EXHIBIT 2.1
AGREEMENT AND PLAN
OF CONSOLIDATION
between
PATRIOT BANK CORP.
and
FIRST LEHIGH CORPORATION
July 28, 1998
AGREEMENT
TABLE OF CONTENTS
BACKGROUND
AGREEMENT
ARTICLE I
THE CONSOLIDATION
Section 1.01 Definitions
Section 1.02 The Consolidation
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FLC
Section 2.01 Organization
Section 2.02 Capitalization
Section 2.03 Authority; No Violation
Section 2.04 Consents
Section 2.05 Financial Statements
Section 2.06 Taxes
Section 2.07 No Material Adverse Effect
Section 2.08 Contracts
Section 2.09 Ownership of Property; Insurance Coverage
Section 2.10 Legal Proceedings
Section 2.11 Compliance With Applicable Law
Section 2.12 ERISA
Section 2.13 Brokers, Finders and Financial Advisors
Section 2.14 Environmental Matters
Section 2.15 Allowance for Loan Losses
Section 2.16 Information to be Supplied
Section 2.17 Securities Documents
Section 2.18 Related Party Transactions <PAGE 1>
Section 2.19 Loans
Section 2.20 Fairness Opinion
Section 2.21 Quality of Representations
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PATRIOT
Section 3.01 Organization
Section 3.02 Capitalization
Section 3.03 Authority; No Violation
Section 3.04 Consents
Section 3.05 Financial Statements
Section 3.06 Taxes
Section 3.07 No Material Adverse Effect
Section 3.08 Legal Proceedings
Section 3.09 Compliance With Applicable Law
Section 3.10 Information to be Supplied
Section 3.11 ERISA
Section 3.12 Brokers, Finders and Financial Advisors
Section 3.13 Securities Documents
Section 3.14 Fairness Opinion
Section 3.15 Quality of Representations
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of FLC's Business
Section 4.02 Access; Confidentiality
Section 4.03 Regulatory Matters and Consents
Section 4.04 Taking of Necessary Action
Section 4.05 Indemnification; Insurance
Section 4.06 No Other Bids and Related Matters
<PAGE 2>
Section 4.07 Duty to Advise; Duty to Update Disclosure Schedule
Section 4.08 Current Information
Section 4.09 Undertakings by FLC
Section 4.10 Employee Benefits
Section 4.11 Nasdaq Listing
Section 4.12 Affiliate Letters
Section 4.13 Severance Pay
Section 4.14 Disposition of FLC Equity Portfolio
Section 4.15 Sale of FLC Headquarters
Section 4.16 Conduct of Patriot
Section 4.17 Closing Date
ARTICLE V
CONDITIONS
Section 5.01 Mutual Conditions to the Obligations of FLC and
Patriot under this Agreement
Section 5.02 Additional Conditions to the Obligations of Patriot
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination
Section 6.02 Effect of Termination
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses
Section 7.02 Non-Survival of Representations and Warranties
Section 7.03 Amendment, Extension and Waiver
Section 7.04 Entire Agreement
Section 7.05 No Assignment
Section 7.06 Notices
Section 7.07 Captions
<PAGE 3>
Section 7.08 Counterparts
Section 7.09 Severability
Section 7.10 Governing Law
Exhibit 1 FLC's Affiliate Agreement
Exhibit 2 Patriot Stock Option Agreement
Exhibit 3 Standstill Agreement
Exhibit 4 Bank Plan of Merger
Exhibit 5 Articles and Certificate of Consolidation
Exhibit 6 Form of Opinion of Patriot's Counsel
Exhibit 7 Form of Opinion of FLC's Counsel
Exhibit 8 Matters to be Covered in Tax Opinion of
Counsel to Patriot
PAGE 4
AGREEMENT
THIS AGREEMENT AND PLAN OF CONSOLIDATION, dated as of
July 28, 1998, is made by and between PATRIOT BANK CORP., a
Delaware corporation, having its principal place of business in
Pottstown, Pennsylvania, and FIRST LEHIGH CORPORATION ("FLC"), a
Pennsylvania corporation, having its principal place of business
in Allentown, Pennsylvania.
BACKGROUND
1. Patriot and FLC desire to consolidate into a new
Pennsylvania business corporation to be named Patriot Bank Corp.
(the "Holding Company"), in accordance with the applicable laws
of the Commonwealth of Pennsylvania and the State of Delaware,
and in accordance with the plan of consolidation set forth
herein.
2. Patriot and FLC desire that the consolidation of
Patriot and FLC constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended.
3. As an inducement to Patriot's willingness to enter
into this Agreement, (a) certain directors and certain officers
of FLC are executing a Letter Agreement in the form attached
hereto as Exhibit 1, (b) FLC is concurrently granting to Patriot
an option to acquire, under certain circumstances, FLC's common
stock (the "Patriot Lock-Up Option") pursuant to a Stock Option
Agreement between Patriot and FLC in the form attached hereto as
Exhibit 2, and (c) James L. Leuthe, Chairman of FLC, is
concurrently executing the Standstill Agreement in the form
attached hereto as Exhibit 3.
4. Patriot desires to merge First Lehigh Bank, a bank
chartered under the laws of the Commonwealth of Pennsylvania and
wholly-owned subsidiary of FLC ("First Lehigh Bank"), into and
with Patriot Bank, a bank chartered under the laws of the
Commonwealth of Pennsylvania, and a wholly-owned subsidiary of
Patriot ("Patriot Bank"), with Patriot Bank surviving such merger
in accordance with the Bank Plan of Merger in the form attached
hereto as Exhibit 4.
5. Patriot and FLC desire to provide the terms and
conditions governing the transactions contemplated herein.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and of
the mutual covenants, agreements, representations and warranties
herein contained, the parties hereto, intending to be legally
bound, do hereby agree as follows:
<PAGE 1>
ARTICLE I
THE CONSOLIDATION
Section 1.01 Definitions. As used in this Agreement,
the following terms shall have the indicated meanings (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined):
Affiliate means, with respect to any Person, any
Person who directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer
or director of such Person and any Affiliate of such
executive officer or director.
Agreement means this agreement, and any amendment
or supplement hereto, which constitutes a "plan of
consolidation" between Patriot and FLC.
Applications means the applications for regulatory
approval which are required by the transactions contemplated
hereby.
Articles and Certificate of Consolidation means
the articles and certificate of consolidation in the form
attached hereto as Exhibit 5 to be executed by Patriot and
FLC and to be filed in the PDS, in accordance with the
applicable laws of the Commonwealth of Pennsylvania and to
be filed in the DOSS, in accordance with the applicable laws
of the State of Delaware.
Bank Merger means the merger of First Lehigh Bank
with and into Patriot Bank, with Patriot Bank surviving such
merger, contemplated by Section 1.03 of this Agreement.
BCL means the Pennsylvania Business Corporation
Law of 1988, as amended.
BHCA means the Bank Holding Company Act of 1956,
as amended.
Closing Date means the fifth business day
following the satisfaction or waiver, to the extent
permitted hereunder, of the conditions to the consummation
of the Consolidation specified in Article V of this
Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the
Closing), or such other date as Patriot and FLC may mutually
agree.
Consolidation means the consolidation of Patriot
and FLC into the Holding Company, contemplated by this
Agreement. <PAGE 2>
DGCL means the Delaware General Corporation Law.
DOJ means the United States Department of Justice.
DOSS means the Delaware Office of the Secretary
State.
Dissenting Shares shall have the meaning set forth
in Section 1.02(e)(ii)(F) hereof.
Effective Date means the date upon which the
Articles of Consolidation shall be filed in the PDS, and
shall be the same as the Closing Date.
Environmental Law means any federal, state, local
or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection,
preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface
soil, plant and animal life or any other natural resource),
and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of any substance presently
listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated,
whether by type or by quantity, including any material
containing any such substance as a component.
ERISA means the Employee Retirement Income
Security Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
from time to time thereunder.
FDIA means the Federal Deposit Insurance Act, as
amended.
FDIC means the Federal Deposit Insurance
Corporation.
FRB means the Board of Governors of the Federal
Reserve System.
FLC Common Stock means the common stock of FLC
described in Section 2.02(a).
FLC Capital Stock means collectively FLC Common
Stock, FLC Senior Preferred Stock and FLC Series A Preferred
Stock. <PAGE 3>
FLC Disclosure Schedule means a disclosure
schedule delivered by FLC to Patriot pursuant to Article II
of this Agreement.
FLC Exchange Ratios shall have the meaning given
to such term in Section 1.02(e)(ii)(A) and (B).
FLC Financials means (i) the audited consolidated
financial statements of FLC as of December 31, 1997 and for
the three years ended December 31, 1997, including the notes
thereto, and (ii) the unaudited interim consolidated
financial statements of FLC as of each calendar quarter
thereafter included in Securities Documents filed by FLC.
FLC Options means options to purchase shares of
FLC Common Stock granted pursuant to the FLC Stock Option
Plans.
FLC Regulatory Reports means the annual and
quarterly reports of FLC filed with the FRB since
December 31, 1996 through the Closing Date, and the
financial reports of First Lehigh Bank and accompanying
schedules for each calendar quarter filed with the FDIC,
beginning with the quarter ended December 31, 1996, through
the Closing Date.
FLC Senior Preferred Stock means the senior
preferred stock described in Section 2.02(a).
FLC Series A Preferred Stock means the series A
preferred stock described in Section 2.02(a).
FLC Stock Option Plans means the 1997 Stock Option
Plan and the First Lehigh Corporation 1989 Equity Incentive
Plan.
FLC Subsidiaries means any corporation, 50% or
more of the capital stock of which is owned, either directly
or indirectly, by FLC, except any corporation the stock of
which is held in the ordinary course of the lending
activities of First Lehigh Bank.
GAAP means generally accepted accounting
principles as in effect at the relevant date.
Holding Company Common Stock means the common
stock, par value, of the Holding Company.
IRC means the Internal Revenue Code of 1986, as
amended.
IRS means the Internal Revenue Service.
<PAGE 4>
Material Adverse Effect shall mean, with respect
to Patriot or FLC, respectively, any effect that is material
and adverse to its assets, financial condition or results of
operations on a consolidated basis, provided, however, that
Material Adverse Effect shall not be deemed to include
(a) any change in the value of the respective investment and
loan portfolios of Patriot or FLC resulting from a change in
interest rates generally, (b) any change occurring after the
date hereof in any federal or state law, rule or regulation
or in GAAP, which change affects banking institutions
generally, including any changes affecting the Bank
Insurance Fund and (c) actions or omissions of a party (or
any of its Subsidiaries) taken with the prior informed
written consent of the other party in contemplation of the
transactions contemplated hereby.
NASD means the National Association of Securities
Dealers, Inc.
Patriot Common Stock has the meaning given to that
term in Section 3.02(a) of this Agreement.
Patriot Disclosure Schedule means a disclosure
schedule delivered by Patriot to FLC pursuant to Article III
of this Agreement.
Patriot Exchange Ratio shall have the meaning
given to such term in Section 1.02(e)(i)(A).
Patriot Financials means (i) the audited
consolidated financial statements of Patriot as of
December 31, 1997 and for the three years ended December 31,
1997, including the notes thereto, and (ii) the unaudited
interim consolidated financial statements of Patriot as of
each calendar quarter thereafter included in Securities
Documents filed by Patriot.
Patriot Lock-Up Option means the option granted to
Patriot to acquire shares of FLC Common Stock referenced in
the recitals to this Agreement.
Patriot Market Price means, as of any date, the
average between the closing high bid and low asked prices of
a share of Patriot Common Stock on the Nasdaq National
Market System (as reported in The Wall Street Journal, or if
not reported therein, in another authoritative source).
Patriot Market Value means the average of the
Patriot Market Prices for the twenty (20) consecutive
trading days ending on the trading day immediately preceding
the Closing Date.
<PAGE 5>
Patriot Options means options to purchase shares
of Patriot Common Stock granted pursuant to the Patriot
Stock Option Plan.
Patriot Regulatory Reports means the annual and
quarterly reports of Patriot filed with the FRB since
December 31, 1997 through the Closing Date, and the
financial reports of Patriot Bank and accompanying schedules
for each calendar quarter, beginning with the quarter ended
December 31, 1998, through the Closing Date.
Patriot Stock Option Plan means the Patriot 1996
Stock-Based Incentive Plan, as amended.
Patriot Subsidiaries means any corporation, 50% or
more of the capital stock of which is owned, either directly
or indirectly, by Patriot, except any corporation the stock
of which is held in the ordinary course of the lending
activities of a bank.
PDB means the Pennsylvania Department of Banking.
PDS means the Department of State of the
Commonwealth of Pennsylvania.
Person means any individual, corporation,
partnership, joint venture, association, trust or "group"
(as that term is defined in Section 13(d)(3) of the Exchange
Act).
Prospectus/Proxy Statement means the prospectus/
proxy statement, together with any amendments and
supplements thereto, to be transmitted to holders of FLC
Capital Stock and Patriot Common Stock in connection with
the transactions contemplated by this Agreement.
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
Holding Company Common Stock to be issued in connection with
the transactions contemplated by this Agreement.
Regulatory Agreement has the meanings given to
that term in Sections 2.11 and 3.09 of this Agreement.
Regulatory Authority means any banking agency or
department of any federal or state government, including
without limitation the FRB, the FDIC, the PDB, or the
respective staffs thereof.
Rights means warrants, options, rights,
convertible securities and other capital stock equivalents
which obligate an entity to issue its securities. <PAGE 6>
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933,
as amended, and the rules and regulations promulgated from
time to time thereunder.
Securities Documents means all registration
statements, schedules, statements, forms, reports, proxy
material, and other documents required to be filed under the
Securities Laws.
Securities Laws means the Securities Act, 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 in each
case the rules and regulations promulgated from time to time
thereunder.
Standstill Agreement means the Standstill
Agreement between James L. Leuthe and Patriot, the form of
which is attached hereto as Exhibit 3.
Subsidiary means any corporation or partnership,
50% or more of the capital stock or partnership interests of
which is owned, either directly or indirectly, by another
entity, except any corporation or partnership the stock or
partnership interests of which is held in the ordinary
course of the lending activities of a bank.
Section 1.02 The Consolidation.
(a) Closing. The closing will take place at
10:00 a.m. on the Closing Date at the offices of Stevens & Lee,
One Glenhardie Corporate Center, Suite 202, 1275 Drummers Lane,
P.O. Box 236, Wayne, Pennsylvania, unless another time and place
are agreed to by the parties hereto; provided, in any case, that
all conditions to closing set forth in Article V (other than the
delivery of certificates, opinions and other instruments and
documents to be delivered at the Closing) have been satisfied or
waived at or prior to the Closing Date. On the Closing Date, FLC
and Patriot shall cause the Articles of Consolidation to be duly
executed and to be filed in the PDS and the Certificate of
Consolidation to be duly executed and filed in the DOSS.
(b) The Consolidation. Subject to the terms and
conditions of this Agreement, on the Effective Date, FLC and
Patriot shall consolidate into the Holding Company in accordance
with the provisions of the BCL and the DGCL. The Holding Company
shall be the corporation formed as a result of the Consolidation
under the laws of the Commonwealth of Pennsylvania and shall have
its headquarters at High and Hanover Streets, Pottstown,
Pennsylvania. From and after the Effective Date, the
Consolidation shall have the effects set forth in Section 1929 of
the BCL. <PAGE 7>
(c) Holding Company's Articles of Incorporation
and Bylaws. On and after the Effective Date, the articles of
incorporation and bylaws of the Holding Company shall be as set
forth in the Articles and Certificate of Consolidation and the
Bylaws of the Holding Company shall be adopted on the Effective
Date by the Holding Company's Board of Directors.
(d) Board of Directors and Officers of the
Holding Company and Patriot Bank Board of Directors and Officers.
(i) On the Effective Date, the Board of
Directors of the Holding Company, as the continuing corporation
as a result of the Consolidation, shall consist of the directors
identified in the Articles and Certificate of Consolidation, all
of whom shall be the existing members of the Patriot Board of
Directors.
(ii) On the Effective Date, the executive
officers of the Holding Company shall be the existing executive
officers of Patriot.
(iii) The Board of Directors and officers of
Patriot Bank shall remain unchanged.
(e) Conversion of Shares.
(i) Patriot Common Stock.
(A) Subject to the provisions of
subparagraphs (B), (C) and (D) of this Section 1.02(e)(i),
each share of Patriot Common Stock issued and outstanding
immediately prior to the Effective Date (other than shares
of Patriot Common Stock, if any, then owned by Patriot or
FLC or any Patriot Subsidiary) shall, on the Effective Date,
by reason of the Consolidation and without any action on the
part of the holder thereof, be converted into and become a
right to receive 1.0 shares of fully paid and nonassessable
shares of Holding Company Common Stock. The exchange ratio
set forth in this Section 1.02(e)(i)(A) is hereinafter
referred to as the "Patriot Exchange Ratio".
(B) Each share of Patriot Common Stock
(other than trust account shares or shares acquired in
connection with debts previously contracted ("DPC shares"))
owned by FLC or a FLC Subsidiary on the Effective Date, if
any, shall be cancelled.
(C) Each share of Patriot Common Stock
issued and held in the treasury of Patriot or owned by any
Patriot Subsidiary (other than trust account shares or DPC
shares) as of the Effective Date, if any, shall be
cancelled, and no cash, stock or other property shall be
delivered in exchange therefor.
<PAGE 8>
(D) No fraction of a whole share of
Holding Company Common Stock and no scrip or certificates
therefor shall be issued in connection with the
Consolidation. Any former holder of Patriot Common Stock
who would otherwise be entitled to receive a fraction of a
share of Holding Company Common Stock shall receive, in lieu
thereof, cash in an amount equal to such fraction of a share
multiplied by the closing price of the Holding Company
Common Stock on the Nasdaq National Market System on the
first day Holding Company Common Stock is traded after the
Effective Date.
(ii) FLC Capital Stock.
(A) Subject to the provisions of
subparagraphs (C), (D), (E) and (F) of this
Section 1.02(e)(ii), each share of FLC Common Stock and each
share of FLC Senior Preferred Stock issued and outstanding
immediately prior to the Effective Date (other than shares
of FLC Common Stock or FLC Senior Preferred stock, if any,
then owned by Patriot or FLC or any FLC Subsidiary) shall,
on the Effective Date, by reason of the Consolidation and
without any action on the part of the holder thereof, be
converted into and become a right to receive:
(i) if the Patriot Market Value is
greater than or equal to $14.71 and less than or equal
to $17.97, then .428 shares of fully paid and
nonassessable shares of Holding Company Common Stock.
(ii) if the Patriot Market Value
is less than $14.71, then that number (rounded to the
nearest thousandth) of shares of fully paid and
nonassessable shares of Holding Company Common Stock,
equal to $6.30 divided by the Patriot Market Value,
provided that if the Patriot Market Value is less than
$13.07, Patriot shall have the option to elect, by
written notice to FLC, and subject to FLC's rights
under Section 6.01(c) hereof, to have the FLC Exchange
Ratio with respect to FLC Common Stock and FLC Senior
Preferred Stock be equal to that number (rounded to the
nearest thousandth) of shares of fully paid and
nonassessable shares of Holding Company Common Stock,
equal to $6.30 divided by $13.07; or
(iii) if the Patriot Market Value
is greater than $17.97, then that number (rounded to
the nearest thousandth) of shares of fully paid and
nonassessable shares of Holding Company Common Stock
equal to $7.69 divided by the Patriot Market Value;
provided that if on or prior to the Effective Date
there has been any public announcement of a proposed
acquisition or sale of all or substantially all of
Patriot's assets or a merger, consolidation or similar
<PAGE 9> transaction involving Patriot in which Patriot
is not the surviving entity or in which shareholders of
Patriot before such transaction will not hold in the
aggregate shares of the surviving or new corporation to
be outstanding immediately after the consummation
thereof entitled to cast at least a majority of the
votes entitled to be cast generally for the election of
directors, the Exchange Ratio shall be .428.
The FLC Exchange Ratio, as determined pursuant to any of
Sections 1.02(e)(ii)(A)(i), 1.02(e)(ii)(A)(ii) or
1.02(e)(ii)(A)(iii), is sometimes hereinafter referred to as
the "Applicable Common and Senior Preferred Exchange Ratio".
(B) Subject to the provisions of
subparagraphs (C), (D), (E) and (F) of this
Section 1.02(e)(ii), each share of FLC Series A Preferred
Stock issued and outstanding immediately prior to the
Effective Date (other than shares of FLC Series A Preferred
Stock, if any, then owned by Patriot or FLC or any FLC
Subsidiary) shall, on the Effective Date, by reason of the
Consolidation and without any action on the part of the
holder thereof, be converted into and become a right to
receive:
(i) if the Patriot Market Value is
greater than or equal to $14.71 and less than or equal
to $17.97, then .342 shares of fully paid and
nonassessable shares of Holding Company Common Stock.
(ii) if the Patriot Market Value
is less than $14.71, then that number (rounded to the
nearest thousandth) of shares of fully paid and
nonassessable shares of Holding Company Common Stock,
equal to $5.04 divided by the Patriot Market Value,
provided that if the Patriot Market Value is less than
$13.07, Patriot shall have the option to elect, by
written notice to FLC, and subject to FLC's rights
under Section 6.01(c) hereof, to have the FLC Exchange
Ratio with respect to the FLC Series A Preferred Stock
be equal to that number (rounded to the nearest
thousandth) of shares of fully paid and nonassessable
shares of Holding Company Common Stock, equal to 5.04
divided by $13.07; or
(iii) if the Patriot Market Value
is greater than $17.97, then that number (rounded to
the nearest thousandth) of shares of fully paid and
nonassessable shares of Holding Company Common Stock
equal to $6.15 divided by the Patriot Market Value;
provided that if on or prior to the Effective Date
there has been any public announcement of a proposed
acquisition or sale of all or substantially all of
Patriot's assets or a merger, consolidation or similar
<PAGE 10> transaction involving Patriot in which
Patriot is not the surviving entity or in which
shareholders of Patriot before such transaction will
not hold in the aggregate shares of the surviving or
new corporation to be outstanding immediately after the
consummation thereof entitled to cast at least a
majority of the votes entitled to be cast generally for
the election of directors, the Exchange Ratio shall be
.342.
The FLC Exchange Ratio, as determined pursuant to any of
Sections 1.02(e)(ii)(B)(i), 1.02(e)(ii)(B)(ii) or
1.02(e)(ii)(B)(iii), is sometimes hereinafter referred to as
the "Applicable Series A Preferred Exchange Ratio".
(C) Each share of FLC Capital Stock
(other than trust account shares or DPC shares) owned by
Patriot or a Patriot Subsidiary on the Effective Date, if
any, shall be cancelled.
(D) Each share of FLC Capital Stock
issued and held in the treasury of FLC or owned by any FLC
Subsidiary (other than trust account shares or DPC shares)
as of the Effective Date, if any, shall be cancelled, and no
cash, stock or other property shall be delivered in exchange
therefor.
(E) No fraction of a whole share of
Holding Company Common Stock and no scrip or certificates
therefor shall be issued in connection with the
Consolidation. Any former holder of FLC Capital Stock who
would otherwise be entitled to receive a fraction of a share
of Holding Company Common Stock shall receive, in lieu
thereof, cash in an amount equal to such fraction of a share
multiplied by the closing price of the Holding Company
Common Stock on the Nasdaq National Market System on the
first day Holding Company Common Stock is traded after the
Effective Date, and, in the case of FLC Series A Preferred
Stock, further multiplied by 0.8.
(F) Each outstanding share of FLC
Capital Stock the holder of which has perfected his
dissenters rights under the BCL and has not effectively
withdrawn or lost such right as of the Effective Date shall
not be converted into or represent a right to receive shares
of Holding Company Stock hereunder, and the holder thereof
shall be entitled only to such rights as are granted by the
BCL. FLC shall give Patriot prompt notice upon receipt by
FLC of any such written demands for payment of the fair
value of such shares of FLC Common Stock ("Dissenting
Shares") and of withdrawals of such demands and any other
instruments provided pursuant to the BCL (any shareholder
duly making such demand being hereinafter called a "FLC
Dissenting Shareholder"). If any FLC Dissenting Shareholder
<PAGE 11> shall effectively withdraw or lose (through
failure to perfect or otherwise) his right to such payment
at any time, such holder's shares of FLC Capital Stock shall
be converted into the right to receive Holding Company
Common Stock in accordance with Section 1.02(e)(ii) of this
Agreement. Any payments made in respect of Dissenting
Shares shall be made by the Holding Company, as the
continuing corporation after the Consolidation.
(f) Stock Options.
(i) On the Effective Date, each FLC Option
and each Patriot Option which is then outstanding, whether
or not exercisable, shall cease to represent a right to
acquire shares of FLC Common Stock or Patriot Common Stock,
as the case may be, and shall be converted automatically
into an option to purchase shares of Holding Company Common
Stock, and the Holding Company shall assume each FLC Option
and Patriot Option, in accordance with the terms of the
applicable FLC Stock Option Plan or Patriot Stock Option
Plan, as the case may be, and the stock option agreement by
which it is evidenced, except that from and after the
Effective Date, (i) the Holding Company and its Board of
Directors or a duly authorized committee thereof shall be
substituted for FLC, Patriot or their respective Boards of
Directors or duly authorized committee thereof administering
such FLC Stock Option Plan or Patriot Stock Option Plan, as
the case may be, (ii) each FLC Option and Patriot Option
assumed by the Holding Company may be exercised solely for
shares of the Holding Company Common Stock, (iii) the number
of shares of Holding Company Common Stock subject to each
Patriot Option shall be equal to the number of shares of
Patriot Common Stock subject to such Patriot Option
immediately prior to the Effective Date multiplied by the
Patriot Exchange Ratio, provided that any fractional shares
of Holding Company Common Stock resulting from such
multiplication shall be rounded down to the nearest share,
and (iv) the per share exercise price under each such
Patriot Option shall be adjusted by dividing the per share
exercise price under each such Patriot Option by the Patriot
Exchange Ratio, provided that such exercise price shall be
rounded up to the nearest cent, (v) the number of shares of
Holding Company Common Stock subject to each FLC Option
shall be equal to the number of shares of FLC Common Stock
subject to such FLC Option immediately prior to the
Effective Date multiplied by the Applicable FLC Common and
Senior Preferred Exchange Ratio, provided that any
fractional shares of Holding Company Common Stock resulting
from such multiplication shall be rounded down to the
nearest share, and (vi) the per share exercise price under
each such FLC Option shall be adjusted by dividing the per
share exercise price under each such FLC Option by the FLC
Common and Senior Preferred Exchange Ratio, provided that
such exercise price shall be rounded up to the nearest cent.
<PAGE 12> Notwithstanding clauses (iii), (iv), (v) and (vi)
of the preceding sentence, each Patriot Option or FLC Option
which is an "incentive stock option" shall be adjusted as
required by Section 424 of the IRC, and the regulations
promulgated thereunder, so as not to constitute a
modification, extension or renewal of the option within the
meaning of Section 424(h) of the IRC. Patriot and FLC agree
to take all necessary steps to effect the foregoing
provisions of this Section 1.02(f).
(ii) As soon as practicable after the
Effective Date, the Holding Company shall deliver to each
participant in each FLC Stock Option Plan and the Patriot
Stock Option Plan an appropriate notice setting forth such
participant's rights pursuant thereto and the grants subject
to such FLC Stock Option Plan or Patriot Stock Option Plan
shall continue in effect on the same terms and conditions,
including without limitation the duration thereof, subject
to the adjustments required by Section 1.02(f)(i) hereof
after giving effect to the Consolidation. Within 30 days
after the Effective Date, the Holding Company shall file a
registration statement on Form S-3 or Form S-8, as the case
may be (or any successor or other appropriate forms), with
respect to the shares of Holding Company Common Stock
subject to such options and shall use its reasonable best
efforts to maintain the current status of the prospectus or
prospectuses contained therein for so long as such options
remain outstanding.
(g) Surrender and Exchange of FLC and Patriot
Stock Certificates.
(i) Exchange of Certificates. Each holder
of shares of FLC Capital Stock or Patriot Common Stock who
surrenders to the Holding Company (or its agent) the
certificate or certificates representing such shares will be
entitled to receive, as soon as practicable after the
Effective Date, in exchange therefor a certificate or
certificates for the number of whole shares of Holding
Company Common Stock into which such holder's shares of FLC
Capital Stock or Patriot Common Stock have been converted
pursuant to the Consolidation, together with a check for
cash in lieu of any fractional share in accordance with
Section 1.02(e)(i)(D) or Section 1.02(e)(ii)(E) hereof, as
the case may be.
(ii) Rights Evidenced by Certificates. Each
certificate for shares of Holding Company Common Stock
issued in exchange for certificates for FLC Capital Stock or
Patriot Common Stock pursuant to Section 1.02(g)(i) hereof
will be dated the Effective Date and be entitled to
dividends and all other rights and privileges pertaining to
Holding Company Common Stock from and after the Effective
Date. Until surrendered, each certificate theretofore
<PAGE 13> evidencing shares of FLC Capital Stock or Patriot
Common Stock, from and after the Effective Date, will
evidence solely the right to receive certificates for shares
of Holding Company Common Stock pursuant to
Section 1.02(g)(i) hereof and a check for cash in lieu of
any fractional share in accordance with
Section 1.02(e)(i)(D) or Section 1.02(e)(ii)(E), as the case
may be. If certificates for shares of FLC Capital Stock or
Patriot Common Stock are exchanged for Holding Company
Common Stock at a date following one or more record dates
for the payment of dividends or of any other distribution on
the shares of Holding Company Common Stock, the Holding
Company will pay cash in an amount equal to dividends
theretofore payable on such Holding Company Common Stock and
pay or deliver any other distribution to which holders of
shares of Holding Company Common Stock have theretofore
become entitled. Upon surrender of certificates for shares
of FLC Capital Stock or Patriot Common Stock in exchange for
certificates for Holding Company Common Stock, the Holding
Company also shall pay any dividends to which such holder of
FLC Capital Stock, in the case of a holder of Patriot Common
Stock, may be entitled as a result of the declaration of a
dividend on the FLC Capital Stock or Patriot Common Stock by
FLC or Patriot in accordance with the terms of this
Agreement with a record date prior to the Effective Date and
a payment date after the Effective Date. No interest will
accrue or be payable in respect of dividends or cash
otherwise payable under this Section 1.02(g) upon surrender
of certificates for shares of FLC Capital Stock or Patriot
Common Stock. Notwithstanding the foregoing, no party
hereto will be liable to any holder of FLC Capital Stock or
any holder of Patriot Common Stock, for any amount paid in
good faith to a public official or agency pursuant to any
applicable abandoned property, escheat or similar law.
Until such time as certificates for shares of FLC Capital
Stock or Patriot Common Stock are surrendered by a Patriot
or FLC shareholder to the Holding Company for exchange, the
Holding Company shall have the right to withhold dividends
or any other distributions on the shares of Holding Company
Common Stock issuable to such shareholder.
(iii) Exchange Procedures. Each certificate
for shares of FLC Capital Stock or Patriot Common Stock
delivered for exchange under this Section 1.02(g) must be
endorsed in blank by the registered holder thereof or be
accompanied by a power of attorney to transfer such shares
endorsed in blank by such holder. If more than one
certificate is surrendered at one time and in one
transmittal package for the same shareholder account, the
number of whole shares of Holding Company Common Stock for
which certificates will be issued pursuant to this
Section 1.02(g) will be computed on the basis of the
aggregate number of shares represented by the certificates
so surrendered. If shares of Holding Company Common Stock
<PAGE 14> or payments of cash are to be issued or made to a
person other than the one in whose name the surrendered
certificate is registered, the certificate so surrendered
must be properly endorsed in blank, with signature(s)
guaranteed, or otherwise in proper form for transfer, and
the person to whom certificates for shares of Holding
Company Common Stock is to be issued or to whom cash is to
be paid shall pay any transfer or other taxes required by
reason of such issuance or payment to a person other than
the registered holder of the certificate for shares of FLC
Capital Stock or Patriot Common Stock which are surrendered.
As promptly as practicable after the Effective Date, the
Holding Company shall send or cause to be sent to each
shareholder of record of FLC Capital Stock or Patriot Common
Stock transmittal materials for use in exchanging
certificates representing FLC Capital Stock for certificates
representing Holding Company Common Stock into which the FLC
Capital Stock or Patriot Common Stock have been converted in
the Consolidation. Certificates representing shares of
Holding Company Common Stock and checks for cash in lieu of
fractional shares shall be mailed to former shareholders of
FLC and Patriot as soon as reasonably possible but in no
event later than twenty (20) business days following the
receipt of certificates representing former shares of FLC
Capital Stock or Patriot Common Stock duly endorsed or
accompanied by the materials referenced herein and delivered
by certified mail, return receipt requested (but in no event
earlier than the second business day following the Effective
Date).
(iv) Closing of Stock Transfer Books;
Cancellation of FLC and Patriot Certificates. Upon the
Effective Date, the stock transfer books for FLC Capital
Stock and Patriot Common Stock will be closed and no further
transfers of shares of FLC Capital Stock or Patriot Common
Stock will thereafter be made or recognized. All
certificates for shares of FLC Capital Stock and Patriot
Common Stock surrendered pursuant to this Section 1.02(g)
will be cancelled by the Holding Company.
(h) Anti-Dilution Provisions. If, FLC or Patriot
has, at any time after the date hereof and before the Effective
Date, (A) issued a dividend in shares of FLC Common Stock or
Patriot Common Stock, (B) combined the outstanding shares of FLC
Common Stock or Patriot Common Stock into a smaller number of
shares, (C) subdivided the outstanding shares of FLC Common Stock
or Patriot Common Stock, or (D) reclassified the shares of FLC
Common Stock or Patriot Common Stock, then the number of shares
of Holding Company Common Stock to be delivered to FLC or Patriot
shareholders who are entitled to receive shares of Holding
Company Common Stock in exchange for shares of FLC Capital Stock
or Patriot Common Stock shall be adjusted so that each FLC or
Patriot shareholder shall be entitled to receive such number of
shares of Holding Company Common Stock as such shareholder would
<PAGE 15> have been entitled to receive if the Effective Date had
occurred prior to the happening of such event. (By way of
illustration, if Patriot or FLC shall declare a stock dividend of
7% payable with respect to a record date on or prior to the
Effective Date and the conditions set forth above are satisfied,
the Patriot Exchange Ratio or the FLC Exchange Ratio, as the case
may be, shall be adjusted downward by 7%).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FLC
FLC hereby represents and warrants to Patriot that,
except as specifically set forth in the FLC Disclosure Schedule
delivered to Patriot by FLC on the date hereof:
Section 2.01 Organization.
(a) FLC is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Pennsylvania. FLC is a bank holding company duly registered
under the BHCA. FLC has the corporate power and authority to
carry on its business and operations as now being conducted and
to own and operate the properties and assets now owned and being
operated by it. FLC is not qualified or licensed to do business
as a foreign corporation in any other jurisdiction and is not
required to be so qualified or licensed as the result of the
ownership or leasing of property or the conduct of its business
except where the failure to be so qualified or licensed would not
have a Material Adverse Effect on FLC.
(b) First Lehigh Bank is a state bank duly
organized and validly existing under the laws of the Commonwealth
of Pennsylvania. First Lehigh Bank has the corporate power and
authority to carry on its business and operations as now being
conducted and to own and operate the properties and assets now
owned and being operated by it. Neither First Lehigh Bank nor
any other FLC Subsidiary is qualified or licensed to do business
as a foreign corporation in any other jurisdiction and neither is
required to be so qualified or licensed as the result of the
ownership or leasing of property or the conduct of its business,
except where the failure to be so qualified or licensed would not
have a Material Adverse Effect on FLC.
(c) There are no FLC Subsidiaries other than
First Lehigh Bank and those identified in the FLC Disclosure
Schedule.
(d) The deposits of First Lehigh Bank are insured
by the FDIC to the extent provided in the FDIA.
(e) The respective minute books of FLC and First
Lehigh Bank and each other FLC Subsidiary accurately record, in
all material respects, all material corporate actions of their
<PAGE 16> respective shareholders and boards of directors
(including committees).
(f) Prior to the date of this Agreement, FLC has
delivered to Patriot true and correct copies of the articles of
incorporation and bylaws of FLC and the articles of incorporation
and bylaws of First Lehigh Bank as in effect on the date hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of FLC consists
of (a) 10,000,000 shares of common stock, $0.01 par value ("FLC
Common Stock"), of which 2,056,140 shares are outstanding,
validly issued, fully paid and nonassessable and free of
preemptive rights, (b) 1,500,000 shares of senior preferred
stock, $.01 par value ("FLC Senior Preferred Stock"), of which
894,223 shares are issued or outstanding and (c) 1,000,000 shares
of series A preferred stock, $.01 par value ("FLC Series A
Preferred Stock"), of which 682,000 shares are issued and
outstanding. Neither FLC nor First Lehigh Bank nor any other FLC
Subsidiary has or is bound by any subscription, option, warrant,
call, commitment, agreement, plan or other Right of any character
relating to the purchase, sale or issuance or voting of, or right
to receive dividends or other distributions on any shares of FLC
Capital Stock or any other security of FLC or any securities
representing the right to vote, purchase or otherwise receive any
shares of FLC Capital Stock, or any other security of FLC, other
than (i) shares issuable under the Patriot Option, (ii) 60,000
shares of FLC Common Stock issuable under the FLC Stock Option
Plans upon the exercise of presently outstanding options,
(iii) with respect to the FLC Senior Preferred Stock, the right
to receive cumulative dividends at the annual rate of $.25 per
share and (iv) with respect to the FLC Series A Preferred Stock
the right to receive cumulative dividends at the annual rate of
$.3255 per share and the right to receive cumulative dividends in
arrears of $832,467 as of June 30, 1998, all as set forth in
detail in the FLC Disclosure Schedule.
(b) The authorized capital stock of First Lehigh
Bank consists of 10,500 shares of common stock, par value $20 per
share ("First Lehigh Bank Common Stock"), of which 10,500 shares
are outstanding, validly issued, fully paid, nonassessable, free
of preemptive rights and owned by FLC. Neither FLC nor any FLC
Subsidiary has or is bound by any subscription, option, warrant,
call, commitment, agreement or other Right of any character
relating to the purchase, sale or issuance or voting of, or right
to receive dividends or other distributions on any shares of the
capital stock of any FLC Subsidiary or any other security of any
FLC Subsidiary or any securities representing the right to vote,
purchase or otherwise receive any shares of the capital stock or
any other security of any FLC Subsidiary. Except as set forth in
the FLC Disclosure Schedule, either FLC or First Lehigh Bank owns
all of the outstanding shares of capital stock of each FLC
Subsidiary free and clear of all liens, security interests,
<PAGE 17> pledges, charges, encumbrances, agreements and
restrictions of any kind or nature.
(c) Except as set forth in the FLC Disclosure
Schedule, neither (i) FLC, (ii) First Lehigh Bank nor (iii) any
other FLC Subsidiary, owns any equity interest, directly or
indirectly, other than treasury stock, in any other company or
controls any other company, except for equity interests held in
the investment portfolios of FLC and FLC Subsidiaries, equity
interests held by FLC Subsidiaries in a fiduciary capacity, and
equity interests held in connection with the commercial loan
activities of FLC Subsidiaries. There are no subscriptions,
options, warrants, calls, commitments, agreements or other Rights
outstanding and held by FLC or First Lehigh Bank with respect to
any other company's capital stock or the equity of any other
person.
(d) To the best of FLC's knowledge, except as
disclosed in FLC's Annual Report on Form 10-KSB for the year
ended December 31, 1997, no person or "group" (as that term is
used in Section 13(d)(3) of the Exchange Act), is the beneficial
owner (as defined in Section 13(d) of the Exchange Act) of 5% or
more of the outstanding shares of any class of FLC Capital Stock.
Section 2.03 Authority; No Violation.
(a) FLC has full corporate power and authority to
execute and deliver this Agreement and to complete the
transactions contemplated hereby. First Lehigh Bank has full
corporate power and authority to execute and deliver the Bank
Plan of Merger and to consummate the Bank Merger. The execution
and delivery of this Agreement by FLC and the completion by FLC
of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of FLC and, except for
approval by the shareholders of FLC as required under the BCL,
FLC's articles of incorporation and bylaws, no other corporate
proceedings on the part of FLC are necessary to complete the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by FLC and, subject to
approval of the shareholders of FLC as required under the BCL,
FLC's articles of incorporation and bylaws and receipt of the
required approvals from Regulatory Authorities described in
Section 3.04 hereof, constitutes the valid and binding obligation
of FLC, enforceable against FLC in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity. The Bank Plan
of Merger, upon its execution and delivery by First Lehigh Bank
concurrently with the execution and delivery of this Agreement,
will constitute the valid and binding obligation of First Lehigh
Bank, enforceable against First Lehigh Bank in accordance with
its terms, subject to required approvals of Regulatory
Authorities, and subject to applicable conservatorship or
receivership provisions of the FDIA, or insolvency and similar
<PAGE 18> laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this
Agreement by FLC, (B) the execution and delivery of the Bank Plan
of Merger by First Lehigh Bank, (C) subject to receipt of
approvals from the Regulatory Authorities referred to in
Section 3.04 hereof and FLC's and Patriot's compliance with any
conditions contained therein, the completion of the transactions
contemplated hereby, and (D) compliance by FLC or First Lehigh
Bank with any of the terms or provisions hereof or of the Bank
Plan of Merger, will not (i) conflict with or result in a breach
of any provision of the articles of incorporation or other
organizational document or bylaws of FLC or any FLC Subsidiary;
(ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to FLC or
any FLC Subsidiary or any of their respective properties or
assets; or (iii) except as set forth in the FLC Disclosure
Schedule, violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default)
under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration
or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of FLC or any
FLC Subsidiary under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, commitment or other instrument or obligation to
which FLC or any FLC Subsidiary is a party, or by which they or
any of their respective properties or assets may be bound or
affected, except for such violations, conflicts, breaches or
defaults under clause (ii) or (iii) hereof which, either
individually or in the aggregate, will not have a Material
Adverse Effect on FLC.
Section 2.04 Consents. Except for the consents,
approvals, filings and registrations from or with the Regulatory
Authorities referred to in Section 3.04 hereof and compliance
with any conditions contained therein, and the approval of this
Agreement by the shareholders of FLC under the BCL, FLC's
articles of incorporation and bylaws, and the approval of the
Bank Plan of Merger by FLC as sole shareholder of First Lehigh
Bank under the Pennsylvania Banking Code of 1965, as amended, and
by the First Lehigh Bank Board of Directors, and except as
disclosed in the FLC Disclosure Schedule, no consents or
approvals of, or filings or registrations with, any public body
or authority are necessary, and no consents or approvals of any
third parties are necessary, or will be, in connection with
(a) the execution and delivery of this Agreement by FLC or the
Bank Plan of Merger by First Lehigh Bank, and (b) the completion
by FLC of the transactions contemplated hereby or by First Lehigh
Bank of the Bank Merger. As of the date hereof, FLC has no
reason to believe that (i) any required consents or approvals
will not be received or will be received with conditions,
<PAGE 19> limitations or restrictions unacceptable to it or which
would adversely impact FLC's or First Lehigh Bank's ability to
complete the transactions contemplated by this Agreement or that
(ii) any public body or authority, the consent or approval of
which is not required or any filing with which is not required,
will object to the completion of the transactions contemplated by
this Agreement.
Section 2.05 Financial Statements.
(a) FLC has previously delivered, or will
deliver, to Patriot the FLC Regulatory Reports. The FLC
Regulatory Reports have been, or will be, prepared in all
material respects in accordance with applicable regulatory
accounting principles and practices throughout the periods
covered by such statements, and fairly present, or will fairly
present in all material respects, the financial position, results
of operations and changes in shareholders' equity of FLC as of
and for the periods ended on the dates thereof, in accordance
with applicable regulatory accounting principles applied on a
consistent basis.
(b) FLC has previously delivered to Patriot the
FLC Financials. The FLC Financials have been, or will be,
prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered by such statements, except as
noted therein, and fairly present, or will fairly present, the
consolidated financial position, results of operations and cash
flows of FLC as of and for the periods ending on the dates
thereof, in accordance with GAAP applied on a consistent basis,
except as noted therein and in the FLC Disclosure Schedule.
(c) At the date of each balance sheet included in
the FLC Financials or the FLC Regulatory Reports, neither FLC nor
First Lehigh Bank (as the case may be) had, or will have any
liabilities, obligations or loss contingencies of any nature
(whether absolute, accrued, contingent or otherwise) of a type
required to be reflected in such FLC Financials or FLC Regulatory
Reports or in the footnotes thereto which are not fully reflected
or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss
contingencies which are not material in the aggregate to FLC and
which are incurred in the ordinary course of business, consistent
with past practice and except for liabilities, obligations and
loss contingencies which are within the subject matter of a
specific representation and warranty herein and subject, in the
case of any unaudited statements, to normal, recurring audit
adjustments and the absence of footnotes.
<PAGE 20>
Section 2.06 Taxes.
(a) FLC and the FLC Subsidiaries are members of
the same affiliated group within the meaning of IRC
Section 1504(a). FLC has duly filed, and will file, all federal,
state and local tax returns required to be filed by or with
respect to FLC and all FLC Subsidiaries on or prior to the
Closing Date (all such returns being accurate and correct in all
material respects) and has duly paid or will pay, or made or will
make, provisions for the payment of all federal, state and local
taxes which have been incurred by or are due or claimed to be due
from FLC and any FLC Subsidiary by any taxing authority or
pursuant to any tax sharing agreement or arrangement (written or
oral) on or prior to the Closing Date other than taxes which
(i) are not delinquent or (ii) are being contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has
been filed (or will be filed prior to the Closing Date) by or
with respect to FLC or any FLC Subsidiary.
Section 2.07 No Material Adverse Effect. FLC has not
suffered any Material Adverse Effect since March 31, 1998.
Section 2.08 Contracts.
(a) Except as described in FLC's Annual Reports
on Form 10-KSB for the years ended December 31, 1995, 1996 and
1997, previously delivered to Patriot, in the footnotes to the
audited consolidated financial statements of FLC as of
December 31, 1997, and for the three years ended December 31,
1997, or in the FLC Disclosure Schedule, neither FLC nor any FLC
Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract or arrangement with any past or
present officer, director or employee of FLC or any FLC
Subsidiary, except for "at will" arrangements; (ii) any plan,
arrangement or contract providing for bonuses, pensions, options,
deferred compensation, retirement payments, profit sharing or
similar arrangements for or with any past or present officers,
directors or employees of FLC or any FLC Subsidiary; (iii) any
collective bargaining agreement with any labor union relating to
employees of FLC or any FLC Subsidiary; (iv) any agreement which
by its terms limits the payment of dividends by any FLC
Subsidiary; (v) any instrument evidencing or related to
indebtedness for borrowed money whether directly or indirectly,
by way of purchase money obligation, conditional sale, lease
purchase, guaranty or otherwise, in respect of which FLC or any
FLC Subsidiary is an obligor to any person, which instrument
evidences or relates to indebtedness other than deposits,
repurchase agreements, Federal Home Loan Bank advances, bankers
acceptances and "treasury tax and loan" accounts established in
the ordinary course of business and transactions in "federal
funds" or which contains financial covenants or other
restrictions (other than those relating to the payment of
principal and interest when due) which would be applicable on or
<PAGE 21> after the Closing Date to Patriot or any Patriot
Subsidiary; or (vi) any contract (other than this Agreement)
limiting the freedom of any FLC Subsidiary to engage in any type
of banking or bank-related business permissible under law.
(b) True and correct copies of agreements, plans,
arrangements and instruments referred to in Section 2.08(a) or
described in the FLC Annual Report on Form 10-KSB for the year
ended December 31, 1997 or in a footnote to the FLC Financials,
have been provided to Patriot on or before the date hereof, are
listed on the FLC Disclosure Schedule and are in full force and
effect on the date hereof and neither FLC nor any FLC Subsidiary
(nor, to the knowledge of FLC, any other party to any such
contract, plan, arrangement or instrument) has breached any
provision of, or is in default in any respect under any term of,
any such contract, plan, arrangement or instrument which breach
or default has resulted in or will result in a Material Adverse
Effect with respect to FLC. Except as set forth in the FLC
Disclosure Schedule, no party to any material contract, plan,
arrangement or instrument will have the right to terminate any or
all of the provisions of any such contract, plan, arrangement or
instrument as a result of the transactions contemplated by this
Agreement. Except as set forth in the FLC Disclosure Schedule,
none of the employees (including officers) of FLC or any FLC
Subsidiary possess the right to terminate their employment as a
result of the execution of this Agreement. Except as set forth
in the FLC Disclosure Schedule, no plan, employment agreement,
termination agreement, or similar agreement or arrangement to
which FLC or any FLC Subsidiary is a party or under which FLC or
any FLC Subsidiary may be liable contains provisions which permit
an employee or independent contractor to terminate it without
cause and continue to accrue future benefits thereunder. Except
as set forth in the FLC Disclosure Schedule, no such agreement,
plan or arrangement (x) provides for acceleration in the vesting
of benefits or payments due thereunder upon the occurrence of a
change in ownership or control of FLC or any FLC Subsidiary
absent the occurrence of a subsequent event; (y) provides for
benefits which may cause the disallowance of a federal income tax
deduction under IRC Section 280G; or (z) requires FLC or any FLC
Subsidiary to provide a benefit in the form of FLC Common Stock
or determined by reference to the value of FLC Common Stock.
Section 2.09 Ownership of Property; Insurance
Coverage.
(a) FLC and the FLC Subsidiaries have, or will
have as to property acquired after the date hereof, good and, as
to real property, marketable title to all assets and properties
owned by FLC or any FLC Subsidiary in the conduct of their
businesses, whether such assets and properties are real or
personal, tangible or intangible, including assets and property
reflected in the balance sheets contained in the FLC Regulatory
Reports and in the FLC Financials or acquired subsequent thereto
(except to the extent that such assets and properties have been
<PAGE 22> disposed of for fair value, in the ordinary course of
business, since the date of such balance sheets), subject to no
encumbrances, liens, mortgages, security interests or pledges,
except (i) those items which secure repurchase agreements and
liabilities for borrowed money from a Federal Home Loan Bank,
(ii) statutory liens for amounts not yet delinquent or which are
being contested in good faith, (iii) items permitted under
Article IV, and (iv) the items disclosed in the FLC Disclosure
Schedule. FLC and the FLC Subsidiaries, as lessee, have the
right under valid and subsisting leases of real and personal
properties used by FLC and its Subsidiaries in the conduct of
their businesses to occupy or use all such properties as
presently occupied and used by each of them. Except as disclosed
in the FLC Disclosure Schedule, such existing leases and
commitments to lease constitute or will constitute operating
leases for both tax and financial accounting purposes and the
lease expense and minimum rental commitments with respect to such
leases and lease commitments are as disclosed in the notes to the
FLC Financials.
(b) With respect to all agreements pursuant to
which FLC or any FLC Subsidiary has purchased securities subject
to an agreement to resell, if any, FLC or such FLC Subsidiary, as
the case may be, has a valid, perfected first lien or security
interest in the securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or
exceeds the amount of the debt secured thereby.
(c) FLC and the FLC Subsidiaries currently
maintain insurance considered by FLC to be reasonable for their
respective operations and similar in scope and coverage to that
maintained by other businesses similarly engaged. Neither FLC
nor any FLC Subsidiary has received notice from any insurance
carrier that (i) such insurance will be cancelled or that
coverage thereunder will be reduced or eliminated, or
(ii) premium costs with respect to such policies of insurance
will be substantially increased. Except as set forth on the FLC
Disclosure Schedule, there are presently no material claims
pending under such policies of insurance and no notices have been
given by FLC or First Lehigh Bank under such policies. All such
insurance is valid and enforceable and in full force and effect,
and within the last ten years FLC has received each type of
insurance coverage for which it has applied and during such
periods has not been denied indemnification for any material
claims submitted under any of its insurance policies.
Section 2.10 Legal Proceedings. Except as set forth
in the FLC Disclosure Schedule, neither FLC nor any FLC
Subsidiary is a party to any, and there are no pending or, to the
best of FLC's knowledge, threatened legal, administrative,
arbitration or other proceedings, claims (whether asserted or
unasserted), actions or governmental investigations or inquiries
of any nature (i) against FLC or any FLC Subsidiary, (ii) to
which FLC or any FLC Subsidiary's assets are or may be subject,
<PAGE 23> (iii) challenging the validity or propriety of any of
the transactions contemplated by this Agreement, or (iv) which
could adversely affect the ability of FLC to perform under this
Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii)
which, if adversely determined, individually or in the aggregate,
could not be reasonably expected to have a Material Adverse
Effect on FLC.
Section 2.11 Compliance With Applicable Law.
(a) Except as set forth in the FLC Disclosure
Schedule, FLC and FLC Subsidiaries hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of
their businesses under, and have complied in all material
respects with, applicable laws, statutes, orders, rules or
regulations of any federal, state or local governmental authority
relating to them, other than where such failure to hold or such
noncompliance will neither result in a limitation in any material
respect on the conduct of their businesses nor otherwise have a
Material Adverse Effect on FLC.
(b) Except as set forth on the FLC Disclosure
Schedule, neither FLC nor any FLC Subsidiary has received any
notification or communication from any Regulatory Authority
(i) asserting that FLC or any FLC Subsidiary is not in compliance
with any of the statutes, regulations or ordinances which such
Regulatory Authority enforces; (ii) threatening to revoke any
license, franchise, permit or governmental authorization which is
material to FLC or any FLC Subsidiary; (iii) requiring or
threatening to require FLC or any FLC Subsidiary, or indicating
that FLC or any FLC Subsidiary 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, in any manner the operations of FLC or any FLC
Subsidiary, including without limitation any restriction on the
payment of dividends; or (iv) directing, restricting or limiting,
or purporting to direct, restrict or limit, in any manner the
operations of FLC or any FLC Subsidiary, including without
limitation any restriction on the payment of dividends (any such
notice, communication, memorandum, agreement or order described
in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither FLC nor any FLC Subsidiary has consented to
or entered into any Regulatory Agreement, except as heretofore
disclosed in the FLC Financials or in the FLC Disclosure
Schedule.
Section 2.12 ERISA. FLC has previously delivered to
Patriot true and complete copies of all employee pension benefit
plans within the meaning of ERISA Section 3(2), profit sharing
plans, stock purchase plans, deferred compensation and
supplemental income plans, supplemental executive retirement
plans, employment agreements, annual or long term incentive
plans, severance plans, policies and agreements, group insurance
<PAGE 24> plans, and all other employee welfare benefit plans
within the meaning of ERISA Section 3(1) (including vacation pay,
sick leave, short-term disability, long-term disability, and
medical plans) and all other employee benefit plans, policies,
agreements and arrangements, all of which are set forth in the
FLC Disclosure Schedule, maintained or contributed to for the
benefit of the employees or former employees (including retired
employees) and any beneficiaries thereof or directors or former
directors of FLC or any FLC Subsidiary, together with (i) the
most recent actuarial (if any) and financial reports relating to
those plans which constitute "qualified plans" under IRC
Section 401(a), (ii) the most recent annual reports relating to
such plans filed by them, respectively, with any government
agency, and (iii) all rulings and determination letters which
pertain to any such plans. Neither FLC, any FLC Subsidiary nor
any pension plan maintained by FLC or any FLC Subsidiary, has
incurred, directly or indirectly, within the past six (6) years
any liability under Title IV of ERISA (including to the Pension
Benefit Guaranty Corporation) or to the IRS with respect to any
pension plan qualified under IRC Section 401(a) which liability
has resulted in or will result in a Material Adverse Effect with
respect to FLC, except liabilities to the Pension Benefit
Guaranty Corporation pursuant to ERISA Section 4007, all of which
have been fully paid, nor has any reportable event under ERISA
Section 4043 occurred with respect to any such pension plan.
With respect to each of such plans that is subject to Title IV of
ERISA, the present value of the accrued benefits under such plan,
based upon the actuarial assumptions used for funding purposes in
the plan's most recent actuarial report did not, as of its latest
valuation date, exceed the then current value of the assets of
such plan allocable to such accrued benefits. Neither FLC nor
any FLC Subsidiary has incurred or is subject to any liability
under ERISA Section 4201 for a complete or partial withdrawal
from a multi-employer plan. All "employee benefit plans," as
defined in ERISA Section 3(3), comply and within the past six (6)
years have complied in all material respects with (i) relevant
provisions of ERISA and (ii) in the case of plans intended to
qualify for favorable income tax treatment, provisions of the IRC
relevant to such treatment. No prohibited transaction (which
shall mean any transaction prohibited by ERISA Section 406 and
not exempt under ERISA Section 408 or any transaction prohibited
under IRC Section 4975) has occurred within the past six (6)
years with respect to any employee benefit plan maintained by FLC
or any FLC Subsidiary which would result in the imposition,
directly or indirectly, of an excise tax under IRC Section 4975
or other penalty under ERISA or the IRC, which, individually or
in the aggregate, has resulted in or will result in a Material
Adverse Effect with respect to FLC. FLC and the FLC Subsidiaries
provide continuation coverage under group health plans for
separating employees and "qualified beneficiaries" in accordance
with the provisions of IRC Section 4980B(f). Such group health
plans are in compliance with Section 1862(b)(1) of the Social
Security Act. Neither FLC nor any FLC Subsidiary is aware of any
existing or contemplated audit of any of its employee benefit
<PAGE 25> plans by the Internal Revenue Service or U.S.
Department of Labor.
Section 2.13 Brokers, Finders and Financial Advisors.
Except for FLC's engagement of McGuire Performance Solutions LLC
and Danielson Associates Inc. in connection with the transactions
contemplated by this Agreement, neither FLC nor any FLC
Subsidiary, nor any of their respective officers, directors,
employees or agents, has employed any broker, finder or financial
advisor in connection with the transactions contemplated by this
Agreement or in connection with any transaction other than the
Consolidation, or, except for its commitments disclosed in the
FLC Disclosure Schedule, incurred any liability or commitment for
any fees or commissions to any such person in connection with the
transactions contemplated by this Agreement or in connection with
any transaction other than the Consolidation, which has not been
reflected in the FLC Financials. The FLC Disclosure Schedule
shall contain as an exhibit the engagement letter between FLC and
Danielson Associates Inc.
Section 2.14 Environmental Matters. Except as set
forth in the FLC Disclosure Schedule, to the knowledge of FLC,
neither FLC nor any FLC Subsidiary, nor any properties owned or
occupied by FLC or any FLC Subsidiary has been or is in violation
of or liable under any Environmental Law which violation or
liability, individually or in the aggregate, resulted in, or will
result, in a Material Adverse Effect with respect to FLC. There
are no actions, suits or proceedings, or demands, claims, notices
or investigations (including without limitation notices, demand
letters or requests for information from any environmental
agency) instituted or pending, or to the knowledge of FLC,
threatened, relating to the liability of any property owned or
occupied by FLC or any FLC Subsidiary under any Environmental
Law.
Section 2.15 Allowance for Loan Losses. The allowance
for loan losses reflected, and to be reflected, in the FLC
Regulatory Reports, and shown, and to be shown, on the balance
sheets contained in the FLC Financials have been, and will be,
established in accordance with the requirements of GAAP and all
applicable regulatory criteria.
Section 2.16 Information to be Supplied. The
information to be supplied by FLC and First Lehigh Bank for
inclusion in the Registration Statement (including the
Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the
Securities Act and as of the date the Prospectus/Proxy Statement
is mailed to shareholders of Patriot and FLC and up to and
including the date(s) of the meetings of shareholders of Patriot
and FLC to which such Prospectus/Proxy Statement relates, contain
any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein
not misleading. The information supplied, or to be supplied, by
<PAGE 26> FLC for inclusion in the Applications will, at the time
such documents are filed with any Regulatory Authority and up to
and including the date(s) of the obtainment of any required
regulatory approvals or consents, be accurate in all material
aspects.
Section 2.17 Securities Documents. FLC has delivered
to Patriot copies of its (i) annual reports on SEC Form 10-KSB
PAGE 27
for the years ended December 31, 1997, 1996 and 1995 and (ii) a
quarterly report on SEC Form 10-Q for the quarter ended March 31,
1998. Such reports complied, at the time filed with the SEC, in
all material respects, with the Exchange Act and all applicable
rules and regulations of the SEC.
Section 2.18 Related Party Transactions. Except as
disclosed (i) in the FLC Disclosure Schedule (which shall include
disclosure of all transactions between FLC or First Lehigh Bank,
on the one hand, and James L. Leuthe and any Affiliate of
Mr. Leuthe, on the other hand), (ii) the FLC Annual Report on
Form 10-KSB for the year ended December 31, 1997, or (iii) in the
footnotes to the FLC Financials, FLC is not a party to any
transaction (including any loan or other credit accommodation but
excluding deposits in the ordinary course of business) with any
Affiliate of FLC (except an FLC Subsidiary); and all such
transactions (a) were made in the ordinary course of business,
(b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other Persons, and (c) did not
involve more than the normal risk of collectability or present
other unfavorable features. Except as set forth on the FLC
Disclosure Schedule, no loan or credit accommodation to any
Affiliate of FLC is presently in default or, during the three
year period prior to the date of this Agreement, has been in
default or has been restructured, modified or extended. Neither
FLC nor First Lehigh Bank has been notified that principal and
interest with respect to any such loan or other credit
accommodation will not be paid when due or that the loan grade
classification accorded such loan or credit accommodation by
First Lehigh Bank is inappropriate.
Section 2.19 Loans. Each loan reflected as an asset
in the FLC Financial Statements (i) is evidenced by notes,
agreements or other evidences of indebtedness which are true,
genuine and correct (ii) to the extent secured, has been secured
by valid liens and security interests which have been perfected,
and (ii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles, in each case
other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on FLC.
Section 2.20 Fairness Opinion. FLC has received a
written opinion from Danielson Associates Inc. to the effect
that, as of the date hereof, the consideration to be received by
shareholders of FLC pursuant to this Agreement is fair, from a
financial point of view, to such shareholders.
Section 2.21 Quality of Representations. The
representations made by FLC in this Agreement are true, correct
and complete in all material respects, and do not omit statements
<PAGE 28> necessary to make them not misleading under all facts
and circumstances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PATRIOT
Patriot hereby represents and warrants to FLC that,
except as set forth in the Patriot Disclosure Schedule delivered
by Patriot to FLC on or prior to the date hereof:
Section 3.01 Organization.
(a) Patriot is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware. Patriot is a bank holding company duly registered
under the BHCA. Patriot has the corporate power and authority to
carry on its business and operations as now being conducted and
to own and operate the properties and assets now owned and being
operated by it. Each Patriot Subsidiary is duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and each possesses full
corporate power and authority to carry on its respective business
and to own, lease and operate its properties as presently
conducted. Neither Patriot nor any Patriot Subsidiary is
required by the conduct of its business or the ownership or
leasing of its assets to qualify to do business as a foreign
corporation in any jurisdiction other than the Commonwealth of
Pennsylvania or the State of Delaware, except where the failure
to be so qualified would not have a Material Adverse Effect on
Patriot.
(b) Patriot Bank is a state-chartered bank, duly
organized and validly existing under the laws of the Commonwealth
of Pennsylvania. Patriot Bank has the corporate power and
authority to carry on its business and operations as now being
conducted and to own and operate the properties and assets now
owned and being operated by it.
(c) The deposits of Patriot Bank are insured by
the FDIC to the extent provided in the FDIA.
Section 3.02 Capitalization.
(a) The authorized capital stock of Patriot
consists of 12,000,000 shares of capital stock divided into
(a) 10,000,000 shares of common stock, $.01 par value ("Patriot
Common Stock"), of which, at the date of this Agreement,
1,579,944 shares were issued and held by Patriot as treasury
stock and 5,448,687 shares are outstanding, validly issued, fully
paid and nonassessable and free of preemptive rights and (b)
2,000,000 shares of preferred $.01 par value, of which, at the
date of this Agreement, none were issued and outstanding.
Neither Patriot nor Patriot Bank nor any other Patriot Subsidiary
has or is bound by any subscription, option, warrant, call,
<PAGE 29> commitment, agreement, plan or other Right of any
character relating to the purchase, sale or issuance or voting
of, or right to receive dividends or other distributions on any
shares of Patriot Common Stock or any other security of Patriot
or any securities representing the right to vote, purchase or
otherwise receive any shares of Patriot Common Stock or any other
security of Patriot, other than (i) options to acquire 652,841
shares of Patriot Common Stock under Patriot Stock Option Plan
and (ii) the employee stock purchase plan.
(b) The authorized capital stock of Patriot Bank
consists of 10,000,000 shares of common stock, par value $1.00
per share ("Patriot Bank Common Stock"), of which 1,000 shares
are outstanding, validly issued, fully paid, nonassessable, free
of preemptive rights and owned by Patriot, and 2,000,000 shares
of preferred stock, none of which is outstanding. Either Patriot
or Patriot Bank owns all of the outstanding shares of capital
stock of each Patriot Subsidiary free and clear of all liens,
security interests, pledges, charges, encumbrances, agreements
and restrictions of any kind or nature.
(c) To the best of Patriot's knowledge, except as
disclosed in Patriot's proxy statement dated March 20, 1998, no
person or "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) is the beneficial owner (as defined in
Section 13(d) of the Exchange Act) of 5% or more of the
outstanding shares of Patriot Common Stock.
Section 3.03 Authority; No Violation.
(a) Patriot has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. Patriot Bank has full
corporate power and authority to execute and deliver the Bank
Plan of Merger and to consummate the Bank Merger. The execution
and delivery of this Agreement by Patriot and the completion by
Patriot of the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of Patriot and,
except for approval of the shareholders of Patriot as required by
the DGCL, Patriot's articles of incorporation and bylaws and
Nasdaq requirements applicable to it, no other corporate
proceedings on the part of Patriot are necessary to complete the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Patriot and, subject to
approval by the shareholders of Patriot and receipt of the
required approvals of Regulatory Authorities described in
Section 3.04 hereof, constitutes the valid and binding obligation
of Patriot, enforceable against Patriot in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity. The Bank Plan
of Merger, upon its execution and delivery by Patriot Bank
concurrently with the execution and delivery of this Agreement,
will constitute the valid and binding obligation of Patriot Bank,
<PAGE 30> enforceable against Patriot Bank in accordance with its
terms, subject to applicable conservatorship and receivership
provisions of the FDIA, or insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to
general principles of equity.
(b) (A) The execution and delivery of this
Agreement by Patriot, (B) subject to receipt of approvals from
the Regulatory Authorities referred to in Section 3.04 hereof and
FLC's and Patriot's compliance with any conditions contained
therein, the completion of the transactions contemplated hereby,
and (C) compliance by Patriot with any of the terms or provisions
hereof, will not (i) conflict with or result in a breach of any
provision of the certificate of incorporation or other
organizational document or bylaws of Patriot or any Patriot
Subsidiary; (ii) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction
applicable to Patriot or any Patriot Subsidiary or any of their
respective properties or assets; or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would
constitute a default), under, result in the termination of,
accelerate the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security
interest, charge or other encumbrance upon any of the properties
or assets of Patriot or any Patriot Subsidiary under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
investment or obligation to which Patriot or any Patriot
Subsidiary is a party, or by which they or any of their
respective properties or assets may be bound or affected, except
for such violations, conflicts, breaches or defaults under
clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect on Patriot.
Section 3.04 Consents. Except for consents,
approvals, filings and registrations from or with the FRB, the
FDIC, the PDB, the DOJ, the SEC, the PDS, the NASD and state
"blue sky" authorities, and compliance with any conditions
contained therein, and the approval of this Agreement by the
shareholders of Patriot, and except as disclosed in the Patriot
Disclosure Schedule, no consents or approvals of, or filings or
registrations with, any public body or authority are necessary,
and no consents or approvals of any third parties are necessary,
or will be, in connection with (a) the execution and delivery of
this Agreement by Patriot, and (b) the completion by Patriot of
the transactions contemplated hereby. As of the date hereof,
Patriot has no reason to believe that (i) any required consents
or approvals will not be received or will be received with
conditions, limitations or restrictions unacceptable to it or
which would adversely impact Patriot's ability to complete the
transactions contemplated by this Agreement or that (ii) any
public body or authority, the consent or approval of which is not
required or any filing with which is not required, will object to
<PAGE 31> the completion of the transactions contemplated by this
Agreement.
Section 3.05 Financial Statements.
(a) Patriot has made the Patriot Regulatory
Reports available to FLC for inspection. The Patriot Regulatory
Reports have been, or will be, prepared in all material respects
in accordance with applicable regulatory accounting principles
and practices throughout the periods covered by such statements,
and fairly present, or will fairly present in all material
respects, the financial position, results of operations, and
changes in shareholders' equity of Patriot as of and for the
periods ended on the dates thereof, in accordance with applicable
regulatory accounting principles applied on a consistent basis.
(b) Patriot has previously delivered, or will
deliver, to FLC the Patriot Financials. The Patriot Financials
have been, or will be, prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered by such
statements, except as noted therein, and fairly present, or will
fairly present, the consolidated financial position, results of
operations and cash flows of Patriot as of and for the periods
ending on the dates thereof, in accordance with GAAP applied on a
consistent basis, except as noted therein.
(c) At the date of each balance sheet included in
the Patriot Financials or Patriot Regulatory Reports, neither
Patriot nor Patriot Bank (as the case may be) had, or will have,
any liabilities, obligations or loss contingencies of any nature
(whether absolute, accrued, contingent or otherwise) of a type
required to be reflected in such Patriot Financials or Patriot
Regulatory Reports or in the footnotes thereto which are not
fully reflected or reserved against therein or disclosed in a
footnote thereto, except for liabilities, obligations or loss
contingencies which are not material in the aggregate to Patriot
and which are incurred in the ordinary course of business,
consistent with past practice, and except for liabilities,
obligations or loss contingencies which are within the subject
matter of a specific representation and warranty herein and
subject, in the case of any unaudited statements, to normal
recurring audit adjustments and the absence of footnotes.
Section 3.06 Taxes.
(a) Patriot and the Patriot Subsidiaries are
members of the same affiliated group within the meaning of IRC
Section 1504(a). Patriot has duly filed, and will file, all
federal, state and local tax returns required to be filed by or
with respect to Patriot and all Patriot Subsidiaries on or prior
to the Closing Date (all such returns being accurate and correct
in all material respects) and has duly paid or will pay, or made
or will make, provisions for the payment of all federal, state
and local taxes which have been incurred by or are due or claimed
<PAGE 32> to be due from Patriot and any Patriot Subsidiary by
any taxing authority or pursuant to any tax sharing agreement or
arrangement (written or oral) on or prior to the Closing Date
other than taxes which (i) are not delinquent or (ii) are being
contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has
been filed (or will be filed prior to the Closing Date) by or
with respect to Patriot or any Patriot Subsidiary.
Section 3.07 No Material Adverse Effect. Patriot has
not suffered any Material Adverse Effect since March 31, 1998.
Section 3.08 Legal Proceedings. Except as set forth
in the Patriot Disclosure Schedule, neither Patriot nor any
Patriot Subsidiary is a party to any, and there are no pending
or, to the best of Patriot's knowledge, threatened legal,
administrative, arbitration or other proceedings, claims, actions
or governmental investigations or inquiries of any nature
(i) against Patriot or any Patriot Subsidiary, (ii) to which
Patriot's or any Patriot Subsidiary's assets are or may be
subject, (iii) challenging the validity or propriety of any of
the transactions contemplated by this Agreement, or (iv) which
could adversely affect the ability of Patriot to perform under
this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii)
which, individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect on Patriot.
Section 3.09 Compliance With Applicable Law.
(a) Patriot and the Patriot Subsidiaries hold all
licenses, franchises, permits and authorizations necessary for
the lawful conduct of their businesses under, and have complied
in all material respects with, applicable laws, statutes, orders,
rules or regulations of any federal, state or local governmental
authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any
material respect on the conduct of their businesses nor otherwise
have a Material Adverse Effect on Patriot.
(b) Neither Patriot nor any Patriot Subsidiary
has received any notification or communication from any
Regulatory Authority (i) asserting that Patriot or any Patriot
Subsidiary is not in compliance with any of the statutes,
regulations or ordinances which such Regulatory Authority
enforces; (ii) threatening to revoke any license, franchise,
permit or governmental authorization which is material to Patriot
or any Patriot Subsidiary; (iii) requiring or threatening to
require Patriot or any Patriot Subsidiary, or indicating that
Patriot or any Patriot Subsidiary 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, in any manner the operations of
<PAGE 33> Patriot or any Patriot Subsidiary, including without
limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to direct,
restrict or limit, in any manner the operations of Patriot or any
Patriot Subsidiary, including without limitation any restriction
on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Neither
Patriot nor any Patriot Subsidiary has consented to or entered
into any Regulatory Agreement.
Section 3.10 Information to be Supplied. The
information to be supplied by Patriot for inclusion in the
Registration Statement (including the Prospectus/Proxy Statement)
will not, at the time the Registration Statement is declared
effective pursuant to the Securities Act and as of the date the
Prospectus/Proxy Statement is mailed to shareholders of Patriot
and FLC and up to and including the date(s) of the meetings of
shareholders of Patriot and FLC to which such Prospectus/Proxy
Statement relates, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to
make the statements therein not misleading. The information
supplied, or to be supplied, by Patriot for inclusion in the
Applications will, at the time such documents are filed with any
Regulatory Authority and up to and including the date(s) of the
obtainment of any required regulatory approvals or consents, be
accurate in all material aspects.
Section 3.11 ERISA. Patriot has previously delivered
or made available to FLC true and complete copies of the employee
pension benefit plans which it currently maintains within the
meaning of ERISA Section 3(2), including profit sharing plans,
stock purchase plans, deferred compensation and severance plans,
policies and agreements, group insurance plans, and all other
employee welfare benefit plans within the meaning of ERISA
Section 3(1) (including, if applicable, vacation pay, sick leave,
short-term disability, long-term disability, and medical plans),
and all other employee benefit plans, policies, agreements and
arrangements, all of which are set forth on the Patriot
Disclosure Schedule, maintained or contributed to for the benefit
of the employees or former employees (including retired
employees) and any beneficiaries thereof or directors or former
directors of Patriot or any Patriot Subsidiary, together with
(i) the most recent actuarial (if any) and financial reports
relating to those plans which constitute "qualified plans" under
IRC Section 401(a), (ii) the most recent annual reports relating
to such plans filed by them, respectively, with any government
agency, and (iii) all rulings and determination letters which
pertain to any such plans. To the best of Patriot's knowledge,
neither Patriot, any Patriot Subsidiary, nor any pension plan
maintained by Patriot or any Patriot Subsidiary, has incurred,
directly or indirectly, within the past six (6) years any
liability under Title IV of ERISA (including to the Pension
Benefit Guaranty Corporation) or to the IRS with respect to any
<PAGE 34> pension plan qualified under IRC Section 401(a) which
liability has resulted in or will result in a Material Adverse
Effect with respect to Patriot, except liabilities to the Pension
Benefit Guaranty Corporation pursuant to ERISA Section 4007, all
of which have been fully paid, nor has any reportable event under
ERISA Section 4043 occurred with respect to any such pension
plan. With respect to each of such plans that is subject to
Title IV of ERISA, the fair market value of the assets under such
plan exceeds the present value of the accrued benefits liability
as of the end of the most recent plan year with respect to such
plan calculated on the basis of the actual assumptions used in
the most recent actuarial valuation for such plan. Neither
Patriot nor any Patriot Subsidiary has incurred or is subject to
any liability under ERISA Section 4201 for a complete or partial
withdrawal from a multi-employer plan. To the best of Patriot's
knowledge, all "employee benefit plans," as defined in ERISA
Section 3(3), comply and within the past six (6) years have
complied in all material respects with (i) relevant provisions of
ERISA, and (ii) in the case of plans intended to qualify for
favorable income tax treatment, provisions of the IRC relevant to
such treatment. To the best of Patriot's knowledge, no
prohibited transaction (which shall mean any transaction
prohibited by ERISA Section 406 and not exempt under ERISA
Section 408 or any transaction prohibited under IRC Section 4975)
has occurred within the past six (6) years with respect to any
employee benefit plan maintained by Patriot or any Patriot
Subsidiary that would result in the imposition, directly or
indirectly, of an excise tax under IRC Section 4975 or other
penalty under ERISA or the IRC, which individually or in the
aggregate, has resulted in or will result in a Material Adverse
Effect with respect to Patriot. Patriot and the Patriot
Subsidiaries comply with the continuation coverage rules
applicable to its group health plan(s) for covered employees and
"qualified beneficiaries" of covered employees (as defined in IRC
Section 4980B(g)), in accordance with the provisions of IRC
Section 4980B(f). Such group health plans are in compliance with
Section 1862(b)(1) of the Social Security Act. Neither Patriot
nor any Patriot Subsidiary is aware of any existing or
contemplated audit of any of its employee benefit plans by the
Internal Revenue Service or U.S. Department of Labor.
Section 3.12 Brokers, Finders and Financial Advisors.
Except for Patriot's engagement of Janney Montgomery Scott Inc.
("JMS") in connection with the transactions contemplated by this
Agreement, neither Patriot nor any Patriot Subsidiary, nor any of
their respective officers, directors, employees or agents, has
employed any broker, finder or financial advisor in connection
with the transactions contemplated by this Agreement or in
connection with any transaction other than the Consolidation, or,
except for its commitments disclosed in the Patriot Disclosure
Schedule, incurred any liability or commitment for any fees or
commissions to any such person in connection with the
transactions contemplated by this Agreement or in connection with
<PAGE 35> any transaction other than the Consolidation, which has
not been reflected in the Patriot Financials.
Section 3.13 Securities Documents. Patriot has
delivered to FLC copies of its (i) annual reports on SEC
Form 10-K for the years ended December 31, 1997 and 1996,
(ii) quarterly reports on SEC Form 10-Q for the quarter ended
March 31, 1998, and (iii) proxy materials used in connection with
its annual meetings of shareholders held in 1998, 1997 and 1996.
Such reports and such proxy materials complied, at the time filed
with the SEC, in all material respects, with the Exchange Act and
the applicable rules and regulations of the SEC.
Section 3.14 Fairness Opinion. Patriot has received a
written opinion from JMS to the effect that, as of the date
hereof, the consideration to be received by shareholders of
Patriot pursuant to this Agreement is fair, from a financial
point of view, to such shareholders.
Section 3.15 Quality of Representations. The
representations made by Patriot in this Agreement are true,
correct and complete in all material respects and do not omit
statements necessary to make the representations not misleading
under the circumstances.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of FLC's Business.
(a) From the date of this Agreement to the
Closing Date, FLC and its Subsidiaries will conduct its business
and engage in transactions, including extensions of credit, only
in the ordinary course and consistent with past practice and
policies, except as otherwise required or contemplated by this
Agreement or with the written consent of Patriot. FLC will use
its best efforts, and will cause each of the Subsidiaries to use
its best efforts, to (i) preserve its business organizations
intact, (ii) maintain good relationships with employees, and
(iii) preserve for itself the goodwill of its customers and
others with whom business relationships exist. From the date
hereof to the Closing Date, except as otherwise consented to or
approved by Patriot in writing or as permitted or required by
this Agreement, FLC will, or will not permit any Subsidiary to:
(i) amend or change any provision of its
articles of incorporation or bylaws;
(ii) change the number of authorized or
issued shares of its capital stock or issue any shares or
issue or grant any option, warrant, call, commitment,
subscription, Right or agreement of any character relating
to its authorized or issued capital stock or any securities
convertible into shares of such stock, or split, combine or
<PAGE 36> reclassify any shares of capital stock, or
declare, set aside or pay any dividend or other distribution
in respect of capital stock, or redeem or otherwise acquire
any shares of capital stock, except that (A) FLC may issue
up to an aggregate of 60,000 shares of FLC Common Stock upon
the valid exercise of presently outstanding FLC Options,
(B) FLC may pay required dividends on the FLC Senior
Preferred Stock and the FLC Series A Preferred Stock, (C)
FLC may pay the cumulative dividends in arrears on the FLC
Series A Preferred Stock, (D) FLC may issue shares of FLC
Common Stock pursuant to the Patriot Lock-Up Option, and
(E) FLC may issue shares of FLC Common Stock upon the
conversion of any outstanding shares of FLC Senior Preferred
Stock or FLC Series A Preferred Stock;
(iii) grant any severance or termination pay
to, or, enter into any new or amend any existing employment
agreement with, or increase the compensation of, any
employee, officer or director;
(iv) merge or consolidate any Subsidiary
with any other corporation; sell or lease all or any
substantial portion of the assets or business; make any
acquisition of all or any substantial portion of the
business or assets of any other person, firm, association,
corporation or business organization other than in
connection with the collection of any loan or credit
arrangement; enter into a purchase and assumption
transaction with respect to deposits and liabilities; permit
the revocation or surrender by any Subsidiary of its
certificate of authority to maintain, or file an application
for the relocation of, any existing branch office;
(v) sell or otherwise dispose of the capital
stock or sell or otherwise dispose of any of its assets or
the assets of any Subsidiary other than in the ordinary
course of business consistent with past practice; subject
any of its assets to a lien, pledge, security interest or
other encumbrance (other than in connection with government
deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary
course of business and transactions in Federal Home Loan
Bank advances and "federal funds" and the satisfaction of
legal requirements in the exercise of trust powers) other
than in the ordinary course of business consistent with past
practice; incur any indebtedness for borrowed money (or
guarantee any indebtedness for borrowed money), except in
the ordinary course of business consistent with past
practice;
(vi) take any action which would result in
any of its representations and warranties set forth in this
Agreement becoming untrue as of any date after the date
hereof except as otherwise contemplated or permitted by this
<PAGE 37> Agreement, or in any of the conditions set forth
in Article V hereof not being satisfied, except in each case
as may be required by applicable law;
(vii) change any method, practice or
principle of accounting, except as may be required from time
to time by GAAP (without regard to any optional early
adoption date) or any Regulatory Authority;
(viii) waive, release, grant or transfer any
rights of value or modify or change in any material respect
any existing material agreement to which it or any
Subsidiary is a party, other than in the ordinary course of
business consistent with past practice;
(ix) implement any pension, retirement,
profit sharing, bonus, welfare benefit or similar plan or
arrangement that was not in effect on the date of this
Agreement, or, except as required by law and except as set
forth in Section 4.10, materially amend any existing plan or
arrangement;
(x) purchase any security for its investment
portfolio;
(xi) amend or otherwise modify the
underwriting and other lending guidelines and policies in
effect as of the date hereof or otherwise fail to conduct
its lending activities in the ordinary course of business;
(xii) enter into, renew, extend or modify
any other transaction with any Affiliate, other than deposit
and loan transactions in the ordinary course of business and
which are in compliance with the requirements of applicable
laws and regulations;
(xiii) change deposit or loan rates;
(xiv) enter into any interest rate swap,
floor or cap or similar commitment, agreement or
arrangement;
(xv) except for the execution of this
Agreement, take any action that would give rise to a right
of payment to any individual under any employment agreement;
(xvi) take any action that would preclude
the Consolidation from qualifying as a reorganization within
the meaning of Section 368 of the IRC; or
(xvii) agree to do any of the foregoing.
For purposes of this Section 4.01, it shall not be
considered in the ordinary course of business for FLC to do any
<PAGE 38> of the following: (i) make any capital expenditure
without the prior written consent of Patriot other than payments
under a contract to purchase furniture at the Walnutport branch
in the amount of $11,000 and a contract to purchase an ATM
machine in the amount of $23,900; (ii) 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 $10,000, other than pledges of assets
to secure Federal Home Loan Bank advances or government deposits,
to exercise trust powers, sales of assets received in
satisfaction of debts previously contracted in the normal course
of business, in each case, in the ordinary course of business; or
(iii) undertake or enter any lease, contract or other commitment
for its account, involving a loan or payment of more than
$10,000, or containing a material financial commitment and
extending beyond 12 months from the date hereof.
Section 4.02 Access; Confidentiality.
(a) From the date of this Agreement through the
Closing Date, FLC or Patriot, as the case may be, shall afford
to, and shall cause each FLC Subsidiary or Patriot Subsidiary to
afford to, the other party and its authorized agents and
representatives, complete access to their respective properties,
assets, books and records and personnel, at reasonable hours and
after reasonable notice; and the officers of FLC and Patriot will
furnish any person making such investigation on behalf of the
other party with such financial and operating data and other
information with respect to the businesses, properties, assets,
books and records and personnel as the person making such
investigation shall from time to time reasonably request.
(b) FLC and Patriot each agree to conduct such
investigation and discussions hereunder in a manner so as not to
interfere unreasonably with normal operations and customer and
employee relationships of the other party.
(c) All information furnished to Patriot by FLC
or by FLC to Patriot previously in connection with the
transactions contemplated by this Agreement or pursuant hereto
shall be held in confidence.
(d) A representative of Patriot shall be invited
to attend all meetings of the FLC Board of Directors and any
committee thereof and all management committee meetings,
including without limitation, loan, asset/liability and
investment committee meetings (or the functional equivalent).
Section 4.03 Regulatory Matters and Consents.
(a) FLC and Patriot shall promptly prepare a
Prospectus/Proxy Statement to be mailed to their respective
shareholders in connection with the meetings of their respective
shareholders and transactions contemplated hereby, and to be
<PAGE 39> filed with the SEC by Patriot and FLC on behalf of the
Holding Company. The Registration Statement shall conform to all
applicable legal requirements. Patriot shall, as promptly as
practicable following the preparation thereof, file the
Registration Statement with the SEC and FLC and Patriot shall use
all reasonable efforts to have the Registration Statement
declared effective under the Securities Act as promptly as
practicable after such filing. Patriot will advise FLC, promptly
after Patriot 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. Patriot
shall use its reasonable best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state
securities laws or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement.
Patriot will provide FLC with as many copies of such Registration
Statement and all amendments thereto promptly upon the filing
thereof as FLC may reasonably request.
(b) Patriot and FLC will prepare all Applications
to Regulatory Authorities and make all filings for, and use their
reasonable best efforts to obtain as promptly as practicable
after the date hereof, all necessary permits, consents,
approvals, waivers and authorizations of all Regulatory
Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement.
(c) Each party will furnish the other with all
information concerning itself and its Subsidiaries as may be
reasonably necessary or advisable in connection with the
Registration Statement and any Application or filing made to any
Regulatory Authority in connection with the transactions
contemplated by this Agreement.
(d) Patriot and FLC shall have the right to
review in advance, and each will consult with the other on, all
information which appears in any filing made with or written
materials submitted to the SEC, any Regulatory Authority or any
third party 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 the SEC, Regulatory
Authorities and third parties 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 hereby
and thereby. <PAGE 40>
(e) Each party will promptly furnish the other
with copies of all Applications and other written communications
to, or received from, any Regulatory Authority in respect of the
transactions contemplated hereby.
Section 4.04 Taking of Necessary Action. Patriot and
FLC shall each use its reasonable best efforts in good faith, and
each of them shall cause its Subsidiaries to use their reasonable
best efforts in good faith, to take or cause to be taken all
action necessary or desirable on its part so as to permit
completion of the Consolidation as soon as practicable after the
date hereof, including, without limitation, (A) obtaining the
consent or approval of each individual, partnership, corporation,
association or other business or professional entity whose
consent or approval is required or desirable for consummation of
the transactions contemplated hereby (including assignment of
leases without any change in terms), provided that neither party
or its Subsidiaries shall agree to make any payments or
modifications to agreements in connection therewith without the
prior written consent of the other party, and (B) requesting the
delivery of appropriate opinions, consents and letters from its
counsel and independent auditors. No party hereto shall take, or
cause, or to the best of its ability permit to be taken, any
action that would substantially impair the prospects of
completing the Consolidation pursuant to this Agreement; provided
that nothing herein contained shall preclude Patriot from
exercising its rights under this Agreement or the Patriot Lock-Up
Option.
Section 4.05 Indemnification; Insurance.
(a) Indemnification. Except as specified in the
Standstill Agreement, in the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil,
criminal or administrative, in which any person who is now, or
has been at any time prior to the date of this Agreement, or who
becomes prior to the Effective Date, a director or officer or
employee of either party or any of their respective Subsidiaries
(the "Indemnified Parties") is, or is threatened to be, made a
party to a suit based in whole or in part on, or arising in whole
or in part out of, or pertaining to (i) the fact that he is or
was a director, officer or employee of either party, any of their
respective Subsidiaries or any of their respective predecessors
or (ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after
the Effective Date, the parties hereto agree to cooperate and use
their best efforts to defend against and respond thereto to the
extent permitted by the BCL and the Articles of Incorporation and
Bylaws of such party. On or after the Effective Date, the
Holding Company shall indemnify, defend and hold harmless all
prior and then-existing directors and officers of FLC, Patriot or
their respective Subsidiaries, against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement (with the prior approval of the
<PAGE 41> Holding Company) of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of FLC, Patriot
or their respective Subsidiaries, whether pertaining to any
matter existing or occurring at or prior to the Effective Date
and whether asserted or claimed prior to, or at or after, the
Effective Date ("Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on, or arising
in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby, to the same extent as such
officer, director or employee may be indemnified by FLC, Patriot
or their respective Subsidiaries, as the case may be, as of the
date hereof including the right to advancement of expenses,
provided, however, that any such officer, director or employee
may not be indemnified by the Holding Company if such
indemnification is prohibited by applicable law.
(b) Insurance. The Holding Company shall
maintain a directors' and officers' liability insurance policy
providing coverage amounts not less than the greater of coverage
amounts provided under the FLC or Patriot directors and officers'
liability insurance policy and on terms generally no less
favorable, including Patriot's existing policy if it meets the
foregoing standard. Such policy shall cover persons who are
currently covered by the FLC and Patriot insurance policies for a
period of six years after the Effective Date, except that the
Holding Company shall have no obligation to provide insurance
coverage for Mr. Leuthe with respect to any matter described in
Section 7(a)(i) of the Standstill Agreement.
(c) Assumption. In the event that the Holding
Company 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 consolidation 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 4.05.
Section 4.06 No Other Bids and Related Matters. So
long as this Agreement remains in effect, FLC shall and shall not
authorize or permit any of its directors, officers, employees or
agents, to directly or indirectly (i) respond to, solicit,
initiate or encourage any inquiries relating to, or the making of
any proposal which relates to, an Acquisition Transaction (as
defined below), (ii) recommend or endorse an Acquisition
Transaction, (iii) participate in any discussions or negotiations
regarding an Acquisition Transaction, (iv) provide any third
party (other than the other party to this Agreement or an
affiliate of such party) with any nonpublic information in
connection with any inquiry or proposal relating to an
Acquisition Transaction or (v) enter into an agreement with any
<PAGE 42> other party with respect to an Acquisition Transaction.
FLC will immediately cease and cause to be terminated any
existing activities, discussions or negotiations previously
conducted with any parties other than Patriot hereto with respect
to any of the foregoing, and will take all actions necessary or
advisable to inform the appropriate individuals or entities
referred to in this sentence of the obligations undertaken in
this Section 4.06. FLC will notify Patriot orally (within one
day) and in writing (as promptly as practicable) if any inquiries
or proposals relating to an Acquisition Transaction are received
or any such negotiations or discussions are sought to be
initiated or continued. As used in this Agreement, "Acquisition
Transaction" shall mean one of the following transactions with a
party other than Patriot hereto (i) a merger or consolidation, or
any similar transaction, (ii) a purchase, lease or other
acquisition of all or a substantial portion of the assets or
liabilities of FLC or (iii) a purchase or other acquisition
(including by way of share exchange, tender offer, exchange offer
or otherwise) of a substantial interest in any class or series of
FLC's equity securities.
Section 4.07 Duty to Advise; Duty to Update Disclosure
Schedule. FLC shall promptly advise Patriot of any change or
event having a Material Adverse Effect on it or which it believes
would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or
covenants set forth herein. FLC shall update its Disclosure
Schedule as promptly as practicable after the occurrence of an
event or fact which, if such event or fact had occurred prior to
the date of this Agreement, would have been disclosed in such
Disclosure Schedule. The delivery of such updated Disclosure
Schedule shall not relieve FLC from any breach or violation of
this Agreement and shall not have any effect for the purposes of
determining the satisfaction of the condition set forth in
Section 5.01(c).
Section 4.08 Current Information.
(a) Ongoing Communications. During the period
from the date of this Agreement to the Effective Date, FLC shall,
cause one or more of its designated representatives to confer on
a weekly or more frequent basis with representatives of Patriot
regarding its financial condition, operations and business and
matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no
event more than 45 days after the end of each calendar quarter
ending after the date of this Agreement (other than the last
quarter of each fiscal year ending December 31) FLC and Patriot
will deliver to the other party its quarterly report on Form 10-Q
under the Exchange Act, and, as soon as reasonably available, but
in no event more than 90 days after the end of each fiscal year
ended December 31, FLC and Patriot will deliver to the other
party its Annual Report on Form 10-K. In addition, within
fifteen (15) days after the end of each month that is not a
<PAGE 43> quarter end, FLC shall deliver to Patriot an interim
consolidated balance sheet as of such month end and an income
statement for the month and year-to-date then ended.
(b) Board Minutes. FLC shall provide to Patriot
a copy of the minutes of any meeting of the Board of Directors of
FLC or any Subsidiary, or any committee thereof, or any senior
management committee, but in any event within 10 days of the
meeting of such board or committee to which such minutes relate,
except that with respect to any meeting held within 10 days of
the Closing Date, such minutes shall be provided prior to the
Closing Date.
Section 4.09 Undertakings by FLC. From and after the
date of this Agreement, FLC shall:
(a) Phase I Environmental Audit. Permit Patriot,
if Patriot elects to do so, at its own expense, to cause a
"phase I environmental audit" to be performed at any physical
location owned or occupied by FLC or any of its Subsidiaries on
the date hereof;
(b) Timely Review. If requested by Patriot and
at Patriot's expense, cause its independent certified public
accountants to perform a review of its unaudited consolidated
financial statements as of the end of any calendar quarter, in
accordance with Statement of Auditing Standards No. 71, and to
issue its report on such financial statements as soon as is
practicable thereafter;
(c) Outside Service Bureau Contracts. If
requested to do so by Patriot, use its best efforts to obtain an
extension of any contract with an outside service bureau or other
vendor of services or any Subsidiary, on terms and conditions
mutually acceptable to each party;
(d) List of Nonperforming Assets. Provide
Patriot, within fifteen (15) days after the monthly meeting of
its Loan Review Committee, a written list of nonperforming
assets, classified assets and problem loans as of the end of such
month; and
(e) Shareholders Meetings. Take all action
necessary to properly call and convene a special meeting of its
shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions
contemplated hereby. The Board of Directors of FLC and the Board
of Directors of Patriot will recommend that the shareholders of
FLC and Patriot, respectively, approve this Agreement and the
transactions contemplated hereby. If required by Patriot, FLC,
shall retain a proxy solicitor in connection with the
solicitation of the approval of its shareholders of this
Agreement and the transactions contemplated hereby.
<PAGE 44>
(f) Public Announcements. Cooperate and cause
its respective officers, directors, employees and agents to
cooperate in good faith, consistent with their respective legal
obligations, in the preparation and distribution of, and agree
upon the form, substance and timing of, any press release related
to this Agreement and the transactions contemplated hereby, and
any other public disclosures related thereto, including without
limitation, communications to shareholders and internal
announcements and customer disclosures, but nothing contained
herein shall prohibit either party from making any disclosure
which its counsel deems necessary under applicable law;
(g) Maintenance of Insurance. Maintain, and
cause their respective Subsidiaries to maintain, insurance in
such amounts as are reasonable to cover such risks as are
customary in relation to the character and location of its
properties and the nature of its business;
(h) Maintenance of Books and Records. Maintain,
and cause their respective Subsidiaries to maintain, books of
account and records in accordance with GAAP applied on a basis
consistent with those principles used in preparing the financial
statements heretofore delivered;
(i) Delivery of Securities Documents. Deliver to
the other, copies of all Securities Documents simultaneously with
the filing thereof; and
(j) Taxes. File all federal, state, and local
tax returns required to be filed by them or their respective
Subsidiaries on or before the date such returns are due
(including any extensions) and pay all taxes shown to be due on
such returns on or before the date such payment is due.
Section 4.10 Employee Benefits. On and after the
Effective Date, the fringe benefits (including miscellaneous
benefits) welfare benefit plans and pension benefit (retirement)
plans of Patriot shall become the fringe benefits, welfare
benefit plans and pension benefit (retirement) plans of the
Holding Company. After Closing, the Holding Company will
initially maintain the FLC employee benefit plans and will study
whether to freeze, terminate, merge or otherwise consolidate such
FLC plans with the Holding Company employee benefit plans.
Section 4.11 Nasdaq Listing. Patriot shall use all
reasonable efforts to cause the shares of the Holding Company
Common Stock to be issued in connection with the Consolidation to
be approved for quotation on the Nasdaq Stock Market's National
Market, subject to official notice of issuance, as of or prior to
the Effective Date.
Section 4.12 Affiliate Letters. FLC shall use its
best efforts to cause each person who may be deemed to be an
Affiliate of FLC, to execute and deliver to Patriot as soon as
<PAGE 45> practicable after the date of this Agreement, and in
any event prior to the date of the meetings of shareholders of
FLC and Patriot to be called pursuant to Section 4.09(f) hereof,
a written agreement in the form of Exhibit 1.
Section 4.13 Severance Pay. After the Effective
Date, employees of FLC or any of their respective Subsidiaries
who are involuntarily terminated, shall receive the severance pay
specified in Patriot's severance plan.
Section 4.14 Disposition of FLC Equity Portfolio.
Within thirty (30) days of the date of this Agreement and subject
to the exercise by the FLC Board of Directors of their fiduciary
duty, FLC and Patriot shall jointly develop a plan to sell all of
FLC's equity portfolio other than Patriot Common Stock in an
orderly fashion provided, however, that FLC shall consult with
the Chief Financial Officer of Patriot prior to the execution of
each sale and with respect to the reinvestment of the proceeds of
such sales.
Section 4.15 Sale of FLC Headquarters. Within thirty
(30) days of the date of this Agreement, FLC shall list for sale
with a broker acceptable to Patriot the property owned by FLC and
located at 1620 Pond Road, Allentown, Pennsylvania.
Section 4.16 Conduct of Patriot. From the date
hereof to the Closing Date, except as otherwise consented to or
approved by FLC in writing or as permitted or required by this
Agreement, Patriot will not take any action that would preclude
the Consolidation from qualifying as a reorganization within the
meaning of Section 368 of the IRC.
Section 4.17 Closing Date. The parties desire the
Closing Date to be on or before November 1, 1998, and shall
observe their covenants in Sections 4.03 and 4.04 and elsewhere
in this Agreement in an attempt to achieve such date. If such
date is not practicably attainable, the parties acknowledge that
the Closing Date may not be able to occur until after January 4,
1999, due to the inability of certain third party processors to
accommodate (during the period November 1, 1998 through
December 31, 1998) the systems conversions of Patriot Bank and
First Lehigh Bank that are to occur concurrently with the Closing
Date.
ARTICLE V
CONDITIONS
Section 5.01 Mutual Conditions to the Obligations of
FLC and Patriot under this Agreement. The obligations of FLC and
Patriot hereunder shall be subject to satisfaction at or prior to
PAGE 46
the Closing Date of each of the following conditions, unless
waived by both parties pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, each party to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement,
shall have been duly and validly taken and each party shall have
received certified copies of the resolutions of the other party
evidencing such authorizations;
(b) Covenants. The obligations and covenants of
each party required by this Agreement to be performed by each
party at or prior to the Closing Date shall have been duly
performed and complied with in all material respects;
(c) Representations and Warranties. The
representations and warranties of each party set forth in this
Agreement shall be true and correct, as of the date of this
Agreement, and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty
(i) which specifically relates to an earlier date or (ii) where
the breach of the representation or warranty would not, either
individually or in the aggregate, constitute a Material Adverse
Effect;
(d) Approvals of Regulatory Authorities. The
parties shall have received all required approvals of Regulatory
Authorities of the Consolidation, without the imposition of any
term or condition that would have a Material Adverse Effect on
the Holding Company upon completion of the Consolidation and all
notice and waiting periods required thereunder shall have expired
or been terminated;
(e) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(f) Officer's Certificate. Each party shall have
delivered to the other party a certificate, dated the Closing
Date and signed, without personal liability, by its chairman or
president, to the effect that the conditions set forth in
subsections (a) through (e) of this Section 5.01 have been
satisfied, to the best knowledge of the officer executing the
same;
(g) Opinions of Counsel. FLC shall have received
an opinion of Stevens & Lee, counsel to Patriot, dated the
Closing Date, in form and substance reasonably satisfactory to
FLC and its counsel to the effect set forth on Exhibit 6 attached
hereto and Patriot shall have received an opinion of counsel of
Duane, Morris & Heckscher LLP, counsel to FLC, dated the Closing
Date, in form and substance reasonably satisfactory to Patriot
<PAGE 47> and its counsel to the effect set forth in Exhibit 7
attached hereto;
(h) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement, shall
have been obtained; and neither the Registration Statement nor
any such approval by state securities or "blue sky" authorities
shall be subject to a stop order or threatened stop order by the
SEC or any such authority;
(i) Tax Opinion. Each party shall have received
an opinion of Stevens & Lee substantially to the effect set forth
on Exhibit 8 attached hereto;
(j) Approval of Shareholders. This Agreement
shall have been approved by the shareholders of FLC and Patriot
by such vote as is required under BCL, the DGCL, their respective
articles or certificates of incorporation and bylaws or under
Nasdaq requirements applicable to it;
(k) Nasdaq Listing. The Holding Company Common
Stock shall be approved for quotation on the Nasdaq National
Market System;
(l) Dividends on FLC Preferred Stock. The
accrued but unpaid dividends in arrears on the FLC Series A
Preferred Stock shall be paid on or before the Closing Date;
(m) Other. Each party shall have furnished the
other party with such certificates of its respective officers or
others and such documents to evidence fulfillment of the
conditions set forth in this Section 5.01 as each party may
reasonable request.
Section 5.02 Additional Conditions to the Obligations
of Patriot. The obligation of Patriot hereunder shall be subject
to satisfaction at or prior to the Closing of each of the
following conditions unless waived by Patriot pursuant to
Section 7.03.
(a) Conversion Rights. No adjustment shall have
occurred with respect to the conversion rights of any holder of
FLC Senior Preferred Stock or FLC Series A Preferred Stock.
(b) Termination of Regulatory Agreements. On or
prior to the Closing Date each Regulatory Agreement to which FLC
or First Lehigh Bank is a party shall have been terminated by the
applicable Regulatory Authority.
<PAGE 48>
(c) FDIC Consent to Standstill Agreement. The
FDIC, pursuant to the provisions of the FDIC order dated June 26,
1998 with respect to Mr. Leuthe, shall have consented in writing
to the terms and conditions of the Standstill Agreement.
(d) Funding of Escrow. Mr. Leuthe shall have
executed the escrow agreement and funded the escrow required by
Section 7 of the Standstill Agreement.
(e) Compliance with Standstill Agreement.
Mr. Leuthe shall have complied with all provisions of the
Standstill Agreement required to be complied with prior to or
concurrently with the completion of the Consolidation, including
without limitation, the execution of a proxy in favor of the
Board of Directors of the Holding Company.
(f) Repayment of Indebtedness. Mr. Leuthe shall
have repaid in full all outstanding indebtedness of Mr. Leuthe to
First Lehigh Bank.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be
terminated on or at any time prior to the Closing Date:
(a) By the mutual written consent of the parties
hereto;
(b) By Patriot or FLC:
(i) if the Closing Date shall not have
occurred on or before March 31, 1999, unless the failure of
such occurrence shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe in
any material respect its agreements set forth in this
Agreement required to be performed or observed by such party
on or before the Closing Date; or
(ii) if either party has received a final
unappealable administrative order from a Regulatory
Authority whose approval or consent has been requested that
such approval or consent will not be granted, or will not be
granted absent the imposition of terms and conditions which
would not permit satisfaction of the condition set forth at
Section 5.01(d) hereof, unless the failure of such
occurrence shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe in any
material respect its agreements set forth herein required to
be performed or observed by such party on or before the
Closing Date; or
(c) By FLC, if the Patriot Market Value is less
than $12.26; <PAGE 49>
(d) at any time on or prior to the Effective
Date, by FLC in writing if Patriot has, or by Patriot in writing
if FLC has, in any material respect, breached (i) any material
covenant or undertaking contained herein or (ii) any
representation or warranty contained herein, which in the case of
a breach by Patriot would have a Material Adverse Effect on
Patriot or in the case of a breach by FLC would have a Material
Adverse Effect on FLC, in any case, if such breach has not been
substantially cured by the earlier of 30 days after the date on
which written notice of such breach is given to the party
committing such breach or the Effective Date unless on such date
such breach no longer causes a Material Adverse Effect;
(e) by either the Board of Directors of Patriot
or the Board of Directors of FLC if their shareholders shall have
not approved this Agreement by the requisite vote; provided,
however, that no termination right shall exist hereunder if prior
to such shareholder vote the Board of Directors of the party
whose shareholders failed to approve this Agreement shall have
otherwise withdrawn, modified or changed in a manner adverse to
the other party its approval or recommendation of this Agreement
and the transactions contemplated thereby.
Section 6.02 Effect of Termination. If this Agreement
is terminated pursuant to Section 6.01 hereof, this Agreement
shall forthwith become void (other than Section 4.02(c) and
Section 7.01 hereof, which shall remain in full force and
effect), and there shall be no further liability on the part of
Patriot or FLC to the other, except for any liability arising out
of any uncured willful breach of any covenant or other agreement
contained in this Agreement, any fraudulent breach of a
representation or warranty, in this Agreement and any obligation
or liability arising under the Patriot Option. Nothing contained
in this Section 6.02 shall be deemed to prohibit Patriot or FLC
from maintaining an action against a third party for tortious
interference or otherwise.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Except for the cost of
printing and mailing the Proxy Statement/Prospectus which shall
be shared equally, each party hereto shall bear and pay all costs
and expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel.
Section 7.02 Non-Survival of Representations and
Warranties. All representations, warranties and, except to the
extent specifically provided otherwise herein, agreements and
covenants, other than those covenants that by their terms are to
be performed after the Effective Date, including without
limitation the covenants set forth in Sections 1.02(f) and (g),
<PAGE 50> and 4.05, hereof, which will survive the Consolidation,
shall terminate on the Closing Date.
Section 7.03 Amendment, Extension and Waiver. Subject
to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may
(a) amend this Agreement, (b) extend the time for the performance
of any of the obligations or other acts of either party hereto,
(c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or
(d) waive compliance with any of the agreements or conditions
contained in Articles IV and V hereof or otherwise, provided that
any amendment, extension or waiver granted or executed after
shareholders of FLC or Patriot have approved this Agreement shall
not modify either the amount or the form of the consideration to
be provided hereby to holders of FLC Common Stock or Patriot
Common Stock upon consummation of the Consolidation, change any
terms of the articles of Holding Company or otherwise materially
adversely affect the shareholders of FLC or Patriot without the
approval of the shareholders who would be so affected. This
Agreement may not be amended except by an instrument in writing
authorized by the respective Boards of Directors and signed, by
duly authorized officers, on behalf of the parties hereto. Any
agreement on the part of a party hereto to any extension or
waiver shall be valid only if set forth in an instrument in
writing signed by a duly authorized officer on behalf of such
party, but such waiver or failure to insist on strict compliance
with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
Section 7.04 Entire Agreement. This Agreement,
including the documents and other writings referred to herein or
delivered pursuant hereto, contains the entire agreement and
understanding of the parties with respect to its subject matter.
This Agreement supersedes all prior arrangements and
understandings between the parties, both written or oral with
respect to its subject matter. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto and their respective
successors, any rights, remedies, obligations or liabilities.
Section 7.05 No Assignment. Neither party hereto may
assign any of its rights or obligations hereunder to any other
person, without the prior written consent of the other party
hereto.
Section 7.06 Notices. All notices or other
communications hereunder shall be in writing and shall be deemed
PAGE 51
given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy,
addressed as follows:
(a) If to Patriot, to:
Patriot Bank Corp.
High and Hanover Streets
Pottstown, Pennsylvania 19464
Attention: Joseph W. Major,
President and Chief Executive
Officer
Telecopy No.: (610) 323-0914
with a copy to:
Stevens & Lee
One Glenhardie Corporate Center
1275 Drummers Lane
P.O. Box 236
Wayne, Pennsylvania 19087-0236
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 687-1384
(b) If to FLC, to:
First Lehigh Corporation
1620 Pond Road
Allentown, Pennsylvania 18104
Attention: Wilbur R. Roat,
Director
Telecopy No.: (610) 398-6693
with copies to:
Duane, Morris & Heckscher LLP
4200 One Liberty Place
Philadelphia, Pennsylvania 19103-7396
Attention: Kathleen M. Shay, Esquire
Telecopy No.: (215) 970-1020
Section 7.07 Captions. The captions contained in this
Agreement are for reference purposes only and are not part of
this Agreement.
<PAGE 52>
Section 7.08 Counterparts. This Agreement may be
executed in any number of counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section 7.09 Severability. If any provision of this
Agreement or the application thereof to any person or
circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
Section 7.10 Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic
internal law (including the law of conflicts of law) of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their duly authorized officers as of
the day and year first above written.
PATRIOT BANK CORP.
By /s/ Joseph W. Major
Joseph W. Major,
President and
Chief Executive Officer
FIRST LEHIGH CORPORATION
By /s/ John H. McKeever
John H. McKeever,
Chairman of the Board and
Acting President
PAGE 53
EXHIBIT 1
FORM OF AFFILIATE LETTER
July 28, 1998
Patriot Bank Corp.
High and Hanover Streets
Pottstown, Pennsylvania 19464
Ladies and Gentlemen:
Patriot Bank Corp. ("Patriot") and First Lehigh Corporation
("FLC") desire to enter into an agreement dated July 28, 1998
("Agreement"), pursuant to which, subject to the terms and
conditions set forth therein, (a) a new Pennsylvania corporation
to be named Patriot Bank Corp. will be formed by Patriot and FLC
(the "Holding Company"), (b) shareholders of Patriot shall
receive shares of Holding Company common stock for shares of
common stock of Patriot outstanding on the closing date, and
(c) shareholders of FLC shall receive shares of Holding Company
common stock for shares of capital stock of FLC outstanding on
the closing date (the foregoing, collectively, referred to herein
as the "Consolidation").
Patriot has requested, as an inducement to its execution and
delivery to FLC of the Agreement, that the undersigned execute
and deliver to Patriot this Letter Agreement.
In consideration of the foregoing, each of the undersigned
hereby irrevocably:
(a) Agrees (i) to be present (in person or by proxy)
at all meetings of shareholders of FLC called to vote for
approval of the Agreement and the Consolidation so that all
shares of capital stock of FLC then owned by the undersigned will
be counted for the purpose of determining the presence of a
quorum at such meetings, and (ii) to vote or cause to be voted
all shares owned by the undersigned on any record date for any
meeting of shareholders of FLC called to vote on the
Consolidation in favor of approval and adoption of the Agreement
and the transactions contemplated thereby (including any
amendments or modifications of the terms thereof approved by the
Board of Directors of FLC).
(b) Agrees not to offer, sell, transfer or otherwise
dispose of any shares of common stock of the Holding Company
received in the Consolidation, except (i) at such time as a
registration statement under the Securities Act of 1933, as
amended ("Securities Act") covering sales of such Holding Company
common stock is effective and a prospectus is made available
<PAGE 54> under the Securities Act, (ii) within the limits, and
in accordance with the applicable provisions of, Rule 145(d)
under the Securities Act, or (iii) in a transaction which, in the
opinion of counsel satisfactory to the Holding Company or as
described in a "no-action" or interpretive letter from the staff
of the Securities and Exchange Commission ("SEC"), is not
required to be registered under the Securities Act; and
acknowledges and agrees that the Holding Company is under no
obligation to register the sale, transfer or other disposition of
the Holding Company common stock by the undersigned or on behalf
of the undersigned, or to take any other action necessary to make
an exemption from registration available;
(c) Agrees that neither FLC nor the Holding Company
shall be bound by any attempted sale of any shares of FLC capital
stock or Holding Company common stock, respectively, in violation
of this Agreement and FLC's and the Holding Company's transfer
agents shall be given appropriate stop transfer orders and shall
not be required to register any such attempted sale, unless the
sale has been effected in compliance with the terms of this
Letter Agreement; and further agrees that the certificate
representing shares of Holding Company common stock owned by the
undersigned may be endorsed with a restrictive legend consistent
with the terms of this Letter Agreement;
(d) Agrees to use reasonable efforts to cause the
provisions of subparagraph (b) hereof to be observed with respect
to shares of Holding Company common stock and FLC common stock
owned by (i) his or her spouse, (ii) any of his or her relatives
or relatives of his or her spouse occupying his or her home,
(iii) any trust or estate in which he or she, his or her spouse,
or any such relative owns at least a 10% beneficial interest or
of which any of them serves as trustee, executor or in any
similar capacity, and (iv) any corporation or other organization
in which the undersigned, any affiliate of the undersigned, his
or her spouse, or any such relative owns at least 10% of any
class of equity securities or of the equity interest;
(e) Represents that the undersigned has the capacity
to enter into this Letter Agreement and that it is a valid and
binding obligation enforceable against the undersigned in
accordance with its terms, subject to bankruptcy, insolvency and
<PAGE 55> other laws affecting creditors' rights and general
equitable principles.
_________________________
This Letter Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the
same Letter Agreement.
_________________________
This Letter Agreement shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
_________________________
The undersigned intend to be legally bound hereby.
Sincerely,
PAGE 56
EXHIBIT 2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement")
dated July 28, 1998, is by and between FIRST LEHIGH CORPORATION,
a Pennsylvania corporation ("FLC") and PATRIOT BANK CORP., a
Delaware corporation ("Patriot").
BACKGROUND
1. Patriot and FLC desire to enter into an Agreement
and Plan of Consolidation, dated July 28, 1998 (the "Agreement"),
providing, among other things, for the creation by Patriot and
FLC of a bank holding company which will issue shares of its
common stock to the shareholders of Patriot and FLC (the
"Consolidation").
2. As a condition to Patriot to enter into the
Agreement, FLC is granting to Patriot an option to purchase up to
that number of shares of common stock, par value $.01 per share
(the "Common Stock") of FLC as shall equal 19.9% of shares of
Common Stock of FLC issued and outstanding as of the date hereof,
on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual
covenants and agreements set forth herein, Patriot and FLC,
intending to be legally bound hereby, agree:
1. Grant of Option. FLC hereby grants to Patriot, on
the terms and conditions set forth herein, the option to purchase
(the "Option") up to 410,000 shares of Common Stock of FLC (as
adjusted as set forth herein, the "Option Shares") at a price per
share (as adjusted as set forth herein, the "Option Price") equal
to $[7.00], provided, however, that in no event shall the number
of Option Shares for which the Option is exercisable exceed 19.9%
of the issued and outstanding shares of FLC Common Stock without
giving effect to any shares subject to or issued pursuant to the
Option.
2. Exercise of Option.
(a) Provided that (i) Patriot shall not be, on
the date of exercise, in material breach of the agreements or
covenants contained in the Agreement or this Stock Option
Agreement, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United
States shall be in effect on the date of exercise, upon or after
the occurrence of a Triggering Event (as such term is hereinafter
defined) Patriot may exercise the Option, in whole or in part, at
<PAGE 57> any time or one or more times, from time to time;
provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of (A) the Effective
Date of the Consolidation, as provided in the Agreement,
(B) termination of the Agreement in accordance with the terms
thereof prior to the occurrence of a Triggering Event or a
Preliminary Triggering Event, other than a termination of the
Agreement pursuant to Section 6.01(d), unless in the case of
termination by FLC pursuant to Section 6.01(d), such termination
is as a result of a willful breach of the Agreement by Patriot (a
termination pursuant to Section 6.01(d), except a termination by
FLC as a result of a willful breach by Patriot, being referred to
herein as a "Default Termination"), (C) 18 months after the
termination of the Agreement by Patriot or FLC pursuant to a
Default Termination, and (D) 18 months after termination of the
Agreement (other than pursuant to a Default Termination)
following the occurrence of a Triggering Event or a Preliminary
Triggering Event; and provided, further, that any purchase of
shares upon exercise of the Option shall be subject to compliance
with applicable securities and banking laws. The rights set
forth in Section 3 hereof shall terminate when the right to
exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth above.
(b) As used herein, the term "Triggering Event"
means the occurrence of any of the following events:
(i) a person or group (as such terms are
defined in the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations
thereunder), other than Patriot or an affiliate of Patriot,
acquires beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of 25% or more of the
then outstanding shares of Common Stock (excluding any
shares eligible to be reported on Schedule 13G of the
Securities and Exchange Commission); or
(ii) a person or group, other than Patriot
or an affiliate of Patriot, enters into an agreement or
letter of intent or memorandum of understanding with FLC or
FLC shall have authorized, recommended or publicly proposed,
or publicly announced an intention to authorize, recommend
or propose, such an agreement or letter of intent or
memorandum of understanding, pursuant to which such person
or group or any affiliate of such person or group would
(i) merge or consolidate, or enter into any similar
transaction, with FLC, (ii) acquire all or substantially all
of the assets or liabilities of FLC or all or substantially
all of the assets or liabilities of First Lehigh Bank (or
any successor subsidiary), the wholly-owned subsidiary of
FLC ("First Lehigh Bank"), or (iii) acquire beneficial
ownership of securities representing, or the right to
acquire beneficial ownership or to vote securities
representing, 25% or more of the then outstanding shares of
<PAGE 58> Common Stock (excluding any shares eligible to be
reported on Schedule 13G of the Securities and Exchange
Commission) or the then outstanding shares of common stock
of First Lehigh Bank.
(c) As used herein, the term "Preliminary
Triggering Event" means the occurrence of any of the following
events:
(i) a person or group (as such terms are
defined in the Exchange Act and the rules and regulations
thereunder), other than Patriot or an affiliate of Patriot,
acquires beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of 10% or more of the
then outstanding shares of Common Stock (excluding any
shares eligible to be reported on Schedule 13G of the
Securities and Exchange Commission);
(ii) a person or group, other than Patriot
or an affiliate of Patriot, publicly announces a bona fide
proposal (including a written communication that is or
becomes the subject of public disclosure) for (i) any
merger, consolidation or acquisition of all or substantially
all the assets or liabilities of FLC or all or substantially
all the assets or liabilities of First Lehigh Bank, or any
other business combination involving FLC or First Lehigh
Bank, or (ii) a transaction involving the transfer of
beneficial ownership of securities representing, or the
right to acquire beneficial ownership or to vote securities
representing, 10% or more of the then outstanding shares of
Common Stock or the then outstanding shares of Common Stock
of First Lehigh Bank (collectively, a "Proposal"), and
thereafter, if such Proposal has not been Publicly Withdrawn
(as such term is hereinafter defined) at least 30 days prior
to the meeting of shareholders of FLC called to vote on the
Consolidation, FLC's shareholders fail to approve the
Consolidation by the vote required by applicable law at the
meeting of shareholders called for such purpose or such
meeting has been cancelled; or
(iii) the Board of Directors of FLC shall
(A) fail to recommend the Consolidation, (B) recommend an
Acquisition Transaction or (C) have withdrawn or modified in
a manner adverse to Patriot the recommendation of the Board
of Directors of FLC with respect to the Agreement and
thereafter FLC's shareholders fail to approve the
Consolidation by the vote required by law at the meeting of
shareholders called for such purpose or such meeting is not
scheduled or is cancelled without the written consent of
Patriot; or
(iv) a person or group, other than Patriot
or an affiliate of Patriot, makes a bona fide Proposal and
thereafter, but before such Proposal has been Publicly
<PAGE 59> Withdrawn, FLC shall have breached any
representation, warranty, covenant or obligation contained
in the Agreement and such breach would entitle Patriot to
terminate the Agreement under Section 6.01(d) thereof
(without regard to the cure period provided for therein
unless such cure is promptly effected without jeopardizing
consummation of the Consolidation pursuant to the
Agreement).
If more than one of the transactions giving rise to a Triggering
Event or a Preliminary Triggering Event under this Section 2 is
undertaken or effected, then all such transactions shall give
rise only to one Triggering Event or Preliminary Triggering
Event, as applicable, which Triggering Event or Preliminary
Triggering Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2
shall mean an unconditional bona fide withdrawal of the Proposal
coupled with a public announcement of no further interest in
pursuing such Proposal or in acquiring any controlling influence
over FLC or in soliciting or inducing any other person (other
than Patriot or an affiliate of Patriot) to do so.
Notwithstanding the foregoing, the obligation of FLC to
issue Option Shares upon exercise of the Option shall be deferred
(but shall not terminate): (i) until the receipt of all required
governmental or regulatory approvals or consents necessary for
FLC to issue the Option Shares or Patriot to exercise the Option,
or until the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other
order, decree or ruling issued by any federal or state court of
competent jurisdiction is in effect which prohibits the sale or
delivery of the Option Shares, and, in each case, notwithstanding
any provision to the contrary set forth herein, the Option shall
not expire or otherwise terminate with respect to the Option
Shares subject to any prior exercise.
FLC shall notify Patriot promptly in writing of the
occurrence of any Triggering Event known to it, it being
understood that the giving of such notice by FLC shall not be a
condition to the right of Patriot to exercise the Option. FLC
will not take any action which would have the effect of
preventing or disabling FLC from delivering the Option Shares to
Patriot upon exercise of the Option or otherwise performing its
obligations under this Stock Option Agreement, except to the
extent required by applicable securities and banking laws and
regulations. In the event Patriot wishes to exercise the Option,
Patriot shall send a written notice to FLC (the date of which is
hereinafter referred to as the "Notice Date") specifying the
total number of Option Shares it wishes to purchase and a place
and date between two and ten business days inclusive from the
Notice Date for the closing of such a purchase (a "Closing");
provided, however, that a Closing shall not occur prior to two
<PAGE 60> days after the later of receipt of any necessary
regulatory approvals or the expiration of any legally required
notice or waiting period, if any.
3. Repurchase of Option by FLC.
(a) Subject to the last sentence of Section 2(a),
at the request of Patriot at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 3(d)) and
ending 18 months immediately thereafter, FLC shall repurchase
from Patriot (x) the Option and (y) all shares of Common Stock
purchased by Patriot pursuant hereto with respect to which
Patriot then has beneficial ownership. The date on which Patriot
exercises its rights under this Section 3 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price
(the "Section 3 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by
Patriot for any shares of Common Stock acquired pursuant to
the Option with respect to which Patriot then has beneficial
ownership;
(ii) the excess, if any, of (x) the
Applicable Price (as defined below) for each share of Common
Stock over (y) the Option Price (subject to adjustment
pursuant to Section 6), multiplied by the number of shares
of Common Stock with respect to which the Option has not
been exercised; and
(iii) the excess, if any, of the Applicable
Price over the Option Price (subject to adjustment pursuant
to Section 6) paid (or, in the case of Option Shares with
respect to which the Option has been exercised, but the
Closing has not occurred, payable) by Patriot for each share
of Common Stock with respect to which the Option has been
exercised and with respect to which Patriot then has
beneficial ownership, multiplied by the number of such
shares.
Section 3, FLC shall, within ten (10) business days after the
Request Date, pay the Section 3 Repurchase Consideration to
Patriot in immediately available funds, and contemporaneously
with such payment, Patriot shall surrender to FLC the Option and
the certificate evidencing the shares of Common Stock purchased
thereunder with respect to which Patriot then has beneficial
ownership, and Patriot shall warrant that it has sole record and
beneficial ownership of such shares, and that the same are then
free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or approval of any banking
agency or department of any federal or state government,
including without limitation the FRB, the PDB, the FDIC, or the
respective staffs thereof (the "Regulatory Authority"), is
<PAGE 61> required in connection with the payment of all or any
portion of the Section 3 Repurchase Consideration, Patriot shall
have the ongoing option to revoke its request for repurchase
pursuant to Section 3, in whole or in part, or to require that
FLC deliver from time to time that portion of the Section 3
Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall
cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval), in which
case the ten (10) business day period of time that would
otherwise run pursuant to the preceding sentence for the payment
of the portion of the Section 3 Repurchase Consideration shall
run instead from the date on which, as the case may be, any
required notification period has expired or been terminated or
such approval has been obtained and, in either event, any
requisite waiting period shall have passed. If any Regulatory
Authority disapproves of any part of FLC's proposed repurchase
pursuant to this Section 3, FLC shall promptly give notice of
such fact to FLC. If any Regulatory Authority prohibits the
repurchase pursuant to this Section 3, FLC shall promptly give
notice of such fact to Patriot. If any Regulatory Authority
prohibits the repurchase in part but not in whole, then Patriot
shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such Regulatory Authority,
determine whether the repurchase should apply to the Option
and/or Option Shares and to what extent to each, and Patriot
shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at
the Request Date less the sum of the number of shares covered by
the Option in respect of which payment has been made pursuant to
Section 3(a)(ii) and the number of shares covered by the portion
of the Option (if any) that has been repurchased. Patriot shall
notify FLC of its determination under the preceding sentence
within five (5) business days of receipt of notice of disapproval
of the repurchase.
(c) For purposes of this Agreement, the
"Applicable Price" means the highest of (i) the highest price per
share of Common Stock paid for any such share by the person or
groups described in Section 3(d)(i), (ii) the price per share of
Common Stock received by a holder of Common Stock in connection
with any merger or other business combination transaction
described in Section 3(d)(ii), (iii) or (iv), or (iii) the
highest closing sales price per share of Common Stock quoted on
the Nasdaq Stock Market or OTC Bulletin Board during the 40
business days preceding the Request Date; provided, however, that
in the event of a sale of less than all of FLC's assets, the
Applicable Price shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining
assets of FLC as determined by a nationally-recognized investment
banking firm selected by Patriot, divided by the number of shares
of Common Stock outstanding at the time of such sale. If the
consideration to be offered, paid or received pursuant to either
<PAGE 62> of the foregoing clauses (i) or (ii) shall be other
than in cash, the value of such consideration shall be determined
in good faith by an independent nationally-recognized investment
banking firm selected by Patriot and reasonably acceptable to
FLC, which determination shall be conclusive for all purposes of
this Agreement.
(d) As used herein, a Repurchase Event shall
occur if (i) any person or group (as such terms are defined in
the Exchange Act and the rules and regulations thereunder), other
than Patriot or an affiliate of FLC, acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of, or the right to acquire beneficial ownership of, 25% or
more of the then-outstanding shares of Common Stock, (ii) FLC
shall have merged or consolidated with any person, other than
Patriot or an affiliate of Patriot, and shall not be the
surviving or continuing corporation of such merger or
consolidation, (iii) any person, other than Patriot or an
affiliate of Patriot, shall have merged into FLC and FLC shall be
the surviving corporation, but, in connection with such merger,
the then-outstanding shares of Common Stock have been changed
into or exchanged for stock or other securities of FLC or any
other person or cash or any other property or the outstanding
shares of Common Stock immediately prior to such merger shall
after such merger represent less than 50% of the outstanding
shares and share equivalents of the surviving corporation or
(iv) FLC shall have sold or otherwise transferred more than 25%
of its consolidated assets to any person, other than Patriot or
an affiliate of Patriot.
4. Payment and Delivery of Certificates. At any
Closing hereunder, (a) Patriot will make payment to FLC of the
aggregate price for the Option Shares so purchased by wire
transfer of immediately available funds to an account designated
by FLC, (b) FLC will deliver to Patriot a stock certificate or
certificates representing the number of Option Shares so
purchased, registered in the name of Patriot or its designee, in
such denominations as were specified by Patriot in its notice of
exercise, and (c) Patriot will pay any transfer or other taxes
required by reason of the issuance of the Option Shares so
purchased.
A legend will be placed on each stock certificate
evidencing Option Shares issued pursuant to this Stock Option
Agreement, which legend will read substantially as follows:
"The shares of stock evidenced by this
certificate have not been the subject of a registration
statement filed under the Securities Act of 1933, as
amended (the "Act"), and declared effective by the
Securities and Exchange Commission. These shares may
not be sold, transferred or otherwise disposed of prior
to such time unless First Lehigh Corporation receives
an opinion of counsel acceptable to it stating that an
<PAGE 63> exemption from the registration provisions of
the Act is available for such transfer."
5. Registration Rights. Upon or after the occurrence
of a Triggering Event and upon receipt of a written request from
Patriot, FLC shall prepare and file as soon as practicable a
registration statement under the Securities Act of 1933 (the
"Securities Act") with the Securities and Exchange Commission
covering the Option and such number of Option Shares as Patriot
shall specify in its request, and FLC shall use its best efforts
to cause such registration statement to be declared effective in
order to permit the sale or other disposition of the Option and
the Option Shares, provided that Patriot shall in no event have
the right to have more than one such registration statement
become effective, and provided further that FLC shall not be
required to prepare and file any such registration statement in
connection with any proposed sale with respect to which counsel
to FLC delivers to FLC and to Patriot its opinion to the effect
that no such filing is required under applicable laws and
regulations with respect to such sale or disposition; provided
further, however, that FLC may delay any registration of Option
Shares above for a period not exceeding 90 days in the event that
FLC shall in good faith determine that any such registration
would adversely affect an offering or contemplated offering of
securities by FLC. Patriot shall provide all information
reasonably requested by FLC for inclusion in any registration
statement to be filed hereunder. In connection with such filing,
FLC shall use its reasonable best efforts to cause to be
delivered to Patriot such certificates, opinions, accountant's
letters and other documents as Patriot shall reasonably request
and as are customarily provided in connection with registration
of securities under the Securities Act. FLC shall provide to
Patriot such number of copies of the preliminary prospectus and
final prospectus and any amendments and supplements thereto as
Patriot may reasonably request.
All reasonable expenses incurred by FLC in complying
with the provisions of this Section 5, including, without
limitation, all registration and filing fees, reasonable printing
expenses, reasonable fees and disbursements of counsel for FLC
and blue sky fees and expenses, shall be paid by FLC.
Underwriting discounts and commissions to brokers and dealers
relating to the Option Shares, fees and disbursements of counsel
to Patriot and any other expenses incurred by Patriot in
connection with such filing shall be borne by FLC. In connection
with such filing, FLC shall indemnify and hold harmless Patriot
against any losses, claims, damages or liabilities, joint or
several, to which Patriot may become subject, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
preliminary or final registration statement or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
<PAGE 64> required to be stated therein or necessary to make the
statements therein not misleading; and FLC will reimburse Patriot
for any legal or other expense reasonably incurred by Patriot in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that FLC will not
be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in such preliminary or final registration statement
or such amendment or supplement thereto in reliance upon and in
conformity with written information furnished by or on behalf of
Patriot specifically for use in the preparation thereof. Patriot
will indemnify and hold harmless FLC to the same extent as set
forth in the immediately preceding sentence but only with
reference to written information furnished by or on behalf of
Patriot for use in the preparation of such preliminary or final
registration statement or such amendment or supplement thereto;
and Patriot will reimburse FLC for any legal or other expense
reasonably incurred by FLC in connection with investigating or
defending any such loss, claim, damage, liability or action.
Notwithstanding anything to the contrary contained herein, no
indemnifying party shall be liable for any settlement effected
without its prior written consent.
6. Adjustment Upon Changes in Capitalization. In the
event of any change in the Common Stock by reason of stock
dividends, split-ups, recapitalizations, combinations,
conversions, divisions, exchanges of shares or the like, then the
number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
7. Filings and Consents. Each of Patriot and FLC
will use its reasonable best efforts to make all filings with,
and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions
contemplated by this Stock Option Agreement. Within 10 days from
the date hereof, Patriot shall file a report of beneficial
ownership on Form 13D with the Securities and Exchange Commission
under the Exchange Act which discloses the rights of Patriot
hereunder.
8. Representations and Warranties of FLC. FLC hereby
represents and warrants to Patriot as follows:
(a) Due Authorization. FLC has full corporate
power and authority to execute, deliver and perform this Stock
Option Agreement and all corporate action necessary for
execution, delivery and performance of this Stock Option
Agreement has been duly taken by FLC. This Stock Option
Agreement constitutes a legal, valid and binding obligation of
FLC, enforceable against FLC in accordance with its terms (except
as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws
<PAGE 65> of general applicability relating to or affecting
creditors' rights or by general equity principles).
(b) Authorized Shares. FLC has taken all
necessary corporate action to authorize and reserve for issuance
all shares of Common Stock that may be issued pursuant to any
exercise of the Option.
9. Representations and Warranties of Patriot.
Patriot hereby represents and warrants to FLC that Patriot has
full corporate power and authority to execute, deliver and
perform this Stock Option Agreement and all corporate action
necessary for execution, delivery and performance of this Stock
Option Agreement has been duly taken by Patriot. This Stock
Option Agreement constitutes a legal, valid and binding
obligation of Patriot, enforceable against Patriot in accordance
with its terms (except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
10. Specific Performance. The parties hereto
acknowledge that damages would be an inadequate remedy for a
breach of this Stock Option Agreement and that the obligations of
the parties hereto shall be specifically enforceable.
11. Entire Agreement. This Stock Option Agreement and
the Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, among
the parties or any of them with respect to the subject matter
hereof.
12. Assignment or Transfer. Patriot may not sell,
assign or otherwise transfer its rights and obligations
hereunder, in whole or in part, to any person or group of persons
other than to a wholly-owned subsidiary of Patriot. Patriot
represents that it is acquiring the Option for Patriot's own
account and not with a view to, or for sale in connection with,
any distribution of the Option or the Option Shares. Patriot is
aware that neither the Option nor the Option Shares is the
subject of a registration statement filed with, and declared
effective by, the Securities and Exchange Commission pursuant to
Section 5 of the Securities Act, but instead each is being
offered in reliance upon the exemption from the registration
requirement provided by Section 4(2) thereof and the
representations and warranties made by Patriot in connection
therewith.
13. Amendment of Stock Option Agreement. By mutual
consent of the parties hereto, this Stock Option Agreement may be
amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation
<PAGE 66> of any governmental authority or any applicable order
of any court or for any other purpose.
14. Validity. The invalidity or unenforceability of
any provision of this Stock Option Agreement shall not affect the
validity or enforceability of any other provisions of this Stock
Option Agreement, which shall remain in full force and effect.
15. Notices. All notices, requests, consents and
other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when
delivered personally, by telegram or telecopy, or by registered
or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
(i) If to FLC, to:
First Lehigh Corporation
1620 Pond Road
Allentown, PA 18104
Attention: Wilbur R. Roat, Director
Telecopy No.: (610) 398-6693
with a copy to:
Duane, Morris & Heckscher, LLP
4200 One Liberty Place
Philadelphia, Pennsylvania 19103-9396
Attention: Kathleen M. Shay, Esquire
Telecopy No.: (215) 979-1020
(ii) If to Patriot, to:
Patriot Bank Corp.
High and Hanover Street
Pottstown, Pennsylvania 19464
Attention: Joseph W. Major, President
and Chief Executive Officer
Telecopy No.: (610) 323-0914
<PAGE 67>
with copies to:
Stevens & Lee
One Glenhardie Corporate Center
Suite 202
1275 Drummers Lane
P.O. Box 236
Wayne, PA 19087
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 687-1384
or to such other address as the person to whom notice is to be
given may have previously furnished to the others in writing in
the manner set forth above (provided that notice of any change of
address shall be effective only upon receipt thereof).
16. Governing Law. This Stock Option Agreement shall
be governed by and construed in accordance with the domestic
internal law (but not the law of conflicts of law) of the
Commonwealth of Pennsylvania.
17. Captions. The captions in this Stock Option
Agreement are inserted for convenience and reference purposes,
and shall not limit or otherwise affect any of the terms or
provisions hereof.
18. Waivers and Extensions. The parties hereto may,
by mutual written consent, extend the time for performance of any
of the obligations or acts of either party hereto. Each party
may waive in writing (i) compliance with any of the covenants of
the other party contained in this Stock Option Agreement and/or
(ii) the other party's performance of any of its obligations set
forth in this Stock Option Agreement.
19. Parties in Interest. This Stock Option Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and, nothing in this Stock Option Agreement,
express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by
reason of this Stock Option Agreement.
20. Counterparts. This Stock Option Agreement may be
executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Expenses. Except as otherwise provided herein,
all costs and expenses incurred by the parties hereto in
connection with the transactions contemplated by this Stock
Option Agreement or the Option shall be paid by the party
incurring such cost or expense.
<PAGE 68>
22. Defined Terms. Capitalized terms which are used
but not defined herein shall have the meanings ascribed to such
terms in the Agreement.
IN WITNESS WHEREOF, each of the parties hereto,
pursuant to resolutions adopted by its Board of Directors, has
caused this Stock Option Agreement to be executed by its duly
authorized officer as of the day and year first above written.
FIRST LEHIGH CORPORATION
By /s/ John H. McKeever
John H. McKeever, Chairman
of the Board and Acting President
PATRIOT BANK CORP.
By /s/ Joseph W. Major
Joseph W. Major,
President and Chief
Executive Officer
PAGE 69
EXHIBIT 3
STANDSTILL AGREEMENT
Agreement made this 28th day of July, 1998 by and between Patriot
Bank Corp., a Delaware corporation and registered bank holding company
("Patriot"), having its principal place of business at High and
Hanover Streets, Pottstown, Pennsylvania 19464 and James L. Leuthe, an
individual residing at 3514 Eton Road, Allentown, Pennsylvania 18104.
Background
Patriot and First Lehigh Corporation, a Pennsylvania corporation
and registered bank holding company ("FLC") have entered into an
Agreement and Plan of Consolidation (the "Agreement") pursuant to
which (i) FLC and Patriot will consolidate into a new Pennsylvania
corporation (the "Holding Company"), to be named Patriot Bank Corp.
(the "Consolidation") and, (ii) shareholders of FLC would receive
(A) shares of Holding Company common stock, no par value per share
("Holding Company Common Stock") in exchange for each share of issued
and outstanding FLC common stock, par value $.01 per share ("FLC
Common Stock"), (B) shares of Holding Company Common Stock in exchange
for each issued and outstanding share of FLC Senior Preferred Stock
(the "FLC Senior Preferred Stock") and (C) shares of Holding Company
Common Stock in exchange for each issued and outstanding share of FLC
Series A Preferred Stock (the "FLC Series A Preferred Stock" and
together with the FLC Common Stock and the FLC Senior Preferred Stock,
the "FLC Capital Stock") all as more particularly set forth in the
Agreement.
Mr. Leuthe is the Chairman of FLC and the owner of a substantial
equity interest in FLC.
As a condition of Patriot's willingness to execute the Agreement,
Patriot has required Mr. Leuthe to enter into this Standstill
Agreement pursuant to which Mr. Leuthe will agree to certain
restrictions on the voting and disposition of his (i) FLC Capital
Stock prior to the Consolidation and (ii) Holding Company Common Stock
after the Consolidation, and certain other conditions and
restrictions, and Mr. Leuthe has agreed to accept such conditions and
restrictions.
Agreement
The parties hereto, intending to be legally bound, hereby agree
as follows:
1. Representations, Warranties and Covenants of Mr. Leuthe.
Mr. Leuthe represents, warrants and covenants as follows:
<PAGE 70>
(a) Mr. Leuthe has full power, right and authority to enter
into this Agreement and to perform all transactions provided for in
this Agreement.
(b) Except for shares of FLC Capital Stock pledged to
Citizens National Bank of Slatington to secure a loan in the
approximate principal amount of $600,000 and shares of FLC Capital
Stock pledged to Royal Bank of Pennsylvania to secure a loan in the
approximate principal amount of $350,000, Mr. Leuthe owns free and
clear of all liens and restrictions (except such restrictions upon
transfer as may arise under federal or state securities laws as a
result of Mr. Leuthe's status as an "affiliate" of FLC and
restrictions imposed by the Federal Deposit Insurance Corporation
("FDIC"), the Board of Governors of the Federal Reserve System (the
"FRB") or the Pennsylvania Department of Banking ("PDB")) including
without limitation any restrictions set forth in any agreement to
which he may be a party, the following shares of FLC Capital Stock:
(i) seven hundred thousand (700,000) shares of FLC
Common Stock;
(ii) no shares of FLC Senior Preferred Stock;
(iii) four hundred thousand (400,000) shares of FLC
Series A Preferred Stock.; and
(iv) no shares of Patriot common stock, no par value
per share ("Patriot Common Stock").
In addition, Mr. Leuthe represents that he holds no options to acquire
shares of FLC Common Stock and holds no other options to acquire FLC
Capital Stock.
(c) Subject to the terms of the FDIC Order (as hereinafter
defined), Mr. Leuthe, in his capacity as Chairman of FLC and in his
capacity as a shareholder of FLC Capital Stock shall use his best
efforts to cause the transactions provided for in the Agreement to be
completed. Mr. Leuthe, as a shareholder, shall be present (in person
or by proxy) at all shareholder meetings FLC holds and his FLC Capital
Stock may be counted for the purposes of determining the presence of a
quorum at such meetings. Moreover, subject to the terms of the FDIC
Order, Mr. Leuthe, as a shareholder, shall vote, or cause to be voted,
all FLC Capital Stock beneficially owned by him and having the right
to vote thereon to approve the Agreement at the special meeting of
shareholders of FLC to be held to consider such approval and shall not
vote any FLC Capital Stock in favor of any transaction with any person
other than Patriot or aid, abet or otherwise lend his support to any
other person in connection with any transaction or in connection with
a tender offer or exchange offer. In addition, Mr. Leuthe shall
disclose, or permit Patriot and FLC to disclose that he has entered
into this Standstill Agreement and that he supports the Consolidation
and recommends a vote in favor of the Consolidation.
<PAGE 71>
(d) Prior to the completion of the Consolidation,
Mr. Leuthe shall not sell, transfer or otherwise dispose of, or permit
the sale, transfer or other disposition of any FLC Capital Stock.
During such period, Mr. Leuthe shall not engage in any negotiations or
initiate discussions with any other party with respect to any sale,
transfer or other disposition of any FLC Capital Stock, and shall not
vote, or permit to be voted, any FLC Capital Stock in favor of any
merger, consolidation, sale of assets, stock or similar transactions
involving FLC or its subsidiary with any party other than Patriot or a
subsidiary of Patriot.
(e) Mr. Leuthe shall file on a timely basis an amendment to
his report on Form 13-D with the Securities and Exchange Commission
pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), with respect to the transactions provided for herein
and shall provide Patriot with a copy thereof prior to its filing.
2. Representation and Warranties of Patriot.
Patriot represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full power, right and authority to enter
into this Standstill Agreement and to perform all transactions
provided for in this Standstill Agreement. The execution, delivery
and performance of this Standstill Agreement has been duly authorized
by all necessary corporate or other action of Patriot.
3. Covenants of Mr. Leuthe.
Prior to June 30, 2013, and subject to the further provisions
hereof:
(a) Except as provided pursuant to the Agreement, neither
Mr. Leuthe nor any corporation, entity or other affiliate controlled
by Mr. Leuthe (collectively, the "Leuthe Group"), will, directly or
indirectly, acquire any FLC Capital Stock, Patriot Common Stock or
Holding Company Common Stock (except by way of stock dividends or
other distributions or offerings made available to holders of FLC
Capital Stock, Patriot Common Stock or Holding Company Common Stock
generally).
(b) Mr. Leuthe shall take such actions as may be required
so that all Holding Company Common Stock owned by a member of the
Leuthe Group are voted for nominees to the Board of Directors of the
Holding Company and, unless the Holding Company otherwise consents in
writing, on all other matters to be voted on by the holders of Holding
Company Common Stock in the manner directed by the Holding Company.
The members of the Leuthe Group, as holders of Holding Company Common
Stock, shall be present, in person or by proxy at all meetings of
shareholders of the Holding Company so that all Holding Company Common
Stock beneficially owned by them may be counted for the purpose of
determining the presence of a quorum at such meetings.
<PAGE 72>
(c) No member of the Leuthe Group shall deposit any Holding
Company Common Stock in a voting trust or subject any Holding Company
Common Stock to any arrangement or agreement with respect to the
voting of such Holding Company Common Stock, except as may otherwise
be required by the Federal Deposit Insurance Corporation ("FDIC") or
the terms of this Standstill Agreement.
(d) No member of the Leuthe Group shall solicit proxies or
become a "participant" in a "solicitation" (as such terms are defined
in Regulation 14A under the Exchange Act) in opposition to the
recommendation of the majority of the directors of the Holding Company
with respect to any matter.
(e) No member of the Leuthe Group shall join a partnership,
limited partnership, syndicate or other group, or otherwise act in
concert with any other person, for the purpose of acquiring, holding,
voting or disposing of Holding Company Common Stock, or otherwise
become a "person" within the meaning of Section 13(d)(3) of the
Exchange Act (in each case other than solely with members of the
Leuthe Group).
(f) Subject to paragraph 4(e), no member of the Leuthe
Group shall, directly or indirectly, offer, sell or transfer any
Holding Company Common Stock without first offering Patriot a right of
first refusal in the manner provided in paragraph 4, except
(i) pursuant to a bona fide public offering registered under the
Securities Act of 1933, as amended (the "Act") (provided that no sales
of Holding Company Common Stock are made to any person or related
group of persons who would immediately thereafter, to the knowledge of
any member of the Leuthe Group, own or have the right to acquire
Holding Company Common Stock representing more than 1% of the total
combined voting power of all Holding Company Common Stock then
outstanding), and (ii) as the result of any pledge or hypothecation to
a bona fide broker or financial institution to secure a bona fide
loan, or the foreclosure of any lien or encumbrance which may be
placed upon any Holding Company Common Stock (whether voluntarily or
involuntarily).
(g) Notwithstanding anything contained herein to the
contrary, for the entire term of this Standstill Agreement, Mr. Leuthe
(i) hereby grants, and directs any party who acts as a record holder
of FLC Capital Stock for Mr. Leuthe to grant, to the Board of
Directors of Patriot an irrevocable proxy in the form attached hereto
as Exhibit A to vote all shares of FLC Capital Stock at any special or
regular meeting of shareholders of FLC and (ii) upon completion of the
Consolidation, will grant, and will direct any party who acts as a
record holder for Mr. Leuthe to grant, to the Board of Directors of
the Holding Company an irrevocable proxy in the form attached hereto
as Exhibit B to vote all shares of Holding Company Common Stock at any
special or regular meeting of shareholders of the Holding Company.
Each such proxy, in consideration of the Agreement and the benefit
conferred upon Mr. Leuthe thereby, shall be deemed coupled with an
interest. In the event that the terms and provisions of this
paragraph 3(g) are not complied with by any member of the Leuthe Group
<PAGE 73> or any party who acts as a record holder of FLC Capital
Stock on behalf of any member of the Leuthe Group, then, in addition
to any remedy, the Holding Company may have under section 7,
Mr. Leuthe, upon written demand by the Holding Company, shall
immediately contribute or cause to be contributed all Holding Company
Common Stock beneficially owned by Mr. Leuthe to a voting trust, the
trustee of which will be designated by the Holding Company.
(h) Mr. Leuthe shall transfer no shares of FLC Capital
Stock to a broker to be held in street name unless the proposed broker
shall be approved by Patriot or the Holding Company, as the case may
be, and such broker, prior to any transfer shall (A) execute a proxy
in favor of the Board of Directors of Patriot or the Holding Company,
as the case may be, and (B) agree in writing to provide to Patriot or
the Holding Company, as the case may be, copies of all statements
delivered to Mr. Leuthe and all trade confirmations delivered to
Mr. Leuthe relating to FLC Capital Stock or Holding Company Common
Stock.
4. Right of First Refusal.
To the extent required by paragraph 3(f), any member of the
Leuthe Group, prior to making any offer to sell or transfer Holding
Company Common Stock, shall give the Holding Company the opportunity
to purchase such Holding Company Common Stock in the following manner:
(a) Any member of the Leuthe Group intending to make such
an offer, sale or transfer shall give notice (the "Transfer Notice")
to the Holding Company in writing of such intention, specifying the
number of shares of Holding Company Common Stock proposed to be
disposed of and certifying in writing that such transfer will be an
open market sale through a broker acceptable to the Holding Company.
(b) The Holding Company shall have the right, exercisable
by written notice given by the Holding Company to the party which gave
the Transfer Notice within fifteen (15) business days after receipt of
such Transfer Notice to purchase (or to cause a corporation, entity,
person or group designated by the Holding Company to purchase) all,
but not a part of, the Holding Company Common Stock specified in such
Transfer Notice for cash at the mean between the high bid and low
asked price for the Holding Company Common Stock on the Nasdaq Stock
Market as of the date of the Transfer Notice.
(c) If the Holding Company exercises its right of first
refusal hereunder, the closing of the purchase of the Holding Company
Common Stock with respect to which such right has been exercised shall
take place within thirty (30) calendar days (or if approval of such
purchase is required by the Holding Company shareholders or any
regulatory authority as required by law or pursuant to any stock
exchange rule or policy, within ninety (90) calendar days) after the
Holding Company gives notice of such exercise. Upon exercise of its
right of first refusal, the Holding Company shall be legally obligated
to consummate the purchase contemplated thereby and shall use its best
efforts to secure all approvals required in connection therewith.
<PAGE 74>
(d) If the Holding Company does not exercise its right of
first refusal hereunder within the time specified for such exercise,
the party giving the Transfer Notice shall be free during the period
of ninety (90) calendar days following the expiration of such time for
exercise to sell the Holding Company Common Stock specified in such
Transfer Notice in an open market sale through a broker acceptable to
the Holding Company and not knowingly to an affiliate provided the
party giving such Transfer Notice gives written direction to the
broker completing the sale to provide the Holding Company with a copy
of any trade confirmation.
(e) Notwithstanding the foregoing, this Section 4 shall not
be applicable to any sale of shares of Holding Company Common Stock by
the Leuthe Group in an amount not to exceed 20,000 shares per calendar
quarter if each sale or sales are made in open market transactions
through a broker designated by the Holding Company and such broker
agrees to give to the Holding Company notice of any such sale.
5. FDIC Agreement.
The parties acknowledge that Mr. Leuthe is the subject of an
order of the FDIC dated June 26, 1998 (the "FDIC Order") that affects
the voting and disposition of FLC Capital Stock and Holding Company
Common Stock. Mr. Leuthe acknowledges and agrees that the provisions
of this Agreement are in addition to, and not in lieu of the
provisions of the FDIC order and Mr. Leuthe shall use his best efforts
to obtain the consent of the FDIC to the terms of this Standstill
Agreement.
6. Waiver of Indemnification.
Mr. Leuthe hereby waives any rights he may have under the
articles of incorporation or bylaws of FLC, the certificate of
incorporation or bylaws of Patriot, the articles of incorporation or
bylaws of the Holding Company, the Agreement, the laws of the State of
Delaware, the laws of the Commonwealth of Pennsylvania or any federal
law to any indemnification against any action, claim or liability
arising out of, or as a result of his position as an officer or
director of FLC other than indemnification against any action, claim
or liability arising solely out of the approval of the Agreement and
the completion of the transactions contemplated thereby with respect
to which Mr. Leuthe shall be entitled to indemnification as, and to
the same extent as, set forth in the Agreement. Mr. Leuthe also
hereby waives any right to advancement of expenses or any right to
common law contribution with respect to any action, claim or liability
as to which he has waived indemnification.
<PAGE 75>
7. Escrow.
(a) Notwithstanding anything contained herein to the
contrary or in the Agreement, upon completion of the Consolidation,
Mr. Leuthe shall deposit into escrow pursuant to a separate escrow
agreement to be executed on or before the closing of the Consolidation
(the "Escrow Agreement") by and among Patriot, Mr. Leuthe and an
independent escrow agent determined by Patriot (the "Escrow Agent"),
an amount of Holding Company Common Stock, cash or other securities
equal to (i) $430,000 to secure any obligation now owed or hereafter
determined by the FDIC or any other state or federal regulatory
authority to be owed by Mr. Leuthe to FLC, its subsidiary, or their
successors and assigns as a result of a determination that Mr. Leuthe
was not entitled to indemnification or advancement of expenses in
connection with proceedings related to the FDIC Order or any action or
proceeding brought against Mr. Leuthe as a result of any breach of
fiduciary or other duty, or any other tort or breach of contract
committed by Mr. Leuthe (the "Restitution Fund") and (ii) $700,000 of
Holding Company Common Stock, cash or other securities to secure and
Mr. Leuthe's obligation under this Standstill Agreement (the
"Collateral Fund"). Except as set forth in paragraphs (b) and (c)
below, Mr. Leuthe shall at all times maintain the balance held in
escrow for these purposes at $1,130,000 million or more.
(b) Funds shall be released from the Restitution Fund in
accordance with this Standstill Agreement and the Escrow Agreement
upon the later of (i) five (5) years from the date hereof, in which
case the entire amount of the Restitution Fund shall be returned to
Mr. Leuthe, or (ii) the issuance of a final, binding, unappealable
order by the FDIC or a court of competent jurisdiction either (A) that
no amount is due and owing by Mr. Leuthe to FLC, its subsidiary or its
successors and assign, or (B) of the amount due and owing by
Mr. Leuthe to FLC, its subsidiary or their successors and assigns. If
an amount is determined to be due and owing by Mr. Leuthe and such
amount equals or exceeds the Restitution Fund, the Escrow Agent shall
pay or deliver the entire Restitution Fund to the Holding Company. If
the amount determined to be due and owing by Mr. Leuthe is less than
the amount escrowed therefor, the Escrow Agent shall pay or deliver
from the Restitution Fund the amount due and owing to the Holding
Company and the difference of the Restitution Fund shall be paid or
delivered to Mr. Leuthe. Notwithstanding the foregoing, in the event
FLC (or the Holding Company as successor to FLC) receives any
insurance or other proceeds from whatever source (including any claim
for malpractice against FLC's counsel) as a result of its claim that
payments made to Mr. Leuthe by FLC are covered under FLC's directors
and officers liability policy, the Restitution Fund shall be reduced,
and the Escrow Agent shall pay from the Restitution Fund to
Mr. Leuthe, an amount equal to such insurance proceeds.
(c) Upon receipt of a certificate from Mr. Leuthe
accompanied by any relevant trade confirmation, funds shall be
released from the Collateral Fund as follows:
<PAGE 76>
Number of Holding
Company Shares
Beneficially Owned by Required Amount of
the Leuthe Group Collateral Fund
400,000 or more $700,000
300,000 - 399,000 600,000
200,000 - 299,000 500,000
100,000 - 199,000 400,000
25,000 - 99,000 350,000
Less than 25,000 0
8. Miscellaneous.
(a) Mr. Leuthe on the one hand, and Patriot, on the other,
acknowledge and agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the holding Company, shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of
this Standstill Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
thereof having jurisdiction, in addition to any other remedy to which
Patriot or the Holding Company may be entitled at law or equity.
(b) As used herein, the term "affiliate" includes parent,
spouse, sibling, any child, grandchild, mother-in-law, father-in-law
or any spouse of any of the foregoing and otherwise shall have the
meaning set forth in Rule 12b-2 under the Exchange Act and the term
"person" shall mean any individual, partnership, corporation, limited
liability company, trust or other entity.
(c) This Standstill Agreement contains the entire
understanding of the parties with respect to the transactions
contemplated hereby and this Standstill Agreement may be amended only
by an agreement in writing executed by the parties hereto.
(d) Descriptive headings are for convenience only and shall
not control or affect the meaning or construction of any provision of
this Standstill Agreement.
(e) For the convenience of the parties, any number of
counterparts of this Standstill Agreement may be executed by the
parties hereto and each such executed counterpart shall be, and shall
be deemed to be, an original instrument.
(f) All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be
validly given or made, if in writing delivered personally or
registered mail, postage prepaid, if to:
<PAGE 77>
Patriot or the Holding Company:
Patriot Bank Corp.
High and Hanover Streets
Pottstown, PA 19464
Attention: Joseph W. Major, President
Copy To:
Jeffrey P. Waldron, Esquire
Stevens & Lee
1275 Drummers Lane
P.O. Box 236
Wayne, PA 19087-0236
Mr. Leuthe:
James L. Leuthe
3514 Eton Road
Allentown, Pennsylvania 18104
Copy To:
Duane, Morris & Heckscher
4200 Liberty Place
Philadelphia, Pennsylvania 19103
Attention: A. John May, Esquire
(g) This Standstill Agreement shall be binding upon the
parties hereto and their respective heirs, executors, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Standstill
Agreement this 28th day of July, 1998.
/s/ James L. Leuthe
James L. Leuthe,
individually
PATRIOT BANK CORP.
By /s/ Joseph W. Major
Joseph W. Major,
President
PAGE 78
Exhibit A
FIRST LEHIGH CORPORATION
IRREVOCABLE PROXY
Pursuant to the terms of a Standstill Agreement dated July 27,
1998 between James L. Leuthe and Patriot Bank Corp., the undersigned
hereby irrevocably appoints the full Board of Directors of Patriot
Bank Corp., with full powers of substitution, to act as attorneys and
proxies for the undersigned to vote all shares of First Lehigh
Corporation Common Stock, Senior Preferred Stock and Series A
Preferred Stock which the undersigned is entitled to vote at any
meeting of shareholders of First Lehigh Corporation. The undersigned
acknowledges that this proxy is coupled with an interest and is
therefore irrevocable until June 30, 2013 as provided in the
Standstill Agreement.
/s/ James L. Leuthe
James L. Leuthe
July 27, 1998
PAGE 79
Exhibit B
PATRIOT BANK CORP.
IRREVOCABLE PROXY
Pursuant to the terms of a Standstill Agreement dated July 27,
1998 between James L. Leuthe and Patriot Bank Corp., a Delaware
corporation, as predecessor of Patriot Bank Corp., a Pennsylvania
corporation, the undersigned hereby irrevocably appoints the full
Board of Directors of Patriot Bank Corp., a Pennsylvania corporation,
with full powers of substitution, to act as attorneys and proxies for
the undersigned to vote all shares of Patriot Bank Corp. Common Stock,
which the undersigned is entitled to vote at any meeting of
shareholders of Patriot Bank Corp. The undersigned acknowledges that
this proxy is coupled with an interest and is therefore irrevocable
until June 30, 2013 as provided in the Standstill Agreement.
/s/ James L. Leuthe
James L. Leuthe
Date: July 28, 1998
PAGE 80
EXHIBIT 4
BANK PLAN OF MERGER
THIS BANK PLAN OF MERGER ("Plan of Merger") dated July 28,
1998, is by and between PATRIOT BANK, a Pennsylvania- chartered bank
("Patriot Bank"), and FIRST LEHIGH BANK, a Pennsylvania-chartered bank
("FL Bank").
BACKGROUND
1. Patriot Bank is a Pennsylvania bank and a wholly-owned
subsidiary of Patriot Bank Corp., a Delaware corporation ("Patriot").
The authorized capital stock of Patriot Bank consists of 10,000,000
shares of common stock, par value $1.00 per share ("Patriot Bank
Common Stock"), of which at the date hereof 1,000 shares are issued
and outstanding, and 2,000,000 shares of preferred stock, none of
which are outstanding.
2. FL Bank is a Pennsylvania bank and a wholly-owned
subsidiary of First Lehigh Corporation, a Pennsylvania corporation
("FL"). The authorized capital stock of FL Bank consists of 10,500
shares of common stock, par value $20.00 per share ("FL Bank Common
Stock"), of which at the date hereof 10,500 shares are issued and
outstanding.
3. The respective Boards of Directors of Patriot Bank and
FL Bank deem the merger of FL Bank with and into Patriot Bank,
pursuant to the terms and conditions set forth or referred to herein,
to be desirable and in the best interests of the respective
corporations and their respective shareholders.
4. The respective Boards of Directors of Patriot Bank and
FL Bank have adopted resolutions approving this Plan of Merger. The
respective Boards of Directors of Patriot and FL have adopted
resolutions approving an Agreement dated July 28, 1998 (the
"Agreement") between Patriot and FL, pursuant to which this Plan of
Merger is being executed by Patriot Bank and FL Bank.
AGREEMENT
In consideration of the premises and of the mutual covenants
and agreements herein contained, and in accordance with
PAGE 81
the applicable laws and regulations of the Commonwealth of
Pennsylvania, Patriot Bank and FL Bank, intending to be legally bound
hereby, agree:
ARTICLE I
MERGER
Subject to the terms and conditions of this Plan of Merger
and in accordance with the applicable laws and regulations of the
Commonwealth of Pennsylvania, on the Effective Date (as that term is
defined in Article V hereof): FL Bank shall merge with and into
Patriot Bank; the separate existence of FL Bank shall cease; and
Patriot Bank shall be the surviving corporation (such transaction
referred to herein as the "Merger" and Patriot Bank, as the surviving
corporation in the Merger, referred to herein as the "Surviving
Bank"). The name of the Surviving Bank shall be "Patriot Bank" and it
shall have its home office at High and Hanover Streets, Pottstown,
Pennsylvania 19464.
ARTICLE II
ARTICLES OF INCORPORATION AND BYLAWS
On and after the Effective Date, the Articles of
Incorporation and Bylaws of Patriot Bank, as in effect immediately
prior to the Effective Date, shall automatically be and remain the
Articles of Incorporation and Bylaws of the Surviving Bank, until
altered, amended or repealed.
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
3.1 Board of Directors. On and after the Effective Date,
the directors of the Surviving Bank shall consist of the directors of
Patriot Bank duly elected and holding office immediately prior to the
Effective Date. Directors shall be elected annually and shall hold
office until their successors are elected and qualified. The names
and residence addresses of the directors are:
Name Residence Address
Larry V. Thren 41 Gladwynn Drive
Reading, PA 19606
James B. Elliott 684 Old Swede Road
Douglasville, PA 19518
Leonard A. Huff 1219 Sheep Hill Road
Pottstown, PA 19464
John H. Diehl 180 Diehl Lane
Alburtis, PA 18011
Samuel N. Landis 669 Furnace Street
Emmaus, PA 18049
Joseph W. Major 2960 Raspberry Lane
Gilbertsville, PA 19525
James A. Bentley, Jr. 2537 Flowing Springs Road
<PAGE 82>
Birchrunville, PA 19421
3.2 Officers. On and after the Effective Date, the
officers of the Surviving Bank shall consist of the officers of
Patriot Bank duly elected and holding office immediately prior to the
Effective Date.
ARTICLE IV
CONVERSION OF SHARES
4.1 Stock of Patriot Bank. Each share of Patriot Bank
Common Stock issued and outstanding immediately prior to the Effective
Date shall, on and after the Effective Date, continue to be issued and
outstanding as a share of common stock of the Surviving Bank.
4.2 Stock of FL Bank. Each share of FL Bank Common Stock
issued and outstanding immediately prior to the Effective Date, and
each share of FL Bank Common Stock issued and held in the treasury of
FL as of the Effective Date, if any, shall, on the Effective Date, be
cancelled, and no cash, stock or other property shall be delivered in
exchange therefor.
ARTICLE V
EFFECTIVE DATE OF THE MERGER
The Merger shall be effective on the date on which articles
of merger executed by Patriot Bank and FL Bank are filed with the
Secretary of State of the Commonwealth of Pennsylvania, unless a later
date is specified in such articles (the "Effective Date").
ARTICLE VI
EFFECT OF THE MERGER
6.1 Separate Existence. On the Effective Date: the
separate existence of FL Bank shall cease; and all of the property
(real, personal and mixed), rights, powers, duties and obligations of
FL Bank shall be taken and deemed to be transferred to and vested in
the Surviving Bank, without further act or deed, as provided by
applicable laws and regulations.
ARTICLE VII
CONDITIONS PRECEDENT
The obligations of Patriot Bank and FL Bank to effect the
Merger shall be subject to (i) the approval of this Plan of Merger by
Patriot and FL in their capacities as the sole shareholder of Patriot
Bank and FL Bank, respectively, (ii) receipt of approval of the Merger
from the Federal Deposit Insurance Corporation, the Pennsylvania
Department of Banking and any other applicable regulatory authority,
(iii) receipt of any necessary approval to operate the main office of
FL Bank and the branch offices of FL Bank as offices of the Surviving
<PAGE 83> Bank and (iv) the consummation of the merger of FL into
Patriot pursuant to the Agreement on or before the Effective Date.
ARTICLE VIII
TERMINATION
This Plan of Merger shall terminate upon any termination of
the Agreement in accordance with its terms.
ARTICLE IX
AMENDMENT
Subject to applicable law, this Plan of Merger may be
amended, by action of the respective Boards of Directors of the
parties hereto, at any time prior to consummation of the Merger, but
only by an instrument in writing signed by duly authorized officers on
behalf of the parties hereto.
ARTICLE X
MISCELLANEOUS
10.1 Extensions; Waivers. Any of the terms and conditions
of this Plan of Merger may be waived at any time by whichever of the
parties hereto is, or the sole shareholder of which is, entitled to
the benefit thereof by a written instrument signed by a duly
authorized officer of such party.
10.2 Notices. Any notice or other communication required or
permitted under this Plan of Merger shall be given, and shall be
effective, in accordance with the provisions of Section 7.06 of the
Agreement.
10.3 Captions. The headings of the several Articles and
Sections 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 Plan of Merger.
10.4 Counterparts. For the convenience of the parties
hereto, this Plan of Merger may be executed in several counterparts,
each of which shall be deemed the original, but all of which together
shall constitute one and the same instrument.
<PAGE 84>
10.5 Governing Law. This Plan of Merger shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, Patriot Bank and FL Bank have caused
this Bank Plan of Merger to be executed by their duly authorized
officers and their corporate seals to be hereunto affixed on the date
first written above.
PATRIOT BANK CORP.
By /s/ Joseph W. Major
Joseph W. Major,
President and Chief Executive
Officer
FIRST LEHIGH BANK
By /s/ John H. McKeever
John H. McKeever,
Chairman of the Board
and Acting President
PAGE 85
EXHIBIT 5
ARTICLES AND CERTIFICATE OF CONSOLIDATION OF
PATRIOT BANK CORP.
AND
FIRST LEHIGH CORPORATION
ARTICLES AND CERTIFICATE OF CONSOLIDATION (the "Articles of
Consolidation") dated _________________, 1999 between PATRIOT BANK
CORP., a Delaware corporation ("Patriot") with a principal place of
business and registered office at High and Hanover Streets, Pottstown,
Pennsylvania, and FIRST LEHIGH CORPORATION, a Pennsylvania corporation
("FLC") with a principal place of business and registered office at
1620 Pond Road, in Allentown, Pennsylvania.
WHEREAS, Patriot is a corporation organized and existing
under the laws of the State of Delaware that is registered as a bank
holding company pursuant to the Bank Holding Company Act of 1956, as
amended (the "Act"), the authorized capital stock of which consists of
12,000,000 shares of capital stock divided into (a) 10,000,000 shares
of common stock, $.01 par value ("Patriot Common Stock"), of which, at
the date of this Agreement, 1,579,944 shares were issued and held by
Patriot as treasury stock and 5,448,687 shares are outstanding,
validly issued, fully paid and nonassessable and free of preemptive
rights and (b) 2,000,000 shares of preferred stock, $.01 par value, of
which, at the date of this Agreement, none were issued and
outstanding; and
WHEREAS, FLC is a corporation organized and existing under
the laws of the Commonwealth of Pennsylvania that is registered as a
bank holding company pursuant to the Act, the authorized capital stock
of which consists of (a) 10,000,000 shares of common stock, $0.01 par
value ("FLC Common Stock"), of which 2,056,140 shares are outstanding,
validly issued, fully paid and nonassessable and free of preemptive
rights, (b) 1,500,000 shares of senior preferred stock, $.01 par value
("FLC Senior Preferred Stock"), of which 894,223 shares are issued or
outstanding and (c) 1,000,000 shares of series A preferred stock, $.01
par value ("FLC Series A Stock" and together with the FLC Common Stock
and FLC Senior Preferred Stock, the "FLC Capital Stock"), of which
682,000 shares are issued and outstanding.
WHEREAS, the respective Boards of Directors of Patriot and
FLC deem the formation of a new Pennsylvania corporation by Patriot
and FLC to be named Patriot Bank Corp. ("PBC") which will then issue
shares of common stock of the PBC to FLC and Patriot shareholders,
respectively, for each share of each of FLC Capital Stock and Patriot
Common Stock outstanding as of the closing date, pursuant to the terms
and conditions herein set forth or referred to, is desirable and in
the best interests of the respective corporations and their respective
<PAGE 86> shareholders, and the respective Boards of Directors and
shareholders of Patriot and FLC have adopted resolutions approving the
Agreement and Plan of Consolidation (the "Agreement and Plan")
pursuant to the following vote results:
(i) On July 28, 1998 the Patriot Board of Directors
approved the Agreement and the Plan by a vote of seven
votes for the Agreement and the Plan and zero votes
against the Agreement and the Plan;
(ii) On ________ __, 1998 the Patriot shareholders approved
the Agreement and the Plan by a vote of _________ votes
for the Agreement and the Plan and ______ votes against
the Agreement and the Plan;
(iii) On July 23, 1998 the FLC Board of Directors approved
the Agreement and the Plan by a vote of ____ votes for
the Agreement and the Plan and zero votes against the
Agreement and the Plan; and
(iv) On ______ __, 1998 the FLC shareholders approved the
Agreement and the Plan by a vote of _________ votes for
the Agreement and the Plan and _______ votes against
the Agreement and the Plan.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, and in accordance with applicable
provisions of the Pennsylvania Business Corporation Law of 1988, as
amended, (the "BCL"), and the Delaware General Corporation Law (the
"DGCL")the parties hereto do hereby agree as follows:
ARTICLE I
CONSOLIDATION
Subject to the terms and conditions of the Agreement and
Plan on the Effective Date, the shareholders of Patriot and FLC shall
consolidate into PBC in accordance with the BCL and DGCL. As a result
of the foregoing, the separate corporate existence of Patriot and FLC
shall cease and such transaction shall hereinafter be referred to as
the "Consolidation." The capital stock of PBC shall consist of
20,000,000 shares of common stock, no par value per share (the "PBC
Common Stock") and 5,000,000 shares of preferred stock, having such
par value as the board of directors of PBC shall fix from time to
time, issuable in series.
ARTICLE II
ARTICLE OF INCORPORATION AND BY-LAWS
The Articles of Incorporation of PBC shall be as set forth
in Exhibit A hereto and the By-Laws of PBC shall be as set forth in
Exhibit B hereto, in each case until altered, amended or repealed.
<PAGE 87>
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
From and after the Effective Date, the directors and
officers of PBC, who shall hold office until their successors are
elected and qualified according to the By-Laws of PBC, shall be those
persons listed on Exhibit C hereto.
ARTICLE IV
CONVERSION AND EXCHANGE OF SHARES
immediately prior to the Effective Date, shall, by virtue of the
Consolidation and without any action by the holders thereof, be
converted as follows:
(a) Each share of Patriot Common Stock shall be
converted into 1.0 shares of PBC Common Stock.
(b) Each share of FLC Common Stock and FLC Senior
Preferred Stock shall be converted into share's of PBC Common Stock to
be determined at closing pursuant to the terms of the Agreement.
(c) Each share of FLC Series A Preferred Stock shall
be converted into shares of PBC Common Stock to be determined at
Closing pursuant to the terms of the Agreement.
(d) No fractional shares of PBC Common Stock and no
scrip or certificates therefor will be issued in connection with the
Consolidation. Any former holder of Patriot or FLC Common Stock who
would otherwise be entitled to receive a fraction of a share of PBC
Common Stock shall receive, in lieu thereof, a check for cash in an
amount equal to such fraction of a share multiplied by the closing
price of PBC Common Stock on the Nasdaq National Market System on the
first day PBC Common Stock is traded after the Effective Date.
2. All shares of Patriot Common Stock held in the treasury
of Patriot or any Patriot Subsidiary or owned by FLC or any FLC
Subsidiary and all shares of FLC Common Stock held in the treasury of
FLC or any FLC Subsidiary or owned by Patriot or any Patriot
Subsidiary shall be cancelled, and no cash, stock or other property
shall be delivered in exchange therefor.
3. On and after the Effective Date, each holder of a
certificate or certificates theretofore representing outstanding
shares of Patriot Common Stock or outstanding shares of FLC Capital
Stock may surrender same to PBC or the Exchange Agent for cancellation
and each such holder shall be entitled upon such surrender to receive
in exchange therefor certificate(s) representing the number of shares
of PBC Common Stock and a check for cash representing the value of
fractional shares to which the holder is entitled as provided above.
Until surrendered, each certificate theretofore representing
outstanding shares of Patriot Common Stock or outstanding shares of
FLC Capital Stock, from and after the Effective Date, will evidence
<PAGE 88> solely the right to receive certificates for shares of PBC
Common stock and a check for cash in lieu of any fractional shares as
described above.
ARTICLE V
EFFECTIVE DATE OF THE CONSOLIDATION
The Consolidation shall be effective at 12:01 a.m.
January __, 1999 (such date being herein referred to as the "Effective
Date").
ARTICLE VI
EFFECT OF THE CONSOLIDATION
On the Effective Date, the separate existence of Patriot and
FLC shall cease and all of the property, real, personal, and mixed,
and franchises of each of Patriot and FLC, and all debts due on
whatever account to each of them, including subscriptions to shares
and other choses in action, shall be taken and deemed to be
transferred to and vested in PBC, without further act or deed. PBC
shall thenceforth be responsible for all the liabilities and
obligations of each of Patriot and FLC provided in the BCL and the
DGCL.
ARTICLE VII
CONDITIONS PRECEDENT
The obligations of Patriot and FLC to effect the
Consolidation shall be subject to satisfaction, unless duly waived, of
the conditions set forth in the Agreement and Plan.
ARTICLE VIII
TERMINATION
Anything contained in these Articles of Consolidation to the
contrary notwithstanding, and notwithstanding adoption hereof by the
shareholders of Patriot or FLC, the Agreement and Plan may be
terminated and the Consolidation abandoned as provided in Section 6 of
the Agreement and Plan.
ARTICLE IX
MISCELLANEOUS
1. Each party, by written instrument signed by a duly
authorized officer, may extend the time for the performance of any of
the obligations or other acts of the other party and may waive
compliance with any of the covenants or performance of any of the
obligations of the other party contained in the Agreement and Plan of
Consolidation.
2. Any notice or other communication required or permitted
under the Agreement and Plan of Consolidation shall be given, and
shall be effective, in accordance with the provisions of Section 7 of
the Agreement and Plan. <PAGE 89>
3. The headings of the several Articles herein are
inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of these Articles
of Consolidation.
4. For the convenience of the parties hereto and to
facilitate the filing and recording of these Articles of
Consolidation, it may be executed in several counterparts, each of
which shall be deemed the original, but all of which together shall
constitute one and the same instrument.
5. This Plan of Consolidation shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
kthe offices of Patriot located at High and Hanover Streets,
Pottstown, Pennsylvania 19464, which shall also be the offices of PBC, and is
available for review by Patriot shareholders, FLC shareholders, & PBC
shareholders during reasonable business hours. Upon request and
without cost, a copy of the Agreement and Plan will be sent to any
shareholder of FLC or Patriot.
7. In accordance with the provisions of Section 252(d) of
the DGCL, PBC hereby consents to service of process in the State of
Delaware in any proceeding for enforcement of any obligation of FLC or
Patriot arising from the Consolidation. PBC irrevocably appoints the
Secretary of State of Delaware as its agent to accept service of
process in any such suit or other proceedings. A copy of any process
served upon the Secretary of State shall be forwarded to the address
of PBC specified in Article IX, Section 6.
PAGE 90
IN WITNESS WHEREOF, Patriot and FLC have caused this Plan
of Consolidation to be executed in counterparts by their duly authorized
officers and their corporate seals to be hereunto affixed on the date
first written above.
ATTEST PATRIOT BANK CORP.
_________________________ ___________________________________
Secretary Joseph W. Major
President and Chief Executive Officer
ATTEST FIRST LEHIGH CORPORATION
_________________________ ___________________________________
Secretary President
PAGE 91
EXHIBIT A
ARTICLES OF INCORPORATION
OF
PATRIOT BANCORP, INC.
FIRST. The name of the Corporation is Patriot Bancorp, Inc.
SECOND. The location and post office address of the
Corporation's registered office in this Commonwealth is High and
Hanover Streets, Pottstown, Pennsylvania 19464.
THIRD. The purpose of the Corporation is and it shall have
unlimited power to engage in and to do any lawful act concerning any
or all lawful business for which corporations may be incorporated
under provisions of the Business Corporation Law of 1988, the Act
approved December, 1988, P.L. 1444, as amended (the "Pennsylvania
Business Corporation Law").
FOURTH. The term of the Corporation's existence is perpetual.
FIFTH. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 25,000,000 shares,
divided into two classes consisting of 20,000,000 shares of common
stock, no par value per share (the "Common Stock") and 5,000,000
shares of preferred stock, having such par value as the board of
directors shall fix and determine, as provided in Article SIXTH below
(the "Preferred Stock").
SIXTH. The Preferred Stock may be issued from time to time as a
class without series or, if so determined by the board of directors of
the Corporation, either in whole or in part, in one or more series.
There is hereby expressly granted to and vested in the board of
directors of the Corporation authority to fix and determine (except as
fixed and determined herein), by resolution, the par value, voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions
thereof, if any, including specifically, but not limited to, the
dividend rights, conversion rights, redemption rights and liquidation
preferences, if any, of any wholly unissued series of Preferred Stock
(or the entire class of Preferred Stock if none of such shares have
been issued), the number of shares constituting any such series and
the terms and conditions of the issue thereof. Prior to the issuance
of any shares of Preferred Stock, a statement setting forth a copy of
each such resolution or resolutions and the number of shares of
Preferred Stock of each such class or series shall be executed and
filed in accordance with the Pennsylvania Business Corporation Law.
Unless otherwise provided in any such resolution or resolutions, the
number of shares of capital stock of any such class or series so set
forth in such resolution or resolutions may thereafter be increased or
decreased (but not below the number of shares then outstanding), by a
<PAGE 92> statement likewise executed and filed setting forth a
statement that a specified increase or decrease therein had been
authorized and directed by a resolution or resolutions likewise
adopted by the board of directors of the Corporation. In case the
number of such shares shall be decreased, the number of shares so
specified in the statement shall resume the status they had prior to
the adoption of the first resolution or resolutions.
SEVENTH. Each holder of record of Common Stock shall have the
right to one vote for each share of Common Stock standing in such
holder's name on the books of the Corporation. No shareholder shall
be entitled to cumulate any votes for the election of directors.
EIGHTH. The management, control and government of the
Corporation shall be vested in a board of directors consisting of not
less than five (5) nor more than twenty-five (25) members in number,
as fixed by the board of directors of the Corporation from time to
time. The directors of the Corporation shall be divided into three
classes: Class I, Class II and Class III. Each Class shall be as
nearly equal in number as possible. If the number of Class I,
Class II or Class III directors is fixed for any term of office, it
shall not be increased during that term, except by a majority vote of
the board of directors. The term of office of the initial Class I
directors shall expire at the annual election of directors by the
shareholders of the Corporation in 2000; the term of office of the
initial Class II directors shall expire at the annual election of
directors by the shareholders of the Corporation in 2001; and the term
of office of the initial Class III directors shall expire at the
annual election of directors by the shareholders of the Corporation in
2002. After the initial term of each Class, the term of office of
each Class shall be three (3) years, so that the term of office of one
class of directors shall expire each year when their respective
successors have been duly elected by the shareholders and qualified.
At each annual election by the shareholders of the Corporation, the
directors chosen to succeed those whose terms then expire shall be
identified as being of the same class as the directors they succeed.
Unless waived by the board of directors of the Corporation, in order
to qualify for election as a director of the Corporation, a person
must have been a shareholder of record of the Corporation for a period
of time equal to three (3) years. Unless waived by the Board of
Directors, shareholders of another corporation that merges with the
Corporation, is acquired by, or acquires the Corporation, or enters
into any similar transaction with the Corporation shall qualify for
election as a director of the Corporation if such shareholder was a
shareholder of record of the other corporation for a period of time
equal to three (3) years. If, for any reason, a vacancy occurs on the
board of directors of the Corporation, a majority of the remaining
directors shall have the exclusive power to fill the vacancy by
electing a director to hold office for the unexpired term in respect
of which the vacancy occurred. No director of the Corporation shall
be removed from office, as a director, by the vote of shareholders,
unless the votes of shareholders cast in favor of the resolution for
the removal of such director constitute at least a majority of the
<PAGE 93> votes which all shareholders would be entitled to cast at an
annual election of directors.
NINTH. No holder of any class of capital stock of the
Corporation shall have preemptive rights, and the Corporation shall
have the right to issue and to sell to any person or persons any
shares of its capital stock or any option, warrant or right to acquire
capital stock, or any securities having conversion or option rights
without first offering such shares, rights or securities to any holder
of any class of capital stock of the Corporation.
TENTH. Except as set forth below, the affirmative vote of at
least 80 percent (80%) of votes cast by shareholders entitled to vote,
and if any class of shares is entitled to vote as a separate class,
the affirmative vote of shareholders entitled to cast at least a
majority of the votes cast by the outstanding shares of such class (or
such greater amount as required by the provisions of these Articles of
Incorporation establishing such class) shall be required to approve
any of the following:
(a) any merger or consolidation of the Corporation with or
into any other corporation;
(b) any share exchange in which a corporation, person or
entity acquires the issued or outstanding shares of capital stock
of the Corporation pursuant to a vote of shareholders;
(c) any sale, lease, exchange or other transfer of all, or
substantially all, of the assets of the Corporation to any other
corporation, person or entity; or
(d) any transaction similar to, or having similar effect
as, any of the foregoing transactions.
The board of directors of the Corporation shall have the power
and duty to determine, for purposes of this Article TENTH, on the
basis of information known to the board, if any transaction is similar
to, or has an effect similar to, any of the transactions identified
above in this Article TENTH. Any such determination shall be
conclusive and binding for all purposes of this Article TENTH. The
Corporation may voluntarily completely liquidate and/or dissolve only
in accordance with all applicable laws and only if the proposed
liquidation and/or dissolution is approved by the affirmative vote of
shareholders entitled to cast at least 80 percent (80%) of the votes
which all shareholders are entitled to cast. The provisions of this
Article TENTH shall not apply to any transaction which is approved in
advance by 75 percent (75%) of the members of the board of directors
of the Corporation, at a meeting duly called and held.
ELEVENTH. Subsection 1. No Person or Group Acting in Concert
shall Acquire Voting Control of the Corporation, at any time, except
in accordance with the provisions of Article TENTH. The terms
"Acquire," "Voting Control," "Group Acting in Concert," and "Person"
as used in this Article ELEVENTH are defined in subsection 4 hereof.
<PAGE 94>
Subsection 2. If Voting Control of the Corporation is
acquired, in violation of this Article ELEVENTH, all shares with
respect to which any Person or Group Acting in Concert has acquired
Voting Control in excess of the number of shares the beneficial
ownership of which is deemed under subsection 4 hereof to confer
Voting Control of the Corporation (as determined without regard to
this Subsection 2) shall be considered from and after the date of
acquisition by such Person or Group Acting in Concert to be "excess
shares" for purposes of this Article ELEVENTH. All shares deemed to
be excess shares shall thereafter no longer be entitled to vote on any
matter or to take other shareholder action. If, after giving effect
to the first two sentences of this Subsection 2, any Person or Group
Acting in Concert still shall be deemed to be in Voting Control of the
Corporation based on the number of votes then entitled to be cast
(rather than the number of issued and outstanding shares of common
stock of the Corporation), then shares held in excess of the number of
shares deemed to confer Voting Control upon such Person or Group
Acting in Concert also shall not be entitled to vote on any matter or
take any other shareholder action, but this subsequent reduction in
voting rights shall be effected only once. The provisions of this
Subsection 2 deeming shares to be excess shares shall only apply for
so long as such shares shall be beneficially owned by such Person or
Group Acting in Concert who has acquired Voting Control.
Notwithstanding the foregoing, shares held in excess of the number of
shares the beneficial ownership of which would otherwise be deemed
under Subsection 4 to confer Voting Control of the Corporation shall
not be deemed to be excess shares if such shares are held by a Tax-
Qualified Employee Stock Benefit Plan.
Subsection 3. The provisions of this Article ELEVENTH shall
be of no further force and effect after the consummation of a
transaction in which another Person Acquires shares of capital stock
of the Corporation entitled to cast 80% or more of the votes which all
shareholders are entitled to cast (as determined without regard to the
application of this Article ELEVENTH) and such transaction was
approved in advance by the board of directors of the Corporation.
Subsection 4. For purposes of this Article ELEVENTH:
A. The term "Acquire" includes every type of
acquisition, whether effected by purchase, exchange, operation of
law or otherwise.
B. "Voting Control" means the sole or shared power to
vote or to direct the voting of, or to dispose or to direct the
disposition of, more than ten percent (10%) of the issued and
outstanding common stock of the Corporation; provided that
(i) the solicitation, holding and voting of proxies obtained by
the board of directors of the Corporation pursuant to a
solicitation under Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended
<PAGE 95> (the "Exchange Act") shall not constitute Voting
Control, (ii) a Tax-Qualified Employee Stock Benefit Plan which
holds more than 10 percent of the voting shares of the
Corporation shall not be deemed to have Voting Control of the
Corporation, (iii) any trustee, member of any administrative
committee or employee beneficiary of a Tax-Qualified Employee
Stock Benefit Plan shall not be deemed to have Voting Control of
the Corporation either (A) as a result of their control of a
Tax-Qualified Employee Stock Benefit Plan, and/or their
beneficial interest in voting shares held by a Tax-Qualified
Employee Stock Benefit Plan, or (B) as a result of the
aggregation of both their beneficial interest in voting shares
held by a Tax-Qualified Employee Stock Benefit Plan and voting
shares held by such trustee, administrative committee member or
employee beneficiary independent of a Tax-Qualified Employee
Stock Benefit Plan, and (iv) any trustee which is a direct or
indirect subsidiary of the Corporation shall not be deemed to
have Voting Control of the Corporation as a result of having the
right to vote more than ten percent (10%) of the issued and
outstanding common stock of the Corporation.
C. "Group Acting in Concert" includes Persons seeking
to combine or pool their voting or other interests in the voting
shares for a common purpose, pursuant to any contract,
understanding, relationship, agreement or other arrangement,
whether written or otherwise, provided, that a "Group Acting in
Concert" shall not include (i) the members of the board of
directors of the Corporation solely as a result of their board
membership, (ii) the members of the board of directors of the
Corporation as a result of their solicitation, holding and voting
of proxies obtained by them pursuant to a solicitation subject to
rules and regulations promulgated under the Exchange Act or any
successor statute or (iii) any member or all the members of the
board of directors of the Corporation, and any Tax-Qualified
Employee Stock Benefit Plan and the trustees, administrative
committee members and employee beneficiaries thereof.
D. The term "Person" includes an individual, a Group
Acting in Concert, a corporation, a partnership, an association,
a joint stock company, a trust, an unincorporated organization or
similar company, a syndicate or any other group formed for the
purpose of acquiring, holding or disposing of the equity
securities of the Corporation.
E. The term "Tax-Qualified Employee Stock Benefit
Plan" means any defined benefit plan or defined contribution plan
of the Corporation or any subsidiary, such as an employee stock
ownership plan, stock bonus plan, profit sharing plan or other
plan, that, with its related trust, meets the requirements to be
"qualified" under Section 401 of the Internal Revenue Code of
1986, as amended.
Subsection 5. This Article ELEVENTH shall not apply to the
purchase of securities of the Corporation by underwriters in
<PAGE 96> connection with a public offering of such securities by the
Corporation or by a holder of shares of capital stock of the
Corporation with written consent of the board of directors of the
Corporation; provided, however, that purchasers of securities of the
Corporation from any underwriter shall be subject to the provisions of
this Article ELEVENTH.
The board of directors of the Corporation shall have the power
and duty to determine, for purposes of this Article ELEVENTH, on the
basis of information known to the Board, if and when such other Person
has acquired Voting Control of the Corporation, and/or if any
transaction is similar to, or has a similar effect as, any of the
transactions identified in this Article ELEVENTH. Any such
determination shall be conclusive and binding for all purposes of this
Article ELEVENTH.
TWELFTH. No action required to be taken or which may be taken at
any annual or special meeting of shareholders of the Corporation may
be taken without a meeting, and the power of the shareholders of the
Corporation to consent in writing to action without a meeting is
specifically denied. The presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes which
all shareholders are entitled to cast shall constitute a quorum of
shareholders at any annual or special meeting of shareholders of the
Corporation.
THIRTEENTH. The authority to make, amend, alter, change or
repeal the By-Laws of the Corporation is hereby expressly and solely
granted to and vested in the board of directors of the Corporation,
subject always to the power of the shareholders to change such action
by the affirmative vote of shareholders of the Corporation entitled to
cast at least 66-2/3 percent (66-2/3%) of the votes which all
shareholders are entitled to cast, except that provisions of the By-
Laws of the Corporation relating to limitations on directors'
liabilities and indemnification of directors, officers and others may
not be amended to increase the exposure to liability for directors or
to decrease the indemnification of directors, officers and others
except by the affirmative vote of 66-2/3 percent (66-2/3%) of the
entire board of directors or by the affirmative vote of shareholders
of the Corporation entitled to cast at least 75 percent (75%) of the
votes which all shareholders are entitled to cast.
FOURTEENTH. The board of directors of the Corporation, when
evaluating any offer of another party to (a) make a tender or exchange
offer for any equity security of the Corporation, (b) merge or
consolidate the Corporation with another corporation, (c) purchase or
otherwise acquire all or substantially all of the properties and
assets of the Corporation, or (d) engage in any transaction similar
to, or having similar effects as, any of the foregoing transactions,
shall, in connection with the exercise of its judgment in determining
what is in the best interests of the Corporation and its shareholders,
give due consideration to all relevant factors, including without
limitation the social and economic effects of the proposed transaction
on the employees, suppliers, customers and other constituents of the
<PAGE 97> Corporation and its subsidiaries and on the communities in
which the Corporation and its subsidiaries operate or are located, the
business reputation of the other party, and the board of directors'
evaluation of the then value of the Corporation in a freely negotiated
sale and of the future prospects of the Corporation as an independent
entity.
FIFTEENTH. If any corporation, person, entity, or group becomes
the beneficial owner, directly or indirectly, of shares of capital
stock of the Corporation having the right to cast in the aggregate 25
percent (25%) or more of all votes entitled to be cast by all issued
and outstanding shares of capital stock of the Corporation entitled to
vote, such corporation, person, entity or group shall within thirty
(30) days thereafter offer to purchase all shares of capital stock of
the Corporation issued, outstanding and entitled to vote. Such offer
to purchase shall be at a price per share equal to the highest price
paid for shares of the respective class or series of capital stock of
the Corporation purchased by such corporation, person, entity or group
within the preceding twelve months. If such corporation, person,
entity or group did not purchase any shares of a particular class or
series of capital stock of the Corporation within the preceding twelve
months, such offer to purchase shall be at a price per share equal to
the fair market value of such class or series of capital stock on the
date on which such corporation, person, entity or group becomes the
beneficial owner, directly or indirectly, of shares of capital stock
of the Corporation having the right to cast in the aggregate 25
percent (25%) or more of all votes entitled to be cast by all issued
and outstanding capital stock of the Corporation. Such offer shall
provide that the purchase price for such shares shall be payable in
cash. The provisions of this Article FIFTEENTH shall not apply if 80
percent (80%) or more of the members of the board of directors of the
Corporation approve in advance the acquisition of beneficial ownership
by such corporation, person, entity or group, of shares of capital
stock of the Corporation having the right to cast in the aggregate 25
percent (25%) or more of all votes entitled to be cast by all issued
and outstanding shares of capital stock of the Corporation. The
provisions of this Article FIFTEENTH shall be in addition to and not
in lieu of any rights granted under Subchapter E of Chapter 25 of the
Pennsylvania Business Corporation Law and any amendment or restatement
of such section ("Subchapter E"); provided, however, that if the
provisions of this Article FIFTEENTH and Subchapter E are both
applicable in any given instance, the price per share to be paid for
shares of capital stock of the Corporation issued, outstanding and
entitled to vote shall be the higher of the price per share determined
in accordance with this Article FIFTEENTH or the price per share
determined in accordance with the provisions of Subchapter E.
SIXTEENTH. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in its Articles of
Incorporation in the manner now or hereafter prescribed by statute and
all rights conferred upon shareholders and directors herein are hereby
granted subject to this reservation; provided, however, that the
provisions set forth in Articles SEVENTH, EIGHTH and TENTH through
FOURTEENTH, inclusive, of these Articles of Incorporation may not be
<PAGE 98> repealed, altered or amended, in any respect whatsoever,
unless such repeal, alteration or amendment is approved by either
(a) the affirmative vote of at least 80 percent (80%) of votes cast by
shareholders entitled to vote or (b) the affirmative vote of 75
percent (75%) of the members of the board of directors of the
Corporation and the affirmative vote of a majority of the votes cast
by all shareholders of the Corporation then entitled to vote.
PAGE 99
EXHIBIT B
BYLAWS
OF
PATRIOT BANK CORP.
ARTICLE I. MEETINGS OF SHAREHOLDERS.
Section 101. Place of Meetings. All meetings of the
shareholders shall be held at such place or places, within or without
the Commonwealth of Pennsylvania, as shall be determined by the Board
of Directors from time to time.
Section 102. Annual Meetings.
(a) Time and Date. The annual meeting of the shareholders
for the election of Directors and the transaction of such other
business as may properly come before the meeting shall be held at such
date or hour as may be fixed by the Board of Directors. At each
annual meeting of shareholders, directors shall be elected, reports of
the affairs of the Corporation shall be considered, and any other
business may be transacted which is within the power of the
shareholders.
(b) Agenda for Annual Meeting. Matters to be placed on the
agenda for consideration at annual meetings of shareholders may be
determined by the Board of Directors or by any shareholder entitled to
vote for the election of directors. Matters proposed for the agenda
by shareholders entitled to vote for the election of directors shall
be made by notice in writing, delivered or mailed by first-class
United States mail, postage prepaid, to the Secretary of the
Corporation not less than ninety (90) days prior to any annual meeting
of shareholders; provided, however, that if less than twenty-one (21)
days' notice of the meeting is given to shareholders, such written
notice shall be delivered or mailed, as prescribed, to the Secretary
of the Corporation not later than the close of the seventh day
following the day on which notice of the meeting was mailed to
shareholders. Notice of matters which are proposed by the Board of
Directors shall be given at any time by the Chairman of the Board or
any other appropriate officer. Each notice made by shareholders shall
set forth a brief description of the business desired to be brought
before the annual meeting. The chairman of the meeting may determine
and declare to the meeting that a matter proposed for the agenda was
not made in accordance with the foregoing procedure, and if the
chairman should so determine, the chairman shall so declare to the
meeting and the matter shall be disregarded.
Section 103. Special Meetings. Special meetings of the
shareholders may be called at any time by the Board of Directors in
the manner provided herein. Shareholders shall not have the right to
<PAGE 100> call special meetings of shareholders, except as
specifically provided by law.
Section 104. Conduct of Shareholders' Meetings. At every
meeting of the shareholders, the Chairman of the Board or, in the
Chairman's absence, the President or, in the President's absence, a
chairman (who shall be one of the officers, if any is present) chosen
by a majority of the members of the Board of Directors shall act as
chairman of the meeting. The chairman of the meeting shall have any
and all powers and authority necessary in the chairman's sole
discretion to conduct an orderly meeting and preserve order and to
determine any and all procedural matters, including imposing
reasonable limits on the amount of time at the meeting taken up in
remarks by any one shareholder or group of shareholders. In addition,
until the business to be completed at a meeting of the shareholders is
completed, the chairman of a meeting of the shareholders is expressly
authorized to temporarily adjourn and postpone the meeting from time
to time. The Secretary of the Corporation or in the Secretary's
absence, an assistant secretary, shall act as secretary of all
meetings of the shareholders. In the absence at such meeting of the
Secretary or assistant secretary, the chairman of the meeting may
appoint another person to act as secretary of the meeting.
Section 105. Determination of Record Date. The Board of
Directors may fix a time prior to the date of any meeting of
shareholders as a record date for the determination of the
shareholders entitled to notice of, or to vote at, the meeting, which
time, except in the case of an adjourned meeting, shall be not more
than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled
notwithstanding any transfer of shares on the books of the Corporation
after any record date fixed as provided in this section. The Board of
Directors may similarly fix a record date for the determination of
shareholders of record for any other purpose. When a determination of
shareholders of record has been made as provided in this section for
purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board of Directors fixes a new record
date for the adjourned meeting.
Section 106. Voting List. The officer or agent having charge of
the transfer books for shares of the Corporation shall make a complete
list of the shareholders entitled to vote at any meeting of
shareholders, arranged in alphabetical order, with the address of and
the number of shares held by each. The list shall be produced and
kept open at the time and place of the meeting and shall be subject to
the inspection of any shareholder during the whole time of the meeting
for the purposes thereof.
Failure to comply with the requirements of this section shall not
affect the validity of any action taken at a meeting prior to a demand
at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book, or a
duplicate thereof kept in Pennsylvania, shall be prima facie evidence
<PAGE 101> as to who are the shareholders entitled to examine the list
or share register or transfer book or to vote at any meeting of
shareholders.
Section 107. Judges of Election. In advance of any meeting of
shareholders of the Corporation, the Board of Directors may appoint
judges of election, who need not be shareholders, to act at the
meeting or any adjournment thereof. If judges of election are not so
appointed, the presiding officer of the meeting may, and on the
request of any shareholder shall, appoint judges of election at the
meeting. The number of judges shall be one (1) or three (3). No
person who is a candidate for office to be filled at the meeting shall
act as a judge of election.
In the event any person appointed as a judge fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made
by the Board of Directors in advance of convening the meeting or at
the meeting by the presiding officer thereof.
The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, the authenticity, validity and
effect of proxies, receive votes or ballots, hear and determine all
challenges and questions in any way arising in connection with the
right to vote, count and tabulate all votes, determine the result and
do such acts as may be proper to conduct the election or vote with
fairness to all shareholders. The judge or judges of election shall
perform their duties impartially, in good faith, to the best of their
ability and as expeditiously as is practical. If there are three
judges of election, the decision, act or certificate of a majority
shall be effective in all respects as the decision, act or certificate
of all.
On request of the presiding officer of the meeting, or of any
shareholder, the judge or judges shall make a report in writing of any
challenge or question or matter determined by them, and execute a
certificate of any fact found by them. Any report or certificate made
by them shall be prima facie evidence of the facts stated therein.
Section 108. No Consent of Shareholders in Lieu of Meeting. No
action required to be taken or which may be taken at any annual or
special meeting of shareholders of the Corporation may be taken
without a meeting, and the power of the shareholders to consent in
writing to action without a meeting is specifically denied.
ARTICLE II. DIRECTORS AND BOARD MEETINGS.
Section 201. Management by Board of Directors. The business and
affairs of the Corporation shall be managed by a Board of Directors
consisting of not less than five (5) nor more than twenty-five (25)
members, as fixed by the Board of Directors from time to time. The
Board of Directors may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by statute, regulation,
the Articles of Incorporation or these Bylaws directed or required to
<PAGE 102> be exercised or done by the shareholders. The Board of
Directors shall appoint one of its members to be the Chairman
("Chairman") to serve at the pleasure of the Board. He shall be a
voting member of the Board of Directors and shall preside at all
meetings of the Board of Directors and Shareholders. The Board of
Directors shall also appoint a President of the Corporation. The
President shall preside at any meeting of the Board in the absence of
the Chairman.
Section 202. Nominations for Directors. Nominations by
shareholders for directors to be elected at an annual meeting of
shareholders must be submitted to the Secretary of the Corporation in
writing not later than the close of business on the ninetieth (90th)
day immediately preceding the date of the meeting. Such notification
shall contain the following information: (a) name and address of each
proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the total number of shares of capital stock of the
Corporation that will be voted for each proposed nominee; (d) the name
and residence address of the notifying shareholder; and (e) the number
of shares of capital stock of the Corporation owned by the notifying
shareholder. Nominations not made in accordance herewith may, in the
discretion of the chairman of the meeting, be disregarded and, upon
instruction, the judges of election may disregard all votes cast for
any such proposed nominee.
Section 203. Qualifications of Directors.
(a) Share Ownership. Every Director must be a shareholder
of the Corporation and shall own in his/her own right the number of
shares (if any) required by law in order to qualify as such Director.
Any Director shall forthwith cease to be a Director when he/she no
longer holds such shares, which fact shall be reported to the Board of
Directors by the Secretary, whereupon the Board of Directors shall
declare the seat of such Director vacated.
(b) Other Qualifications. It shall be a qualification for
election and continued service as a Director of the Corporation for
each Director of the Corporation to observe the following agreements
and covenants:
(i) Except for the Chairman and the President,
Directors of the Corporation shall not, either in their
capacities as Directors, shareholders, or otherwise, directly or
indirectly, encourage, solicit, initiate, or respond to any
indications of interest, proposals or offers for any acquisition
of, or change of control involving, the Corporation, whether by
merger, sale of assets, or otherwise, or assist, aid or abet any
person or persons with respect to such conduct. In the event
that any director is approached as described herein, any such
contact shall be immediately referred in writing to the Chairman
and the President of Directors.
(ii) Directors of the Corporation shall not, either in
their capacities as Directors, shareholders or otherwise, provide
<PAGE 103> any third person with non-public information
concerning the Corporation; and
(iii) Directors of the Corporation shall not (in any
capacity) publicly comment on the Corporation's strategic
alternatives (including sale or possible sale of the Corporation)
or on differences of view among members of the Board relating to
the Corporation's strategic alternatives or on specific merger
proposals or opportunities;
absent in any case either a direction from the entire Board of
Directors by the affirmative vote of 75% of the total number of
directors then in office (rounding up to the nearest whole number) or
a written opinion of counsel to the Corporation that such Director's
fiduciary duty requires any such conduct.
It is adopted as the corporate policy of this Corporation that
the failure by a Director to observe and comply with the foregoing
covenants and agreements shall subject the Director to removal by a
vote of a majority of the Board of Directors then in office or
otherwise in accordance with law, unless such Director has received a
written opinion of the Corporation's counsel that such Director's
fiduciary duty requires such conduct.
Section 204. Classification of Directors. The Board of
Directors of the Corporation shall be divided into three (3) classes,
as nearly equal in number as possible, as provided in the
Corporation's Articles of Incorporation.
Section 205. Compensation of Directors. No Director shall be
entitled to any salary as such; but the Board of Directors may fix,
from time to time, reasonable fees or other compensation, payable in
cash, stock or other property, for acting as a Director and reasonable
fees to be paid each Director for his/her services in attending
meetings of the Board and meetings of committees appointed by the
Board. The Corporation may reimburse Directors for expenses related
to their duties as members of the Board of Directors.
Section 206. Regular Meetings. Regular meetings of the Board of
Directors shall be held on such day, at such hour, and at such place,
consistent with applicable law, as the Board of Directors shall from
time to time designate or as may be designated in any notice from the
Secretary calling the meeting. The Board of Directors shall meet for
reorganizational purposes at the first regular meeting following the
annual meeting of shareholders at which the Directors are elected.
Notice need not be given of regular meetings of the Board of Directors
which are held at the time and place designated by the Board of
Directors. If a regular meeting is not to be held at the time and
place designated by the Board of Directors, notice of such meeting,
which need not specify the business to be transacted thereat and which
may be either verbal or in writing, shall be given by the President to
each member of the Board of Directors at least twenty-four (24) hours
before the time of the meeting.
<PAGE 104>
A majority of the members of the Board of Directors shall
constitute a quorum for the transaction of business. If at the time
fixed for the meeting, including the meeting to organize the new Board
following the annual meeting of shareholders, a quorum is not present,
the directors in attendance may adjourn the meeting from time to time
until a quorum is present.
Except as otherwise provided herein, a majority of Directors
present and voting at any meeting of the Board of Directors at which a
quorum is present, shall decide each matter considered. A Director
cannot vote by proxy, or otherwise act by proxy at a meeting of the
Board of Directors.
Section 207. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President or
at the request of a majority of Directors then in office. A special
meeting of the Board of Directors shall be deemed to be any meeting
other than a regular meeting of the Board of Directors. Notice of the
time and place of every special meeting, which need not specify the
business to be transacted thereat, shall be given by the Chairman or
the President to each member of the Board at least twenty-four (24)
hours before the time of such meeting.
Section 208. Reports and Records. The reports of officers and
Committees and the records of the proceedings of all Committees shall
be filed with the Secretary of the Corporation and presented to the
Board of Directors, if practicable, at its next regular meeting. The
Board of Directors shall keep complete records of its proceedings in a
minute book kept for that purpose. When a Director shall request it,
the vote of each Director upon a particular question shall be recorded
in the minutes.
ARTICLE III. COMMITTEES.
Section 301. Committees. The following two (2) Committees of
the Board of Directors shall be established by the Board of Directors
in addition to any other Committee the Board of Directors may in its
discretion establish: Executive and Audit Committees.
Section 302. Executive Committee. The Executive Committee shall
consist of not more than five (5) Directors, including the President
who shall serve as Chairman of the Committee and who shall designate
the remaining members. A majority of the members of the Executive
Committee shall constitute a quorum, and actions of a majority of
those present at a meeting at which a quorum is present shall be the
actions of the Committee. Meetings of the Committee may be called at
any time by the Chairman of the Committee or his designee. The
Executive Committee shall have and exercise the authority of the Board
of Directors in the management of the business of the Corporation
between the dates of regular meetings of the Board of Directors.
Section 303. Audit Committee. The Audit Committee shall consist
of at least three (3) Directors, none of whom shall be officers of the
<PAGE 105> Corporation. Meetings of the Committee may be called at
any time by the Chairman of the Board or the Chairman of the Committee
or his designee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the actions
of a majority of those present at a meeting at which a quorum is
present shall be the actions of the Committee. The Committee shall,
among other things, supervise the audit of the books of the
Corporation and recommend for approval by the Board the services of a
reputable Certified Public Accounting firm to perform such audit.
Section 304. Appointment of Committee Members. The President
shall appoint the members of the Committees and the Chairman of each
such Committee to serve until the next annual meeting of shareholders.
The President shall appoint the members of any other Committees
established by the Board of Directors, and the Chairman of such
Committee, to serve until the next annual meeting of shareholders.
The Board of Directors may appoint, from time to time, other
committees, for such purposes and with such powers as the Board may
determine.
Section 305. Organization and Proceedings. Each Committee of
the Board of Directors shall effect its own organization by the
appointment of a Secretary and such other officers, except the
Chairman, as it may deem necessary. A record of proceedings of all
Committees shall be kept by the Secretary of such Committee and filed
and presented as provided in Section 208 of these Bylaws.
ARTICLE IV. OFFICERS.
Section 401. Chairman. The Board of Directors shall appoint one
of its members to be the Chairman to serve at the pleasure of the
Board. He shall be a voting member of the Board of Directors and
shall preside at all meetings of the Board of Directors, and
shareholders.
Section 402. President. The Board of Directors shall appoint a
President of the Corporation who shall be a member of the Board of
Directors. In the absence of the Chairman of the Board, the President
shall preside at any meeting of the Board. The President shall
supervise the carrying out of the policies adopted or approved by the
Board. He shall have general executive powers, as well as the
specific powers conferred by these Bylaws. He shall also have and may
exercise such further powers and duties as from time to time may be
conferred upon,or assigned to him by the Board of Directors.
Section 403. Vice Presidents. The Board of Directors may
appoint one or more Executive Vice Presidents, Senior Vice Presidents,
Vice Presidents and Assistant Vice Presidents (collectively referred
to herein as the "Vice Presidents"). The Vice Presidents shall have
such powers and duties as may be assigned to them by the Board of
Directors. The Executive Vice Presidents shall, in the absence of the
President, perform all the duties of the President.
<PAGE 106>
Section 404. Secretary. The Board of Directors shall appoint a
Secretary, who shall be Secretary of the Board and of the Corporation,
and shall keep accurate minutes of all meetings. He shall attend to
the giving of all notices required by these Bylaws to be given. He
shall be custodian of the corporate seal, records, documents and
papers of the Corporation. He shall provide for the keeping of proper
records of all transactions of the Corporation. He shall have and may
exercise any and all other powers and duties pertaining by law,
regulation or practice, to the office of Secretary, or imposed by
these Bylaws. He shall also perform such other duties as may be
assigned to him, from time to time, by the Board of Directors.
Section 405. Chief Financial Officer ("CFO"). The CFO shall act
under the supervision of the President or such other officer as the
President may designate. The CFO shall have custody of the
Corporation's funds and such other duties as may be prescribed by the
Board of Directors, President or such other Supervising Officer as the
president may designate.
Section 406. Assistant Officers. Unless otherwise provided by
the Board of Directors, each Assistant Officer shall perform such
duties as shall be prescribed by the Board of Directors, the Chairman
of the Board, the President or the Officer to whom he/she is an
Assistant. In the event of the absence or disability of an Officer or
his/her refusal to act, his/her Assistant Officer shall, in the order
of their rank, and within the same rank in the order of their
seniority, have the powers and authorities of such Officer.
Section 407. Compensation. Unless otherwise provided by the
Board of Directors, the salaries and compensation of all Officers and
Assistant Officers, except the President shall be fixed by the
President in accordance with the general salary administration
programs and guidelines established by the Board.
Section 408. General Powers. The Officers are authorized to do
and perform such corporate acts as are necessary in the carrying on of
the business of the Corporation, subject always to the direction of
the Board of Directors.
ARTICLE V. SHARES OF CAPITAL STOCK.
Section 501. Authority to Sign Share Certificates. Every share
certificate of the Corporation shall be signed by the Chairman of the
Board, the President or by an Executive Vice President or one of the
Vice Presidents. Certificates may be signed by facsimile signature.
Section 502. Lost or Destroyed Certificates. Any person
claiming a share certificate to be lost, destroyed or wrongfully taken
shall receive a replacement certificate if such person shall have:
(a) requested such replacement certificate before the Corporation has
notice that the shares have been acquired by a bona fide purchaser;
(b) provided the Corporation with an indemnity agreement satisfactory
in form and substance to the Chairman of the Board, the President or
the Executive Vice President; and (c) satisfied any other reasonable
<PAGE 107> requirements (including providing an affidavit and a surety
bond) fixed by the Vice Chairman and President or the Executive Vice
President.
ARTICLE VI. GENERAL.
Section 601. Fiscal Year. The fiscal year of the Corporation
shall begin on the first (1st) day of January in each year and end on
the thirty-first (31st) day of December in each year.
Section 602. Absentee Participation in Meetings. Participation
in meetings of the Board of Directors, or of Committees of the Board,
by means of a conference telephone or similar communications
equipment, by means of which all persons participating in the meeting
can hear each other shall be permitted.
Section 603. Emergency Bylaws. In the event of any emergency
resulting from a nuclear attack or similar disaster, and during the
continuance of such emergency, the following Bylaw provisions shall be
in effect, notwithstanding any other provisions of the Bylaws:
(a) A meeting of the Board of Directors or of any Committee
thereof may be called by any Officer or Director upon one (1) hour's
notice to all persons entitled to notice whom, in the sole judgment of
the notifier, it is feasible to notify;
(b) The Director or Directors in attendance at the meeting
of the Board of Directors or of any Committee thereof shall constitute
a quorum; and
(c) These Bylaws may be amended or repealed, in whole or in
part, by a majority vote of the Directors attending any meeting of the
board of Directors, provided such amendment or repeal shall only be
effective for the duration of such emergency.
Section 604. Severability. If any provision of these Bylaws is
illegal or unenforceable as such, such illegality or unenforceability
shall not affect any other provision of these Bylaws and such other
provisions shall continue in full force and effect.
ARTICLE VII. LIABILITY OF DIRECTORS: INDEMNIFICATION.
Section 701. Elimination of Liability. To the fullest extent
permitted by the laws of the Commonwealth of Pennsylvania, a Director
of the Corporation shall not be personally liable for monetary damages
for any action taken or any failure to take any action unless the
Director has breached or failed to perform the duties of his or her
office under the Pennsylvania Business Corporation Law of 1988, as
amended, or any successor statute, and such breach or failure
constitutes self-dealing, willful misconduct or recklessness. The
provisions of this Section 701 shall not apply with respect to the
responsibility or liability of a Director under any criminal statute
or the liability of a director for the payment of taxes pursuant to
local, state or federal law. <PAGE 108>
Section 702. Indemnification. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative by reason of
the fact that such person is or was a Director, officer, employee, or
agent of the Corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), amounts paid in
settlement, judgments, and fines actually and reasonably incurred by
such person in connection with such action, suit, or proceeding;
provided, however, that no indemnification shall be made in any case
where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful
misconduct or recklessness.
Section 703. Expenses. Expenses (including attorneys' fees)
incurred in defending a civil or criminal action, suit, or proceeding
shall be paid by the Corporation in advance of the final disposition
of such action, suit, or proceeding upon receipt of an undertaking by
or on behalf of the Director, officer, employee, or agent to repay
such amount if it shall be ultimately determined that he/she is not
entitled to be indemnified by the Corporation as authorized in this
Article VII.
Section 704. Non-Exclusive. The indemnification and advancement
of expenses provided by this Article VII shall not be deemed exclusive
of any other right to which persons seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
shareholders or disinterested directors, or otherwise, both as to
actions in such persons' official capacity and as to their actions in
another capacity while holding office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent
and shall inure to the benefit of the heirs, executors, and
administrator of such person.
Section 705. Insurance, Etc. The Corporation may purchase and
maintain insurance on behalf of any person, may enter into contracts
of indemnification with any person, may create a fund of any nature
(which may, but need not be, under the control of a trustee) for the
benefit of any person, and may otherwise secure in any manner its
obligations with respect to indemnification and advancement of
expenses, whether arising under this Article IX or otherwise, to or
for the benefit of any person, whether or not the Corporation would
have the power to indemnify such person against such liability under
the provisions of this Article VII.
Section 706. Amendment. Notwithstanding anything herein
contained or contained in the Articles of Incorporation to the
contrary, this Article VII may not be amended or repealed, and a
provision inconsistent herewith may not be adopted, except by the
affirmative vote of 66-2/3% of the members of the entire Board of
Directors or by the affirmative vote of shareholders of the
corporation entitled to cast at least 75% of all votes which
<PAGE 109> shareholders of the corporation are then entitled to cast,
except that, if the laws of the Commonwealth of Pennsylvania are
amended or any other statute is enacted so as to decrease the exposure
of directors to liability or to increase the indemnification rights
available, this Article VII and any other provision of these Bylaws
inconsistent with such decreased exposure or increased indemnification
rights shall be amended, automatically and without any further action
on the part of shareholders or directors, to reflect such decreased
exposure or to include such increased indemnification rights, unless
such legislation expressly otherwise requires. Any repeal or
modification of this Article VII by the directors or shareholders of
the Corporation shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director of the
Corporation or any right to indemnification for any action taken or
any failure to take any action occurring prior to the time of such
repeal or modification.
Section 707. Severability. If, for any reason, any provision of
this Article VII shall be held invalid, such invalidity shall not
affect any other provision not held so invalid, and each such other
provision shall, to the full extent consistent with law, continue in
full force and effect. If any provision of this Article VII shall be
held invalid in part, such invalidity shall in no way affect the
remainder of such provision, and the remainder of such provision,
together with all other provisions of this Article VII shall, to the
full extent consistent with law, continue in full force and effect.
ARTICLE VIII. AMENDMENT OR REPEAL.
Section 801. Amendment or Repeal by the Board of Directors.
These Bylaws may be amended or repealed, in whole or in part, in the
manner set forth in the Articles of Incorporation.
PAGE 110
EXHIBIT C
DIRECTORS
CLASS I
CLASS II
CLASS III
OFFICERS
Joseph W. Major - President and Chief Executive
Officer
Richard A. Elko - Executive Vice President and
Chief Financial Officer
PAGE 111
EXHIBIT 6
FORM OF OPINION OF COUNSEL TO PATRIOT BANK CORP
FLC shall have received from counsel to Patriot, an opinion,
dated as of the Closing Date, substantially to the effect that,
subject to normal exceptions and qualifications:
(a) Patriot has full corporate power to carry out the
transactions contemplated in the Agreement. The execution and
delivery of the Agreement and the consummation of the transactions
contemplated thereunder have been duly and validly authorized by all
necessary corporate action on the part of Patriot, and the Agreement
constitutes a valid and legally binding obligation of Patriot, except
as may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship, and other laws now or
hereafter in effect relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of banking
institutions or their holding companies, and (ii) general equitable
principles, except that no opinion need be rendered as to the effect
or availability of equitable remedies or injunctive relief (regardless
of whether such enforceability is considered in a proceeding in equity
or at law).
(b) Subject to satisfaction of the conditions set forth in
the Agreement, neither the transactions contemplated in the Agreement,
nor compliance by Patriot with any of the provisions thereof, will
(i) conflict with or result in a breach or default under (A) the
certificate of incorporation or bylaws of Patriot or the articles of
incorporation or bylaws of Patriot Bank, or, (B) to the knowledge of
such counsel, any note, bond, mortgage, indenture, license, agreement
or other material instrument or obligation to which Patriot or Patriot
Bank is a party; or (ii) based on certificates of officers and without
independent verification, to the knowledge of such counsel, result in
the creation or imposition of any material lien or encumbrance upon
the property of Patriot or Patriot Bank, except such material lien,
instrument or obligation that has been disclosed pursuant to the
Agreement or the Plan; or (iii) violate in any material respect any
order, writ, injunction or decree known to such counsel, or any
federal or Pennsylvania statute, rule or regulation applicable to
Patriot or Patriot Bank.
(c) Patriot Bank is a validly existing Pennsylvania-
chartered commercial bank organized under the laws of the Commonwealth
of Pennsylvania and the United States of America. The deposits of
Patriot Bank are insured to the maximum extent provided by law by the
Federal Deposit Insurance Corporation. Patriot Bank has full
corporate power to carry out the transactions contemplated in the Bank
Plan of Merger. The execution and delivery of the Bank Plan of Merger
and the consummation of the transactions contemplated thereunder have
been duly and validly authorized by all necessary corporate action on
the part of Patriot Bank, and the Bank Plan of Merger constitutes a
<PAGE 112> valid and legally binding obligation of Patriot Bank,
except as may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship, and other
laws now or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors
of banking institutions or their holding companies, and (ii) general
equitable principles, except that no opinion need be rendered as to
the effect or availability of equitable remedies or injunctive relief
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(d) There is, to the knowledge of such counsel, no legal,
administrative, arbitration or governmental proceeding or
investigation pending or threatened to which Patriot or Patriot Bank
is a party which would, if determined adversely to Patriot or Patriot
Bank, have a material adverse effect on the financial condition or
results of operation of Patriot and Patriot Bank taken as a whole, or
which presents a claim to restrain or prohibit the transactions
contemplated by the Agreement and the Plan, respectively.
(e) No consent, approval, authorization or order of any
federal or state court or federal or state governmental agency or
body, or to such counsel's knowledge, of any third party, is required
for the consummation by Patriot of the transactions contemplated by
the Agreement, except for such consents, approvals, authorizations or
orders as have been obtained or which would not have a Material
Adverse Effect upon Patriot or the Holding Company upon consummation
of the Consolidation.
(f) Upon the filing and effectiveness of the Articles and
Certificate of Consolidation with the PDS and DGCL, the Consolidation
will have been effected in compliance with all applicable Pennsylvania
and Delaware laws and regulations in all material respects.
(g) The shares of Holding Company Common Stock to be issued
in connection with the Consolidation have been duly authorized and
will, when issued in accordance with the terms of the Agreement, be
validly issued, fully paid and nonassessable, free and clear of any
mortgage, pledge, lien, encumbrance or claim (legal or equitable).
Such counsel's opinion shall be limited to matters governed
by federal banking and securities laws, the BCL and the DGCL.
PAGE 113
EXHIBIT 7
FORM OF OPINION OF COUNSEL TO FLC
Patriot shall have received from counsel to FLC, an opinion,
dated as of the Closing Date, substantially to the effect that,
subject to normal exceptions and qualifications:
(a) FLC has full corporate power to carry out the
transactions contemplated in the Agreement. The execution and
delivery of the Agreement and the consummation of the transactions
contemplated thereunder have been duly and validly authorized by all
necessary corporate action on the part of FLC and the Agreement
constitutes a valid and legally binding obligation of FLC except as
may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship, and other laws now or
hereafter in effect relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of banking
institutions or their holding companies, and (ii) general equitable
principles, except that no opinion need be rendered as to the effect
or availability of equitable remedies or injunctive relief (regardless
of whether such enforceability is considered in a proceeding in equity
or at law).
(b) Subject to satisfaction of the conditions set forth in
the Agreement, neither the transactions contemplated in the Agreement
nor compliance by FLC with any of the provisions thereof, will
(i) conflict with or result in a breach or default under (A) the
articles of incorporation or bylaws of FLC or the articles of
incorporation or bylaws of First Lehigh Bank, or (B) based on
certificates of officers and without independent verification, to the
knowledge of such counsel, any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which FLC or
First Lehigh Bank is a party; or (ii) to the knowledge of such
counsel, result in the creation or imposition of any material lien,
instrument or encumbrance upon the property of FLC or First Lehigh
Bank, except such material lien, instrument or obligation that has
been disclosed to Patriot pursuant to the Agreement and the Plan, or
(iii) violate in any material respect any order, writ, injunction, or
decree known to such counsel, or any statute, rule or regulation
applicable to FLC or First Lehigh Bank.
(c) First Lehigh Bank is a validly existing bank organized
under the laws of the Commonwealth of Pennsylvania. The deposits of
First Lehigh Bank are insured to the maximum extent provided by law by
the Federal Deposit Insurance Corporation. First Lehigh Bank has full
corporate power to carry out the transactions contemplated in the Bank
Plan of Merger. The execution and delivery of the Bank Plan of Merger
and the consummation of the transactions contemplated thereunder have
been duly and validly authorized by all necessary corporate action on
the part of First Lehigh Bank and the Bank Plan of Merger constitutes
a valid and legally binding obligation of First Lehigh Bank except as
<PAGE 114> may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship, and other
laws now or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors
of banking institutions or their holding companies, and (ii) general
equitable principles, except that no opinion need be rendered as to
the effect or availability of equitable remedies or injunctive relief
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(d) There is, to the knowledge of such counsel, no legal,
administrative, arbitration or governmental proceeding or
investigation pending or threatened to which FLC or First Lehigh Bank
is a party which would, if determined adversely to FLC or First Lehigh
Bank, have a material adverse effect on the business, properties,
results of operations, or condition, financial or otherwise, of FLC or
First Lehigh Bank taken as a whole or which presents a claim to
restrain or prohibit the transactions contemplated by the Agreement
and the Plan, respectively.
(e) No consent, approval, authorization, or order of any
federal or state court or federal or state governmental agency or
body, or to such counsel's knowledge, of any third party of any third
party, is required for the consummation by FLC of the transactions
contemplated by the Agreement, except for such consents, approvals,
authorizations or orders as have been obtained or which would not have
a Material Adverse Effect upon FLC or the Holding Company upon
consummation of the Consolidation.
Such counsel's opinion shall be limited to matters governed
by federal banking and securities laws and by the BCL.
PAGE 115
EXHIBIT 8
FORM OF TAX OPINION OF STEVENS & LEE
FLC and Patriot shall have received an opinion of Stevens & Lee
substantially to the effect that, under the provisions of the IRC:
1. The Consolidation will constitute a reorganization within the
meaning of IRC Section 368(a)(1)(A).
2. FLC, Patriot and the Holding Company will each be "a party to
a reorganization" within the meaning of IRC Section 368(b).
3. Neither FLC, nor Patriot, nor the Holding Company will
recognize any gain or loss upon the respective transfers of FLC's and
Patriot's assets to the Holding Company in exchange solely for Holding
Company Common Stock (including any fractional share interests) and
the assumption by the Holding Company of the respective liabilities of
FLC and Patriot.
4. The basis of the respective FLC and Patriot assets in the
hands of the Holding Company will be the same as the basis of such
assets in the hands of FLC and Patriot immediately prior to the
Consolidation.
5. The holding period of the respective assets of FLC and
Patriot to be received by the Holding Company will include the period
during which the assets were held by FLC and Patriot.
6. No gain or loss will be recognized by the shareholders of FLC
or Patriot on the receipt of Holding Company Common Stock (including
any fractional share interests) solely in exchange for their shares of
FLC or Patriot Common Stock, as the case may be.
7. The basis of the Holding Company Common Stock (including any
fractional share interests) to be received by the FLC and Patriot
shareholders in the Consolidation will be the same as the basis of the
FLC or Patriot Common Stock, as the case may be, surrendered in
exchange therefor.
8. The holding period of the Holding Company Common Stock
(including any fractional share interests) to be received by the FLC
and Patriot shareholders in the Consolidation will include the period
during which the FLC and Patriot shareholders held their respective
FLC and Patriot Common Stock, provided the shares of such FLC or
Patriot Common Stock, as the case may be, are held as a capital asset
on the Effective Date of the Consolidation.
9. The payment of cash in lieu of fractional share interests of
Holding Company Common Stock will be treated as if the fractional
share interests were distributed as part of the Consolidation and then
redeemed by the Holding Company. Such cash payments will be treated
<PAGE 116> as having been received as distributions in full payment in
exchange for the fractional share interests redeemed, as provided in
IRC Section 302(a). Any gain or loss recognized by an FLC or Patriot
shareholder will be a capital gain or loss, provided the shares of FLC
or Patriot Common Stock, as the case may be, are held as a capital
asset on the Effective Date of the Consolidation.
10. As provided in IRC Section 381(c)(2) and related Treasury
regulations, the Holding Company will succeed to and take into account
the earnings and profits, or deficit in earnings and profits, of FLC
and Patriot as of the Effective Date of the Consolidation. Any
deficit in the earnings and profits of the parties will be used only
to offset the earnings and profits accumulated after the
Consolidation.
11. Pursuant to IRC Section 381(a) and related Treasury
regulations, the Holding Company will succeed to and take into account
the respective items of FLC and Patriot described in IRC Section
381(c). Such items will be taken into account by Holding Company
subject to the conditions and limitations of IRC Sections 381, 382,
383, and 384 and the Treasury regulations thereunder.
12. The Bank Merger will constitute a reorganization within the
meaning of IRC Section 368(a)(1).
13. First Lehigh Bank and Patriot Bank will each be "a party to a
reorganization" within the meaning of IRC Section 368(b).
14. Neither First Lehigh Bank nor Patriot Bank will recognize any
gain or loss upon the transfer of First Lehigh Bank's assets to
Patriot Bank in constructive exchange solely for Patriot Bank Common
Stock and the assumption by Patriot Bank of the liabilities of First
Lehigh Bank.
15. The basis of the First Lehigh Bank assets in the hands of
Patriot Bank will be the same as the basis of such assets in the hands
of First Lehigh Bank immediately prior to the Bank Merger.
16. The holding period of the First Lehigh Bank assets in the
hands of Patriot Bank will include the period during which such assets
were held by First Lehigh Bank.
17. No gain or loss will be recognized by the Holding Company, as
the shareholder of First Lehigh Bank, upon the constructive receipt of
shares of Patriot Bank Common Stock in exchange for the First Lehigh
Bank Common Stock surrendered in exchange therefor in the Bank Merger.
18. The basis of the Patriot Bank Common Stock to be held by the
Holding Company after the Bank Merger will equal the basis of such
stock immediately before the Bank Merger, increased by the basis of
the First Lehigh Bank Common Stock surrendered in the constructive
exchange.
<PAGE 117>
19. As provided in IRC Section 381(c)(2) and related Treasury
regulations, Patriot Bank will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of First
Lehigh Bank as of the effective date of the Bank Merger. Any deficit
in the earnings and profits of Patriot Bank or First Lehigh Bank will
be used only to offset the earnings and profits accumulated after the
Bank Merger.
20. Pursuant to IRC Section 381(a) and related Treasury
regulations, Patriot Bank will succeed to and take into account the
items of First Lehigh Bank described in IRC Section 381(c). Such
items will be taken into account by Patriot Bank subject to the
conditions and limitations of IRC Sections 381, 382, 383, and 384 and
the Treasury regulations thereunder.
<PAGE 118>