will be determined by dividing
$1,500,000 by the average sales price, or (ii) if the average sales price is
less than $20, the aggregate number of shares will equal 75,000 and, in
addition, Bank of Avoca shareholders will receive an aggregate amount of cash
equal to the difference between $1,500,000 and the product of the average sales
price multiplied by 75,000. As of the date of this prospectus, there were 5,000
shares of Bank of Avoca common stock outstanding.
Financial Institutions, Inc. common stock is traded on the Nasdaq
National Market under the symbol "FISI." The closing sale price of Financial
Institutions, Inc. common stock on March 4, 2002 was $28.31 per share.
--------------------
THE OFFERING OF FINANCIAL INSTITUTIONS, INC. COMMON STOCK INVOLVES A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
--------------------
NEITHER THE SECURITIES EXCHANGE COMMISSION, NOR ANY STATE SECURITIES
COMMISSION, HAS APPROVED OR DISAPPROVED OF THE MERGER OR THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATIONS TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 13, 2002
TABLE OF CONTENTS
Page
THE COMPANIES.................................................................1
THE MERGER....................................................................3
RISK FACTORS..................................................................5
SELECTED CONSOLIDATED FINANCIAL DATA..........................................8
DESCRIPTION OF THE MERGER....................................................10
DESCRIPTION OF CAPITAL STOCK.................................................14
LEGAL MATTERS................................................................16
EXPERTS......................................................................16
WHERE YOU CAN FIND MORE INFORMATION..........................................16
MERGER AGREEMENT............................................................A-1
DISSENTERS RIGHTS...........................................................A-2
This prospectus incorporates important business and financial
information about Financial Institutions Inc. from documents that are not
included in or delivered with this prospectus. Financial Institutions, Inc. is
also referred to in this prospectus as Financial Institutions, FII or the
Company. This information is available to you without charge upon your written
or oral request. You can obtain documents incorporated by reference in this
prospectus by requesting them in writing or by telephone from Financial
Institutions, Inc. at the following address and telephone number:
Financial Institutions, Inc
220 Liberty Street
Warsaw, New York 14569
Telephone 585-786-1100
TO OBTAIN TIMELY DELIVERY OF SUCH INFORMATION REQUESTED, THE REQUEST
MUST BE MADE BY MARCH 20, 2002, WHICH IS FIVE BUSINESS DAYS PRIOR TO THE MEETING
OF SHAREHOLDERS OF THE BANK OF AVOCA ON MARCH 28, 2002. SEE ALSO "WHERE YOU CAN
FIND MORE INFORMATION" BEGINNING ON PAGE 16.
-----------------------
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this Prospectus,
any prospectus supplement or any document that we have referred you to. We have
not authorized anyone to provide you with different information. We are only
offering these securities in states where the offer is permitted. You should not
assume that the information included in this Prospectus is accurate as of any
date other than the date on the front of those documents.
-ii-
THE COMPANIES
This summary highlights information contained in other parts of this
prospectus. It does not contain all of the information that you should consider
before the transaction is complete. You should read the entire prospectus
carefully.
FINANCIAL INSTITUTIONS, INC.
220 LIBERTY STREET
WARSAW, NEW YORK 14569
585-786-1100
We are a financial holding company headquartered in Warsaw, New York,
which is located 45 miles southwest of Rochester and 45 miles southeast of
Buffalo. We operate as what is referred to in the financial industry as a
super-community financial holding company--a holding company that owns multiple
community banks and other financial services companies that are separately
managed. We own five commercial banks that provide consumer, commercial and
agricultural banking services in Western and Central New York State: Wyoming
County Bank, The National Bank of Geneva, Bath National Bank, The Pavilion State
Bank and First Tier Bank & Trust. We were formed in 1931 to facilitate the
management of three of these banks that had been primarily owned by the Humphrey
family during the late 1800s and early 1900s. In recent years, we have grown
through a combination of internal growth, the opening of new branch offices and
acquisitions. We also now provide varied financial services to our customers and
clients, including brokerage, trust, insurance and benefits consulting services.
As a super-community financial holding company, our strategy has been
to manage our businesses on a decentralized basis. We feel that this strategy
provides us with the flexibility to efficiently serve our markets and respond to
local customer needs. While we generally operate on a decentralized basis, we
have consolidated selected operations and support functions in order to achieve
economies of scale, greater efficiency and operational consistency. We believe
that by expanding our use of the technology that we have already implemented,
and by further centralizing back-office and other common operations, we can
accommodate substantial additional growth without incurring proportionately
greater operational costs.
Our banks provide a wide range of consumer and commercial banking
services and products to individuals, municipalities and small and medium size
businesses, including agribusiness. While our banks function as community banks,
we strive to provide our customers with a broad range of competitive services
generally provided only by larger, regional banks.
BANK OF AVOCA
18 NORTH MAIN STREET
AVOCA, NEW YORK 14809
607-566-2203
Established in 1901, the Bank of Avoca is a commercial bank chartered
by the laws of the state of New York, located in Avoca, New York, which is in
northern Steuben County, approximately 70 miles south of Rochester, New York.
The Bank of Avoca is a small retail oriented institution that operates two full
service branch locations and a remote drive through facility. Avoca stock is not
publicly traded, and the bank is not part of a bank holding company or
affiliated with any other financial institution. Karl V. Anderson, Jr. is the
Bank of Avoca's President and Chief Executive Officer.
At its main office location in Avoca, as well as at its branch located
in Cohocton, New York, Avoca offers various loan and deposit products including
home mortgage loans, home equity loans, business and farm loans, Small Business
Administration loans, personal and credit card loans and other consumer loan
products. In addition, Avoca's deposits include checking, savings and money
market accounts along with certificates of deposits and various other accounts.
According to Avoca's September 30, 2001 Federal Deposit Insurance
Corporation quarterly call report, Avoca had total assets of $18.4 million,
total deposits of $16.8 million and total loans of $10.6 million. Approximately
80 percent of Avoca's loans are secured by real estate, 12 percent are loans to
consumers and 8 percent are commercial and agricultural loans.
1
THE MERGER
Financial Institutions, Inc. has agreed to merge FI
Acquisition III, Inc., its wholly owned subsidiary, with and into the Bank of
Avoca pursuant to an Agreement and Plan of Merger dated as of January 11, 2002
among Financial Institutions, Inc, FI Acquisition III, Inc. and Bank of Avoca.
This transaction contemplates that each issued and outstanding share of Bank of
Avoca common stock, par value $20 per share, will be converted into the right of
each Bank of Avoca shareholder to receive a pro rata share of an aggregate
number of shares of Financial Institutions common stock, and possibly cash, to
be determined on the closing date of the merger as follows: (i) if the average
sales price of Financial Institutions common stock, meaning the average of the
daily closing prices per share on the NASDAQ National Market for the 30 trading
days immediately prior to the closing, is equal to or greater than $20, the
aggregate number of shares will be determined by dividing $1,500,000 by such
average sales price, or (ii) if the average sales price is less than $20, the
aggregate number of shares will equal 75,000 and, in addition, each Bank of
Avoca shareholder will receive a pro rata share of an aggregate amount of cash
equal to the difference between $1,500,000 and the product of the average sales
price multiplied by 75,000. Subsequently, the Bank of Avoca will merge with and
into Bath National Bank and become a branch of Bath National Bank.
AFFILIATE OWNERSHIP
A vote of 66 2/3% of the holders of outstanding Bank of Avoca common
stock is required for the Bank of Avoca to complete the proposed transaction. As
of December 31, 2001, approximately 35% of the issued and outstanding shares of
stock of the Bank of Avoca was held by directors, executive officers and
affiliates of the Bank of Avoca.
A vote of shareholders of Financial Institutions is not required to
complete this transaction. As of December 31, 2001, 9.7% of the issued and
outstanding shares of stock of Financial Institutions was held by directors,
executive officers and affiliates of Financial Institutions.
REGULATORY APPROVALS
The following are a list of regulatory approvals which need to be
obtained to complete the merger. There can be no assurance that the required
approvals will be obtained.
Federal OCC Filings. Under the federal banking statutes and regulations
an application must be filed with the Office of The Comptroller of the Currency,
which was filed on January 14, 2002. On February 26, 2002, the Office of The
Comptroller of the Currency approved the application.
New York Bank Holding Company Act. Under New York State banking law we
must file an application to expand the Financial Institutions Bank Holding
company on a form CB 105, which was filed on January 28, 2002.
Federal Reserve Board Waiver. A waiver must be obtained from the
Federal Reserve Board with respect to the proposed transaction. Such waiver from
the Federal Reserve Board was granted on February 22, 2002.
DISSENTERS RIGHTS AND TAX CONSEQUENCES
Shareholders of the Bank of Avoca have dissenters rights and should
review such description on page 12 of this prospectus. The tax consequences to
Bank of Avoca shareholders are described on page 11 of this prospectus.
STOCK PRICE OF FINANCIAL INSTITUTIONS
Financial Institutions common stock is listed for trading on the Nasdaq
national market under the trading symbol "FISI" and the shares of the Bank of
Avoca are not publicly traded. The last full trading day prior to the
announcement of the transaction was January 10, 2002, and the most recent date
available prior to printing this prospectus was March 4, 2002.
2
. Equivalent price
per share of
Date FISI Avoca Avoca Shares
---- -----------------------------------------------
January 10, 2002 24.89 ___ ___
March 4, 2002 28.31 ___ ___
The shares of stock of the Bank of Avoca are not publicly traded, and a
stock price for such stock prior to and after the announcement of the
transaction is not available. In addition, no dividends have been declared by
the Bank of Avoca during 2000 and 2001.
Below are the high and low closing prices of Financial Institutions
common stock as reported by Nasdaq for the periods indicated.
Sales Price Cash
--------------------------- Dividends
High Low Declared
------------------------------------------
2000
First Quarter 13.250 10.375 0.10
Second Quarter 15.000 11.938 0.10
Third Quarter 15.438 12.375 0.11
Fourth Quarter 15.375 13.375 0.11
2001
First Quarter 20.000 13.000 0.11
Second Quarter 24.250 18.000 0.12
Third Quarter 26.650 21.000 0.12
Fourth Quarter 24.850 17.100 0.13
2002
First Quarter 28.31 23.33 ___
(through March 4, 2002)
3
RISK FACTORS
Prospective investors should carefully consider the risk factors set
forth below, as well as the other information contained in this Prospectus, in
evaluating the securities offered hereby. This Prospectus contains certain
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth below and
elsewhere in this Prospectus.
CHANGES IN INTEREST RATES COULD MAKE US LESS PROFITABLE
Our profitability depends largely on our net interest income, which is
the difference between the interest we receive from loans and investments and
the interest we pay on deposit liabilities and borrowings. Changes in interest
rates may adversely affect our profitability. Interest rates are sensitive to
many factors, including general economic conditions and the policies of
government and regulatory authorities. Changes in the difference between short
and long-term interest rates, commonly known as the yield curve, may also harm
our business. If the difference between short-term and long-term interest rates
shrinks or disappears, we would earn less net interest income.
OUR BORROWERS MAY NOT REPAY US, OUR COLLATERAL MAY BE INSUFFICIENT AND OUR
DECENTRALIZED LENDING AUTHORITY CARRIES RISKS
All lending involves the risk that borrowers may default on their loans
and that loans may be insufficiently collateralized. Most industry experts
believe that agricultural, commercial and consumer loans, which accounted for
approximately 79% of our total loans outstanding at December 31, 2001, expose a
lender to a greater risk of loss than one- to four-family residential loans,
which accounted for approximately 21% of our total loans outstanding at
December 31, 2001.
The independent appraisals we use to value our collateral may overstate
such value of our collateral and we may use existing appraisals that may not be
current. Also, our banks may not be able to realize the full value of our
collateral in the event of a foreclosure. The value of collateral such as
farmland, farm equipment, construction equipment, cattle, crops and receivables
generated by agricultural and construction-related businesses may be adversely
affected by falling prices for farm commodities or a decline in construction
work in our area. Many of our commercial loans are collateralized by personal
guarantees of the owners of the farm or business obtaining the loan. In the
event the personal financial condition of the guarantors deteriorates, these
guarantees may be of limited value.
There is additional lending risk inherent in our decentralized
management structure. Because most loans are made at the branch or individual
bank level, there are a number of loan officers with the ability to approve
loans. This increases the possibility of errors, noncompliance with underwriting
standards and fraud.
WE MAY FAIL TO IMPLEMENT OUR ACQUISITIONS SUCCESSFULLY, ACHIEVE SAVINGS AND
REALIZE THE OTHER ANTICIPATED BENEFITS FROM THE ACQUISITIONS BECAUSE OF
DIFFICULTIES IN INTEGRATING OUR BUSINESS OPERATIONS.
We recently acquired Bath National Bank, a community bank based in
Bath, New York and the Burke Group, Inc., a full service benefits consulting
business located in Honeoye Falls, New York. The integration of the acquired
businesses following an acquisition are complex and time-consuming and present
us with challenges. As a result, we may not be able to operate the combined
company as effectively as we expect. We may also fail to achieve the anticipated
potential benefits of the acquisitions as quickly or as cost effectively as we
anticipate or may not be able to achieve those benefits at all. Specifically, we
will face significant challenges integrating the companies' organizations,
procedures and operations in a timely and efficient manner and retaining key
personnel. In addition, our management will have to dedicate substantial effort
to integrating the acquired businesses and branches and, therefore, its focus
and resources may be diverted from other strategic opportunities and from
operational matters. There may also be undisclosed liabilities that we assume
with the acquired business.
4
IF WE LOSE ANY OF OUR KEY PERSONNEL, WE MAY NOT BE ABLE TO REPLACE THEM
We are very dependent on our key personnel, including Peter G. Humphrey
and the presidents of our five banks. The loss of Mr. Humphrey or other members
of senior management could have an adverse effect on us. Qualified replacements
could be difficult to find or retain.
INTENSE COMPETITION COULD HURT OUR FINANCIAL PERFORMANCE OR CAUSE US TO LOSE
MARKET SHARE
Our competition is intense, and we expect that it will continue. If we
are unable to compete effectively, our profitability will be reduced. We compete
with other commercial banks, savings banks, savings and loan associations,
credit unions, finance companies, mutual funds, insurance companies and other
financial institutions, as well as with retail stores which offer credit
programs and governmental agencies. Many of our competitors have greater
financial strength, marketing capability and name recognition than we do, and
operate on a statewide or nationwide basis. In addition, recent developments in
technology and mass marketing have permitted larger companies to market loans
more aggressively to our small business customers. Such advantages may give our
competitors opportunities to realize greater efficiencies and economies of scale
than we can. Competition for loans and deposits reduces interest rate spreads,
which reduces our net interest income.
IF THE ECONOMIC CONDITIONS IN OUR MARKET AREAS DETERIORATE, OUR BORROWERS MAY BE
UNABLE TO PAY THEIR LOANS
Adverse changes in our local market economies may have a material
adverse effect on our business. Our business depends heavily on general economic
conditions within our primary market areas, which have seen limited economic
growth in the past decade. Our primary market areas are substantially rural,
which may limit our prospects for growth.
WE MAY NOT BE ABLE TO UNDERTAKE ACTIVITIES THAT WE WOULD LIKE TO BECAUSE OF
GOVERNMENTAL REGULATIONS; CHANGES IN GOVERNMENTAL REGULATIONS MAY FORCE US TO
ALTER THE WAY WE CONDUCT OUR BUSINESS
We and our banks operate in a highly regulated environment and are
subject to supervision and examination by several federal and state regulatory
agencies, including the Federal Reserve Board, the FDIC, the Office of the
Comptroller of the Currency and the New York State Banking Department. The laws
and regulations administered by these agencies are intended primarily for the
protection of depositors and customers, rather than for the benefit of investors
in our stock, and may adversely affect our business. Federal laws and
regulations govern numerous matters including adequate capital and financial
condition, permissible types, amounts and terms of extensions of credit and
investments, permissible non-banking activities and restrictions on dividend
payments. The federal and state regulators have extensive discretion and power
to prevent or remedy unsafe or unsound practices or violations of law by banks
and bank holding companies. Following periodic examinations by regulatory
agencies, we may be required, among other things, to change our asset valuations
or the amounts of required loss allowances or to restrict our operations. The
banks' operations are also subject to a wide variety of state and federal
consumer protection and similar statutes and regulations. Such federal and state
regulatory restrictions limit the manner in which Financial Institutions and the
banks may conduct business and obtain financing. We are subject to changes in
federal and state laws, as well as changes in regulations and governmental
policies, income tax laws and accounting principles. The Federal Reserve Board
has adopted a policy that can require a financial holding company to contribute
cash to its bank subsidiaries, which could have the effect of decreasing funds
available for distributions to our shareholders. In addition, in certain
circumstances we could be required to guarantee the capital plan of an
undercapitalized bank subsidiary.
YOU MAY NOT RECEIVE DIVIDENDS ON YOUR COMMON STOCK AND THE AMOUNT OF DIVIDENDS
THAT YOU DO RECEIVE MAY BE LESS THAN WE HAVE PAID IN THE PAST
While we currently pay cash dividends on our common stock, there can be
no assurance that we will do so in the future. The declaration and payment of
dividends on our common stock will depend upon our earnings and financial
condition, liquidity and capital requirements, the general economic and
regulatory climate, specific regulatory requirements, our ability to service any
equity or debt obligations senior to the common stock and other factors deemed
relevant by our Board of Directors.
YOU WILL HAVE A MINIMAL INFLUENCE ON SHAREHOLDER DECISIONS
5
A small number of our shareholders are able to significantly influence
our management policies and decisions and matters which require a shareholder
vote. Their interests, and the interests of the executive officers and directors
who are members of the Humphrey family, may differ from the interests of other
shareholders with respect to management issues. As of December 31, 2001, our
executive officers and directors beneficially own 1,152,445, or 10.6%, of the
outstanding shares of common stock. In addition W. J. Humphrey, Jr., Margaret H.
Wyckoff, Gail Humphrey their children and grandchildren, and their respective
immediate family members own a significant portion of the outstanding shares of
common stock. In addition, Wyoming County Bank beneficially owns 643,435, or
5.8%, of the outstanding shares of common stock in its capacity as trustee of
trusts established by members of the Humphrey family.
Possible future sales of our common stock by our directors, officers
and other shareholders could cause the market value of our common stock to
decline and may make raising equity capital more difficult.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED IN THIS PROSPECTUS, INCLUDING
DOCUMENTS INCORPORATED BY REFERENCE, MAY CONSTITUTE FORWARD-LOOKING STATEMENTS
FOR PURPOSES OF THE SECURITIES ACT AND THE SECURITIES AND EXCHANGE ACT OF 1934,
AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS MAY INVOLVE RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS AND PERFORMANCE OF THE COMPANY
TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS OR PERFORMANCE EXPRESSED OR
IMPLIED BY SUCH STATEMENTS.
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY ARE EXPRESSLY QUALIFIED BY THE FOREGOING CAUTIONARY STATEMENTS.
-----------------------
6
SELECTED CONSOLIDATED FINANCIAL DATA
(dollars in thousands, except per share data)
This section presents our selected historical financial data. You
should read carefully the financial statements incorporated by reference. The
selected data in this section is not intended to replace the financial
statements.
We derived the consolidated income statement data for the years ended
December 31, 2001, 2000, and 1999, and consolidated statements of financial
condition data as of December 31, 2001 and 2000, from the audited consolidated
financial statements incorporated by reference. We derived the consolidated
income statement data for the years ended December 31, 1998 and 1997 and the
consolidated statements of financial condition data as of December 31, 1999,
1998 and 1997 from consolidated audited financial statements which are not
included in this prospectus. Our consolidated financial statements as of and for
each of the years ended December 31, 2001, 2000, 1999, 1998 and 1997 have been
audited by KPMG LLP.
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- ------- -------- -------
INCOME STATEMENT DATA:
Interest income................................. $114,468 $96,467 $78,692 $72,870 $67,168
Interest expense................................ 49,694 43,605 31,883 30,958 27,851
------ ------ ------ ------ ------
Net interest income............................. 64,774 52,862 46,809 41,912 39,317
Provision for loan losses....................... 4,958 4,211 3,062 2,732 2,829
------ ------ ------ ------- ------
Net interest income after provision
for loan losses.............................. 59,816 48,651 43,747 39,180 36,488
Noninterest income.............................. 15,782 9,409 8,055 6,381 5,733
Noninterest expense............................. 43,352 30,156 27,032 24,602 22,084
------ ------ ------ ------- ------
Income before income taxes...................... 32,246 27,904 24,770 20,959 20,137
Income taxes.................................... 11,033 9,804 8,813 7,354 7,295
------ ------ ------ ------- ------
Net income...................................... 21,213 18,100 15,957 13,605 12,842
Preferred dividends............................. 1,496 1,496 1,503 1,506 1,513
------ ------ ------ ------- ------
Net income available to common shares........... $19,717 $16,604 $14,454 $12,099 $11,329
======= ====== ====== ====== ======
PER COMMON SHARE DATA:
Net income per common share (diluted)........... $1.77 $1.51 $1.38 $1.22 $1.14
Book value...................................... $11.93 $10.36 $9.05 $7.94 $6.94
Tangible book value(1).......................... $8.37 $10.15 $8.77 $7.54 $6.46
Cash dividends declared......................... $0.48 $0.42 $0.31 $0.26 $0.22
Common dividend payout ratio.................... 26.77% 27.81% 22.54% 21.43% 19.28%
Weighted average shares outstanding (diluted)... 11,125,524 10,996,201 10,474,465 9,915,921 9,926,678
Shares outstanding at end of period............. 11,021,314 10,986,721 11,017,733 9,915,600 9,928,500
STATEMENT OF FINANCIAL CONDITION DATA:
Total assets.................................... $1,794,296 $1,289,327 $1,136,460 $976,185 $880,512
Securities...................................... 489,704 334,770 281,628 248,038 209,207
Loans........................................... 1,166,050 887,145 763,745 655,427 602,477
Allowance for loan losses....................... 19,074 13,883 11,421 9,570 8,145
Goodwill and other intangible assets............ 39,166 2,381 3,118 3,957 4,796
Total deposits.................................. 1,433,658 1,078,111 949,531 850,455 767,726
Borrowings...................................... 174,189 62,384 56,336 13,862 12,066
Preferred equity................................ 17,752 17,758 17,812 17,858 17,927
Common equity................................... 131,435 113,860 99,727 78,720 68,916
Total shareholders' equity...................... 149,187 131,618 117,539 96,578 86,843
7
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
2001 2000 1999 1998 1997
------- ------- ------- ------- ----------
AVERAGE BALANCE SHEET DATA:
Total assets.................................... $1,588,172 $1,197,616 $1,036,461 $918,408 $834,786
Securities...................................... 421,945 308,643 274,290 227,352 197,992
Loans........................................... 1,056,720 825,953 700,062 621,418 571,877
Allowance for loan losses....................... 16,825 12,509 10,261 8,910 7,370
Total deposits.................................. 1,303,211 998,668 888,670 798,954 730,098
Borrowings...................................... 107,530 60,978 26,398 13,635 10,585
Preferred equity................................ 17,755 17,767 17,842 17,883 17,980
Common equity................................... 124,466 105,197 89,460 74,323 64,286
Total shareholders' equity...................... 142,221 122,964 107,302 92,206 82,266
PERFORMANCE RATIOS:
Return on average assets........................ 1.34% 1.51% 1.54% 1.48% 1.54%
Return on average common equity................. 15.84% 15.78% 16.16% 16.28% 17.62%
Net interest margin (tax-equivalent)(2)......... 4.62% 4.87% 5.00% 5.06% 5.21%
Efficiency ratio(3)............................. 48.49% 45.19% 45.55% 46.64% 45.22%
ASSET QUALITY RATIOS:(4)(5)
Nonperforming loans to total loans.............. 0.86% 0.80% 0.75% 0.93% 1.24%
Nonperforming assets to total
loans and other real estate.................. 0.94% 0.91% 0.88% 1.24% 1.62%
Net loan charge-offs to average
loans(4)..................................... 0.23% 0.21% 0.17% 0.21% 0.32%
Allowance for loan losses to
total loans.................................. 1.64% 1.56% 1.50% 1.46% 1.35%
Allowance for loan losses to
nonperforming loans.......................... 190.32% 195.06% 198.83% 156.86% 108.95%
CAPITAL RATIOS:(4)
Average common equity to
average total assets......................... 7.84% 8.78% 8.63% 8.09% 7.70%
Leverage ratio.................................. 7.02% 10.19% 10.80% 9.58% 9.53%
Tier 1 risk-based capital ratio................. 9.81% 14.02% 14.94% 13.71% 13.58%
Risk-based capital ratio........................ 11.37% 15.27% 16.19% 14.96% 14.81%
Goodwill and intangibles to tangible common equity 42.45% 2.14% 3.23% 5.29% 7.48%
- -----------------------------------
(1) Calculated by dividing common shareholders' equity less goodwill and other intangible assets, by common
shares outstanding at end of the applicable period.
(2) Calculated using a 35% federal income tax rate.
(3) Calculated by dividing total noninterest expense less other real estate expense and amortization of goodwill
and intangible assets by the sum of tax-equivalent net interest income and noninterest income excluding
securities gains and losses.
(4) Except for the ratio of net loan charge-offs to average loans and the ratio of average common equity to
average total assets, all asset quality ratios and capital ratios have been stated as of the end of the
applicable period.
(5) Nonperforming loans include nonaccrual loans, restructured loans and accruing loans 90 days or more delinquent.
8
DESCRIPTION OF THE MERGER
On January 11, 2002 the parties executed a definitive merger agreement
whereby Financial Institutions, Inc. has agreed to merge a wholly owned
subsidiary with and into the Bank of Avoca subject to the approval by the
shareholders of the Bank of Avoca.
BANK OF AVOCA REASONS FOR THE MERGER
In reaching its decision to approve the merger agreement and the
merger, the board of directors of the Bank of Avoca consulted with its
management team and advisors and independently considered the proposed merger
agreement and the transactions contemplated under such merger agreement. The
board of directors of the Bank of Avoca considered the advantages to its
customers and employees of being part of a larger bank holding company and the
stockholder benefit created by exchanging shares of the privately held Bank of
Avoca for shares of the publicly held Financial Institutions.
FINANCIAL INSTITUTIONS REASONS FOR THE MERGER
In reaching its decision to approve the merger agreement and the
merger, the board of directors of Financial Institutions consulted with its
management team and advisors and independently considered the proposed merger
agreement and the transactions contemplated under such merger agreement. The
board of directors of Financial Institutions evaluated the opportunity to expand
the market presence its subsidiary, Bath National Bank, through the acquisition
of the Bank of Avoca.
MERGER AGREEMENT
Financial Institutions, Inc. has agreed to merge FI Acquisition III,
Inc., its wholly owned subsidiary, with and into the Bank of Avoca pursuant to
an Agreement and Plan of Merger dated as of January 11, 2002 among Financial
Institutions, Inc, FI Acquisition III, Inc. and Bank of Avoca. This transaction
contemplates that each issued and outstanding share of Bank of Avoca common
stock, par value $20 per share, will be converted into the right of each Bank of
Avoca shareholder to receive a pro rata share of an aggregate number of shares
of Financial Institutions common stock, and possibly cash, to be determined on
the closing date of the merger as follows: (i) if the average sales price of
Financial Institutions common stock, meaning the average of the daily closing
prices per share on the NASDAQ National Market for the 30 trading days
immediately prior to the closing, is equal to or greater than $20, the aggregate
number of shares will be determined by dividing $1,500,000 by such average sales
price, or (ii) if the average sales price is less than $20, the aggregate number
of shares will equal 75,000 and, in addition, each Bank of Avoca shareholder
will receive a pro rata share of an aggregate amount of cash equal to the
difference between $1,500,000 and the product of the average sales price
multiplied by 75,000. Subsequently, the Bank of Avoca will merge with and into
Bath National Bank and become a branch of Bath National Bank.
By way of example, if the average sales price of Financial Institutions
common stock is $25, each share of Bank of Avoca common stock will entitle the
holder to receive twelve shares of Financial Institutions common stock.
The following summarizes some material provisions of the merger
agreement. You should read carefully the merger agreement which is attached as
Exhibit A to this prospectus and incorporated herein by reference.
Conditions to completion of the Merger.
Each party's obligation to effect the merger is subject to the
satisfaction or waiver of various conditions which include, in addition to other
customary closing conditions the following:
o Receipt of all necessary regulatory, governmental or third party approvals,
waivers, clearances, authorizations and consents, including from the New
York State Banking Department, the Federal Reserve Board and the Office of
the Comptroller of the Currency, required to consummate the merger;
9
o No court with appropriate jurisdiction has issued an order, judgment,
decree, injunction or ruling which restrains, enjoins, prohibits or
prevents, after the best efforts of the parties to cause such action to be
vacated or lifted, the completion of the merger; and
o Approval by Bank of Avoca Shareholders.
The Bank of Avoca's obligation to close is subject to the satisfaction or
waiver of various conditions which include, in addition to other customary
closing conditions the following:
o The registration statement of which this prospectus forms a part must have
been declared effective by the Securities and Exchange Commission and must
remain effective;
o The shares of Financial Institution's common stock issuable in connection
with the merger must have been approved for listing on the Nasdaq national;
and
o Receipt of an opinion by the Bank of Avoca's tax advisor, R.A. Mercer
& Co., P.C., that the merger qualifies as a tax-free reorganization under
the Internal Revenue Code.
Financial Institution's obligation to close is subject to the satisfaction
or waiver of various conditions which include customary closing conditions and
satisfactory due diligence review by Financial Institutions to be completed by
February 11, 2001.
REGULATORY APPROVALS
The following are a list of regulatory approvals which need to be
obtained to complete the merger. There can be no assurance that the required
approvals will be obtained.
Federal OCC Filings. Under the federal banking statutes and regulations
an application must be filed with the Office of The Comptroller of the Currency,
which was filed on January 14, 2002. On February 26, 2002, the Office of The
Comptroller of the Currency approved the application.
New York Bank Holding Company Act. Under New York State banking law we
must file an application to expand the Financial Institutions Bank Holding
company on a form CB 105, which was filed on January 28, 2002.
Federal Reserve Board Waiver. A waiver must be obtained from the
Federal Reserve Board with respect to the proposed transaction. Such waiver from
the Federal Reserve Board was granted on February 22, 2002.
MATERIAL INCOME TAX CONSEQUENCES
The following is a summary of material U.S. federal income tax
consequences of the merger to holders or other beneficial owners of Bank of
Avoca common stock that are U.S. persons and that hold such stock as a capital
asset as defined in Section 1221 of the Internal Revenue Code of 1986, as
amended (generally, property held for investment is a capital asset). For these
purposes, you are a U.S. person if you are either (1) a citizen or resident of
the United States for U.S. federal income tax purposes, (2) a corporation or
partnership created or organized in or under the laws of the United States or
any political subdivision thereof, (3) an estate, the income of which is subject
to U.S. federal income tax regardless of the source or (4) a trust with respect
to which a court within the United States is able to exercise primary
supervision over your administration and one or more U.S. persons have the
authority to control all your substantial decisions. This summary is based on
the Internal Revenue Code, Treasury regulations, administrative rulings and
court decisions, all as in effect as of the date hereof and all of which are
subject to change at any time (possibly with retroactive effect). This summary
is not a complete description of all tax consequences of the merger and, in
particular, may not address U.S. federal income tax considerations applicable to
stockholders subject to special treatment under U.S. federal income tax law. In
addition, no information is provided herein with respect to the tax consequences
of the merger under applicable foreign, state or local laws.
10
The material U.S. federal income tax consequences of the merger are as
follows:
o the merger will constitute a reorganization within the meaning of
Section 368(a)(1) of the Internal Revenue Code;
o no gain or loss will be recognized by the holders of Bank of
Avoca common stock who exchange their Bank of Avoca common stock
for Financial Institutions common stock pursuant to the merger,
except with respect to any cash received in lieu of a fractional
share of Financial Institutions common stock;
o the aggregate tax basis of the Financial Institutions common
stock received in the merger by each holder of Bank of Avoca
common stock will be the same as the aggregate tax basis of the
Bank of Avoca common stock surrendered in exchange therefor,
reduced by any amount of tax basis allocable to a fractional
share interest in Financial Institutions common stock for which
cash is received;
o the holding period of the Financial Institutions common stock
received in the merger by a former Bank of Avoca stockholder will
include the holding period of the Bank of Avoca common stock
surrendered in exchange therefor;
o a Bank of Avoca stockholder who receives cash in lieu of a
fractional share interest in Financial Institutions common stock
pursuant to the merger will be treated as having received such
cash in exchange for such fractional share interest and generally
will recognize capital gain or loss on such deemed exchange in an
amount equal to the difference between the amount of cash
received and the tax basis of the Bank of Avoca common stock
allocable to such fractional share interest; and
o no gain or loss will be recognized by Financial Institutions,
Financial Institutions shareholders, or Bank of Avoca as a result
of the merger.
Under the U.S. backup withholding rules, as a holder of Bank of Avoca
common stock you may be subject to backup withholding at the rate of 31% on any
cash received in lieu of fractional shares of Financial Institutions common
stock, unless you (1) are a corporation or come within other exempt categories
and, when required, demonstrate this fact or (2) provide a correct taxpayer
identification number, certify that you are not subject to backup withholding
and otherwise comply with applicable requirements of the backup withholding
rules. Any amount withheld under these rules will be credited against your
federal income tax liability provided you furnish the required information to
the IRS. If you do not comply with the backup withholding rules, you may be
subject to penalties imposed by the IRS.
The preceding summary does not purport to be a complete analysis or
discussion of a potential tax effect relevant to the merger. You are urged to
consult with your own tax advisors regarding the U.S. federal income and other
tax consequences of the merger to you, under state, local and foreign tax laws.
DESCRIPTION OF THE BANK OF AVOCA
The Bank of Avoca is a retail oriented commercial bank chartered by the laws of
the state of New York. The Bank of Avoca offers various loan and deposit
products including home mortgage loans, home equity loans, business and farm
loans, Small Business Administration loans, personal and credit card loans and
other consumer loan products. In addition, Avoca's deposits include checking,
savings and money market accounts along with certificates of deposits and
various other accounts.
ACCOUNTING TREATMENT
Financial Institutions will account for the merger under the purchase
method of accounting in accordance with generally accepted accounting
principles. The purchase price will be allocated based on the fair value of the
assets acquired and the liabilities assumed.
11
DISSENTERS RIGHTS
The discussion of the provisions of New York law relating to dissenters
rights is not intended to be a complete statement of those provisions and you
should refer to the full text of ss.6022 of New York Banking Law attached as
Exhibit B to this prospectus. Pursuant to the ss.6022 of New York Banking Law
the shareholders of the Bank of Avoca who have not voted in favor of the Merger
or consented thereto in writing and who have delivered to the Bank of Avoca
written demand for appraisal of the fair value of such Bank of Avoca shares
prior to the shareholder meeting in accordance with New York Law shall not be
converted into or represent the right to receive the Financial Institutions
common stock to be issued pursuant to this prospectus. Such Bank of Avoca
shareholders instead shall be entitled to receive payment of the fair value of
all Bank of Avoca shares held by them in accordance with the provisions of New
York Law, except that all shares held by shareholders who shall have failed to
perfect or who effectively shall have withdrawn or otherwise lost their
dissenters' rights under New York Law shall thereupon be deemed to have been
converted into and to have become exchangeable, at the closing of the merger,
for the right to receive, without any interest thereon, the shares of Financial
Institutions, Inc. common stock pursuant to the merger agreement.
DIFFERENCES IN STOCK
Financial Institutions is a bank holding company incorporated under the
laws of the state of New York and the rights of Financial Institutions
shareholders are currently governed by the New York Business Corporation Law,
Financial Institutions' certificate of incorporation and Financial Institutions'
by-laws. The Bank of Avoca is a commercial bank chartered under the laws of the
state of New York and the rights of the Bank of Avoca shareholders are currently
governed by the New York Business Corporation law, the Bank of Avoca's
certificate of incorporation and the Bank of Avoca's by-laws. Upon completion of
the merger the rights of the Bank of Avoca shareholders will be governed by the
Financial Institutions certificate of incorporation and by-laws. The following
summarizes some material differences which may affect the rights of stockholders
of the Bank of Avoca as they become shareholders of Financial Institutions, but
is not a complete summary. You should read carefully the relevant provisions of
Financial Institutions' and the Bank of Avoca's certificate of incorporation and
by-laws.
Authorized Capital Stock
Financial Institutions' authorized capital stock consists of 50,000,000
shares of common stock, $.01 par value per share, of which 11,303,533 shares
were issued and 11,021,314 were outstanding as of December 31, 2001; 10,000
shares of Class A Preferred Stock, $100.00 par value per share, of which there
were 1,666 shares of Series A 3% Preferred Stock issued and outstanding as of
December 31, 2001; and 200,000 shares of Class B Preferred Stock, $100.00 par
value per share, of which 180,000 shares have been designated as Series B-1
8.48% Preferred Stock (of which 175,855 shares were issued and outstanding as of
December 31, 2001).
The Bank of Avoca's authorized capital stock consists of 5,000 shares
of common stock, $20.00 par value per share, all of which were issued and
outstanding at December 31, 2001.
Board of Director Share Ownership
Financial Institutions' directors are not required by its by-laws to
have any ownership of Financial Institutions Stock. The Bank of Avoca's
directors must, according to its by-laws, own at least fifty unencumbered shares
of capital stock of the Bank of Avoca having aggregate par value of at least
$1,000 or if the shares are without par then they must have an aggregate book
value of $1,000.
MATERIAL CONTRACTS
Besides the agreements entered into with respect to the Merger, there
are no material contracts between Financial Institutions, Inc. or its officers
and directors and the Bank of Avoca and its officers and directors.
12
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Our authorized capital stock consists of:
50,000,000 shares of common stock, $.01 par value per share, of which
11,303,533 shares were issued and 11,021,314 were outstanding as of
December 31, 2001;
10,000 shares of Class A Preferred Stock, $100.00 par value per share, of
which there were 1,666 shares of Series A 3% Preferred Stock issued and
outstanding as of December 31, 2001; and
200,000 shares of Class B Preferred Stock, $100.00 par value per share, of
which 180,000 shares have been designated as Series B-1 8.48% Preferred
Stock (of which 175,855 shares were issued and outstanding as of December
31, 2001).
The terms of any new series of preferred stock may be fixed by our
Board of Directors within certain limits set by our Certificate of
Incorporation.
The following discussion of the terms and provisions of our capital
stock is qualified in its entirety by reference to our Certificate of
Incorporation and By-laws, copies of which have been filed as exhibits to the
Registration Statement of which this prospectus is a part.
COMMON STOCK
The holders of the common stock are entitled to one vote for each share
of common stock owned. Except as expressly provided by law and except for any
voting rights which may be conferred by the Board of Directors on any shares of
preferred stock issued, the holders of our preferred stock do not have the right
to vote. Holders of common stock may not cumulate their votes for the election
of directors. Holders of common stock do not have preemptive rights to acquire
any additional, unissued or treasury shares of Financial Institutions, or
securities of Financial Institutions convertible into or carrying a right to
subscribe for or acquire shares of Financial Institutions.
Holders of common stock will be entitled to receive dividends out of
funds legally available therefor, if and when properly declared by the Board of
Directors.
On the liquidation of Financial Institutions, the holders of common
stock are entitled to share pro rata in any distribution of our assets after the
holders of shares of preferred stock have received the liquidation preference of
their shares plus accumulated but unpaid dividends (whether or not earned or
declared), if any, and after all of our other indebtedness has been provided for
or satisfied.
PREFERRED STOCK
There are two classes of preferred stock, Class A preferred stock and
Class B preferred stock. The Certificate of Incorporation provides that both
classes of preferred stock are issuable in one or more series. There is one
series of Class A preferred stock that has been created, Series A 3% Preferred
Stock, and one class of Series B preferred stock that has been created, Series
B-1 8.48% Preferred Stock.
Holders of Series A 3% Preferred Stock are entitled to receive an
annual dividend of $3.00 per share, which is cumulative and payable quarterly.
Holders of Series A 3% Preferred Stock have no pre-emptive right in, or right to
purchase or subscribe for, any additional shares of Financial Institutions stock
and have no voting rights. Dividend or dissolution payments to the Class A
shareholders must be declared and paid, or set apart for payment,
13
before any dividends or dissolution payments can be declared and paid, or set
apart for payment, to the holders of Class B preferred stock or common stock.
The Series A 3% Preferred Stock is not convertible into any other Financial
Institutions security.
Holders of Series B-1 8.48% Preferred Stock are entitled to receive an
annual dividend of $8.48 per share, which is cumulative and payable quarterly.
Holders of Series B-1 8.48% Preferred Stock have no pre-emptive right in, or
right to purchase or subscribe for, any additional shares of Financial
Institutions stock and have no voting rights. Accumulated dividends on the
Series B-1 8.48% Preferred Stock do not bear interest, and the Series B-1 8.48%
Preferred Stock is not subject to redemption. Dividend or dissolution payments
to the Class B shareholders must be declared and paid, or set apart for payment,
before any dividends or dissolution payments are declared and paid, or set apart
for payment, to the holders of common stock. The Series B-1 8.48% Preferred
Stock is not convertible into any other Financial Institutions security.
The Board of Directors of Financial Institutions may, in the future,
designate additional series of preferred stock, and to fix the relative rights,
preferences and limitations of each such series. The unissued shares of Series A
3% preferred stock, Series B-1 8.48% Preferred Stock and any new series of
preferred stock designated by the Board of Directors may be issued by the Board
of Directors in the future.
14
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon by Nixon Peabody LLP, Rochester, New York.
EXPERTS
The consolidated financial statements of Financial Institutions, Inc.
and subsidiaries as of December 31, 2001, 2000 and 1999 and for each of the
years in the three-year period ended December 31, 2001 have been included in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference, and upon the authority
of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus, filed as a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement or
the exhibits and schedules thereto as permitted by the rules and regulations of
the SEC. Statements made in this prospectus concerning the contents of any
contract, agreement or other document filed as an exhibit to the Registration
Statement are summaries of the terms of such contracts, agreements or documents
and are not necessarily complete. Reference is made to each such exhibit for a
more complete description of the matters involved and such statements shall be
deemed qualified in their entirety by such reference. The Registration Statement
and the exhibits and schedules thereto filed with the SEC may be inspected,
without charge, and copies may be obtained at prescribed rates, at the public
reference facility maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Registration Statement and other information
filed by us with the SEC are also available at the SEC's World Wide Web site on
the internet at http://www.sec.gov.
Financial Institutions has filed with the SEC a registration statement
on Form S-4 under the Securities Exchange Act with respect to the shares of
Financial Institutions common stock to be issued in the merger. This prospectus,
which is a part of that registration statement does not contain all the
information set forth in the registration statement, selected portions of which
are omitted in accordance with the rules and regulations of the SEC. For further
information with respect to Financial Institutions, and the Financial
Institutions common stock, reference is hereby made to the registration
statement (including its exhibits and schedules).
The SEC allows us to "incorporate by reference" information into this
Prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. Statements
contained in this prospectus or in any document incorporated by reference in
this prospectus as to the contents of any contract or other document referred to
herein or therein are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document (if any) filed as an
exhibit to the registration statement or such other document, each such
statement being qualified in all respects by such reference. The information
incorporated by reference is deemed to be part of this prospectus. This
prospectus incorporates by reference the documents that Financial Institutions
has previously filed with the SEC. These documents contain important information
about Financial Institutions its finances.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have been filed by the Company with the
Commission are hereby incorporated in this Prospectus by reference:
1) Our Annual Report on Form 10-K for the year ended December
31, 2001, filed with the Commission on March 11, 2002.
2) Our proxy statement with respect to the Registrant's 2001
annual meeting filed with the Commission on April 24, 2001.
15
3) Our Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2001, filed with the Commission on May 15, 2001.
4) Our Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2001, filed with the Commission on August 14, 2001.
5) Our Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2001, filed with the Commission on November 14,
2001.
6) Our Report on Form 8-K filed with the Commission on May 11,
2001 and on Form 8-K/A, filed with the Commission on July 16, 2001.
7) Our Registration Statement on Form 8-A dated June 23, 1999
(registration no. 000-26481).
8) All documents subsequently filed by the Registrant pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934 subsequent to the date of this Registration Statement and prior
to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all
securities remaining unsold shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of
such documents.
Any statement contained herein or in a document which is incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement in
any subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such prior statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The following are attached as exhibits to this prospectus.
Exhibit A - Agreement and Plan of Merger
Exhibit B - ss.6022 of the New York Banking Law
16
EXHIBIT A - AGREEMENT AND PLAN OF MERGER
----------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 11, 2002
AMONG
FINANCIAL INSTITUTIONS, INC.
FI ACQUISITION III, INC.
AND
BANK OF AVOCA
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of the
11th day of January, 2002, by and among Financial Institutions, Inc., a New York
corporation and registered financial holding company (the "Buyer"), FI
Acquisition III, Inc., a New York corporation and wholly-owned subsidiary of
Buyer (the "Merger Subsidiary"), and Bank of Avoca, a commercial bank chartered
under the laws of New York (the "Company").
WHEREAS, the parties hereto have considered a proposal whereby Bath
National Bank ("Bath National Bank"), a national banking association and
wholly-owned subsidiary of Buyer, will acquire the Company, such acquisition to
be accomplished by (i) the merger of Merger Subsidiary with and into the
Company, whereby each issued and outstanding share of common stock, par value
$20 per share, of the Company (the "Company Shares") will be converted into the
right of the holder thereof (each a "Shareholder," and collectively the
"Shareholders") to receive common stock, par value $.01 per share, of Buyer (the
"Buyer Stock"), and (ii) the subsequent merger of the Company with and into Bath
National Bank; and
WHEREAS, this Agreement is intended to set forth the terms and
conditions upon which Merger Subsidiary will be merged with and into the Company
(the "Merger"); and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement constitutes a plan of reorganization; and
WHEREAS, the Boards of Directors of each of the Company and the Merger
Subsidiary have determined it to be in the best interests the Company and the
Merger Subsidiary, respectively, and their respective shareholders, that the
Merger be consummated upon the terms and conditions set forth herein, and, in
furtherance thereof, have approved the Merger upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.3), Merger
Subsidiary shall be merged with and into the Company and the separate existence
of Merger Subsidiary shall thereupon cease, and the Company shall continue as
the surviving corporation (the "Surviving Corporation") and as a wholly-owned
subsidiary of Buyer. As soon as reasonably practicable after the consummation of
the Merger, the Buyer shall cause the Surviving Corporation to be merged with
and into Bath National Bank, with Bath National Bank surviving such merger (the
"Bank Merger").
Section 1.2 Closing. Subject to the satisfaction or waiver of the
conditions set forth in Article VIII hereof, the closing of the Merger will take
place as promptly as practicable (and in any event within ten business days)
after satisfaction or waiver of the conditions set forth in Article VIII (the
"Closing Date"), at the offices of Nixon Peabody LLP, Rochester, New York,
unless this Agreement shall have been terminated pursuant to Section 9.1. It is
anticipated that the Closing Date will occur on or prior to March 29, 2002.
Section 1.3 Effective Time of the Merger. Subject to the provisions of
this Agreement, as soon as practicable on the Closing Date, the parties shall
file, and the Merger shall become effective upon the filing of, a certificate of
merger ("Certificate of Merger") pursuant to and in compliance with this
Agreement and Section 907 of Business Corporation Law of the State of New York
(the "New York Law") with the Secretary of State of the
2
State of New York. When used in this Agreement, the term "Effective Time" shall
mean the time at which the Certificate of Merger has been filed and become
effective in accordance with New York Law.
Section 1.4 Effect of the Merger. The Merger shall, from and after the
Effective Time, have all the effects provided by applicable New York Law. If at
any time after the Effective Time the Surviving Corporation shall determine that
any further deeds, conveyances, assignments or any other acts are necessary,
desirable or proper to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, the title to any property or rights of Merger Subsidiary
or the Company, or otherwise to carry out the purposes of this Agreement, the
Company and the Merger Subsidiary agree that the Surviving Corporation and its
officers and directors shall execute and deliver all such deeds, conveyances,
assignments and other documents or instruments, and do all things necessary,
desirable or proper to vest, perfect or confirm title to such property or rights
in the Surviving Corporation and otherwise to carry out the purposes of this
Agreement, and that the officers and directors of the Surviving Corporation are
fully authorized in the name of each of the Company and the Merger Subsidiary or
otherwise to take any and all such action.
Section 1.5 Modifications of Structure. Notwithstanding any provision
of this Agreement to the contrary, Buyer, with the prior written consent of the
Company, which consent shall not be unreasonably withheld, may elect to modify
the structure of the transactions contemplated hereby so long as (i) there are
no material adverse federal income tax consequences to the Shareholders as a
result of such modification, (ii) the consideration to be paid to the
Shareholders under this Agreement is not thereby changed in kind or reduced in
amount solely because of such modification, and (iii) such modification will not
be likely to materially delay or jeopardize receipt of any required regulatory
approvals or impair or prevent the satisfaction of any conditions to the
Effective Time.
Section 1.6 Dissenters' Rights. Notwithstanding any provision of this
Agreement to the contrary, Company Shares that are outstanding immediately prior
to the Effective Time and that are held by Shareholders who have not voted in
favor of the Merger or consented thereto in writing and who have delivered to
the Company written demand for appraisal of the fair value of such Company
Shares in accordance with New York Law (collectively, the "Dissenters' Shares")
shall not be converted into or represent the right to receive the Merger
Consideration. Such Shareholders instead shall be entitled to receive payment of
the fair value of all Company Shares held by them in accordance with the
provisions of New York Law, except that all Dissenters' Shares held by
Shareholders who shall have failed to perfect or who effectively shall have
withdrawn or otherwise lost their dissenters' rights under New York Law shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration in the manner provided in Section 3.1 below.
The Company shall give Buyer (i) prompt notice of any written demands for
appraisal of the fair value of any Company Shares, attempted withdrawals of such
demands and any other instruments served pursuant to New York Law and received
by the Company relating to Shareholders' rights of appraisal, and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under New York Law. The Company shall not, without the prior
written consent of Buyer, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for appraisal.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Surviving Corporation shall be amended and
restated to read substantially in the form of the Certificate of Incorporation
of the Merger Subsidiary as in effect immediately prior to the Effective Time
until thereafter changed or amended as provided therein or by applicable law.
Section 2.2 By-laws. At the Effective Time, the By-laws of the
Surviving Corporation shall be amended and restated to read substantially in the
form of the By-laws of the Merger Subsidiary as in effect immediately prior to
the Effective Time until thereafter changed or amended as provided therein or by
applicable law.
Section 2.3 Board of Directors; Officers. The persons listed on
Schedule 2.3 hereto shall be the directors and officers of the Surviving
Corporation immediately after the Effective Time and shall hold the offices set
forth
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after their respective names until the earlier of their respective resignations
or the time that their respective successors are duly elected or appointed and
qualified.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Merger Consideration.
(a) Subject to the provisions of this Agreement, by virtue of
the Merger and without any action on the part of Buyer, the Merger Subsidiary,
the Company, or any Shareholder, at the Effective Time, the holders of Company
Shares issued and outstanding immediately prior to the Effective Time (other
than Company Shares canceled in accordance with this Agreement) shall be
entitled to receive, as aggregate consideration for the Merger, (i) in the event
that the Average Sales Price is equal to or greater than $20, that number of
shares of Buyer Stock determined by dividing $1,500,000 by the Average Sales
Price, or (ii) in the event that the Average Sales Price is less than $20,
75,000 shares of Buyer Stock plus an amount of cash equal to the difference
between $1,500,000 and the product of the Average Sales Price multiplied by
75,000 (the consideration determined in accordance with (i) or (ii), as the case
may be, is hereafter referred to as the "Merger Consideration") payable to each
Shareholder pro rata (the "Exchange Ratio"). As of the Effective Time, each
share of Company Common Stock held by the Company as treasury stock shall be
canceled and retired without any consideration being paid or exchanged therefor.
(b) Subject to the provisions of this Agreement, at the
Effective Time each share of common stock of Merger Subsidiary outstanding
immediately prior to the Merger shall be converted, by virtue of the Merger and
without any action on the part of the holder thereof, into 25 shares of the
common stock of the Surviving Corporation, par value of $20 per share, which
shares shall constitute all of the issued and outstanding capital stock of the
Surviving Corporation and shall be owned by Buyer.
(c) As soon as reasonably practicable after the Effective
Time, Buyer shall cause the Surviving Corporation to merge with and into Bath
National Bank, with Bath National Bank surviving such merger.
3.2 Shareholders' Rights at the Effective Time. On and after the
Effective Time, the certificates that immediately prior to the Effective Time
represented the Company Shares (the "Certificates") shall cease to represent any
rights with respect to the Company and shall only represent the right to receive
the Merger Consideration and holders of Certificates theretofore evidencing
Company Shares shall cease to have any rights as Shareholders of the Company,
except as otherwise provided herein or by law.
3.3 Surrender and Exchange of Share Certificates.
(a) On the Closing Date, or within three Business Days
thereafter, Buyer or its agent shall cause to be mailed to each Shareholder: (i)
a letter of transmittal (the "Letter of Transmittal"), and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for such
Shareholder's portion of the Merger Consideration determined in accordance with
the provisions of Section 3.1 hereof.
(b) At or prior to the Effective Time, Buyer shall deposit or
cause to be deposited in a separate bank account cash in an amount equal to that
portion of the aggregate Merger Consideration payable in cash to Shareholders at
the Effective Time pursuant to Section 3.1(a)(ii), if any.
(c) After the Effective Time, each Shareholder shall surrender
and deliver each Certificate held by such Shareholder (or, in the event any
Certificate is claimed to have been lost, stolen or destroyed, an affidavit and
indemnity bond as provided in Section 3.3(e) hereof) to Buyer or its agent
together with a duly completed and executed Letter of Transmittal. Within three
Business Days after receipt of a duly completed and executed Letter of
Transmittal, together with the related Certificate (or affidavit and indemnity
bond as provided in Section 3.3(e) hereof), Buyer shall deliver or cause to be
delivered to each Shareholder (i) one or more duly executed certificates
representing that number of fully paid and non-assessable shares of Buyer Stock
equal to such Shareholder's portion of the Merger Consideration determined in
accordance with the provisions of Section 3.1 hereof and (ii) a check in
4
the amount equal to the cash that such holder has the right to receive pursuant
to Section 3.1(a)(ii) hereof, if any. Until so surrendered and exchanged, each
Certificate shall after the Effective Time be deemed for all purposes to
evidence only the right to receive the Merger Consideration as provided in
Section 3.1 hereof.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and no transfer of Company Shares shall be made
thereafter, other than transfers that have occurred prior to the Effective Time.
In the event that, after the Effective Time, Certificates are presented for
transfer to the transfer agent for the Company, the Merger Subsidiary or the
Buyer, they shall be delivered to the Buyer or its agent and exchanged for the
Merger Consideration payable pursuant to Section 3.1 hereof.
(e) Neither the Company, Merger Subsidiary or Buyer shall be
liable to any holder of Company Shares with respect to any portion of the Merger
Consideration delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law, rule, regulation, statute, order,
judgment or decree.
(f) In the event that any Shareholder claims that any
Certificate owned by such Shareholder has been lost, stolen or destroyed, such
Shareholder shall execute and deliver to Buyer an affidavit attesting to that
fact, in form and substance reasonably satisfactory to Buyer, together with a
bond or other security, as Buyer may reasonably require, and Buyer shall
thereupon deliver or cause to be delivered to such Shareholder one or more duly
executed certificates representing the Merger Consideration determined in
accordance with the provisions of Section 3.1 hereof with respect to such lost,
stolen or destroyed Certificate.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer and Merger Subsidiary
that, except as otherwise disclosed in the disclosure schedule attached to this
Agreement (the "Company Disclosure Schedule"):
Section 4.1 Organization and Qualification.
(a) The Company is a commercial bank organized, validly
existing and in good standing under the laws of the State of New York and has
the requisite corporate power and authority to conduct its business as it is now
being conducted and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties or the
nature of its activities makes such qualification or licensing necessary. The
Company is not in violation of any provision of its Certificate of Incorporation
or By-Laws, true and correct copies of which have previously been provided to
Buyer.
(b) The deposits of the Company are insured by the FDIC
through the BIF to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been paid when due
by the Company.
(c) The minute books of the Company accurately record all
material corporate actions of its shareholders and board of directors (including
committees) through the date of this Agreement.
Section 4.2 Capitalization. The authorized capital stock of the Company
consists of 5,000 shares of common stock, $20 par value per share, all of which
are validly issued and outstanding, fully paid and non-assessable, and no other
classes or series of capital stock. There are no bonds, debentures, notes or
other indebtedness issued and outstanding having voting rights with respect to
the Company. Except as contemplated by this Agreement, there are no options,
warrants, calls or other rights, agreements or commitments presently outstanding
obligating the Company to issue, deliver or sell shares of its capital stock, or
obligating the Company to grant, extend or enter into any such option, warrant,
call or other such right, agreement or commitment.
Section 4.3 Authority Relative to this Agreement. The Company has the
necessary corporate power and authority to execute and deliver this Agreement
and, subject to approval of this Agreement and the transactions contemplated
hereby by the Shareholders, to consummate the transactions contemplated hereby.
The execution and
5
delivery of this Agreement and the consummation of the transactions contemplated
hereby by the Company have been duly and validly authorized and approved by the
Company's board of directors and no other corporate proceedings on the part of
the Company are necessary to authorize or approve this Agreement or consummation
of the transactions contemplated hereby (other than, with respect to the Merger,
the approval of this Agreement by the necessary vote of the Shareholders). This
Agreement has been duly executed and delivered by the Company, subject to
approval by the Company's shareholders as required under New York Law, and
constitutes the valid and binding obligation of the Company enforceable against
it in accordance with its terms except as such enforceability may be limited by
general principles of equity or principles applicable to creditors' rights
generally.
Section 4.4 No Conflicts, Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by
the Company, the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with any of the provisions hereof will, (i)
subject to approval by the Company's shareholders referred to in Section 4.3
hereof, conflict with or violate the Certificate of Incorporation or By-laws of
the Company, (ii) subject to receipt or filing of the Consents , result in a
violation of any statute, ordinance, rule, regulation, order, judgment or decree
applicable to the Company (a "Violation"), or (iii) subject to receipt or filing
of the Consents, result in a Violation pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the
Company's properties may be bound or affected, except (in the case of clauses
(ii) and (iii) above) for such Violations that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect on the
Company.
(b) None of the execution and delivery of this Agreement by
the Company, the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with any of the provisions hereof will
require any Consent of any Regulatory Authority to be received by the Company,
except for (i) the filing of the Certificate of Merger pursuant to New York law,
(ii) certain state takeover and securities statutes, and (iii) the Banking
Department. The Company has no reason to believe that any required Consents or
approvals will not be received, or that any Regulatory Authority, including
without limitation, the Banking Department or the Federal Reserve Board, will
object to the consummation of the transactions contemplated by this Agreement.
Section 4.5 Financial Statements. Except as described in Section 4.5 of
the Company Disclosure Schedule, the Financial Statements have been prepared in
conformity with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis and present fairly the financial position and the
results of operations and cash flows of the Company and its consolidated
Subsidiaries as of the dates or for the periods presented therein.
Section 4.6 Litigation. There is no suit, action or proceeding pending
or, to the Knowledge of the Company, threatened against or affecting the
Company, nor is there any judgment, decree, injunction or order of any
government or subdivision thereof, domestic, foreign, multinational or
supranational or any administrative, governmental or regulatory authority,
agency, commission, court, tribunal or body, domestic, foreign, multinational or
supranational (a "Governmental Entity") or arbitrator outstanding against the
Company. The Company has furnished to the Buyer copies of all attorney responses
to the request of the Company's independent accountants for the period from
January 1, 1998, through September 30, 2001, and a written list of, and
documents relating to, all claims, suits, actions, proceedings or investigations
pending or, to the Knowledge of the Company, threatened against the Company.
Section 4.7 Absence of Certain Changes or Events. Except as
contemplated by this Agreement and except as disclosed in Section 4.7 of the
Company Disclosure Schedule, since September 30, 2001, the Company has conducted
its business only in the ordinary course, and there has not been (i) any
Material Adverse Effect or any change that would reasonably be expected to
result in the occurrence of a Material Adverse Effect, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the Company Shares, or, any redemption,
purchase or other acquisition of any of its capital stock, (iii) any split,
combination or reclassification of any of the Company's capital stock or any
issuance or the authorization of any issuance of, any other securities in
respect of, in lieu of or in substitution for shares of the Company's capital
stock, (iv) any granting by the Company to any officer of the Company of any
increase in compensation, except in the ordinary course of business consistent
with prior practice, (v) any granting by the Company to any officer of the
6
Company of any increase in severance or termination pay, (vi) any entry by the
Company into any employment, severance or termination agreement with any officer
of the Company, or any increase in benefits available under or establishment of
any Company Benefit Plan (as defined below) except in the ordinary course of
business consistent with past practice, (vii) any damage, destruction or loss to
any material assets or properties of the Company, whether or not covered by
insurance, or (viii) any change in accounting methods, principles or practices
by the Company.
Section 4.8 Employee Benefit Plans.
(a) Section 4.8(a) of the Company Disclosure Schedule sets
forth a complete and correct list of all employee benefit or compensation plans,
agreements and arrangements, including "employee benefit plans," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including but not limited to, plans, agreements or arrangements
relating to former employees, including but not limited to, retiree medical
plans and life insurance sponsored, maintained or contributed to by the Company
or any entity which is considered one employer with the Company under Section
4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate") (together such
plans, agreements or arrangements are referred to as the "Company Benefit
Plans"). The Company and its ERISA Affiliates have complied with the terms of
all Company Benefit Plans, and no default exists with respect to the obligations
of the Company or any of its ERISA Affiliates under such Company Benefit Plans.
(b) Except as set forth in Section 4.8(b) of the Company
Disclosure Schedule, each Company Benefit Plan is in writing and the Company has
previously furnished Buyer with a true and complete copy of each Company Benefit
Plan document, including all amendments thereto, and a true and complete copy of
each material document prepared in connection with each such Company Benefit
Plan, including without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, including all attachments thereto, (iv) the most recently received
IRS determination letter for each such Company Benefit Plan, and (v) the most
recently prepared actuarial report and financial statement in connection with
each such Company Benefit Plan.
(c) Neither the Company nor any ERISA Affiliate has any
express or implied commitment to (i) create or incur liability with respect to,
or to cause to exist, any other employee benefit plan, program or arrangement,
(ii) enter into any contract or agreement to provide compensation or benefits to
any individual, or (iii) modify, change or terminate any Company Benefit Plan,
other than with respect to a modification, change or termination required by
ERISA or the Code.
Section 4.9 ERISA.
(a) Each of the Company Benefit Plans which is intended to
meet the requirements of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), has been determined by the IRS to be "qualified," within
the meaning of such Section of the Code and the Company has no Knowledge of any
circumstances which could result in revocation of such determination. No Company
Benefit Plan is subject to Title IV of ERISA and the Company and its current and
former ERISA Affiliates have never sponsored, maintained or contributed to an
employee benefit plan that is subject to Title IV of ERISA. There have not been
any non-exempt "prohibited transactions," as such term is defined in Section
4975 of the Code or Section 406 of ERISA, involving the Company Benefit Plans
which could subject the Company, its ERISA Affiliates or Buyer to the penalty or
tax imposed under Section 502(i) of ERISA or Section 4975 of the Code. Except as
set forth in Section 4.9(a) of the Company Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation or golden parachute)
becoming due to any director or employee of the Company, (ii) increase any
benefits otherwise payable under any Company Benefit Plan, or (iii) result in
the acceleration of the time of payment or vesting of any such benefits.
(b) No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Company Benefit Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
which is intended to meet the requirements of Section 401(a) of the Code (a
"Pension Plan"), or by the Company or any ERISA Affiliate within the 60-month
period ending on the date hereof.
7
(c) As of the date hereof, neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA. Neither the Company nor its ERISA Affiliates has
provided, or is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code. Neither the Company nor any ERISA Affiliate has incurred any liability
under, arising out of or by operation of Title IV of ERISA, including, without
limitation, any material liability in connection with the termination or
reorganization of any employee pension benefit plan subject to Title IV of
ERISA, and no fact or event exists which could give rise to any such material
liability.
(d) The Company and its ERISA Affiliates are not and have
never been a sponsor or liable with respect to any multi-employer plan within
the meaning of Section 3(37) of ERISA.
(e) All contributions and premiums required by law or by the
terms of any Company Benefit Plan in which employees of the Company and its
ERISA Affiliates participate or any agreement relating thereto have been timely
made (without regard to any waivers granted with respect thereto).
(f) Each of the Company Benefit Plans has been maintained in
accordance with its terms, applicable collective bargaining agreements and all
provisions of applicable laws and regulations except to the extent that any
failure to be so maintained will not have a Material Adverse Effect on the
Company. All amendments and actions required to bring each of such Benefit Plans
into conformity in all material respects with all of the applicable provisions
of ERISA and other applicable laws and regulations have been made or taken
except to the extent that such amendments or actions are not required by law to
be made or taken until a date after the Closing Date.
(g) The liabilities of each Company Benefit Plan or Pension
Plan that has been terminated or otherwise wound up, have been fully discharged
in compliance with applicable law.
(h) Neither the Company nor any ERISA Affiliate maintains a
welfare benefit plan providing continuing benefits after the termination of
employment (other than as required by Section 4980B of the Code and at the
former employee's own expense) except as disclosed in Section 4.9(h) of the
Company's Disclosure Schedule, and the Company and each of the ERISA Affiliates
have complied in all material respects with the notice and continuation
requirements of Section 4980B of the Code and the regulations thereunder.
(i) No payments or benefits under any Company Benefit Plan or
other agreement of the Company will be considered excess parachute payments
under Section 280G of the Code or trigger a limitation on the ability of the
Company to take a deduction under Section 162(m) of the Code.
(j) There has been no violation of ERISA with respect to the
filing of applicable returns, reports, documents and notices regarding any of
the Company Benefit Plans with the Secretary of Labor or the Secretary of the
Treasury or the furnishing of such notices or documents to the participants or
beneficiaries of the Company Benefit Plans which, either individually or in the
aggregate, could result in a Material Adverse Effect to the Company.
(k) There are no pending or threatened legal proceedings,
claims or administrative actions which have been asserted or instituted against
any of the Company Benefit Plans, the assets of any such Plans or the Company or
any ERISA Affiliate or the plan administrator or any fiduciary of the Company
Benefit Plans with respect to the operation of such plans, and, to the Knowledge
of the Company, there is no basis for the institution of any such proceedings,
claims or administrative actions.
Section 4.10 Taxes. The Company has filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports required to have been filed by it prior to the date hereof. All of such
returns and reports are true and correct in all material respects, and the
Company has paid or, prior to the Effective Time will pay, all taxes, interest
and penalties shown on such returns or reports as being due or (except to the
extent the same are contested in good faith) claimed to be due to any federal,
state, local or other taxing authority. The Company has paid and will pay all
installments of estimated taxes due on or before the Effective
8
Time. All taxes and state assessments and levies which the Company is required
by law to withhold or collect have been withheld or collected and have been paid
to the proper Governmental Entity or are held by the Company for such payment.
The Company has paid or made adequate provision in accordance with GAAP in the
financial statements of the Company for all taxes payable in respect of all
periods ending on or prior to the date of this Agreement and will have paid or
provided for all taxes payable in respect of all periods ending on or prior to
the Closing Date. As of the date hereof, all deficiencies proposed as a result
of any audits have been paid or settled.
Section 4.11 Compliance with Applicable Laws.
(a) The Company holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business, except where
the failure to have such licenses, franchises, permits or authorizations either
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect on the Company, and has complied with all applicable
laws, statutes, orders, rules or regulations of any Governmental Entity relating
to it, except where the failure to comply could not reasonably be expected to
have a Material Adverse Effect on the Company.
(b) The Company has not received any notification or
communication from any Regulatory Authority (i) asserting that the Company is
not in compliance with any statutes, regulations or ordinances; (ii) threatening
to revoke any license, franchise, permit or authorization; (iii) requiring or
threatening to require the Company to, or indicating that the Company may be
required to, enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting, or purporting to
restrict or limit, the operations of the Company, including without limitation,
any restriction on the payment of dividends; (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any manner the
operations of the Company, including without limitation, any restriction on the
payment of dividends or in any manner relating to its capital adequacy, credit
policies, management or overall safety and soundness or the ability of the
Company to perform its obligations hereunder or indicating that the Company may
be requested to enter into, or otherwise be subject to, any such commitment,
letter, written agreement, memorandum of understanding or cease and desist
order. The Company is not a party to any commitment, letter (other than letters
addressed to regulated depository institutions generally), written agreement,
memorandum of understanding or order to cease and desist with any Governmental
Entity, including without limitation, any entity charged with the supervision or
regulation of the Company or engaged in the insurance of Company deposits. The
Company was rated "Satisfactory" or better following its most recent Community
Reinvestment Act examination by the regulatory agency responsible for its
supervision. The Company has not received any notice of, or has any Knowledge
of, any planned or threatened objection by any community group to the
transactions contemplated hereby.
Section 4.12 Voting Requirements. The affirmative vote of the holders
of at least two-thirds of the Company Shares is the only vote necessary with
respect to the Company or the Shareholders to approve this Agreement and
consummate the transactions contemplated hereby.
Section 4.13 Material Contracts.
(a) Section 4.13(a) of the Company Disclosure Schedule
identifies each agreement, contract, arrangement, commitment and understanding
(whether written or oral): (i) which is material to the financial condition,
results of operations or business of the Company; (ii) which relates to the
employment of any person, including without limitation, employment as a
consultant, or the election or retention in office or severance of any present
or former director or officer of the Company; ( iii) by and between the Company
and any labor union; (iv) by and between the Company and any officer, director,
shareholder, employee or Affiliate of the Company; (v) which, upon the
consummation of the transactions contemplated by this Agreement, will result in
any payment (whether of severance pay or otherwise) becoming due from the
Company to any officer or employee thereof, (vi) which restricts in any manner
the conduct of business by the Company, and (vii) which provides for any
increase in, vesting of, or acceleration of, any benefits (including without
limitation, any stock option plan, stock appreciation rights plan, restricted
stock plan, stock purchase plan or employment agreement) as a result of
consummation of any of the transactions contemplated by this Agreement. The
Company has previously delivered to the Buyer true and complete copies of all
employment, severance, consulting and deferred compensation agreements to which
the Company is a party. Each contract, arrangement, commitment or understanding
of the type described in this Section 4.13(a) is referred to as a "Company
Contract."
9
(b) (i) Each Company Contract constitutes the legal, valid and
binding obligation of the Company and each other party thereto and is in full
force and effect, subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles, (ii) the Company and each other party thereto
has performed all obligations required to be performed by it to date under each
such Company Contract, and (iii) no event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute, a breach or default
on the part of the Company or any other party thereto under any such Company
Contract, except for violations or defaults that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
Section 4.14 Title and Condition of Assets and Property.
(a) The Company has good and valid title to all assets owned
by it, free and clear of all Liens (except Liens for taxes not yet due and
payable). The property and assets reflected in the Financial Statements or
acquired after the dates of such Financial Statements, constitute all of the
tangible assets and properties that the Company owns in connection with its
business, and the conduct of such business as a going concern and, except for
additions or dispositions in the ordinary course of business, include, together
with any tangible assets and tangible properties leased or licensed to the
Company, all material tangible assets and tangible properties used in such
business as being presently conducted. The assets, properties, rights and
contracts of the Company are sufficient to permit the Company to conduct its
business as it is currently being conducted. The facilities, machinery,
furniture, office and other equipment of the Company that are used in its
business are in good operating condition and repair in all material respects,
subject only to ordinary wear and tear, and are useable in the ordinary course
of business as currently conducted by the Company.
(b) Except as set forth in Section 4.14(b) of the Company
Disclosure Schedule, the Company does not own real estate, and is not a party to
any contract pursuant to which it will, or may, become the owner of any real
estate.
(c) Section 4.14(c) of the Company Disclosure Schedule
contains a true, correct and complete list of (i) all depreciable personal
property of the Company, and (ii) real estate or personal property that is
leased to the Company and specifies, in the case of real estate, the location of
each property, the use of the facility thereon, the name of the owner or the
name of the lessor and the approximate square footage of floor area. The Company
has delivered to the Buyer a copy of each lease by which the Company acquired
its interest in the personal property or real estate described in Section
4.14(c) of the Company Disclosure Schedule, all of which documents are true and
complete copies thereof as in effect on the date hereof.
Section 4.15 Intellectual Property. Section 4.15 of the Company
Disclosure Schedule contains a true, complete and correct list (including
registration numbers and dates of filing, renewal, and termination) of all
trademarks, patents, tradenames, material copyrights, domain names, service
marks and licenses, all registrations and applications for any of the foregoing,
and other material intellectual property (whether or not subject to statutory
registration or protection) owned or used by the Company or in which the Company
has an interest (whether licensed to or by the Company) (collectively the
"Intellectual Property"). The Company owns or has the right to use all of the
Intellectual Property necessary to conduct its operations and business as
presently conducted and the Company does not know of any claim, or any basis for
any claim, that it has infringed any intellectual property of any other person
or that any other person has infringed any of the Intellectual Property. No
third party has been permitted or licensed to use any of the Intellectual
Property or been granted any option thereto, and no royalties or other fees are
payable by the Company to any third party with respect to any of the
Intellectual Property.
Section 4.16 Affiliate Transactions. Since December 31, 2000, the
Company has not been a party to any transaction (including any loan or other
credit accommodation) with any Affiliate of the Company.
Section 4.17 Undisclosed Liabilities. Except (i) as disclosed in the
Financial Statements, and (ii) liabilities incurred subsequent to September 30,
2001 in the ordinary course of business or in connection with this Agreement,
the Company has no liabilities or obligations of any nature whether or not
accrued, contingent or otherwise, that would be required by GAAP to be reflected
in the Financial Statements of the Company. No investigation or review
10
by any Governmental Entity with respect to the Company is pending or, to the
Company's Knowledge, threatened, nor has any such Governmental Entity indicated
an intention to conduct any such investigation or review.
Section 4.18 Environmental Matters.
(a) Each of the Company and, to the Knowledge of the Company,
the Loan Properties (each as hereinafter defined), are, and have been, in
compliance with all applicable environmental laws and with all rules,
regulations, standards and requirements of the United States Environmental
Protection Agency (the "EPA") and of state and local agencies with jurisdiction
over pollution or protection of the environment, except in each case as have not
been or would not be material.
(b) There is no suit, claim, action or proceeding pending or,
to the Knowledge of the Company threatened, before any governmental authority or
other forum in which the Company or any of its Subsidiaries has been or, with
respect to threatened proceedings, may be, named as a defendant, responsible
party or potentially responsible party (i) for alleged noncompliance (including
by any predecessor), with respect to any environmental law, rule, regulation,
standard or requirement or (ii) relating to the release into or presence in the
Environment (as hereinafter defined) or any Hazardous Materials (as hereinafter
defined) or Oil (as hereinafter defined) occurring at or on a site owned, leased
or operated by the Company or any of its Subsidiaries except in each case as has
not been or would not be material.
(c) To the Knowledge of the Company, there is no suit, claim,
action or proceeding pending or threatened, before any governmental authority or
other forum in which any Loan Property has been or, with respect to threatened
proceedings, may be, named as a defendant, responsible party or potentially
responsible party (i) for alleged noncompliance (including by any predecessor)
with any environmental law, rule, regulation, standard or requirement of (ii)
relating to the release into or presence in the Environment of any Hazardous
Material or Oil whether or not occurring at or on a site owned, leased or
operated as a Loan Property, except in each case as have not been or would not
be material.
(d) Neither the Company nor, to the Knowledge of the Company,
any Loan Property, has received any written notice indicating that there is a
possibility that a suit, claim, action or proceeding as described in subsection
(b) or (c) of this Section 4.18 could be initiated except in each case as has
not been or would not be material. No facts or circumstances have come to the
Company's attention which have caused it to believe that a material suit claim
action or proceeding as described in subsection (b) or (c) of this Section 4.18
could reasonably be expected to occur.
(e) During the period of (i) the Company's ownership or
operation of any of its properties or (ii) the Company's holding of a security
interest in a Loan Property, to the Knowledge of the Company, there has been no
release or presence of Hazardous Material or Oil in, on, under or affecting such
property or Loan Property, except where such release or presence is not or would
not, either individually or in the aggregate, be material. To the Knowledge of
the Company, prior to the period of (x) the Company's ownership or operation of
any of its properties or any previously owned or operated properties, or (y) the
Company's holding of a security interest in a Loan Property, there was no
release or presence of Hazardous Material or Oil in, on, under or affecting any
such property or Loan Property, except where such release or presence is not or
would not, either individually or in the aggregate, be material.
(f) The Company is not an owner or operator of any Loan
Property and there are no Participation Facilities.
(g) The following definitions apply for purposes of this
Section 4.18: (i) "Loan Property" means any property in which the Company or any
of its Subsidiaries holds a security interest, and, where required by the
context (as a result of foreclosure), said term means the owner or operator of
such property; (ii) "Participation Facility" means any facility in which the
Company participates or has participated in the management and, where required
by the context, said term means the owner or operator of such property; (iii)
"Hazardous Material" means any pollutant, contaminant, or hazardous substance or
hazardous material as defined in or pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. ss.9601 et seq., or any
other federal, state, or local environmental law, regulation, or requirement;
(iv) "Oil" means oil or petroleum of any kind
11
or origin or in any form, as defined in or pursuant to the Federal Clean Water
Act, 33 U.S.C. ss.1251 et seq., or any other federal, state, or local
environmental law, regulation, or requirement; and (v) "Environment" means any
soil, surface waters, groundwaters, stream sediments, surface or subsurface
strata, and ambient air, and any other environmental medium.
Section 4.19 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon the Company or any
of its Subsidiaries or any of their properties which has had or could reasonably
be expected to have the effect of prohibiting or materially impairing any
business practice of the Company or the conduct of business by the Company as
currently conducted or as proposed to be conducted by the Company.
Section 4.20 Certain Business Practices. Neither the Company nor, to
the Knowledge of the Company, any director, officer, or employee of the Company
has in any material respect (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful payments relating to political activity,
(ii) made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other similar unlawful
payment.
Section 4.21 Brokers. No broker or finder is entitled to any broker's
or finder's fee in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
Section 4.22 Board Approval. The Board of Directors of the Company has,
by resolutions duly adopted and not subsequently rescinded or modified in any
way (the "Company Board Approval"), (i) subject to Section 7.7 hereof,
determined that this Agreement and the Merger are fair to and in the best
interests of the Company and its shareholders, (ii) approved this Agreement and
the Merger and (iii) subject to Section 7.7 hereof, recommended that the
shareholders of the Company adopt this Agreement and approve the Merger and
directed that this Agreement and the transactions contemplated hereby be
submitted for consideration by the Company's shareholders. The Company Board
Approval constitutes approval of this Agreement and the Merger for purposes of
Section 907 of the New York Law and no state takeover statute is applicable to
the Merger or the other transactions contemplated hereby.
Section 4.23 Opinions of the Company's Financial Advisor. The Company
has received the opinion of Danielson & Company (the "Company Financial
Advisor"), dated the date of this Agreement, to the effect that, as of such
date, the Merger Consideration is fair from a financial point of view to the
Company and its shareholders, a copy of which opinion has been made available to
Buyer.
Section 4.24 Deposits. None of the deposits of the Company is a
"brokered" deposit as defined in 12 U.S. Code Section 1831f(g).
Section 4.25 Regulation O. The Company has made no loan which is
subject to Regulation O promulgated by the Board of Governors of the Federal
Reserve System except in compliance with such Regulation O.
Section 4.26 Loan Portfolio.
(a) With respect to each loan owned by the Company in whole or
in part (each, a "Loan"):
(i) the note and the related security documents are each
legal, valid and binding obligations of the maker or
obligor thereof, enforceable against such maker or
obligor in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or
affecting creditors' rights and to general equity
principles;
12
(ii) neither the Company nor any prior holder of a Loan
has modified the note or any of the related security
documents in any material respect or satisfied,
canceled or subordinated the note or any of the
related security documents except as otherwise
disclosed by documents in the applicable Loan file;
(iii) the Company is the sole holder of legal and
beneficial title to each Loan (or the Company's
applicable participation interest, as applicable),
except as otherwise referenced on the books and
records of the Company;
(iv) the note and the related security documents, copies
of which are included in the Loan files, are true and
correct copies of the documents they purport to be
and have not been suspended, amended, modified,
canceled or otherwise changed except as otherwise
disclosed by documents in the applicable Loan file;
(v) there is no pending or threatened condemnation
proceeding or similar proceeding affecting the
property that serves as security for a Loan, except
as otherwise referenced on the books and records of
the Company;
(vi) there is no litigation or proceeding pending or
threatened relating to the property that serves as
security for a Loan that would reasonably be expected
to have a Material Adverse Effect upon the borrower
or guarantor of the related Loan, or upon the loan
itself, except as otherwise disclosed by documents in
the applicable Loan file; and
(vii) with respect to a Loan held in the form of a
participation, the participation documentation is
legal, valid, binding and enforceable, except as
otherwise disclosed by documents in the applicable
Loan file,
in each case ((i) through (vii), each inclusive, above) other than Loans as to
which the failure to satisfy the foregoing standards, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(b) The allowance for loan losses reflected on the Financial
Statements, as of their respective dates, is, to the Company's Knowledge,
adequate to provide for possible or specific losses, net of recoveries relating
to Loans previously charged off and on Loans outstanding, and is, to the
Company's Knowledge, consistent with applicable regulatory standards to provide
for the reasonably anticipated losses with respect to the Company's loan
portfolio based upon information reasonably available at the time.
(c) Section 4.26 of the Company's Disclosure Schedule sets
forth by category the amounts of all loans, leases, advances, credit
enhancements, other extensions of credit, commitments and interest-bearing
assets of the Company that have been classified (whether regulatory or internal)
as "Special Mention," "Substandard," "Doubtful," "Loss" or words of similar
import as of September 30, 2001. The other real estate owned ("OREO") included
in any non-performing assets of the Company is carried net of reserves at the
lower of cost or fair value, less estimated selling costs, based on current
independent appraisals or evaluations or current management appraisals or
evaluations; provided, however, that "current" shall mean within the past 12
months.
Section 4.27 Administration of Fiduciary Accounts. The Company has no
accounts for which it acts as a fiduciary.
Section 4.28 Insurance. Section 4.28 of the Company's Disclosure
Schedule sets forth a summary of all material policies of insurance of the
Company currently in effect, which summary is accurate and complete in all
material respects. All such policies are in full force and effect and the
Company has not received any notice of cancellation with respect thereto and
there have been no lapses of coverage. All property and casualty insurance
policies are written on an occurrence basis. The Company has no life insurance
policies on the lives of any of the current and former officers and directors of
the Company which are maintained by the Company or which are otherwise included
as assets on the books of the Company.
13
Section 4.29 Disclosure. No representation or warranty by the Company
in this Agreement and no statement contained in any exhibit, list, certificate,
document or schedule delivered or to be delivered pursuant to this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact necessary in order to make the statement contained
therein in light of the circumstances under which they were made not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary jointly and severally represent and warrant
to the Company that, except as disclosed in the Buyer disclosure schedule which
is attached to this Agreement (the "Buyer Disclosure Schedule"):
Section 5.1 Organization and Qualification.
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York. Merger Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of the State of New York. Each of Buyer and Merger Subsidiary has the
requisite corporate power and authority to conduct its business as it is now
being conducted.
(b) Bath National Bank is a national banking association duly
organized and validly existing. The deposits of Bath National Bank are insured
by the FDIC through the BIF to the fullest extent permitted by law, and all
premiums and assessments required to be paid in connection therewith have been
paid when due by Bath National Bank.
Section 5.2 Ownership of Merger Subsidiary. Buyer owns all of the
issued and outstanding shares of capital stock of Merger Subsidiary, free and
clear of any lien or encumbrance.
Section 5.3. Capitalization.
(a) The authorized capital stock of Buyer consists of
50,000,000 shares of Buyer Common Stock, 10,000 shares of Class A 3% cumulative
preferred stock and 200,000 shares of Class B 8.48% cumulative preferred stock,
par value $100 per share. As of December 31, 2001, (i) 11,021,314 shares of
Company Common Stock were issued and outstanding, (ii) 1,583 shares of 3%
cumulative preferred stock and 175,855 shares of 8.48% cumulative preferred
stock were issued and outstanding, and (iii) 315,671 shares of Company Common
Stock were held by the Company in its treasury. As of December 31, 2001,
1,110,353 shares of Company Common Stock were reserved for issuance upon the
exercise of stock options granted pursuant to Buyer's 1999 Management Stock
Incentive Plan and 296,142 shares of Company Common Stock were reserved for
issuance upon the exercise of stock options granted pursuant to Buyer's 1999
Directors' Stock Incentive Plan. All outstanding shares of Buyer capital stock
have been duly authorized and validly issued and are fully paid and (except as
provided by applicable law) nonassessable. The shares of Buyer Common Stock to
be issued in connection with the Merger have been duly authorized and, when
issued in accordance with the terms of this Agreement and the Merger, will be
validly issued, fully paid, (except as provided by applicable law) nonassessable
and free and clear of any preemptive rights.
(b) All issued and outstanding shares of capital stock of Bath
National Bank is owned by Buyer.
Section 5.4 Authority Relative to Agreement. Each of Buyer and Merger
Subsidiary has the necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Buyer and Merger Subsidiary (including the
Bank Merger) have been duly and validly authorized and approved by the
respective boards of directors of Buyer, Merger Subsidiary, and Bath National
Bank, and by Buyer as the sole stockholder of Merger Subsidiary and Bath
National Bank and no other corporate proceedings on the part of Buyer or Merger
Subsidiary are necessary to authorize and approve this Agreement or to
consummate the transactions contemplated hereby. The Buyer has no reason to
believe that (i) any required Consents or approvals will not be received, or
that (ii) any Governmental Entity, including the Banking Department, the OCC, or
the Federal Reserve, will object to the completion of the transactions
contemplated by this Agreement
14
(including the Bank Merger). This Agreement has been duly executed and delivered
by each of Buyer and Merger Subsidiary and constitutes the valid and binding
obligation of Buyer and Merger Subsidiary enforceable against each of them in
accordance with its terms except as such enforceability may be limited by
general principles of equity or principles applicable to creditors' rights
generally.
Section 5.5 No Conflicts; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by
Buyer or Merger Subsidiary, the consummation by Buyer or Merger Subsidiary of
the transactions contemplated hereby or compliance by Buyer or Merger Subsidiary
with any of the provisions hereof will, (i) conflict with or violate the
Certificate of Incorporation or By-laws of Buyer or Merger Subsidiary, (ii)
subject to receipt or filing of the Consents referred to in Section 5.5(b),
conflict with or violate any statute, ordinance, rule, regulation, order,
judgment or decree applicable to Buyer or Merger Subsidiary, or by which either
of them or any of their respective properties or assets may be bound or
affected, or (iii) result in a violation or breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien, charge, security
interest, pledge, or encumbrance of any kind or nature (any of the foregoing
being a "Lien") on any of the property or assets of Buyer or Merger Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Buyer or
Merger Subsidiary is a party or by which Buyer or Merger Subsidiary or any of
their respective properties may be bound or affected.
(b) None of the execution and delivery of this Agreement by
Buyer or Merger Subsidiary, the consummation by Buyer or Merger Subsidiary of
the transactions contemplated hereby or compliance by Buyer or Merger Subsidiary
with any of the provisions hereof will require any consent, waiver, license,
approval, authorization, order or permit of, or registration or filing with or
notification to Governmental Entity, except for (i) compliance with any
applicable requirements of the Exchange Act, (ii) the filing of the certificate
of merger under New York Law, (iii) certain state takeover, securities and "blue
sky" statutes, and (iv) the obtaining of regulatory approvals as set forth in
Section 5.4 of the Buyer Disclosure Schedule (any of the foregoing being a
"Consent").
Section 5.6. Buyer Shareholder Approval. This Agreement and the
transactions contemplated hereby, including the issuance of shares of Buyer
Stock pursuant to Article III hereof, do not require the approval of the holders
of any shares of capital stock of Buyer.
Section 5.7 Brokers. No broker or finder is entitled to any broker's or
finder's fee in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Buyer or Merger Subsidiary.
Section 5.8 Ability to Pay Merger Consideration. Buyer will have
available to it as of the Effective Time sufficient shares of Buyer Stock
authorized to permit it to deliver or cause to be delivered the aggregate Merger
Consideration to Shareholders of the Company as set forth in Section 3.1.
Section 5.9 Absence of Certain Changes or Events. There has not been
any material adverse change in the business, operations, prospects, assets or
financial condition of Buyer since September 30, 2001, and to the best Knowledge
of the Buyer, no fact or condition exists which Buyer believes will cause such a
material adverse change in the future.
Section 5.10 Legal Proceedings. Neither Buyer nor the Merger Subsidiary
is a party to any, and there are no pending, or to the Knowledge of Buyer and
the Merger Subsidiary, threatened legal, administrative, arbitration or other
proceedings, claims, actions or governmental investigations of any nature
against Buyer or Merger Subsidiary, except such proceedings, claims actions or
governmental investigations which in the good faith judgment of Buyer and Merger
Subsidiary will not have a Material Adverse Effect on the business, operations,
assets or financial condition of Buyer and Merger Subsidiary. Neither Buyer nor
Merger Subsidiary is a party to any order, judgment or decree which materially
adversely affects the business, operations, assets or financial condition of
Buyer or Merger Subsidiary.
15
Section 5.11. SEC Documents; Regulatory Filings. Buyer has timely filed
all SEC Documents required by the Securities Laws and all reports and notices
with the Nasdaq Stock Market Inc. required to be filed by the rules and
regulations of the Nasdaq Stock Market Inc. and the Exchange Act (collectively,
the "Nasdaq Reports"). The SEC Documents and the Nasdaq Reports are true,
complete and correct as of their respective dates, in all material respects, and
neither any SEC Documents nor any Nasdaq Reports contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading. Buyer and each of the Buyer's
Subsidiaries has filed all reports required by statute or regulation to be filed
with any federal or state bank regulatory agency, except where the failure to so
file would not have a Material Adverse Effect, and such reports were prepared in
accordance with the applicable statutes, regulations and instructions in
existence as of the date of filing of such reports in all material respects, and
none of the reports contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not misleading.
Section 5.12 Financial Statements. The Buyer Financial Statements filed
by Buyer in SEC Documents prior to the date of this Agreement fairly present in
all material respects the consolidated financial position of Buyer and its
consolidated Subsidiaries as of the dates indicated and the consolidated results
of operations, changes in stockholders' equity and cash flows of Buyer and its
consolidated Subsidiaries for the periods then ended and each such financial
statement has been prepared in conformity with GAAP applied on a consistent
basis.
Section 5.13 Information Supplied. None of the information supplied or
to be supplied by Buyer or Merger Subsidiary specifically for inclusion or
incorporation by reference in the Registration Statement will, at the time the
Registration Statement is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration
Statement will comply as to form in all material respects with the requirements
of the Securities Act, except that no representation or warranty is made by
Buyer or Merger Subsidiary with respect to statements made or incorporated by
reference therein based on information supplied by the Company specifically for
inclusion or incorporation by reference in the Registration Statement.
Section 5.14 Disclosure. No representation or warranty by the Buyer or
Merger Subsidiary in this Agreement, no information provided by Buyer in writing
and no statement contained in any exhibit, list, certificate, document or
schedule delivered or to be delivered pursuant to this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit any
material fact necessary in order to make the statement contained therein in
light of the circumstances under which they were made not misleading.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of the Business Pending the Merger.
(a) From and after the date hereof, prior to the Effective
Time, except as contemplated by this Agreement or unless Buyer shall otherwise
agree in writing, the Company shall carry on its businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and to use reasonable efforts to conduct its business in a manner
consistent with the budgets and plans heretofore made available to Buyer, and
shall use its reasonable best efforts to preserve intact its present business
organizations, keep available the services of its employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it to the end that its goodwill and
on-going business shall not be impaired in any material respect at the Effective
Time and shall take no action which would materially adversely affect or
materially delay the ability of the Company to obtain any necessary approvals of
any Governmental Authority required for the transactions contemplated hereby or
to perform its covenants and agreements under this Agreement. Unless Buyer shall
otherwise agree in writing (or except as permitted or required by this
Agreement), prior to the Effective Time, the Company shall not, to the extent
within its reasonable control, allow any representation or warranty of the
Company to become inaccurate or:
16
(i) declare, set aside, or pay any dividends on, or make
any other distributions in respect of, any of its
capital stock, split, combine or reclassify any of
its capital stock or, issue or authorize the issuance
of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or
purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any other equity
securities thereof or any rights, warrants, or
options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting
securities of the Company or any securities
convertible into, or any rights, warrants or options
to acquire, any such shares or voting securities;
(iii) amend its Certificate of Incorporation or By-laws;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint
venture, association or other business organization
or division thereof, or any assets that are material
to the Company, individually or in the aggregate;
(v) subject to a Lien or sell, lease or otherwise dispose
of any of its material properties or assets except in
the ordinary course of business;
(vi) incur any indebtedness for borrowed money or any
non-deposit liability or guarantee any such
indebtedness of another Person, issue or sell any
debt securities of the Company, guarantee any debt
securities of another person or enter into any "keep
well" or other agreement to maintain any financial
condition of another Person, except, in any such
case, for borrowings or other transactions incurred
in the ordinary course of business including to repay
existing indebtedness pursuant to the terms thereof,
or except in the ordinary course of business, make
any loans, advances or capital contributions to, or
investments in, any other Person, or settle or
compromise any material claims or litigation;
(vii) except for commitments issued prior to the date of
this Agreement, make any new loan or other credit
facility commitment (including without limitation,
lines of credit and letters of credit) to any
borrower or group of affiliated borrowers in excess
of $50,000 in the aggregate, or increase, compromise,
extend, renew or modify any existing loan or
commitment outstanding in excess of $25,000, or
approve any real estate secured loans in excess of
$100,000 or any unsecured loans in excess of $10,000.
(viii) enter into, renew, extend or modify any other
transaction with any Affiliate;
(ix) enter into any futures contract, option, interest
rate caps, interest rate floors, interest rate
exchange agreement or other agreement or take any
other action for purposes of hedging the exposure of
its interest-earning assets and interest-bearing
liabilities to changes in market rates of interest;
(x) make any change in policies with regard to the
extension of credit, the establishment of reserves
with respect to the possible loss thereon or the
charge off of losses incurred thereon, investment,
asset/liability management or other Company policies
in any material respect except as may be required by
changes in applicable law or regulations or in GAAP
or by applicable regulatory authorities or enter into
any new areas of lending, new loan categories or loan
types, or open new loan origination offices;
(xi) sell any OREO or loan (other than loans secured by
one- to four-family real estate and OREO properties
which generate no book loss);
17
(xii) authorize any of, or commit or agree to take any of,
the foregoing actions;
(xiii) recruit, hire or contract with any new personnel,
except with respect to non-officer positions, in
which case Buyer will be provided a copy of the job
posting in advance of internal posting or
publication; or
(xiv) authorize or permit any employee salary or benefit
increases in excess of 10% of an employee's level of
salary or benefits existing at September 30, 2001,
provided, however, that the Company may pay bonuses
to its senior executive officers as provided in
Schedule 6.1(a)(xiv).
For purposes of this Section 6.1, it shall not be considered
in the ordinary course of business for the Company to do any of the following:
(i) make any sale, assignment, transfer, pledge, hypothecation or other
disposition of any assets having a book or market value, whichever is greater,
in the aggregate in excess of $50,000, other than pledges of assets to secure
government deposits, to exercise trust powers, sales of assets received in
satisfaction of debts previously contracted in the normal course of business,
issuance of loans, sales of previously purchased government guaranteed loans, or
transactions in the investment securities portfolio by the Company or repurchase
agreements made, in each case, in the ordinary course of business; or (ii)
undertake or enter into any lease, contract, capital expenditure or other
commitment for its account, other than in the normal course of providing credit
to customers as part of its business, involving a payment by the Company of more
than $25,000 annually, or containing a material financial commitment and
extending beyond 12 months from the date hereof.
(b) Advice of Changes. The Company shall promptly provide the
Buyer copies of all filings made by the Company with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby. The
Company shall, before settling or compromising any income tax liability, consult
with Buyer and its advisors as to the positions and elections that will be taken
or made with respect to such matter.
Section 6.2 System Conversions. From and after the date hereof, the
Buyer and the Company shall meet on a regular basis to discuss and plan for the
conversion of the Company's data processing and related electronic informational
systems to those used by the Buyer and its Subsidiaries, which planning shall
include, but not be limited to, discussion of the possible termination by the
Company of third-party service provider arrangements effective at the Effective
Time or at a date thereafter, non-renewal of personal property leases and
software licenses used by the Company in connection with its systems operations,
retention of outside consultants and additional employees to assist with the
conversion, and outsourcing, as appropriate, of proprietary or self-provided
system services, it being understood that the Company shall not be obligated to
take any such action prior to the Effective Time and provided further that no
conversion shall take place prior to the Effective Time. In the event that the
Company takes, at the request of the Buyer, any action relative to third parties
to facilitate the conversion that results in the imposition of any termination
fees, expenses or charges, the Buyer shall indemnify the Company for any such
fees, expenses and charges, and the costs of reversing the conversion process,
if for any reason the Merger is not consummated in accordance with the terms of
this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information.
(a) From the date hereof through the Effective Time, the
Company shall afford to Buyer and Buyer's accountants, counsel and other
representatives full and complete access during normal business hours (and at
such other times as the parties may mutually agree) to the Company's properties,
assets, books, contracts, commitments, records and personnel so as to permit
Buyer to perform a due diligence review as contemplated by Section 9.1(h); and
during such period, shall furnish promptly to Buyer all information concerning
its business, properties and personnel as Buyer may reasonably request.
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(b) The Company shall not be required to provide access to or
to disclose information where such access or disclosure would violate or
prejudice the rights of its customers, jeopardize any attorney-client privilege
or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty
or binding agreement entered into prior to the date of this Agreement. The
parties hereto will advise each other in writing if, and make approximate
substitute disclosure arrangement under circumstances in which, the restrictions
of the preceding sentence apply. Furthermore, notwithstanding anything to the
contrary herein, the Company shall not be required to provide Buyer with any
information regarding a Takeover Proposal (as hereinafter defined) except as
required by Section 7.7 hereof. Buyer shall hold, and shall cause its employees,
agents and representatives to hold, in confidence all "Confidential Information"
in accordance with the terms of the Confidentiality Agreement dated July 11,
2001, by and between Buyer and the Company, which shall remain in full force and
effect in accordance with the terms thereof, including, without limitation, in
the event of termination of this Agreement. No investigation pursuant to this
Section 7.1 shall limit any representation or warranty of the Company or Buyer.
Section 7.2 Shareholders' Meeting. The Company shall take all action
necessary, in accordance with applicable law and its Certificate of
Incorporation and By-laws, to convene the Company Special Shareholders Meeting
for the purpose of considering and taking action upon the Merger and this
Agreement.
Section 7.3 Public Announcements. On or before the Closing Date, Buyer
and the Company shall not (nor shall they permit any of their respective
Affiliates to), without prior consultation with the other party and such other
party's review of and consent to any public announcement concerning the
transactions contemplated by this Agreement, issue any press release or make any
public announcement with respect to such transactions except such disclosures as
may be required by law. During such period, Buyer and the Company shall, to the
extent practicable, allow the other party reasonable time to review and comment
on such release or announcement in advance of its issuance and use reasonable
efforts in good faith to reflect the reasonable and good faith comments of such
other party, provided, however, no party shall be prevented from making any
disclosure required by law at the time so required. The parties intend that the
initial announcement of the terms of the Merger shall be made by joint press
release of Buyer and the Company.
Section 7.4 Undertakings by the Company
(a) The Company shall provide Buyer, within ten (10) days of
the end of each calendar month, a written list of nonperforming assets (the term
"nonperforming assets," for purposes of this subsection, means (i) loans that
are "troubled debt restructuring" as defined in Statement of Financial
Accounting Standards No. 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructuring," (ii) loans on nonaccrual, (iii) real estate owned, (iv) all
loans ninety (90) days or more past due as of the end of such month and (v)
impaired loans);
(b) On or before the Effective Time, and at the request of
Buyer, the Company shall establish, consistent with GAAP, such additional
accruals and reserves as may be necessary to conform the accounting reserve
practices and methods (including credit loss practices and methods) of the
Company to those of Buyer (as such practices and methods are to be applied to
the Company from and after the Closing Date) and Buyer's plans with respect to
the conduct of the business of the Company following the Merger and otherwise to
reflect Merger-related expenses and costs incurred by the Company, provided,
however, that the Company shall not be required to take such action (i) more
than two (2) business days prior to the Closing Date and (ii) unless Buyer
agrees in writing that all conditions to closing set forth in Section 8.3 have
been satisfied or waived (except for the expiration of any applicable waiting
periods); prior to the delivery by Buyer of the writing referred to in the
preceding clause, the Company shall provide Buyer a written statement, certified
without personal liability by the chief executive officer of the Company and
dated the date of such writing, that the representation made in Section 4.29
hereof is true as of such date or, alternatively, setting forth in detail the
circumstances that prevent such representation from being true as of such date;
and no accrual or reserve made by the Company or any of its Subsidiaries
pursuant to this subsection, or any litigation or regulatory proceeding arising
out of any such accrual or reserve, shall constitute or be deemed to be a breach
or violation of any representation, warranty, covenant, condition or other
provision of this Agreement or to constitute a termination event within the
meaning of Section 9.1 hereof. No action shall be required to be taken by the
Company pursuant to this Section 7.4 if, in the opinion of the Company's
independent accountants, such action would contravene GAAP.
Section 7.5 Efforts; Consents.
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(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and the Merger and to cooperate with each other
in connection with the foregoing. Without limiting the generality of the
foregoing, each of the Company, Merger Subsidiary and Buyer shall make or cause
to be made all required filings with or applications to Regulatory Authorities
and use its best efforts to (i) obtain all necessary consents of all Regulatory
Authorities and other third parties, necessary for the parties to consummate the
transactions contemplated hereby, (ii) oppose, lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby, and (iii) fulfill all
conditions to this Agreement.
(b) Without limiting the foregoing, the Company and Buyer
shall cooperate in promptly preparing and filing as soon as practicable, all
necessary documentation, to effect all applications, notices, petitions and
filings, to obtain as promptly as practicable all permits, consents, approvals
and authorizations of all third parties and Governmental Entities and Regulatory
Authorities which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including, without limitation, the Merger), and
to comply with the terms and conditions of all such permits, consents, approvals
and authorizations of all such Governmental Entities and Regulatory Authorities.
The Buyer and the Company shall have the right to review in advance, and, to the
extent practicable, each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
relating to the Buyer or the Company, as the case may be, which appear in any
filing made with, or written materials submitted to, any third party or any
Governmental Entities or Regulatory Authority 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 or Regulatory Authorities 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.
(c) The Buyer and the Company shall, upon request, furnish
each other with all information concerning themselves, their Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of the Buyer or the Company or any of their
respective Subsidiaries to any Governmental Entity or Regulatory Authority in
connection with the Merger and the other transactions contemplated by this
Agreement.
(d) The Buyer and the Company shall promptly advise and inform
each other upon receiving (and the Buyer shall so advise with respect to
communications received by any Affiliate of the Buyer) any communication,
written or oral, from any Governmental Entity or Regulatory Authority whose
consent or approval is required for consummation of the transactions
contemplated by this Agreement. To the extent that any such communication is in
writing, the receiving party shall furnish a copy to the other party.
(e) The Buyer shall, as promptly as practicable following the
preparation thereof, file the Registration Statement with the SEC and the
Company and the Buyer shall use all reasonable efforts to have the Registration
Statement declared effective under the Securities Act. The Buyer shall advise
the Company, promptly after the Buyer receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order or the suspension of the
qualification of the shares of capital stock issuable pursuant to the
Registration Statement, or the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.
(f) The Buyer shall cause the shares of Buyer Common Stock to
be issued in the Merger to be approved for listing on the Nasdaq National
Market, subject to official notice of issuance, prior to the Closing Date.
Section 7.6 Notice of Breaches. The Company shall give prompt notice to
Buyer, and Buyer or Merger Subsidiary shall give prompt notice to the Company,
of (i) any representation or warranty made by it contained in this Agreement
which has become untrue or inaccurate in any material respect, or (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition, or agreement to be complied with or satisfied by it
20
under this Agreement; provided, however, that such notification shall not excuse
or otherwise affect the representations, warranties, covenants or agreements of
the parties or the conditions to the obligations of the parties under this
Agreement.
Section 7.7 Acquisition Proposals.
(a) The Company shall, and shall direct and cause its
officers, directors, employees, representatives and agents to, immediately cease
any discussions or negotiations with any parties that may be ongoing with
respect to a Takeover Proposal (as hereinafter defined). The Company shall not,
nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any of its officers, directors or employees or any financial advisor, attorney,
accountant or other representative retained by it to, directly or indirectly:
(i) solicit, initiate or encourage, including by way of furnishing information,
or take any other action designed or reasonably likely to facilitate, including,
without limitation, any adoption of any rights or similar plan, the grant of any
option or proxy or otherwise except to Buyer, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Takeover Proposal or (ii) subject to paragraph (b) of this Section 7.7, provide
any information or data to any third party in connection with any Takeover
Proposal or participate in any discussions or negotiations regarding any
Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any officer
or director of the Company or any financial advisor, attorney, accountant, or
other representative of the Company, shall be deemed to be a breach of this
Section 7.7 by the Company. "Takeover Proposal" means any inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or purchase
of 15% or more of the assets of the Company or 15% or more of any class of
equity securities of the Company, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of equity securities of the Company, any merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company (other than the transactions
contemplated by this Agreement) or any other transaction the consummation of
which could reasonably be expected to impede, interfere with, prevent or
materially delay the Merger or which would reasonably be expected to diminish
materially the benefits to Buyer of the transactions contemplated by this
Agreement.
(b) Except as set forth in this Section 7.7, neither the Board
of Directors of the Company nor any committee thereof shall: (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to Buyer,
or take any action not explicitly permitted by this Agreement that would be
inconsistent with, the approval or recommendation by such Board of Directors or
such committee of the Merger, (ii) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal, (iii) provide any information or
data to any third party in connection with a Takeover Proposal or participate in
any discussions or negotiations regarding any Takeover Proposal or (iv) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Takeover Proposal. Notwithstanding the foregoing, in
the event that prior to the Effective Time the board of directors of the Company
determines in good faith, upon advice from outside counsel, that it is necessary
to do so in order to comply with their fiduciary duties under applicable law,
the board of directors of the Company may (subject to this and the following
sentences): (x) withdraw or modify its approval or recommendation of the Merger,
or (y) approve or recommend a Superior Proposal (as defined below) or terminate
this Agreement (and concurrently with or after such termination, if it so
chooses, cause the Company to enter into any Acquisition Agreement with respect
to any Superior Proposal), but in each of the cases set forth in this clause
(y), only at a time that is after the fifth (5th) day following Buyer's receipt
of written notice advising Buyer that the Board of Directors of the Company has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and identifying the person making such Superior Proposal.
For purposes of this Agreement, a "Superior Proposal" means any bona fide
proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the Company
Shares then outstanding or all or substantially all the assets of the Company
and otherwise on terms which the board of directors of the Company determines in
its good faith judgment (based on the advice of a financial advisor mutually
acceptable to the Company and Buyer) to be materially more favorable to the
Company's shareholders than the Merger and for which third-party financing, to
the extent required, is then firmly committed.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 7.7, the Company shall promptly (but in
any event within forty-eight hours of receipt) advise Buyer orally and in
writing of any request by any person for information about the Company or of any
Takeover Proposal, the material terms and conditions of such request or the
Takeover Proposal and the identity of the person making such request or
21
the Takeover Proposal. The Company shall keep Buyer fully and promptly informed
of the status and details (including amendments or proposed amendments) of any
request by any person for information about the Company or of any Takeover
Proposal.
Section 7.8 Related Agreements. Simultaneously with the execution and
delivery of this Agreement, or as otherwise provided below, and as material
consideration for the execution and delivery of this Agreement by Buyer and
Merger Subsidiary, each of the Persons listed on Schedule 7.8 to this Agreement
is entering into a Shareholders' Agreement in the form of Exhibit A hereto.
Section 7.9 Advice of Changes. The Buyer and the Company shall each
promptly advise the other party of any change or event having a Material Adverse
Effect on it or which it believes would or would be reasonably likely to cause
or constitute a material breach of any of its representations, warranties or
covenants contained herein; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 7.10 Update of Disclosure Schedules. From time to time prior to
the Effective Time, the Company and the Buyer will promptly supplement or amend
their respective Disclosure Schedules to reflect any matter which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such Disclosure Schedule or which is necessary to
correct any information on the Disclosure Schedule which has been rendered
inaccurate thereby. No supplement or amendment to the Disclosure Schedules nor
any investigation by the Company or the Buyer, before or after execution of this
Agreement, shall have any effect for the purpose of determining satisfaction of
the conditions set forth in Section 8.2 and Section 8.3, respectively, hereof or
compliance by the Buyer or the Company with the covenants set forth in Articles
VI and VII hereof.
Section 7.11 Indemnification.
(a) From and after the Effective Time through the one-year
anniversary of the Effective Time, Buyer shall indemnify and hold harmless each
present and former director, officer and employee of the Company determined as
of the Effective Time (the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time to the extent covered by directors and officers
insurance maintained by the Company (collectively, "Claims"), to the fullest
extent to which such Indemnified Parties would be entitled under New York law
and the Certificate of Incorporation and By-laws of the Company as in effect on
the date hereof.
Any Indemnified Party wishing to claim indemnification under
this Section 7.11(a), upon learning of any such claim, action, suit, proceeding
or investigation, shall promptly notify Buyer, but the failure to so notify
shall not relieve Buyer of any liability it may have to such Indemnified Party
if such failure does not materially prejudice Buyer. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) Buyer shall have the right to assume the defense
thereof and Buyer shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Buyer elects not to assume such defense or counsel for the Indemnified Parties
advises that there are issues which raise conflicts of interest between Buyer
and the Indemnified Parties, the Indemnified Parties may retain counsel which is
reasonably satisfactory to Buyer and Buyer shall pay, promptly as statements
therefore are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel of such Indemnified Parties would present such counsel
with a conflict of interest), (ii) the Indemnified Parties will cooperate in the
defense of any such matter, and (iii) Buyer shall not be liable for any
settlement effected without its prior written consent, which consent shall not
be unreasonably withheld.
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 7.11, which
obligations
22
are expressly intended to be for the irrevocable benefit of, and shall be
enforceable by, each of the Indemnified Parties.
(b) From and after the Effective Time, Buyer shall maintain a
directors' and officers' liability insurance policy covering the Indemnified
Parties Costs in connection with any Claims for a period of not less than one
(1) years after the Effective Time at annual premiums no greater than 150% of
the annual premium of the directors' and officers' liability insurance
maintained by the Company as of the date hereof.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby
shall have been approved and adopted by the requisite vote of the Shareholders;
(b) All necessary regulatory, governmental or third-party
approvals, waivers, clearances, authorizations and Consents (including, without
limitation, from the Banking Department and the Federal Reserve Board and the
OCC) required to consummate the transactions contemplated hereby shall have been
obtained, all conditions required to be satisfied prior to the Effective Time by
the term of such approvals and consents shall have been satisfied, any
applicable waiting periods shall have expired or been terminated and any other
Consents from Regulatory Authorities and other third parties which in any case
are required to be received prior to the Effective Time with respect to the
transactions contemplated hereby shall have been received; and
(c) The consummation of the Merger shall not be restrained,
enjoined or prohibited by any order, judgment, decree, injunction or ruling of a
court of competent jurisdiction; provided, however, that the parties shall use
their best efforts to cause any such order, judgment, decree, injunction or
ruling to be vacated or lifted.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the additional conditions,
unless waived by the Company, that:
(a) The representations and warranties of Buyer and Merger
Subsidiary contained in this Agreement shall be true in all material respects
when made and at and as of the Effective Time as if made at and as of such time,
and the Company shall have received a certificate of an officer of Buyer and
Merger Subsidiary, without personal liability to that officer, to that effect.
(b) Buyer and Merger Subsidiary shall have performed or
complied in all material respects with all agreements and covenants required to
be performed by each of them under this Agreement at or prior to the Effective
Time and the Company shall have received a certificate of the President of Buyer
and Merger Subsidiary, without personal liability to that officer, to that
effect.
(c) The Company shall be in receipt of a legal opinion from
Nixon Peabody LLP, counsel to Buyer and Merger Subsidiary, in form and substance
reasonably satisfactory to the Company.
(d) The shares of Buyer Common Stock issuable to the Company's
shareholders as contemplated by this Agreement shall have been approved for
listing on the Nasdaq National Market, subject to official notice of issuance.
(e) The Registration Statement (including any post-effective
amendment thereto) shall be effective under the Securities Act, and no
proceeding shall be pending or threatened by the SEC to suspend the
effectiveness of such
23
Registration Statement, and the Buyer shall have received all state securities
or "Blue Sky" permits or other authorizations, or confirmations as to the
availability of an exemption from registration requirements as may be necessary.
(f) The Company shall be in receipt of an opinion from R.A.
Mercer & Co., P.C., certified public accountants, that the Merger will qualify
as a reorganization pursuant to Section 368(a) of the Code.
Section 8.3 Conditions to Obligations of Buyer and Merger Subsidiary to
Effect the Merger. The obligations of Buyer and Merger Subsidiary to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the additional following conditions, unless waived by Buyer:
(a) The representations and warranties of the Company
contained in this Agreement shall be true in all material respects when made and
at and as of the Effective Time as if made at and as of such time, and Buyer and
Merger Subsidiary shall have received a certificate of an officer of the
Company, without personal liability to that officer, to that effect.
(b) The Company shall have performed or complied in all
material respects with all agreements and covenants required to be performed by
it under this Agreement at or prior to the Effective Time and Buyer and Merger
Subsidiary shall have received a certificate of the President of the Company,
without personal liability to that officer, to such effect.
(c) There shall not have occurred any change in the business,
assets, financial condition or results of operations of the Company or any of
its Subsidiaries which has had, or is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect.
(d) Buyer shall be in receipt of a legal opinion of Harris
Beach LLP, counsel to the Company, in form and substance reasonably satisfactory
to Buyer.
(e) At or prior to the Effective Time, Company shall deliver
to Buyer evidence satisfactory to Buyer of the resignations of those directors
and officers of Company that are requested by Buyer, such resignations to be
effective at the Effective Time. Such resignations shall not affect any rights
of those directors and officers to receive contracted-for severance benefits to
which they would otherwise be entitled.
(f) The Related Agreements have been executed and delivered by
the respective parties thereto and continue in full force and effect.
(g) Shareholder approval shall have been obtained for
consummation by the Company of the transactions contemplated hereby, including
without limitation, the Merger.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
Shareholders:
(a) by mutual written consent of Buyer and the Company;
(b) by the Company, upon a material breach of this Agreement
on the part of Buyer or Merger Subsidiary which has not been cured within 30
days of written notice of such breach and which would have a Material Adverse
Effect on the Company or would materially impair the parties' abilities to
consummate the transactions contemplated hereby;
24
(c) by Buyer, upon a material breach of this Agreement on the
part of the Company which has not been cured within 30 days of written notice of
such breach and which would have a Material Adverse Effect on the Buyer or would
materially impair the parties' abilities to consummate the transaction
contemplated hereby;
(d) by Buyer or the Company if any court of competent
jurisdiction shall have issued, enacted, entered, promulgated or enforced any
order, judgment, decree, injunction or ruling, after reasonable efforts on the
part of Buyer and the Company to resist, resolve or lift, which permanently
restrains, enjoins or otherwise prohibits the Merger and such order, judgment,
decree, injunction or ruling shall have become final and nonappealable;
(e) by either Buyer or the Company if the Merger shall not
have been consummated on or before May 31, 2002, provided the terminating party
is not otherwise in material breach of its representations, warranties or
obligations under this Agreement;
(f) by either Buyer or the Company upon written notice to the
other party 45 days after the date on which any Application for regulatory
approval shall have been denied or withdrawn at the request or recommendation of
the Regulatory Authority which must grant such regulatory approval, unless
within the 45-day period following such denial or withdrawal a petition for
rehearing or an amended Application has been filed with the applicable
Regulatory Authority, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 9.1(f) 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;
(g) by the Company if it receives a Superior Proposal and the
Company's Board of Directors determines that it would be in accordance with
their fiduciary duties, based upon the advice of its outside legal counsel, to
accept the third party proposal; provided, however, that in such event the
Company shall not be permitted to terminate this Agreement pursuant to this
Section 9.1(g) unless it has complied with the provisions of Section 7.7; or
(h) by the Buyer by written notice to the Company delivered in
accordance with the provisions of Section 10.1 hereof not later than thirty (30)
days after the date hereof indicating that Buyer is not satisfied with the
results of its due diligence review of the Company and the Company's business,
properties, assets, books, contracts, commitments, records and personnel.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either Buyer or the Company, as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of any of the Company, Buyer or Merger Subsidiary or their
respective officers or directors; provided that Sections 9.2, 9.3, the
penultimate sentence of Section 7.1(b) and the provisions of Article 10 (other
than Section 10.3) shall survive such termination.
Section 9.3 Fees and Expenses.
(a) Whether or not the Merger is consummated, except as
otherwise expressly provided in this Agreement all costs and expenses incurred
in connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
(b) In the event of a willful breach of any representation,
warranty, covenant or agreement contained in this Agreement, the breaching party
shall remain liable for any and all damages, costs and expenses, including all
reasonable attorneys' fees, sustained or incurred by the non-breaching party as
a result thereof or in connection therewith or with the enforcement of its
rights hereunder.
(c) In order to induce Buyer and Merger Subsidiary to enter
into this Agreement and to reimburse Buyer and Merger Subsidiary for their costs
and expenses in connection with this Agreement and the transactions contemplated
hereby, the Company shall pay to Buyer $75,000 cash, in the event that this
Agreement is terminated by the Company pursuant to Section 9.1(g).
25
Section 9.4 Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval hereof by the Shareholders, but,
after such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the Merger Consideration, (ii) in any way materially
adversely affects the rights of the Shareholders or (iii) under applicable law
would require approval of the Shareholders without such approval having been
obtained. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time, the
parties hereto may, to the extent permitted by applicable law, (i) extend the
time for the performance of any of the obligations or other acts of any other
party hereto, (ii) waive any inaccuracies in the representations and warranties
by any other party contained herein or in any documents delivered by any other
party pursuant hereto and (iii) waive compliance with any of the agreements of
any other party or with any conditions to its own obligations contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE X
Section 10.1 Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telecopy (with
confirmation of receipt), by registered or certified mail, postage prepaid,
return receipt requested, or by overnight courier (providing proof of delivery),
addressed as follows:
If to the Company:
Bank of Avoca
18 N. Main Street
Avoca, New York 14809
Attention: Karl V. Anderson, Jr., President and Chief
Executive Officer
With copies to:
Beth Ela Wilkens, Esq.
Harris Beach LLP
99 Garnsey Road
Pittsford, New York 14534
Telecopy: 716-419-8818
If to Buyer:
Financial Institutions, Inc.
220 Liberty Street
Warsaw, New York 14569-0227
Attention: Peter G. Humphrey, Chairman and Chief Executive
Officer
Telecopy: 716-786-1108
With a copy to:
Bruce J. Baker, Esq.
Nixon Peabody LLP
Clinton Square
Rochester, New York 14603
Telecopy: 716-263-1600
If to Merger Subsidiary:
26
Bath National Corporation
44 Liberty Street
Bath, New York 14810
Attention: Douglas McCabe, President and Chief Executive
Officer
Telecopy No.: 607-776-4510
With a copy to:
Bruce J. Baker, Esq.
Nixon Peabody LLP
Clinton Square
Rochester, New York 14603
Telecopy: 716-263-1600
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 10.2 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for those covenants and agreements contained
herein and therein which by their terms apply in whole or in part after the
Effective Time.
Section 10.3 Specific Performance. The Company acknowledges that the
Company Shares and the Company's business and assets are unique, and that if the
Company shall refuse to consummate the transaction contemplated by this
Agreement in breach of its obligations hereunder, such failure by the Company
will cause irreparable harm to Buyer for which there will be no adequate remedy
at law, in which event Buyer shall be entitled, in addition to its other
remedies at law, to specific performance of this Agreement.
Section 10.4 Entire Agreement. This Agreement (including the documents
and instruments referred to herein (including without limitation, the Company
Disclosure Schedule and the Buyer Disclosure Schedule)), together with the
Confidentiality Agreement, constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
Section 10.5 Assignments; Parties in Interest. Neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties except that Buyer or Merger
Subsidiary may assign this Agreement to any Affiliate of Buyer or Merger
Subsidiary, respectively, without necessity of obtaining the Company's consent
to such assignment, provided however, that notwithstanding such assignment,
Buyer or Merger Subsidiary, as the case may be, shall remain liable for
performance of its obligations hereunder. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
not a party hereto any right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, including to confer third party beneficiary
rights, except for the provisions of Article III and Sections 7.7 and 7.11.
Section 10.6 Governing Law. This Agreement, shall be governed in all
respects by the laws of the State of New York (without giving effect to any
provisions thereof relating to conflicts of laws that would require application
of the laws of any other jurisdiction). The exclusive venue for the adjudication
of any dispute or proceeding arising out of this Agreement or the performance
thereof shall be the courts located in the County of Monroe, State of New York
and the parties hereto and their affiliates each consents to and hereby submits
to the jurisdiction of any court located in the County of Monroe, State of New
York or Federal courts in the Western District of New York.
Section 10.7 Headings; Disclosure. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
27
Section 10.8 Certain Definitions and Rules of Construction.
(a) As used in this Agreement:
"Affiliate," as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that person; for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in the preamble.
"Applications" means all applications for regulatory approval
which are required by the transactions contemplated hereby.
"Acquisition Agreement" has the meaning set forth in Section
7.7(b).
"Average Sales Price" means the average of the daily closing
prices per share of Buyer Stock on the NASDAQ National Market for the 30 trading
days immediately prior to the Effective Date, as reported by The Wall Street
Journal (Northeast edition), or, if not so reported thereby, as reported by any
other authoritative source.
"Bath National Bank" has the meaning set forth in the recitals
to this Agreement.
"Bank Merger" has the meaning set forth in Section 1.1.
"Banking Department" means the New York State Banking
Department.
"BHCA" means the Company Holding Company Act of 1956, as
amended.
"BIF" means the Company Insurance Fund administered by the
FDIC.
"Business Day" shall mean any day, Monday-Friday, on which
national Banks may legally be open for business in New York.
"Buyer" has the meaning set forth in the preamble.
"Buyer Disclosure Schedule" has the meaning set forth in the
introductory paragraph of Article V.
"Buyer Financial Statements" mean (i) the consolidated balance
sheets of Buyer as at September 30, 2001 and as at December 31, 2000 and 1999
and the related consolidated statements of income, cash flows and changes in
stockholders' equity (including related notes, if any) for the nine months ended
September 30, 2001 and each of the three years ended December 31, 2000, 1999 and
1998, respectively, as filed by Buyer in SEC Documents.
"Buyer Common Stock" has the meaning set forth in the
recitals.
"Certificate of Merger" has the meaning set forth in Section
1.3.
"Certificates" has the meaning set forth in Section 3.2.
"Closing Date" has the meaning set forth in Section 1.2.
"Code" has the meaning set forth in the preamble.
28
"Company" has the meaning set forth in the preamble.
"Company Benefit Plans" has the meaning set forth in Section
4.8(a).
"Company Board Approval" has the meaning set forth in Section
4.22.
"Company Contract" has the meaning set forth in Section 4.13.
"Company Financial Advisor" has the meaning set forth in
Section 4.23.
"Company Shares" has the meaning set forth in the recitals.
"Company Disclosure Schedule" has the meaning set forth in the
introductory paragraph of Article IV.
"Company Special Shareholders Meeting" means the special
meeting of shareholders of the Company called for the purpose of voting on and
approving the Merger and relation transactions contemplated by this Agreement,
as and to the extent required by New York Law."Consent" shall have the meaning
set forth in Section 4.4(b) and 5.5(b).
"Costs" shall have the meaning set forth in Section 7.11(a).
"Dissenters' Shares" shall have the meaning set forth in
Section 1.6.
"Effective Time" shall have the meaning set forth in Section
1.3.
"Environment" shall have the meaning set forth in Section
4.18(g).
"EPA" shall have the meaning set forth in Section 4.18(a).
"ERISA" shall have the meaning set forth in Section 4.8(a).
"ERISA Affiliate" has the meaning set forth in Section 4.8(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended
"Exchange Ratio" shall have the meaning set forth in Section
3.1(a).
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Statements" means the reviewed balance sheet and
income statement (including the related notes and schedules thereto) of the
Company as of September 30, 2001, attached hereto as Section 4.5 of the
Disclosure Schedule.
"FRB" means the Board of Governors of the Federal Reserve
System.
"GAAP" has the meaning set forth in Section 4.5.
"Governmental Entity" has the meaning set forth in Section
4.4(b).
"Hazardous Material" has the meaning set forth in Section
4.18(g).
"Indemnified Parties" shall have the meaning set forth in
Section 7.11(a).
29
"Intellectual Property" shall have the meaning set forth in
Section 4.15.
"IRS" shall have the meaning set forth in Section 4.8(b).
"Knowledge" or any other formulation of "knowledge" shall
mean, with respect to Company, the knowledge of the Company's senior executive
officers, and with respect to Buyer and Merger Subsidiary, the knowledge of
Buyer's senior executive officers;
"Law" means any constitution, statute, order, regulation,
directive, opinion, interpretive letter or embodiment of official action taken
at the federal or state law by an entity having jurisdiction over one or more
parties to this Agreement.
"Lien" shall have the meaning set forth in Section 5.4(a).
"Loan" shall have the meaning set forth in Section 4.26(a).
"Loan Property" shall have the meaning given to such term in
Section 4.18(g) of this Agreement.
"Material Adverse Effect" shall mean, (i) with respect to the
Company taken as a whole, Buyer and its Subsidiaries taken as a whole, and any
other Person (including a Person who is a borrower or guarantor of a Loan), a
change or effect that is or is reasonably likely to be materially adverse to the
business, results of operations or financial condition of such Person taken as a
whole, and (ii) with respect to the Company, a change or effect that results in
the Company incurring or suffering any loss, cost, damage, liability or other
expense which individually exceeds $25,000, or which, when aggregated with all
other losses, costs, damages, liabilities or other expenses, exceeds $50,000;
provided, however, that "Material Adverse Effect" shall not be deemed to include
the impact of (a) any change in GAAP or in banking or similar laws, rules or
regulations of general applicability to depository institutions and their
holding companies (including changes in insurance deposit assessment rates
applicable to financial institutions and their holding companies) or
interpretations thereof by courts and governmental authorities, (b) actions and
omissions of the Company or the Buyer or any Subsidiaries taken with the prior
written consent of the other parties hereto, (c) changes in economic conditions
affecting financial institutions generally, including, but not limited to,
changes in the general level of market interest rates, and (d) the direct
effects of compliance with this Agreement on the operating performance of the
parties including expenses incurred by the parties hereto in consummating the
transactions contemplated by this Agreement.
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" has the meaning set forth in Section
3.1(a).
"Merger Subsidiary" has the meaning set forth in the preamble
to this Agreement.
"Nasdaq National Market" shall mean the Nasdaq National Market
of the Nasdaq Stock Market Inc.
"New York Law" shall have the meaning set forth in Section
1.3.
"OCC" shall mean the Office of the Controller of the Currency.
"Oil" shall have the meaning set forth in Section 4.18(g).
"OREO" means other real estate owned as described in Section
4.26(c).
"Participation Facility" shall have the meaning set forth in
Section 4.18(g).
"Pension Plan" has the meaning set forth in Section 4.9(b).
30
"Person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act).
"Registration Statement" means the registration statement on
Form S-4, including any pre-effective or post-effective amendments or
supplements thereto, as filed with the SEC under the Securities Act with respect
to the Buyer Stock to be issued in connection with the transactions contemplated
by this Agreement.
"Regulatory Authority" means any agency or department of any
Federal or state government, including without limitation, the FDIC, the FRB,
the Banking Department, the SEC or the respective staffs thereof.
"Shareholders" has the meaning set forth in the recitals.
"SEC Documents" shall mean all reports and registration
statements filed, or required to be filed, with the Securities and Exchange
Commission by a party hereto pursuant to the Securities Laws.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"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 Commission promulgated thereunder.
"Subsidiary" or "Subsidiaries" means, with respect to Buyer,
the Company or any other person, any corporation, partnership, joint venture or
other legal entity of which Buyer, the Company or such other person, as the case
may be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
"Superior Proposal" has the meaning set forth in Section
7.7(b).
"Surviving Corporation" has the meaning set forth in Section
1.1.
"Takeover Proposal" has the meaning set forth in Section
7.7(a).
"Violation" has the meaning set forth in Section 4.4(a).
(b) Other Rules of Construction.
(i) References in this Agreement to any gender shall
include references to all genders. Unless the context
otherwise requires, references in the singular
include references in the plural and vice versa.
References to a party to this Agreement or to other
agreements described herein means those Persons
executing such agreements.
(ii) The words "include", "including" or "includes" shall
be deemed to be followed by the phrase "without
limitation" or the phrase "but not limited to" in all
places where such words appear in this Agreement.
(iii) This Agreement is the joint drafting product of Buyer
and the Company and each provision has been subject
to negotiation and agreement and shall not be
construed for or against either party as drafter
thereof.
(iv) Each case in this Agreement where a contract or
agreement, including this Agreement, is represented
or warranted to be enforceable will be deemed to
include as a limitation to the extent that
enforceability may be subject to applicable
Bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar Laws affecting the
31
enforcement of creditors' rights generally and to
general equitable principles, whether applied in
equity or at law.
Section 10.9 Counterparts. This Agreement may be executed in
counterparts which together shall constitute a single agreement.
Section 10.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economics or legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon determination that any term or other
provision hereof is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
32
IN WITNESS WHEREOF, Buyer, Merger Subsidiary and the Company have
caused this Agreement to be signed by their respective officers thereunder duly
authorized all as of the date first written above.
BUYER:
FINANCIAL INSTITUTIONS, INC.
By/s/ Peter G. Humphrey
---------------------------
Name: Peter G. Humphrey
Title: Chairman and Chief Executive Officer
MERGER SUBSIDIARY:
FI SUBSIDIARY III, INC.
By/s/ Peter G. Humphrey
-------------------------
Name: Peter G. Humphrey
Title: President and Chief Executive Officer
COMPANY
BANK OF AVOCA
By/s/ Karl V. Anderson
-------------------------
Name: Karl V. Anderson, Jr.
Title: President and Chief Executive Officer
EXHIBIT B - DISSENTERS RIGHTS UNDER NEW YORK BANKING LAW
ss.6022. Procedure to enforce stockholder's right to receive payment for shares.
1. A stockholder intending to enforce his right under a section of this chapter
to receive payment for his shares if the proposed corporate action referred to
therein is taken shall file with the corporation, before the meeting of
stockholders at which the action is submitted to a vote, or at such meeting but
before the vote, written objection to the action. The objection shall include a
statement that he intends to demand payment for his shares if the action is
taken. Such objection is not required from any stockholder to whom the
corporation did not give notice of such meeting in accordance with this chapter
or where the proposed action is authorized by written consent of stockholders
without a meeting.
2. Within ten (10) days after the stockholders' authorization date, which term
as used in this section means the date on which the stockholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite stockholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
stockholder who filed written objection or from whom written objection was not
required, excepting any who voted for or consented in writing to the proposed
action.
3. Within twenty (20) days after the giving of notice to him, any stockholder to
whom the corporation was required to give such notice and who elects to dissent
shall file with the corporation a written notice of such election, stating his
name and residence address, the number and classes of shares as to which he
dissents and a demand for payment of the fair value of his shares.
4. A stockholder may not dissent as to less than all of the shares, held by him
of record, that he owns beneficially. A nominee or fiduciary may not dissent on
behalf of any beneficial owner as to less than all of the shares of such owner
held of record by such nominee or fiduciary.
5. Upon filing a notice of election to dissent, the stockholder shall cease to
have any of the rights of a stockholder except the right to be paid the fair
value of his shares and any other rights under this section. Withdrawal of a
notice of election shall require the written consent of the corporation. If a
notice of election is withdrawn, or the proposed corporate action is abandoned
or rescinded, or a court shall determine that the stockholder is not entitled to
receive payment for his shares, or the stockholder shall otherwise lose his
dissenter's rights, he shall not have the right to receive payment for his
shares and he shall be reinstated to all his rights as a stockholder as of the
filing of his notice of election, including any intervening preemptive rights
and the right to payment of any intervening dividend or other distribution or,
if any such rights have expired or any such dividend or distribution other than
in cash has been completed, in lieu thereof, at the election of the corporation,
the fair value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
6. At the time of filing the notice of election to dissent or within one month
thereafter the stockholder shall submit the certificates representing his shares
to the corporation, or to its transfer agent, which shall forthwith note
conspicuously thereon that a notice of election has been filed and shall return
the certificates to the stockholder or other person who submitted them on his
behalf. Any stockholder who fails to submit his certificates for such notation
as herein specified shall, at the option of the corporation exercised by written
notice to him within forty-five days from the date of filing of such notice of
election to dissent, lose his dissenter's rights unless a court, for good cause
shown, shall otherwise direct. Upon transfer of a certificate bearing such
notation, each new certificate issued therefor shall bear a similar notation
together with the name of the original dissenting holder of the shares and a
transferee shall acquire no rights in the corporation except those which the
original dissenting stockholder had after filing his notice of election.
7. Within seven days after the expiration of the period within which
stockholders may file their notices of election to dissent, or within seven days
after the proposed corporate action is consummated, whichever is later, the
corporation or, in the case of a merger, the receiving corporation, shall make a
written offer by registered mail to each stockholder who has filed such notice
of election to pay for his shares at a specified price which the corporation
considers to be their fair value. Such offer shall be made at the same price per
share to all dissenting stockholders of the same class, or if divided into
series, of the name series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting stockholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. If within thirty days after
the making of such offer, the corporation making the offer and any stockholder
agree upon the price to be paid for his shares, payment therefor shall be made
within sixty days after the making of such offer upon the surrender of the
certificates representing such shares.
8. The following procedure shall apply if the corporation fails to make such
offer within such period of seven (7) days, or if it makes the offer and any
dissenting stockholder or stockholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(a) The corporation or, in the case of a merger, the receiving
corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned,
institute a special proceeding in the supreme court in the
judicial district in which the office of the corporation is
located to determine the rights of dissenting stockholders and
to fix the fair value of their shares.
(b) If the corporation fails to institute such proceeding within
such period of twenty days, any dissenting stockholder may
institute such proceeding for the same purpose not later than
thirty days after the expiration of such twenty day period. If
such proceeding is not instituted within such thirty day
period, all dissenter's rights shall be lost unless the
supreme court, for good cause shown, shall otherwise direct.
(c) All dissenting stockholders, excepting those who, as provided
in subdivision seven, have agreed with the corporation upon
the price to be paid for their shares, shall be made parties
to such proceeding, which shall have the effect of an action
quasi in rem against their shares. The corporation shall serve
a copy of the petition in such proceeding upon each dissenting
stockholder who is a resident of this state in the manner
provided by law for the service of a summons, and upon each
nonresident dissenting stockholder either by registered mail
and publication, or in such other manner as is permitted by
law. The jurisdiction of the court shall be plenary and
exclusive.
(d) The court shall determine whether each dissenting stockholder,
as to whom the corporation requests the court to make such
determination, is entitled to receive payment for his shares.
If the corporation does not request any such determination or
if the court finds that any dissenting stockholder is so
entitled, it shall proceed to fix the value of the shares,
which, for the purposes of this section, shall be the fair
value as of the close of business on the day prior to the
stockholders' authorization date, excluding any appreciation
or depreciation directly or indirectly induced by such
corporate action or its proposal. The court may, if it so
elects, appoint an appraiser to receive evidence and recommend
a decision on the question of fair value. Such appraiser shall
have the power, authority and duties specified in the order
appointing him, or any amendment thereof.
(e) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting stockholder who is a
party to the proceeding and is entitled thereto for the value
of his shares so determined.
(f) The final order shall include an allowance for interest at
such rate as the court finds to be equitable, from the
stockholders' authorization date to the date of payment. If
the court finds that the refusal of any stockholder to accept
the corporate offer of payment for his shares was arbitrary,
vexatious or otherwise not in good faith, no interest shall be
allowed to him.
(g) The costs and expenses of such proceeding shall be determined
by the court and shall be assessed against the corporation,
or, in the case of a merger, the receiving corporation, except
that all or any part of such costs and expenses may be
apportioned and assessed, as the court may determine, against
any or all of the dissenting stockholders who are parties to
the proceeding if the court finds that their refusal to accept
the corporate offer was arbitrary, vexatious or otherwise not
in good faith. Such expenses shall include reasonable
compensation for and the reasonable expenses of the
2
appraiser, but shall exclude the fees and expenses of counsel
for and experts employed by any party unless the court, in its
discretion, awards such fees and expenses. In exercising such
discretion, the court shall consider any of the following: (A)
that the fair value of the shares as determined materially
exceeds the amount which such corporation offered to pay; (B)
that no offer was made by such corporation; and (C) that such
corporation failed to institute the special proceeding within
the period specified therefor.
(h) Within sixty (60) days after final determination of the
proceeding, the corporation or, in the case of a merger, the
receiving corporation shall pay to each dissenting stockholder
the amount found to be due him, upon surrender of the
certificates representing his shares.
9. Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall be dealt with as provided in section five thousand fourteen,
except that, in the case of a merger, they shall be disposed of as provided in
the plan of merger or consolidation.
10. The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided herein shall exclude the enforcement by such
stockholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in subdivision five, and except that this
section shall not exclude the right of such stockholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is illegal or fraudulent as to him.
11. Except as otherwise expressly provided in this section, any notice to be
given by a corporation to a stockholder under this section shall be given in the
manner provided in section six thousand five.
3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Sections 721 through 725 of the Business Corporation Law of the
State of New York (the "BCL"), the Registrant has broad powers to indemnify its
directors, officers and other employees. These sections (i) provide that the
statutory indemnification and advancement of expenses provision of the BCL are
not exclusive, provided that no indemnification may be made to or on behalf of
any director or officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action os adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled, (ii) establish
procedures for indemnification and advancement of expenses that may be contained
in the certificate of incorporation or by-laws, or, when authorized by either of
the foregoing, set forth in a resolution of the shareholders or directors of an
agreement providing for indemnification and advancement of expenses, (iii) apply
a single standard for statutory indemnification for third-party and derivative
suits by providing that indemnification is available if the director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation, and, in criminal actions, had no reasonable
cause to believe that his conduct was unlawful and (iv) permit the advancement
of litigation expenses upon receipt of an undertaking to repay such advance if
the director or officer is ultimately determined not to be entitled to
indemnification or to the extent the expenses advanced exceed the
indemnification to which the director or officer is entitled. Section 726 of the
BCL permits the purchase of insurance to indemnify a corporation or its officers
and directors to the extent permitted.
As permitted by Section 721 of the BCL, the Registrant's By-laws
provide that the Registrant shall indemnify its officers and directors, as such,
to the fullest extent permitted by applicable law, and that expenses reasonably
incurred by any such officer or director in connection with a threatened or
actual action or proceeding shall be advanced or promptly reimbursed by the
Registrant in advance of the final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of such officer or director to repay
such amount if and to the extent that it is ultimately determined that such
officer or director is not entitled to indemnification.
Article EIGHTH of the Registrant's Certificate of Incorporation
provides that no director of the Registrant shall be held personally liable to
the Registrant or its shareholders for damages for any breach of duty in his
capacity as a director occurring after authorization of such Article EIGHTH by
the shareholders unless a judgment or other final adjudication adverse to him
establishes that (1) his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, or (2) he personally
gained in fact a financial profit or other advantage to which he was not legally
entitled, or (3) his acts violated section 719 of the BCL. The Registrant has
entered into Indemnity Agreements with its directors and certain key officers
pursuant to which the Registrant generally is obligated to indemnify its
directors and such officers to the full extent permitted by the BCL as described
above. The Company also has purchased directors' and officers' liability
insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following is a list of all exhibits filed or incorporated by
reference as part of this Registration Statement.
EXHIBIT INDEX
Exhibit
No. Description Location
- ------- ------------ ---------
3.1 Amended and Restated Certificate of Contained in Exhibit 3.1 of
Incorporation the Registrant's Registration
Statement on Form S-1 dated
June 25, 1999 (File No.
333-76865) (The "S-1
Registration Statement")
II-1
3.2 Amended and Restated Bylaws Contained in Exhibit 3.2 to
the Registrant's 10K Annual
Report filed March 11, 2002
5.1 Opinion of Nixon Peabody Filed Herewith
10.1 1999 Management Stock Incentive Plan Contained in Exhibit 10.1 of
the S-1 Registration
Statement
10.2 1999 Directors Stock Incentive Plan Contained in Exhibit 10.2 of
the S-1 Registration
Statement
10.3 Employment Agreement for Contained in Exhibit 10.3 to
Peter G. Humphrey the Registrant's 10K Annual
Report Filed March 11, 2002
10.4 Employment Agreement for Contained in Exhibit 10.4 to
John R. Koelmel the Registrant's 10K Annual
Report Filed March 11, 2002
10.5 Employment Agreement for Contained in Exhibit 10.5 to
Jon J. Cooper the Registrant's 10K Annual
Report Filed March 11, 2002
10.6 Employment Agreement for Contained in Exhibit 10.6 to
Thomas L. Kime the Registrant's 10K Annual
Report Filed March 11, 2002
10.7 Employment Agreement for Contained in Exhibit 10.7 to
Douglas McCabe the Registrant's 10K Annual
Report Filed March 11, 2002
10.8 Employment Agreement for Contained in Exhibit 10.8 to
Randolph C. Brown the Registrant's 10K Annual
Report Filed March 11, 2002
10.9 Employment Agreement for Contained in Exhibit 10.9 to
Patrick C. Burke the Registrant's 10K Annual
Report Filed March 11, 2002
11.1 Computation of Per Share Earnings Contained in Exhibit 11.1 to
the Registrant's 10K Annual
Report Filed March 28, 2000
12.1 Statement Regarding Computation of Ratios Contained in Exhibit 12.1 to
the Registrant's 10K Annual
Report Filed March 28, 2000
21.1 Subsidiaries of Financial Institutions, Contained in Exhibit 21.1 to
Inc. the Registrant's 10K Annual
Report Filed March 11, 2002
23.1 Consent of KPMG LLP Filed Herewith
23.2 Consent of Nixon Peabody LLP (Included in Exhibit 5.1)
24.1 Power of Attorney Included in Part II of this
Registration Statement
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
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(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The registrant hereby further undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The registrant hereby further undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the Prospectus pursuant to Items 4,
10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes
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information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
The registrant hereby further undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1933, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Warsaw,
State of New York on March 11, 2002.
FINANCIAL INSTITUTIONS, INC.
By: /s/Peter G. Humphrey
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Peter G. Humphrey
Chairman and Chief Executive Officer