SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 27, 2000
--------------
YORK FINANCIAL CORP.
--------------------
(Exact Name of Registrant as Specified in Charter)
Pennsylvania 0-14995 23-2427539
- ---------------------------- --------------------- ------------------
(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
101 South George Street, York, Pennsylvania 17401
- ------------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (717) 846-8777
--------------
Not Applicable
--------------------------------------------------------------
(Former name or former address, if changed since last report)
Items 1, 2, 3, 4 and 6: Not Applicable
Item 5. Other Events
------------
On March 27, 2000, York Financial Corp. (the "Registrant") entered into
an Agreement and Plan of Reorganization by and between York Financial Corp.
and York Federal Savings and Loan Association and Harris Financial, MHC,
Harris Financial, Inc., New Harris Financial, Inc. and Harris Savings Bank.
The Registrant is the holding company of York Federal Savings and Loan
Association. Harris Financial, MHC is the mutual holding company of Harris
Financial, Inc. and owns approximately 76% of Harris Financial Inc.'s
outstanding shares of common stock. Harris Savings Bank is Harris Financial
Inc.'s wholly-owned subsidiary. New Harris Financial is a special-purpose
subsidiary formed to facilitate the merger of the Registrant with and into
Harris Financial Inc.
The Agreement provides for the merger of the Registrant with and into
Harris Financial Inc., with Harris Financial Inc. as the surviving entity.
The merger consideration will be stock, but in certain circumstances may
include between 15% and 30% cash.
A copy of the Agreement and Plan of Reorganization and the press release
relating to the announcement of the transaction is filed as an exhibit to this
Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits
-------------------------------------------------------------------
1. March 27, 2000, Agreement and Plan of Reorganization by and Between
Harris Financial, MHC, Harris Financial, Inc., New Harris Financial,
Inc. and Harris Savings Bank, and York Financial Corp. and York
Federal Savings and Loan Association.
2. Press release relating to the execution of the Agreement and Plan of
Reorganization.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
YORK FINANCIAL CORP.
DATE: April 10, 2000 By: /s/ Robert W. Pullo
------------------------------------
Robert W. Pullo
President and Chief Executive Officer
EXHIBIT 1
Agreement and Plan of Reorganization
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
HARRIS FINANCIAL, M.H.C.,
HARRIS FINANCIAL, INC.,
NEW HARRIS FINANCIAL, INC.,
HARRIS SAVINGS BANK
AND
YORK FINANCIAL CORP. AND
YORK FEDERAL SAVINGS AND LOAN ASSOCIATION
MARCH 27, 2000
TABLE OF CONTENTS
AGREEMENT AND PLAN OF REORGANIZATION
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions..........................................1
ARTICLE II
THE MERGER
2.1 The Merger...................................................9
2.2 Effective Time...............................................9
2.4 Directors and Officers of Surviving Corporation..............9
2.5 Directors and Officers of New Harris Financial and
Harris Savings Bank..........................................9
2.6 Additional Actions..........................................10
2.7 Effects of the Merger.......................................11
2.8 The York Option Agreement...................................11
2.9 Possible Alternative Structures.............................11
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration........................................11
3.2 York Options................................................13
3.3 Dissenting Shares...........................................14
3.4 Procedures for Exchange of York Common Stock................14
3.5 Reservation of Shares.......................................16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF YORK
4.1 Capital Structure...........................................17
4.2 Organization, Standing and Authority of York................17
4.3 Ownership of York Subsidiaries..............................17
4.4 Organization, Standing and Authority of York Subsidiaries...18
4.5 Authorized and Effective Agreement..........................18
4.6 Securities Documents and Regulatory Reports.................20
i
4.7 Financial Statements........................................20
4.8 Material Adverse Change.....................................21
4.9 Environmental Matters.......................................21
4.10 Tax Matters.................................................22
4.11 Legal Proceedings...........................................22
4.12 Compliance with Laws........................................23
4.13 Certain Information.........................................23
4.14 Employee Benefit Plans......................................24
4.15 Certain Contracts...........................................27
4.16 Brokers and Finders.........................................28
4.17 Insurance...................................................28
4.18 Properties..................................................28
4.19 Labor.......................................................29
4.20 Certain Transactions........................................29
4.21 Disclosures.................................................29
4.22 Disclosure Schedule.........................................29
4.23 Pooling of Interests........................................29
4.24 Fairness Opinion............................................30
4.25 Loan Portfolio..............................................30
4.26 Required Vote; Inapplicability of Anti-takeover Statutes....30
4.27 Material Interests of Certain Persons.......................30
4.28 Joint Ventures..............................................30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HARRIS
5.1 Capital Structure...........................................31
5.2 Organization, Standing and Authority of the Mutual Company,
Harris Financial and New Harris Financial...................31
5.3 Ownership of Harris Financial Subsidiaries..................32
5.4 Organization, Standing and Authority of
Harris Financial Subsidiaries...............................32
5.5 Authorized and Effective Agreement..........................32
5.6 Securities Documents and Regulatory Reports.................34
5.7 Financial Statements........................................34
5.8 Material Adverse Change.....................................35
5.9 Environmental Matters.......................................35
5.10 Tax Matters.................................................36
5.11 Legal Proceedings...........................................37
5.12 Compliance with Laws........................................37
5.13 Certain Information.........................................38
5.14 Employee Benefit Plans......................................38
5.15 Certain Contracts...........................................40
ii
5.16 Brokers and Finders.........................................41
5.17 Insurance...................................................41
5.18 Properties..................................................42
5.19 Labor.......................................................42
5.20 Certain Transactions........................................42
5.21 Disclosures.................................................42
5.22 Disclosure Schedule.........................................43
5.23 Pooling of Interests........................................43
5.24 Fairness Opinion............................................43
5.25 Loan Portfolio..............................................43
5.26 Required Vote; Inapplicability of Anti-takeover Statutes....43
5.27 Material Interests of Certain Persons.......................44
5.28 Joint Ventures..............................................44
5.29 Ownership of York Common Stock..............................44
ARTICLE VI
COVENANTS OF YORK
6.1 Conduct of Business.........................................44
6.2 Current Information.........................................47
6.3 Access to Properties and Records............................48
6.4 Financial and Other Statements..............................48
6.5 Disclosure Supplements......................................49
6.6 Consents and Approvals of Third Parties.....................49
6.7 All Reasonable Efforts......................................49
6.8 Failure to Fulfill Conditions...............................49
6.9 No Solicitation.............................................49
6.10 Board of Directors and Committee Meetings...................50
ARTICLE VII
COVENANTS OF HARRIS FINANCIAL
7.1 Conduct.....................................................50
7.2 Current Information.........................................50
7.3 Access to Properties and Records............................51
7.4 Financial and Other Statements..............................51
7.5 Disclosure Supplements......................................52
7.6 Consents and Approvals of Third Parties.....................52
7.7 All Reasonable Efforts......................................52
7.8 Failure to Fulfill Conditions...............................52
7.9 Employee Benefits...........................................52
iii
7.10 Directors and Officers Indemnification and Insurance........55
7.12 Options.....................................................56
7.13 Registration of Shares Issuable Upon Exercise of Options....57
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1 York and Harris Financial Special Meetings..................57
8.2 Proxy Statement-Prospectus..................................57
8.3 The Mutual Company Conversion from Mutual to Stock Form.....59
8.4 Regulatory Approvals........................................61
8.5 Affiliates; Publication of Combined Financial Results.......61
ARTICLE IX
CLOSING CONDITIONS
9.1 Conditions to Each Party's Obligations under
this Agreement..............................................61
9.2 Conditions to the Obligations of Harris Financial
under this Agreement........................................63
9.3 Conditions to the Obligations of York
under this Agreement........................................65
ARTICLE X
THE CLOSING
10.1 Time and Place..............................................67
10.2 Deliveries at the Pre-Closing and the Closing...............67
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination.................................................67
11.2 Effect of Termination.......................................69
11.3 Amendment, Extension and Waiver.............................70
ARTICLE XII
MISCELLANEOUS
12.1 Confidentiality.............................................71
12.2 Public Announcements........................................71
12.3 Survival....................................................71
12.4 Notices.....................................................71
12.5 Parties in Interest.........................................72
iv
12.6 Complete Agreement..........................................72
12.7 Counterparts................................................73
12.8 Severability................................................73
12.9 Governing Law...............................................73
12.10 Interpretation..............................................73
12.11 Specific Performance........................................73
Exhibit A Form of Stock Option Agreement..................................A-1
Exhibit B Form of Voting Agreement........................................B-1
Exhibit C Form of Affiliates Agreement....................................C-1
Exhibit D Form of Opinion of Breyer & Associates PC.......................D-1
Exhibit E Form of Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C....E-1
v
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), is dated as
of March 27, 2000 by and between HARRIS FINANCIAL, M.H.C., a Pennsylvania
mutual holding company (the "Mutual Company"), its majority- owned subsidiary,
HARRIS FINANCIAL, INC., a Pennsylvania corporation ("Harris Financial"),
HARRIS SAVINGS BANK, a Pennsylvania savings bank ("Harris Savings Bank"), NEW
HARRIS FINANCIAL, INC., a Pennsylvania corporation ("New Harris Financial"),
YORK FINANCIAL CORP., a Pennsylvania corporation ("York"), and its
wholly-owned subsidiary, YORK FEDERAL SAVINGS AND LOAN ASSOCIATION, a federal
savings association ("York Fed").
WHEREAS, as a condition and inducement to Harris Financial's willingness
to enter into this Agreement, (i) immediately after the execution of this
Agreement York will enter into a Stock Option Agreement with Harris Financial
(the "York Option Agreement"), in the form attached hereto as Exhibit A,
pursuant to which York will grant to Harris Financial the option to purchase
shares of York Common Stock (as defined herein) under certain circumstances,
and (ii) all of the directors of York and York Fed are entering into voting
agreements in the form attached hereto as Exhibit B;
WHEREAS, in connection with the transactions described in this Agreement,
it is intended that the Mutual Company will convert from the mutual form of
organization to the capital stock form of organization, and that in connection
with such conversion New Harris Financial will conduct a subscription offering
of its common stock, and if necessary a community and/or syndicated community
offering, and an exchange offering to the existing public shareholders of
Harris Financial;
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the business transactions described in this
Agreement and to prescribe certain conditions thereto;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings (unless the context otherwise requires, both
here and throughout this Agreement, references to Articles and Sections refer
to Articles and Sections of this Agreement).
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Bank Regulator" shall mean any Federal or state banking regulator,
including but not limited to the FDIC, the OTS, the Department, and the FRB,
which regulates Harris Savings Bank or York Fed, or any of their respective
holding companies or subsidiaries, as the case may be.
"Certificate" shall mean certificates evidencing shares of York Common
Stock.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreements" shall mean the confidentiality agreements
referred to in Section 12.1 of this Agreement.
"Conversion" shall mean the conversion from mutual to stock form of the
Mutual Company, pursuant to the Plan of Conversion to be adopted by the Mutual
Company.
"Conversion Offering" shall mean the offering, in connection with the
Conversion, of shares of Harris Common Stock in a subscription offering and,
if necessary, a community offering and/or a syndicated community offering.
"Conversion Prospectus" shall mean a prospectus issued by New Harris
Financial in connection with the Offering, that meets all of the requirements
of the Securities Act, applicable state securities laws and banking laws and
regulations. The Conversion Prospectus may be combined with (i) the Proxy
Statement-Prospectus delivered to shareholders of York in connection with the
solicitation of their approval of this Agreement and the transactions
contemplated hereby and the offering of the New Harris Common Stock to them as
Merger Consideration, and (ii) the proxy statement delivered to Harris
Financial stockholders in connection with the solicitation of their approval
of the Conversion and the Plan of Conversion.
"Conversion Registration Statement" shall mean the registration
statement, together with all amendments, filed with the SEC under the
Securities Act for the purpose of registering shares of New Harris Common
Stock to be offered and issued in connection with the Offering. The Merger
Registration Statement and the Conversion Registration Statement may be
separate registration statements or may be combined in one registration
statement that shall register shares of New Harris Common Stock to be offered
and issued in connection with the Offering and to be offered to holders of
York Common Stock in connection with the Merger.
"Department" shall mean the Pennsylvania Department of Banking.
"Depositors" shall mean former or current depositors of Harris Savings
Bank that under the Plan of Conversion are given, as indicated by the context,
the opportunity to purchase New Harris Common Stock in the Conversion or the
opportunity to vote on the Plan of Conversion.
2
"DOJ" shall mean the United States Department of Justice.
"Effective Date" shall mean the date on which the Effective Time occurs.
The Effective Date shall not occur until after the closing of the Offering.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from
the presence, or release into the environment, of any Materials of
Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) 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
(2) the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Materials
of Environment Concern. The term Environmental Law includes without limitation
(a) the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, 42 U.S.C. ss.9601, et seq; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42
U.S.C. ss.7401, et seq; the Federal Water Pollution Control Act, as amended,
33 U.S.C. ss.1251, et seq; the Toxic Substances Control Act, as amended, 15
U.S.C. ss.9601, et seq; the Emergency Planning and Community Right to Know
Act, 42 U.S.C. ss.1101, et seq; the Safe Drinking Water Act, 42 U.S.C.
ss.300f, et seq; and all comparable state and local laws, and (b) any common
law (including without limitation common law that may impose strict liability)
that may impose liability or obligations for injuries or damages due to the
presence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean a bank or trust company designated by Harris
Financial, reasonably acceptable to York, which shall act as agent for New
Harris Financial in connection with the exchange procedures for converting
Certificates into the Merger Consideration.
"Exchange Offering" shall mean the offer and issuance of New Harris
Common Stock, in connection with the Conversion, to the existing public
shareholders of Harris Financial.
3
"Exchange Ratio" shall have the meaning set forth in Section 3.1.1.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of Pittsburgh.
"FRB" shall mean the Board of Governors of the Federal Reserve System or
any successor thereto.
"GAAP" shall mean Generally Accepted Accounting Principles.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"Harris" shall mean the Mutual Company, New Harris Financial, Harris
Financial and/or any direct or indirect Subsidiary of Harris Financial.
"Harris Common Stock" shall mean the common stock, par value $.01 per
share, of Harris Financial.
"HARRIS DISCLOSURE SCHEDULE" shall mean a written, signed disclosure
schedule delivered by Harris Financial to York specifically referring to the
appropriate section of this Agreement and describing in reasonable detail the
matters contained therein.
"Harris Employee Plan(s)" shall mean all stock option, employee stock
purchase, stock bonus and any other stock-based plans, qualified pension or
profit-sharing plans, any deferred compensation, non-qualified plan or
arrangement, supplemental retirement, consultant, bonus or group insurance
contract or any other incentive, health and welfare or employee benefit plan
or agreement maintained for the benefit of any of the employees or former
employees or directors of Harris Financial or any Harris Financial Subsidiary,
whether written or oral.
"Harris Financial" shall mean Harris Financial, Inc., a Pennsylvania
corporation with its principal executive offices located at 235 North Second
Street, Harrisburg, Pennsylvania 17101, which owns 100% of the common stock of
Harris Savings Bank prior to the Conversion.
"Harris Financial Statements" shall mean the (i) unaudited balance sheet
of the Mutual Company as of December 31, 1999 and the unaudited income
statement of the Mutual Company for the year ended December 31, 1999, and (ii)
the audited consolidated statements of financial condition (including related
notes and schedules) of Harris Financial as of December 31, 1999 and 1998 and
the consolidated statements of operations, shareholders' equity and cash flows
(including related notes and schedules, if any) of Harris Financial for each
of the three years ended December
4
31, 1999, 1998 and 1997, as set forth in Harris Financial's annual report for
the year ended December 31, 1999, and the unaudited interim consolidated
financial statements of Harris Financial as of the end of each quarter
following December 31, 1999, as filed by Harris Financial in its Securities
Documents.
"Harris Savings Bank" shall mean Harris Savings Bank, a Pennsylvania
savings bank, with its principal offices located at 235 North Second Street,
Harrisburg, Pennsylvania 17101, which is a wholly-owned subsidiary of Harris
Financial.
"Harris Option Plans" shall mean the Harris Financial, Inc. 1999
Incentive Stock Option Plan, the 1999 Stock Option Plan for Outside Directors,
the Harris Savings Bank 1996 Incentive Stock Option Plan, the Harris Savings
Bank 1994 Incentive Stock Option Plan, and the 1994 Stock Option Plan for
Outside Directors.
"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended.
"Independent Valuation" shall mean the appraised pro forma market value
of the New Harris Common Stock issued in the Conversion and the Merger, and
any updates, as determined by an independent valuation.
"Joint Venture" shall mean any limited partnership, joint venture,
corporation, or venture capital investment.
"Material Adverse Effect" shall mean, with respect to Harris Financial or
York, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Mutual Company
and Harris Financial and its Subsidiaries taken as a whole, or York and its
Subsidiaries taken as a whole, respectively, or (ii) materially impairs the
ability of either York, on the one hand, or Harris Financial, on the other
hand, to consummate the transactions contemplated by this Agreement; provided
that "Material Adverse Effect" shall not be deemed to include the impact of
(a) changes in laws and regulations affecting banks or thrift institutions
generally, (b) changes in GAAP or regulatory accounting principles generally
applicable to financial institutions and their holding companies, (c) actions
and omissions of a party (or any of its Subsidiaries) taken with the prior
written consent of the other party, (d) changes in interest rates, and (e) the
direct effects of compliance with this Agreement on the operating performance
of the parties including expenses incurred by the parties hereto in
consummating the transactions contemplated by this Agreement, including
without limitation the expenses associated with the termination of any of the
York Employee Plans as and to the extent contemplated herein.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"Maximum Percentage" shall have the meaning set forth in Section
3.1.1(A) hereof.
5
"Merger" shall mean the merger of York with and into New Harris Financial
pursuant to the terms hereof.
"Merger Consideration" shall mean the number of whole shares of New
Harris Common Stock and cash in lieu of fractional shares into which the
shares represented by a Certificate are converted pursuant to Section 3.1 and
any cash paid by New Harris Financial to holders of York Common Stock under
Section 3.1.6.
"Merger Registration Statement" shall mean the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering shares of New Harris Common Stock to be offered to
holders of York Common Stock in connection with the Merger. The Merger
Registration Statement and the Conversion Registration Statement may be
separate registration statements or may be combined in one registration
statement that shall register shares of New Harris Common Stock to be offered
and sold in connection with the Offering and to be offered to holders of York
Common Stock in connection with the Merger.
"Minimum Percentage" shall have the meaning set forth in Section 3.1.1(B)
hereof.
"Mutual Company" shall mean Harris Financial, M.H.C., a Pennsylvania
mutual holding company which owns a majority of the Harris Common Stock.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"New Harris Common Stock" shall mean the common stock, par value $.01 per
share, of New Harris Financial that will be issued and sold in the Offering
and the Merger.
"New Harris Financial" shall mean New Harris Financial, Inc., a
Pennsylvania corporation with its principal executive offices located at 235
North Second Street, Harrisburg, Pennsylvania 17101, which was organized in
connection with the Conversion and which will be the successor to Harris
Financial.
"Offering" shall mean the Conversion Offering and the Exchange Offering.
"OTS" shall mean the Office of Thrift Supervision.
"PBC" shall mean the Pennsylvania Banking Code of 1965, as amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PBCL" shall mean the Pennsylvania Business Corporation Law, as amended.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
6
"Plan of Conversion" shall mean the Plan of Conversion and Reorganization
pursuant to which the Mutual Company will convert from the mutual form of
organization to the capital stock form of organization.
"Pre-Closing" shall have the meaning set forth in Section 10.1 hereof.
"Pre-Closing Date" shall be the date on which the Pre-Closing occurs.
"Proxy Statement-Prospectus" shall mean the proxy statement/prospectus,
as amended or supplemented, to be delivered to shareholders of York in
connection with the solicitation of their approval of this Agreement and the
transactions contemplated hereby and the offering of the New Harris Common
Stock to them as Merger Consideration. The Proxy Statement-Prospectus may be
combined with (i) the Conversion Prospectus delivered to offerees in the
Conversion Offering and Exchange Offering, and (ii) the proxy statement
delivered to Harris Financial stockholders in connection with the solicitation
of their approval of the Conversion and the Plan of Conversion.
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation
of its capital stock.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended, and the rules
and regulations of the SEC promulgated thereunder.
"Stock Exchange" shall mean the Nasdaq National Market.
"Subsidiary" shall have the meanings set forth in Rule 1-02 of Regulation
S-X of the SEC.
"Surviving Corporation" shall have the meaning set forth in Section 2.1
hereof.
"Termination Date" shall mean December 31, 2000, and may be extended to
March 31, 2001 by Harris Financial pursuant to Sections 11.1.11. and
11.2.2(c).
7
"York" shall mean York Financial Corp., a Pennsylvania corporation, with
its principal offices located at 101 South George Street, York, Pennsylvania
17401, which owns 100% of the common stock of York Fed.
"York Fed" shall mean York Federal Savings and Loan Association, a
federal savings association, with its principal offices located at 101 South
George Street, York, Pennsylvania 17401, which is a wholly-owned subsidiary of
York.
"York Common Stock" shall mean the common stock, par value $1.00 per
share, of York.
"York Employee Plan(s)" shall mean all stock option, employee stock
purchase, stock bonus and any other stock-based plans, qualified pension or
profit-sharing plans, any deferred compensation, non-qualified plan or
arrangement, supplemental retirement, consultant, bonus or group insurance
contract or any other incentive, health and welfare or employee benefit plan
or agreement maintained for the benefit of any of the employees or former
employees or directors of York or any York Subsidiary, whether written or
oral.
"YORK DISCLOSURE SCHEDULE" shall mean a written, signed disclosure
schedule delivered by York to Harris Financial specifically referring to the
appropriate section of this Agreement and describing in reasonable detail the
matters described therein.
"York Financial Statements" shall mean (i) the audited consolidated
balance sheets (including related notes and schedules, if any) of York as of
June 30, 1999 and 1998 and the consolidated statements of income, changes in
stockholders' equity and cash flows (including related notes and schedules, if
any) of York for each of the three years ended June 30, 1999, 1998 and 1997 as
filed by York in its Securities Documents, and (ii) the unaudited interim
consolidated financial statements of York as of the end of each calendar
quarter following June 30, 1999 as filed by York in its Securities Documents.
"York Options" shall mean options to purchase shares of York Common Stock
granted pursuant to the York Option Plans or as otherwise set forth in Section
4.01 of the YORK DISCLOSURE SCHEDULE.
"York Option Plans" shall mean the 1984 York Financial Corp. Amended
Incentive Stock Option Plan, 1984 York Financial Corp. Non-Incentive Stock
Option Plan, 1992 York Financial Corp. Non-Incentive Stock Option Plan for
Directors, 1992 York Financial Corp. Stock Option and Incentive Plan, 1995
York Financial Corp. Non-Qualified Stock Option Plan for Directors, and 1997
York Financial Corp. Stock Option and Incentive Plan.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
8
ARTICLE II
THE MERGER
2.1 The Merger. As promptly as practicable following the
satisfaction or waiver of the conditions to each party's respective
obligations hereunder, and subject to the terms and conditions of this
Agreement, at the Effective Time: (a) unless previously done, York shall merge
with and into New Harris Financial with New Harris Financial as the resulting
or surviving corporation (the "Surviving Corporation"); and (b) the separate
existence of York shall cease and all of the rights, privileges, powers,
franchises, properties, assets, liabilities and obligations of York shall be
vested in and assumed by New Harris Financial. As part of the Merger, each
share of York Common Stock will be converted into and exchanged for a number
of shares of New Harris Common Stock pursuant to the terms of Article III
hereof. Immediately after the Merger, York Fed shall merge with and into
Harris Savings Bank, with Harris Savings Bank as the resulting institution.
2.2 Effective Time. The Merger shall be effected by the filing of
articles of merger with the Pennsylvania Department of State in accordance
with Pennsylvania law to become effective on the day of the closing ("Closing
Date") provided for in Article X hereof (the "Closing"). The "Effective Time"
of the Merger shall be the time on the Closing Date (or a subsequent date not
later than the opening of business on the next business day) when the Merger
becomes effective as set forth in the articles of merger. The Closing of the
Merger shall immediately follow the closing of the Offering.
2.3 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of New Harris Financial shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation as in effect immediately
prior to the Effective Time, until thereafter amended as provided therein and
by applicable law.
2.4 Directors and Officers of Surviving Corporation. Subject to
Section 2.5.1, the directors of New Harris Financial immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation. The officers of New Harris Financial
immediately prior to the Effective Time shall be the initial officers of
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
2.5 Directors and Officers of New Harris Financial and Harris
Savings Bank.
2.5.1 Each of the ten (10) directors of Harris Savings Bank and the
ten (10) directors of Harris Financial immediately prior to the Effective Time
shall continue as directors of Harris Savings Bank and New Harris Financial,
respectively, immediately after the Effective Time. Prior to or at the
Effective Time, the Board of Directors of Harris Savings Bank and New Harris
Financial shall increase the number of directors of Harris Savings Bank and
New Harris Financial, respectively, by seven (7) directors such that the total
number of directors on each board shall be
9
seventeen (17). Each of the three classes of the Boards of Directors shall be
increased by two (2), and one of the classes shall be increased by three (3)
so that the number of directors serving in each class shall be as nearly equal
as possible. At the Effective Time, the Board of Directors of York shall
identify seven (7) persons who are directors of York on the date hereof and
thereof, and the Board of Directors of Harris Savings Bank and New Harris
Financial shall elect such persons to fill the vacancies created by the
increase in the number of directors on their respective Boards of Directors.
The Boards of Directors of Harris Savings Bank and New Harris Financial will
use their best efforts to nominate each of the seven directors for at least
one additional term. After the Effective Time, the nominating committees of
New Harris Financial and Harris Savings Bank shall fill any vacancy on the
Boards of Directors of New Harris Financial and Harris Savings Bank,
respectively, that results during the initial terms of the Boards of Directors
of New Harris Financial and Harris Savings Bank pursuant to the
recommendations of: (i) the former directors of York in the case of a vacancy
in a New Harris Financial and Harris Savings Bank director position held by a
former York director; and (ii) the former directors of Harris Financial in the
case of a vacancy in a New Harris Financial and Harris Savings Bank director
position held by a former Harris Financial director. Section 2.5.1 of the
HARRIS DISCLOSURE SCHEDULE sets forth New Harris Financial's intentions with
respect to the composition of certain of its committees following the Merger.
2.5.2 At the Effective Time, (i) the Chairman, President and Chief
Executive Officer of Harris Financial will become the Co-Chairman, President
and Chief Executive Officer of Harris Financial, and (ii) the President and
Chief Executive Officer of York shall be appointed Co-Chairman of the Board of
Directors of New Harris Financial.
2.5.3 The officers of Harris Savings Bank immediately prior to the
Effective Time shall continue as officers of Harris Savings Bank immediately
after the Effective Time, each to hold office in accordance with the Articles
of Incorporation and Bylaws of Harris Savings Bank. The officers and employees
of York Fed immediately prior to the Effective Time shall continue as officers
and employees of Harris Savings Bank immediately after the Effective Time,
except as provided for in Section 7.9 of this Agreement.
2.6 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further
assignments or assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, title to and possession of any property or right of York acquired
or to be acquired by reason of, or as a result of, the Merger, or (b)
otherwise to carry out the purposes of this Agreement, York and its proper
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary
or proper to vest, perfect or confirm title to and possession of such property
or rights in the Surviving Corporation and otherwise to carry out the purposes
of this Agreement; and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of York or otherwise to take any
and all such action.
10
2.7 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Section 1929 of the PBCL.
2.8 The York Option Agreement. The parties acknowledge that
immediately after the execution of this Agreement, York and Harris Financial
will enter into that certain York Option Agreement, dated as of even date
herewith, pursuant to which York will grant to Harris Financial the right to
purchase certain shares of York Common Stock upon terms and conditions
specified in the York Option Agreement.
2.9 Possible Alternative Structures. Notwithstanding anything to
the contrary contained in this Agreement, prior to the Effective Time Harris
Financial shall be entitled to revise the structure of the Merger described in
Section 2.1 hereof, provided that (i) there are no adverse federal or state
income tax consequences to York and its stockholders as a result of the
modification; (ii) the consideration to be paid to the holders of York Common
Stock under this Agreement is not thereby changed in kind, value or reduced in
amount; (iii) there are no adverse changes to the benefits and other
arrangements provided to or on behalf of York's directors, officers and other
employees; (iv) the Merger's qualifying for pooling of interests accounting
treatment will not be adversely affected thereby, unless Arthur Andersen LLP
has previously not been able to provide a letter to Harris Financial pursuant
to the terms of Section 3.1.6 hereof; and (v) such modification will not delay
materially or jeopardize receipt of any required regulatory approvals or other
consents and approvals relating to the consummation of the Merger. The Mutual
Company, Harris Financial, New Harris Financial, Harris Savings Bank, York and
York Fed agree to appropriately amend this Agreement and any related documents
in order to reflect any such revised structure.
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. At the Effective Time, by virtue of the
Merger and without any action on the part of New Harris Financial, York or the
holders of any of the shares of York Common Stock:
3.1.1 Each share of York Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares to be canceled
pursuant to Section 3.1.4) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and exchanged for
1.725 shares of Harris Common Stock (the "Exchange Ratio"), provided that:
(A) If, after giving effect to the issuance of shares of Harris
Common Stock to (i) purchasers in the Conversion Offering, (ii) Harris
Financial shareholders in the Exchange Offering, and (iii) York shareholders
as part of the Merger, the aggregate shares issued or issuable pursuant to
(iii) would represent more than 37.6% (the "Maximum Percentage") of the total
shares issued or issuable pursuant to (i) through (iii), then, subject to
Sections 8.3.8 and 11.1.8, the Exchange Ratio shall be decreased such that the
shares issued or issuable pursuant to (iii) shall
11
represent the Maximum Percentage of the total shares issued or issuable
pursuant to (i) through (iii); and
(B) If, after giving effect to the issuance of shares of Harris
Common Stock to (i) purchasers in the Conversion Offering, (ii) Harris
Financial shareholders in the Exchange Offering, and (iii) York shareholders
as part of the Merger, the aggregate shares issued or issuable pursuant to
(iii) would represent less than 33.8% (the "Minimum Percentage") of the total
shares issued or issuable pursuant to (i) through (iii), then the Exchange
Ratio shall be increased so that the shares issued or issuable pursuant to
(iii) shall represent the Minimum Percentage of the total shares issued or
issuable pursuant to (i) through (iii).
(C) Shares issued after the date of this Agreement pursuant to
the exercise of York Options or Harris Options or shares of New Harris Common
Stock issued in exchange for such shares shall be excluded from all
calculations pursuant to Subsections 3.1.1(A) and 3.1.1(B).
References in this Agreement to the "Exchange Ratio" shall mean
the Exchange Ratio as adjusted in accordance with subsections (A) and (B)
above.
3.1.2 The foregoing determination of the Exchange Ratio assumes that
shares of Harris Common Stock will be sold for $10.00 per share in the
Conversion Offering and that the shares of New Harris Common Stock will be
issued to all former York stockholders immediately following the completion of
the Conversion. If such shares are sold for an amount other than $10.00 per
share, the Exchange Ratio shall be proportionately adjusted to reflect the
actual offering price.
3.1.3 Shares of York Common Stock converted into New Harris Common
Stock pursuant to this Section 3.1 shall be no longer outstanding and shall
automatically be canceled and shall cease to exist, and each Certificate
previously representing any such share shall thereafter represent the right to
receive the Merger Consideration. Certificates previously representing shares
of York Common Stock shall be exchanged for certificates representing whole
shares of New Harris Common Stock and cash in lieu of fractional shares issued
in consideration therefor upon the surrender of such Certificates in
accordance with Section 3.4 hereof, without any interest thereon.
3.1.4 Each share held in the treasury of York and each share of York
Common Stock owned by the Mutual Company, Harris Financial or any direct or
indirect wholly owned subsidiary of Harris Financial or of York immediately
prior to the Effective Time (other than shares held in a fiduciary capacity or
in connection with debts previously contracted) shall, at the Effective Time,
cease to exist, and the certificates for such shares shall be canceled as
promptly as practicable thereafter, and no payment or distribution shall be
made in consideration therefor.
3.1.5 Cash Election. Harris Financial shall request a letter from
Arthur Andersen LLP, dated as of a date prior to the mailing of the Proxy
Statement-Prospectus, addressed to Harris Financial, to the effect that based
on the facts as of such date, the Merger will qualify for "pooling of
interests" accounting treatment. If Arthur Andersen LLP is not able to issue
such letter, then 15%
12
to 30% of the aggregate Merger Consideration issued to former shareholders of
York shall be in the form of cash, and Harris Financial and York agree to
amend the Agreement to provide for the terms of such cash election, and to the
extent there are excess cash elections, all York stockholders electing to
receive cash will receive stock in lieu of cash on a pro rated basis so that
in the aggregate 15% to 30% of the aggregate Merger Consideration will be in
the form of cash. In the event that cash elections are less than 15% of the
aggregate consideration then such shortfall shall be prorated among all
shareholders electing to receive stock resulting in such shareholder receiving
a combination of cash and stock. Harris Financial and York may mutually agree
that the cash consideration issued to former shareholders of York will exceed
15% to 30% of the aggregate Merger Consideration. If cash is issued pursuant
to this Section 3.1.6 to York Shareholders, then: (i) each share of York
Common Stock as to which such election is made shall be converted into and
exchanged for cash in an amount equal to $10.00 multiplied by the Exchange
Ratio; and (ii) the Exchange Ratio and the percentage limitations set forth in
Section 3.1.1(A) and (B) shall be calculated assuming that all shareholders of
York receive shares of Harris Common Stock and no shareholder of York receives
cash as part of his or her Merger Consideration. In addition, Harris Financial
and York may mutually agree that more than 15% to 30% of the aggregate Merger
Consideration issued to former shareholders of York Financial may be in the
form of cash regardless of whether the Merger would otherwise qualify as a
pooling of interests, and in such case Harris Financial and York agree to
amend the Agreement to provide for the terms of such cash election.
3.2 York Options.
3.2.1 Except as set forth in Section 3.2.2, on the Effective Date,
each York Option which is then outstanding, whether or not exercisable, shall
cease to represent a right to acquire shares of York Common Stock and shall be
converted automatically into an option to purchase shares of New Harris Common
Stock, and New Harris Financial shall assume each York Option in accordance
with the terms of the applicable York Option Plan and stock option agreement
by which it is evidenced, except that from and after the Effective Date, (i)
New Harris Financial and its Board of Directors or a duly authorized committee
thereof shall be substituted for York and York's Board of Directors or duly
authorized committee thereof administering such York Option Plan, (ii) each
York Option assumed by New Harris Financial may be exercised solely for shares
of New Harris Common Stock, (iii) the number of shares of New Harris Common
Stock subject to such York Option shall be equal to the number of shares of
York Common Stock subject to such York Option immediately prior to the
Effective Date multiplied by the Exchange Ratio, provided that any fractional
shares of New Harris Common Stock resulting from such multiplication shall be
rounded to the nearest share, and (iv) the per share exercise price under each
such York Option shall be adjusted by dividing the per share exercise price
under each such York Option by the Exchange Ratio, provided that such exercise
price shall be rounded to the nearest cent. Notwithstanding clauses (iii) and
(iv) of the preceding sentence, each York Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Code, 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
Code. New Harris Financial and York agree to take all necessary steps to
effect the foregoing provisions of this Section 3.2.
13
3.2.2 On the Effective Date, each York Option issued pursuant to both
of the York Financial Corp. Non-Incentive Stock Option Plan for Directors and
the York Financial Corp. 1995 Non-Qualified Stock Option Plan for Directors,
which is then outstanding (a "Director Option"), whether or not exercisable,
shall cease to represent a right to acquire shares of York Common Stock and
shall be converted automatically into the right to receive such number of
shares (rounded to the nearest whole share) of New Harris Common Stock as is
equal in value (based on the price for which New Harris Common Stock is sold
in the Conversion Offering) to the difference (if a positive amount) between
(A) the product of the Exchange Ratio, the price for which the shares of New
Harris Common Stock are sold in the Offering and the number of shares of York
Common Stock issuable upon exercise of the Director Options, and (B) the
aggregate exercise price of the Director Options; provided however, that this
Section 3.2.2 shall be further modified if and to the extent necessary to
enable the Merger to qualify for pooling-of-interests accounting treatment.
Prior to the Effective Time, York shall take, or cause to be taken, all
necessary action to effect the intent of the provisions set forth in this
Section 3.2.2. New Harris Financial or, at the option of New Harris Financial,
York, shall make such payment at the Effective Time to each individual
provided that the individual delivers to New Harris Financial his written
acceptance, in a form acceptable to New Harris Financial, of such payment as
full and complete consideration for the cancellation of each York Option held
by him.
3.3 Dissenting Shares. Stockholders of York shall not have
dissenters' rights of appraisal, unless the Merger Consideration includes
cash. Stockholders of Harris Financial shall not have dissenters' rights of
appraisal.
3.4 Procedures for Exchange of York Common Stock.
3.4.1 New Harris Financial to Make Shares Available. Prior to the
Effective Time, New Harris Financial shall designate the Exchange Agent. New
Harris Financial shall take all steps necessary on and as of the Effective
Time to deliver to the Exchange Agent, for the benefit of the holders of
Certificates, for exchange in accordance with this Section 3.4, certificates
representing shares of New Harris Common Stock and cash in lieu of fractional
shares to be paid pursuant to this Section 3.4 (such cash and certificates for
shares of New Harris Common Stock, together with any dividends or
distributions with respect thereto being hereinafter referred to as the
"Exchange Fund") to be issued and paid in exchange for outstanding York Common
Stock in accordance with this Agreement.
3.4.2 Exchange of Certificates. Within five (5) business days after
the Effective Time, New Harris Financial shall take all steps necessary to
cause the Exchange Agent to mail to each holder of a Certificate or
Certificates, a form letter of transmittal for return to the Exchange Agent
and instructions for use in effecting the surrender of the Certificates for
certificates representing the New Harris Common Stock and cash in lieu of
fractional shares into which the York Common Stock represented by such
Certificates shall have been converted as a result of the Merger. The letter
of transmittal (which shall be subject to the reasonable approval of York)
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only
14
upon delivery of the Certificates to the Exchange Agent. Upon surrender of a
Certificate for exchange and cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor (x) a certificate for the
number of whole shares of New Harris Common Stock to which such holder of York
Common Stock shall have become entitled pursuant to the provisions of Section
3.1, and (y) a check representing the amount of cash in lieu of the fractional
shares, if any, which such holder has the right to receive in respect of
Certificates surrendered pursuant to the provisions of this Section 3.4, and
the Certificates so surrendered shall forthwith be canceled. Certificates
surrendered for exchange by any person who is an "affiliate" of York for
purposes of Rule 145(c) under the Securities Act shall not be exchanged for
certificates representing shares of New Harris Common Stock until New Harris
Financial or Harris Financial has received the written agreement of such
person contemplated by Section 8.5 hereof.
3.4.3 Rights of Certificate Holders after the Effective Time. The
holder of a Certificate that prior to the Merger represented issued and
outstanding York Common Stock shall have no rights, after the Effective Time,
with respect to such York Common Stock except to surrender the Certificate in
exchange for the Merger Consideration as provided in this Agreement. No
dividends or other distributions declared after the Effective Time with
respect to New Harris Common Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Section 3.4. After the surrender of a
Certificate in accordance with this Section 3.4, the record holder thereof
shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with
respect to shares of New Harris Common Stock represented by such Certificate.
3.4.4 Fractional Shares. Notwithstanding anything to the contrary
contained herein, no certificates or scrip representing fractional shares of
New Harris Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to New Harris Common
Stock shall be payable on or with respect to any fractional share interest,
and such fractional share interests shall not entitle the owner thereof to
vote or to any other rights of a stockholder of New Harris Financial. In lieu
of the issuance of any such fractional share, New Harris Financial shall pay
to each former holder of York Common Stock who otherwise would be entitled to
receive a fractional share of New Harris Common Stock, an amount in cash
determined by multiplying the price for which the New Harris Common Stock is
sold in the Offering by the fraction of a share of Harris Common Stock which
such holder would otherwise be entitled to receive pursuant to Section 3.4.2
hereof. No interest will be paid on the cash which the holders of such
fractional shares shall be entitled to receive upon such delivery. For
purposes of determining any fractional share interest, all shares of York
Common Stock owned by a York shareholder shall be combined so as to calculate
the maximum number of whole shares of New Harris Common Stock issuable to such
York shareholder.
3.4.5 Surrender by Persons Other than Record Holders. If the Person
surrendering a Certificate and signing the accompanying letter of transmittal
is not the record holder thereof, then it shall be a condition of the payment
of the Merger Consideration that: (i) such Certificate is
15
properly endorsed to such Person or is accompanied by appropriate stock
powers, in either case signed exactly as the name of the record holder appears
on such Certificate, and is otherwise in proper form for transfer, or is
accompanied by appropriate evidence of the authority of the Person
surrendering such Certificate and signing the letter of transmittal to do so
on behalf of the record holder; and (ii) the person requesting such exchange
shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate surrendered, or required for any other reason, or shall
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
3.4.6 Closing of Transfer Books. From and after the Effective Time,
there shall be no transfers on the stock transfer books of York of the York
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be exchanged for the
Merger Consideration and canceled as provided in this Section 3.4.
3.4.7 Return of Exchange Fund. At any time following the twelve (12)-
month period after the Effective Time, New Harris Financial shall be entitled
to require the Exchange Agent to deliver to it any portions of the Exchange
Fund which had been made available to the Exchange Agent and not disbursed to
holders of Certificates (including, without limitation, all interest and other
income received by the Exchange Agent in respect of all funds made available
to it), and thereafter such holders shall be entitled to look to Harris
Financial (subject to abandoned property, escheat and other similar laws) with
respect to any Merger Consideration that may be payable upon due surrender of
the Certificates held by them. Notwithstanding the foregoing, neither New
Harris Financial nor the Exchange Agent shall be liable to any holder of a
Certificate for any Merger Consideration delivered in respect of such
Certificate to a public official pursuant to any abandoned property, escheat
or other similar law.
3.4.8 Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by New Harris Financial, the posting by
such person of a bond in such amount as New Harris Financial may reasonably
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in
respect thereof.
3.5 Reservation of Shares. New Harris Financial shall reserve for
issuance a sufficient number of shares of the New Harris Common Stock for the
purpose of issuing shares of New Harris Common Stock to the York shareholders
and option holders in accordance with this Article III.
16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF YORK
York and York Federal represent and warrant to Harris Financial, New
Harris Financial and Harris Savings Bank that the statements contained in this
Article IV are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article IV), except as set forth in the YORK DISCLOSURE
SCHEDULE delivered by York to Harris Financial on the date hereof, and except
as to any representation or warranty which specifically relates to an earlier
date. York and York Federal have made a good faith effort to ensure that the
disclosure on each schedule of the YORK DISCLOSURE SCHEDULE corresponds to the
section referenced herein. However, for purposes of the YORK DISCLOSURE
SCHEDULE, any item disclosed on any schedule therein is deemed to be fully
disclosed with respect to all schedules under which such item may be relevant.
4.1 Capital Structure. The authorized capital stock of York
consists of 20,000,000 shares of common stock, par value $1.00 per share, and
10,000,000 shares of undesignated preferred stock, par value $1.00 per share.
As of the date of this Agreement, 10,107,267 shares of York Common Stock are
issued and outstanding, no shares of York Common Stock are directly or
indirectly held by York as treasury stock and no shares of York preferred
stock are issued and outstanding. All outstanding shares of York Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of York Common Stock has
been issued in violation of the preemptive rights of any person, firm or
entity. Except for the York Option Plans pursuant to which there are
outstanding options to acquire 1,006,108 shares of York Common Stock, a
schedule of which is set forth in Section 4.1 of the YORK DISCLOSURE SCHEDULE
which has been delivered to Harris Financial prior to the execution of this
Agreement, there are no Rights authorized, issued or outstanding with respect
to or relating to the capital stock of York.
4.2 Organization, Standing and Authority of York. York is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification. York is duly registered as a savings and loan holding company
under the HOLA. York has heretofore delivered to Harris Financial and has
included as Section 4.2 of the YORK DISCLOSURE SCHEDULE true and complete
copies of the Articles of Incorporation and Bylaws of York as in effect as of
the date hereof.
4.3 Ownership of York Subsidiaries. Set forth in Section 4.3 of the
YORK DISCLOSURE SCHEDULE is the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect York Subsidiary. Except for
(x) capital stock of the York Subsidiaries, (y) securities and other interests
held in a fiduciary capacity and beneficially owned by third parties or
17
taken in consideration of debts previously contracted, and (z) securities and
other interests which are set forth in the YORK DISCLOSURE SCHEDULE, York does
not own or have the right or obligation to acquire, directly or indirectly,
any outstanding capital stock or other voting securities or ownership
interests of any corporation, bank, savings association, partnership, joint
venture or other organization, other than investment securities representing
not more than 5% of the outstanding capital stock of any entity. The
outstanding shares of capital stock or other ownership interests of each York
Subsidiary that are owned by York or any York Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and are
directly or indirectly owned by York free and clear of all liens, claims,
encumbrances, charges, pledges, restrictions or rights of third parties of any
kind whatsoever. No Rights are authorized, issued or outstanding with respect
to the capital stock or other ownership interests of any York Subsidiary and
there are no agreements, understandings or commitments relating to the right
of York to vote or to dispose of such capital stock or other ownership
interests.
4.4 Organization, Standing and Authority of York Subsidiaries. Each
York Subsidiary is a savings association, corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Each York Subsidiary (i) has full power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted, and (ii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership
or leasing of property or the conduct of its business requires such
qualification. York is authorized to own each York Subsidiary under the HOLA.
The deposit accounts of York Fed are insured by the FDIC to the maximum extent
permitted by the FDIA. York Fed has paid all premiums and assessments required
by the FDIC. York has heretofore delivered or made available to Harris
Financial and has included as Section 4.4 of the YORK DISCLOSURE SCHEDULE true
and complete copies of the Charter and Bylaws of York Fed as in effect as of
the date hereof.
4.5 Authorized and Effective Agreement.
4.5.1 Each of York and York Fed has all requisite corporate power and
authority to enter into this Agreement and (subject to receipt of all
necessary governmental approvals and the approval of York's shareholders of
this Agreement) to perform all of its obligations under this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of York and York
Fed, except for the approval of this Agreement by York's shareholders. This
Agreement has been duly and validly executed and delivered by York and York
Fed and, assuming due authorization and execution by Harris, constitutes the
legal, valid and binding obligations of York and York Fed, enforceable against
York and York Fed in accordance with its terms, subject, as to enforceability,
to bankruptcy, insolvency and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
4.5.2 York has all requisite corporate power and authority to enter
the York Option Agreement. The execution and delivery of the York Option
Agreement and the consummation of the
18
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action on the part of York. The York Option Agreement has
been duly and validly executed and delivered by York and constitutes the
legal, valid and binding obligation of York, enforceable against York in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
4.5.3 Except as set forth in Section 4.5.3 of the YORK DISCLOSURE
SCHEDULE, neither the execution and delivery of this Agreement or the York
Option Agreement, nor consummation of the transactions contemplated hereby or
thereby, nor compliance by York and York Fed with any of the provisions hereof
or by York with respect to the York Option Agreement (i) does or will conflict
with or result in a breach of any provisions of the Articles of Incorporation
or Bylaws of York or the equivalent documents of any York Subsidiary, (ii)
violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or give rise to any right
of termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of York
or any York Subsidiary pursuant to, any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which York or any York Subsidiary is a party, or by which any of
their respective properties or assets may be bound or affected, or (iii)
subject to receipt of all required governmental and shareholder approvals,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to York or any York Subsidiary.
4.5.4 Except for (i) the filing of applications and notices with, and
the consents and approvals of, as applicable, the Bank Regulators, (ii) the
filing of the Proxy Statement-Prospectus with the SEC, (iii) the approval of
this Agreement by the requisite vote of the shareholders of York, (iv) the
filing of Articles of Merger with the Secretary of State of the Commonwealth
of Pennsylvania pursuant to the PBCL in connection with the Merger, and (v)
review of the Merger by the DOJ under federal antitrust laws, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of York or York Fed in connection
with the execution and delivery by York and York Fed of this Agreement or the
York Option Agreement and the consummation of the Merger by York.
4.5.5 As of the date hereof, neither York nor York Fed is aware of any
reasons relating to York or York Fed (including without limitation Community
Reinvestment Act compliance) why all consents and approvals shall not be
procured from all regulatory agencies having jurisdiction over the Merger as
shall be necessary for (i) consummation of the Merger, and (ii) the
continuation by New Harris Financial after the Effective Time of the business
of York and York Fed as such business is carried on immediately prior to the
Effective Time, free of any conditions or requirements which, in the
reasonable opinion of York, could have a Material Adverse Effect on York or
York Fed or materially impair the value of York and York Fed to New Harris
Financial.
19
4.6 Securities Documents and Regulatory Reports.
4.6.1 Since January 1, 1995, York and any corporation that has merged
into or consolidated with York subsequent to such date have timely filed with
the SEC, the Bank Regulators and the NASD all Securities Documents required by
the Securities Laws and such Securities Documents as the same may have been
amended, complied in all material respects with the Securities Laws and did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.6.2 Since January 1, 1995, each of York and York Fed, and any
financial institution or company that has merged into or consolidated with
York or York Fed, has duly filed with the Bank Regulators in correct form the
reports required to be filed under applicable laws and regulations and such
reports were in all material respects complete and accurate and in compliance
with the requirements of applicable laws and regulations. In connection with
the most recent examinations of York and York Fed by the OTS, neither York nor
York Fed was required to correct or change any action, procedure or proceeding
which York or York Fed believes has not been corrected or changed as required
as of the date hereof in all material respects.
4.7 Financial Statements.
4.7.1 York has previously delivered or made available to Harris
Financial accurate and complete copies of the York Financial Statements which,
in the case of audited York Financial Statements, are accompanied by the audit
reports of its independent public accountants. The York Financial Statements
referred to herein, as well as the York Financial Statements to be delivered
pursuant to Section 6.2 hereof, fairly present or will fairly present, as the
case may be, the consolidated financial condition of York as of the respective
dates set forth therein, and the consolidated results of operations,
shareholders' equity and cash flows of York for the respective periods or as
of the respective dates set forth therein.
4.7.2 Each of the York Financial Statements (including the financial
statements of any company or financial institution that has merged into or
consolidated with York or any York subsidiary) referred to in Section 4.7.1
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as stated therein or, in the case of unaudited interim York
Financial Statements, the absence of footnotes and customary year-end
adjustments. The audits of York and York Subsidiaries have been conducted in
all material respects in accordance with generally accepted auditing
standards. The books and records of York and the York Subsidiaries are being
maintained in material compliance with applicable legal and accounting
requirements, and such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of York and its Subsidiaries. The minute books of York
and each York Subsidiary contain complete and accurate records of all meetings
and other corporate actions of its
20
stockholders and Board of Directors authorized at such meetings held or taken
since January 1, 1995 through the date of this Agreement.
4.7.3 Except (i) as set forth in Section 4.7.3 of the YORK DISCLOSURE
SCHEDULE, (ii) as reflected, disclosed or provided for in the consolidated
statement of financial condition of York as of June 30, 1999 (including
related notes), (iii) for liabilities incurred since June 30, 1999 in the
ordinary course of business and (iv) liabilities incurred in connection with
this Agreement and the transactions contemplated hereby, neither York nor any
York Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of York on a consolidated basis that would be required to be
reflected on an audited consolidated balance sheet of York or the notes
thereto.
4.8 Material Adverse Change. Since June 30, 1999 to the date hereof
(i) York and each York Subsidiary has conducted its respective business in the
ordinary and usual course (excluding the incurrence of expenses in connection
with this Agreement, and excluding the transactions contemplated hereby), and
(ii) no event has occurred or circumstance arisen that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect
on York.
4.9 Environmental Matters.
4.9.1 To the best of York's knowledge, York and each York Subsidiary
is in material compliance with all Environmental Laws. Neither York nor any
York Subsidiary has received any written communication during the last three
years alleging that York or any York Subsidiary is not in such compliance and,
to the best knowledge of York, there are no present circumstances that would
prevent or interfere with the continuation of such compliance.
4.9.2 To the actual knowledge of the senior management and directors
of York and York Fed, none of the properties presently or formerly owned,
leased or operated by York or any York Subsidiary, or in which York or any
York Subsidiary has a lien or other security interest, has been or is in
material violation of or materially liable under any Environmental Law.
4.9.3 To the best of York's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any material Environmental Claim or other claim
or action or governmental investigation that could result in the imposition of
any material liability arising under any Environmental Law against York or any
York Subsidiary or against any person or entity whose liability for any
Environmental Claim York or any York Subsidiary has or may have retained or
assumed either contractually or by operation of law.
4.9.4 Except as set forth in Section 4.9.4 of the YORK DISCLOSURE
SCHEDULE, York has not conducted any environmental studies during the past
five years with respect to any properties owned by York or any York Subsidiary
as of the date hereof.
21
4.10 Tax Matters.
4.10.1 York and each York Subsidiary has timely filed all federal,
state and local (and, if applicable, foreign) income, franchise, bank, excise,
real property, personal property and other tax returns required by applicable
law to be filed by them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made,
have set up an adequate reserve or accrual for the payment of, all material
taxes required to be paid in respect of the periods covered by such returns
and, as of the Effective Time, will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual
for the payment of, all material taxes for any subsequent periods ending on or
prior to the Effective Time. To the best of York's knowledge, neither York nor
any York Subsidiary will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established. As of
the date hereof, no audit, examination or deficiency or refund litigation with
respect to any federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax
returns filed by York or any York Subsidiary is pending or, to the best of
York's knowledge, threatened.
4.10.2 All federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other
tax returns filed by York and its Subsidiaries are complete and accurate in
all material respects. Neither York nor any York Subsidiary is delinquent in
the payment of any tax, assessment or governmental charge, or has requested
any extension of time within which to file any tax returns in respect of any
fiscal year or portion thereof which have not since been filed. Except as set
forth in Section 4.10.2 of the YORK DISCLOSURE SCHEDULE, the federal, state
and local income tax returns of York and its Subsidiaries have been examined
by the applicable tax authorities (or are closed to examination due to the
expiration of the applicable statute of limitations) and no deficiencies for
any tax, assessment or governmental charge have been proposed, asserted or
assessed (tentatively or otherwise) against York or any York Subsidiary as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to York or any York
Subsidiary to extend the period of limitations for the assessment or
collection of any tax.
4.10.3 Except as set forth in Section 4.10.3 of the YORK DISCLOSURE
SCHEDULE, neither York nor any York Subsidiary (i) is a party to any agreement
providing for the allocation or sharing of taxes (other than a tax allocation
agreement between York and York Fed), (ii) is required to include in income
any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by York or any York Subsidiary (nor does
York have any knowledge that the Internal Revenue Service has proposed any
such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
4.11 Legal Proceedings. Except as set forth in Section 4.11 of the
YORK DISCLOSURE SCHEDULE, there are no material actions, suits, claims,
governmental investigations or proceedings
22
instituted, pending or, to the best knowledge of the senior officers and
directors of York or any York Subsidiary, threatened against York or any York
Subsidiary or against any asset, interest or right of York or any York
Subsidiary, or against any officer, director or employee of any of them, and
neither York nor any York Subsidiary is a party to any order, judgment or
decree.
4.12 Compliance with Laws.
4.12.1 Each of York and the York Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect; and to the best knowledge of York, no suspension or
cancellation of any of the same is threatened.
4.12.2 Except as set forth in Section 4.12.2 of the YORK DISCLOSURE
SCHEDULE, neither York nor any York Subsidiary is in violation of its
respective Articles of Incorporation, Charter or other chartering instrument
or Bylaws, or in material violation of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all
banking (including without limitation all regulatory capital requirements),
municipal securities, insurance, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency and, to the best knowledge of
York, York along with its executive officers and directors is not in material
violation of any securities laws; and neither York nor any York Subsidiary has
received any written notice or communication from any federal, state or local
governmental authority asserting that York or any York Subsidiary is in
violation of any of the foregoing, which violation has not been corrected on a
prospective basis in all material respects. Neither York nor any York
Subsidiary is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written
commitment (other than those of general applicability to all savings
associations or holding companies thereof), and none of them has received any
written communication requesting that it enter into any of the foregoing.
Since January 1, 1995, no regulatory agency has initiated any proceeding or,
to the best knowledge of York, investigation into the business or operations
of York, or any York Subsidiary. York has not received any objection from any
regulatory agency to York's response to any violation, criticism or exception
with respect to any report or statement relating to any examination of York or
any of the York Subsidiaries.
4.13 Certain Information. None of the information relating to York
and its Subsidiaries to be included or incorporated by reference in (i) the
Conversion Prospectus will, at the time such prospectus is mailed to
subscribers and to the holders of Harris Common Stock (and at the time the
related Conversion Registration Statement becomes effective under the
Securities Act), contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (ii) the
Proxy
23
Statement-Prospectus, as of the date(s) such Proxy Statement-Prospectus is
mailed to shareholders of York (and at the time the related Merger
Registration Statement becomes effective under the Securities Act), and up to
and including the date of the meeting of shareholders to which such Proxy
Statement-Prospectus relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date. The Proxy Statement-Prospectus
mailed by York to its shareholders in connection with the meeting of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
4.14 Employee Benefit Plans.
4.14.1 York has set forth in Section 4.14.1 of the YORK DISCLOSURE
SCHEDULE all York Employee Plans, and York has previously furnished or made
available to Harris Financial accurate and complete copies of the same
together with (i) the actuarial and financial reports prepared with respect to
any qualified plans for the last three plan years, (ii) the annual reports
filed with any governmental agency for any qualified or non-qualified plans
for the last three plan years, and (iii) all rulings and determination letters
and any open requests for rulings or letters that pertain to any qualified
plan.
4.14.2 None of York, any York Subsidiary, any pension plan maintained
by any of them and qualified under Section 401 of the Code or, to the best of
York's knowledge, any fiduciary of such plan has incurred any material
liability to the PBGC or the Internal Revenue Service with respect to any
employees of York or any York Subsidiary. To the best of York's knowledge, no
reportable event under Section 4043(b) of ERISA has occurred with respect to
any such pension plan, other than the transactions contemplated by this
Agreement.
4.14.3 Except as set forth in Section 4.14.3 of the YORK DISCLOSURE
SCHEDULE: (a) neither York nor any York Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA); (b)
no liability under Title IV of ERISA has been incurred by York or any York
Subsidiary with respect to any York Employee Plan which is subject to Title IV
of ERISA, or with respect to any "single-employer plan" (as defined in Section
4001(a) of ERISA) ("York Defined Benefit Plan") currently or formerly
maintained by York or any entity which is considered one employer with York
under Section 4001(b)(1) of ERISA or Section 414 of the Code (an "ERISA
Affiliate") since the effective date of ERISA that has not been satisfied to
the extent required by ERISA from time to time; (c) no York Defined Benefit
Plan had an "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, as of the last day of the end of the most
recent plan year ending prior to the date hereof that has not or will not be
funded within the time provided under Section 302(c)(10) of ERISA; (d) the
fair market value of the assets of each York Defined Benefit Plan exceeds the
present value of the "benefit liabilities" (as defined in Section 4001(a)(16)
of ERISA) under such York Defined Benefit Plan as of the end of
24
the most recent plan year with respect to the respective York Defined Benefit
Plan ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such York Defined
Benefit Plan as of the date hereof; (e) neither York nor any ERISA Affiliate
has provided, or is required to provide, security to any York Defined Benefit
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code; (f) neither York nor any ERISA Affiliate has
contributed to any "multiemployer plan," as defined in Section 3(37) of ERISA,
on or after September 26, 1980; (g) neither York, nor any ERISA Affiliate, nor
any York Employee Plan, including any York Defined Benefit Plan, nor any trust
created thereunder has engaged in a transaction in connection with which York,
any ERISA Affiliate, and any York Employee Plan, including any York Defined
Benefit Plan any such trust or any trustee or administrator thereof, is
subject to either a civil liability or penalty pursuant to Section 409, 502(i)
or 502(l) of ERISA or a tax imposed pursuant to Chapter 43 of the Code.
4.14.4 A favorable determination letter has been issued by the
Internal Revenue Service with respect to each York Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (a "York
Pension Plan") which is intended to qualify under Section 401 of the Code to
the effect that such plan is qualified under Section 401 of the Code and the
trust associated with such employee pension plan is tax exempt under Section
501 of the Code. No such letter has been revoked or, to the best of York's
knowledge, is threatened to be revoked and York does not know of any ground on
which such revocation may be based. Except as set forth in Section 4.14.4 of
the YORK DISCLOSURE SCHEDULE, neither York nor any York Subsidiary has any
current liability under any such plan that was required to be reflected as a
liability on the Financial Statements as of June 30, 1999 under GAAP, which
was not reflected on the consolidated statement of financial condition of York
at June 30, 1999 included in the York Financial Statements.
4.14.5 No prohibited transaction (which shall mean any transaction
prohibited by Section 406 of ERISA and not exempt under Section 408 of ERISA
or Section 4975 of the Code) has occurred with respect to any York Employee
Plan which would result in the imposition, directly or indirectly, of a
material excise tax on York under Section 4975 of the Code.
4.14.6 Except as specifically identified in Section 4.14.6 of the YORK
DISCLOSURE SCHEDULE, neither York nor any York Subsidiary has any obligations
for post- retirement or post-employment benefits under any York Employee Plan
that cannot be amended or terminated upon 60 or fewer days notice without
incurring any liability thereunder, except for coverage required by Part 6 of
Title I of ERISA or Section 4980B of the Code, or similar state law, the cost
of which is borne by the insured individual. Full payment has been made (or
proper accruals have been established) of all contributions which are required
for periods prior to the date hereof, and full payment will be so made (or
proper accruals will be so established) of all contributions which are
required for periods after the date hereof and prior to the Effective Time,
under the terms of each York Employee Plan or ERISA; to the best of York's
knowledge, no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect
to any York Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any York Pension Plan.
25
4.14.7 To the best of York's knowledge, the York Employee Plans have
been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws
and regulations.
4.14.8 There are no pending or, to the best knowledge of York,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the York Employee Plans or any trust related thereto or any
fiduciary thereof.
4.14.9. Section 4.14.9 of the YORK DISCLOSURE SCHEDULE sets forth (i)
any amounts payable by York or any York Subsidiary that is estimated to be
nondeductible for federal income tax purposes by Section 280G of the Code
(taking into account transactions contemplated by this Agreement); (ii) the
maximum amount that could be paid to each executive officer of York or any
York Subsidiary as a result of the transactions contemplated by this Agreement
under all employment, severance, and termination agreements, other
compensation arrangements and York Employee Plans currently in effect; and
(iii) the "base amount" (as such term is defined in section 280G(b)(3) of the
Code) for each such disqualified individual calculated as of the date of this
Agreement.
4.14.10 No compensation payable by York or any York Subsidiary to any of
their employees under any York Employee Plan (including by reason of the
transactions contemplated hereby) will be subject to disallowance under
Section 162(m) of the Code.
4.14.11 Except as set forth in Section 4.14.11 of the YORK DISCLOSURE
SCHEDULE, with respect to any York Employee Plan which is an employee welfare
benefit plan (within the meaning of ERISA Section 3(1) (a "York Welfare
Plan"): (i) each such York Welfare Plan which is intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of the
Code meets such requirements; (ii) there is no disqualified benefit (as such
term is defined in Code Section 4976(b)) which would subject York to a tax
under Code Section 4976(a); (iii) to the best knowledge of York, each and
every York Welfare Plan which is a group health plan (as such term is defined
in Code Sections 162(i)(3)) complies and in each and every case has complied
in all material respects with the applicable requirements of Code Section
4980B; and (iv) each such York Welfare Plan (including any such plan covering
former employees of York or any York Subsidiary) may be amended or terminated
by York or Harris Financial on or at any time after the Effective Date without
incurring liability thereunder except as required to satisfy the terms of the
Plan.
26
4.15 Certain Contracts.
4.15.1 Except as described in Section 4.15.1 of the YORK DISCLOSURE
SCHEDULE, neither York nor any York Subsidiary is in material default or non-
compliance under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party or by which its
assets, business or operations may be bound or affected, whether entered into
in the ordinary course of business or otherwise and whether written or oral,
and there has not occurred any event that with the lapse of time or the giving
of notice, or both, would constitute such a material default or non-
compliance.
4.15.2 Except as set forth in Section 4.15.2 of the YORK DISCLOSURE
SCHEDULE, as of the date hereof, neither York nor any York Subsidiary is a
party to, is bound or affected by, receives, or is obligated to pay benefits
under:
(a) any agreement, arrangement or commitment, including without
limitation any agreement, indenture or other instrument, relating to the
borrowing of money by York or any York Subsidiary (other than in the case of
York Fed deposits, FHLB advances, federal funds purchased and securities sold
under agreements to repurchase in the ordinary course of business) or the
guarantee by York or any York Subsidiary of any obligation;
(b) any agreement or commitment relating to the employment of a
consultant or the employment, election or retention in office of any present
or former director, officer or employee of York or any York Subsidiary;
(c) any agreement, arrangement or understanding pursuant to
which any payment (whether of severance pay or otherwise) became or may become
due to any director, officer or employee of York or any York Subsidiary upon
execution of this Agreement or upon or following consummation of the
transactions contemplated by this Agreement (either alone or in connection
with the occurrence of any additional acts or events);
(d) any agreement, arrangement or understanding pursuant to
which York or any York Subsidiary is obligated to indemnify any director,
officer, employee or agent of York or any York Subsidiary;
(e) any agreement, arrangement or understanding to which York or
any York Subsidiary is a party or by which any of the same is bound which
limits the freedom of York or any York Subsidiary to compete in any line of
business or with any person;
(f) any assistance agreement, supervisory agreement, memorandum
of understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by any Bank Regulator;
27
(g) any agreement (other than any agreement with a banking
customer for the provision of banking services entered into by any York
Subsidiary in the ordinary course of business) that involves a payment or
series of payments of more than $100,000 in any one year from or to York or
any York Subsidiary (unless such agreement is cancellable by York upon payment
of a termination fee of not more than $50,000); or
(h) any other agreement, arrangement or understanding which
would be required to be filed as an exhibit to York's Annual Report on Form
10-K under the Exchange Act and which has not been so filed.
4.16 Brokers and Finders. Except as set forth in Section 4.16 of the
YORK DISCLOSURE SCHEDULE, neither York nor any York Subsidiary nor any of
their respective directors, officers or employees, has employed any broker or
finder or incurred any liability for any broker or finder fees or commissions
in connection with the transactions contemplated hereby.
4.17 Insurance. York and each York Subsidiary is insured for
reasonable amounts with financially sound and reputable insurance companies
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured and has
maintained all insurance required by contracts currently in effect and
applicable laws and regulations. Section 4.17 of the YORK DISCLOSURE SCHEDULE
sets forth all policies of insurance maintained by it or any York Subsidiary
as of the date hereof and any claims thereunder in excess of $25,000 since
January 1, 1998. Since January 1, 1995, neither York nor any York Subsidiary
has received any notice of termination of any such insurance coverage or
material increase in the premiums therefor or has any reason to believe that
any such insurance coverage will be terminated or the premiums therefor
materially increased.
4.18 Properties. All material real and personal property owned by
York or any York Subsidiary or presently used by any of them in its respective
business are in good condition (ordinary wear and tear excepted) and are
sufficient to carry on its business in the ordinary course of business
consistent with their past practices. York and each York Subsidiary have good
and marketable title free and clear of all liens, encumbrances, charges,
defaults or equities (other than equities of redemption under applicable
foreclosure laws) to all of the material properties and assets, real and
personal, reflected on the consolidated statement of financial condition of
York as of June 30, 1999 included in the York Financial Statements or
acquired, through merger of otherwise, after such date (other than those
disposed of for fair value after such date), except (i) liens for current
taxes not yet due or payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not
material in character, amount or extent, and (iv) as reflected on the
consolidated statement of financial condition of York as of June 30, 1999
included in the York Financial Statements. All real and personal property
which are material to York's business on a consolidated basis and leased or
licensed by York or any York Subsidiary are held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and no such real property lease will terminate or lapse prior to the
Effective Time.
28
4.19 Labor. No work stoppage involving York or any York Subsidiary
is pending or, to the best knowledge of York, threatened. Neither York nor any
York Subsidiary is involved in, or to the best knowledge of York, threatened
with or affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding involving its employees, which would have Material Adverse Effect
on York. Employees of York and the York Subsidiaries are not represented by
any labor union nor are any collective bargaining agreements otherwise in
effect with respect to such employees, and to the best of York's knowledge,
there have been no efforts to unionize or organize any employees of York or
any York Subsidiary during the past five years.
4.20 Certain Transactions. Since June 30, 1999, neither York, any York
Subsidiary nor any company or financial institution that shall have merged
with and into York or any York Subsidiary subsequent to June 30, 1999, has
been a party to any material off-balance-sheet transactions involving interest
rate and currency swaps, options and futures contracts, or any other similar
derivative transactions, except as set forth in Section 4.20 of the YORK
DISCLOSURE SCHEDULE.
4.21 Disclosures. None of the representations and warranties of York
and York Fed or any of the written information or documents furnished or to be
furnished by York and York Fed to Harris Financial in connection with or
pursuant to this Agreement or the consummation of the transactions
contemplated hereby, when considered as a whole, contains or will contain any
untrue statement of a material fact, or omits or will omit to state any
material fact required to be stated or necessary to make any such information
or document, in light of the circumstances, not misleading.
4.22 Disclosure Schedule. The YORK DISCLOSURE SCHEDULE sets forth,
among other things, disclosures with respect to or exceptions to York's and
York Fed's representations and warranties in this Article IV. The mere
inclusion of an exception in the YORK DISCLOSURE SCHEDULE shall not be deemed
an admission by York or York Fed that such exception represents a material
fact, event or circumstance.
4.23 Pooling of Interests. As of the date of this Agreement, York knows
of no reason relating to it why the Merger would not qualify as a "pooling of
interests" for accounting purposes or a tax free reorganization under Section
368 of the Code. Except as set forth in Section 4.23 of the YORK DISCLOSURE
SCHEDULE, since January 1, 1998, neither York nor York Fed has (A) issued or
permitted to be issued any shares of capital stock, or securities exercisable
for or convertible into shares of capital stock, of York, York Fed or any York
Subsidiaries, other than pursuant to and as required by the terms of any York
Options that were issued and outstanding on such date; (B) repurchased,
redeemed or otherwise acquired, or authorized the repurchase, redemption or
other acquisition of, directly or indirectly through one or more of its
Subsidiaries, any shares of capital stock of York, York Fed or any York
Subsidiary; or (C) declared, set aside, made or paid to the stockholders of
York or York Fed dividends or other distributions on the outstanding shares of
capital stock of York or York Fed. For purposes of clause (B) above, York and
York Fed shall be deemed to include any person that York or York Fed has
caused to purchase such shares.
29
4.24 Fairness Opinion. York has received a written opinion from
Advest, Inc. to the effect that, subject to the terms, conditions and
qualifications set forth therein, as of the date thereof, the Merger
Consideration to be received by the stockholders of York pursuant to this
Agreement is fair to such stockholders from a financial point of view.
4.25 Loan Portfolio. Section 4.25 of the YORK DISCLOSURE SCHEDULE
sets forth all of the loans in original principal amount in excess of $100,000
of York or any York Subsidiary that as of the date of this Agreement are
classified by York or any Bank Regulator as "Special Mention," "Substandard,"
"Doubtful," "Loss" or "Classified," together with the aggregate principal
amount of and accrued and unpaid interest on all such loans by category, it
being understood that no representation is being made that the OTS or any
other Bank Regulator would agree with the loan classifications of York. The
allowance for loan losses reflected, and to be reflected, in York's regulatory
reports, and shown, and to be shown, on the balance sheets contained in the
York Financial Statements and any financial statements of any company or
financial institution that shall have merged into York or any York Subsidiary
subsequent to June 30, 1999 have been, and will be, established in accordance
with the requirements of GAAP and all applicable regulatory criteria.
4.26 Required Vote; Inapplicability of Anti-takeover Statutes.
4.26.1 The affirmative vote of a majority of votes cast by all holders
of shares of York Common Stock entitled to vote is necessary to approve this
Agreement and the transactions contemplated hereby on behalf of York.
4.26.2 No "fair price," "moratorium," "control share acquisition" or
other form of antitakeover statute or regulation is applicable to this
Agreement and the transactions contemplated hereby.
4.27 Material Interests of Certain Persons. Except as set forth in
Section 4.27 of the YORK DISCLOSURE SCHEDULE, to the knowledge of York, no
officer or director of York, or any "associate" (as such term is defined in
Rule 14a-1 under the Exchange Act) of any such officer or director, (i) has
any material interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of York or any
of the York Subsidiaries, or (ii) is indebted to, or has the right under a
line of credit to borrow from, York or any York Subsidiary in an amount
exceeding $50,000.
4.28 Joint Ventures. Section 4.28 of the YORK DISCLOSURE SCHEDULE
sets forth (i) the identities of all Joint Ventures in which York or any York
Subsidiary is participating, (ii) the agreements relating to such Joint
Ventures, (iii) the identities of the other participants in the Joint Venture,
(iv) the percentage of the Joint Venture owned by each participant, (v) copies
of the most recent available financial statements (on an audited basis if
available) of such Joint Ventures, and (vi) the amount of the investment or
contractually binding commitment of York or any York Subsidiary to invest in
such Joint Venture.
30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HARRIS
Harris Financial, New Harris Financial and Harris Savings Bank represent
and warrant to York and York Fed that the statements contained in this Article
V are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout
this Article V), except as set forth in the HARRIS DISCLOSURE SCHEDULE
delivered by Harris Financial to York on the date hereof. Unless otherwise
specified, any reference to Harris in this Article V shall include the Mutual
Company, Harris Financial, New Harris Financial and any direct or indirect
Subsidiary of Harris Financial. Harris Financial, New Harris Financial and
Harris Savings Bank have made a good faith effort to ensure that the
disclosure on each schedule of the HARRIS DISCLOSURE SCHEDULE corresponds to
the section referenced herein. However, for purposes of the HARRIS DISCLOSURE
SCHEDULE, any item disclosed on any schedule therein is deemed to be fully
disclosed with respect to all schedules under which such item may be relevant.
5.1 Capital Structure. The authorized capital stock of Harris
Financial consists of 100,000,000 shares of common stock, par value $.01 per
share, and 10,000,000 shares of preferred stock, par value $.01 per share. As
of the date of this Agreement, 33,574,325 shares of Harris Common Stock are
issued and outstanding, 449,300 shares of Harris Common Stock are directly or
indirectly held by Harris Financial as treasury stock and no shares of Harris
Financial preferred stock are issued and outstanding. All outstanding shares
of Harris Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable, and none of the outstanding shares of Harris
Common Stock has been issued in violation of the preemptive rights of any
person, firm or entity. Except for the Harris Option Plans pursuant to which
there are outstanding or authorized options to acquire 1,301,375 shares of
Harris Common Stock, a schedule of which is set forth in Section 5.1 of the
HARRIS DISCLOSURE SCHEDULE which has been delivered to York concurrently
herewith, there are no Rights authorized, issued or outstanding with respect
to or relating to the capital stock of Harris Financial.
5.2 Organization, Standing and Authority of the Mutual Company,
Harris Financial and New Harris Financial. Each of the Mutual Company Harris
Financial and New Harris Financial is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania with full corporate power and authority to own or lease all of
its properties and assets and to carry on its business as now conducted, and
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of
its business requires such licensing or qualification. Each of the Mutual
Company and Harris Financial is duly registered as a bank holding company
under the BHCA, and on the Effective Date New Harris Financial will be a duly
registered bank holding company under the BHCA. Section 5.2 of the HARRIS
DISCLOSURE SCHEDULE contains true and complete
31
copies of the Articles of Incorporation and Bylaws of Harris Financial and New
Harris Financial as in effect as of the date hereof.
5.3 Ownership of Harris Financial Subsidiaries. Section 5.3 of the
HARRIS DISCLOSURE SCHEDULE sets forth each direct or indirect Harris Financial
Subsidiary. The outstanding shares of capital stock of each Harris Financial
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable and are directly or indirectly owned by Harris Financial free
and clear of all liens, claims, encumbrances, charges, pledges, restrictions
or rights of third parties of any kind whatsoever. No Rights are authorized,
issued or outstanding with respect to the capital stock or other ownership
interests of any Harris Financial Subsidiary and there are no agreements,
understandings or commitments relating to the right of Harris Financial to
vote or to dispose of said shares or other ownership interests.
5.4 Organization, Standing and Authority of Harris Financial
Subsidiaries. Each Harris Financial Subsidiary is a bank, corporation or
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized. Each Harris Financial
Subsidiary (i) has full power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted, and (ii)
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of
its business requires such qualification. Harris Financial is authorized to
own each Harris Financial Subsidiary under the BHCA. The deposit accounts of
Harris Savings Bank are insured by the FDIC to the maximum extent permitted by
the FDIA. Harris Savings Bank has paid all premiums and assessments required
by the FDIC. Harris Financial has heretofore delivered or made available to
York and has included in Section 5.4 of the HARRIS DISCLOSURE SCHEDULE, true
and complete copies of the Articles and Bylaws of Harris Savings Bank as in
effect on the date hereof.
5.5 Authorized and Effective Agreement.
5.5.1 Each of Harris Savings Bank, Harris Financial, New Harris
Financial and the Mutual Company has all requisite corporate power and
authority to enter into this Agreement and (subject to receipt of all
necessary governmental approvals and the approval of the Depositors and Harris
Financial's and New Harris Financial's stockholders) to perform all of its
obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of Harris Savings Bank, Harris Financial, New Harris Financial, and
the Mutual Company except for the approval by Harris Financial's and New
Harris Financial's stockholders and approval of the Conversion and/or the Plan
of Conversion by Harris Financial's stockholders and the Depositors. This
Agreement has been duly and validly executed and delivered by Harris Savings
Bank, Harris Financial, New Harris Financial, and the Mutual Company, and,
assuming due authorization, execution and delivery by York, constitutes the
legal, valid and binding obligation of Harris Savings Bank, Harris Financial,
and New Harris Financial, and the Mutual Company, enforceable against each of
Harris Savings Bank, Harris Financial, New Harris Financial, and the Mutual
Company in accordance with its terms, subject, as to enforceability, to
bankruptcy,
32
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
5.5.2 Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the
Conversion) nor compliance by Harris Savings Bank, Harris Financial, New
Harris Financial, and the Mutual Company with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of Harris Savings Bank, Harris Financial,
New Harris Financial, and the Mutual Company or the equivalent documents of
any Harris Financial Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a
default) under, or give rise to any right of termination, cancellation or
acceleration with respect to, or result in the creation of any lien, charge or
encumbrance upon any property or asset of Harris pursuant to, any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Harris is a party, or by which any of
their respective properties or assets may be bound or affected, or (iii)
subject to receipt of all required governmental, Depositor and shareholder
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Harris.
5.5.3 Except for (i) the filing of applications and notices with, and
the consents and approvals of, the applicable Bank Regulators, (ii) the filing
and effectiveness of the Conversion Registration Statement and the Merger
Registration Statement with the SEC in connection with the Conversion and the
Merger, (iii) the approval of the transactions contemplated by this Agreement
by the requisite vote of stockholders of Harris Financial and approval of the
Conversion and/or the Plan of Conversion by the requisite vote of the
Depositors and the stockholders of Harris Financial, (iv) the filing of
Articles of Merger with the Secretary of State of the Commonwealth of
Pennsylvania pursuant to the PBCL in connection with the Merger, (v) review of
the Merger by the DOJ under federal antitrust laws, and (vi) compliance with
applicable state securities or "blue sky" laws, and except for such filings,
registrations, consents or approvals as are set forth in Section 5.5.3 of the
HARRIS DISCLOSURE SCHEDULE, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary on the part of Harris in connection with the execution and delivery
of this Agreement by Harris and the consummation of the Merger by New Harris
Financial.
5.5.4 As of the date hereof, Harris is not aware of any reasons
relating to Harris (including without limitation (a) Community Reinvestment
Act and (b) FRB compliance) why all consents and approvals shall not be
procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and (ii) the
continuation by New Harris Financial after the Effective Time of the business
of York as such business is carried on immediately prior to the Effective
Time, free of any conditions or requirements which, in the reasonable opinion
of Harris Financial, could have a Material Adverse Effect on Harris Financial
or materially impair the value of York and York Fed to New Harris Financial.
33
5.6 Securities Documents and Regulatory Reports.
5.6.1 Since January 1, 1995, Harris Financial and Harris Savings Bank
have timely filed with the SEC, the Bank Regulators and the NASD all
Securities Documents required by the Securities Laws and such Securities
Documents as the same may have been amended, complied in all material respects
with the Securities Laws and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.6.2 Since January 1, 1995, each of the Mutual Company, Harris
Financial and Harris Savings Bank has duly filed with the Bank Regulators, in
correct form the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and
accurate and in compliance with the requirements of applicable laws and
regulations. In connection with the most recent examinations of Harris
Financial and Harris Savings Bank by the FRB, the FDIC or the Department,
neither Harris Financial nor Harris Savings Bank was required to correct or
change any action, procedure or proceeding which Harris Financial or Harris
Savings Bank believes has not been corrected or changed as required as of the
date hereof in all material respects.
5.7 Financial Statements.
5.7.1 Harris Financial has previously delivered or made available to
York accurate and complete copies of the Harris Financial Statements which, in
the case of audited Harris Financial Statements, are accompanied by the audit
reports of Arthur Andersen LLP, independent public accountants with respect to
Harris Financial. The Harris Financial Statements referred to herein, as well
as the Harris Financial Statements to be delivered pursuant to Section 7.2
hereof, fairly present or will fairly present, as the case may be, the
consolidated financial condition of Harris Financial as of the respective
dates set forth therein, and the consolidated results of operations,
shareholders' equity and cash flows of Harris Financial for the respective
periods or as of the respective dates set forth therein.
5.7.2 Each of the Harris Financial Statements referred to in Section
5.7.1 has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as stated therein, or in the case of unaudited
interim Harris Financial Statements the absence of footnotes and customary
year-end adjustments. The audits of Harris Financial and Harris Financial
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Mutual
Company, New Harris Financial, Harris Financial and Harris Financial
Subsidiaries are being maintained in material compliance with applicable legal
and accounting requirements, and all such books and records accurately reflect
in all material respects all dealings and transactions in respect of the
business, assets, liabilities and affairs of the Mutual Company, New Harris
Financial, Harris Financial and Harris Financial Subsidiaries. The minute
books of the Mutual Company, New Harris Financial, Harris Financial and each
Harris Financial Subsidiary contain complete and accurate
34
records of all meetings and other corporate actions of its stockholders and
the Board of Directors authorized at such meetings held or taken since January
1, 1995 through the date of this Agreement.
5.7.3 Except (i) as reflected, disclosed or provided for in the
consolidated statement of financial condition of Harris Financial as of
December 31, 1999 (including related notes), (ii) liabilities incurred since
December 31, 1999 in the ordinary course of business, and (iii) liabilities
incurred in connection with this Agreement and the transactions contemplated
hereby, neither Harris Financial nor any Harris Financial Subsidiary has any
liabilities, whether absolute, accrued, contingent or otherwise, material to
the financial condition, results of operations or business of Harris Financial
on a consolidated basis that would be required to be reflected on an audited
consolidated balance sheet of Harris Financial or the notes thereto.
5.8 Material Adverse Change. Since December 31, 1999 to the date
hereof, (i) the Mutual Company, Harris Financial and each Harris Financial
Subsidiary has conducted its respective business in the ordinary and usual
course (excluding the incurrence of expenses in connection with this
Agreement, and excluding the transactions contemplated hereby) and (ii) no
event has occurred or circumstance arisen that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect
on Harris Financial.
5.9 Environmental Matters. Except as set forth in Section 5.9 of the
HARRIS DISCLOSURE SCHEDULE:
5.9.1 To the best of Harris Financial's knowledge, Harris Financial
and Harris Financial Subsidiaries are in material compliance with all
Environmental Laws. Neither Harris Financial nor any Harris Financial
Subsidiary has received any written communication during the last three (3)
years alleging that Harris Financial or any Harris Financial Subsidiary is not
in such compliance and, to the best knowledge of Harris Financial, there are
no present circumstances that would prevent or interfere with the continuation
of such compliance.
5.9.2 To the actual knowledge of the senior management and directors
of Harris Financial and Harris Savings Bank, none of the properties presently
or formerly owned, leased or operated by Harris Financial or any Harris
Financial Subsidiary, or in which Harris Financial or any Harris Financial
Subsidiary has a lien or other security interest, has been or is in material
violation of or materially liable under any Environmental Law.
5.9.3 To the best of Harris Financial's knowledge, there are no past
or present actions, activities, circumstances, conditions, events or incidents
that could reasonably form the basis of any material Environmental Claim or
other claim or action or governmental investigation that could result in the
imposition of any material liability arising under any Environmental Law
against Harris Financial or any Harris Financial Subsidiary or against any
person or entity whose liability for any Environmental Claim Harris Financial
or any Harris Financial Subsidiary has or may have retained or assumed either
contractually or by operation of law.
35
5.9.4 Harris Financial has not conducted any environmental studies
during the past five years with respect to any properties owned by Harris
Financial or any Harris Financial Subsidiary as of the date hereof.
5.10 Tax Matters.
5.10.1 Except as set forth in Section 5.10.1 of the HARRIS DISCLOSURE
SCHEDULE, the Mutual Company, Harris Financial and Harris Financial
Subsidiaries have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all material taxes required to be paid
in respect of the periods covered by such returns and, as of the Effective
Time, will have paid, or where payment is not required to have been made, will
have set up an adequate reserve or accrual for the payment of, all material
taxes for any subsequent periods ending on or prior to the Effective Time. To
the best of Harris Financial's knowledge, none of the Mutual Company, Harris
Financial or any Harris Financial Subsidiary will have any material liability
for any such taxes in excess of the amounts so paid or reserves or accruals so
established. Except as set forth in Section 5.10.1 of the HARRIS DISCLOSURE
SCHEDULE, as of the date hereof, no audit, examination or deficiency or refund
litigation with respect to any federal, state and local (and, if applicable,
foreign) income, franchise, bank, excise, real property, personal property and
other tax returns filed by the Mutual Company, Harris Financial or any Harris
Financial Subsidiary is pending or, to the best of Harris Financial's
knowledge, threatened.
5.10.2 All federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other
tax returns filed by the Mutual Company, Harris Financial or any Harris
Subsidiary are complete and accurate in all material respects. None of the
Mutual Company, Harris Financial or any Harris Financial Subsidiary is
delinquent in the payment of any tax, assessment or governmental charge, or
has requested any extension of time within which to file any tax returns in
respect of any fiscal year or portion thereof which have not since been filed.
Except as set forth in Section 5.10.2 of the HARRIS DISCLOSURE SCHEDULE, the
federal, state and local income tax returns of the Mutual Company, Harris
Financial and the Harris Subsidiaries have been examined by the applicable tax
authorities (or are closed to examination due to the expiration of the
applicable statute of limitations) and no deficiencies for any tax, assessment
or governmental charge have been proposed, asserted or assessed (tentatively
or otherwise) against the Mutual Company, Harris Financial or any Harris
Financial Subsidiary as a result of such examinations or otherwise which have
not been settled and paid. There are currently no agreements in effect with
respect to the Mutual Company, Harris Financial or any Harris Financial
Subsidiary to extend the period of limitations for the assessment or
collection of any tax.
5.10.3 None of the Mutual Company, Harris Financial or any Harris
Financial Subsidiary (i) is a party to any agreement providing for the
allocation or sharing of taxes (other than
36
a tax allocation agreement between the Mutual Company, Harris Financial and
Harris Savings Bank), (ii) is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by the Mutual Company, Harris Financial or any
Harris Financial Subsidiary (nor does Harris Financial have any knowledge that
the Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
5.11 Legal Proceedings. Except as set forth in Section 5.11 of the
HARRIS DISCLOSURE SCHEDULE, there are no material actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of the senior officers and directors of Harris Financial or any
Harris Financial Subsidiary, threatened against Harris or against any asset,
interest or right of Harris, or against any officer, director or employee of
Harris, and Harris is not a party to any order, judgment or decree.
5.12 Compliance with Laws.
5.12.1 Harris has all permits, licenses, certificates of authority,
orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is presently being conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect;
and to the best knowledge of Harris, no suspension or cancellation of any of
the same is threatened.
5.12.2 Except as set forth in Section 5.12.2 of the HARRIS DISCLOSURE
SCHEDULE, none of the Mutual Company, Harris Financial or any Harris Financial
Subsidiary is in violation of its respective Articles of Incorporation,
Charter or other chartering instrument or Bylaws, or in material violation of
any applicable federal, state or local law or ordinance or any order, rule or
regulation of any federal, state, local or other governmental agency or body
(including, without limitation, all banking (including without limitation all
regulatory capital requirements), insurance, municipal securities, safety,
health, environmental, zoning, anti-discrimination, antitrust, and wage and
hour laws, ordinances, orders, rules and regulations), or in default with
respect to any order, writ, injunction or decree of any court, or in default
under any order, license, regulation or demand of any governmental agency and,
to the best knowledge of Harris Financial, Harris Financial along with its
executive officers and directors is not in material violation of any
securities laws; and none of the Mutual Company, Harris Financial or any
Harris Financial Subsidiary has received any written notice or communication
from any federal, state or local governmental authority asserting that the
Mutual Company, Harris Financial or any Harris Financial Subsidiary is in
violation of any of the foregoing, which violation has not been corrected on a
prospective basis in all material respects. None of the Mutual Company, Harris
Financial or any Harris Financial Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, written directive, memorandum
of understanding or written commitment (other than those of general
applicability to all banks or holding companies thereof), and none of them has
received any written communication
37
requesting that it enter into any of the foregoing. Since January 1, 1995, no
regulatory agency has initiated any proceeding or, to the best knowledge of
Harris Financial, investigation into the business or operations of the Mutual
Company, Harris Financial or any Harris Financial Subsidiary. None of them has
received any objection from any regulatory agency to its response to any
violation, criticism or exception with respect to any report or statement
relating to any examinations of the Mutual Company, Harris Financial or any
Harris Financial Subsidiary.
5.13 Certain Information. None of the information relating to Harris
to be included or incorporated by reference in (i) the Conversion Prospectus
will, at the time such prospectus is mailed to subscribers and to the holders
of Harris Common Stock (and at the time the related Conversion Registration
Statement becomes effective under the Securities Act), contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and (ii) the Proxy Statement- Prospectus, as of the
date(s) such Proxy Statement-Prospectus is mailed to shareholders of York (and
at the time the related Merger Registration Statement becomes effective under
the Securities Act), and up to and including the date of the meeting of
shareholders to which such Proxy Statement- Prospectus relates, will contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date. The Proxy
Statement-Prospectus mailed by Harris to its stockholders in connection with
the meeting of shareholders will comply as to form in all material respects
with the Securities Laws.
5.14 Employee Benefit Plans.
5.14.1 Harris Financial has set forth in Section 5.14.1 of the HARRIS
DISCLOSURE SCHEDULE all Harris Employee Plans.
5.14.2 None of the Mutual Company, Harris Financial, any Harris
Financial Subsidiary, any pension plan maintained by any of them and qualified
under Section 401 of the Code or, to the best of Harris Financial's knowledge,
any fiduciary of such plan has incurred any material liability to the PBGC or
the Internal Revenue Service with respect to any employees of Harris Financial
or any Harris Financial Subsidiary. To the best of Harris Financial's
knowledge, no reportable event under Section 4043(b) of ERISA has occurred
with respect to any such pension plan.
5.14.3 Neither Harris Financial nor any Harris Financial Subsidiary
participates in or has incurred any liability under Section 4201 of ERISA for
a complete or partial withdrawal from a multi-employer plan (as such term is
defined in ERISA).
5.14.4 A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Harris Financial Employee Plan which is
an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Harris Financial Pension Plan") which is intended
38
to qualify under Section 401 of the Code to the effect that such plan is
qualified under Section 401 of the Code and the trust associated with such
employee pension plan is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of Harris Financial's knowledge, is
threatened to be revoked and Harris Financial does not know of any ground on
which such revocation may be based. Neither Harris Financial nor any Harris
Financial Subsidiary had any liability under any such plan that was required
to be reflected as a liability on the Harris Financial Statements as of
December 31, 1999, under GAAP, which was not reflected on the consolidated
statement of financial condition of Harris Financial at December 31, 1999
included in the Harris Financial Statements.
5.14.5 No prohibited transaction (which shall mean any transaction
prohibited by Section 406 of ERISA and not exempt under Section 408 of ERISA
or Section 4975 of the Code) has occurred with respect to any Harris Financial
Employee Plan which would result in the imposition, directly or indirectly, of
a material excise tax under Section 4975 of the Code.
5.14.6 Except for as specifically described in Section 5.14.6 of the
HARRIS DISCLOSURE SCHEDULE, Harris does not have any obligations for post-
retirement benefits under any Harris Employee Plan that cannot be amended or
terminated upon sixty (60) or fewer days notice without incurring any
liability thereunder, except for coverage required by Part 6 of Title I of
ERISA or Section 4980B of the Code, or similar state law, the cost of which is
borne by the insured individual. Full payment has been made (or proper
accruals have been established) of all contributions which are required for
periods prior to the date hereof, and full payment will be so made (or proper
accruals will be so established) of all contributions which are required for
periods after the date hereof and prior to the Effective Time, under the terms
of each Harris Financial Employee Plan or ERISA; to the best of Harris
Financial's knowledge, no accumulated funding deficiency (as defined in
Section 302 of ERISA or Section 412 of the Code), whether or not waived,
exists with respect to any Harris Financial Pension Plan, and there is no
"unfunded current liability" (as defined in Section 412 of the Code) with
respect to any Harris Financial Pension Plan.
5.14.7 To the best of Harris Financial's knowledge, the Harris Employee
Plans have been operated in compliance in all material respects with the
applicable provisions of ERISA, the Code, all regulations, rulings and
announcements promulgated or issued thereunder and all other applicable
governmental laws and regulations.
5.14.8 There are no pending or, to the best knowledge of Harris
Financial, threatened claims (other than routine claims for benefits) by, on
behalf of or against any of the Harris Employee Plans or any trust related
thereto or any fiduciary thereof.
5.14.9. Section 5.14.9 of the HARRIS DISCLOSURE SCHEDULE sets forth (i)
any amounts payable by the Mutual Company, Harris Financial or any Harris
Financial Subsidiary that is estimated to be nondeductible for federal income
tax purposes by Section 280G of the Code (taking into account transactions
contemplated by this Agreement); (ii) the maximum amount that could be paid to
each executive officer of the Mutual Company, Harris Financial or any Harris
39
Financial Subsidiary as a result of the transactions contemplated by this
Agreement under all employment, severance, and termination agreements, other
compensation arrangements and Harris Employee Plans currently in effect and
(iii) the "base amount" (as such term is defined in section 280G(b)(3) of the
Code) for each such disqualified individual calculated as of the date of this
Agreement.
5.14.10 No compensation payable by the Mutual Company, Harris Financial
or any Harris Financial Subsidiary to any of their employees under any Harris
Employee Plan (including by reason of the transactions contemplated hereby)
will be subject to disallowance under Section 162(m) of the Code.
5.14.11 Except as set forth in Section 5.14.11 of the HARRIS DISCLOSURE
SCHEDULE, with respect to any Harris Employee Plan which is an employee
welfare benefit plan (within the meaning of ERISA Section 3(1) (a "Harris
Welfare Plan"): (i) each such Harris Welfare Plan which is intended to meet
the requirements for tax-favored treatment under Subchapter B of Chapter 1 of
the Code meets such requirements; (ii) there is no disqualified benefit (as
such term is defined in Code Section 4976(b)) which would subject York or
Harris Financial to a tax under Code Section 4976(a); (iii) to the best
knowledge of Harris each and every Harris Welfare Plan which is a group health
plan (as such term is defined in Code Sections 162(i)(3)) complies and in each
and every case has complied in all material respects with the applicable
requirements of Code Section 4980B; and (iv) each such Harris Welfare Plan
(including any such plan covering former employees of Harris Financial or any
Harris Financial Subsidiary) may be amended or terminated by York or Harris
Financial on or at any time after the Effective Date without incurring
liability thereunder except as required to satisfy the terms of the Plan.
5.15 Certain Contracts.
5.15.1 Except as described in Section 5.15.1 of the HARRIS DISCLOSURE
SCHEDULE, Harris is not in material default or non-compliance under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party or by which its assets, business or
operations may be bound or affected, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has not
occurred any event that with the lapse of time or the giving of notice, or
both, would constitute such a material default or non-compliance.
5.15.2 Except as set forth in Section 5.15.2 of the HARRIS DISCLOSURE
SCHEDULE, as of the date hereof, Harris is not a party to, is not bound or
affected by, nor receives, or is obligated to pay, benefits under:
(a) any agreement, arrangement or commitment, including without
limitation any agreement, indenture or other instrument, relating to the
borrowing of money by Harris (other than in the case of Harris Savings Bank
deposits, FHLB advances, federal funds purchased and securities
40
sold under agreements to repurchase in the ordinary course of business) or the
guarantee by Harris of any obligation;
(b) any agreement or commitment relating to the employment of a
consultant or the employment, election or retention in office of any present
or former director, officer or employee of Harris;
(c) any agreement, arrangement or understanding pursuant to
which any payment (whether of severance pay or otherwise) became or may become
due to any director, officer or employee of Harris upon execution of this
Agreement or upon or following consummation of the transactions contemplated
by this Agreement (either alone or in connection with the occurrence of any
additional acts or events);
(d) any agreement, arrangement or understanding pursuant to
which Harris is obligated to indemnify any director, officer, employee or
agent of Harris;
(e) any agreement, arrangement or understanding to which Harris
is a party or by which any of the same is bound which limits the freedom of
Harris to compete in any line of business or with any person;
(f) any assistance agreement, supervisory agreement, memorandum
of understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by any Bank Regulator;
(g) any agreement (other than any agreement with a banking
customer for the provision of banking services entered into by any Harris in
the ordinary course of business) that involves a payment or series of payments
of more than $100,000 in any one year from or to Harris (unless such agreement
is cancellable by Harris upon payment of a termination fee of not more than
$50,000); or
(h) any other agreement, arrangement or understanding which
would be required to be filed as an exhibit to Harris Financial's Annual
Report on Form10-K under the Exchange Act and which has not been so filed.
5.16 Brokers and Finders. Except as set forth in Section 5.16 of the
HARRIS DISCLOSURE SCHEDULE, neither Harris Financial nor any Harris Financial
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or
finder fees or commissions in connection with the transactions contemplated
hereby.
5.17 Insurance. Harris Financial and each Harris Financial Subsidiary
is insured for reasonable amounts with financially sound and reputable
insurance companies against such risks as companies engaged in a similar
business would, in accordance with good business practice,
41
customarily be insured and has maintained all insurance required by applicable
laws and regulations. Section 5.17 of the HARRIS DISCLOSURE SCHEDULE sets
forth all policies of insurance maintained by Harris as of the date hereof and
any claims thereunder in excess of $25,000 since January 1, 1998. Since
January 1, 1995, Harris has not received any notice of termination of any such
insurance coverage or material increase in the premiums therefor, and Harris
has no reason to believe that any such insurance coverage will be terminated
or the premiums therefor materially increased.
5.18 Properties. All material real and personal property owned by
Harris Financial or any Harris Financial Subsidiary or presently used by any
of them in its respective business is in good condition (ordinary wear and
tear excepted) and is sufficient to carry on its business in the ordinary
course of business consistent with their past practices. Harris Financial has
good and marketable title free and clear of all liens, encumbrances, charges,
defaults or equities (other than equities of redemption under applicable
foreclosure laws) to all of the material properties and assets, real and
personal, reflected on the consolidated statement of financial condition of
Harris Financial as of December 31, 1999 included in the Harris Financial
Statements or acquired after such date (other than those disposed of for fair
value after such date), except (i) liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount
or extent and (iv) as reflected on the consolidated statement of financial
condition of Harris Financial as of December 31, 1999 included in the Harris
Financial Statements. All real and personal property which are material to
Harris Financial's business on a consolidated basis and leased or licensed by
Harris are held pursuant to leases or licenses which are valid and enforceable
in accordance with their respective terms and no such real property lease will
terminate or lapse prior to the Effective Time.
5.19 Labor. No work stoppage involving the Mutual Company, Harris
Financial or any Harris Financial Subsidiary is pending or, to the best
knowledge of Harris Financial, threatened. Neither Harris Financial nor any
Harris Financial Subsidiary is involved in, or to the best knowledge of Harris
Financial, threatened with or affected by, any labor dispute, arbitration,
lawsuit or administrative proceeding involving its employees, which would have
a Material Adverse Effect on Harris. Employees of Harris are not represented
by any labor union nor are any collective bargaining agreements otherwise in
effect with respect to such employees, and to the best of Harris Financial's
knowledge, there have been no efforts to unionize or organize any employees of
Harris during the past five years.
5.20 Certain Transactions. Since December 31, 1999, Harris has not
been a party to any material off-balance-sheet transactions involving interest
rate and currency swaps, options and futures contracts, or any other similar
derivative transactions, except as set forth in Section 5.20 of the HARRIS
DISCLOSURE SCHEDULE.
5.21 Disclosures. None of the representations and warranties of the
Mutual Company, Harris Financial, New Harris Financial or Harris Savings Bank
or any of the written information or
42
documents furnished or to be furnished by the Mutual Company, Harris
Financial, New Harris Financial or Harris Savings Bank to York in connection
with or pursuant to this Agreement or the consummation of the transactions
contemplated hereby, when considered as a whole, contains or will contain any
untrue statement of a material fact, or omits or will omit to state any
material fact required to be stated or necessary to make any such information
or document, in light of the circumstances, not misleading.
5.22 Disclosure Schedule. The HARRIS DISCLOSURE SCHEDULE sets forth,
among other things, disclosures with respect to or exceptions to the
representations and warranties of the Mutual Company, Harris Financial, New
Harris Financial and Harris Savings Bank in this Article V. The mere inclusion
of an exception in HARRIS DISCLOSURE SCHEDULE shall not be deemed an admission
by the Mutual Company, Harris Financial, New Harris Financial or Harris
Savings Bank that such exception represents a material fact, event or
circumstance.
5.23 Pooling of Interests. As of the date of this Agreement, Harris
Financial knows of no reason relating to it why the Merger would not qualify
as a "pooling of interests" for accounting purposes or a tax free
reorganization under Section 368 of the Code.
5.24 Fairness Opinion. Harris Financial has received a written
opinion from Ryan, Beck & Co., to the effect that, subject to the terms,
conditions and qualifications set forth therein, as of the date thereof, the
Conversion and the Merger pursuant to this Agreement, is fair to Harris
Financial stockholders, including the Mutual Company, from a financial point
of view.
5.25 Loan Portfolio. Section 5.25 of the HARRIS DISCLOSURE SCHEDULE
sets forth all of the loans in original principal amount in excess of $100,000
of Harris or any Harris Subsidiary that as of the date of this Agreement are
classified by Harris or any Bank Regulator as "Special Mention,"
"Substandard," "Doubtful," "Loss" or "Classified," together with the aggregate
principal amount of and accrued and unpaid interest on all such loans by
category, it being understood that no representation is being made that the
Department or any other Bank Regulator would agree with the loan
classifications of Harris. The allowance for loan losses reflected, and to be
reflected, in Harris Financial's regulatory reports, and shown, and to be
shown, on the balance sheets contained in the Harris Financial Statements and
any financial statements of any company or financial institution that shall
have merged into Harris Financial or any Harris Financial Subsidiary
subsequent to January 1, 1999 have been, and will be, established in
accordance with the requirements of GAAP and all applicable regulatory
criteria.
5.26 Required Vote; Inapplicability of Anti-takeover Statutes.
5.26.1 The affirmative vote of a majority of votes cast by all holders
of shares of Harris Financial Common Stock entitled to vote is necessary to
approve the transactions contemplated hereby on behalf of Harris Financial.
43
5.26.2 No "fair price," "moratorium," "control share acquisition" or
other form of antitakeover statute or regulation is applicable to this
Agreement and the transactions contemplated hereby.
5.27 Material Interests of Certain Persons. Except as set forth in
Section 5.27 of the HARRIS DISCLOSURE SCHEDULE, to the knowledge of Harris
Financial, no officer or director of Harris Financial, or any "associate" (as
such term is defined in Rule 14a-1 under the Exchange Act) of any such officer
or director, (i) has any material interest in any material contract or
property (real or personal), tangible or intangible, used in or pertaining to
the business of Harris or (ii) is indebted to, or has the right under a line
of credit to borrow from, Harris in an amount exceeding $50,000.
5.28 Joint Ventures. Section 5.28 of the HARRIS DISCLOSURE SCHEDULE
sets forth (i) the identities of all Joint Ventures in which the Mutual
Company, Harris Financial or any Harris Financial Subsidiary is participating,
(ii) the agreements relating to such Joint Ventures, (iii) the identities of
the other participants in the Joint Venture, (iv) the percentage of the Joint
Venture owned by each participant, (v) copies of the most recent available
financial statements (on an audited basis if available) of such Joint
Ventures, and (vi) the amount of the investment or contractually binding
commitment of Harris to invest in such Joint Venture.
5.29 Ownership of York Common Stock. As of the date hereof, neither
Harris Financial nor, to its best knowledge, any of its affiliates or
associates (as such terms are defined under the Exchange Act), (i)
beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of York Common Stock which in the
aggregate represent 5% or more of the outstanding shares of York Common Stock
(other than shares held in a fiduciary capacity and beneficially owned by
third parties, shares taken in consideration of debts previously contracted or
in the case of Harris Financial shares which may be acquired pursuant to the
York Option Agreement).
ARTICLE VI
COVENANTS OF YORK
6.1 Conduct of Business.
6.1.1 Affirmative Covenants. During the period from the date of this
Agreement to the Effective Time, except with the written consent of Harris
Financial, which consent will not be unreasonably withheld, York will operate
its business, and it will cause each of the York Subsidiaries to operate its
business, only in the usual, regular and ordinary course of business; use
reasonable efforts to preserve intact its business organization and assets and
maintain its rights and franchises; and voluntarily take no action which would
(i) adversely affect the ability of Harris Financial or York to obtain any
necessary approvals of governmental authorities required for the transactions
contemplated hereby or materially increase the period of time necessary to
obtain such
44
approvals, or (ii) adversely affect its ability to perform its covenants and
agreements under this Agreement.
6.1.2 Negative Covenants. York agrees that from the date of this
Agreement to the Effective Time, except as otherwise specifically permitted or
required by this Agreement, or consented to by Harris Financial in writing
(which consent shall not be unreasonably withheld), York will not, and will
cause each of the York Subsidiaries not to:
(a) change or waive any provision of its Articles of
Incorporation, Charter or Bylaws, except as required by law;
(b) change the number of shares of its authorized or issued
capital stock (except for the issuance of York Common Stock pursuant to the
York Option Agreement or upon the exercise of outstanding York Options under
the York Option Plans, as contemplated by Section 4.1 hereof);
(c) issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to the
authorized or issued capital stock of York or any of the York Subsidiaries, or
any securities convertible into shares of such stock; except that (i) York may
issue shares of York Common Stock or permit treasury shares to become
outstanding to satisfy presently outstanding options under and in accordance
with the terms of the York Option Plans, and (ii) York may issue shares of
York Common Stock to Harris Financial in accordance with the terms of the York
Option Agreement;
(d) effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization, or redeem, repurchase
or otherwise acquire any shares of its capital stock;
(e) declare or pay any dividends or other distributions with
respect to its capital stock except for dividends paid by any York Subsidiary
to York, and except for a quarterly cash dividend not in excess of $0.13 per
share, which amount may be increased consistent with past practice subject to
Section 6.1.2(q). The Board of Directors of York shall cause its last
quarterly dividend record date, prior to the Effective Time to occur on the
day immediately preceding the Closing Date with the dividend amount to be
calculated on a pro-rata basis from the previous dividend record date, and
York shall not issue any additional shares (including treasury shares) of York
Common Stock in connection with York's dividend reinvestment plan (it being
understood that York may purchase shares of York Common Stock in the open
market to fund its dividend reinvestment plan).
(f) enter into, amend in any material respect or terminate any
contract or agreement (including without limitation any settlement agreement
with respect to litigation) except in the ordinary course of business;
(g) except in the ordinary course of business consistent with
past practice, incur any material liabilities or material obligations, whether
directly or by way of guaranty, including any obligation for borrowed money
whether or not evidenced by a note, bond, debenture or similar instrument
45
(other than borrowings not exceeding 120% of the December 31, 1999 level), or
acquire any equity, debt, or except in the ordinary course of business
consistent with past practice, other investment securities;
(h) make any capital expenditures in excess of $50,000
individually or $500,000 in the aggregate, other than pursuant to binding
commitments existing on the date hereof and/or pursuant to a budget previously
provided to Harris Financial and as set forth in Section 6.1.2(h) of the YORK
DISCLOSURE SCHEDULE or expenditures reasonable and necessary to maintain
assets in good repair;
(i) make or commit to make any commercial or commercial real
estate loan in an amount in excess of $5,000,000 or loans to one borrower
(including such borrower's related interests) in an aggregate principal amount
(or with an aggregate commitment) of $7,500,000 or more;
(j) grant any increase in rates of compensation to its employees
other than in the ordinary course of business consistent with past practice;
grant any increase in rates of compensation to, or pay or agree to pay any
bonus or severance to, or provide any other new employee benefit or incentive
to its directors or to its officers except for nondiscretionary payments
required by such agreements and increases and bonuses in the ordinary course
of business consistent with past practice other than cash bonuses that are
reasonable and necessary to compensate York or York Fed employees in lieu of
option grants between July 1, 2000 through the Closing Date, in consultation
with the Chief Executive Officer of Harris Financial; enter into any
employment, severance or similar agreements or arrangements with any director
or employee; adopt or amend in any material respect or terminate any employee
benefit plan, pension plan or incentive plan except as required by law or the
terms of such plan or as provided in Section 6.1.2, or permit the vesting of
any material amount of benefits under any such plan other than pursuant to the
provisions thereof as in effect on the date of this Agreement; or make any
contributions to York's deferred compensation plans, supplemental executive
retirement plans, grantor trust, defined benefit Pension Plan or 401(k) Plan
not in the ordinary course of business consistent with past practice; or make
any contributions to York's Employee Stock Ownership Plan, other than
contributions, based on York's accrual levels in effect for 1999 on the date
of this Agreement, for the period ending on the Effective Time; provided
notwithstanding anything herein to the contrary, York or York Fed shall be
permitted to make contributions to the York ESOP on a monthly basis.
(k) other than as set forth in Section 6.1.2(k) of the YORK
DISCLOSURE SCHEDULE, make application for the opening or closing of any, or
open or close any, branch or automated banking facility;
(l) other than as set forth in Section 6.1.2(l) of the YORK
DISCLOSURE SCHEDULE, make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with customary banking practices;
46
(m) subject to Section 6.9 hereof, merge into, consolidate with,
affiliate with, or be purchased or acquired by, any other Person, or permit
any other Person to be merged, consolidated or affiliated with it or be
purchased or acquired by it, or, except to realize upon collateral in the
ordinary course of its business, acquire a significant portion of the assets
of any other Person, or sell a significant portion of its assets;
(n) make any material change in its accounting methods or
practices, except changes as may be required by GAAP or by law or regulatory
requirements;
(o) enter into any off-balance sheet transaction involving
interest rate and currency swaps, options and futures contracts, or any other
similar derivative transactions other than to hedge forward commitments in the
ordinary course of business consistent with past practices;
(p) knowingly take any action that would result in the
representations and warranties of York and York Fed contained in this
Agreement not being true and correct on the date of this Agreement or at any
future date on or prior to the Closing Date;
(q) voluntarily take or cause to be taken any action which would
disqualify the Merger as a "pooling of interests" for accounting purposes or a
tax free reorganization under Section 368 of the Code, including, without
limitation, cashing out or accelerating any York Options, except for automatic
acceleration in accordance with the terms of such York Options;
(r) invest in or commit to invest in, or otherwise increase,
decrease or alter its investment in, any existing or new Joint Venture other
than pursuant to commitments outstanding at the date of this Agreement which
are set forth in Section 4.28;
(s) make any material change in policies with regard to the
extension of credit, the establishment of reserves with respect to the
possible loss thereon or the charge off of losses incurred thereon,
investment, asset/liability management or other material banking policies,
except as may be required by changes in applicable law or regulations or in
GAAP; or
(t) agree to do any of the foregoing.
6.2 Current Information. During the period from the date of this
Agreement to the Effective Time, York will cause one or more of its
representatives to confer with representatives of Harris Financial and report
the general status of its ongoing operations at such times as Harris Financial
may reasonably request. York will promptly notify Harris Financial of any
material change in the normal course of its business or in the operation of
its properties and, to the extent permitted by applicable law, of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the
threat of material litigation involving York or any York Subsidiary. York will
also provide Harris Financial such information with respect to such events as
Harris Financial may reasonably request from time to time. As soon as
reasonably available, but in no event more than 45 days after the end of each
calendar quarter
47
ending after the date of this Agreement (other than the last quarter of each
fiscal year ending June 30), York will deliver to Harris Financial 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 the fiscal year,
York will deliver to Harris Financial its Annual Report on Form 10-K. Within
25 days after the end of each month, York will deliver to Harris Financial a
consolidated balance sheet and a consolidated statement of operations, without
related notes, for such month prepared in accordance with current financial
reporting practices.
6.3 Access to Properties and Records. Subject to Section 12.1
hereof, York shall permit Harris Financial reasonable access upon reasonable
notice to its properties and those of the York Subsidiaries, and shall
disclose and make available to Harris Financial during normal business hours
all of its books, papers and records relating to the assets, properties,
operations, obligations and liabilities, including, but not limited to, all
books of account (including the general ledger), tax records, minute books of
directors' (other than minutes that discuss any of the transactions
contemplated by this Agreement or other strategic alternatives) and
stockholders' meetings, organizational documents, Bylaws, material contracts
and agreements, filings with any regulatory authority, litigation files, plans
affecting employees, and any other business activities or prospects in which
Harris Financial may have a reasonable interest; provided, however, that York
shall not be required to take any action that would provide access to or to
disclose information where such access or disclosure would violate or
prejudice the rights or business interests or confidences of any customer or
other person or would result in the waiver by it of the privilege protecting
communications between it and any of its counsel. York shall provide and shall
request its auditors to provide Harris Financial with such historical
financial information regarding it (and related audit reports and consents) as
Harris Financial may reasonably request for securities disclosure purposes.
6.4 Financial and Other Statements.
6.4.1 Promptly upon receipt thereof, York will furnish to Harris
Financial copies of each annual, interim or special audit of the books of York
and the York Subsidiaries made by its independent accountants and copies of
all internal control reports submitted to York by such accountants in
connection with each annual, interim or special audit of the books of York and
the York Subsidiaries made by such accountants.
6.4.2 As soon as practicable, York will furnish to Harris Financial
copies of all such financial statements and reports as it or any York
Subsidiary shall send to its stockholders, the SEC, the FDIC, the OTS or any
other regulatory authority, except as legally prohibited thereby.
6.4.3 York will advise Harris Financial promptly of the receipt of any
examination report of any Bank Regulator with respect to the condition or
activities of York or any of the York Subsidiaries.
48
6.4.4 With reasonable promptness, York will furnish to Harris
Financial such additional financial data as Harris Financial may reasonably
request, including without limitation, detailed monthly financial statements
and loan reports.
6.5 Disclosure Supplements. From time to time prior to the Effective
Time, York and York Fed will promptly supplement or amend the YORK DISCLOSURE
SCHEDULE delivered in connection herewith with respect to any material matter
hereafter arising which, if existing, occurring or known at the date of this
Agreement, would have been required to be set forth or described in such YORK
DISCLOSURE SCHEDULE or which is necessary to correct any information in such
YORK DISCLOSURE SCHEDULE which has been rendered inaccurate thereby. No
supplement or amendment to such YORK DISCLOSURE SCHEDULE shall have any effect
for the purpose of determining satisfaction of the conditions set forth in
Article IX.
6.6 Consents and Approvals of Third Parties. York shall use all
reasonable efforts to obtain as soon as practicable all consents and approvals
of any other persons necessary or desirable for the consummation of the
transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, York shall utilize the services of a professional proxy
soliciting firm to help obtain the shareholder vote required to be obtained by
it hereunder.
6.7 All Reasonable Efforts. Subject to the terms and conditions
herein provided, York agrees to use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.
6.8 Failure to Fulfill Conditions. In the event that York determines
that a condition to its obligation to complete the Merger cannot be fulfilled
and that it will not waive that condition, it will promptly notify Harris
Financial.
6.9 No Solicitation. Unless and until this Agreement shall have been
properly terminated by either party pursuant to Section 11.1 hereof, neither
York nor any York Subsidiary shall (and York and York Fed shall use all
commercially reasonable efforts to cause its representatives, including, but
not limited to, investment bankers, attorneys and accountants, not to),
directly or indirectly, encourage, solicit, initiate or participate in any
discussions or negotiations with, or, provide any information to, any
corporation, partnership, person or other entity or group (other than Harris
Financial and its affiliates or representatives) concerning any merger, tender
offer, sale of substantial assets, sale of shares of capital stock or debt
securities or similar transaction involving York or York Fed (an "Acquisition
Transaction"). Notwithstanding the foregoing, nothing contained in this
Section 6.9 shall prohibit York or its Board of Directors from taking and
disclosing to York's stockholders a position with respect to a tender offer by
a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act or from such action in response to an unsolicited Acquisition
Transaction which, in the judgment of the Board of Directors, may be required
under applicable law or is necessary in order to comply with its fiduciary
obligations. York will immediately communicate to Harris Financial the terms
of any proposal or inquiry relating to an
49
Acquisition Transaction and the identity of the party making such proposal or
inquiry which it may receive in respect of any such transaction (which shall
mean that any such communication shall be delivered no less promptly than by
telephone within 24 hours of York's receipt of any such proposal or inquiry)
or its receipt of any request for information from the Bank Regulator, or any
other governmental agency or authority with respect to a proposed Acquisition
Transaction. York shall continue to consult with Harris Financial after
receipt of such proposal.
6.10 Board of Directors and Committee Meetings. York and York Fed
shall permit a representative of Harris Financial to attend any meeting of the
Board of Directors of York and/or York Fed or the Executive Committees thereof
(provided that neither York nor York Fed shall be required to permit the
Harris Financial representative to remain present during any confidential
discussion of this Agreement and the transactions contemplated hereby or any
third party proposal to acquire control of York or York Fed).
ARTICLE VII
COVENANTS OF HARRIS FINANCIAL
7.1 Conduct of Business. During the period from the date of this
Agreement to the Effective Time, except with the written consent of York,
which consent will not be unreasonably withheld, none of the Mutual Company,
New Harris Financial, Harris Financial or Harris Savings Bank will engage in
any significant transactions outside the ordinary course of business and
consistent with past practices (it being understood that the purchase or sale
of any branch office shall not be considered outside the ordinary course of
business) or take any action which would: (i) adversely affect the ability of
any party to obtain any necessary approvals of Governmental Entities required
for the transactions contemplated hereby or materially increase the period of
time necessary to obtain such approvals; (ii) adversely affect its ability to
perform its covenants and agreements under this Agreement; (iii) disqualify
the Merger as a "pooling of interests" for accounting purposes or a tax free
reorganization under Section 368 of the Code; or (iv) result in the
representations and warranties contained in Article V of this Agreement not
being true and correct on the date of this Agreement or at any future date on
or prior to the Closing Date, provided that nothing herein contained shall
preclude Harris Financial from exercising its rights under the York Option
Agreement or taking any action previously disclosed. Provided further, that
nothing herein shall preclude the Mutual Company and Harris Savings Bank from
electing, and the Mutual Company and Harris Savings Bank shall be permitted
to, convert their charters to a federal mutual holding company charter and
federal savings bank charter, respectively, subject to applicable law and
regulation and the consent of York.
7.2 Current Information. During the period from the date of this
Agreement to the Effective Time, Harris Financial will cause one or more of
its representatives to confer with representatives of York and report the
general status of its ongoing operations at such times as York may reasonably
request. Harris Financial will promptly notify York of any material change in
the normal course of its business or in the operation of its properties and,
to the extent permitted by
50
applicable law, of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the
institution or the threat of material litigation involving Harris Financial.
Harris Financial will also provide York such information with respect to such
events as York may reasonably request from time to time. 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), Harris Financial will deliver to York
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 the
fiscal year, Harris Financial will deliver to York its Annual Report on Form
10-K. Within 25 days after the end of each month, Harris Financial will
deliver to York a consolidated balance sheet and a consolidated statement of
operations, without related notes, for such month prepared in accordance with
current financial reporting practices.
7.3 Access to Properties and Records. Subject to Section 12.1
hereof, Harris Financial shall permit York reasonable access upon reasonable
notice to its properties and those of the Harris Financial Subsidiaries, and
shall disclose and make available to York during normal business hours all of
its books, papers and records relating to the assets, stock ownership,
properties, operations, obligations and liabilities, including, but not
limited to, all books of account (including the general ledger), tax records,
minute books of directors' (other than minutes that discuss any of the
transactions contemplated by this Agreement or other strategic alternatives)
and stockholders' meetings, organizational documents, Bylaws, material
contracts and agreements, filings with any regulatory authority, litigation
files, plans affecting employees, and any other business activities or
prospects in which York may have a reasonable interest; provided, however,
that Harris Financial shall not be required to take any action that would
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights or business interests or confidences of
any customer or other person or would result in the waiver by it of the
privilege protecting communications between it and any of its counsel. Harris
Financial shall provide and shall request its auditors to provide York with
such historical financial information regarding it (and related audit reports
and consents) as York may reasonably request for securities law disclosure
purposes.
7.4 Financial and Other Statements.
7.4.1 Promptly upon receipt thereof, Harris Financial will furnish to
York copies of each annual, interim or special audit of the books of Harris
Financial and the Harris Financial Subsidiaries made by its independent
accountants and copies of all internal control reports submitted to Harris
Financial by such accountants in connection with each annual, interim or
special audit of the books of Harris Financial and the Harris Financial
Subsidiaries made by such accountants.
7.4.2 As soon as practicable, Harris Financial will furnish to York
copies of all such financial statements and reports as it or any Harris
Financial Subsidiary shall send to its stockholders, the SEC, the Department,
the FDIC, the FRB or any other regulatory authority, except as legally
prohibited thereby.
51
7.4.3 Harris Financial will advise York promptly of the receipt of any
examination report of any Bank Regulator with respect to the condition or
activities of Harris Financial or any of the Harris Financial Subsidiaries.
7.4.4 With reasonable promptness, Harris Financial will furnish to
York such additional financial data as York may reasonably request, including
without limitation, detailed monthly financial statements and loan reports.
7.5 Disclosure Supplements. From time to time prior to the Effective
Time, the Mutual Company, New Harris Financial, Harris Financial and Harris
Savings Bank will promptly supplement or amend the HARRIS DISCLOSURE SCHEDULE
delivered in connection herewith with respect to any material matter hereafter
arising which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such HARRIS
DISCLOSURE SCHEDULE or which is necessary to correct any information in such
HARRIS DISCLOSURE SCHEDULE which has been rendered inaccurate thereby. No
supplement or amendment to such HARRIS DISCLOSURE SCHEDULE shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Article IX.
7.6 Consents and Approvals of Third Parties. The Mutual Company, New
Harris Financial, Harris Financial and Harris Savings Bank shall use all
reasonable efforts to obtain as soon as practicable all consents and approvals
of any other Persons, including the Depositors and stockholders of Harris
Financial necessary or desirable for the consummation of the transactions
contemplated by this Agreement, including the Conversion.
7.7 All Reasonable Efforts. Subject to the terms and conditions
herein provided, the Mutual Company, New Harris Financial, Harris Financial
and Harris Savings Bank agree to use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including the
Conversion.
7.8 Failure to Fulfill Conditions. In the event that Harris
Financial determines that a condition to its obligation to complete the Merger
cannot be fulfilled and that it will not waive that condition, it will
promptly notify York.
7.9 Employee Benefits.
7.9.1 All employees of York and the York Subsidiaries as of the
Effective Time shall become employees of New Harris Financial or a Harris
Financial Subsidiary as of the Effective Time. New Harris Financial shall use
its best reasonable efforts consistent with the objectives of the Merger, to
place former employees of York and its Subsidiaries in comparable positions
with New Harris Financial or a Harris Financial Subsidiary, provided that
except as set forth in Section 7.9.1 of the HARRIS DISCLOSURE SCHEDULE and as
set forth in a separate letter between York and Harris Financial of even date
herewith nothing in this Agreement shall give any employee of York
52
or its Subsidiaries any right to any severance payment or continuing
employment with Harris Financial or any Subsidiary thereof after the Effective
Time, or any termination benefit in the event of a change in control of New
Harris Financial after the Effective Time.
7.9.2 Except as otherwise provided in Section 7.9 of this Agreement or
as agreed to in writing between Harris Financial and York, as of or after the
Effective Time, and at New Harris Financial's election and subject to the
requirements of the Code, the York Employee Plans may continue to be
maintained separately, or consolidated or terminated. Employees of York and
the York Subsidiaries who continue employment with New Harris Financial or any
Harris Financial Subsidiary ("Continuing Employees") shall receive credit for
service with York and the York Subsidiaries under any existing Harris benefit
plan or any Harris benefit plan in which such employees would be eligible to
enroll, which, in the aggregate, are no less favorable than those generally
afforded to other employees of Harris holding similar positions, subject to
the terms and conditions under which those employee benefits are made
available to such employees; provided, however, that (i) for purposes of
determining eligibility, participation, vesting and accrual of such employee
benefits (provided that employees of York and the York Subsidiaries shall not
receive credit for benefit accrual purposes under any Harris defined benefit
pension plan), service with York or any York Subsidiary prior to the Effective
Time shall be treated as service with Harris, (ii) this Section 7.9 shall not
be construed to limit the ability of Harris to terminate the employment of any
employee or to review employee benefits programs from time to time and to make
such changes as they deem appropriate, (iii) to the extent that any comparable
employee benefit or welfare plan for York or any York Subsidiary is continued
after the Effective Time (other than the York ESOP) and while such plan is
continuing, there shall be no requirements to include Continuing Employees in
the comparable plan of Harris, (iv) Harris shall honor any and all vacation
leave (and sick leave) accrued by employees of York and the York Subsidiaries,
except to the extent of any duplication of benefits, and (v) Harris agrees
that any pre-existing condition, limitation, or exclusion in its health plans
shall not apply to Continuing Employees or their covered dependents who are
covered under a medical or hospitalization indemnity plan maintained by York
or any York Subsidiary immediately prior to the Effective Time and who then
change that coverage to Harris' medical or hospitalization indemnity health
plan at the time such Continuing Employees are first given the option to
enroll in Harris' health plans, and there shall be no duplications of
deductions or co-payments.
7.9.3 Section 7.9.3 of the YORK DISCLOSURE SCHEDULE contains all
employment and change of control, severance and similar agreements with any
employee or director of York or any York Subsidiary ("Benefit Agreements").
Following the Effective Time, Harris Financial shall honor or cause its
Subsidiaries to honor in accordance with their terms all such previously
disclosed Benefit Agreements and assume or cause its Subsidiaries to assume
all duties, liabilities and obligations under such agreements and
arrangements.
7.9.4 If New Harris Financial implements a stock option plan pursuant
to which awards of options to purchase shares of New Harris Common Stock will
be made to officers, key employees and directors of New Harris Financial or
its Subsidiaries within two years of the Effective Date, then 10% of such
awards shall be determined by a committee consisting of at least two (2)
53
directors that are outside directors as such term applies under Section 162(m)
of the Code ("Outside Directors") that is selected by the Board of Directors
of New Harris Financial, 40% of such awards shall be determined by a committee
of at least two (2) Outside Directors selected by directors of York on the
date hereof who are also directors of New Harris Financial on the date of the
determination of the award, and 60% of such awards shall be determined by a
committee of at least two (2) Outside Directors selected by directors of
Harris Financial on the date hereof who are also directors of New Harris
Financial on the date of the determination of the award. Any forfeited options
may be reawarded by the committee selected by the Board of Directors of New
Harris Financial. No Continuing Employee shall receive awards that are
materially greater than awards under such plan to other employees of similar
job title and responsibilities (other than awards to reflect superior
performance) who are not Continuing Employees. Any such option plan shall
provide that awards under the plan shall vest in the event of retirement of
the recipient of the award, and upon such other events as shall be determined
by the committee making the award. No option plan shall be implemented and
awards shall not be made under any new option plan unless the plan is approved
by New Harris Financial shareholders.
7.9.5 If New Harris Financial implements a restricted stock plan
pursuant to which awards of shares of New Harris Common Stock restricted by
the terms of such plan will be made to officers, key employees and directors
of New Harris Financial or its Subsidiaries within two years of the Effective
Date, then 10% of such awards shall be determined by a committee consisting of
at least two (2) Outside Directors that is selected by the Board of Directors
of New Harris Financial, 40% of such awards shall be determined by a committee
of at least two (2) Outside Directors selected by directors of York on the
date hereof who are also directors of New Harris Financial on the date of the
determination of the award, and 60% of such awards shall be determined by a
committee of at least two (2) Outside Directors selected by directors of
Harris Financial on the date hereof, who are also directors of New Harris
Financial on the date of the determination of the award. Any forfeited shares
may be reawarded by the committee selected by the Board of Directors of New
Harris Financial. Any such restricted stock plan shall provide that awards
under the plan shall vest in the event of retirement of the recipient of the
award, and upon such other events as shall be determined by the committee
making the award. No restricted stock plan shall be implemented and awards
shall not be made under any new restricted stock plan unless the plan is
approved by New Harris Financial shareholders.
7.9.6 In the event that either New Harris Financial or any New Harris
Financial Subsidiary or any of its successors or assigns (i) consolidates with
or merges into any other person and shall not be the continuing or surviving
bank or entity of such consolidation or merger, or (ii) transfers all or
substantially all of its properties and assets to any person, then, and in
each such case, proper provision shall be made so that the successors and
assigns of New Harris Financial or a Harris Financial Subsidiary shall assume
the obligations set forth in Sections 7.9.4 and 7.9.5.
7.9.7 For purposes of this Section 7.9, the term York Subsidiary shall
include only subsidiaries that are wholly-owned by York.
54
7.10 Directors and Officers Indemnification and Insurance.
7.10.1 New Harris Financial shall maintain, or shall cause Harris
Savings Bank to maintain, in effect for three years following the Effective
Time, the current directors' and officers' liability insurance policies
maintained by York and the York Subsidiaries (provided, that New Harris
Financial may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less favorable) with
respect to matters occurring prior to the Effective Time; provided, however,
that in no event shall New Harris Financial be required to expend pursuant to
this Section 7.10.1 more than 135% of the annual cost currently expended by
York with respect to such insurance. In connection with the foregoing, York
agrees to provide such insurer or substitute insurer with such representations
as such insurer may request with respect to the reporting of any prior claims.
7.10.2 New Harris Financial shall, or shall cause Harris Savings Bank
or the appropriate New Harris Financial Subsidiary to, indemnify, defend and
hold harmless each person who is now, or who has been at any time before the
date hereof or who becomes before the Effective Time, an officer or director
of York or a York Subsidiary (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses (including attorney's fees), liabilities or
judgments or amounts that are paid in settlement (which settlement shall
require the prior written consent of New Harris Financial, which consent shall
not be unreasonably withheld) of or in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, or administrative
(each a "Claim"), in which an Indemnified Party is, or is threatened to be
made, a party or witness 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
York or a York Subsidiary if such Claim pertains to any matter of fact
arising, existing or occurring before the Effective Time (including, without
limitation, the Merger and the other transactions contemplated hereby),
regardless of whether such Claim is asserted or claimed before, or after, the
Effective Time (the "Indemnified Liabilities"), to the fullest extent
permitted under applicable state or federal law and under York's Articles of
Incorporation or Charter and Bylaws. New Harris Financial shall pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by applicable state or federal
law upon receipt of an undertaking to repay such advance payments if he shall
be adjudicated or determined to be not entitled to indemnification in the
manner set forth below. Any Indemnified Party wishing to claim indemnification
under this Section 7.10.2 upon learning of any Claim, shall notify New Harris
Financial (but the failure so to notify New Harris Financial shall not relieve
it from any liability which it may have under this Section 7.10.2, except to
the extent such failure materially prejudices New Harris Financial) and shall
deliver to New Harris Financial the undertaking referred to in the previous
sentence. In the event of any such Claim (whether arising before or after the
Effective Time) (1) New Harris Financial shall have the right to assume the
defense thereof (in which event the Indemnified Parties will cooperate in the
defense of any such matter) and upon such assumption New Harris Financial
shall not be liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any Indemnified Party
in connection with the defense thereof, except that if New Harris Financial
elects not to assume such defense, or counsel for the Indemnified Parties
reasonably advises the
55
Indemnified Parties that there are or may be (whether or not any have yet
actually arisen) issues which raise conflicts of interest between New Harris
Financial and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them, and New Harris Financial shall pay
the reasonable fees and expenses of such counsel for the Indemnified Parties,
(2) New Harris Financial shall be obligated pursuant to this paragraph to pay
for only one firm of counsel for all Indemnified Parties whose reasonable fees
and expenses shall be paid promptly as statements are received unless there is
a conflict of interest that necessitates more than one law firm, (3) New
Harris Financial shall not be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld), and
(4) no Indemnified Party shall be entitled to indemnification hereunder with
respect to a matter as to which (x) he shall have been adjudicated in any
proceeding not to have acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of York or any York
Subsidiary, or (y) in the event that a proceeding is compromised or settled so
as to impose any liability or obligation upon an Indemnified Party, if there
is a determination that with respect to said matter said Indemnified Party did
not act in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of York or any York Subsidiary. The
determination shall be made by a majority vote of a quorum consisting of the
Directors of New Harris Financial who are not involved in such proceeding.
7.10.3 In the event that either Harris Financial, New Harris Financial
or Harris Savings Bank or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving bank or entity of such consolidation or merger or (ii) transfers all
or substantially all of its properties and assets to any person, then, and in
each such case, proper provision shall be made so that the successors and
assigns of Harris Financial, New Harris Financial or Harris Savings Bank shall
assume the obligations set forth in this Section 7.10.
7.10.4 The obligations of Harris provided under this Section 7.10 are
intended to be enforceable against Harris directly by the Indemnified Parties
and shall be binding on all respective successors and permitted assigns of
Harris.
7.11 Stock Listing. New Harris Financial agrees to list on the Stock
Exchange (or such other national securities exchange on which the shares of
the New Harris Common Stock shall be listed as of the date of consummation of
the Merger), subject to official notice of issuance, the shares of New Harris
Common Stock to be issued in the Merger.
7.12 Options. Harris Financial agrees that from the date of this
Agreement until the Effective Time it will not issue or grant any option,
warrant, call, commitment, subscription, right to purchase or agreement of any
character relating to the authorized or issued capital stock of Harris
Financial or any of the Harris Financial Subsidiaries, or any securities
convertible into shares of such stock; except that (i) Harris Financial may
issue shares of Harris Common Stock or permit treasury shares to become
outstanding to satisfy presently outstanding options under and in accordance
with the terms of the Harris Option Plans, and (ii) New Harris Financial may
issue shares of New Harris Common Stock in connection with the Offering.
56
7.13 Registration of Shares Issuable Upon Exercise of Options. New
Harris Financial agrees to register under the Securities Act all shares of New
Harris Common Stock issuable upon the exercise of York Options that will be
converted into options to acquire New Harris Common Stock upon the Effective
Time.
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1 York and Harris Financial Special Meetings.
8.1.1 York will (i) as promptly as practicable after the Merger
Registration Statement is declared effective by the SEC, take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (the "York Stockholders Meeting"), for the purpose of considering
this Agreement and the Merger, and for such other purposes as may be, in
York's reasonable judgment, necessary or desirable, (ii) subject to the
fiduciary responsibility of the Board of Directors of York as advised by
counsel, recommend to its stockholders the approval of the aforementioned
matters to be submitted by it to its stockholders, and (iii) cooperate and
consult with Harris Financial and New Harris Financial with respect to each of
the foregoing matters. The York Stockholders Meeting shall not be held until
the Conversion Registration Statement has been declared effective by the SEC.
8.1.2 Harris Financial will (i) as promptly as practicable after the
Merger Registration Statement is declared effective by the SEC, take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (the "Harris Financial Stockholders Meeting"), which shall not be
held until the Conversion Registration Statement has been declared effective
by the SEC, for the purpose of approving the transactions contemplated by this
Agreement, and for such other purposes as may be, in Harris Financial's
reasonable judgment, necessary or desirable, (ii) subject to the fiduciary
responsibility of the Board of Directors of Harris Financial as advised by
counsel, recommend to its stockholders the approval of the aforementioned
matters to be submitted by it to its stockholders, and (iii) cooperate and
consult with York with respect to each of the foregoing matters.
8.2 Proxy Statement-Prospectus.
8.2.1 For the purposes (x) of registering New Harris Common Stock to
be offered to holders of York Common Stock in connection with the Merger with
the SEC under the Securities Act and applicable state securities laws and (y)
of holding the York Stockholders Meeting and Harris Financial Stockholders
Meeting, New Harris Financial shall draft and prepare, and York shall
cooperate in the preparation of, the Merger Registration Statement, including
a combined proxy statement and prospectus or statements satisfying all
applicable requirements of applicable state securities and banking laws, and
of the Securities Act and the Exchange Act, and the rules and regulations
thereunder (such proxy statement/prospectus in the form mailed by York to the
York
57
stockholders and by Harris Financial to the Harris Financial stockholders,
together with any and all amendments or supplements thereto, being herein
referred to as the "Proxy Statement-Prospectus"). New Harris Financial shall
file the Merger Registration Statement, including the Proxy Statement-
Prospectus, with the SEC. Each of New Harris Financial and York shall use
their best efforts to have the Merger Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing, and each of York and New Harris Financial shall thereafter promptly
mail the Proxy Statement-Prospectus to its stockholders. New Harris Financial
shall also use its best efforts to obtain all necessary state securities law
or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and York shall furnish all information
concerning York and the holders of York Common Stock as may be reasonably
requested in connection with any such action.
8.2.2 York shall provide New Harris Financial with any information
concerning itself that Harris Financial may reasonably request in connection
with the drafting and preparation of the Proxy Statement-Prospectus, and
Harris Financial shall notify York promptly of the receipt of any comments of
the SEC with respect to the Proxy Statement-Prospectus and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to York promptly copies of all correspondence between New
Harris Financial, Harris Financial or any of their representatives and the
SEC. New Harris Financial and Harris Financial shall give York and its counsel
the opportunity to review and comment on the Proxy Statement-Prospectus prior
to its being filed with the SEC and shall give York and its counsel the
opportunity to review and comment on all amendments and supplements to the
Proxy Statement-Prospectus and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent
to, the SEC. Each of Harris Financial, New Harris Financial and York agrees to
use all reasonable efforts, after consultation with the other party hereto, to
respond promptly to all such comments of and requests by the SEC and to cause
the Proxy Statement-Prospectus and all required amendments and supplements
thereto to be mailed to the holders of York Common Stock and Harris Common
Stock entitled to vote at the York Stockholders Meeting and Harris Financial
Stockholders Meeting, respectively, referred to in Section 8.1 hereof at the
earliest practicable time.
8.2.3 York and Harris Financial shall promptly notify the other party
if at any time it becomes aware that the Proxy Statement-Prospectus or the
Merger Registration Statement contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. In such event, York shall cooperate with
Harris Financial and New Harris Financial in the preparation of a supplement
or amendment to such Proxy Statement- Prospectus which corrects such
misstatement or omission, and New Harris Financial shall file an amended
Merger Registration Statement with the SEC, and each of York, Harris Financial
and New Harris Financial shall mail an amended Proxy Statement-Prospectus to
York's and Harris Financial's stockholders, respectively. York, Harris
Financial and New Harris Financial shall each provide to the other a "comfort"
letter from its independent certified public accountant, dated as of the date
of the Proxy Statement-Prospectus and updated as of the date of consummation
of the Merger, with respect to certain financial information regarding York
and Harris Financial and New Harris
58
Financial, respectively, each in form and substance which is customary in
transactions such as the Merger.
8.3 The Mutual Company Conversion from Mutual to Stock Form.
Commencing promptly after the date of this Agreement, the Mutual Company,
Harris Financial, New Harris Financial and Harris Savings Bank will take all
reasonable steps necessary to effect the Conversion. In addition, without
limiting the generality of the foregoing, the Mutual Company shall cause the
following to be done:
8.3.1 The Harris Financial Stockholders Meeting. Harris Financial will
(i) as promptly as practicable after the Conversion Registration Statement is
declared effective by the SEC, take all steps necessary to duly call, give
notice of, convene and hold the Harris Financial Stockholders Meeting for the
purpose of approving the Conversion and/or the Plan of Conversion, and for
such other purposes as may be, in the reasonable judgment of Harris Financial,
necessary or desirable, and (ii) subject to the fiduciary responsibility of
the Board of Directors of Harris Financial as advised by counsel, recommend to
its stockholders the approval of the aforementioned matters to be submitted by
it to its stockholders.
8.3.2 The Mutual Company Special Meeting. The Mutual Company will (i)
as promptly as practicable after the Conversion Registration Statement is
declared effective by the SEC, take all steps necessary to duly call, give
notice of, convene and hold a meeting of Depositors (the "Depositors Meeting")
for the purpose of approving the Plan of Conversion, and for such other
purposes as may be, in the reasonable judgment of the Mutual Company,
necessary or desirable, (ii) subject to the fiduciary responsibility of the
Board of Trustees of the Mutual Company as advised by counsel, recommend to
Depositors the approval of the aforementioned matters to be submitted by it to
Depositors, and (iii) cooperate and consult with York with respect to each of
the foregoing matters.
8.3.3 The Mutual Company will use all reasonable efforts to prepare
and file all required regulatory applications required in connection with the
Conversion, including, without limitation, filing applications with the
Department, the FDIC (if necessary) and the FRB.
8.3.4 Harris Financial and New Harris Financial shall prepare as
promptly as practicable, and York shall co-operate in the preparation of, the
Conversion Prospectus. Such Conversion Prospectus shall be incorporated into
the Conversion Registration Statement. New Harris Financial shall file the
Conversion Registration Statement with the SEC. New Harris Financial shall use
its reasonable best efforts to have the Conversion Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing.
8.3.5 York shall provide Harris Financial and New Harris Financial
with any information concerning it that Harris Financial or New Harris
Financial may reasonably request in connection with the Conversion Prospectus,
and Harris Financial shall notify York promptly of the receipt of any comments
of the SEC, the FRB, the FDIC or the Department with respect to the
59
Conversion Prospectus and of any requests by the SEC, the FRB, the FDIC or the
Department for any amendment or supplement thereto or for additional
information, and shall provide to York promptly copies of all correspondence
between New Harris Financial or any representative of New Harris Financial and
the SEC, the FRB, the FDIC or the Department. New Harris Financial shall give
York and its counsel the opportunity to review and comment on the Conversion
Prospectus prior to its being filed with the SEC, the FRB, the FDIC or the
Department and shall give York and its counsel the opportunity to review and
comment on all amendments and supplements to the Conversion Prospectus and all
responses to requests for additional information and replies to comments prior
to their being filed with, or sent to, the SEC, the FRB, the FDIC or the
Department. Each of Harris Financial, New Harris Financial and York agrees to
use all reasonable efforts, after consultation with the other party hereto, to
respond promptly to all such comments of and requests by the SEC, the FRB, the
FDIC or the Department and to cause the Conversion Prospectus and all required
amendments and supplements thereto to be mailed to Depositors at the earliest
practicable time.
8.3.6 York shall promptly notify Harris Financial if at any time it
becomes aware that the Conversion Prospectus or the Conversion Registration
Statement contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. In such event, York shall cooperate with Harris
Financial and New Harris Financial in the preparation of a supplement or
amendment to such Conversion Prospectus, which corrects such misstatement or
omission, and New Harris Financial shall file an amended Conversion
Registration Statement with the SEC. York shall provide to New Harris
Financial, Harris Financial and the placement agent for the sale of New Harris
Common Stock in the Conversion Offering a "comfort" letter from the
independent certified public accountants for York, dated as of the date of the
Conversion Prospectus and updated as of the date of consummation of the
Conversion, with respect to certain financial information regarding York, each
in form and substance which is customary in transactions such as the
Conversion, and shall cause its counsel to deliver to the placement agent for
the Conversion such opinions as Harris Financial and New Harris Financial may
reasonably request.
8.3.7 The aggregate price for which the shares of Harris Common Stock
are sold to purchasers in the Conversion Offering shall be based on the
Independent Valuation. The Independent Valuation shall be expressed as a range
(the "Valuation Range"), the maximum and minimum of which shall vary 15% above
and below the midpoint of such range, and the maximum of such range may be
increased by an additional 15%.
8.3.8 If any shares of New Harris Common Stock that are offered for
sale in the subscription offering that is conducted as part of the Conversion
Offering remain unsold then, subject to the consent of York which consent
shall not be unreasonably withheld, such shares may be issued to York
shareholders as part of the Merger Consideration. In such event, the unsold
shares of New Harris Common Stock that are issued to York shareholders shall
be assumed to have also been issued in the Conversion Offering for purposes of
calculating the Maximum Percentage.
60
8.4 Regulatory Approvals. Each of York, New Harris Financial and
Harris Financial will cooperate with the other and use all reasonable efforts
to promptly prepare all necessary documentation, to effect all necessary
filings and to obtain all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement, including without
limitation the Merger and the Conversion. York and Harris Financial will
furnish each other and each other's counsel with all information concerning
themselves, their subsidiaries, directors, officers and stockholders and such
other matters as may be necessary or advisable in connection with the
Conversion Prospectus, the Proxy Statement-Prospectus and any application,
petition or any other statement or application made by or on behalf of York,
New Harris Financial or Harris Financial to any governmental body in
connection with the Conversion, the Merger, and the other transactions
contemplated by this Agreement. York shall have the right to review and
approve in advance all characterizations of the information relating to York
and any of its Subsidiaries, which appear in any filing made in connection
with the transactions contemplated by this Agreement with any governmental
body. In addition, York, Harris Financial and New Harris Financial shall each
furnish to the other for review a copy of each such filing made in connection
with the transactions contemplated by this Agreement with any governmental
body prior to its filing.
8.5 Affiliates; Publication of Combined Financial Results.
8.5.1 York shall use all reasonable efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act and for purposes of qualifying the Merger for
"pooling of interests" accounting treatment) of York to deliver to Harris
Financial, as soon as practicable after the date of this Agreement, and at
least thirty (30) days prior to the date of the shareholders meeting called by
York to approve this Agreement, a written agreement, in the form of Exhibit C
hereto, providing that such person will not sell, pledge, transfer or
otherwise dispose of any shares of New Harris Common Stock or York Common
Stock now or hereafter held by such "affiliate," including, without
limitation, the shares of New Harris Common Stock to be received by such
"affiliate" in the Merger: (1) otherwise than in compliance with the
applicable provisions of the Securities Act and the rules and regulations
thereunder; or (2) during the period commencing thirty (30) days prior to the
consummation of the Merger and ending at the time of the publication of
financial results covering at least thirty (30) days of combined operations of
New Harris Financial and York, except that the restriction set forth in clause
(2) above, and the restriction set forth in Section A of such letter, shall
not apply if the Merger is accounted for as a purchase transaction.
ARTICLE IX
CLOSING CONDITIONS
9.1 Conditions to Each Party's Obligations under this Agreement. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Pre-Closing Date of the following
conditions, none of which may be waived:
61
9.1.1 Stockholder and Depositor Approval.
(A) This Agreement and the transactions contemplated hereby
shall have been approved by the requisite vote of the stockholders of York and
Harris Financial.
(B) The Conversion and the Plan of Conversion shall have been
approved by the requisite vote of Depositors and stockholders of Harris
Financial.
9.1.2 Injunctions. None of the parties hereto shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits the consummation of the transactions contemplated
by this Agreement.
9.1.3 Regulatory Approvals. All necessary approvals, authorizations
and consents of all Governmental Entities required to consummate the
transactions contemplated by this Agreement shall have been obtained and shall
remain in full force and effect and all waiting periods relating to such
approvals, authorizations or consents shall have expired; and no such
approval, authorization or consent shall include any condition or requirement,
excluding standard conditions that are normally imposed by the regulatory
authorities in bank merger transactions or in mutual-to- stock conversions,
that would, in the good faith reasonable judgment of the Board of Directors of
Harris Financial or York, materially and adversely affect the business,
operations, financial condition, property or assets of the combined enterprise
of York, York Fed and Harris or otherwise materially impair the value of York
or York Fed to Harris, it being understood that any regulatory approval
requiring the divestiture of one or more Harris Savings Bank branches or York
Fed branches as a condition to such approval shall not be deemed to materially
impair the value of York or York Fed to Harris.
9.1.4 Effectiveness of Merger Registration Statement. The Merger
Registration Statement shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the Merger Registration
Statement shall have been issued, and no proceedings for that purpose shall
have been initiated or threatened by the SEC and, if the offer and sale of New
Harris Common Stock in the Merger is subject to the blue sky laws of any
state, shall not be subject to a stop order of any state securities
commissioner.
9.1.5 Stock Exchange Listing. The shares of New Harris Common Stock to
be issued in the Merger shall have been authorized for listing on the Stock
Exchange, subject to official notice of issuance.
9.1.6 Tax Opinion. On the basis of facts, representations and
assumptions which shall be consistent with the state of facts existing at the
Pre-Closing date, Harris Financial, New Harris Financial and York shall have
received an opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. reasonably
acceptable in form and substance to Harris Financial, New Harris Financial and
York dated as of the Pre-Closing Date, substantially to the effect that, for
federal income tax purposes:
62
(a) The Merger, when consummated in accordance with the terms
hereof, either will constitute a reorganization within the meaning of Section
368(a) of the Code or will be treated as part of a reorganization within the
meaning of Section 368(a) of the Code;
(b) None of the Conversion, the Exchange Offer, or the merger of
York Fed into Harris Savings Bank will adversely affect the Merger qualifying
as a Reorganization within the meaning of Section 368(A) of the Code.
(c) No gain or loss will be recognized by Harris Financial, New
Harris Financial, Harris Savings, York or York Fed by reason of the Merger;
(d) The exchange of York Common Stock to the extent exchanged
for New Harris Common Stock will not give rise to recognition of gain or loss
for federal income tax purposes to the shareholders of York;
(e) The basis of the New Harris Common Stock to be received
(including any fractional shares deemed received for tax purposes) by a York
shareholder will be the same as the basis of the York Common Stock surrendered
pursuant to the Merger in exchange therefor; and
(f) The holding period of the shares of New Harris Common Stock
to be received by a shareholder of York will include the period during which
the shareholder held the shares of York Common Stock surrendered in exchange
therefor, provided the York Common Stock surrendered is held as a capital
asset at the Effective Time.
Each of Harris Financial, New Harris Financial and York shall
provide a letter setting forth the facts, assumptions and representations on
which such counsel may rely in rendering its opinion.
9.1.7 Conversion. New Harris Financial shall have received and
accepted orders to purchase and/or shall be prepared to issue as Merger
Consideration at least the minimum number of shares of New Harris Common Stock
offered for sale in the Conversion Offering, and the proceeds of such sale are
sufficient to enable Harris Savings Bank to remain "well-capitalized" under
applicable federal banking law and otherwise to meet regulatory capital
requirements, in each case after giving effect to the Merger.
9.2 Conditions to the Obligations of Harris Financial under this
Agreement. The obligations of Harris Financial and New Harris Financial under
this Agreement shall be further subject to the satisfaction of the conditions
set forth in Sections 9.2.1 through 9.2.7 at or prior to the Pre-Closing, and
the satisfaction of the condition set forth in Section 9.2.8 at or prior to
the Closing:
9.2.1 Representations and Warranties. Except as otherwise contemplated
by this Agreement or consented to in writing by Harris Financial, the
representations and warranties of York set forth in Article IV hereof shall be
true and correct in all material respects as of the date of this Agreement and
as of the Pre-Closing date as though made on and as of the Pre-Closing Date
(or on
63
the date when made in the case of any representation and warranty which
specifically relates to an earlier date); provided, however, that (i) in
determining whether or not the condition contained in this Section 9.2.1 shall
be satisfied, no effect shall be given to any exceptions in such
representations and warranties relating to materiality or Material Adverse
Effect, and (ii) the condition contained in this Section 9.2.1 shall be deemed
to be satisfied unless the failure of such representations and warranties to
be so true and correct constitute, individually or in the aggregate, a
Material Adverse Effect on York and the York Subsidiaries, taken as a whole;
and York shall have delivered to Harris Financial a certificate of York to
such effect signed by the Chief Executive Officer and the Chief Financial
Officer of York as of the Effective Time.
9.2.2 Agreements and Covenants. As of the Pre-Closing Date, York and
each York Subsidiary shall have performed in all material respects all
obligations and complied in all material respects with all agreements or
covenants to be performed or complied with by each of them at or prior to the
Effective Date under this Agreement, except to the extent that any failure to
perform or comply shall not individually, or in the aggregate, have a Material
Adverse Effect on York and the York Subsidiaries, taken as a whole, or
materially adversely affect consummation of the Merger and other transactions
contemplated hereby, and Harris Financial shall have received a certificate
signed on behalf of York by the Chief Executive Officer and Chief Financial
Officer of York to such effect dated as of the Effective Time.
9.2.3 Permits, Authorizations, Etc. York and the York Subsidiaries
shall have obtained any and all material permits, authorizations, consents,
waivers, clearances or approvals required for the lawful consummation of the
Merger by York, the failure to obtain which would have a Material Adverse
Effect on York and the York Subsidiaries, taken as a whole.
9.2.4 Accountants' Letter. Harris Financial shall have received a
"comfort" letter from the independent certified public accountants for York,
dated (i) the effective date of the Merger Registration Statement and (ii) the
Pre-Closing Date, with respect to certain financial information regarding
York, each in form and substance which is customary in transactions of the
nature contemplated by this Agreement.
9.2.5 Legal Opinion. Harris Financial shall have received an opinion,
dated the Pre-Closing Date, from counsel reasonably acceptable to Harris
Financial, in the form attached hereto as Exhibit D.
9.2.6 Updated Fairness Opinion. Harris Financial shall have received
an update of the written opinion that it received from Ryan, Beck & Co.
pursuant to Section 5.24 of this Agreement, dated as of the date the proxy
statement is mailed to Harris Financial stockholders in connection with the
solicitation of their approval of the Conversion and the Plan of Conversion,
to the effect that, subject to the terms, conditions and qualifications set
forth therein, as of the date thereof, the Conversion and Merger is fair to
Harris Financial stockholders, including the Mutual Company, from a financial
point of view.
64
9.2.7 Pooling of Interests. If Harris Financial shall have received a
letter from Arthur Andersen LLP pursuant to Section 3.1.6, to the effect that
the Merger will qualify for "pooling of interests" accounting treatment and
Harris Financial and York shall not have mutually agreed that the Merger will
be accounted for as a purchase transaction, then Harris Financial shall also
have received a letter from Arthur Andersen LLP, dated as of the Closing Date
addressed to Harris Financial, to the effect that the Merger will qualify for
"pooling of interests" accounting treatment.
9.2.8 No Material Adverse Effect. Since June 30, 1999, no event has
occurred or circumstance arisen that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect on York.
York will furnish Harris Financial with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 9.2 as Harris Financial may reasonably
request.
9.3 Conditions to the Obligations of York under this Agreement. The
obligations of York under this Agreement shall be further subject to the
satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.7 at or
prior to the Pre-Closing, and the satisfaction of the condition set forth in
Section 9.3.8 at or prior to the Closing:
9.3.1 Representations and Warranties. Except as otherwise contemplated
by this Agreement or consented to in writing by York, the representations and
warranties of the Mutual Company, New Harris Financial, Harris Savings Bank
and Harris Financial set forth in Article V hereof shall be true and correct
in all material respects as of the date of this Agreement and as of the Pre-
Closing Date as though made on and as of the Pre-Closing Date (or on the date
when made in the case of any representation and warranty which specifically
relates to an earlier date); provided, however, that (i) in determining
whether or not the condition contained in this Section 9.3.1 shall be
satisfied, no effect shall be given to any exceptions in such representations
and warranties relating to materiality or Material Adverse Effect, and (ii)
the condition contained in this Section 9.3.1 shall be deemed to be satisfied
unless the failure of such representations and warranties to be so true and
correct constitute, individually or in the aggregate, a Material Adverse
Effect on Harris Financial and the Harris Financial Subsidiaries, taken as a
whole; and Harris Financial shall have delivered to York a certificate of
Harris Financial to such effect signed by the Chief Executive Officer and the
Chief Financial Officer of Harris Financial as of the Effective Time;
9.3.2 Agreements and Covenants. As of the Pre-Closing Date, Harris
Financial and New Harris Financial shall have performed in all material
respects all obligations and complied in all material respects with all
agreements or covenants of Harris Financial and New Harris Financial to be
performed or complied with by it at or prior to the Effective Date under this
Agreement except to the extent that any failure to perform or comply shall not
individually, or in the aggregate, have a Material Adverse Effect on Harris
Financial, New Harris Financial and Harris Financial Subsidiaries, taken as a
whole, or materially adversely affect consummation of the Merger and other
65
transactions contemplated hereby, and York shall have received a certificate
signed on behalf of Harris Financial and New Harris Financial by the Chief
Executive Officer and Chief Financial Officer of Harris Financial and New
Harris Financial to such effect dated as of the Effective Time.
9.3.3 Permits, Authorizations, Etc. The Mutual Company, New Harris
Financial, Harris Financial and its Subsidiaries shall have obtained any and
all material permits, authorizations, consents, waivers, clearances or
approvals required for the lawful consummation of the Merger by Harris
Financial and New Harris Financial, the failure to obtain which would have a
Material Adverse Effect on Harris Financial and its Subsidiaries, taken as a
whole.
9.3.4 Accountants' Letter. York shall have received a "comfort" letter
from the independent certified public accountants for Harris Financial and New
Harris Financial, dated (i) the effective date of the Merger Registration
Statement and (ii) the Pre-Closing Date, with respect to certain financial
information regarding Harris Financial and New Harris Financial, each in form
and substance which is customary in transactions of the nature contemplated by
this Agreement.
9.3.5 Legal Opinion. York shall have received an opinion from Luse
Lehman Gorman Pomerenk & Schick, counsel to Harris Financial and New Harris
Financial, dated the Pre-Closing Date, in the form attached hereto as Exhibit
E.
9.3.6 Updated Fairness Opinion. York shall have received an update of
the written opinion that it received from Advest, Inc. pursuant to Section
4.24 of this Agreement, dated as of the date of the Proxy Statement-
Prospectus, to the effect that, subject to the terms, conditions and
qualifications set forth therein, as of the date thereof, the Merger
Consideration to be received by the stockholders of York pursuant to this
Agreement is fair to such stockholders from a financial point of view.
9.3.7 Payment of Merger Consideration. New Harris Financial shall have
delivered the Exchange Fund to the Exchange Agent on or before the Closing
Date and the Exchange Agent shall provide York with a certificate evidencing
such delivery.
9.3.8 No Material Adverse Effect. Since December 31, 1999, no event
has occurred or circumstance arisen that, individually or in the aggregate,
has had or is reasonably likely to have a Material Adverse Effect on Harris
Financial.
Harris Financial and New Harris Financial will furnish York with
such certificates of their officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 9.3 as York
may reasonably request.
66
ARTICLE X
THE CLOSING
10.1 Time and Place. Subject to the provisions of Articles IX and XI
hereof, the Closing of the transactions contemplated hereby shall take place
at the offices of Luse Lehman Gorman Pomerenk & Schick, 5335 Wisconsin Avenue,
Suite 400, Washington, D.C. at 10:00 a.m. on the date determined by Harris
Financial, in its sole discretion, upon five (5) days prior written notice to
York, but in no event later than thirty days (30) after the last condition
precedent pursuant to this agreement has been fulfilled or waived (including
the expiration of any applicable waiting period), or at such other place, date
or time upon which Harris Financial and York mutually agree. A pre-closing of
the transactions contemplated hereby (the "Pre-Closing") shall take place at
the offices of Luse Lehman Gorman Pomerenk & Schick, 5335 Wisconsin Avenue,
Suite 400, Washington, D.C. at 10:00 a.m. on the day prior to the Closing
Date.
10.2 Deliveries at the Pre-Closing and the Closing. At the Pre-
Closing there shall be delivered to Harris Financial, New Harris Financial and
York the opinions, certificates, and other documents and instruments required
to be delivered at the Pre-Closing under Article IX hereof. At the Closing
there shall be delivered to York the Merger Consideration required to be
delivered at the Closing under Section 9.3.7 hereof.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior
to the Pre-Closing Date, whether before or after approval of the Merger by the
stockholders of York:
11.1.1 At any time by the mutual written agreement of Harris Financial
and York;
11.1.2 By either York or Harris Financial (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the representations or warranties set forth
in this Agreement on the part of the other party, which breach by its nature
cannot be cured prior to the Pre-Closing Date or shall not have been cured
within 30 business days after written notice by Harris Financial to York (or
by York to Harris Financial) of such breach (for purposes of this Section
11.1.2 a material breach shall be deemed to be a breach which has, either
individually or in the aggregate, a Material Adverse Effect on the party
making such representations or warranties (provided, that no effect shall be
given to any qualification relating to materiality or a Material Adverse
Effect in such representations and warranties) or a Material Adverse Effect on
the business, operations, financial condition, property or assets of the
combined enterprise or which materially adversely affects the consummation of
the Merger and the other transactions contemplated hereby, including the
Conversion);
67
11.1.3 By either York or Harris Financial (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material failure to perform or comply with any of the covenants or
agreements set forth in this Agreement on the part of the other party, which
failure by its nature cannot be cured prior to the Pre-Closing Date or shall
not have been cured within 30 business days after written notice by Harris
Financial to York (or by York to Harris Financial) of such failure (for
purposes of this Section 11.1.3 a material failure to perform or comply shall
be deemed to be a failure which has, either individually or in the aggregate,
a Material Adverse Effect on the party so failing or on the business,
operations, financial condition, property or assets of the combined enterprise
or which materially adversely affects consummation of the Merger and the other
transactions contemplated hereby, including the Conversion);
11.1.4 Subject to Section 11.1.11, at the election of either Harris
Financial or York, if the Closing shall not have occurred by the Termination
Date, or such later date as shall have been agreed to in writing by Harris
Financial and York; provided, that no party may terminate this Agreement
pursuant to this Section 11.1.4 if the failure of the Closing to have occurred
on or before said date was due to such party's breach of any of its
obligations under this Agreement;
11.1.5 By either York or Harris Financial if (i) the stockholders of
York shall have voted at the York stockholders meeting on the transactions
contemplated by this Agreement and such vote shall not have been sufficient to
approve such transactions, or (ii) the stockholders of Harris Financial or the
Depositors shall have voted on the Conversion and/or the Plan of Conversion at
a meeting of such stockholders or Depositors and such vote shall not have been
sufficient to approve the Conversion and/or the Plan of Conversion;
11.1.6 By either York or Harris Financial if (i) final action has been
taken by a regulatory authority whose approval is required in connection with
this Agreement and the transactions contemplated hereby, including the
Conversion, which final action (x) has become unappealable and (y) does not
approve this Agreement or the transactions contemplated hereby, including the
Conversion, (ii) any regulatory authority whose approval or nonobjection is
required in connection with this Agreement and the transactions contemplated
hereby has stated in writing that it will not issue the required approval or
nonobjection, or (iii) any court of competent jurisdiction or other
governmental authority shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger or
Conversion and such order, decree, ruling or other action shall have become
final and nonappealable;
11.1.7 By the Board of Directors of Harris Financial, provided that it
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein, if at the conclusion of the Conversion the
appraised value of the shares issued in the Offering (based upon the
Independent Valuation) is less than the $260,000,000.
11.1.8 By the Board of Directors of York, provided that it is not then
in material breach of any representation, warranty, covenant or other
agreement contained herein, if at the
68
conclusion of the Conversion the appraised value of the shares issued in the
Offering (based upon the Independent Valuation) is less than the $260,000,000
and Harris Financial shall not have agreed to maintain the Exchange Ratio at
1.550.
11.1.9 By the Board of Directors of either party (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) in the event that any
of the conditions precedent to the obligations of such party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
11.1.4 of this Agreement.
11.1.10 By the Board of Directors of Harris Financial or York, provided
that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein, if
either of the fairness opinions required by Sections 9.2.6 and 9.3.6 shall not
have been obtained.
11.1.11 If Harris Financial shall have extended the Termination Date to
March 31, 2001, then at the election of either Harris Financial or York if the
Closing shall not have occurred by March 31, 2001; provided, that no party may
terminate this Agreement pursuant to this Section 11.1.11 if the failure of
the Closing to have occurred on or before said date was due to such party's
breach of any of its obligations under this Agreement;
It is the intention of the parties that following completion of
the Pre-Closing, which completion will be acknowledged in writing by the
parties at such time, neither party shall have the right to terminate this
Agreement at any time thereafter. If, after the Pre-Closing Date, any party
hereto shall attempt to terminate this Agreement or shall fail to take any
action necessary to effect the consummation of the Merger (including, without
limitation, Harris Financial's obligation to satisfy the condition set forth
in Section 9.3.6), the other party shall be entitled to injunctive relief to
enforce this Agreement, and the first party hereby agrees not to contest any
judicial proceeding seeking the granting of such an injunction.
11.2 Effect of Termination.
11.2.1 In the event of termination of this Agreement pursuant to any
provision of Section 11.1, this Agreement shall forthwith become void and have
no further force, except that (i) the provisions of Sections 1.1, 11.3, 12.1,
12.2, 12.6, 12.9, 12.10, this Section 11.2, and any other Section which, by
its terms, relates to post-termination rights or obligations, shall survive
such termination of this Agreement and remain in full force and effect.
11.2.2 If this Agreement is terminated, expenses and damages of the
parties hereto shall be determined as follows:
69
(a) Except as provided in paragraph (b) and (c) below,
termination of this Agreement pursuant to Section 11.1 shall be without
liability, cost or expense on the part of any party to the other.
(b) In the event of a termination of this Agreement pursuant to
Section 11.1.2 or 11.1.3 hereof resulting from the willful breach of any
provision of this Agreement by a party, such party shall be obligated to pay
the other party $1,500,000, and up to $500,000 of out-of-pocket costs and
expenses, including, without limitation, reasonable legal, accounting and
investment banking fees and expenses, incurred by the other party in
connection with the entering into of this Agreement and the carrying out of
any and all acts contemplated hereunder, which payments shall be an exclusive
remedy.
(c) In the event of a termination of this Agreement pursuant to
Section 11.1.7, 11.1.8, or 11.1.10 hereof, Harris Financial shall be obligated
to reimburse York for up to $500,000 of out-of- pocket costs and expenses,
including, without limitation, reasonable legal, accounting and investment
banking fees and expenses, incurred by York in connection with the entering
into of this Agreement and the carrying out of any and all acts contemplated
hereunder. Except as set forth in the following sentence, the payment of such
out-of-pocket costs shall be the exclusive remedy. In the event of termination
of this Agreement pursuant to Section 11.1.7, 11.1.8, or 11.1.10 hereof, and
Harris Financial shall have extended the Termination Date to March 31, 2001,
then Harris Financial shall be obligated to pay to an additional $500,000 to
York. The payment of such $500,000 in addition to the out-of-pocket costs and
expenses set forth in the first sentence of this Section 11.2.2(c) shall be
the exclusive remedy.
11.2.3 Except as provided in Section 11.2.2, whether or not the Merger
is consummated, all Costs incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by the party incurring such
costs and expenses.
11.2.4 In no event shall any officer, agent or director of York, any
York Subsidiary, Harris Financial or any Harris Financial Subsidiary, be
personally liable thereunder for any default by any party in any of its
obligations hereunder unless any such default was intentionally caused by such
officer, agent or director.
11.3 Amendment, Extension and Waiver. Subject to applicable law, at
any time prior to the Effective Time (whether before or after approval thereof
by the stockholders of York), the parties hereto by action of their respective
Boards of Directors, may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of any other 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 herein; provided, however,
that after any approval of this Agreement and the transactions contemplated
hereby by the stockholders of York, there may not be, without further approval
of such stockholders, any amendment of this Agreement which reduces the
amount, value or changes the form of consideration to be delivered to York's
stockholders pursuant to this Agreement. This
70
Agreement may not be amended except by an instrument in writing signed on
behalf of each 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 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.
ARTICLE XII
MISCELLANEOUS
12.1 Confidentiality. Except as specifically set forth herein, Harris
Financial and York mutually agree to be bound by the terms of the
confidentiality agreements dated November 1, 1999 and November 2, 1999
(collectively, the "Confidentiality Agreement") previously executed by the
parties hereto, which Confidentiality Agreement is hereby incorporated herein
by reference. The parties hereto agree that such Confidentiality Agreements
shall continue in accordance with their respective terms, notwithstanding the
termination of this Agreement.
12.2 Public Announcements. York and Harris Financial shall cooperate
with each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement, except as
may be otherwise required by law, and neither York nor Harris Financial shall
issue any joint news releases with respect to this Agreement unless such news
releases have been mutually agreed upon by the parties hereto, except as
required by law.
12.3 Survival. All representations, warranties and covenants in this
Agreement or in any instrument delivered pursuant hereto or thereto shall
expire on and be terminated and extinguished at the Effective Date, other than
those covenants set forth in Sections 2.5, 7.9, 7.10 and 7.13 and in that
certain letter from Harris Financial to York of even date herewith, which
shall survive or be performed after the Effective Date.
12.4 Notices. All notices or other communications hereunder shall be
in writing and shall be deemed given if delivered by receipted hand delivery
or mailed by prepaid registered or certified mail (return receipt requested)
or by cable, telegram, telex or fax addressed as follows:
If to York or York Fed, to:
101 South George Street
York, Pennsylvania 17401
Attention: President
Fax: (717) 846-5590
71
With required copies to each of:
John F. Breyer, Jr. Esq.
Breyer & Associates PC
1100 New York Avenue, N.W.
Washington, D.C. 20005-3934
Fax: (202) 737-7979
If to Harris Financial or to Harris Savings Bank, to:
235 North Second Street
Harrisburg, Pennsylvania 17101
Attention: President
Fax: (717) 231-2950
With required copies to each of:
Eric Luse, Esq.
Kenneth R. Lehman, Esq.
Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C. 20015
Fax: (202) 362-2902
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
12.5 Parties in Interest. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other party, and that
(except as otherwise expressly provided in this Agreement) nothing in this
Agreement is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement.
12.6 Complete Agreement. This Agreement, including the Exhibits and
Disclosure Schedules hereto and the documents and other writings referred to
herein or therein or delivered pursuant hereto or thereto, together with that
certain letter from Harris Financial to York of even date herewith, the Stock
Option Agreement and the Confidentiality Agreement, as amended, referred to in
Section 12.1, contains the entire agreement and understanding of the parties
with respect to its subject matter. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties other than
those expressly set forth herein or therein. This Agreement supersedes all
prior agreements and understandings (other than the Confidentiality
72
Agreements referred to in Section 12.1 hereof) between the parties, both
written and oral, with respect to its subject matter.
12.7 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
12.8 Severability. In the event that any one or more provisions of
this Agreement shall for any reason be held invalid, illegal or unenforceable
in any respect, by any court of competent jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Agreement and the parties shall use their reasonable efforts to substitute a
valid, legal and enforceable provision which, insofar as practical, implements
the purposes and intents of this Agreement.
12.9 Governing Law. This Agreement shall be governed by the laws of
Pennsylvania, without giving effect to its principles of conflicts of laws.
12.10 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section of or Exhibit to
this Agreement unless otherwise indicated. The recitals hereto constitute an
integral part of this Agreement. References to Sections include subsections,
which are part of the related Section (e.g., a section numbered "Section
5.5.1" would be part of "Section 5.5" and references to "Section 5.5" would
also refer to material contained in the subsection described as "Section
5.5.1"). The table of contents, index and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The phrases "the date of this Agreement", "the
date hereof" and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to the date set forth in the Recitals to
this Agreement.
12.11 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions thereof in any court of
the United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.
73
IN WITNESS WHEREOF, the Mutual Company, Harris Financial, New Harris
Financial, Harris Savings Bank, York and York Fed have caused this Agreement
to be executed under seal by their duly authorized officers as of the date
first set forth above.
Harris Financial, MHC
Dated: March 27, 2000 By: /s/ Charles C. Pearson, Jr.
- ------------------------- ---------------------------
Charles C. Pearson, Jr.
Chairman, President
and Chief Executive Officer
Harris Financial, Inc.
Dated: March 27, 2000 By: /s/ Charles C. Pearson, Jr.
- ------------------------- ---------------------------
Charles C. Pearson, Jr.
Chairman, President
and Chief Executive Officer
New Harris Financial, Inc.
Dated: March 27, 2000 By: /s/ Charles C. Pearson, Jr.
- ------------------------- ---------------------------
Charles C. Pearson, Jr.
Chairman, President
and Chief Executive Officer
Harris Savings Bank
Dated: March 27, 2000 By: /s/ Charles C. Pearson, Jr.
- ------------------------- ---------------------------
Charles C. Pearson, Jr.,
Chairman, President
and Chief Executive Officer
74
York Financial Corp.
Dated: March 27, 2000 By: /s/ Robert W. Pullo
- -------------------------- ---------------------------------
Robert W. Pullo,
President and Chief Executive Officer
York Federal Savings and Loan Association
Dated: March 27, 2000 By: /s/ Robert W. Pullo
- -------------------------- ---------------------------------
Robert W. Pullo,
President and Chief Executive Officer
75
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated March 27, 2000, between York Financial
Corp., a Pennsylvania corporation ("Issuer") and Harris Financial, Inc., a
Pennsylvania corporation ("Grantee"). Capitalized terms used herein without
definition have the meanings specified in the Reorganization Agreement (as
hereinafter defined).
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization dated March 27, 2000 (the "Reorganization Agreement"), which
agreement has been executed by the parties hereto prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Reorganization
Agreement and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Reorganization Agreement,
the parties hereto agree as follows:
1.(a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
2,011,346 fully paid and nonassessable shares of its common stock, par value
$1.00 per share ("Common Stock"), at a price of $12 1/4 per share (such price,
as adjusted if applicable, the "Option Price"); provided, however, that in the
event Issuer issues or agrees to issue any shares of Common Stock (other than
as permitted under the Reorganization Agreement) at a price less than $12 1/4
per share, such Option Price shall be equal to such lesser price. The number
of shares of Common Stock that may be received upon the exercise of the Option
and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to
the Option shall be increased so that, after such issuance, it equals 19.9% of
the number of shares of Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed
to authorize Issuer or Grantee to breach any provision of the Reorganization
Agreement.
2.(a) The holder or holders of the Option (including Grantee or any
subsequent transferee(s)) (the "Holder") may exercise the Option, in whole or
part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided
A-1
in subsection (e) of this Section 2) within 180 days following the first such
Subsequent Triggering Event. Each of the following shall be an Exercise
Termination Event: (i) the Effective Time (as defined in the Reorganization
Agreement); (ii) termination of the Reorganization Agreement in accordance
with the provisions thereof if such termination occurs prior to the occurrence
of an Initial Triggering Event; (iii) the termination of the Reorganization
Agreement under Section 11.1.1, 11.1.6 or 11.1.7 thereof, or by Issuer under
Section 11.1.2 or 11.1.3 thereof, or by reason of Grantee failing to secure
any necessary approval or consent (including but not limited to any
governmental, stockholder or depositor approval of the Conversion, the
Exchange Offering, the Merger and the other transactions contemplated by the
Reorganization Agreement); (iv) the commencement of any action by Grantee
against Issuer for relief under Section 11.2.2(b) of the Reorganization
Agreement; or (v) the passage of eighteen months after termination of the
Reorganization Agreement if such termination follows or occurs at the same
time as the occurrence of an Initial Triggering Event. The Grantee
acknowledges that in the event any Holder exercises any rights to acquire
shares pursuant to the Option or any Substitute Option (as hereinafter
defined) or Issuer repurchases the Option, or any part thereof, or any Option
Shares pursuant to this Agreement, then in any such event the Grantee shall
have no rights to pursue any relief against Issuer under Section 11.2.2(b) of
the Reorganization Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of
this Agreement having the meaning assigned thereto in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, and the rules and
regulations thereunder (the "1934 Act")) other than Grantee or any of
its subsidiaries (each a "Grantee Subsidiary"). For purposes of this
Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or an
Issuer Subsidiary, (y) a purchase, lease or other acquisition of all or
substantially all of the assets of Issuer or an Issuer Subsidiary, or
(z) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of beneficial ownership of
securities representing 15% or more of the voting power of Issuer or an
Issuer Subsidiary, provided that the term "Acquisition Transaction"
does not include any internal merger or consolidation involving only
Issuer and/or Issuer Subsidiaries;
(ii) Any person other than Grantee or any Grantee Subsidiary,
alone or together with such person's affiliates and associates (as such
terms are defined in Rule 12b-2 under the 1934 Act) shall have acquired
beneficial ownership or the right to acquire beneficial ownership of
15% or more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Option Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder);
A-2
(iii) The Board of Directors of Issuer shall have failed to
recommend to its stockholders the adoption or approval of the
Reorganization Agreement or shall have withdrawn, modified or changed
its recommendation in a manner adverse to Grantee;
(iv) After a publicly announced or publicly disclosed proposal
is made by a third party (other than Grantee or a Grantee Subsidiary)
to Issuer to engage in an Acquisition Transaction, either (A) Issuer
shall have intentionally and knowingly breached any representation,
warranty, covenant or agreement contained in the Reorganization
Agreement and such breach shall not have been cured prior to the Notice
Date (as defined below) or (B) the York stockholders shall have voted
and failed to approve the Reorganization Agreement; or
(v) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed an application or notice
with any federal or state bank regulatory authority ("Regulatory
Authority"), for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than Grantee or a
Grantee Subsidiary of beneficial ownership of 25% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in subparagraph (i) of subsection (b) of this Section 2, except that
the percentage referred to in clause (z) of the second sentence thereof
shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which is herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of any Regulatory Authority is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval, shall promptly notify Issuer of such
filing, and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which any required notification periods have expired or been terminated or
such approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
A-3
(f) At each closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act") in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the
opinion of counsel to the Holder; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds,
the Holder shall be deemed subject to the receipt of any necessary regulatory
approvals to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
A-4
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a
and regulations promulgated thereunder and (y) in the event, under the Change
in Bank Control Act of 1978, as amended, or any other federal or state banking
law or regulation, prior approval of or notice to any Regulatory Authority is
necessary before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing such
information to the any Regulatory Authority as they may require) in order to
permit the Holder to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
of this Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement (but not in duplication thereof), in the event of any change in
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares, distributions, or the like, the type and number, and/or the price, of
shares of Common Stock purchasable upon exercise hereof shall be appropriately
adjusted, and proper provision shall be made in the agreements governing such
transaction so that the Holder shall receive, upon exercise of the Option (at
the aggregate exercise price calculated in accordance with Section 1 of this
Agreement), the number and class of shares or other securities or property
that Holder would have received in respect of the Common Stock if the Option
had been exercised immediately prior to such event, or the record date
therefor, as applicable.
A-5
6. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or a Grantee Subsidiary, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or a Grantee Subsidiary, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power with
respect of the election of directors (or other persons similarly
responsible for direction of the business and affairs) of the issuer of
the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the price
per share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with Issuer, or (iii)
in the event of a sale of all or substantially all of Issuer's assets,
the sum of the price paid in such sale for such assets and the current
market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder
plus the exercise price of all of the outstanding in-the-money options
to acquire Common Stock less the aggregate of the income taxes payable
by Issuer with respect to the purchase price paid for the sale of
assets and the income tax that would be paid on the remaining assets as
if they were sold for cash at the current market value, divided by the
aggregate of the number of shares of Common Stock outstanding at the
time of such sale and the number of shares of Common Stock subject to
in-the-money outstanding options at the time of such sale. In
determining the Assigned Value, the value of consideration other than
cash shall be determined by a nationally recognized investment banking
firm selected by the Holder.
A-6
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the six months immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the Average
Price shall be computed with respect to a share of common stock issued
by the person merging into Issuer or by any company which controls or
is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms and conditions as the
Option, provided, that if any term or condition of the Substitute Option
cannot, for legal reasons, be the same as the Option, such term or condition
shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the Substitute Option shall also enter into an agreement
with the then Holder or Holders of the Substitute Option in substantially the
same form as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to (i) the product of (A) the Assigned
Value and (B) the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in Section 6(a)(i),
6(a)(ii) or 6(a)(iii), divided by (ii) the Average Price. The exercise price
of the Substitute Option per share of Substitute Common Stock shall then be
equal to the Option Price multiplied by a fraction the numerator of which
shall be the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in Section 6(a)(i),
6(a)(ii) or 6(a)(iii) and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option is
exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option.
(f) Issuer shall not enter into any transaction described in Section
6(a)(i), 6(a)(ii) or 6(a)(iii) unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations
of Issuer hereunder.
7. The 180-day period for exercise of certain rights under Section 2
shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
8. Repurchase at the Option of Holder.
(a) At the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)) and ending 12
months immediately thereafter, Issuer shall repurchase from Holder (i) the
Option and (ii) all shares of Common Stock purchased by
A-7
Holder pursuant hereto with respect to which Holder then has beneficial
ownership. The date on which Holder exercises its rights under this Section 8
is referred to as the "Request Date". Such repurchase shall be at an aggregate
price (the "Section 8 Repurchase Consideration") equal to the sum of: (i) the
Applicable Price (as defined below) for any shares of Common Stock acquired
pursuant to the Option with respect to which Holder then has beneficial
ownership; and (ii) the excess, if any, of (x) the Applicable Price for each
share of Common Stock over (y) the Option Price (subject to adjustment
pursuant to Sections 1 and 5), multiplied by the number of shares of Common
Stock with respect to which the Option has not been exercised or has been
exercised but the Closing Date has not occurred.
(b) If Holder exercises its rights under this Section 8, Issuer shall
subject to any required regulatory notice or approval, within 10 business days
after the Request Date, pay the Section 8 Repurchase Consideration to Holder
in immediately available funds, and contemporaneously with such payment,
Holder shall surrender to Issuer the Option and the certificates evidencing
the shares of Common Stock purchased thereunder with respect to which Holder
then has beneficial ownership, and Holder 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. Notwithstanding the foregoing, to the extent that
prior notification to or approval of any Regulatory Authority is required in
connection with the payment of all or any portion of the Section 8 Repurchase
Consideration, Holder shall have the ongoing option to revoke its request for
repurchase pursuant to Section 8, in whole or in part, or to require that
Issuer deliver from time to time that portion of the Section 8 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). If any
Regulatory Authority disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such fact to
Holder. If any Regulatory Authority prohibits the repurchase in part but not
in whole, then Holder 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 Holder 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 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 2(a).
(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 8(d)(i); (ii) the price per
share of Common Stock received by holders of Common Stock in connection with
any merger or other business combination transaction described in Section
6(a)(i),
A-8
6(a)(ii) or 6(a)(iii); (iii) the highest closing bid price per share of Issuer
Common Stock quoted on the Nasdaq System (or if Issuer Common Stock is not
quoted on the Nasdaq System, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Holder) during the 40
business days preceding the Request Date; or (iv) in the event of a sale of
all or substantially all of the assets of Issuer, the Applicable Price shall
be the Assigned Value. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i), (ii) or (iv) 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 Holder and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if, prior to an
Exercise Termination Event, (i) any person (other than Grantee or a Grantee
Subsidiary) shall have acquired beneficial ownership of (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), or the right to
acquire beneficial ownership of 50% or more of the then outstanding shares of
Issuer Common Stock, or (ii) any of the transactions described in Section
6(a)(i), 6(a)(ii) or 6(a)(iii) shall be consummated.
9. Limitation of Value of Option. (a) Notwithstanding any other
provision of this Agreement, in no event shall the Grantee's Total Profit (as
hereinafter defined) exceed $5.5 million and, if it otherwise would exceed
such amount, the Grantee, at its sole election, shall either (a) reduce the
number of shares of Common Stock subject to the Option or any Substitute
Option, (b) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (c) pay cash to Issuer, or (d) any combination thereof,
so that Grantee's actually realized Total Profit shall not exceed $5.5 million
after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than
$5.5 million; provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option shall
be the Total Profit (as defined below) determined as of the date of such
proposed exercise assuming that this Option were exercised on such date for
such number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold
for cash at the closing market price for the Issuer Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions).
(d) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8; (ii) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares (or any portion thereof) pursuant to
Section 8, less the
A-9
Grantee's purchase price for such Option Shares; (iii) the net cash amounts
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee's purchase price of such Option
Shares; (iv) any amounts received by Grantee on the transfer of the Option or
any Substitute Option (or in either case any portion thereof) to any
unaffiliated party; and (v) any amount equivalent to the foregoing with
respect to the Substitute Option.
10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and subject to any required regulatory notices or approvals, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of Issuer and
no other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by Issuer.
This Agreement is the valid and legally binding obligation of Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any preemptive
rights.
(c) Issuer has taken all necessary action to exempt this Agreement, and
the transactions contemplated hereby and thereby from, and this Agreement and
the transactions contemplated hereby and thereby are exempt from, (i) any
applicable state takeover laws, (ii) any state laws limiting or restricting
the voting rights of stockholders and (iii) any provision in its articles of
incorporation or bylaws restricting or limiting stock ownership or the voting
rights of stockholders.
(d) The execution, delivery and subject to any required regulatory
notices or approvals, performance of this Agreement does not or will not, and
the consummation by Issuer of any of the transactions contemplated hereby will
not, constitute or result in (i) a breach or violation of, or a default under,
its articles of incorporation or bylaws, or the comparable governing
instruments of any of its subsidiaries, or (ii) a breach or violation of, or a
default under, any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation of it or any of its subsidiaries (with or
without the giving of notice, the lapse of time or both) or under any law,
rule, ordinance or regulation or judgment, decree, order, award or
governmental or nongovernmental permit or license to which it or any of its
subsidiaries is subject, that would, in any case referred to in this clause
(ii), give any other person the ability to prevent or enjoin Issuer's
performance under this Agreement in any material respect.
A-10
11. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any required regulatory notices or approvals, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being acquired with a view to the public
distribution thereof and neither this Option nor any Option Shares will be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under applicable federal and state securities laws
and regulations.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
(i) to any wholly-owned Subsidiary or (ii) that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination Event,
Grantee, subject to the express provisions hereof, may assign in whole or in
part its rights and obligations hereunder to one or more transferees.
13. Each of Grantee and Issuer will use its 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 Agreement.
14. Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 7), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee
equal to the Surrender Price; provided, however, that Grantee may not exercise
its rights pursuant to this Section 14 if Issuer has repurchased the Option
(or any portion thereof) or any Option Shares pursuant to Section 8. The
"Surrender Price" shall be equal to $5.5 million (i) plus, if applicable,
Grantee's purchase price with respect to any Option Shares and (ii) minus, if
applicable, the excess of (B) the net cash amounts, if any, received by
Grantee pursuant to the arms' length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to any
unaffiliated party, over (b) Grantee's purchase price of such Option Shares.
15. Notwithstanding anything to the contrary herein, in the event that
the Holder or any Related Person thereof is a person making an offer or
proposal to engage in an Acquisition Transaction (other than the transactions
contemplated by the Reorganization Agreement), then in the case of a Holder or
any Related Person thereof, the Option held by it shall immediately terminate
and be of no further force or effect. A Related Person of a Holder means any
Affiliate (as defined in Rule 12b-2 of the rules and regulations under the
1934 Act) of the Holder and any person that is the beneficial owner of 20% or
more of the voting power of the Holder.
A-11
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire the full number
of shares of Common Stock provided in Section 1(a) hereof (as adjusted
pursuant to Section 1(b) or Section 5 hereof), it is the express intention of
Issuer to allow the Holder to acquire such lesser number of shares as may be
permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Reorganization Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
20. This 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 . Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
22. Except as otherwise expressly provided herein, or in the
Reorganization Agreement, this Agreement contains the entire agreement between
the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and, as permitted herein, assignees, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Reorganization Agreement.
A-12
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers, all as of the date first above
written.
YORK FINANCIAL CORP.
Dated: March 27, 2000 BY: /s/ Robert W. Pullo
- ----------------------- --------------------------
Robert W. Pullo
President and Chief Executive
Officer
HARRIS FINANCIAL, INC.
Dated: March 27, 2000 BY: /s/ Charles C. Pearson, Jr.
- ----------------------- ----------------------------
Charles C. Pearson, Jr.
President and Chief Executive
Officer
A-13
EXHIBIT B
FORM OF VOTING AGREEMENT
March , 2000
--
Harris Financial, Inc.
235 North Second Street
Harrisburg, Pennsylvania 17101
Ladies and Gentlemen
The undersigned is a director of York Financial Corp. ("York") and is the
beneficial holder of shares of common stock of York ("York Common Stock").
York and Harris Financial, Inc. ("Harris Financial") are considering the
execution of an Agreement And Plan of Reorganization ("Agreement")
contemplating the merger of York with and into Harris Financial or a successor
thereto (collectively referred to as Harris Financial), with Harris Financial
as the surviving corporation of the merger (the "Merger"), such execution
being subject in the case of Harris Financial to the execution and delivery of
this letter agreement ("letter agreement"). In consideration of the
substantial expenses that Harris Financial will incur in connection with the
transactions contemplated by the Agreement and in order to induce Harris
Financial to execute the Agreement and to proceed to incur such expenses, the
undersigned agrees and undertakes, in his capacity as a shareholder of York
and not in his capacity as a director of York, as follows:
1. The undersigned, while this letter agreement is in effect, shall vote
or cause to be voted all of the shares of York Common Stock that the
undersigned shall be entitled to so vote, whether such shares are beneficially
owned by the undersigned on the date of this letter agreement or are
subsequently acquired, whether pursuant to the exercise of stock options or
otherwise, at the special meeting of York's stockholders to be called and held
following the date hereof, to consider the Agreement and the Merger.
2. The undersigned acknowledges and agrees that any remedy at law for
breach of the foregoing provisions shall be inadequate and that, in addition
to any other relief which may be available, Harris Financial shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
actual damages.
3. The foregoing restrictions shall not apply to shares with respect to
which the undersigned may have voting power as a fiduciary for others. In
addition, this letter agreement shall only apply to actions taken by the
undersigned in his capacity as a shareholder of York and shall not in any way
limit or affect actions the undersigned may take in his capacity as a director
of York.
B-1
4. This letter agreement shall automatically terminate if the Agreement
is not entered into by the parties thereto or upon termination of the
Agreement on or before March 31, 2000 in accordance with its terms.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
Very truly yours,
Signature
------------------------------
Name (please print)
Accepted and agreed to as of
the date first above written:
Harris Financial, Inc.
By:
----------------------------
Title:
-------------------------
B-2
EXHIBIT C
AFFILIATES AGREEMENT
March , 2000
--
Harris Financial, Inc.
235 North Second Street
Harrisburg, Pennsylvania 17101
Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
York Financial Corp., a Pennsylvania corporation ("York"), for purposes of
paragraphs (c) and (d) of Rule 145 of the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the "Securities
Act") and for purposes of generally accepted accounting principles ("GAAP") as
such term relates to pooling of interests accounting treatment for certain
business combinations under GAAP and the interpretations of the SEC or its
staff, including, without limitation, Section 201.01 of the SEC's Codification
of Financial Reporting Policies ("Section 201.01") and the SEC's Staff
Accounting Bulletin No. 65.
Harris Financial, Inc. ("Harris Financial") and York have entered into an
Agreement and Plan of Reorganization, dated as of March __, 2000 (the
"Agreement"). Upon consummation of the merger contemplated by the Agreement
(the "Merger"), I may receive shares of common stock of Harris Financial or
any successor thereto ("Harris Common Stock") in exchange for my shares of
common stock, par value $1.00 per share, of York ("York Common Stock"). This
agreement is hereinafter referred to as the "Letter Agreement."
A. I represent and warrant to, and agree with, Harris Financial as
follows:
1. I have read this Letter Agreement and the Agreement and have
discussed their requirements and other applicable limitations upon my ability
to sell, pledge, transfer or otherwise dispose of share of the Harris Common
Stock, and any other capital stock of Harris Financial and York Common Stock,
to the extent I felt necessary, with my counsel or counsel for York.
2. I shall not make any offer, sale, pledge, transfer or other
disposition in violation of the Securities Act or the rules and regulations of
the SEC thereunder of the shares of the Harris Common Stock I receive pursuant
to the Merger.
3. Notwithstanding the foregoing and any other agreements on my part in
connection with the Harris Common Stock, any other capital stock of Harris
Financial, and York Common Stock, I hereby agree that, without the consent of
Harris Financial, I will not sell or otherwise reduce
C-1
my risk relative to any shares of York Common Stock, the Harris Common Stock
or any other capital stock of Harris Financial during the period beginning
thirty days prior to the effective date of the Merger and continuing until
financial results covering at least thirty days of combined operations have
been published following the effective date of the Merger within the meaning
of Section 201.01.
B. I understand and agree that:
1. I have been advised that any issuance of shares of the Harris Common
Stock to me pursuant to the Merger will be registered with the SEC. I have
also been advised, however, that, because I may be an "affiliate" of York at
the time the Merger will be submitted for a vote of the stockholders of York
and my disposition of such shares has not been registered under the Securities
Act, I must hold such shares indefinitely unless (i) such disposition of such
shares is subject to an effective registration statement and to the
availability of a prospectus under the Securities Act, (ii) a sale of such
shares is made in conformity with the provisions of Rule 145(d) under the
Securities Act, (iii) a sale of such shares is made following expiration of
the restrictive period set forth in Rule 145(d) or (iv) in an opinion of
counsel, in form and substance reasonably satisfactory to Harris Financial,
some other exemption from registration is available with respect to any such
proposed disposition of such shares.
2. Stop transfer instructions will be given to the transfer agents of
York and Harris Financial with respect to the shares of York Common Stock and
the shares of the Harris Common Stock and any other capital stock in
connection with the restrictions set forth herein, and there will be placed on
the certificate representing shares of the Harris Common Stock I receive
pursuant to the Merger, or any certificates delivered in substitution
therefor, a legend stating in substance:
The shares represented by this certificate were issued in a transaction
to which Rule 145 under the Securities Act applies. The shares represented by
this certificate may only be transferred in accordance with the terms of an
agreement between the registered holder hereof and Harris Financial, a copy of
which agreement is on file at the principal offices of Harris Financial. A
copy of such agreement shall be provided to the holder hereof without charge
upon receipt by Harris Financial of a written request.
3. Unless a transfer of my shares of the Harris Common Stock is a sale
made in conformity with the provisions of Rule 145(d), made following
expiration of the restrictive period set forth in Rule 145(d) or made pursuant
to any effective registration statement under the Securities Act, Harris
Financial reserves the right to put an appropriate legend on the certificate
issued to my transferee.
It is understood and agreed that this Letter Agreement shall terminate
and be of no further force and effect if the Agreement is terminated in
accordance with its terms. It is also understood and agreed that this Letter
Agreement shall terminate and be of no further force and effect and the stop
transfer instructions set forth in Paragraph B.2. above shall be lifted
forthwith
C-2
upon the later of (i) such time as financial results covering at least thirty
days of combined operations following the effective date of the Merger have
been published within the meaning of Section 201.01 and (ii) delivery by the
undersigned to Harris Financial of a copy of a letter from the staff of the
SEC, an opinion of counsel in form and substance reasonably satisfactory to
Harris Financial, or other evidence reasonably satisfactory to Harris
Financial, to the effect that a transfer of my shares of the Harris Common
Stock will not violate the Securities Act or any of the rules and regulations
of the SEC thereunder. In addition, it is understood and agreed that the
legend set forth in Paragraph B.2. above shall be removed forthwith from the
certificate or certificates representing my shares of the Harris Common Stock
upon expiration of the restrictive period set forth in Rule 145(d) or if I
shall have delivered to Harris Financial a copy of a letter from the staff of
the SEC, an opinion of counsel in form and substance reasonably satisfactory
to Harris Financial, or other evidence satisfactory to Harris Financial that a
transfer of my shares of the Harris Common Stock represented by such
certificate or certificates will be a sale made in conformity with the
provisions of Rule 145(d), or made pursuant to an effective registration
statement under the Securities Act.
4. I recognize and agree that the foregoing provisions also apply to (i)
my spouse, (ii) any relative of mine or my spouse's occupying my home, (iii),
any trust or estate in which I, my spouse or any such relative owns at least
10% beneficial interest or of which any of us serves as trustee, executor or
in any similar capacity and (iv) any corporation or other organization in
which I, my spouse or any such relative owns at least 10% of any class of
equity securities or of the equity interest.
5. I further recognize that in the event I become a director or officer
of Harris Financial upon consummation of the Merger, any sale of Harris
Financial stock by me may be subject to liability pursuant to Section 16 (b)
of the Securities Exchange Act of 1934, as amended.
6. Execution of this Letter Agreement should not be construed as an
admission on my part that I am an "affiliate" of York as described in the
first paragraph of this Letter Agreement or as a waiver of any rights I may
have to object to any claim that I am such an affiliate on or after the date
of this Letter Agreement.
* * * * *
This Letter Agreement shall be binding on my heirs, legal representative
and successors.
Very truly yours,
Signature
------------------------------
Name (Please Print)
C-3
Accepted as of the date first above
written
Harris Financial, Inc.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
C-4
EXHIBIT D
FORM OF OPINION OF BREYER & ASSOCIATES PC
(a) Each of York and York Fed is validly existing under the laws of the
Commonwealth of Pennsylvania, and York is duly registered as a savings and
loan holding company under the HOLA.
(b) The authorized capital stock of York consists of _______________
shares of common stock and ________________ shares of preferred stock. All of
the outstanding shares of York Common Stock have been duly authorized and are
nonassessable, and the shareholders of York have no preemptive rights with
respect to any shares of capital stock of York. All of the outstanding shares
of capital stock of York Fed and each other York Subsidiary have been duly
authorized and are nonassessable, and, to the actual knowledge of such
counsel, are directly or indirectly owned by York free and clear of all liens,
claims, encumbrances, charges, restrictions or rights of third parties of any
kind whatsoever.
(c) The Agreement has been duly authorized, executed and delivered by
York and York Fed and, assuming due authorization, execution and delivery by
Harris Financial, New Harris Financial, the Mutual Company and Harris Savings
Bank, constitutes a valid and binding obligation of York and York Fed
enforceable in accordance with its terms, except that the enforceability of
the obligations of York and York Fed may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
creditors, (ii) equitable principles limiting the right to obtain specific
performance or other similar equitable relief and (iii) considerations of
public policy.
(d) York and York Fed have all requisite corporate power and authority to
execute and deliver the Agreement and to consummate the Merger. All corporate
actions required to be taken by York and York Fed by law and their respective
Charters and Bylaws to authorize the execution and delivery of the Agreement
and consummation of the Merger have been taken.
(e) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by York and
York Fed to permit the execution of the Agreement and consummation of the
Merger have been obtained.
(f) Neither the execution of the Agreement nor consummation of the Merger
will (i) conflict with or result in a breach of any provision of the Charter
or Bylaws or similar governing instruments, of York or any of the York
Subsidiaries, or (ii) violate any Pennsylvania banking or corporate law or
federal banking law of the United States binding upon York or any of its
Subsidiaries, or any order, writ, injunction or decree of which we have actual
knowledge to which York or any of its Subsidiaries, is subject.
(g) We do not have actual knowledge of any actions, suits or proceedings
pending or threatened against York or any Subsidiary, at law or in equity,
before any court or governmental body which in any manner challenges or seeks
to prevent, enjoin, alter or materially delay consummation of the Merger.
D-1
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials, certificates or opinions of other counsel to York or
an York Subsidiary reasonably satisfactory to Harris Financial and, as to
matters of fact, certificates of officers of York or an York Subsidiary. The
opinion of such counsel need refer only to matters of Pennsylvania and federal
law and may add other qualifications and explanations of the basis of their
opinion as may be reasonably acceptable to Harris Financial.
Counsel may expressly exclude any opinions as to choice of law and anti-
trust matters and may add such other qualifications and explanations of the
basis of its opinions as are consistent with the Legal Opinion Accord prepared
by the Section of Business Law of the American Bar Association.
D-2
EXHIBIT E
FORM OF OPINION OF LUSE LEHMAN GORMAN POMERENK & SCHICK, P.C.
(a) Each of the Mutual Company, Harris Financial and Harris Savings Bank
is validly existing under the laws of the Commonwealth of Pennsylvania, and
Harris Financial and the Mutual Company are duly registered as a bank holding
company under the BHCA.
(b) The Agreement has been duly authorized, executed and delivered by the
Mutual Company, Harris Financial, New Harris Financial and Harris Savings Bank
and, assuming due authorization, execution and delivery by York and York Fed,
constitutes a valid and binding obligation of the Mutual Company, Harris
Financial, New Harris Financial and Harris Savings Bank enforceable in
accordance with its terms, except that the enforceability of the obligations
of the Mutual Company, Harris Financial, New Harris Financial and Harris
Savings Bank may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors, (ii)
equitable principles limiting the right to obtain specific performance or
other similar equitable relief and (iii) considerations of public policy, and
except that certain remedies may not be available in the case of a nonmaterial
breach of the Agreement.
(c) the Mutual Company, Harris Financial, New Harris Financial and Harris
Savings Bank have all requisite corporate power and authority to execute and
deliver the Agreement and to consummate the Merger. All corporate actions
required to be taken by the Mutual Company, Harris Financial, New Harris
Financial and Harris Savings Bank by law and their respective Charters and
Bylaws to authorize the execution and delivery of the Agreement and
consummation of the Merger have been taken.
(d) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by the
Mutual Company, Harris Financial, New Harris Financial and Harris Savings Bank
to permit the execution of the Agreement and consummation of the Merger have
been obtained.
(e) Neither the execution of the Agreement nor consummation of the Merger
will (i) conflict with or result in a breach of any provision of the Charter
or Bylaws or similar governing instruments of the Mutual Company, Harris
Financial, New Harris Financial or any Harris Financial Subsidiaries or (ii)
violate any Pennsylvania banking or corporate law or federal banking law of
the United States binding upon the Mutual Company, Harris Financial, New
Harris Financial or any Harris Financial Subsidiaries, or any order, writ,
injunction or decree of which we have actual knowledge to which the Mutual
Company, Harris Financial, New Harris Financial or any Harris Financial
Subsidiaries, is subject.
(f) We do not have actual knowledge of any actions, suits or proceedings
pending or threatened against the Mutual Company, Harris Financial, New Harris
Financial or any Harris Financial Subsidiary, at law or in equity, before any
court or governmental body which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay consummation of the Merger.
(g) The authorized capital stock of Harris Financial consists of shares
of Harris Common Stock and shares of Preferred Stock. The shares of Harris
Common Stock to be issued to York
E-1
shareholders in connection with the Merger will be, upon consummation of the
Merger in accordance with the terms of the Agreement, duly authorized, validly
issued, fully paid and non-assessable.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials and, as to matters of fact, certificates of officers of
the Mutual Company, Harris Financial, New Harris Financial or any the Harris
Financial Subsidiary. The opinion of such counsel need refer only to matters
of Pennsylvania and federal law, and may add other qualifications and
explanations of the basis of their opinion as may be reasonably acceptable to
York.
Counsel may expressly exclude any opinions as to choice of law and anti-
trust matters and may add such other qualifications and explanations of the
basis of its opinions as are consistent with the Legal Opinion Accord prepared
by the Section of Business Law of the American Bar Association.
EXHIBIT 2
Press Release
Harris Financial, Inc. to Conduct Conversion Offering
and Merge with York Financial Corp.
Harrisburg, PA--March 28, 2000 -- Harris Financial, Inc. (Nasdaq/NMS:
HARS), Harrisburg, Pennsylvania, and York Financial Corp. (Nasdaq/NMS: YFED),
York, Pennsylvania, jointly announced today that they have entered into a
definitive agreement and plan of reorganization pursuant to which Harris
Financial will merge with York Financial. The merger consideration will be
stock, but in certain circumstances may include between 15% and 30% cash. The
merger received the unanimous approvals of both Boards of Directors.
Harris Financial is the holding company for Harris Savings Bank, and York
Financial is the holding company for York Federal Savings and Loan
Association. Approximately 76% of Harris Financial's outstanding shares of
common stock are owned by its mutual holding company, Harris Financial, MHC.
To accomplish the merger, the Board of Trustees of Harris Financial, MHC
has adopted a plan of conversion pursuant to which it will convert from the
mutual to the capital stock form of organization. The plan provides that
Harris Financial will conduct an offering of common stock to certain Harris
Savings Bank depositors. The number and price of shares to be issued in the
conversion offering will be based on an independent appraisal.
Under the terms of the agreement, the merger consideration will be based,
in part, on the independent appraisal. The pricing provisions of the agreement
include the following:
* If the independent appraisal of the common stock issued in the conversion
is between $289.5 million and $341.5 million, each York Financial share
will be exchanged for $17.25 of Harris Financial common stock based on the
price at which Harris Financial's shares are sold in the conversion
offering.
* If the appraisal of the common stock issued in the conversion is more than
$341.5 million or less than $289.5 million, the percentage of Harris
Financial shares outstanding immediately upon completion of the conversion
and merger that will be owned by former York Financial stockholders will be
fixed at 33.8% and 37.6%, respectively, subject to certain exceptions.
* At appraisal levels above $341.5 million, the merger consideration will
increase from $17.25 (based on the conversion offering share price) as a
result of the fixed percentage ownership.
* At appraisal levels below $289.5 million, the merger consideration will
decrease from $17.25 (based on the conversion offering share price) as a
result of the fixed percentage ownership. York Financial or Harris
Financial will have the right to terminate in the event consideration is
less than $15.50 per share.
The merger is contemplated to be accounted for under the "pooling of
interests" method for business combinations. However, the agreement provides
that the parties may mutually elect to employ the "purchase" method of
accounting for the merger. In a "purchase", between 15% and 30% of the merger
consideration may be paid in cash. The merger is intended to be a tax free
exchange for York Financial stockholders, except to the extent that cash is
received as consideration.
Harris Savings Bank is a community bank that operates 37 branches in five
counties of south-central Pennsylvania and Washington County, Maryland. As of
December 31, 1999, Harris Financial had assets of $2.7 billion, deposits of
$1.4 billion and equity of $169.3 million. York Federal Savings and Loan
Association is a community savings association that operates 25 full-service
offices in four counties in south central Pennsylvania and Harford County,
Maryland. As of December 31,1999, York Financial had assets of $1.7 billion,
deposits of $1.1 billion and equity of $109.1 million.
As a result of the conversion and merger, York Federal Savings and Loan
will be merged with Harris Savings Bank. The resulting company will be wholly
owned by Harris Financial. Currently, Harris Savings is ranked fourth and York
Federal is ranked sixth in deposit market share, in the five county south
central region of Pennsylvania including Dauphin, York, Cumberland, Lancaster
and Lebanon. With 13.3% of deposits after the combination, Harris will rank
second in market share in the five county south central region. It will also
have six branches holding $164 million in deposits in two Maryland counties.
Pro forma for the merger and the expected second-step conversion indicate
Harris Financial will have assets of approximately $4.5 billion, deposits of
$2.5 billion and equity of $480.0 million.
The merger is subject to the approval of York Financial's stockholders
and the conversion is subject to the approval of Harris Savings' depositors
and Harris Financial's minority stockholders. The transactions are also
subject to the approval of federal and state bank regulatory authorities, as
well as other customary conditions. The conversion and merger are expected to
be completed in the fourth quarter of 2000. The agreement provides for breakup
fees and grants Harris Financial an option to acquire 19.9% of York
Financial's common stock if the agreement is terminated under certain
circumstances.
Charles Pearson, President and CEO of Harris, stated The merger
represents the combination of two successful community banks. It is a great
opportunity for two organizations with similar backgrounds and cultures that
are both making great strides to becoming full service financial providers to
join together into an even stronger organization. Economies of scale resulting
from this merger will help the two companies increase their competitive
position while
continuing to be locally managed and operated. I believe that the last ten
years have proven that the community owned-banks have a definite advantage in
delivering better local service over the regional and money center banks.
Together, we will continue to work closely with our local customers to provide
the best products and delivery systems available in our region. We look
forward to welcoming York Financial's stockholders and employees, and the
addition of York Financial's Directors to our Board of Directors.
Mr. Pullo, President and CEO of York Financial, noted "Our Board of
Directors and management team felt strongly that this union offered the best
to all of our constituencies. By blending the resources of York Financial and
Harris Financial we can keep pace with the rapidly changing banking
environment and provide the technological and product advantages required to
remain competitive. Most importantly, the merger provides us with sufficient
resources to transition from a bank to the type of financial services company
that will dominate in the new millenium. This union ensures our customers will
still receive the best products and services a community bank can offer while
allowing us to continue to provide our communities with access to a familiar
and sensitive management team with local decision making capabilities. Because
Harris Financial is a local organization, we will be able to carry on our
commitment to community banking for our customers, employees and communities."
The Boards of Directors of the two companies will be combined, as will
the management teams. Mr. Pearson will serve as Co-Chairman, President and CEO
of the combined company. Mr. Pullo will serve as Co-Chairman of the combined
company and also as the Chairman of the bank's Strategic Planning and
Development Committee.
This news release contains certain forward-looking statements about the
proposed merger of Harris Financial and York Financial. These include
statements regarding the anticipated closing date of the transactions,
anticipated cost savings, and anticipated future results. Forward-looking
statements can be identified by the fact that they do not relate strictly to
historical or current facts. They often include words like "believe,"
"expect," "anticipate," "estimate" and "intend" or future or conditional verbs
such as "will," "would," "should," "could" or "may." Certain factors that
could cause actual results to differ materially from expected results include
delays in completing the merger, difficulties in achieving cost savings or in
achieving such savings within the expected time frame, difficulties in
integrating Harris Financial and York Financial, increased competitive
pressures, changes in the interest rate environment, general economic
conditions or the securities market, and legislative and regulatory changes
that adversely affect the businesses in which Harris Financial and York
Financial are engaged.
CONTACT:
Bob Gentry
Harris Financial, Inc.
(717) 909-2329
OR
Robert W. Pullo
York Financial Corp.
(717) 846-8777