SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant []
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Leeds Federal Bankshares, Inc.
-------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
--------------------------------------------------------
(Name of Person(s) Filling Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common stock, par value $1.00 per share
.......................................................................
2) Aggregate number of securities to which transaction applies:
1,238,181
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
1,238,181 shares x $32 (cash consideration) plus 138,500 options x
$24.08 (option cash out value), and multiplying that sum by 1/50th
of 1%
.......................................................................
4) Proposed maximum aggregate value of transaction:
$42,956,900
.......................................................................
5) Total fee paid:
$8,600
.......................................................................
[ ] Fee previously paid with premlininary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<page>
[Leeds Federal Bankshares, Inc. Letterhead]
December ___, 2001
Dear Stockholder:
We cordially invite you to attend the special meeting of the
stockholders of Leeds Federal Bankshares, Inc. The meeting will be held at our
headquarters, located at 1101 Maiden Choice Lane, Baltimore, Maryland, on
_____________, January ___, 2002 at __:____ p.m., Eastern Time.
At the special meeting, you will be asked to approve a Merger Agreement
by and among Leeds Federal Bankshares, Inc., Leeds Federal Savings Bank, and
Leeds Federal Bankshares, MHC and Northwest Bancorp, Northwest Savings Bank, and
Northwest Bancorp, MHC. As a result of the merger, you will be entitled to
receive a cash payment of $32.00 for each share of Leeds Federal Bankshares,
Inc. stock that you own. You will not own any stock or other interest in Leeds
Bankshares, nor will you receive, as a result of the merger, any stock of
Northwest Bancorp, Northwest Savings Bank, or Northwest Bancorp, MHC.
Your exchange of shares of Leeds Bankshares' stock for cash generally
will cause you to recognize a taxable gain or loss for federal, and possibly
state and local, income tax purposes. You should consult your personal tax
advisor for a full understanding of the tax consequences of the merger to you.
The completion of the merger is subject to certain conditions, including
the approval of the Merger Agreement by the stockholders of Leeds Federal
Bankshares, Inc. and the receipt of all required regulatory approval.
YOUR VOTE IS VERY IMPORTANT. THE MERGER AGREEMENT MUST BE APPROVED BY
THE AFFIRMATIVE VOTE OF:
o A MAJORITY OF ALL VOTES ENTITLED TO BE CAST AT THE MEETING, BY ALL LEEDS
FEDERAL BANKSHARES, INC. STOCKHOLDERS, INCLUDING LEEDS FEDERAL
BANKSHARES, MHC, AND
o A MAJORITY OF VOTES CAST AT THE MEETING, BY THE LEEDS FEDERAL
BANKSHARES, INC. STOCKHOLDERS OTHER THAN LEEDS FEDERAL BANKSHARES, MHC.
We urge you to read the attached proxy statement carefully. It describes
the Merger Agreement in detail and includes a copy of the Merger Agreement as
Appendix A.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
Whether or not you plan to attend the special meeting, please complete,
date and sign the enclosed proxy form and return it promptly in the postage-paid
envelope provided.
On behalf of the Board of Directors, I thank you for your prompt
attention to this important matter.
The Board of Directors also wants to take this opportunity to announce
the recent passing of Director John F. Doyle, who served as a board member of
Leeds Federal Savings Bank since 1989. We are grateful for Director Doyle's many
years of service and extend our deepest sympathy to his family.
Sincerely,
Gordon E. Clark
President and Chief Executive
Officer
Leeds Federal Bankshares, Inc.
1101 Maiden Choice Lane
Baltimore, Maryland 21229
(410) 242-1234
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY ___, 2002
Notice is hereby given that the special meeting of stockholders of Leeds
Federal Bankshares, Inc. will be held at its headquarters located at 1101 Maiden
Choice Lane, Baltimore, Maryland on _______________, January ___, 2002 at _____
p.m., Eastern Time, for the following purposes:
1. To approve the Agreement and Plan of Merger, dated as of August
16, 2001, by and among Northwest Savings Bank, Northwest Bancorp,
Inc. and Northwest Bancorp, MHC and Leeds Federal Savings Bank,
Leeds Federal Bankshares, Inc. and Leeds Federal Bankshares, MHC.
Upon completion of the merger, you will be entitled to receive
$32.00 in cash for each share of Leeds Federal Bankshares, Inc.
stock that you own. A copy of the Merger Agreement is included as
Appendix A to the accompanying proxy statement; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof. The Board of Directors is not
aware of any such other business.
Any action may be taken on the foregoing proposals at the meeting on the
date specified above, or on any date or dates to which the meeting may be
adjourned. Only stockholders of record at the close of business on December __,
2001 are entitled to vote at the meeting or any adjournments or postponements.
YOUR VOTE IS VERY IMPORTANT
You are requested to complete and sign the enclosed proxy card which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the meeting and vote
in person.
Remember, if your shares are held in the name of a broker, only your
broker can vote your shares and only after receiving your instructions. Please
contact the person responsible for your account and instruct him/her to execute
a proxy card on your behalf. You should also sign, date and mail your proxy at
your earliest convenience.
Please review the document accompanying this notice for more complete
information regarding the matters proposed for your consideration at the special
meeting. Should you have any questions or require assistance, please call us at
(410) 242-1234.
BY ORDER OF THE BOARD OF DIRECTORS
Margaret Balsamo
Secretary
Baltimore, Maryland
December ___, 2001
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE LEEDS FEDERAL BANKSHARES, INC.
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE
UNITED STATES.
THE BOARD OF DIRECTORS OF LEEDS FEDERAL BANKSHARES, INC. UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" THE MERGER AGREEMENT. YOUR SUPPORT IS APPRECIATED.
--------------------------------------------------------------------------------
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PLEASE NOTE
No one has been authorized to provide Leeds Federal Bankshares, Inc.
stockholders with any information other than the information included in this
proxy statement and the documents that are referred to in this proxy statement.
Stockholders of Leeds Federal Bankshares, Inc. should not rely on other
information as being authorized by Leeds Federal Bankshares, Inc.
This proxy statement is first being mailed to stockholders on or about
December ___, 2001.
As used in this proxy statement, Leeds Federal Savings Bank is sometimes
referred to as "Leeds Federal," Leeds Federal Bankshares, Inc. is sometimes
referred to as "Leeds Bankshares," and Leeds Federal Bankshares, MHC is
sometimes referred to as "Leeds MHC." Leeds Federal, Leeds Bankshares and Leeds
MHC are sometimes collectively referred to as "Leeds." Additionally Northwest
Savings Bank is sometimes referred to as "Northwest Bank," Northwest Bancorp,
Inc. is sometimes referred to as "Northwest Bancorp," and Northwest Bancorp,
MHC, is sometimes referred to as "Northwest MHC." Northwest Bank, Northwest
Bancorp and Northwest MHC are sometimes collectively referred to as "Northwest."
WHO CAN HELP ANSWER YOUR QUESTIONS
If you want additional copies of this document, or if you want to ask
any questions about the Merger Agreement you should contact:
Mr. Gordon E. Clark
President and CEO
Leeds Federal Bankshares, Inc.
1101 Maiden Choice Lane
Baltimore, Maryland 21229
Telephone: (410) 242-1234
3
TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................4
SUMMARY TERM SHEET.............................................................5
QUESTIONS AND ANSWERS ABOUT THE VOTING PROCEDURES
REGARDING THE MERGER PROPOSAL...............................................9
THE SPECIAL MEETING...........................................................11
Place, Time and Date.......................................................11
Matters to be Considered...................................................11
Voting Rights of Stockholders; Votes Required for Approval.................11
Solicitation and Revocability of Proxies...................................11
Principal Stockholders.....................................................12
Security Ownership of Directors and Management.............................12
THE MERGER....................................................................13
Overview...................................................................13
The Parties to the Merger..................................................14
Background to the Merger...................................................15
Leeds Reasons for the Merger...............................................17
Opinion of Financial Advisor...............................................18
Interests of Certain Persons in the Merger and Related Transactions........22
Conditions of the Merger...................................................25
Federal Income Tax Consequences of the Merger to You.......................26
Accounting Treatment of the Merger.........................................26
Effective Time.............................................................27
Procedures for Surrendering Your Certificates..............................27
Regulatory Approvals.......................................................28
Time Period for Completing the Merger......................................28
Other Provisions of the Merger Agreement...................................28
Voting Agreements..........................................................30
No Dissenters' Rights......................................................30
OTHER MATTERS.................................................................30
STOCKHOLDER PROPOSALS.........................................................30
WHERE YOU CAN FIND MORE INFORMATION...........................................30
Appendix A - Agreement and Plan of Merger....................................A-1
Appendix B - Opinion of RP Financial, LC.....................................B-1
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LEEDS FEDERAL BANKSHARES, INC.
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
SUMMARY TERM SHEET
This summary term sheet highlights selected information from this proxy
statement and may not contain all of the information that is important to you.
You should carefully read this entire document and the other documents we refer
to in this document. These will give you a more complete description of the
transactions we are proposing. We have included page references in this summary
term sheet to direct you to other places in this proxy statement where you can
find a more complete description of the topics we discuss below.
The Companies (See Page ___).
Leeds Bankshares is a federally chartered stock holding company
headquartered in Baltimore, Maryland. Leeds Bankshares operates through its
wholly-owned subsidiary bank, Leeds Federal, a federally chartered savings bank
headquartered in Baltimore, Maryland, with two branch offices in Baltimore and
Elkridge, Maryland. Leeds MHC, a federal mutual holding company, also
headquartered in Baltimore, Maryland, owns 72.7% of the common stock of Leeds
Bankshares.
Northwest Bancorp is a federally chartered stock holding company
headquartered in Warren, Pennsylvania. Northwest Bancorp operates through its
wholly-owned subsidiaries, Northwest Bank, a Pennsylvania chartered savings
bank, and Jamestown Savings Bank, a New York chartered savings bank. Northwest
Bancorp, through its subsidiaries, provides a wide range of commercial and
consumer banking services through 118 community banking offices throughout its
market area in northwest, southwest and central Pennsylvania, southeastern New
York and eastern Ohio.
Our Reasons for the Merger (See Pages ___ Through ___).
Our Board of Directors believes that the merger is in the best interests
of Leeds Bankshares and its stockholders. The merger will enable our
stockholders to realize significant value on their investment in Leeds
Bankshares. The Board of Directors of Leeds MHC believes that the merger is in
the best interests of Leeds MHC and its members. In reaching its decision to
approve the Merger Agreement, our Board considered various factors which are
discussed in detail in this proxy statement.
Our Board of Directors Recommends Stockholder Approval (See Pages ___
Through ___).
Our Board of Directors believes that the transactions contemplated by
the Merger Agreement are in the best interests of Leeds Bankshares and all of
our stockholders. The Board has approved the Merger Agreement. Our Board of
Directors recommends that you vote "FOR" approval of the Merger Agreement.
Our Financial Advisor Says the Merger Consideration is Fair From a Financial
Point of View (See Pages ___ Through ___).
Our financial advisor, RP Financial, LC., has given our Board of
Directors a written opinion dated August 16, 2001 and updated as of December __,
2001, that states the cash consideration to be paid to our stockholders is fair
to the holders of our common stock from a financial point of view and the
membership conversion is fair to the members from a financial point of view. A
copy of the updated opinion is attached to this proxy statement as Appendix B.
You should read it completely to understand the assumptions made, matters
considered and limitations on the review performed by our financial advisor in
issuing its opinion. We have agreed to pay RP Financial a fee of approximately
$500,000 as consideration for its services. Of this amount, $60,000 has been
paid.
Some Material Terms of the Merger Agreement (See Pages _____ Through ______).
o Leeds MHC will merge with and into Northwest MHC, with Northwest MHC as
the resulting entity. The separate existence of Leeds MHC will cease.
5
o As a result of the above merger, each issued and outstanding share of
Leeds Bankshares common stock held by Leeds MHC will be transferred to
Northwest MHC as the surviving entity in that merger.
o Leeds Bankshares will then merge with and into Northwest Bancorp, with
Northwest Bancorp as the resulting entity. The separate existence of
Leeds Bankshares will cease.
o As part of the merger of Leeds Bankshares into Northwest Bancorp, each
issued and outstanding share of Leeds Bankshares common stock held by
minority stockholders will cease to be outstanding, will cease to exist
and will be converted automatically into the right to receive $32.00 in
cash. Each issued and outstanding share of Leeds Bankshares common stock
held by Northwest MHC will be cancelled.
o On the effective date of the merger, Leeds Federal will become a
wholly-owned subsidiary of Northwest Bancorp.
o All deposit accounts established at Leeds Federal prior to the merger
effective date will confer on each depositor the same rights and
privileges in Northwest MHC as if such deposit account had been
established at Northwest Bank on the date established at Leeds Federal.
Any borrower members of Leeds MHC prior to the merger effective date
will be given subscription rights to the extent permitted by
regulatory authorities in any conversion of Northwest MHC to stock form
that occurs prior to any merger of Leeds Federal with and into Northwest
Bank, provided such borrowing remains outstanding at the time of such
mutual-to-stock conversion.
o The merger cannot occur unless: (1) our stockholders approve the Merger
Agreement; (2) the members of Leeds MHC approve the Merger Agreement;
(3) we receive required regulatory approvals; and (4) certain other
conditions to the merger are satisfied or waived.
o If the merger is not completed on or before April 30, 2002, the Merger
Agreement may be terminated by either Leeds or Northwest, unless the
failure to close is due to a breach of the party seeking to terminate.
However, the parties have agreed to extend this deadline for 120 days if
they reasonably believe that the merger can be completed within that
time period (see page __).
o We have agreed not to solicit or encourage a competing transaction to
acquire us. However, if our fiduciary duties require it, the Board of
Directors may furnish information to or negotiate with someone who
makes, or accepts, an unsolicited proposal that would be superior to
Northwest Bancorp's proposal.
o If we terminate the Merger Agreement with Northwest because we receive a
superior proposal, or if our Board of Directors changes its
recommendation to approve of the Merger Agreement, we will pay Northwest
Bancorp a fee of $2.2 million.
Amendment or Termination of the Merger Agreement (See Page ___).
Leeds Bankshares and Northwest Bancorp may mutually agree to terminate
the Merger Agreement and elect not to complete the merger at any time before the
effective date of the merger.
The parties also may terminate the merger if other circumstances occur
that are described in the Merger Agreement, including the failure to complete
the merger by April 30, 2002.
The Merger Agreement may be amended by the written agreement of Leeds
and Northwest. However, after you approve the Merger Agreement, any subsequent
amendment or waiver that reduces or changes the amount or form of the
consideration that you will receive as a result of the merger transactions
cannot be completed without your prior approval. Similarly, if any subsequent
amendment or waiver results in a negative taxable event to you, we must first
obtain your approval.
6
Merger Consideration To Be Received By Leeds Bankshares Stockholders (See
Page ____).
All Leeds Bankshares stockholders, except for Northwest MHC, will be
entitled to receive $32.00 in cash for each share of Leeds Bankshares common
stock that they own on the effective date of the merger.
Leeds Bankshares Stock Options Awards (See Pages ___ Through ___).
The Leeds Bankshares stock option plan will terminate on the effective
date of the merger. In addition, stock options to purchase Leeds Bankshares
common stock made pursuant to the Leeds Bankshares stock option plan will become
immediately vested and holders of these options will receive a cash payment in
accordance with the calculation presented in the Merger Agreement.
Votes Required by Leeds Bankshares Stockholders (See Pages ___ Through ___).
The Merger Agreement must be approved by the affirmative vote of:
o A majority of all votes entitled to be cast at the meeting by all Leeds
Bankshares stockholders, including Leeds MHC, and
o A majority of votes cast at the meeting by the Leeds Bankshares
stockholders other than Leeds MHC.
Leeds MHC, which owns 72.7% of our common stock, is required to vote for the
Merger Agreement, pursuant to the terms thereof.
The Merger Will Be Taxable To Our Stockholders (See Page ___).
Our stockholders will generally recognize gain for federal, and possibly
state and local, income tax purposes, on the exchange of their Leeds Bankshares
common stock for cash. You will recognize gain equal to the difference between
the amount of cash you receive and your tax basis in your Leeds Bankshares
common stock. You should determine the actual tax consequences of the exchange
to you. It will depend on your specific situation and factors not within our
control. You should consult your personal tax advisor for a full understanding
of the transactions contemplated by the Merger Agreement and their specific tax
consequences to you.
Accounting Treatment (See Page ___).
Northwest Bancorp intends to account for the merger transactions as a
"purchase" for accounting and financial reporting purposes.
You Do Not Have Dissenters' Rights (See Pages ___ Through ___).
Under federal law, you do not have dissenters' appraisal rights with
respect to your Leeds Bankshares shares (see page __).
The Merger and Related Transactions are Expected to be Completed in the First
Quarter of 2002 (See Page ____).
The merger and the related transactions will only occur after all the
conditions to its completion have been satisfied or waived. Currently, we
anticipate that the merger transactions will be completed in the first quarter
of 2002.
Regulatory Approvals (See Pages ___ Through ___).
The merger and related acquisition of Leeds by Northwest must be
approved by the Office of Thrift Supervision. The U.S. Department of Justice may
also review the impact of the merger on competition.
7
We have filed all the regulatory applications and notices with the
Office of Thrift Supervision. We cannot assure you that we will receive
regulatory approval or that regulatory approvals received will not contain a
condition or requirement that fails to satisfy the conditions set forth in the
Merger Agreement.
Financial Interests of Leeds' Officers and Directors in the Merger (See
Pages ___ Through ___).
Our directors and executive officers have interests in the merger as
individuals in addition to their interests as stockholders, such as receiving
severance payments, indemnification and insurance coverage, and other benefits.
Our Board of Directors was aware of these interests and considered them
in its decision to approve the Merger Agreement.
8
QUESTIONS AND ANSWERS ABOUT THE
VOTING PROCEDURES REGARDING THE MERGER PROPOSAL
Q: What do I need to do now:
A: After you have carefully read this proxy statement, indicate on your
proxy form how you want your shares to be voted. Then sign, date and
mail your proxy form in the enclosed prepaid return envelope as soon as
possible. This will enable your shares to be represented and voted at
the special meeting.
If you sign, date and send in your proxy but you do not indicate how you
want to vote, your proxy will be voted in favor of the proposal to
approve the Merger Agreement.
If you do not sign and send in your proxy or attend and vote at the
special meeting, it will have the effect of a vote against the Merger
Agreement with respect to the requirement that it be approved by at
least a majority of all votes entitled to be cast at the special meeting
by our stockholders including Leeds MHC.
Q: If my shares are held in street name by my broker, will my broker
automatically vote my shares for me?
A: No. Your broker will not be able to vote your shares without
instructions from you. You should instruct your broker to vote your
shares, following the directions your broker provides.
Q: What if I fail to instruct my broker?
A: If you fail to instruct your broker to vote your shares, your shares
will not be voted on the Merger Agreement and it will have the same
effect as a vote against the Merger Agreement with respect to the
requirement that it be approved by at least a majority of all votes
entitled to be cast at the special meeting by our stockholders including
Leeds MHC.
Q: May I attend the meeting and vote my shares in person?
A: Yes. All stockholders are invited to attend the special meeting.
Stockholders of record can vote in person at the special meeting. If
your shares are held in street name, then you are not the stockholder of
record and you must ask your broker or other nominee how you can vote
at the special meeting.
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. If you have not voted through your broker or other nominee, there
are three ways you can change your vote after you have sent in your
proxy card.
o First, you may send a written notice to the person to whom you
submitted your proxy stating that you would like to revoke your
proxy.
o Second, you may complete and submit a new proxy form. Any earlier
proxies will be revoked automatically.
o Third, you may attend the special meeting and vote in person. Any
earlier proxy will be revoked. However, simply attending the special
meeting without voting in person will not revoke your proxy.
If you have instructed a broker or other nominee to vote your shares,
you must follow directions you received from your broker or other
nominee to change your vote.
Q: Should I send in my stock certificates now?
A: No. You should not send in your stock certificates at this time.
Instructions for surrendering your stock certificates in exchange for
$32.00 per share in cash will be sent to you after we complete the
merger.
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Q: Whom should I call with questions?
A: You should call us at (410) 242-1234, extension 112 or 120.
10
THE SPECIAL MEETING
Place, Time and Date
The special meeting is scheduled to be held at our corporate
headquarters, 1101 Maiden Choice Lane, Baltimore, Maryland at ____ p.m. on
____________, January __, 2002.
Matters to be Considered
At the special meeting you will be asked to approve the agreement and
plan of merger as more fully discussed on pages _ through __. You may also
consider and vote upon any other matters that may properly come before the Leeds
Bankshares special meeting, including approval of any adjournment of the special
meeting. As of the date of this document, the Board of Directors of Leeds
Bankshares is not aware of any other business to be presented for consideration
at the meeting.
Voting Rights of Stockholders; Votes Required for Approval
The Leeds Bankshares Board has fixed the close of business on December
__, 2001, as the record date for determining Leeds Bankshares stockholders
entitled to receive notice of and to vote at the special meeting. Each share of
Leeds Bankshares common stock you own entitles you to one vote. Only holders of
record of Leeds Bankshares common stock as of the record date are entitled to
notice of and to vote at the special meeting. As of the record date, there were
issued and outstanding 4,538,181 shares of Leeds Bankshares common stock.
The presence, in person or by properly executed proxy, of the holders of
a majority of the outstanding shares of Leeds Bankshares common stock entitled
to vote is necessary to constitute a quorum at the special meeting. Abstentions
and broker non-votes (as described below) will be counted solely for the purpose
of determining whether a quorum is present. Under the applicable rules of the
National Association of Securities Dealers ("NASD"), brokers or members who hold
shares in street name for customers who are the beneficial owners of such shares
are prohibited from giving a proxy to vote those shares with respect to the
approval of the Merger Agreement in the absence of specific instructions from
such customers ("broker non-votes"). Abstentions and broker non-votes will not
be deemed to be cast either "FOR" or "AGAINST" the Merger Agreement.
Approval of the merger requires the affirmative vote of:
o A majority of all votes entitled to be cast at the meeting by all
Leeds Bankshares stockholders, including Leeds MHC, and
o A majority of votes cast at the meeting by the Leeds Bankshares
stockholders other than Leeds MHC.
The directors and executive officers of Leeds are entitled to vote
approximately 2.4% of the outstanding shares of Leeds Bankshares common stock in
their individual capacities. These directors and executive officers have already
agreed to vote their shares in favor of the Merger Agreement.
With respect to the required affirmative vote of at least a majority of
the outstanding shares of common stock entitled to be cast at the special
meeting, including Leeds MHC, abstentions and broker non-votes will have the
effect of a vote against the Merger Agreement. With respect to the required
affirmative vote by a majority of votes cast by stockholders other than Leeds
MHC, broker non-votes will be considered as shares not voted. Pursuant to the
Merger Agreement, Leeds MHC is required to vote all of its shares to approve the
Merger Agreement, which would be determinative of the outcome of the vote on the
merger proposal with respect to the vote of at least a majority of all votes
entitled to be cast at the special meeting.
Solicitation and Revocability of Proxies
Proxies in the form accompanying this document are being solicited by
the Board. Shares represented by properly executed proxies, if such proxies are
received in time and are not revoked, will be voted in accordance with the
instructions indicated on the proxies. Except for broker non-votes, if no
instructions are indicated, such proxies will be voted "FOR" approval of the
Merger Agreement and, as determined by a majority of the Board, as to any other
matter that may come before the special meeting including, among other things, a
motion to adjourn or postpone the special meeting to another time and/or place,
for the purpose of soliciting additional proxies or otherwise. No proxy with
instructions to vote against the proposal to approve the Merger Agreement,
however, will be voted in favor of any adjournment or postponement of the
special meeting.
11
A stockholder who has given a proxy may revoke it at any time prior to
its exercise at the special meeting by:
o giving written notice of revocation to the Secretary of Leeds
Bankshares;
o properly submitting a duly executed proxy bearing a later date; or
o voting in person at the special meeting.
All written notices of revocation and other communications with respect to
the revocation of proxies should be addressed to Margaret Balsamo, Secretary,
1101 Maiden Choice Lane, Baltimore, Maryland 21229. A stockholder whose shares
are held in street name should follow the instructions of his or her broker
regarding revocation of proxies. A proxy appointment will not be revoked by the
death or incapacity of the stockholder executing the proxy unless, before the
shares are voted, notice of such death or incapacity is filed with the Secretary
of Leeds Bankshares or other person responsible for tabulating votes on behalf
of Leeds Bankshares.
In addition to this mailing, Leeds directors, officers and employees may
also solicit proxies personally, or by telephone, or by other forms of
communication. Leeds may also retain a professional proxy solicitation firm to
assist in the solicitation of proxies. For this service, it is expected that
Leeds would pay a fee of up to $5,000 plus expenses to help with the
solicitation. Leeds will also reimburse brokers and other nominees for their
expenses in sending these materials to you and obtaining your voting
instructions.
Principal Stockholders
Persons and groups owning in excess of 5% of Leeds Bankshares common
stock are required to file certain reports regarding such ownership pursuant to
the Securities Exchange Act of 1934, as amended (the "1934 Act"). The following
table sets forth, as of December __, 2001, persons or groups who own more than
5% of the common stock. Other than as noted below, management knows of no person
or group that owns more than 5% of the outstanding shares of common stock as of
December __, 2001.
Amount and Nature
of Percent of
Name and address Beneficial Shares of Common
of Beneficial Owner Ownership Stock Outstanding (%)
Leeds Federal Bankshares, MHC 3,300,000 72.7%
1101 Maiden Choice Lane
Baltimore, Maryland
Security Ownership of Directors and Management
On the record date, Leeds Bankshares directors and executive officers
beneficially owned 222,006 shares (inclusive of 112,697 stock options) or
approximately 4.9% of the outstanding shares of Leeds Bankshares common stock.
Our directors and executives have already agreed to vote their shares in favor
of the Merger Agreement pursuant to voting agreements entered into by each
individual director and executive officer. For a more detailed description of
the voting agreements entered into by each individual director and executive
officer of Leeds Bankshares, please refer to "Voting Agreements," elsewhere in
this proxy statement.
12
The following table shows Leeds Bankshares' common stock beneficially
owned by each director and executive officer of Leeds Bankshares and all
directors and executive officers of Leeds Bankshares as a group, as of December
__, 2001.
Amount and Nature of
Beneficial Ownership Percent of common
Name(1) Title (2) stock Outstanding
--------------------- ----------------------- --------------------- -------------------
John F. Amer Chairman 23,714(3) *
Marguerite E. Wolf Vice Chairman and 22,325(4)
Director *
Gordon E. Clark President, Chief 81,501(5)
Executive Officer and
Director 1.5%
Raymond J. Hartman, Jr. Director 17,332(6) *
Joan H. McCleary Director 11,815 *
Dale R. Douglas Senior Vice President 31,606(7) *
Kathleen G. Trumpler Treasurer 33,713(8) *
All directors and
executive officers as a
group (7 persons) 222,006(9) 4.9%
.......
----------------------------------------------------------------------------------------------
<FN>
* Less than 1%.
(1) The mailing address for each person listed is 1101 Maiden Choice Lane,
Baltimore, Maryland 21229. Each of the Directors listed is also a director
of Leeds MHC, which owns the majority of the issued and outstanding shares
of common stock.
(2) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner for purposes of this table, of any shares of common
stock if he has shared voting or investment power with respect to such
security, or has a right to acquire beneficial ownership at any time within
60 days from the date as of which beneficial ownership is being determined.
As used herein, "voting power" is the power to vote or direct the voting of
shares and "investment power" is the power to dispose or direct the
disposition of shares. Includes all shares held directly as well as by
spouses and minor children, in trust and other indirect ownership, over
which shares the named individuals effectively exercise sole or shared
voting and investment power.
(3) Includes options to purchase 20,714 shares of common stock.
(4) Includes options to purchase 14,541 shares of common stock.
(5) Includes options to purchase 36,000 shares of common stock.
(6) Includes options to purchase 13,692 shares of common stock.
(7) Includes options to purchase 12,750 shares of common stock.
(8) Includes options to purchase 15,000 shares of common stock.
(9) Includes options to purchase 112,697 shares of common stock.
</FN>
THE MERGER
The following information describes certain information pertaining to
the merger. This description is not complete and is qualified in its entirety by
reference to the full text of the Merger Agreement, which is attached as
Appendix A and incorporated by reference herein. All stockholders are urged to
read the Merger Agreement in its entirety, as well as the opinion of our
financial advisor attached as Appendix B.
Overview
As soon as possible after the conditions to consummation of the merger
described below have been satisfied or waived, and unless the Merger Agreement
has been terminated or an alternative structure used as discussed below, the
merger will be effected as follows:
o Leeds MHC will merge with and into Northwest MHC (the "MHC
Merger") with Northwest MHC as the resulting entity. The separate
existence of Leeds MHC will cease.
o As a result of the MHC Merger, each issued and outstanding share
of Leeds Bankshares common stock held by Leeds MHC will be
transferred to Northwest MHC as the surviving entity in the MHC
Merger.
13
o Leeds Bankshares will merge with and into Northwest Bancorp (the
"Mid-Tier Merger") with Northwest Bancorp as the resulting
entity. The separate existence of Leeds Bankshares will cease.
o On the effective date of the Mid-Tier Merger, (i) each issued and
outstanding share of Leeds Bankshares common stock held by
Minority Stockholders (a "Minority Share") will cease to be
outstanding, will cease to exist and will be converted
automatically into the right to receive $32.00 in cash, and (ii)
each issued and outstanding share of Leeds Bankshares common
stock held by Northwest MHC will be cancelled
o On the effective date, Leeds Federal will become a wholly-owned
subsidiary of Northwest Bancorp.
o All deposit accounts established at Leeds Federal prior to the
Merger Effective Date will confer on each depositor the same
rights and privileges in Northwest MHC as if such deposit account
had been established at Northwest Bank on the date established at
Leeds Federal. Any borrower members of Leeds MHC prior to the
Merger Effective Date will be given subscription rights to the
extent permitted by regulatory authorities in any conversion of
Northwest MHC to stock form that occurs prior to any merger of
Leeds Federal with and into Northwest Bank, provided such
borrowing remains outstanding at the time of such mutual-to-stock
conversion.
The Merger Agreement provides that Northwest Bancorp may modify the
structure of the combination with Leeds provided that:
o the consideration to be received by Leeds Bankshares'
stockholders is not changed or reduced;
o there are no adverse tax consequences for Leeds Bankshares'
stockholders; or,
o the merger is not materially delayed or jeopardized.
The Parties to the Merger
Leeds. Leeds MHC is a federally chartered mutual holding company that
currently owns approximately 72.7% of the common stock of Leeds Bankshares. As a
mutual holding company, Leeds MHC has no stockholders. Leeds MHC has no
significant operations. Leeds Bankshares is a federally chartered mid-tier stock
holding company that owns 100% of the outstanding shares of common stock of
Leeds Federal. Leeds Bankshares was organized in connection with the two-tier
reorganization of Leeds that was completed in January, 1998. The principal
business activity of Leeds Bankshares is the ownership of 100% of the common
stock of Leeds Federal.
Leeds Federal is a federally-chartered savings bank headquartered in
Baltimore, Maryland. Leeds Federal's deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") under the Savings Association Insurance Fund
("SAIF"). Leeds Federal has been a member of the Federal Home Loan Bank ("FHLB")
System since 1938.
Leeds Federal is a community-oriented savings bank that is engaged
primarily in the business of accepting deposits from the general public in Leeds
Federal's market area, and investing such deposits in fixed-rate one- to
four-family residential mortgage loans and adjustable rate home equity loans
and, to a lesser extent, commercial real estate loans and consumer loans. To the
extent available funds exceed local mortgage loan demand, Leeds Federal also
invests in mortgage-backed securities issued or guaranteed by the United States
Government or agencies thereof, secured short-term loans to commercial banks,
interest-earning deposits in other institutions, and other short- and
medium-term investments. At September 30, 2001, Leeds Bankshares had total
consolidated assets of approximately $395.2 million, total consolidated deposits
of approximately $338.2 million, and total consolidated stockholder's equity of
approximately $51.3 million.
The executive offices of Leeds Bankshares, Leeds Federal and Leeds MHC
are located at 1101 Maiden Choice Lane, Baltimore, Maryland 21229. Their
telephone number at that address is (410) 242-1234.
14
Northwest. Northwest MHC is a federally chartered mutual holding company
that currently owns approximately 74.6% of the common stock of Northwest
Bancorp. As a mutual holding company, Northwest MHC has no stockholders.
Northwest MHC has no significant operations. Northwest Bancorp is a federally
chartered mid-tier stock holding company that owns 100% of the outstanding
common stock of Northwest Bank and Jamestown Savings Bank ("Jamestown").
Northwest Bancorp became the stock holding company of Northwest Bank in a
two-tier reorganization that was completed in February 1998. The principal
business activity of Northwest Bancorp is the ownership of all of the issued and
outstanding common stock of Northwest Bank and of Jamestown.
Northwest Bank is a Pennsylvania-chartered stock savings bank
headquartered in Warren, which is located in northwestern Pennsylvania.
Northwest Bank's deposits are insured by the FDIC under the SAIF. Northwest Bank
is a member of the FHLB System. Northwest Bank is a community bank that offers
traditional deposit and loan products, and through a subsidiary, consumer
finance services. Northwest Bank's mutual savings bank predecessor was founded
in 1896. Northwest Bank in its current stock form was established on November 2,
1994, as a result of the reorganization of Northwest Bank's mutual predecessor
into a mutual holding company structure. Jamestown was formed in November of
1995 as a de novo New York-chartered savings bank headquartered in Jamestown,
New York.
As of September 30, 2001, Northwest Bank and Jamestown operated 118
community banking offices throughout its market area in northwest, southwest and
central Pennsylvania, southwestern New York, and eastern Ohio. Northwest Bank
and its wholly owned subsidiaries also operate 44 consumer lending offices
throughout Pennsylvania and one consumer lending office in New York. Northwest
Bank has focused its lending activities primarily on the origination of loans
secured by first mortgages on owner-occupied, one- to four-family residences.
Northwest Bank, directly or through its subsidiaries, also emphasizes the
origination of consumer loans, including home equity, second mortgage, education
and other consumer loans. To a lesser extent, Northwest Bank also originates
multifamily residential and commercial real estate loans and commercial business
loans.
Northwest Bank's principal sources of funds are deposits, borrowed funds
and the principal and interest payments on loans and marketable securities. The
principal source of income is interest received from loans and marketable
securities. Northwest Bank's principal expenses are the interest paid on
deposits and the cost of employee compensation and benefits.
The principal executive offices of Northwest Bancorp, Northwest Bank and
Northwest, MHC are located at Liberty and Second Streets, Warren, Pennsylvania.
Their telephone number at that address is (814) 726-2140.
Background to the Merger
In September 2000, a large mutual savings institution ("Institution
#1"), through its financial advisor, approached senior management of Leeds to
express an interest in pursuing a business combination. In such a transaction,
Institution #1 proposed to convert the deposits of Leeds Federal into deposits
of Institution #1 and pay cash for the shares of Leeds Bankshares common stock
not held by Leeds MHC. In order to consider this expression of interest and the
strategic alternatives generally, the Boards of Directors retained RP Financial
in September 2000 as a financial advisor. RP Financial was retained because of
its expertise in advising financial institutions in merger transactions, its
knowledge of Leeds operations gained in conjunction with Leeds Federal's 1994
mutual holding company reorganization and stock offering, and its extensive
experience providing financial advisory and planning services to mutual holding
companies.
Specifically, the Boards requested that RP Financial evaluate Leeds
current business plan to identify alternative business strategies that might be
available to Leeds, including a possible merger, and to make recommendations to
the Boards regarding those strategies that would benefit the depositors of Leeds
Federal and increase stockholder value. On September 20, 2000, representatives
of RP Financial met with the Leeds Boards and presented a strategic options
analysis. The analysis included a market overview, a situation analysis, and a
presentation of alternative strategic options available to Leeds. The options
included remaining in mutual holding company structure and continuing to
implement the current business plan, pursuing a second step conversion to a full
public company in the current market, completing a second step conversion in the
future, and pursuing a merger with a mutual institution. RP Financial reviewed
the potential impact of each alternative on the depositors of Leeds Federal as
well as on the holders of Leeds Bankshares common stock. Leeds legal counsel
also attended this meeting and discussed the fiduciary responsibilities of the
Boards of Directors of Leeds Bankshares and Leeds MHC. Legal counsel then
reviewed and discussed the regulatory issues associated with each of the
alternatives presented by RP Financial in the strategic options analysis. After
considering the RP Financial presentation, advice from counsel, the treatment of
and the potential benefits accruing to depositors and customers of Leeds as
proposed by Institution #1, and the offer to pay cash for the Leeds Bankshares
common stock, the Leeds Boards authorized counsel and RP Financial to continue
discussions with Institution #1 with the objective of determining whether
mutually agreeable terms could be reached regarding a potential business
combination.
15
Informal conversations between Institution #1 and the senior management
of Leeds regarding the purchase price for the Leeds Bankshares common stock and
the treatment of Leeds MHC's members continued during December 2000 and January
2001. In late December and early January 2001, Institution #1, through its
financial advisor, orally indicated an interest in a business combination that
included a cash payment to minority stockholders ranging from $30 to $31 per
share for each share of Leeds Bankshares common stock. The price per share of
this nonbonding indication of interest was consistent with the potential value
that RP Financial estimated could be created for the holders of Leeds Bankshares
common stock under an aggressive stand-alone business plan. After assessing
Institution #1's proposed treatment of depositors, the proposed per share price
and the other factors, the Leeds Boards authorized counsel and RP Financial to
initiate the due diligence process. The Leeds Boards retained RP Financial in
January 2001 to provide certain financial advisory and investment banking
services in conjunction with a potential merger transaction.
In January 2001, both Leeds and Institution #1 executed confidentiality
agreements. During February 2001, Leeds and Institution #1 exchanged certain due
diligence documents and materials. On February 20, 2001, senior management of
Leeds traveled to Institution #1 to meet with senior management and review
operations. On March 9, 2001, RP Financial received the proposed terms under
which Institution #1 would be willing to proceed, including conversion of the
deposits of Leeds Federal into deposits of Institution #1 and payment of $24 per
share in cash for each share of Leeds Bankshares common stock. On March 14,
2001, representatives of RP Financial met with the Leeds Boards to review the
proposal. Since the purchase price indicated in the March 9, 2001 proposal was
considerably lower than the previous oral indication of interest, the Leeds
Boards elected to suspend discussions with Institution #1 and to explore other
alternatives.
In early April 2001, RP Financial provided to the Leeds Boards a list of
several alternative merger partners that could pursue a transaction under the
same general terms as originally proposed by Institution #1. This list consisted
of a limited number of large mutual savings institutions that possessed the
financial resources and geographic proximity that would make them viable merger
partners. In mid-April 2001, the Leeds Boards authorized RP Financial to
approach the mutual institution ("Institution #2") identified by RP Financial as
having the greatest likelihood of having an interest in pursuing a business
combination with Leeds. In late April 2001, after executing a confidentiality
agreement and reviewing certain due diligence materials provided by Leeds,
Institution #2 indicated that it would not pursue a business combination with
Leeds.
At the same time as RP Financial was contacting Institution #2, RP
Financial and senior management of Leeds engaged in limited discussions with
Institution #1 regarding their proposal, with the objective of negotiating an
increase in the price to $30 to $31 per share. As a result of these discussions,
in a letter dated May 2, 2001, Institution #1 modified certain terms of its
proposal, including increasing the proposed purchase price for the Leeds
Bankshares common stock to $26 per share. In a teleconference with the Leeds
Boards on May 23, 2001, RP Financial reviewed the revised proposal from
Institution #1. The Leeds Boards concluded that the purchase price was
insufficient and authorized RP Financial to continue to negotiate with
Institution #1. In a letter dated June 18, 2001, Institution #1 modified certain
terms of its proposal, including increasing the proposed purchase price to $27
per share. In a June 27, 2001 meeting, RP Financial met with the Leeds Boards to
review the most recent proposal from Institution #1. The Leeds Boards authorized
RP Financial to continue negotiations with Institution #1.
16
In mid-June 2001, Northwest Bancorp and Northwest MHC requested guidance
from the Office of Thrift Supervision (the "OTS") as to whether a combination of
two publicly-traded companies in the mid-tier mutual holding company form of
organization would be approvable under OTS regulations and policy if the
business combination were structured to satisfy the standards addressed in the
merger application submitted in connection with the OTS approval of the merger
of North Shore Bank, F.S.B. and Marquette Savings Bank, S.A. (the "North Shore
Transaction"). Northwest submitted a letter to the OTS in order to determine
whether it was advisable to initiate preliminary discussions regarding a
business combination with one or more mutual holding companies. At the time
Northwest submitted the letter to the OTS, Northwest was not considering a
possible business combination with Leeds, and was not aware that Leeds was in
discussions regarding a possible business combination. On June 29 and again on
July 3, the OTS staff informed Northwest that a combination of two
publicly-traded companies in the mid-tier mutual holding company form of
organization involving the cash-out of minority stockholders would be approvable
under OTS regulations and policy if the business combination were structured to
satisfy the standards addressed in the merger application submitted in
connection with the OTS approval of the North Shore Transaction.
On July 3 in a conference call in which Leeds management, Leeds counsel
and RP Financial participated, Leeds counsel advised Leeds management that the
OTS staff had indicated that a combination of two publicly-traded companies in
the mid-tier mutual holding company form of organization would be approvable
under OTS regulations and policy if the business combination were structured in
a manner similar to the North Shore Transaction. RP Financial provided to Leeds
management a limited list of potential merger partners, consisting of large
mutual holding company institutions with public stockholders that could be
potential merger partners, including Northwest. Leeds management concluded that
Northwest was the most attractive merger partner based upon Northwest's
financial resources, business strategy, geographic proximity and track record of
successful merger transactions. Leeds management authorized Leeds legal counsel
and financial advisor to contact senior management of Northwest to ascertain the
level of interest in a potential business combination with Leeds. Legal counsel,
followed by Leeds financial advisor, contacted Northwest, which indicated
preliminarily that it had an interest in discussing a business combination with
Leeds. Northwest executed a confidentiality agreement and exchanged due
diligence materials with Leeds. In a letter dated July 6, 2001, Northwest
proposed a transaction structure that included initially retaining Leeds Federal
as a separate savings association subsidiary, converting the depositor rights in
Leeds into similar rights in Northwest MHC, and purchasing the shares of Leeds
Bankshares common stock for a price of $32 per share in cash. In a
teleconference with the Leeds Boards on July 11, 2001, RP Financial reviewed the
Northwest proposal. RP Financial indicated that the proposed price was
acceptable and supportable in relation to the value that could be created under
Leeds strategic alternatives. After considering Northwest's proposal, the Leeds
Boards authorized counsel and RP Financial to initiate the due diligence process
with Northwest.
During the following weeks, senior management of Northwest completed its
due diligence analysis of Leeds, and engaged in extensive negotiations with
senior management of Leeds, legal counsel, and RP Financial. During this period,
the specific characteristics of the proposed transaction were negotiated,
including the conversion of the rights of Leeds Federal depositors. Also during
this week, Northwest and Leeds agreed to the $32.00 per share purchase price for
the Leeds Bankshares common stock. On August 15, 2001, at a meeting with the
Leeds Boards and its legal counsel, RP Financial reviewed its fairness opinion
analysis and provided a written fairness opinion to the Leeds Boards. At the
same meeting, legal counsel to Leeds reviewed the Agreement with the Leeds
Boards. After extensive deliberations regarding the merits of the proposed
merger, the Leeds Boards reviewed and authorized management to execute the
Merger Agreement. The Merger Agreement was executed on August 16, 2001.
Leeds Reasons for the Merger
Our Board of Directors believes that the terms of the Merger Agreement,
which are the product of arm's length negotiations between representatives of
Leeds and Northwest are in the best interests of our stockholders. In the course
of reaching its determination, our Board of Directors considered the following
factors:
o the merger consideration to be paid to our stockholders in
relation to the market value, book value and earnings per share
of our common stock,
o information concerning our financial condition, results of
operations, capital levels, asset quality and prospects,
o our assessment of Northwest Bancorp's ability to pay the
aggregate merger consideration,
17
o the opinion of our financial advisor as to the fairness of the
merger consideration from a financial point of view to the
minority holders of our common stock,
o industry and economic conditions,
o the general structure of the transaction and the compatibility of
management and business philosophy,
o the greater resources and expanded branch network that Northwest
Bancorp, through its subsidiaries, will have after the merger
than we currently have,
o depositors of Leeds Federal will have the same rights in
Northwest MHC, as other depositors of Northwest Bank,
o in the event of a stock offering transaction by Northwest, MHC,
depositors of Leeds Federal will retain their subscription rights
as of the date of their original deposit at Leeds Federal,
o each borrower member of Leeds MHC will have the same rights and
privileges in Northwest MHC as if such borrowing had been
established at Northwest Bank, and the borrower members of Leeds
MHC will be given subscription rights to the extent permitted by
regulatory authorities in any conversion of Northwest MHC to
stock form that occurs prior to any merger of Leeds Savings with
and into Northwest Bank if such borrowing remains outstanding at
the time of such mutual-to-stock conversion.
o the results of our due diligence investigation of Northwest,
including the likelihood of receiving the requisite regulatory
approvals in a timely manner,
o the ability of Northwest after the merger to compete in relevant
banking and non-banking markets, and
o our strategic alternatives to the merger, including the continued
operation of Leeds Federal as an independent financial
institution.
In making its determination, our Boards of Directors did not ascribe any
relative or specific weights to the factors which it considered. The foregoing
discussion of the factors considered by our Board is not intended to be
exhaustive, but it does include the material factors considered by our Board.
Our Boards of Directors believe that the merger is in the best interests
of Leeds Bankshares and our stockholders. Accordingly, Leeds Bankshares' Board
of Directors unanimously recommends that its stockholders vote for the approval
of the Merger Agreement.
Opinion of Financial Advisor
On August 15, 2001, at a meeting in which the Leeds Boards reviewed the
terms of the Agreement, RP Financial rendered its opinion to the Leeds Boards
that, as of the date thereof, the merger consideration was fair to the holders
of Leeds Bankshares common stock from a financial point of view and the
membership conversion was fair to the members from a financial point of view.
The effective date of the RP Financial opinion was August 16, 2001, the date
that the Merger Agreement was executed. The opinion was updated as of the date
of this Proxy Statement. In connection with its opinion, dated the date of this
Proxy Statement, RP Financial also confirmed the appropriateness of the analysis
used to render its August 16, 2001 opinion by confirming the appropriateness of
the procedures and assumptions used.
The full text of the opinion of RP Financial, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is attached as Appendix B to this Proxy Statement and is incorporated herein by
reference. Holders of Leeds Bankshares common stock and members of Leeds are
urged to read the opinion in its entirety.
18
the opinion of rp financial is directed to THE Leeds BoardS in THEIR
consideration of the MERGER CONSIDERATION as described in the Agreement, and
does not constitute a recommendation to any stockholder or member of Leeds as to
any action that such stockholder should take in connection with the Agreement,
or otherwise. It is further understood that the opinion of rp financial is based
on market conditions and other circumstances existing on the date hereof.
The opinion states that RP Financial reviewed the following material:
(1) the Agreement, dated August 16, 2001, including exhibits; (2) the following
information from Leeds -- (a) Leeds Bankshares' audited financial statements for
the fiscal years ended June 30, 1998 through 2000, and (b) stockholder,
regulatory and internal financial and other reports through June 30, 2001 -- all
with regard to balance sheet and off-balance sheet composition, profitability,
interest rates, volumes, maturities, market values, trends, credit risk,
interest rate risk, liquidity risk and operations; (3) discussions with Leeds
management regarding past and current business, operations, financial condition,
and future prospects; (4) an analysis of the pro forma impact on stockholders
and depositors of Leeds of alternative strategies as an independent institution,
including the option of remaining in mutual holding company form and various
options regarding the timing and pro forma impact of pursuing a second step
conversion; (5) competitive, economic and demographic characteristics in the
local market area; (6) the potential impact of regulatory and legislative
changes on savings institutions; (7) the financial terms of recently completed
second step conversions of mutual holding companies, regionally and nationally,
and the terms of the three recent similar transactions announced involving the
merger of mutual holding company institutions with and into larger mutual
institutions; (8) the impact on depositors of Leeds Federal resulting from
having their rights in Leeds MHC converted into rights in Northwest MHC and
gaining access to the broader product line, significantly greater number of
branches and ATMs and greater resources of Northwest Bancorp; and (9) Northwest
Bancorp's financial condition as of June 30, 2001 regarding the ability to
complete the merger from a cash and capital perspective.
In addition, RP Financial stated that it reviewed financial,
operational, market area and stock price and trading characteristics for Leeds
Bankshares common stock relative to publicly-traded savings institutions with
comparable resources, financial condition, earnings, operations and markets. RP
Financial also considered the economic and demographic characteristics in the
local market area, and the potential impact of the regulatory, legislative and
economic environments on operations for Leeds and the public perception of the
thrift and banking industries. In rendering its opinion, RP Financial stated
that it relied, without independent verification, on the accuracy and
completeness of the information concerning Leeds furnished to RP Financial for
review, as well as publicly-available information regarding other financial
institutions and economic and demographic data. RP Financial stated that Leeds
did not restrict RP Financial as to the material it was permitted to review. The
opinion further states that RP Financial did not perform or obtain any
independent appraisals or evaluations of the assets and liabilities and
potential and/or contingent liabilities of Leeds. RP Financial further indicated
that the financial forecasts and budgets reviewed by RP Financial were prepared
by the management of Leeds, Leeds does not publicly disclose internal management
forecasts or budgets of the type provided to RP Financial in connection with the
review of the merger, and such financial forecasts were not prepared with a view
towards public disclosure. The financial forecasts and budgets were based upon
numerous variables and assumptions which are inherently uncertain, including
without limitation factors related to general economic and competitive
conditions, as well as trends in asset quality. Accordingly, RP Financial
cautioned that actual results could vary significantly from those set forth in
such financial forecasts.
In connection with rendering its opinion dated August 16, 2001 and
updated as of the date of this Proxy Statement, RP Financial performed a variety
of analyses, which are summarized below. The preparation of a fairness opinion
is a complex process involving subjective judgments and is not necessarily
susceptible to partial analyses or summary description. RP Financial stated that
its analyses must be considered as a whole and that selecting portions of such
analyses and of the factors considered by RP Financial without considering all
such analyses and factors could create an incomplete view of the process
underlying RP Financial's opinion. In its analyses, RP Financial made numerous
assumptions with respect to industry performance, business and economic
conditions, applicable laws and regulations, and other matters, many of which
are beyond the control of Leeds. Any estimates contained in RP Financial's
analyses are not necessarily indicative of future results or values, which may
be significantly more or less favorable than such estimates. No company or
transaction utilized in RP Financial's analyses was identical to Leeds,
Northwest or the merger. None of the analyses performed by RP Financial was
assigned a greater significance by RP Financial than any other.
19
The following is a summary of the material financial analyses performed
by RP Financial in connection with providing its opinion of August 16, 2001.
(a)Transaction Summary. RP Financial summarized the terms of the merger,
including the conversion of membership rights of Leeds Federal
depositors in Leeds MHC into rights in Northwest MHC, and the
conversion of each share of Leeds Bankshares common stock held by
stockholders other than the Leeds MHC into the right to receive the
merger consideration. RP Financial also summarized the total deal
value, the treatment of the Leeds Bankshares stock options, and the
termination provision incorporated in the Merger Agreement.
(b)Evaluation of Implied Pricing. RP Financial evaluated the pricing
ratios indicated by the merger consideration relative to the book
value, historical earnings and assets of Leeds Bankshares on a fully
converted basis. RP Financial then compared the indicated pricing
ratios to two groups of institutions. The first group is a peer group
of public companies consisting of the entire universe of 25
publicly-traded mutual holding company institutions (the "Peer
Group"). The second group consists of the three transactions in which
a mutual holding company merged with a larger mutual institution (the
"Comparable Transactions"). RP Financial selected the Peer Group
because the trading prices of public mutual holding company shares
are affected by the same factors impacting the value of the Leeds
Bankshares common stock: the minority ownership interest represented
by the public shares, the regulatory treatment of dividends, and the
lower level of liquidity in the shares of public mutual holding
companies versus their fully converted counterparts. On a fully
converted basis, adjusting for the potential sale of the majority
ownership interest in a hypothetical second step conversion, the
merger consideration equaled 102.7% of fully converted book value per
share versus an average for the Peer Group of 80.1% (and a maximum of
107.6%). The merger consideration was equal to 24.2x fully converted
earnings per share versus an average of 16.4x for the Peer Group (and
a maximum of 25.8x). And the merger consideration equaled 31.0% of
fully converted assets per share versus an average of 15.8% for the
Peer Group (and a maximum of 35.3%). Because the pricing ratios
indicated by the merger consideration were near the top of the range
indicated by current pricing for the Peer Group, RP Financial
concluded that the analysis of the current pricing ratios supported
the fairness conclusion. The Comparable Transactions included the
sale of mutual holding company institutions Marquette Savings
Association, West Allis, Wisconsin, Ridgewood Financial, Inc.,
Ridgewood, New Jersey, and RFS Bancorp, Inc., Revere, Massachusetts.
The fully converted price-to-book value indicated by the merger
consideration of 102.7% exceeded the average of the Comparable Group
of 98.2%. The fully converted price-to-earnings multiple of 24.2x was
lower than the average of the Comparable Group of 31.6x. And the
fully converted price-to-assets ratio indicated by the merger
consideration of 31.0% exceeded the average of the Comparable Group
of 20.4%. Because the pricing ratios indicated by the merger
consideration exceeded the averages of the Comparable transactions
relative to fully converted book value and assets, notwithstanding
the lower earnings multiple, RP Financial concluded that the
Comparable Transactions support the fairness conclusions.
20
(c)Discounted Cash Flow Analysis. RP Financial prepared several
discounted cash flow ("DCF") analyses, all of which incorporated a
projection of financial operations and a cash flow analysis to
stockholders over a period of five years. The DCF analyses
incorporated several specific assumptions for Leeds as a stand-alone
company: growth prospects in the local market, the level of
competition from other financial institutions, continued share
repurchases at a rate approximating current repurchase activity, and
future earnings estimates under a stand-alone business plan. The
projections of future cash flows to stockholders included a policy of
continuing to pay a $0.60 per share annual cash dividend and the
receipt of consideration at the end of each year of operations,
assuming a terminal value for the Leeds Bankshares common stock equal
to an assumed trading value. The projected cash flows were discounted
to present value using a range of reasonable market rates ranging
from 10% to 14%. Since the public shares of Leeds Bankshares common
stock do not represent a controlling interest, RP Financial omitted
the use of "sale of control" pricing in it calculation of terminal
value for the cash flow analyses. RP Financial examined three
alternative operating scenarios. In the "Stay the Course" scenario,
RP Financial assumed Leeds remained in mutual holding company form,
introduced additional services as resources allowed, pursued stock
repurchases, and eventually realized a terminal value for holders of
Leeds common stock equal to a slight premium to the current average
trading price of public mutual holding companies equal to 90% of book
value per share (fully converted basis). In the "Stay the Course"
scenario, the depositors of Leeds Federal realized improvements in
services only as resources would allow, and the holders of Leeds
Bankshares common stock realized a present value benefit assuming the
terminal value was achieved in year three ranging from $23.10 to
$25.12 per share (ranging from $22.51 to $26.02 per share assuming
the terminal value was realized in year five). In the "Second Step
Conversion Today" scenario, RP Financial assumed Leeds immediately
pursued a second step conversion, thereby becoming a full public
company by selling the majority ownership interest owned by Leeds MHC
in a subscription and community offering. Under this scenario, RP
Financial assumed that depositors would benefit by a slight
acceleration of additional services due to greater capital resources
of the pro forma company, and depositors would be allowed to exercise
their rights to purchase second step conversion stock pursuant to
their subscription rights. RP Financial estimated the present value
to the holders of Leeds Bankshares common stock under this scenario
assuming a range of second step values from 85% of pro forma book
value per share to 95% of pro forma book value per share (the
tangible book value ratio indicated in the most recent second step
conversion completed was 93.1%), indicating a range of value of
$20.25 to $26.10 per share. In the "Second Step in the Future"
scenario, RP Financial assumed Leeds continued to implement its
current business plan, continuing stock repurchases and pursuing a
second step conversion only when the market recovered such that Leeds
conversion stock would be priced with a minimum pro forma
price-to-book value ratio ranging between 95% and 105% (historical
second step conversions were priced at pro forma ratios of 94.3%,
106.4%, 90.1%, 78.1% and 93.1% in 1997, 1998, 1999, 2000, and 2001
respectively). RP Financial concluded that under a realistic
scenario, the second step conversion could be completed at a pricing
of 100% of pro forma book value. Under this scenario, depositors
continued to benefit from the gradual introduction of additional
products and services as resources permitted and the terminal value
of the cash flows was equal to the appraised value in the second step
conversion. In the "Second Step in the Future" scenario, assuming
realistic second step pricing at 100% of pro forma book value, the
depositors of Leeds Federal realized improvements in services only as
resources would allow and the holders of Leeds Bankshares common
stock realized a present value benefit assuming the terminal value
was achieved in year three ranging from $30.23 to $32.91 per share
(ranging from $29.69 to $34.45 per share assuming the terminal value
was realized in year five). Because the merger consideration was
similar to or exceeded the present value benefit accruing to the
holders of the Leeds Bankshares common stock under the three
scenarios, and because the terminal values were not based on
sale-of-control pricing consistent with the minority ownership
interest of the public shares, RP Financial concluded the discounted
cash flow analyses supported the fairness conclusions.
21
(d)Depositor and Borrower Member Considerations. RP Financial considered
the impact of the merger on the depositors and borrower members of
Leeds Federal, particularly evaluating the merger's impact on
continuity of depositor and borrower member rights, services to
depositors, and the fairness of the purchase price. The factors
considered include: (i) depositors and borrower members will enjoy
continuity of ownership without curtailment of subscription rights in
the event of a second step conversion; (ii) the continuity of Board
oversight and operating strategy will be preserved; (iii) Northwest
offers a broad product line, including services not offered by Leeds
Federal such as internet banking, consumer finance, business lending,
financial planning and trust services; (iv) depositors will benefit
from Northwest's significantly greater technological resources than
available at Leeds Federal; and (v) the purchase price to be received
by minority stockholders does not exceed the value that could be
realized by the Leeds Bankshares common stock were Leeds to remain
independent and pursue a second step conversion in the future in a
more favorable market. RP Financial also considered Northwest's track
record of introducing new products to new customers. RP Financial
also considered that Leeds Federal depositors could have their
liquidation benefits reduced as a result of the lower pro forma
equity-to-deposits ratio after the merger, but ultimately concluded
that any potential curtailment of liquidation benefits is minimized
by the ability of Northwest to raise substantial capital in a second
step conversion to avoid liquidation and the remote possibility that
either Leeds Federal or Northwest would be liquidated as a going
concern. Based on this comparison, RP Financial concluded that the
anticipated benefits of the merger with Northwest supported the
fairness conclusions regarding the impact of the merger on depositors
and borrower members.
On the basis of these analyses and other considerations, RP Financial
concluded that the merger consideration, as described in the Merger Agreement,
is fair to the holders of Leeds Bankshares common stock from a financial point
of view and is fair from a financial point of view to the depositor and borrower
members. As described above, RP Financial's opinion and presentation to the
Leeds Boards was one of many factors taken into consideration by the Leeds
Boards in making its determination to approve the Merger Agreement. Although the
foregoing summary describes the material components of the analyses presented by
RP Financial to the Leeds Boards, it does not purport to be a complete
description of all the analyses performed by RP Financial and is qualified by
reference to the written opinion of RP Financial set forth as Appendix B hereto,
which the holders of Leeds Bankshares common stock and the depositor and
borrower members are urged to read in its entirety.
RP Financial had previously provided valuation and business planning
services to Leeds in conjunction with Leeds May 1994 MHC reorganization and
minority stock offering. Pursuant to the engagement letter dated January 5, 2001
(the "RP Financial Engagement Letter"), RP Financial estimates that it will
receive from Leeds total fees of $500,000, of which $60,000 has been paid to
date, plus reimbursement of certain out-of-pocket expenses, for its services in
connection with the Merger. In addition, Leeds has agreed to indemnify RP
Financial against certain liabilities, including liabilities under the federal
securities laws.
Interests of Certain Persons in the Merger and Related Transactions
General. Some members of our management and Board of Directors may have
interests in the merger and related transactions that are in addition to or
different from the interests of our stockholders. Our Board of Directors was
aware of these interests and considered them in approving the Merger Agreement
and the transactions contemplated by it. Included below is a summary of some of
the benefit plans under which officers or directors participate, and under which
benefits will be paid in accordance with the Merger Agreement.
Termination of Employment Agreement with Gordon E. Clark; Adoption of
New Employment Agreements with Gordon E. Clark and Dale R. Douglas. The Merger
Agreement provides that Gordon E. Clark will execute a termination and release
to his existing employment agreement with Leeds Federal that will provide that
the employment agreement will terminate as of the merger effective date, and in
lieu of any payments under the employment agreement, Mr. Clark will be entitled
to $779,154, subject to reduction to the extent that such amount, combined with
any other payments to the executive, would constitute an excess parachute
payment under the Internal Revenue Code of 1986, as amended.
As of the effective time of the merger, Leeds Federal and Northwest
Bancorp, will each enter into new employment agreements with Mr. Clark and Dale
R. Douglas, pursuant to which the executives will serve as the President and
Senior Vice President, respectively, of Leeds Federal, and Vice Presidents of
Northwest Bancorp. Mr. Clark's agreement with Leeds Federal will provide for an
annual base salary of $135,800 and Mr. Douglas' agreement will provide for an
annual base salary of $98,000. Under the agreements with Northwest Bancorp,
Messrs. Clark and Douglas will each receive annual base salaries of $25,000. All
four agreements will have terms of 36 months, renewable annually for an
additional 12 months unless notice of non-renewal is provided, and will provide
for the reimbursement of reasonable business expenses and participation in all
employee benefit plans available to full-time employees of Leeds Federal. Under
the agreements with Leeds Federal, each of the executives will receive an annual
incentive compensation of $70,000 if Leeds Federal's net income reaches a
certain target; they will also continue participation in their respective
supplemental executive retirement plans, and participate in supplemental health
benefits. In addition, Mr. Clark will receive an annual benefit of $38,483 under
the Leeds Federal Savings Bank Directors Retirement Plan commencing in January
2012, payment of club dues up to $5,400 per year and use of a company
automobile. Mr. Douglas will receive an automobile allowance of up to $200 per
month. The agreements provide that upon occurrence of an event of termination
(as defined in the agreement), each executive will be entitled to a lump sum
payment of his pro-rated base salary due for the remaining term of the
agreement, plus, if the event of termination occurs prior to the second
anniversary date of the agreement, a severance payment equal to three times the
base salary less the pro-rated salary, plus any incentive compensation that
would have been paid during the remaining term of the agreement. Each executive
will also continue to receive health and dental benefits during the term of the
agreements. In the event the agreements are not renewed prior to their first
anniversary date, the executives will receive a severance payment equal to two
times their base salary. If the agreements are not renewed prior to their second
anniversary date, the severance payment will be equal to each executive's base
salary.
22
The term "event of termination" is defined to include termination of
employment
o by Leeds Federal or Northwest Bancorp, for any reason other than
death, disability or termination for cause;
o by the executive, following a relocation of his principal place
of employment by more than 30 miles, a material reduction in his
salary and benefits or a material reduction in his duties and
responsibilities;
o by the executive, upon failure to be elected or reelected,
appointed or reappointed to his executive position;
o by the executive, upon liquidation or dissolution of Leeds
Federal or Northwest Bancorp other than liquidations or
dissolutions due to reorganizations that do not affect the status
of the executive;
o by the executive, following a change in control; or
o by the executive, upon a breach of the agreement by Leeds Federal
or Northwest Bancorp.
In the case of termination for cause, the executive will receive his
salary and benefits through the date of termination. In the event of disability,
he will continue to receive his base salary for the remaining term of the
agreement plus any unpaid incentive compensation. If the executive dies while
employed, his estate, or such other person as may be designated by the
executive, will receive the executive's base salary, unpaid incentive
compensation and the executive's family will continue to receive medical and
dental benefits for the remaining term of the agreement.
Noncompetition Agreements. The Merger Agreement provides that Messrs.
Clark and Douglas will enter into noncompetition agreements pursuant to which
the executives will not engage in any competing banking activities within
Baltimore or Howard County for a period of five years following the merger
effective date. The noncompetition agreements will each provide that Messrs.
Clark and Douglas will each receive $150,000, payable in three equal
installments of $50,000 beginning one year after the effective date of the
noncompetition agreements.
Supplemental Executive Retirement Plans for Senior Officers. Mr. Clark,
Mr. Douglas, Kathleen Trumpler and Marge Balsamo are each participants in a
supplemental executive retirement plan which provides annual supplemental
benefits equal to $64,529, $21,479, $11,495 and $23,116, respectively, to each
executive if paid from the retirement income trust fund, i.e., a secular trust
maintained by the participant, or equal to $107,548, $35,799, $19,158, and
$32,106, respectively, if paid from the accrued benefit account, i.e., the rabbi
trust maintained by Leeds Federal, when each of the executives reaches age 65.
Annual contributions to the supplemental executive retirement plans are paid to
a secular trust for each of the covered executives. The Merger Agreement
provides for the payment, at Northwest Bancorp's request, of the present value
of all remaining contributions to the secular trusts under the supplemental
executive retirement plans or, if greater, an amount which is sufficient to
provide each participant with after-tax benefits beginning at his or her benefit
age equal to the amount payable if no secular trust had been established. Such
payment is to be made within 10 days of the termination of the executive's
employment. The remaining charge to fully fund the secular trust supplemental
executive retirement plans is approximately $1,153,127. Joan McCleary, who is
retired, is also a participant in a supplemental executive retirement plan
without a secular trust. Ms. McCleary is fully vested and receives payments
under the SERP.
23
1993 and 1998 Directors Deferred Compensation Plans. Directors Amer,
McCleary, and Wolf participate in both the 1993 and 1998 Deferred Compensation
Plans; in addition, Directors Hartman and Clark participate in the 1998 plan.
Under the Merger Agreement, Northwest Bancorp and Leeds Federal will continue
the plans for directors participating in the plans on the merger effective date
until the date the last participating director terminates service on both the
Leeds Federal Board of Directors and the Leeds Federal Advisory Board. If a
continuing director becomes ineligible to continue participation in the 1993
Directors Deferred Compensation Plan on or after the merger effective date, such
director will be authorized to participate in the 1998 Directors Deferred
Compensation Plan, provided he or she satisfies the eligibility requirements for
participation in the 1998 plan. Upon a change in control, directors will be
entitled to the annuitized value of their elective contribution accounts
commencing on their benefit eligibility date and payable over the payout period.
In addition, under the 1998 Deferred Compensation Plan, a director may apply for
an immediate distribution of his or her accrued benefit in a lump sum or in some
alternative form upon a change in control.
1997 Directors Retirement Plan. The 1997 Directors Retirement Plan
guarantees each director a payment of a percentage of the director's regular
board fees beginning at the director's benefit age for the longer of 10 years or
until death. Prior to the merger effective date, the Director Retirement Plan
will be amended to increase the annual retirement benefit to 90% of the highest
rate of a director's regular board fees. Under the Merger Agreement and after
the amendment of the plan, John Amer and Joan McCleary will receive annual
benefits of $29,700 and $25,200, respectively, at the merger's closing.
Marguerite Wolf will receive an annual amount of $26,460 beginning April 2002;
Raymond Hartman, Jr. will receive an annual amount of $27,783, beginning July
2003, and Gordon Clark will receive an annual amount of $38,483, beginning
January 2012; in each case regardless of whether they are employed by Northwest
Bancorp or its successor upon their attainment of their benefit ages.
Supplemental Health Benefits. Prior to entering into the Merger
Agreement, Leeds Federal sponsored a supplemental health benefit plan for
employees with 15 years of service, officers with 10 years of service and
directors with 5 years of service who attained age 65. The supplemental health
plan provided coverage supplementing such person's medicare coverage which
continued after retirement. In connection with the acquisition of Leeds Federal
by Northwest Bancorp, the Merger Agreement provides that those persons presently
receiving supplemental health coverage, which includes directors Marguerite
Wolf, John Amer and Joan McCleary, will continue to receive supplemental health
benefits. Supplemental post-retirement health benefits will be provided to
certain officers, including Kathleen Trumpler and Margaret Balsamo, if their
employment with Leeds Federal or Northwest Bancorp continues through their
retirement after reaching age 65 and they satisfy all other terms of the
program, provided that the annual cost of such benefit for any such employee
will be limited to $1,300, increased by 5% each year after the merger effective
date. Such supplemental health benefits will continue for the life of the
director or employee. Notwithstanding the foregoing, Messrs. Clark and Douglas
will be entitled to receive supplemental health benefits commencing at age 65,
regardless of whether they are employed by Northwest Bancorp or its successor
upon their attainment of age 65.
ESOP. The Merger Agreement provides that the Leeds Federal Savings Bank
Employee Stock Ownership Plan ("ESOP") will be terminated at or prior to the
merger effective date. In accordance with the terms of the ESOP, all
participants will fully vest and have a nonforfeitable interest in their
accounts under the ESOP, including allocations of the consideration received
from the sale of the shares in the ESOP suspense account. At the time
distribution of benefits is made under the ESOP on or after the merger effective
date, at the election of the ESOP participant, the amount that constitutes an
eligible rollover distribution may be rolled over to any qualified Northwest
Bancorp or Northwest Bank benefit plan that permits rollover distributions or to
any eligible individual retirement account or distributed to the participant.
401k Plan. The Merger Agreement provides that the Leeds Federal Savings
Bank 401(k) Plan (the "401k Plan") will be terminated prior to the merger
effective date and the 401k Plan participants and beneficiaries will become
fully vested on the date of termination. Prior to the merger effective date,
Leeds Federal will make matching company contributions for the portion of the
plan year that ends on the 401k Plan termination date. Subject to and following
receipt of an Internal Revenue Service favorable determination letter as to the
qualified status of the 401k Plan upon its termination, all remaining account
balances will be distributed to or rolled over by 401k Plan participants
pursuant to the distribution options available to participants. At the time
distribution of benefits is made under the 401k Plan on or after the merger
effective date, at the election of the 401k Plan participant, the amount that
constitutes an eligible rollover distribution may be rolled over to any
qualified Northwest Bancorp or Northwest Bank benefit plan that permits rollover
distributions or to any eligible individual retirement account.
24
1994 Stock Option Plans. Leeds Federal adopted the 1994 Incentive Stock
Option Plan and the 1994 Stock Option Plan for Outside Directors, to which Leeds
Bankshares succeeded in connection with the mid-tier reorganization. Under the
1994 Incentive Stock Option Plan, 76,500 options remain outstanding and 62,000
options remain outstanding under the 1994 Stock Option Plan for Outside
Directors. All awards under both plans are fully vested. Pursuant to the Merger
Agreement, each option to purchase shares of Leeds Bankshares will, as of the
merger effective date, cease to be outstanding and will be converted into the
right to receive cash in an amount equal to the difference between $32.00 and
the option exercise price multiplied by the number of shares subject to such
option.
Continuing Directors; Leeds Advisory Board. Directors Wolf, Hartman and
Clark will continue as directors of Leeds Federal following the merger effective
date. Continuing directors who are not also employees of Leeds Federal will
receive an annual fee, payable quarterly, equal to the annual rate paid prior to
the merger effective date, increased by 5% each year. If Northwest Bancorp
causes Leeds Federal to merge with Northwest Bank prior to June 30, 2003,
Northwest Bank will establish an advisory board consisting of those former
directors of Leeds Federal serving on the effective date of the merger with
Northwest Bank. The advisory board will be continued for a period ending no
earlier than June 30, 2003 and Northwest Bank will consult with the advisory
board members to determine whether to continue the advisory board following such
date. The advisory board members will be entitled to the same fee as paid during
service on the Leeds Federal board, increased by 5% each year.
Indemnification and Continuance of Director and Officer Liability
Insurance Coverage. For a period of six years from the merger effective date,
Northwest Bancorp has agreed to indemnify, defend and hold harmless the present
and former directors and officers of Leeds to the fullest extent permitted under
applicable law and the charters and bylaws of Leeds as in effect on the date of
the Merger Agreement with respect to claims arising from facts or events
occurring at or prior to the merger effective date. Leeds Federal is also
required to advance expenses to the fullest extent permitted by law to any
individual subject to a right of indemnification. Northwest Bancorp has also
agreed, for a period of three years after the merger, to maintain the current
officers' and directors' liability insurance sponsored by Leeds Bankshares,
provided that Northwest Bancorp may substitute policies of substantially the
same coverage with respect to events occurring at or prior to the merger closing
date. However, Northwest Bancorp will not be required to expend annually more
than an amount equal to 125% of the current annual amount expended by Leeds to
maintain or procure insurance coverage.
Conditions of the Merger
The respective obligations of Leeds and Northwest to effect the merger
are subject to the satisfaction or waiver of the following conditions specified
in the Merger Agreement.
Leeds and Northwest must:
o fulfill their obligations under the Merger Agreement;
o avoid any material breach of their representations and warranties;
o obtain regulatory approvals from the OTS without the imposition of
any conditions adversely affecting in any material respect the
economic benefit Northwest reasonably expects to accrue in the
transaction,
o not have in effect any order, decree, or injunction of a court or
agency of competent jurisdiction which would prevent the completion
of the merger; and
o receive certain officer's certificates from each other regarding the
satisfaction of the Merger Agreements conditions.
25
Leeds must also:
o obtain approval from the stockholders of Leeds Bankshares and from
the members of Leeds MHC;
o do nothing that would have or result in any material adverse effect
on Leeds Bankshares and Leeds Federal; and
o receive an updated fairness opinion from RP Financial prior to the
mailing of the proxy statement.
Northwest must also deposit with the exchange agent an amount of cash
equal to the merger consideration stockholders of Leeds Bankshares will be
entitled to receive.
In addition, Leeds obligations are conditioned upon Northwest Bancorp
executing employment agreements and non-competition agreements with Gordon Clark
and Dale Douglas, and Northwest's obligations are conditioned upon Messrs. Clark
and Douglas executing such agreements as well as Mr. Clark executing a
termination and release agreement.
You can find the details of the conditions to the merger in Article VI
of the Merger Agreement. We cannot guarantee that all of these conditions will
be satisfied or waived.
Federal Income Tax Consequences of the Merger to You
The exchange of our common stock for cash pursuant to the terms of the
Merger Agreement will be a taxable transaction for federal income tax purposes
under the Internal Revenue Code, and may also be a taxable transaction under
state, local and other tax laws. A stockholder of Leeds Bankshares will
recognize gain or loss equal to the difference between the amount of cash
received by the stockholder pursuant to the merger and the tax basis in the
Leeds Bankshares common stock exchanged by such stockholder pursuant to the
merger.
Gain or loss recognized by the stockholder exchanging his or her Leeds
Bankshares common stock pursuant to the merger will be capital gain or loss if
such Leeds Bankshares common stock is a capital asset in the hands of the
stockholder. If the Leeds Bankshares common stock has been held for more than
one year, the gain or loss will be long-term. Capital gains recognized by an
exchanging individual stockholder generally will be subject to federal income
tax at capital gain rates applicable to the stockholder (up to a maximum of
39.6% for short-term capital gains and 20% for long-term capital gains), and
capital gains recognized by an exchanging corporate stockholder generally will
be subject to federal income tax at a maximum rate of 35%.
Neither Leeds nor Northwest has requested or will request a ruling from
the Internal Revenue Service as to any of the tax effects to Leeds Bankshares'
stockholders of the transactions discussed in this proxy statement, and no
opinion of counsel has been or will be rendered to Leeds Bankshares'
stockholders with respect to any of the tax effects of the merger to
stockholders.
The federal income tax discussion set forth above is based upon current
law and is intended for general information only. You are urged to consult your
tax advisor concerning the specific tax consequences of the merger to you,
including the applicability and effect of state, local or other tax laws and of
any proposed changes in those tax laws and the Internal Revenue Code. We also
note that any stock held in an individual retirement account or other
tax-deferred account may not be subject to immediate taxation upon receipt of
the cash consideration in the merger.
Accounting Treatment of the Merger
The merger will be accounted for under the purchase method of
accounting. Under this method of accounting, Leeds Bankshares and Northwest
Bancorp will be treated as one company as of the date of the merger, and
Northwest Bancorp will record the fair market value of Leeds Bankshares' assets
less liabilities on its consolidated financial statements. Acquisition costs in
excess of the fair values of the net assets acquired, if any, will be recorded
as an intangible asset and may be amortized for financial accounting purposes.
The reported consolidated income of Northwest Bancorp will include the
operations of Leeds Bankshares after the completion of the merger.
26
Effective Time
The merger will be consummated if the Merger Agreement is approved by
Leeds Bankshares stockholders and by the members of Leeds MHC, Leeds and
Northwest obtain all required consents and all other conditions to the merger
are either satisfied or waived. The merger will become effective on the date and
at the time that articles of combinations are filed with the OTS, or such later
date or time as may be indicated in such certificates. Leeds and Northwest have
generally agreed to cause the effective date to occur no later than fifteen days
after the last of the conditions to the consummation of the merger have been
satisfied or waived, including the expiration of any applicable waiting periods.
We anticipate that the merger will become effective during the first
calendar quarter of 2002. However, it is possible that factors outside of the
control of the parties could require us to complete the transactions at a later
time.
We cannot assure you that the necessary approvals of the merger will be
obtained or that other conditions to consummation of the merger can or will be
satisfied. If the merger is not completed by April 30, 2002, both Leeds and
Northwest have the right to terminate the Merger Agreement, unless the failure
to close is due to a breach of the party seeking to terminate. However, the
parties have agreed to extend this deadline for an additional 120 days if they
reasonably believe the merger can be completed within that time period.
Procedures for Surrendering Your Certificates
On or prior to the merger effective date, Northwest will deposit with
the exchange agent an amount of cash equal to the aggregate merger
consideration. The exchange agent will act as paying agent for the benefit of
the holders of certificates of Leeds Bankshares common stock in exchange for the
merger consideration. Each holder of Leeds Bankshares common stock who
surrenders his or her Leeds Bankshares shares to the exchange agent will be
entitled to receive a cash payment of $32.00 per share of Leeds Bankshares
common stock upon acceptance of the shares by the exchange agent.
No later than five business days after the merger effective date, a
letter of transmittal will be mailed by the exchange agent to Leeds Bankshares
stockholders. The letter of transmittal will contain instructions for
surrendering your certificates of Leeds Bankshares common stock.
You should not return your Leeds Bankshares common stock certificates
with the enclosed proxy, and you should not send your stock certificates to the
exchange agent until you receive the letter of transmittal.
If a certificate for Leeds Bankshares common stock has been lost, stolen
or destroyed, the exchange agent is not obligated to deliver payment until the
holder of the shares delivers:
o an appropriate affidavit by the person claiming the loss, theft or
destruction of his or her certificate,
o an indemnity agreement, and
o if required by Northwest, a bond.
Twelve months following the merger effective date, the exchange agent
will deliver to Northwest Bank any funds, certificates, and other documents, not
claimed by former Leeds Bankshares stockholders. Thereafter, the payment
obligation for any certificate representing Leeds Bankshares common stock which
has not been satisfied will become the responsibility of Northwest.
If certificates for Leeds Bankshares common stock are not surrendered
prior to the date on which such payments would otherwise escheat to or become
the property of any governmental agency, the unclaimed amounts will become the
property of Northwest to the extent permitted by applicable law, free and clear
of all claims or interest of any person previously entitled to such property.
None of Northwest, Leeds, the exchange agent or any other party to the merger
will be liable to any former holder of Leeds Bankshares common stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
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Regulatory Approvals
In addition to the approval of the Merger Agreement by our stockholders,
completion of the merger and the transactions contemplated by the Merger
Agreement is subject to the prior approval of the OTS. In determining whether to
approve the merger transaction, the OTS must consider, among other factors, the
financial and managerial resources and future prospects of the existing and
resulting institutions, and the convenience and needs of the communities to be
served. In addition, the OTS may not approve a transaction if it will result in
a monopoly or otherwise be anti-competitive.
Under the Community Reinvestment Act of 1977, the OTS must take into
account the record of performance of Leeds Federal and Northwest Bank in meeting
the credit needs of the entire community, including low- and moderate-income
neighborhoods, served by each institution. Leeds Federal and Northwest Bank each
received a "satisfactory" rating during their respective last Community
Reinvestment Act examinations.
Northwest filed its application with the OTS on or about October 3,
2001, and the OTS deemed the application complete on November ___, 2001. From
the date the application is deemed complete, the OTS has 60 calendar days, or
until _______, 2001, to review the application. By the end of this period, the
OTS must approve or disapprove the application. This 60 day period may be
extended by the OTS under particular circumstances.
In addition, a period of up to 30 days must expire following approval by
the OTS, within which period the United States Department of Justice may file
objections to the merger under the federal anti-trust laws. Although we believe
that the likelihood of such action by the Department of Justice is remote in
this merger, there can be no assurance that the Department of Justice will not
initiate such proceeding. If such proceeding is instituted or challenge is made,
we cannot ensure a favorable result.
We are not aware of any other regulatory approvals required for
completion of the merger, except as described above. Should any other approvals
be required, it is presently contemplated that such approvals would be sought.
There can be no assurance that any other approvals, if required, will be
obtained.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which does not include review of the merger
from the standpoint of the adequacy of the consideration to be received by Leeds
Bankshares stockholders. Furthermore, regulatory approvals do not constitute an
endorsement or recommendation of the merger.
Time Period for Completing the Merger
If the merger is not consummated on or before April 30, 2002, the Merger
Agreement may be terminated by either Northwest or Leeds Bankshares or Leeds
MHC. However, the parties have agreed to extend this deadline for an additional
120 days if they reasonably believe the merger can be completed during that time
period.
Other Provisions of the Merger Agreement
Although the completion of the merger requires stockholder approval,
many provisions of the Merger Agreement became effective immediately upon its
signing. Your vote was not required to make these provisions binding obligations
of Leeds and Northwest.
Representations and Warranties. Each party has made representations and
warranties to the other party with respect to various matters, including its
financial statements, capital structure, business, loans, investments,
regulatory filings and benefit plans. These representations and warranties must
be true and correct upon both signing of the Merger Agreement and the completion
of the merger. A party can terminate the Merger Agreement if the other party's
representations and warranties are not true and correct in all material
respects. If the Merger is completed, or if the Merger Agreement is terminated
for some unrelated reason, the representations and warranties become void. You
can find details of these obligations in Articles III and IV of the Merger
Agreement.
28
Cooperation and Conduct of Business. Each party has agreed to cooperate
in completing the merger and to avoid extraordinary transactions between the
signing of the Merger Agreement and the completion of the merger. In addition,
we have agreed not to solicit or encourage a competing transaction to acquire
us. However, we can furnish information to or negotiate with someone who makes
an unsolicited written bona fide proposal if, among things, the Board of
Directors, after consultation with independent legal counsel, determines in good
faith that such action is necessary to comply with its fiduciary duties. These
provisions become void if the merger is completed. These provisions also become
void if the Merger Agreement is terminated, except for those related to
confidentiality and shared expenses. You can find details of these obligations
in Article V of the Merger Agreement.
Waiver and Amendment. Section 8.03 of Article VIII of the Merger
Agreement allows either Leeds or Northwest to extend the time for the
performance of any obligation by the other party, to waive (to the extent
permitted by law) any condition or obligation of the other party, and to amend
the Merger Agreement. The parties have previously waived the timeline set forth
in the Merger Agreement for Leeds Federal to prepare and file preliminary proxy
material with the SEC.
Termination. The Merger Agreement may be terminated under any of the following
circumstances:
(1) The Merger Agreement may be terminated by the mutual consent of
Leeds and Northwest.
(2) The Merger Agreement may be terminated by either Leeds or Northwest
if:
o any party has been informed by a regulatory authority whose
approval or consent has been requested that the approval or
consent is denied, or is granted subject to any change that
adversely affects in a material respect the economic benefit that
either party reasonably expects to receive in the transactions;
o the merger is not completed by April 30, 2002, provided however,
that the right to terminate the Merger Agreement will not be
available to any party whose breach of any obligation under the
Merger Agreement has been the cause of or resulted in the failure
of the merger to occur on or before April 30, 2002; provided, the
parties will extend such deadline for an additional one hundred
and twenty days in the event they determine that it is reasonably
likely the closing will in fact occur during such extension
period;
o a material breach by or failure to perform on the part of a party
of any representation, warranty, covenant or agreement contained
in the Merger Agreement has occurred and cannot be or has not
been cured within 30 days after the giving of written notice of
such breach by the other party;
o the approval of the stockholders of Leeds Bankshares and any
approval of the members of Leeds MHC required for the
consummation of the merger is not obtained at a duly held meeting
of stockholders or members.
(3) The Merger Agreement may be terminated by Leeds:
o if our Boards of Directors determine, after consultation with our
advisors, that it is their fiduciary duty to accept a superior
proposal (as defined in the Merger Agreement).
(4) The Merger Agreement may be terminated by Northwest:
o if the Boards of Directors of Leeds Bankshares or Leeds MHC
withdraw their recommendation to approve the Merger Agreement,
fail to make such recommendation or modify their recommendation
in a manner adverse to Northwest, as set forth in the Merger
Agreement, or Leeds Bankshares enters into an agreement to be
acquired by, or merge or combine with, a third party in
connection with a superior proposal.
29
You can find details of the termination provisions in Article VII of the
Merger Agreement.
Termination Fee. If the Merger Agreement is terminated due to either of
the immediately preceding two reasons, Leeds Bankshares will, within five
business days after written demand by Northwest, make a cash payment of $2.2
million to Northwest to reimburse Northwest for incurring the costs and expenses
related to entering into the Merger Agreement and consummating the transactions
contemplated by the Merger Agreement.
Voting Agreements
Concurrently with or following the execution of the Merger Agreement,
each director and executive officer of Leeds (collectively the "Stockholders")
separately entered into voting agreements under which the Stockholders: (1)
agreed to restrict their ability to transfer or dispose of their shares of Leeds
Bankshares common stock; (2) agreed to vote their shares of common stock of
Leeds Bankshares to approve the Merger Agreement; and (3) agreed to vote all
votes over which they have power at any meeting of members of Leeds MHC in favor
of approval of the Merger Agreement. The Stockholders agreed to enter into the
voting agreements as an indication of their support for the Merger Agreement and
the transactions contemplated by it and their willingness to vote their shares
of Leeds Bankshares common stock in favor of the Merger Agreement at the special
meeting. The voting agreements terminate automatically upon the termination of
the Merger Agreement.
No Dissenters' Rights
Federal law does not grant dissenters' rights to the stockholders of
Leeds Bankshares in connection with the merger.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not
know of any matters that will be presented for consideration at the special
meeting other than as described in this proxy statement. However, if any other
matters properly come before the special meeting or any adjournment, the
enclosed proxy will be deemed to confer discretionary authority to the
individuals named as proxies to vote the shares represented by such proxies as
to any such matters.
STOCKHOLDER PROPOSALS
The merger is expected to be consummated prior to the next regularly
scheduled annual meeting of our stockholders, in which case the annual meeting
would not be convened. However, if the merger is not consummated prior to the
next regularly scheduled annual meeting of our stockholders, any proposal which
a stockholder wishes to have included in our proxy materials for the next annual
meeting of stockholders must have been received at our main office located at
1101 Maiden Choice Lane, Baltimore, Maryland, not later than _______ __, 2002.
Any such proposal will be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934. All stockholder proposals must also
comply with our bylaws and applicable federal law.
Under Leeds Bankshares' Bylaws, certain procedures are provided which a
stockholder must follow to nominate persons for election as directors or to
introduce an item of business at an annual meeting of stockholders. These
procedures provide, generally, that stockholders desiring to make nominations
for directors, or to bring a proper subject of business before the meeting, must
do so by a written notice timely received (generally not later than 5 days in
advance of such meeting, subject to certain exceptions) by the Secretary of
Leeds Bankshares.
WHERE YOU CAN FIND MORE INFORMATION
Leeds Bankshares is subject to the informational requirements of the
Securities Exchange Act of 1934 and files annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information that Leeds Bankshares files at the
SEC's public reference room located at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. The public filings of Leeds Bankshares also are
available to the public from commercial document retrieval services and at the
internet website maintained by the SEC at "http://www.sec.gov."
30
Leeds Bankshares common stock is traded on the Nasdaq National Market
market under the symbol "LFED." Documents filed by Leeds Bankshares can be
inspected at the office of the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
31
APPENDIX A
----------
AGREEMENT AND PLAN OF MERGER
By and Among
NORTHWEST SAVINGS BANK,
NORTHWEST BANCORP, INC.,
NORTHWEST BANCORP, MHC
And
LEEDS FEDERAL SAVINGS BANK,
LEEDS FEDERAL BANKSHARES, INC.,
LEEDS FEDERAL BANKSHARES, MHC
Dated as of August 16, 2001
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions...................................................2
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01 Effects of Merger; Surviving Institutions.....................6
Section 2.02 Conversion and Cancellation of Shares.........................7
Section 2.03 Exchange Procedures...........................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LEEDS
Section 3.01 Organization.................................................10
Section 3.02 Capitalization...............................................11
Section 3.03 Authority; No Violation......................................11
Section 3.04 Consents.....................................................12
Section 3.05 Leeds Financial Statements...................................13
Section 3.06 Taxes........................................................13
Section 3.07 No Material Adverse Effect...................................14
Section 3.08 Contracts....................................................14
Section 3.09 Ownership of Property; Insurance Coverage....................15
Section 3.10 Legal Proceedings............................................16
Section 3.11 Compliance With Applicable Law...............................16
Section 3.12 ERISA........................................................17
Section 3.13 Brokers, Finders and Financial Advisors......................18
Section 3.14 Environmental Matters........................................18
Section 3.15 Loan Portfolio...............................................19
Section 3.16 Securities Documents.........................................21
Section 3.17 Related Party Transactions...................................21
Section 3.18 Schedule of Termination Benefits.............................21
Section 3.19 Deposits.....................................................22
Section 3.20 Fairness Opinion.............................................22
Section 3.21 Required Vote of Stockholders................................22
Section 3.22 Derivative Transactions......................................22
ARTICLES IV
REPRESENTATIONS AND WARRANTIES OF NORTHWEST
Section 4.01 Organization.................................................22
Section 4.02 Authority; No Violation......................................23
Section 4.03 Consents.....................................................24
Section 4.04 Northwest Financial Statements...............................24
Section 4.05 Material Adverse Effect......................................25
Section 4.06 Legal Proceedings............................................25
Section 4.07 Compliance With Applicable Law...............................25
Section 4.08 Northwest Benefit Plans......................................26
Section 4.09 Financing....................................................26
Section 4.10 Regulatory Approvals.........................................26
Section 4.11 Securities Documents.........................................27
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of the Business of Leeds.............................27
Section 5.02 Access; Confidentiality......................................30
Section 5.03 Regulatory Matters and Consents..............................31
Section 5.04 Taking of Necessary Action...................................32
Section 5.05 Certain Agreements...........................................33
Section 5.06 No Other Bids and Related Matters............................35
Section 5.07 Duty to Advise; Duty to Update the Leeds
Disclosure Schedules.......................................36
Section 5.08 Conduct of Northwest's Business..............................37
Section 5.09 Board and Committee Minutes..................................37
Section 5.10 Undertakings by the Parties..................................37
Section 5.11 Employee and Termination Benefits;
Directors and Management...................................40
Section 5.12 Duty to Advise; Duty to Update the
Northwest Disclosure Schedules.............................46
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Obligations of Leeds Under this Agreement......47
Section 6.02 Conditions to the Obligations of
Northwest Under this Agreement.............................48
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination..................................................49
Section 7.02 Effect of Termination........................................50
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses.....................................................51
Section 8.02 Non-Survival of Representations and Warranties...............51
Section 8.03 Amendment, Extension and Waiver..............................51
Section 8.04 Entire Agreement.............................................51
Section 8.05 No Assignment................................................52
Section 8.06 Notices......................................................52
Section 8.07 Captions.....................................................53
Section 8.08 Counterparts.................................................53
Section 8.09 Severability.................................................53
Section 8.10 Governing Law................................................53
Section 8.11 Specific Performance.........................................53
Exhibit A Form of Merger Agreement Relating to the MHC Merger
Exhibit B Form of Merger Agreement Relating to the Mid-Tier Merger
Exhibit C Form of Leeds Voting Agreement
54
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this Agreement"), dated as of August
15, 2001, is by and among (i) Northwest Savings Bank, a Pennsylvania savings
bank ("Northwest Bank"), Northwest Bancorp, Inc., a Federal corporation
("Northwest Bancorp"), Northwest Bancorp, MHC, a Federal mutual holding company
("Northwest MHC"), and Leeds Federal Savings Bank, a Federal savings bank
("Leeds Savings"), Leeds Federal Bankshares, Inc., a Federal corporation ("Leeds
Bankshares"), and Leeds Federal Bankshares, MHC, a Federal mutual holding
company ("Leeds MHC"). Each of Northwest Bank, Northwest Bancorp, Northwest MHC,
Leeds Savings, Leeds Bankshares and Leeds MHC is sometimes individually referred
to herein as a "party," and collectively as the "parties."
RECITALS
1. Northwest MHC owns a majority of the outstanding capital stock of
Northwest Bancorp, which owns all of the outstanding capital stock of Northwest
Bank. Each of Northwest Bank, Northwest Bancorp and Northwest MHC has its
principal offices in Warren, Pennsylvania.
2. Leeds MHC owns a majority of the outstanding capital stock of Leeds
Bankshares, which owns all of the outstanding capital stock of Leeds Savings.
Each of Leeds Savings, Leeds Bankshares and Leeds MHC has its principal offices
in Baltimore, Maryland.
3. The Boards of Directors of the respective parties deem it advisable
and in the best interests of the parties, including the depositors of Northwest
Bank and Leeds Savings, and the stockholders of Northwest Bancorp and Leeds
Bankshares, for Leeds MHC to merge with and into Northwest MHC with Northwest
MHC as the surviving entity, and for Leeds Bankshares to merge with and into
Northwest Bancorp, with Northwest Bancorp as the surviving entity, all pursuant
to the terms, conditions and procedures set forth in this Agreement.
4. The parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement; and
5. In consideration of the premises and of the mutual representations,
warranties and covenants herein contained and intending to be legally bound
hereby, the parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions
Except as otherwise provided herein, as used in this Agreement, the
following terms shall have the indicated meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to any Person, any Person who directly,
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with such Person and, without limiting the
generality of the foregoing, includes any executive officer or director of such
Person and any Affiliate of such executive officer or director.
"Aggregate Merger Consideration" means the sum of (i) the Merger
Consideration multiplied by the number of shares of Leeds Bankshares Common
Stock (except for shares held by either Leeds or Northwest other than in a
fiduciary capacity or in connection with debts previously contracted), and (ii)
the Merger Consideration multiplied by the number of options issued or
outstanding pursuant to the Leeds Stock Option Plans, less the aggregate
exercise price of all such options.
"Agreement" means this agreement, and any amendment or supplement
hereto, which constitutes a "plan of merger" between the Northwest Parties and
the Leeds Parties.
"Applications" means the applications to be filed with the appropriate
Regulatory Authorities requesting approval or nonobjection of the transactions
described in this Agreement.
"Board of Directors" means the Board of Directors of Leeds MHC, Leeds
Bankshares, Leeds Savings, Northwest Bancorp or Northwest Bank, or the Board of
Trustees of Northwest MHC, as applicable.
"Closing Date" means the date determined by Northwest, in consultation
with and upon no less than five (5) days prior written notice to Leeds
Bankshares, but in no event later than fifteen (15) days after the last
condition precedent pursuant to this Agreement has been fulfilled or waived
(including the expiration of any applicable waiting period), or such other date
as to which the parties shall mutually agree.
"Environmental Law" means any Federal or state law, statute, rule,
regulation, code, judgment, common law or agreement with any Federal or state
governmental authority, and any decree, injunction or order entered with or by
any governmental authority that is binding upon Leeds relating to (i) the
protection, preservation or restoration of the environment (including air,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource), (ii) human health or
safety, or (iii) exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of, hazardous substances, in each case as amended and now in effect.
2
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated from time to time thereunder.
"Exchange Agent" means the third party entity selected by Northwest and
reasonably acceptable to Leeds, as provided in Section 2.03(a) of this
Agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLB" means the Federal Home Loan Bank.
"GAAP" means generally accepted accounting principles as in effect at
the relevant date and consistently applied.
"Hazardous Material" means any substance (whether solid, liquid or gas)
that is detrimental to human health or safety or to the environment and
currently listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any material containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum, or any
derivative or by-product thereof, radon, radioactive material, friable
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
"HOLA" the Home Owners' Loan Act of 1956.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"Leeds" means the Leeds Parties and/or any direct or indirect
Subsidiary of such entities.
"Leeds Bankshares" means Leeds Federal Bankshares, Inc., a Federal
corporation.
"Leeds Bankshares Common Stock" means the common stock of Leeds
Bankshares described in Section 3.02(a).
"Leeds Disclosure Schedules" means the Disclosure Schedules delivered
by Leeds to Northwest pursuant to Article III of this Agreement.
"Leeds Employee Plan" has the meaning given to that term in Section
3.12 of this Agreement.
3
"Leeds Financials" means (i) the audited consolidated financial
statements of Leeds Bankshares as of June 30, 2000 and 1999 and for the three
years ended June 30, 2000, including the notes thereto, included in Securities
Documents filed by Leeds Bankshares, and (ii) the unaudited interim consolidated
financial statements of Leeds Bankshares as of each calendar quarter following
June 30, 2000 included in Securities Documents filed by Leeds Bankshares.
"Leeds MHC" means Leeds Federal Bankshares, MHC, a Federal mutual
holding company.
"Leeds Parties" means Leeds Savings, Leeds Bankshares and Leeds MHC.
"Leeds Regulatory Reports" means the Thrift Financial Reports of Leeds
Savings and accompanying schedules, as filed with the OTS, for each calendar
quarter beginning with the quarter ended June 30, 2000, through the Closing
Date, and all Annual, Quarterly and Current Reports filed on Form H-(b)11 with
the OTS by Leeds Bankshares and Leeds MHC from June 30, 2000 through the Closing
Date.
"Leeds Savings" means Leeds Federal Savings Bank.
"Leeds Stock Option Plans" means the Leeds Federal Savings Bank 1994
Incentive Stock Option Plan and the Leeds Federal Savings Bank 1994 Stock Option
Plan for Outside Directors.
"Leeds Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by Leeds Bankshares, and
includes Leeds Savings, except that it does not include any corporation the
stock of which is held in the ordinary course of the lending activities of Leeds
Savings.
"Loan Property" shall have the meaning given to such term in Section
3.14(b) of this Agreement.
"Material Adverse Effect" shall mean, with respect to Northwest Bancorp
or Leeds Bankshares, any adverse effect on its assets, financial condition or
results of operations which is material to its assets, financial condition or
results of operations on a consolidated basis, except for any material adverse
effect caused by (i) any change in the value of the assets of Northwest Bancorp
or Leeds Bankshares resulting from a change in interest rates generally, (ii)
any individual or combination of changes occurring after the date hereof in any
Federal or state law, rule or regulation or in GAAP, which change(s) affect(s)
financial institutions generally, or (iii) expenses incurred in connection with
this Agreement and the transactions contemplated hereby.
"Member Proxy Statement" means any proxy statement, if any, together
with any supplements thereto, to be transmitted by Leeds MHC to its members in
connection with the transactions contemplated by this Agreement if a vote of
such members is required by any Regulatory Authority.
4
"Merger" shall mean collectively the MHC Merger and the Mid-Tier
Merger, and any other mergers by interim corporate entities necessary to
effectuate the transactions contemplated by this Agreement.
"Merger Consideration" has the meaning given to that term in Section
2.02(a) of this Agreement.
"Merger Effective Date" means the date as of which the articles of
combination as to the Merger are endorsed by the OTS, or such other date
specified in the endorsement of the articles of combination by the OTS.
"MHC Merger" means the merger of Leeds MHC with and into Northwest MHC
with Northwest MHC as the surviving entity.
"Mid-Tier Merger" means the merger of Leeds Bankshares with and into
Northwest Bancorp with Northwest Bancorp as the surviving entity.
"Northwest" means Northwest Bank, Northwest Bancorp, Northwest MHC
and/or any direct or indirect Subsidiary of such entities.
"Northwest Bank" means Northwest Savings Bank, a Pennsylvania stock
savings bank.
"Northwest Disclosure Schedules" means the Disclosure Schedules
delivered by Northwest to Leeds pursuant to Article III of this Agreement.
"Northwest Financials" means (i) the audited consolidated financial
statements of Northwest Bancorp as of June 30, 2000 and 1999 and for the three
years ended June 30, 2000, including the notes thereto, included in Securities
Documents filed by Northwest Bancorp, and (ii) the unaudited interim
consolidated financial statements of Northwest Bancorp as of each calendar
quarter following June 30, 2000 included in Securities Documents filed by
Northwest Bancorp.
"Northwest Parties" means Northwest Bank, Northwest Bancorp and
Northwest MHC.
"Northwest Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by Northwest
Bancorp, and includes Northwest Bank, except that it does not include any
corporation the stock of which is held in the ordinary course of the lending
activities of Northwest Bank.
"OTS" means the Office of Thrift Supervision.
"Participation Facility" shall have the meaning given to such term in
Section 3.14(b) of this Agreement.
"Person" means any individual, corporation, partnership, joint venture,
association, trust or "group" (as that term is defined under the Exchange Act).
5
"Regulatory Agreement" has the meaning given to that term in Section
3.11(b) of this Agreement.
"Regulatory Authority" or "Regulatory Authorities" means any agency or
department of any Federal or state government, including without limitation the
OTS, the FDIC, the SEC and the respective staffs thereof.
"Right" means any warrant, option, right, convertible security and
other capital stock equivalent that obligate an entity to issue its securities.
"RP Financial" means RP Financial, LC, the financial advisor to Leeds
in connection with the transactions provided for in this Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time thereunder.
"Securities Documents" means all registration statements, schedules,
statements, forms, reports, proxy material, and other documents required to be
filed under the Securities Laws.
"Securities Laws" means the Securities Act and the Exchange Act and the
rules and regulations promulgated from time to time thereunder.
"Stockholder Proxy Statement" means the proxy statement together with
any supplements thereto to be transmitted to holders of Leeds Bankshares Common
Stock in connection with the transactions contemplated by this Agreement.
"Subsidiary" means any corporation, 50% or more of the capital stock of
which is owned, either directly or indirectly, by another entity, except any
corporation the stock of which is held as security by either Northwest Bank or
Leeds Savings, as the case may be, in the ordinary course of their lending
activities.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01 Effects of Merger; Surviving Institutions.
On the Merger Effective Date the Merger will be effected as follows:
(a) The MHC Merger. Leeds MHC shall merge with and into Northwest MHC
with Northwest MHC as the surviving entity pursuant to the merger agreement
substantially in the form of Exhibit A hereto. The separate existence of Leeds
MHC shall cease, and all of the property (real, personal and mixed), rights,
powers and duties and obligations of Leeds MHC shall be transferred to and
assumed by Northwest MHC as the surviving entity in the MHC Merger, without
further act or deed, all in accordance with the HOLA, and regulations of the
OTS. As a result of the MHC Merger, each borrower member of Leeds MHC and holder
of a deposit account in Leeds Savings as of the Merger Effective Date shall have
the same rights and privileges in Northwest MHC as if such borrowing and/or
deposit account, respectively, had been established at Northwest Bank, and all
deposit accounts established at Leeds Savings prior to the Merger Effective Date
shall confer on a depositor the same rights and privileges in Northwest MHC as
if such deposit account had been established at Northwest Bank on the date
established at Leeds Savings and the borrower members of Leeds MHC identified by
Leeds prior to the Merger Effective Date will be given subscription rights to
the extent permitted by regulatory authorities in any conversion of Northwest
MHC to stock form that occurs prior to any merger of Leeds Savings with and into
Northwest Bank if such borrowing remains outstanding at the time of such
mutual-to-stock conversion (collectively, the "Membership Conversion").
6
(b) The Mid-Tier Merger. Leeds Bankshares shall merge with and into
Northwest Bancorp with Northwest Bancorp as the surviving entity pursuant to the
merger agreement substantially in the form of Exhibit B hereto. The separate
existence of Leeds Bankshares shall cease, and all of the property (real,
personal and mixed), rights, powers and duties and obligations of Leeds
Bankshares shall be transferred to and assumed by Northwest Bancorp as the
surviving entity in the Mid-Tier Merger, without further act or deed, all in
accordance with the HOLA, and regulations of the OTS.
(c) Modification of Structure. Notwithstanding any provision of this
Agreement to the contrary, Northwest Bancorp may elect, subject to the filing of
all necessary applications and the receipt of all required regulatory approvals,
to modify the structure of the transactions described in this Section 2.01, and
the parties shall enter into such alternative transactions, so long as (i) there
are no adverse tax consequences to any of the stockholders of Leeds Bankshares
as a result of such modification, (ii) the Merger Consideration is not thereby
changed in kind or reduced in amount because of such modification and (iii) such
modification will not materially delay or jeopardize receipt of any required
regulatory approvals required under Sections 6.02(d).
Section 2.02 Conversion and Cancellation of Shares
(a) On the Merger Effective Date and in accordance with the MHC Merger
and the Mid-Tier Merger:
(i) Each issued and outstanding share of Leeds Bankshares
Common Stock held by Leeds MHC shall be transferred to Northwest MHC as
the surviving entity in the MHC Merger.
(ii) Each issued and outstanding share of Leeds Bankshares
Common Stock (except shares held by Northwest MHC and except as
otherwise provided in this subsection (a) of Section 2.02), shall cease
to be outstanding, shall cease to exist and shall be converted
automatically into the right to receive $32.00 in cash (the "Merger
Consideration").
(iii) Each issued and outstanding share of Leeds Bankshares
Common Stock held by Northwest MHC shall cease to be outstanding and
shall cease to exist.
7
(b) Any shares of Leeds Bankshares Common Stock which are owned or held
by either party hereto or any of their respective Subsidiaries (other than in a
fiduciary capacity or in connection with debts previously contracted) at the
Merger Effective Date shall cease to exist, the certificates for such shares
shall be canceled as promptly as practicable, such shares shall not be converted
into the Merger Consideration, and no cash shall be issued or exchanged
therefor.
(c) The holders of certificates representing shares of Leeds Bankshares
Common Stock (any such certificate being hereinafter referred to as a
"Certificate") shall cease to have any rights as stockholders of Leeds
Bankshares.
(d) Each option to purchase shares of Leeds Bankshares Common Stock
issued and outstanding pursuant to the Leeds Stock Option Plans, whether or not
such option is exercisable as of the Merger Effective Date, shall, by reason of
the Merger, cease to be outstanding and shall automatically be converted into
the right to receive in cash an amount equal to (i) the difference (if a
positive number) between (A) the Merger Consideration and (B) the exercise price
of each such option multiplied by (ii) the number of shares of Leeds Bankshares
Common Stock subject to such option.
Section 2.03 Exchange Procedures
(a) As promptly as practicable after the Merger Effective Date, and in
any event within five business days of the Merger Effective Date, the Exchange
Agent shall mail to each holder of record of an outstanding Certificate(s) a
Letter of Transmittal containing instructions for the surrender of the
Certificate(s) held by such holder for payment if applicable. Upon surrender of
the Certificate(s) to the Exchange Agent in accordance with the instructions set
forth in the Letter of Transmittal, such holder shall promptly receive in
exchange therefor the Merger Consideration if applicable, without interest
thereon. Approval of this Agreement by the stockholders of Leeds Bankshares
shall constitute authorization for Northwest Bancorp to designate and appoint
the Exchange Agent, which appointment shall be reasonably acceptable to Leeds
Bankshares. Neither Northwest Bancorp nor the Exchange Agent shall be obligated
to deliver the Merger Consideration to a former stockholder of Leeds Bankshares
until such former stockholder surrenders his Certificate(s) or, in lieu thereof,
any such appropriate affidavit of loss and indemnity agreement and bond as may
be reasonably required by Northwest Bancorp.
(b) If payment of the Merger Consideration is to be made to a person
other than the person in whose name a Certificate surrendered in exchange
therefor is registered, it shall be a condition of payment that the Certificate
so surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the
person requesting such payment shall pay 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.
(c) On or prior to the Merger Effective Date, Northwest Bancorp or
Northwest Bank shall deposit or cause to be deposited, in trust with the
Exchange Agent, an amount of cash equal to the Aggregate Merger Consideration
that the Leeds Bankshares stockholders shall be entitled to receive on the
Merger Effective Date pursuant to Section 2.02 hereof.
8
(d) The payment of the Merger Consideration in exchange for each share
of Leeds Bankshares Common Stock in accordance with the above terms and
conditions shall be in full satisfaction of all rights pertaining to such Leeds
Bankshares Common Stock.
(e) Promptly following the date which is 12 months after the Merger
Effective Date, the Exchange Agent shall deliver to Northwest Bancorp all cash,
certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing shares of Leeds
Bankshares Common Stock may surrender such Certificate to Northwest Bancorp and
(subject to applicable abandoned property, escheat and similar laws) receive in
consideration therefor the Merger Consideration multiplied by the number of
shares of Leeds Bankshares Common Stock formerly represented by such
Certificate, without any interest or dividends thereon.
(f) After the close of business on the Merger Effective Date, there
shall be no transfers on the stock transfer books of Leeds Bankshares of Leeds
Bankshares Common Stock which are outstanding immediately prior to the Merger
Effective Date, and the stock transfer books of Leeds Bankshares shall be closed
with respect to such shares. If, after the Merger Effective Date, Certificates
representing such shares are presented for transfer to the Exchange Agent, they
shall be canceled and exchanged for the Merger Consideration as provided in this
Article II.
(g) In the event any certificate for Leeds Bankshares Common Stock
shall have been lost, stolen or destroyed, the Exchange Agent shall deliver
(except as otherwise provided in Section 2.02) in exchange for such lost, stolen
or destroyed certificate, upon receipt of an affidavit of such fact by the
holder thereof, the cash to be paid in the Merger as provided for herein;
provided, however, that Northwest Bancorp may, in its sole discretion and as a
condition precedent to the delivery thereof, require the owner of such lost,
stolen or destroyed certificate to deliver a bond in such reasonable sum as
Northwest Bancorp may specify as indemnity against any claim that may be made
against Leeds Bankshares, Northwest Bancorp or any other party with respect to
the certificate alleged to have been lost, stolen or destroyed.
(h) Northwest Bancorp is hereby authorized, with the written consent of
Leeds Bankshares, to adopt additional rules and regulations with respect to the
matters referred to in this Section 2.03 not inconsistent with the provisions of
this Agreement and which do not adversely affect the rights of stockholders of
Leeds Bankshares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LEEDS
Leeds represents and warrants to Northwest that the statements
contained in this Article III 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 III), except as set forth in the Leeds
Disclosure Schedules delivered to Northwest on the date hereof, and except as to
any representation or warranty which relates to a specific date. Leeds has made
a good faith effort to ensure that the disclosure on each schedule of the Leeds
Disclosure Schedules corresponds to the section reference herein. However, for
purposes of the Leeds Disclosure Schedules, 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.
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Section 3.01 Organization
(a) Leeds MHC is a Federal mutual holding company organized, validly
existing and in good standing under the laws of the United States, and is duly
registered as a savings and loan holding company under the HOLA. Leeds MHC has
full power and authority to carry on its business as now conducted and is duly
licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on Leeds. Except
as set forth in Leeds Disclosure Schedule 3.01(a), Leeds MHC has no subsidiary
other than Leeds Bankshares and Leeds Savings.
(b) Leeds Bankshares is a Federal corporation organized, validly
existing and in good standing under the laws of the United States, and is duly
registered as a savings and loan holding company under the HOLA. Leeds
Bankshares has the full corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on Leeds. Other than shares of capital stock in Leeds Savings and its
subsidiaries, as identified below (collectively, the "Leeds Subsidiaries"),
Leeds Bankshares does not own or control, directly or indirectly, or have the
right to acquire directly or indirectly, an equity interest in any corporation,
company, association, partnership, joint venture or other entity.
(c) Leeds Savings is a Federal savings bank organized, validly existing
and in good standing under the laws of the United States. Except as set forth in
Leeds Disclosure Schedule 3.01(c), Leeds Savings is the only Leeds Subsidiary.
The deposits of Leeds Savings are insured by the FDIC to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due by Leeds Savings. Each Leeds
Subsidiary is identified in Leeds Disclosure Schedule 3.01(c), and is a
corporation organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization.
(d) Leeds Savings is a member in good standing of the FHLB of Atlanta
and owns the requisite amount of stock therein.
(e) Except as disclosed in Leeds Disclosure Schedule 3.01(e), the
respective minute books of Leeds MHC, Leeds Bankshares, Leeds Savings and each
Leeds Subsidiary accurately records, in all material respects, all material
corporate actions of their respective stockholders and boards of directors
(including committees) through the date of this Agreement.
10
(f) Prior to the date of this Agreement, Leeds has made available to
Northwest true and correct copies of the charters and bylaws of Leeds Savings,
Leeds Bankshares and Leeds MHC, and the certificates of incorporation and bylaws
of each Leeds Subsidiary.
Section 3.02 Capitalization
(a) The authorized capital stock of Leeds Bankshares consists of
20,000,000 shares of common stock, $1.00 par value ("Leeds Bankshares Common
Stock"), and 10,000,000 shares of Preferred Stock, $1.00 par value (the "Leeds
Preferred Stock"), of which 5,205,597 shares of Leeds Bankshares Common Stock
are outstanding, validly issued, fully paid and nonassessable and free of
preemptive rights. There are no shares of Leeds Bankshares Preferred Stock
issued and outstanding. There are 667,416 shares of Leeds Bankshares Common
Stock held by Leeds Bankshares as treasury stock. Neither Leeds Bankshares nor
any Leeds Subsidiary has or is bound by any Right of any character relating to
the purchase, sale, issuance or voting of, or right to receive dividends or
other distributions on, any shares of Leeds Bankshares Common Stock, or any
other security of Leeds Bankshares or any Leeds Subsidiary, or any securities
representing the right to vote, purchase or otherwise receive any shares of
Leeds Bankshares Common Stock or any other security of Leeds Bankshares, other
than as set forth in the Leeds Disclosure Schedule 3.02(a).
(b) Leeds MHC owns 3,300,000 shares of Leeds Bankshares Common Stock,
free and clear of any lien or encumbrance except as set forth in Leeds
Disclosure Schedule 3.02(b). Except as disclosed in Leeds Disclosure Schedule
3.02(b) and except for shares of Leeds Bankshares Common Stock (and any equity
interests that may be attributed to Leeds MHC due to its ownership of Leeds
Bankshares Common Stock), Leeds MHC does not possess, directly or indirectly,
any equity interest in any corporation.
(c) To the best knowledge of Leeds Bankshares, no Person or "group" (as
that term is used in Section 13(d)(3) of the Exchange Act) other than Leeds MHC,
is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5%
or more of the outstanding shares of Leeds Bankshares Common Stock, except as
disclosed in the Leeds Disclosure Schedule 3.02(c).
(d) The authorized capital stock of Leeds Savings consists of
20,000,000 shares of common stock, $1.00 par value, and 10,000,000 shares of
Preferred Stock, $1.00 par value. There are 100 shares of Leeds Savings common
stock outstanding, all of which are validly issued, fully paid and nonassessable
and free of preemptive rights, and all of which are owned by Leeds Bankshares
free and clear of any liens, encumbrances, charges, restrictions or rights of
third parties of any kind whatsoever.
Section 3.03 Authority; No Violation
(a) Leeds has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Leeds and the completion by Leeds of the
transactions contemplated hereby have been duly and validly approved by the
requisite vote of the Boards of Directors of the Leeds Parties and, except for
approval of the stockholders of Leeds Bankshares and, if required, the members
of Leeds MHC, no other proceedings on the part of the Leeds Parties are
necessary to complete the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Leeds and, subject to approval
by the stockholders of Leeds Bankshares and, if required, the members of Leeds
MHC and receipt of the required approvals of the Regulatory Authorities,
constitutes the valid and binding obligations of Leeds, enforceable against
Leeds in accordance with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally, and as to Leeds Savings,
the conservatorship or receivership provisions of the FDIA, and subject, as to
enforceability, to general principles of equity.
11
(b) Subject to the receipt of approvals from the Regulatory Authorities
referred to in Section 5.03 hereof and the compliance by Leeds and Northwest
with any conditions contained therein,
(A) the execution and delivery of this Agreement by Leeds,
(B) the consummation of the transactions contemplated hereby, and
(C) compliance by Leeds with any of the terms or provisions hereof,
will not (i) conflict with or result in a material breach of any provision of
the charters or bylaws of any of the Leeds Parties or the certificate of
incorporation of any Leeds Subsidiary; (ii) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Leeds Parties or any of the properties or assets of the Leeds
Parties; or (iii) violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of Leeds under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other investment or obligation to which
Leeds is a party, or by which they or any of their respective properties or
assets may be bound or affected, except in the case of clauses (ii) and (iii)
above for violations which, individually or in the aggregate, would not have a
Material Adverse Effect on Leeds.
Section 3.04 Consents
Except as set forth in Leeds Disclosure Schedule 3.04, and except for
the consents, waivers, approvals, filings and registrations from or with the
Regulatory Authorities referred to in Section 5.03 hereof and compliance with
any conditions contained therein, and the approval of this Agreement by the
requisite vote of the stockholders of Leeds Bankshares and, if required, the
members of Leeds MHC, no consents, waivers or approvals of, or filings or
registrations with, any public body or governmental authority are necessary,
and, to the best knowledge of Leeds, no consents, waivers or approvals of, or
filings or registrations with, any other third parties are necessary, in
connection with (a) the execution and delivery of this Agreement by Leeds, and
(b) the completion by Leeds of the transactions described in this Agreement.
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Section 3.05 Leeds Financial Statements
(a) Leeds Bankshares has previously made available to Northwest the
Leeds Regulatory Reports. The Leeds Regulatory Reports have been, or will be,
prepared in all material respects in accordance with applicable regulatory
accounting principles and practices throughout the periods covered by such
statements, and fairly present, or will fairly present in all material respects,
the consolidated financial position, results of operations and changes in
stockholders' equity of each of the Leeds Parties as of and for the periods
ended on the dates thereof, in accordance with applicable regulatory accounting
principles applied on a consistent basis.
(b) Leeds Bankshares has previously made available to Northwest the
Leeds Financials (the availability of the Leeds Financials will be assumed if
they are included in SEC Documents filed on EDGAR). The Leeds Financials
(including the related notes where applicable) fairly present in each case in
all material respects (subject in the case of the unaudited interim statements
to normal year-end adjustments), the consolidated financial condition, results
of operations and cash flows of Leeds Bankshares as of and for the respective
periods ending on the dates thereof and have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as
indicated therein, or in the case of unaudited statements, as permitted by Form
10-QSB.
(c) At the date of each balance sheet included in the Leeds Financials
or the Leeds Regulatory Reports, Leeds did not have, and will not have, any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such
Leeds Financials or Leeds Regulatory Reports or in the footnotes thereto which
are not fully reflected or reserved against therein or fully disclosed in a
footnote thereto, except for liabilities, obligations and loss contingencies
that are not material individually or in the aggregate or which are incurred in
the ordinary course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies that are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
Section 3.06 Taxes
Leeds Bankshares and the Leeds Subsidiaries are members of the same
affiliated group within the meaning of IRC Section 1504(a). Leeds has duly filed
all Federal, state and material local tax returns required to be filed by or
with respect to it on or prior to the date hereof (all such returns being
accurate and correct in all material respects) and has duly paid or has made
provisions for the payment of, all material Federal, state and local taxes which
have been incurred by or are due or claimed to be due from Leeds by any taxing
authority or pursuant to any written tax sharing agreement on or prior to the
date hereof other than taxes or other charges which (i) are not delinquent, (ii)
are being contested in good faith, or (iii) have not yet been fully determined.
As of the date of this Agreement, there is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to any taxes of
Leeds, and no claim has been made by any authority in a jurisdiction where Leeds
does not file tax returns that Leeds is subject to taxation in that
jurisdiction. Leeds has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. Leeds has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor or stockholder, and Leeds has timely complied
with all applicable information reporting requirements under Part III,
Subchapter A of Chapter 61 of the IRC and similar applicable state and local
information reporting requirements.
13
Section 3.07 No Material Adverse Effect
Leeds has not suffered any Material Adverse Effect since June 30, 2000.
Section 3.08 Contracts
(a) Except as set forth in Leeds Disclosure Schedule 3.08(a), Leeds
is not a party to or subject to:
(i) any employment, consulting or severance contract or
material arrangement with any past or present officer, director or
employee of Leeds except for "at will" arrangements;
(ii) any plan, material arrangement or contract providing for
bonuses, pensions, options, deferred compensation, retirement payments,
profit sharing or similar material arrangements for or with any past or
present officers, directors or employees of Leeds;
(iii) any collective bargaining agreement with any labor
union relating to employees of Leeds;
(iv) any agreement which by its terms limits the payment of
dividends by Leeds Savings or Leeds Bankshares;
(v) any instrument evidencing or related to material
indebtedness for borrowed money whether directly or indirectly, by way
of purchase money obligation, conditional sale, lease purchase,
guaranty or otherwise, in respect of which Leeds is an obligor to any
person, which instrument evidences or relates to indebtedness other
than deposits, repurchase agreements, bankers' acceptances, advances
from the FHLB of Atlanta, and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in
"Federal funds" or which contains financial covenants or other
restrictions (other than those relating to the payment of principal and
interest when due) which would be applicable on or after the Closing
Date to Northwest; or
(vi) any contract (other than this Agreement) limiting the
freedom, in any material respect, of Leeds to engage in any type of
banking or bank-related business in which Leeds is permitted to engage
under applicable law as of the date of this Agreement.
14
(b) True and correct copies of agreements, plans, contracts,
arrangements and instruments referred to in Section 3.08(a), have been made
available to Northwest on or before the date hereof, are listed in and attached
to Leeds Disclosure Schedule 3.08(a) and are in full force and effect on the
date hereof, and Leeds (nor, to the knowledge of Leeds, any other party to any
such contract, plan, arrangement or instrument) has not materially breached any
provision of, or is in default in any respect under any term of, any such
contract, plan, arrangement or instrument. Except as set forth in the Leeds
Disclosure Schedule 3.08(b)(i), no party to any material contract, plan,
arrangement or instrument will have the right to terminate any or all of the
provisions of any such contract, plan, arrangement or instrument as a result of
the execution of, and the transactions contemplated by, this Agreement. Except
as set forth in Leeds Disclosure Schedule 3.08(b)(i), none of the employees
(including officers) of Leeds possesses the right to terminate his/her
employment and receive or be paid (or cause Leeds to accrue on his/her behalf)
benefits solely as a result of the execution of this Agreement or the
consummation of the transactions contemplated thereby. Except as set forth in
Leeds Disclosure Schedule 3.08(b)(i), no plan, contract, employment agreement,
termination agreement, or similar agreement or arrangement to which Leeds is a
party or under which Leeds may be liable contains provisions which permit any
employee or independent contractor to terminate it without cause and continue to
accrue future benefits thereunder. Except as set forth in Leeds Disclosure
Schedule 3.08(b)(i), no such agreement, plan, contract, or arrangement: (x)
provides for acceleration in the vesting of benefits or payments due thereunder
upon the occurrence of a change in ownership or control of Leeds or upon the
occurrence of a subsequent event; or (y) requires Leeds to provide a benefit in
the form of Leeds Bankshares Common Stock or determined by reference to the
value of Leeds Bankshares Common Stock. Except as disclosed in Leeds Disclosure
Schedule 3.08(b)(ii), no such agreement, plan or arrangement with respect to
officers or directors of Leeds or to any of their respective employees, provides
for benefits which may cause an "excess parachute payment" or the disallowance
of a Federal income tax deduction under IRC Section 280G.
Section 3.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in Leeds Disclosure Schedule 3.09(a), Leeds has
good and, as to real property, marketable title to all material assets and
properties owned by Leeds in the conduct of its business, whether such assets
and properties are real or personal, tangible or intangible, including assets
and property reflected in the balance sheets contained in the Leeds Regulatory
Reports and in the Leeds Financials or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of in the ordinary
course of business, since the date of such balance sheets), subject to no
material encumbrances, liens, mortgages, security interests or pledges, except
(i) those items which secure liabilities for public or statutory obligations or
any discount with, borrowing from or other obligations to the FHLB of Atlanta,
inter-bank credit facilities, or any transaction by Leeds acting in a fiduciary
capacity, and (ii) statutory liens for amounts not yet delinquent or which are
being contested in good faith. Leeds, as lessee, has the right under valid and
subsisting leases of real and personal properties used by Leeds in the conduct
of its businesses to occupy or use all such properties as presently occupied and
used by each of them. Except as disclosed in Leeds Disclosure Schedule 3.09(a),
such existing leases and commitments to lease constitute operating leases for
both tax and financial accounting purposes and the lease expense and minimum
rental commitments with respect to such leases and lease commitments are as
disclosed in the notes to the Leeds Financials.
15
(b) With respect to all material agreements pursuant to which Leeds has
purchased securities subject to an agreement to resell, if any, Leeds has a lien
or security interest (which to the knowledge of Leeds is a valid, perfected
first lien) in the securities or other collateral securing the repurchase
agreement, and the value of such collateral equals or exceeds the amount of the
debt secured thereby.
(c) Leeds currently maintains insurance considered by Leeds to be
reasonable for its operations, in accordance with good business practice. Leeds
has not received notice from any insurance carrier that (i) such insurance will
be canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. There are presently no material claims pending under such policies of
insurance and no notices have been given by Leeds under such policies. All such
insurance is valid and enforceable and in full force and effect, and within the
last three years Leeds has received each type of insurance coverage for which it
has applied and during such periods has not been denied indemnification for any
material claims submitted under any of its insurance policies. Leeds Disclosure
Schedule 3.09(c) identifies all policies of insurance maintained by Leeds.
Section 3.10 Legal Proceedings.
Except as disclosed in Leeds Disclosure Schedule 3.10, Leeds is not a
party to any, and there are no pending or, to the best of the knowledge of
Leeds, threatened legal, administrative, arbitration or other proceedings,
actions or governmental investigations of any nature (i) against Leeds, (ii) to
which the assets of Leeds are or may be subject, (iii) challenging the validity
or propriety of any of the transactions contemplated by this Agreement, or (iv)
which could adversely affect the ability of Leeds to perform under this
Agreement, except for any proceedings, claims, actions, investigations or
inquiries referred to in clauses (i) or (ii) which, if adversely determined,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Leeds.
Section 3.11 Compliance With Applicable Law
(a) Leeds holds all licenses, franchises, permits and authorizations
necessary for the lawful conduct of its businesses under, and has complied in
all material respects with, applicable laws, statutes, orders, rules or
regulations of any Federal, state or local governmental authority relating to
it, other than where such failure to hold or such noncompliance will neither
result in a limitation in any material respect on the conduct of its business
nor otherwise have a Material Adverse Effect on Leeds. Leeds, directly or
indirectly, owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights
and any applications therefor, technology, know-how and tangible or intangible
proprietary information or material that are material to the business of Leeds.
16
(b) Except as disclosed in Leeds Disclosure Schedule 3.11(b), Leeds has
not received any notification or communication from any Regulatory Authority (i)
asserting that Leeds is not in material compliance with any of the statutes,
regulations or ordinances which such Regulatory Authority enforces; (ii)
threatening to revoke any license, franchise, permit or governmental
authorization which is material to Leeds; (iii) requiring or threatening to
require Leeds, or indicating that Leeds may be required, to enter into a cease
and desist order, agreement or memorandum of understanding or any other
agreement with any Federal or state governmental agency or authority which is
charged with the supervision or regulation of banks or engages in the insurance
of bank deposits restricting or limiting, or purporting to restrict or limit, in
any material respect the operations of Leeds, including without limitation any
restriction on the payment of dividends; or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any material manner the
operations of Leeds, including without limitation any restriction on the payment
of dividends (any such notice, communication, memorandum, agreement or order
described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Leeds has not consented to or entered into any currently effective
Regulatory Agreement, except as set forth in Leeds Disclosure Schedule 3.11(b).
The most recent regulatory rating given to Leeds Savings as to compliance with
the Community Reinvestment Act ("CRA") is satisfactory or better.
Section 3.12 ERISA.
(a) Leeds Disclosure Schedule 3.12(a) contains a complete and accurate
list of all pension, retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred compensation,
consulting, bonus, group insurance, severance and other benefit plans,
contracts, agreements and arrangements, including, but not limited to, "employee
benefit plans," as defined in Section 3(3) of ERISA, incentive and welfare
policies, contracts, plans and arrangements and all trust agreements related
thereto with respect to any present or former directors, officers or other
employees of Leeds (hereinafter collectively referred to as the "Leeds Employee
Plans" and individually as a "Leeds Employee Plan"). If such plan, contract,
agreement or arrangement is funded through a trust or third party funding
vehicle, such as an insurance contract, the Leeds Disclosure Schedule 3.12 (a)
includes such trust or other funding arrangement.
(b) Each of the Leeds Employee Plans complies in all material respects
with all applicable requirements of ERISA, the IRC and other applicable laws;
and there has occurred no "prohibited transaction" (as defined in Section 406 of
ERISA or Section 4975 of the IRC) for which no statutory exemption exists under
Section 408(b) of ERISA or Section 4975(d) of the IRC or for which no
administrative exemption has been granted under Section 408(a) of ERISA.
(c) Neither Leeds nor any ERISA Affiliate has contributed to a Leeds
Employee Plan that is subject to Title IV of ERISA. Neither Leeds nor any ERISA
Affiliate has contributed to any "multiemployer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA).
(d) Each Leeds Employee Plan that is an "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) and which is intended to be qualified
under Section 401(a) of the IRC (a "Qualified Plan") has received a favorable
determination letter from the IRS, and Leeds is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. There
is no pending or, to the knowledge of Leeds, threatened litigation,
administrative action or proceeding relating to any Leeds Employee Plan. There
has been no announcement or commitment by Leeds to create an additional Leeds
Employee Plan, or to amend any Leeds Employee Plan, except for amendments
required by applicable law; and, except as specifically identified in Leeds
Disclosure Schedules, Leeds does not have any obligations for post-retirement or
post-employment benefits under any Leeds Employee Plan that cannot be amended or
terminated upon 60 days' notice or less without incurring any liability
thereunder, except for coverage required by Part 6 of Title I of ERISA or
Section 4980B of the IRC, or similar state laws, the cost of which is borne by
the insured individuals. With respect to each Leeds Employee Plan, Leeds has
supplied to Northwest a true and correct copy of (A) the annual report on the
applicable form of the Form 5500 series filed with the IRS for the most recent
three plan years, if required to be filed, (B) such Leeds Employee Plan,
including amendments thereto, (C) each trust agreement, insurance contract or
other funding arrangement relating to such Leeds Employee Plan, including
amendments thereto, (D) the most recent summary plan description and summary of
material modifications thereto for such Leeds Employee Plan, if the Leeds
Employee Plan is subject to Title I of ERISA, and (E) the most recent
determination letter issued by the IRS if such Employee Plan is a Qualified
Plan.
17
(e) Except as set forth in Leeds Disclosure Schedule 3.12(e), no
compensation payable by Leeds to any of its employees under any Leeds Employee
Plan (including by reason of the transactions contemplated hereby) will be
subject to disallowance under Section 162(m) of the IRC.
(f) Except as set forth on Leeds Disclosure Schedule 3.12(f), Leeds
does not have any liability for any post-retirement health, medical or similar
benefit of any kind whatsoever, except as required by statute or regulation.
With respect to any benefit set forth on Leeds Disclosure Schedule 3.12(f), such
schedule identifies the method of funding and the funded status of such benefit.
Section 3.13 Brokers, Finders and Financial Advisors
Except the engagement of RP Financial in connection with transactions
contemplated by this Agreement, neither Leeds, nor any of its officers,
directors, employees or agents, has engaged or retained any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement, or, except for the commitments disclosed in Leeds Disclosure Schedule
3.13, incurred any liability or commitment for any fees or commissions to any
such person in connection with the transactions contemplated by this Agreement,
which has not been reflected in the Leeds Financials.
Section 3.14 Environmental Matters
(a) Except as set forth in Leeds Disclosure Schedule 3.14(a):
(i) To the knowledge of Leeds, the Participation Facilities
(as defined below) and the Loan Properties are, and have been, in
substantial compliance with all Environmental Laws;
18
(ii) There is no suit, claim, action, notice, demand,
executive or administrative order, directive, investigation or
proceeding pending or, to the knowledge of Leeds, threatened before any
court, governmental agency or board or other forum against Leeds (x)
for alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence
of or release (as defined herein) into the environment of any Hazardous
Material (as defined herein), whether or not occurring at or on a site
owned, leased or operated by Leeds or any Participation Facility;
(iii) To the knowledge of Leeds, there is no suit, claim,
action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened before any court,
governmental agency or board or other forum relating to or against any
Loan Property (or Leeds in respect of such Loan Property) (x) relating
to alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence
of or release into the environment of any Hazardous Material;
(iv) The properties currently owned or operated by Leeds
(including, without limitation, soil, groundwater or surface water on
or under the properties, and buildings thereon) are not contaminated
with and do not otherwise contain any Hazardous Material other than as
permitted under any applicable Environmental Law;
(v) Leeds has not received any notice, demand letter,
executive or administrative order, directive or request for information
from any Federal, state, local or foreign governmental entity or any
third party indicating that it may be in violation of, or liable under,
any Environmental Law;
(vi) To the knowledge of Leeds, there are no underground
storage tanks on, in or under any properties owned or operated by Leeds
and no underground storage tanks have been closed or removed from any
properties owned or operated by Leeds; and
(vii) During the period of ownership or operation by Leeds of
any of its respective current properties, or during the period of
participation in the management of any Participation Facility by Leeds,
there has been no contamination by or release of Hazardous Materials
in, on, under or affecting such properties. Prior to the period of
ownership or operation by Leeds of any of its current properties, or
prior to the period of participation in the management of any
Participation Facility by Leeds, there was no contamination by or
release of Hazardous Material in, on, under or affecting such
properties.
(b) As used in this section the term "Loan Property" means any property
in which the applicable party (or a Subsidiary of it) holds a security interest.
The term "Participation Facility" means any facility in which the applicable
party (or a Subsidiary of it) participates in the management (including all
property held as trustee or in any other fiduciary capacity) and, where required
by the context, includes the owner or operator of such property.
Section 3.15 Loan Portfolio.
(a) With respect to each loan owned by Leeds in whole or in part (each,
a "Loan"):
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(i) the note and the related security documents are each
legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their
terms;
(ii) neither Leeds nor any prior holder of a Loan, has
modified the note or any of the related security documents in any
material respect or satisfied, canceled or subordinated the note or any
of the related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(iii) Leeds is the sole holder of legal and beneficial title
to each Loan (or any applicable participation interest, as
appropriate), except as otherwise referenced on the books and records
of Leeds;
(iv) the note and the related security documents, copies of
which are included in the Loan files, are true and correct copies of
the documents they purport to be and have not been suspended, amended,
modified, canceled or otherwise changed except as otherwise disclosed
by documents in the applicable Loan file;
(v) there is no pending or threatened condemnation proceeding
or similar proceeding affecting the property that serves as security
for a Loan, except as otherwise referenced on the books and records of
Leeds;
(vi) there is no litigation or proceeding pending or
threatened relating to the property that serves as security for a Loan
that would have a Material Adverse Effect upon the related Loan, except
as otherwise disclosed by documents in the applicable Loan file;
(vii) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding
and enforceable, except as otherwise disclosed by documents in the
applicable Loan file; and
(viii) no representation or warranty set forth in this Section
3.15(a) shall be deemed to be breached unless such breach, individually
or in the aggregate, has had or is reasonably likely to have a Material
Adverse Effect on Leeds.
(b) The allowance for possible losses reflected in the audited
statement of condition of Leeds Bankshares at June 30, 2000 was, and the
allowance for possible losses shown on the balance sheets in the Securities
Documents of Leeds Bankshares for periods ending after June 30, 2000 have been
and will be adequate, as of the dates thereof, under GAAP.
(c) Leeds Disclosure Schedule 3.15(c) sets forth by category all loans,
leases, advances, credit enhancements, other extensions of credit, commitments
and interest-bearing assets of Leeds, including the amounts thereof and the name
of the obligor, that have been classified (whether regulatory or internal) as
"Special Mention," "Substandard," "Doubtful," "Loss" or words of similar import
as of June 30, 2001. The real estate owned ("REO") included in any
non-performing assets of Leeds is carried net of reserves at the lower of cost
or fair value, less estimated selling costs, based on current independent
appraisals or evaluations or current management appraisals or evaluations;
provided, however, that "current" shall mean within the past 12 months.
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Section 3.16 Securities Documents
Leeds Bankshares has made available to Northwest copies of its (i)
annual reports on Form 10-KSB for the years ended June 30, 2000 and 1999, (ii)
quarterly reports on Form 10-QSB for the quarters ended September 30, 2000,
December 31, 2000, and March 31, 2001, and (iii) proxy materials used in
connection with its most recent meeting of stockholders (the availability of the
preceding documents will be assumed if such documents are filed on EDGAR). Such
reports and such proxy materials, at the time filed, did not contain any untrue
statements of material fact or omit to state any material fact necessary in
order to make the statements therein not misleading.
Section 3.17 Related Party Transactions
Except as disclosed in Leeds Disclosure Schedule 3.17, or as described
in the proxy statement of Leeds Bankshares distributed in connection with the
2000 annual meeting of stockholders (which previously has been provided to
Northwest), Leeds is not a party to any transaction (including any loan or other
credit accommodation) with an Affiliate. Except as disclosed in Leeds Disclosure
Schedule 3.17, all such transactions (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. Except as set
forth in Leeds Disclosure Schedule 3.17, no loan or credit accommodation to an
Affiliate is presently in default or, during the three-year period prior to the
date of this Agreement, has been in default or has been restructured, modified
or extended. Leeds has not been notified that principal and interest with
respect to any such loan or other credit accommodation will not be paid when due
or that the loan grade classification accorded such loan or credit accommodation
is inappropriate.
Section 3.18 Schedule of Termination Benefits
Leeds Disclosure Schedule 3.18 includes a schedule of all termination
benefits and related payments that would be payable to the individuals
identified thereon, excluding any options to acquire Leeds Bankshares Common
Stock granted to such individuals under the Leeds Stock Option Plans, under any
and all employment agreements, special termination agreements, supplemental
executive retirement plans, deferred bonus plans, deferred compensation plans,
salary continuation plans, or any compensation arrangement, or other pension
benefit or welfare benefit plan maintained by Leeds for the benefit of officers
or directors of Leeds (the "Benefits Schedule"), assuming their employment or
service is terminated as of February 28, 2002 and the Closing Date occurs prior
to such termination. No other individuals are entitled to benefits under any
such plans.
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Section 3.19 Deposits
Except as set forth in Leeds Disclosure Schedule 3.19, none of the
deposits of Leeds is a "brokered" deposit as defined in 12 U.S.C. Section
1831f(g).
Section 3.20 Fairness Opinion
Leeds Bankshares and Leeds MHC have received a written opinion from RP
Financial 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 Leeds Bankshares pursuant to
this Agreement is fair to such stockholders from a financial point of view, and
the Membership Conversion is fair from a financial point of view to the members
of Leeds MHC (the "Fairness Opinion").
Section 3.21 Required Vote of Stockholders
The affirmative vote of (i) two-thirds of all votes entitled to be cast
by all the stockholders of Leeds Bankshares, including Leeds MHC, and to the
knowledge of Leeds (ii) a majority of votes cast by the stockholders of Leeds
Bankshares other than Leeds MHC is necessary to approve this Agreement and the
transactions contemplated hereby, in each case at a meeting of the stockholders
of Leeds Bankshares.
Section 3.22 Derivative Transactions
Except as set forth in Leeds Disclosure Schedule 3.22, Leeds has not
entered into any future or option contracts, exchange rate swaps, caps or
floors, or other interest rate or exchange rate risk management instruments or
arrangements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NORTHWEST
Northwest represents and warrants to Leeds 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 Northwest
Disclosure Schedules delivered by Northwest on the date hereof, and except as to
any representation or warranty that relates to a specific date. Northwest has
made a good faith effort to ensure that the disclosure on each schedule of the
Northwest Disclosure Schedules corresponds to the section referenced herein.
However, for purposes of the Northwest Disclosure Schedules, 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.
Section 4.01 Organization
(a) Northwest MHC is a Federal mutual holding company organized,
validly existing and in good standing under the laws of the United States, and
is duly registered as a savings and loan holding company under the HOLA.
Northwest MHC has full power and authority to carry on its business as now
conducted and is duly licensed or qualified to do business in the states of the
United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification, except
where the failure to be so licensed or qualified would not have a Material
Adverse Effect on Northwest MHC.
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(b) Northwest Bancorp is a Federal corporation organized, validly
existing and in good standing under the laws of the United States, and is duly
registered as a savings and loan holding company under the HOLA. Northwest
Bancorp has the full corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on Northwest Bancorp.
(c) Northwest Bank is a savings bank organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. The deposits
of Northwest Bank are insured by the FDIC to the fullest extent permitted by
law, and all premiums and assessments required to be paid in connection
therewith have been paid when due by Northwest Bank. Each Northwest Subsidiary
is identified in exhibits to Northwest Bancorp's Form 10-K for the fiscal year
ended June 30, 2000, filed with the SEC, and is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization.
(d) Northwest Bank is a member in good standing of the FHLB of
Pittsburgh and owns the requisite amount of stock therein.
(e) Prior to the date of this Agreement, Northwest has made available
to Leeds true and correct copies of the charters and bylaws of Northwest MHC and
Northwest Bancorp, and the articles of incorporation and bylaws of Northwest
Bank.
Section 4.02 Authority; No Violation
(a) Northwest has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Northwest and the completion by Northwest of
the transactions contemplated hereby have been duly and validly approved by the
requisite vote of the Boards of Directors of the Northwest Parties, and no other
corporate proceedings on the part of Northwest are necessary to complete the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Northwest and, subject to receipt of the required
approvals of Regulatory Authorities described in Section 4.03 hereof,
constitutes the valid and binding obligation of Northwest, enforceable against
Northwest in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally.
23
(b) Subject to the receipt of approvals from the Regulatory Authorities
referred to in Section 5.03 hereof and the compliance by Leeds and Northwest
with any conditions contained therein,
(A) the execution and delivery of this Agreement by Northwest,
(B) the consummation of the transactions contemplated hereby, and
(C) compliance by Northwest with any of the terms or provisions
hereof,
will not (i) conflict with or result in a breach of any provision of the charter
or bylaws of Northwest MHC or Northwest Bancorp, or the articles of
incorporation or bylaws of Northwest Bank or any Northwest Subsidiary; (ii)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Northwest or any Northwest Subsidiary or any
of their respective properties or assets; or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default),
under, result in the termination of, accelerate the performance required by, or
result in a right of termination or acceleration or the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of Northwest under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other investment or obligation to which Northwest is a party, or by which it or
any of its properties or assets may be bound or affected, except in the case of
clauses (i) and (iii) above, for violations which individually or in the
aggregate would not have a Material Adverse Effect on Northwest.
Section 4.03 Consents
Except for consents, waivers, approvals, filings and registrations from
or with the OTS and the SEC, and compliance with any conditions contained
therein, and the approval of this Agreement by the stockholders of Leeds
Bankshares and, if necessary, the members of Leeds MHC, no consents, waivers or
approvals of, or filings or registrations with, any public body or governmental
authority are necessary, and no consents, waivers or approvals of, or filings or
registrations with, any third parties are necessary in connection with (a) the
execution and delivery of this Agreement by Northwest, and (b) the completion by
Northwest of the transactions contemplated hereby. Northwest has no reason to
believe that (i) any required consents or approvals will not be received or will
be received with conditions, limitations or restrictions unacceptable to it or
which would adversely impact Northwest' ability to complete the transactions
described in this Agreement or that (ii) any public body or authority, the
consent or approval of which is not required or any filing which is not
required, will object to the completion of the transactions described in this
Agreement.
Section 4.04 Northwest Financial Statements
Northwest Bancorp has previously made available to Leeds the Northwest
Financials. The Northwest Financials (including the related notes where
applicable) fairly present in each case in all material respects (subject in the
case of the unaudited interim statements to normal year-end adjustments), the
consolidated financial condition, results of operations and cash flows of
Northwest Bancorp as of and for the respective periods ending on the dates
thereof and have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved, except as indicated therein, or in the case
of unaudited statements, as permitted by Form 10-Q.
24
Section 4.05 Material Adverse Effect
Northwest has not suffered any Material Adverse Effect since June 30,
2000.
Section 4.06 Legal Proceedings
Northwest is not a party to any, and there are no pending or, to the
best of Northwest's knowledge, threatened legal, administrative, arbitration or
other proceedings, actions or governmental investigations of any nature (i)
against Northwest, (ii) to which Northwest's assets are or may be subject, (iii)
challenging the validity or propriety of any of the transactions contemplated by
this Agreement, or (iv) which could adversely affect the ability of Northwest to
perform under this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii) which, if
adversely determined, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Northwest.
Section 4.07 Compliance With Applicable Law
(a) Northwest holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its businesses under, and has
complied in all material respects with, applicable laws, statutes, orders, rules
or regulations of any Federal, state or local governmental authority relating to
it, other than where such failure to hold or such noncompliance will neither
result in a limitation in any material respect on the conduct of its businesses
nor otherwise have a Material Adverse Effect on Northwest.
(b) Northwest has not received any notification or communication from
any Regulatory Authority (i) asserting that Northwest is not in compliance with
any of the statutes, regulations or ordinances which such Regulatory Authority
enforces; (ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to Northwest; (iii) requiring or
threatening to require Northwest, or indicating that Northwest may be required,
to enter into a cease and desist order, agreement or memorandum of understanding
or any other agreement restricting or limiting, or purporting to restrict or
limit, in any manner the operations of Northwest; or (iv) directing, restricting
or limiting, or purporting to direct, restrict or limit, in any manner the
operations of Northwest, including without limitation any restriction on the
payment of dividends (any such notice, communication, memorandum, agreement or
order described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Northwest has not consented to or entered into any currently
effective Regulatory Agreement. The most recent regulatory rating given to
Northwest Bank as to compliance with the CRA is satisfactory or better.
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Section 4.08 Northwest Benefit Plans
(a) Northwest has provided Leeds with a complete and accurate list of
all pension, retirement, group insurance, and other employee benefit plans and
arrangements, including, but not limited to, "employee benefit plans," as
defined in Section 3(3) of ERISA, incentive and welfare policies, contracts,
plans and arrangements with respect to any present employees of Northwest
(hereinafter collectively referred to as the "Northwest Employee Plans" and
individually as a "Northwest Employee Plan"). Each of the Northwest Employee
Plans complies in all material respects with all applicable requirements of
ERISA, the IRC and other applicable laws.
(b) No Northwest Employee Plan which is subject to Title IV of ERISA
(each such plan shall be referred to herein as a "Northwest Pension 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; the fair market value of the assets of
each Northwest Pension Plan exceeds the present value of the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) under such Northwest
Pension Plan as of the end of the most recent plan year with respect to the
respective Northwest Pension Plan ending prior to the date hereof, calculated on
the basis of the actuarial assumptions used in the most recent actuarial
valuation for such Northwest Pension Plan as of the date hereof; and no notice
of a "reportable event" (as defined in Section 4043 of ERISA) for which the
30-day reporting requirement has not been waived has been required to be filed
for any Northwest Pension Plan within the 12-month period ending on the date
hereof.
(c) Each Northwest Employee Plan that is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the IRC has received a favorable determination
letter from the IRS, and Northwest is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. There is no
pending or, to Northwest's knowledge, threatened litigation, administrative
action or proceeding relating to any Northwest Employee Plan.
Section 4.09 Financing
As of the date hereof, Northwest has, and will have at the Merger
Effective Date, funds that are sufficient and available to meet its obligations
under this Agreement and to consummate in a timely manner the transactions
contemplated by this Agreement, and Northwest Bank will not fail to meet its
capital requirements as a result thereof.
Section 4.10 Regulatory Approvals
Northwest is not aware of any reason that it cannot obtain any of the
approvals of Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement, and Northwest has not received any advice or
information from any regulatory authority indicating that such approvals will be
denied or are doubtful or will be unduly delayed.
26
Section 4.11 Securities Documents
Northwest Bancorp has made available to Leeds copies of its (i) annual
reports on Form 10-K for the years ended June 30, 2000 and 1999, (ii) quarterly
reports on Form 10-Q for the quarters ended September 30, 2000, December 31,
2000, and March 31, 2001, and (iii) proxy materials used in connection with its
most recent meeting of stockholders (the availability of the preceding documents
will be assumed if such documents are filed on EDGAR). Such reports and such
proxy materials, at the time filed, did not contain any untrue statements of a
material fact or omit to state any material fact necessary in order to make the
statements therein not misleading.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of the Business of Leeds
(a) From the date of this Agreement to the Closing Date, Leeds will
conduct its business and engage in transactions, including extensions of credit,
only in the ordinary course and consistent with past practice and policies in
existence on the date hereof, except as otherwise required or contemplated by
this Agreement or with the written consent of Northwest Bank. Leeds will use its
reasonable good faith efforts to (i) preserve its business organizations intact,
(ii) maintain good relationships with its employees, and (iii) preserve the
goodwill of its customers and others with whom business relationships exist.
From the date hereof to the Closing Date, except as otherwise consented to or
approved by Northwest in writing (which approval will not be unreasonably
delayed or withheld) or as contemplated or required by this Agreement, Leeds
will not:
(i) amend or change any provision of its certificate of
incorporation, charter, or bylaws;
(ii) change the number of authorized or issued shares of its
capital stock or issue or grant any Right or agreement of any character
relating to its authorized or issued capital stock or any securities
convertible into shares of such stock, or split, combine or reclassify
any shares of capital stock, or declare, set aside or pay any dividend
or other distribution in respect of capital stock or redeem or
otherwise acquire any shares of capital stock, except that (I) Leeds
Bankshares may continue to pay its regular quarterly cash dividend to
stockholders other than Leeds MHC of $0.15 per share, with record and
payment dates consistent with past practice; provided further, that if
the Closing Date is more than forty-five (45) after the next preceding
Leeds Bankshares Common Stock dividend payment date, Leeds Bankshares
may declare and pay to stockholders other than Leeds MHC a final cash
dividend per share at the quarterly rate of $0.15 per share, with the
exact amount per share to be an amount that is pro rata through the
payment date (from the preceding payment date) and (II) Leeds
Bankshares may issue Leads Bankshares Common Stock upon the valid
exercise of presently outstanding options to acquire Leeds Bankshares
Common Stock in accordance with the information set forth in Leeds
Disclosure Schedule 3.02(a) and the Leeds Employee Plans;
27
(iii) except as required by this Agreement, grant or agree to
pay any bonus, severance or termination payment to, enter into or
amend, or take any action (other than executing this Agreement) that
would trigger obligations under any employment agreement, severance
agreement, supplemental executive agreement, or similar agreement or
arrangement with any of its directors, officers or employees, or
increase in any manner the compensation or fringe benefits of any
employee, officer or director, except for salary increases in the
ordinary course of business consistent with past practice or as may be
required pursuant to legally binding commitments existing on the date
hereof set forth in Leeds Disclosure Schedules 3.08 and 3.12; and
provided further, that bonuses may be paid to employees with respect to
the year ending December 31, 2001 to the extent that the related
expense has been accrued (with no change in the method or amount of
accrual during the calendar year) and the bonuses are generally
consistent (with respect to amounts and persons covered) with past
practices, and stay bonuses of up to a total of $50,000 may be paid by
the President of Leeds Bankshares in his discretion to Leeds employees;
(iv) enter into or, except as may be required by law or by the
terms of this Agreement, modify any pension, retirement, stock option,
stock purchase, stock appreciation right, stock grant, savings, profit
sharing, deferred compensation, supplemental retirement, consulting,
bonus, group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or employees; or make any
contributions to any defined contribution or defined benefit plan not
in the ordinary course of business consistent with past practice; or
materially amend any Leeds Employee Plan other than amendments that are
required by law to be made prior to the Merger Effective Date, or
amendments required by the terms of this Agreement;
(v) except as otherwise provided in Section 5.06 of this
Agreement, merge or consolidate Leeds with any other corporation; sell
or lease all or any substantial portion of the assets or business of
Leeds; make any acquisition of all or any substantial portion of the
business or assets of any other person, firm, association, corporation
or business organization other than in connection with foreclosures,
settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit arrangement
between Leeds and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit
the revocation or surrender by Leeds of its certificate of authority to
maintain, or file an application for the relocation of, any existing
branch office, or file an application for a certificate of authority to
establish a new branch office;
(vi) sell or otherwise dispose of the capital stock of Leeds
or sell or otherwise dispose of any asset of Leeds other than in the
ordinary course of business consistent with past practice; subject any
asset of Leeds to any lien, pledge, security interest or other
encumbrance (other than in connection with deposits, repurchase
agreements, bankers acceptances, FHLB of Atlanta advances, "treasury
tax and loan" accounts established in the ordinary course of business
and transactions in "Federal funds" and the satisfaction of legal
requirements in the exercise of trust powers) other than in the
ordinary course of business consistent with past practice; incur any
indebtedness for borrowed money (or guarantee any indebtedness for
borrowed money), except in the ordinary course of business consistent
with past practice;
28
(vii) take any action which would result in any of the
representations and warranties of Leeds set forth in Article III of
this Agreement becoming untrue as of any date after the date hereof
(except as to any representation or warranty which specifically relates
to an earlier date) or in any of the conditions set forth in Article VI
hereof not being satisfied, except in each case as may be required by
applicable law;
(viii) change any method, practice or principle of accounting,
except as may be required from time to time by GAAP (without regard to
any optional early adoption date) or any Regulatory Authority
responsible for regulating Leeds;
(ix) waive, release, grant or transfer any material rights of
value or modify or change in any material respect any existing material
agreement or indebtedness to which Leeds is a party, other than in the
ordinary course of business, consistent with past practice;
(x) purchase any security for its investment portfolio not
rated "A" or higher by either Standard & Poor's Corporation or Moody's
Investor Services, Inc, or with a remaining term to maturity of more
than five (5) years;
(xi) make any new loan or other credit facility commitment
(including without limitation, lines of credit and letters of credit)
to any borrower or group of affiliated borrowers in excess of $300,000
in the aggregate, or increase, compromise, extend, renew or modify any
existing loan or commitment outstanding in excess of $300,000, except
for loans secured by one- to four- family, residential real property in
an amount not exceeding $750,000 (on the basis of and consistent with
existing lending policies);
(xii) enter into, renew, extend or modify any other
transaction with any Affiliate;
(xiii) enter into any futures contract, option, interest rate
caps, interest rate floors, interest rate exchange agreement or other
agreement or, except in the ordinary course of business and consistent
with past practice, take any other action for purposes of hedging the
exposure of its interest-earning assets and interest-bearing
liabilities to changes in market rates of interest;
(xiv) except for the execution of, and as otherwise provided
in or contemplated by, this Agreement, take any action that would give
rise to a right of payment to any individual under any employment
agreement, or take any action that would give rise to a right of
payment to any individual under any Leeds Employee Plan other than as a
result of the prepayment of the ESOP loan;
(xv) make any change in policies with regard to the extension
of credit, the establishment of reserves with respect to the possible
loss thereon or the charge off of losses incurred thereon, investment,
asset/liability management or other material banking policies in any
material respect except as may be required by changes in applicable law
or regulations or in GAAP or by applicable regulatory authorities;
29
(xvi) make any capital expenditures in excess of $50,000
individually or $100,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(xvii) purchase or otherwise acquire, or sell or otherwise
dispose of, any assets or incur any liabilities other than in the
ordinary course of business consistent with past practices and
policies;
(xviii) incur any non-deposit liability in excess of $250,000
other than in the ordinary course of business consistent with past
practice; or
(xix) agree to do any of the foregoing.
(b) For purposes of this Section 5.01, unless provided for in a
business plan, budget or similar document delivered to Northwest prior to the
date of this Agreement, it shall not be considered in the ordinary course of
business for Leeds to do any of the following: (i) make any sale, assignment,
transfer, pledge, hypothecation or other disposition of any assets having a book
or market value, whichever is greater, in the aggregate in excess of $200,000,
other than pledges of assets to secure government deposits, to exercise trust
powers, sales of assets received in satisfaction of debts previously contracted
in the normal course of business, issuance of loans, sales of previously
purchased government guaranteed loans, or transactions in the investment
securities portfolio by Leeds or repurchase agreements made, in each case, in
the ordinary course of business; or (ii) undertake or enter any lease, contract
or other commitment for its account, other than in the normal course of
providing credit to customers as part of its banking business, involving a
payment by Leeds of more than $50,000 annually, or containing a material
financial commitment and extending beyond 12 months from the date hereof.
Section 5.02 Access; Confidentiality
(a) Leeds shall permit Northwest and its representatives reasonable
access to its properties and make available to them all books, papers and
records relating to the assets, properties, operations, obligations and
liabilities of Leeds, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of boards
of directors (and any committees thereof) (other than minutes of any
confidential discussion of this Agreement and the transactions contemplated
hereby), and stockholders, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, plans affecting employees, and any other business activities
or prospects in which Northwest may have a reasonable interest (provided that
Leeds shall not be required to provide access to any information that would
violate its attorney-client privilege or any employee or customer privacy
policies, laws or regulations). Leeds shall make its respective officers,
employees and agents and authorized representatives (including counsel and
independent public accountants) available to confer with Northwest and its
representatives. Leeds Savings shall provide in a timely manner to Northwest
Bank's officer in charge of retail banking copies of current rate sheets for all
deposit and loan products. Leeds shall permit Northwest, at its expense, to
cause a "phase I environmental audit" and a "phase II environmental audit" to be
performed at any physical location owned or occupied by Leeds, provided that
such audit is contracted for within forty-five (45) days of the date of this
Agreement and commenced as soon as practicable thereafter. The Northwest Parties
agree to abide and be bound by the confidentiality letter between RP Financial
(in RP Financial's capacity as an agent for Leeds) and Northwest Bancorp dated
and acknowledged on July 3, 2001, (the "Confidentiality Letter") as if each such
party had executed such Confidentiality Letter originally and the Northwest
Parties will hold all information delivered pursuant to this Section 5.02 in
confidence to the extent required by, and in accordance with, the provisions of
the Confidentiality Letter.
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(b) Northwest agrees to conduct such investigations and discussions
hereunder in a manner so as not to interfere unreasonably with normal operations
and customer and employee relationships of the other party.
(c) In addition to the access permitted by subparagraph (a) above, from
the date of this Agreement through the Closing Date, Leeds shall permit
employees of Northwest Bank reasonable access to information relating to problem
loans, loan restructurings and loan work-outs of Leeds Savings.
Section 5.03 Regulatory Matters and Consents
(a) Northwest will, in consultation with Leeds, prepare all
Applications (other than the Stockholder Proxy Statement and, if necessary, the
Member Proxy Statement) and make all filings for, and use its best efforts to
obtain as promptly as practicable after the date hereof, all necessary permits,
consents, approvals, waivers and authorizations of all Regulatory Authorities or
other Persons necessary or advisable to consummate the transactions contemplated
by this Agreement. Northwest shall file the Applications within forty-five (45)
days of the date of this Agreement, or as soon as practicable thereafter.
(b) Leeds will furnish Northwest with all information concerning Leeds
as may be necessary or advisable in connection with any Application or filing
made by or on behalf of Northwest to any Regulatory Authority in connection with
the transactions contemplated by this Agreement.
(c) Northwest and Leeds will promptly furnish the other with copies of
all material written communications to, or received by them from any Regulatory
Authority regarding the transactions contemplated hereby, except for information
filed by either party that is designated confidential.
(d) Northwest will use its best efforts to obtain all necessary
regulatory approvals to effectuate the transactions contemplated by this
Agreement and related exhibits and appendices.
(e) Leeds will use its best efforts to cooperate with Northwest to
obtain all necessary regulatory approvals to effectuate the transactions
contemplated by this Agreement and related exhibits and appendices.
31
(f) The parties agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities. Northwest will furnish Leeds
Bankshares and its counsel with copies of all Applications prior to filing with
any Regulatory Authority and provide Leeds Bankshares a reasonable opportunity
to provide changes to such Applications, and copies of all Applications filed by
Northwest.
(g) Leeds and Northwest will cooperate with each other in the foregoing
matters and will furnish the responsible party with all information concerning
it and its subsidiaries as may be necessary or advisable in connection with any
Application or filing made by or on behalf of Northwest or Leeds to any
Regulatory Authority in connection with the transactions contemplated by this
Agreement, and such information will be accurate and complete in all material
respects. In connection therewith, each party will provide certificates and
other documents reasonably requested by the other.
(h) If any (i) Regulatory Authority objects to a term or condition set
forth in this Agreement, and (ii) that term or condition is modified to the
satisfaction of the Regulatory Authority or is eliminated in order to satisfy
the Regulatory Authority, and (iii) such modification or elimination would cause
a reduction in benefits to the party for whom the term or condition was meant to
benefit, then the parties shall use their best efforts to enter into an
alternative arrangement so that such benefits are not reduced, provided such
alternative arrangement is permissible under applicable law and is not
disapproved by any Regulatory Authority and provided further that such
alternative arrangement shall not be more costly than the original benefit that
has been or would be reduced as a result of an objection by a Regulatory
Authority.
Section 5.04 Taking of Necessary Action
(a) Northwest and Leeds shall each use its best efforts in good
faith to:
(i) furnish such information as may be required in connection
with the preparation of the documents referred to in Section 5.03 of
this Agreement; and
(ii) take or cause to be taken all action necessary or
desirable on its part using its best efforts so as to permit completion
of the Merger and the transactions contemplated by this Agreement,
including, without limitation;
(A) obtaining the consent or approval of each
individual, partnership, corporation, association or other business or
professional entity whose consent or approval is required for
consummation of the transactions contemplated hereby (including
assignment of leases without any material change in terms), provided
that Leeds shall not agree to make any payments or modifications to
agreements in connection therewith without the prior written consent of
Northwest; and
(B) requesting the delivery of appropriate opinions,
consents and letters from its counsel and independent auditors. No
party hereto shall take, or cause, or to the best of its ability permit
to be taken, any action that would substantially impair the prospects
of completing the Merger pursuant to this Agreement; provided that
nothing herein contained shall preclude Northwest or Leeds from
exercising its rights under this Agreement.
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(b) Leeds Bankshares shall prepare, subject to the review of Northwest
with respect to matters relating to Northwest and the transactions contemplated
by this Agreement, the Stockholder Proxy Statement, which shall be filed by
Leeds Bankshares with the SEC and mailed to the stockholders of Leeds Bankshares
in connection with the meeting of its stockholders and transactions contemplated
hereby, and which shall conform to all applicable legal requirements. Should it
be required by Regulatory Authorities, Leeds MHC shall prepare, subject to the
review and consent of Northwest with respect to matters relating to Northwest
and the transactions contemplated by this Agreement, the Member Proxy Statement,
which shall be filed by Leeds MHC with the Regulatory Authorities and mailed to
members of Leeds MHC in connection with any meeting of depositors and the
transactions contemplated hereby. The parties shall cooperate with each other
with respect to the preparation of the Stockholder Proxy Statement and any
Member Proxy Statement. Leeds Bankshares and Leeds MHC shall, as promptly as
practicable following the preparation thereof, file any proxy statement with the
Regulatory Authorities, and use all reasonable efforts to have the Stockholder
Proxy Statement mailed to stockholders, and if necessary the Member Proxy
Statement mailed to members, as promptly as practicable after such filing,
provided that Leeds Bankshares and Leeds MHC shall have received an updated
Fairness Opinion as of a date no more than three days prior to the date of the
Stockholder Proxy Statement (the "Updated Fairness Opinion"). Leeds Bankshares
and Leeds Savings will promptly advise Northwest of the time when the
Stockholder Proxy Statement and any Member Proxy Statement has been filed and
mailed, and of any comments from any Regulatory Authority and any request by any
Regulatory Authority for additional information.
(c) Northwest agrees that the information to be supplied by Northwest
for inclusion in the Stockholder Proxy Statement and any Member Proxy Statement
will not, at the time they are mailed, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or to be supplied,
by Northwest for inclusion in the Applications will be, at the time such
documents are filed with any Regulatory Authority, accurate in all material
respects.
(d) Leeds agrees that, except for any information provided by Northwest
concerning Northwest for inclusion therein, the Stockholder Proxy Statement and
any Member Proxy Statement will not, at the time it or they are mailed, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein not misleading. The
information supplied, or to be supplied, by Leeds for inclusion in the
Applications will be, at the time such documents are filed with any Regulatory
Authority, accurate in all material aspects.
Section 5.05 Certain Agreements
(a) Northwest shall maintain in effect for three years from the Merger
Effective Date, if available, the current directors' and officers' liability
insurance policy maintained by Leeds Bankshares (provided that Northwest may
substitute therefor policies of substantially the same coverage containing terms
and conditions which are not materially less favorable) with respect to matters
occurring at or prior to the Closing Date; provided however that in no event
shall Northwest be required to expend annually pursuant to this section more
than the amount equal to 125% of the current annual amount expended by Leeds to
maintain or procure insurance coverage pursuant hereto. In connection with the
foregoing, Leeds Bankshares 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.
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(b) For a period of six years from the Merger Effective Date, Northwest
agrees to indemnify, defend and hold harmless each present and former director
and officer of Leeds determined as of the Closing Date (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
reasonable attorneys' fees and expenses), liabilities, judgments or amounts paid
in settlement (with the approval of Northwest, which approval shall not be
unreasonably withheld) or in connection with any claim, action, suit, proceeding
or investigation arising out of matters existing or occurring at or prior to the
Merger Effective Date (a "Claim") in which an Indemnified Party is, or is
threatened to be made, a party or a witness based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director or officer of Leeds, regardless of whether such Claim is asserted or
claimed prior to, at or after the Closing Date, to the fullest extent to which
directors and officers of Leeds are entitled under Federal law, or Leeds'
charters and bylaws, or other applicable law as in effect on the date hereof
(and Northwest shall pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the extent permissible to
a Federal corporation or savings bank, or Leeds' charters and bylaws; provided,
that the person to whom expenses are advanced provides an undertaking to repay
such expenses if it is ultimately determined that such person is not entitled to
indemnification). All rights to indemnification in respect of a Claim asserted
or made within the period described in the preceding sentence shall continue
until the final disposition of such Claim.
(c) Any Indemnified Party wishing to claim indemnification under
Section 5.05(b), upon learning of any Claim, shall promptly notify Northwest,
but the failure to so notify shall not relieve Northwest of any liability it may
have to such Indemnified Party except to the extent that such failure materially
prejudices Northwest. In the event of any Claim, (i) Northwest shall have the
right to assume the defense thereof (with counsel reasonably satisfactory to the
Indemnified Party) and shall not be liable to the Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof, except that, if
Northwest elects not to assume such defense or counsel for the Indemnified Party
advises that there are issues which raise conflicts of interest between
Northwest and the Indemnified Party, the Indemnified Party may retain counsel
satisfactory to them, and Northwest shall pay all reasonable fees and expenses
of such counsel for the Indemnified Party promptly as statements therefor are
received, provided further that Northwest shall in all cases be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (ii) the Indemnified Parties will cooperate in the defense
of any such Claim and (iii) Northwest shall not be liable for any settlement
effected without its prior written consent (which consent shall not unreasonably
be withheld).
34
(d) In the event Northwest or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not continue or
survive such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Northwest assume the obligations set forth in this
Section 5.05.
(e) The provisions of this Section 5.05 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
Section 5.06 No Other Bids and Related Matters
(a) From and after the date hereof until the termination of this
Agreement, neither Leeds nor any of its officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by Leeds), will, directly or
indirectly, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or facilitate knowingly, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal (as defined below), or enter into
or maintain or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain an Acquisition Proposal or agree to
or endorse any Acquisition Proposal, or authorize or permit any of its officers,
directors, or employees or any of its subsidiaries or any investment banker,
financial advisor, attorney, accountant or other representative retained by any
of its subsidiaries to take any such action, and Leeds shall notify Northwest
orally (within two business days) and in writing (as promptly as practicable) of
all of the relevant details relating to all inquiries and proposals which it or
any such officer, director, employee, investment banker, financial advisor,
attorney, accountant or other representative may receive relating to any of such
matters; provided, however, that nothing contained in this Section 5.06 shall
prohibit the Board of Directors from:
(i) furnishing information to, or entering into discussions or
negotiations with any person or entity that makes an unsolicited
written, bona fide proposal, to acquire Leeds Bankshares and/or Leeds
Savings pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction, if,
and only to the extent that,
(A) the Board of Directors of Leeds Bankshares
receives a written opinion from its independent financial
advisor that such proposal may be superior to the Merger from
a financial point of view to Leeds Bankshares stockholders;
(B) the Board of Directors of Leeds Bankshares, after
consultation with and receipt of the advice of independent
legal counsel (including whether the proposed acquiror may
legally acquire Leeds and the prospects of regulatory approval
under regulations and policies of the OTS), determines in good
faith that such action is necessary for the Board of Directors
of Leeds Bankshares to comply with its fiduciary duties to
stockholders under applicable law (such proposal that
satisfies (A) and (B) being referred to herein as a "Superior
Proposal");
35
(C) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or
entity, Leeds Bankshares provides reasonable notice to
Northwest to the effect that it is furnishing information to,
or entering into discussions or negotiations with, such person
or entity and Leeds Bankshares receives from such person or
entity an executed confidentiality agreement in form and
substance identical in all material respects to the
Confidentiality Agreement; and
(D) the Leeds Bankshares special meeting of
stockholders convened to approve this Agreement has not
occurred;
(ii) complying with Rule 14e-2 promulgated under the Exchange
Act with regard to a tender or exchange offer; or
(iii) prior to the Leeds Bankshares meeting of stockholders
convened to approve this Agreement, failing to make or withdrawing or
modifying its recommendation to stockholders, if the Board of Directors
of Leeds Bankshares, after consultation with and based upon the advice
of independent legal counsel, determined in good faith that such action
is necessary for such Board of Directors to comply with its fiduciary
duties to stockholders under applicable law.
(b) For purposes of this Agreement, "Acquisition Proposal" shall mean
any of the following (other than the transactions contemplated hereunder)
involving Leeds: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 20% or more of the assets of
Leeds Bankshares or Leeds Savings, taken as a whole, in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for 20% or more
of the outstanding shares of capital stock of Leeds Bankshares or the filing of
a registration statement under the Securities Laws in connection therewith; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Section 5.07 Duty to Advise; Duty to Update the Leeds Disclosure
Schedules
Leeds shall promptly advise Northwest of any change or event having a
Material Adverse Effect on Leeds or which Leeds believes would or would be
reasonably likely to cause or constitute a material breach of any of its
representations, warranties or covenants set forth herein. Leeds shall update
the Leeds Disclosure Schedules as promptly as practicable after the occurrence
of an event or fact that, if such event or fact had occurred prior to the date
of this Agreement, would have been disclosed in the Leeds Disclosure Schedules.
The delivery of such updated Leeds Disclosure Schedule shall not relieve Leeds
from any breach or violation of this Agreement and shall not have any effect for
the purposes of determining the satisfaction of the condition set forth in
Sections 6.02(c) hereof.
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Section 5.08 Conduct of Northwest's Business
(a) From the date of this Agreement to the Closing Date, Northwest will
use its best efforts to preserve its business organizations intact, maintain
good relationships with employees, and preserve for itself the goodwill of
customers of Northwest. From the date of this Agreement to the Closing Date,
Northwest will not
(i) amend its charter or bylaws in any manner
inconsistent with the prompt and timely consummation of the
transactions contemplated by this Agreement;
(ii) take any action that would result in any of the
representations and warranties of Northwest set forth in Article IV of
this Agreement becoming untrue as of any date after the date hereof or
in any of the conditions set forth in Article VI hereof not being
satisfied, except in each case as may be required by applicable law;
(iii) take any action that would or is reasonably likely to
adversely effect or materially delay the receipt of the necessary
approvals from the Regulatory Authorities;
(iv) take action that would or is reasonably likely to
materially and adversely affect Northwest's ability to perform its
covenants and agreements under this Agreement;
(v) take any action that would result in any of the conditions
to the transactions contemplated by this Agreement not being satisfied;
or
(vi) agree to do any of the foregoing.
Section 5.09 Board and Committee Minutes
The Leeds Parties shall each provide to Northwest, within twenty-five
(25) days after any meeting of their respective Board of Directors, or any
committee thereof, or any senior management committee, a copy of the minutes of
such meeting, except that with respect to any meeting held within twenty-five
(25) days of the Closing Date, such minutes shall be provided to each party
prior to the Closing Date. Leeds may exclude from the minutes matters (i)
relating to merger negotiations, (ii) associated with Section 5.06, or (iii)
relating to discussions of Leeds of possible breaches of this Agreement by
Northwest.
Section 5.10 Undertakings by the Parties
(a) From and after the date of this Agreement:
(i) Voting by Directors and Executive Officers. Concurrently
with the execution of this Agreement, or within five (5) business days
thereof, all Directors and the Executive Officers of Leeds set forth in
Leeds Disclosure Schedule 5.10(a)(i), shall have entered into the
agreement set forth as Exhibit C to this Agreement;
37
(ii) Proxy Solicitor. If requested to do so by Northwest,
Leeds Bankshares and/or Leeds MHC shall retain a proxy solicitor in
connection with the solicitation of stockholders and if necessary Leeds
MHC member approval of this Agreement and the transaction contemplated
hereby;
(iii) Outside Service Bureau Contracts. If requested to do so
by Northwest, Leeds Savings shall use its best efforts to obtain an
extension of any contract with an outside service bureau or other
vendor of services to Leeds Savings, on terms and conditions mutually
acceptable to Leeds Savings and Northwest Bank;
(iv) Board Meetings. Each of the Leeds Parties shall permit a
representative of Northwest to attend meetings of their Boards of
Directors or the Executive Committees thereof (provided that they shall
not be required to permit the Northwest representative to remain
present during any confidential discussion of the Agreement and the
transactions contemplated thereby);
(v) List of Nonperforming Assets. Leeds Savings shall provide
Northwest Bank, within ten (10) days of the end of each calendar month,
a written list of nonperforming assets (the term "nonperforming
assets," for purposes of this subsection, means (i) loans that are
"troubled debt restructuring" as defined in Statement of Financial
Accounting Standards No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring," (ii) loans on nonaccrual, (iii) real
estate owned, (iv) all loans ninety (90) days or more past due as of
the end of such month and (v) and impaired loans); and
(vi) Reserves and Merger-Related Costs. On or before the
Merger Effective Date, and at the request of Northwest, Leeds
Bankshares shall establish such additional accruals and reserves as may
be necessary to conform the accounting reserve practices and methods
(including credit loss practices and methods) of Leeds Bankshares to
those of Northwest Bancorp (as such practices and methods are to be
applied to Northwest Bancorp from and after the Closing Date) and
Northwest Bancorp plans with respect to the conduct of the business of
Leeds Bankshares following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by Leeds Bankshares,
provided, however, that Leeds Bankshares shall not be required to take
such action unless Northwest Bancorp agrees in writing that all
conditions to closing set forth in Section 6.02 have been satisfied or
waived (except for the expiration of any applicable waiting periods);
prior to the delivery by Northwest Bancorp of the writing referred to
in the preceding clause, Leeds Bankshares shall provide Northwest
Bancorp a written statement, certified without personal liability by
the chief executive officer of Leeds Bankshares and dated the date of
such writing, that the representations made in Section 3.15 hereof are
true as of such date or, alternatively, setting forth in detail the
circumstances that prevent such representation from being true as of
such date; and no accrual or reserve made by Leeds Bankshares or any
Leeds Subsidiary pursuant to this subsection, or any litigation or
regulatory proceeding arising out of any such accrual or reserve, shall
constitute or be deemed to be a breach or violation of any
representation, warranty, covenant, condition or other provision of
this Agreement or constitute a termination event within the meaning of
Section 7.01(b) hereof. No action shall be required to be taken by
Leeds Bankshares pursuant to this Section 5.10(vi) if, in the opinion
of the independent auditor of Leeds Bankshares, such action would
contravene GAAP.
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(vii) Stockholders and Depositors Meeting.
(A) Leeds Bankshares shall use its best efforts to
file with the SEC, within forty-five (45) days of the date of
this Agreement, preliminary proxy materials relating to this
Agreement, and shall mail the Stockholder Proxy Statement
within twenty (20) days thereafter, or such longer period as
may be necessitated by SEC review and comment with respect to
the Stockholder Proxy Statement, and shall submit this
Agreement to its stockholders for approval at a meeting to be
held within thirty-five (35) days after the date of the
mailing of the Stockholder Proxy Statement. Subject to the
receipt of the Updated Fairness Opinion, the Board of
Directors shall recommend approval of this Agreement to the
Leeds Bankshares stockholders. The Board of Directors of Leeds
Bankshares may fail to make such a recommendation, or
withdraw, modify or change any such recommendation only in
connection with a Superior Proposal, as set forth in Section
5.06 of this Agreement, and only if such Board of Directors,
after having consulted with and considered the written advice
of outside counsel to such Board, has determined that the
making of such recommendation, or the failure so to withdraw,
modify or change its recommendation, would constitute a breach
of the fiduciary duties of such Board. Leeds MHC shall vote
its shares in favor of this Agreement.
(B) If required by Regulatory Authorities, as soon as
practicable Leeds MHC shall submit this Agreement to Leeds MHC
members for approval, and the Board of Directors of Leeds MHC
shall recommend approval of this Agreement to the members of
Leeds MHC. Leeds MHC shall take all steps necessary in order
to hold a special meeting of depositors for the purpose of
approving this Agreement as soon as practicable.
(b) From and after the date of this Agreement, Northwest and Leeds
shall each:
(i) Filings and Approvals. Cooperate with the other in the
preparation and filing, as soon as practicable, of (A) the
Applications, (B) the Stockholder Proxy Statement and any Member Proxy
Statement, (C) all other documents necessary to obtain any other
approvals and consents required to effect the completion of the Merger,
and the transactions contemplated by this Agreement, and (D) all other
documents contemplated by this Agreement;
(ii) Public Announcements. Cooperate and cause their
respective officers, directors, employees and agents to cooperate in
good faith, consistent with their respective legal obligations, in the
preparation and distribution of, and agree upon the form and substance
of, any press release related to this Agreement and the transactions
contemplated hereby, and any other public disclosures related thereto,
including without limitation communications to stockholders, internal
announcements and customer disclosures, but nothing contained herein
shall prohibit either party from making any disclosure which its
counsel deems necessary, provided that the disclosing party notifies
the other party reasonably in advance of the timing and contents of
such disclosure;
39
(iii) Maintenance of Insurance. Maintain insurance in
such amounts as are reasonable to cover such risks as are customary
in relation to the character and location of its properties and the
nature of its business;
(iv) Maintenance of Books and Records. Maintain books of
account and records in accordance with GAAP applied on a basis
consistent with those principles used in preparing the financial
statements heretofore delivered;
(v) Delivery of Securities Documents. Deliver to the other
copies of all Securities Documents simultaneously with the filing
thereof; and
(vi) Taxes. File all Federal, state, and local tax returns
required to be filed by them on or before the date such returns are due
(including any extensions) and pay all taxes shown to be due on such
returns on or before the date such payment is due.
Section 5.11 Employee and Termination Benefits; Directors and
Management
(a) Employee Benefits. Except as otherwise provided in this Section
5.11, as of or after the Merger Effective Date, and at Northwest's election and
subject to the requirements of the IRC and ERISA, the Leeds Employee Plans may
continue to be maintained separately, consolidated, or terminated, provided that
if any Leeds Employee Plan is terminated, Continuing Employees (as defined
below) shall participate in any Northwest Employee Plan of a similar character
(to the extent that one exists) as of the first entry date coincident with or
following such termination. Leeds Continuing Employees (as defined below) shall
be eligible to participate in the Northwest 401(k) Plan not later than the first
entry date coincident with or following the Merger Effective Date, with
recognition of prior Leeds service for purposes of eligibility to participate
and vesting, but not benefit accrual, under such plan. Leeds Continuing
Employees shall be eligible to participate in the Northwest Pension Plan not
later than the first entry date coincident with or following the Merger
Effective Date, with recognition of prior Leeds service for purposes of
eligibility to participate and vesting, but not benefit accrual, under such
plan. In the event of a consolidation of any or all of such plans or in the
event of termination of any Leeds Employee Plan, Leeds employees who are
participants in the Leeds Employee Plans and who continue employment with
Northwest ("Continuing Employees") shall receive credit for service with Leeds
Savings (for purposes of eligibility and vesting determination but not for
benefit accrual purposes) under any existing Northwest benefit plan other than
the Northwest ESOP and the Holiday Bonus Plan, or new Northwest benefit plan in
which such employees or their dependents would be eligible to enroll, subject to
any pre-existing conditions or other exclusions to which such persons were
subject under the Leeds Employee Plans. Preexisting conditions will be subject
to the provisions provided under the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"). Such service shall also apply for purposes
of satisfying any waiting periods, actively-at-work requirements, and evidence
of insurability requirements. Continuing Employees who become covered under a
Northwest health plan shall be required to satisfy the deductible limitations of
the Northwest health plan for the plan year in which coverage commences, without
offset for deductibles satisfied under the Leeds health plan, except to the
extent, prior to the Merger Effective Date, Leeds shall provide substantiation
in a form satisfactory to Northwest, of the dollar amount of such deductibles
that have been satisfied for such Continuing Employees. Notwithstanding anything
to the contrary herein, Continuing Employees shall be eligible to participate in
the Northwest ESOP and the Holiday Bonus Plan at the same time and in the same
manner as new employees of Northwest.
40
(b) In the event of any termination or consolidation of any Leeds
health, disability or life insurance plan with any Northwest health, disability
or life insurance plan, Northwest shall make available to Continuing Employees
and their dependents employer-provided health, disability or life insurance
coverage on the same basis as it provides such coverage to Northwest employees.
Unless a Continuing Employee affirmatively terminates coverage under a Leeds
health, disability or life insurance plan prior to the time that such Continuing
Employee becomes eligible to participate in the Northwest health, disability or
life insurance plan, no coverage of any of the Continuing Employees or their
dependents shall terminate under any of the Leeds health, disability or life
insurance plans prior to the time such Continuing Employees and their dependents
become eligible to participate in the health, disability or life insurance
plans, programs and benefits common to all employees of Northwest and their
dependents. In the event of a termination or consolidation of any Leeds health
plan, terminated Leeds employees and qualified beneficiaries will have the right
to continued coverage under group health plans of Northwest in accordance with
IRC Section 4980B(f) and ERISA Sections 601-609, consistent with the provisions
of subsection (c) below. In the event of any termination, or consolidation of
any Leeds health plan with any Northwest health plan, any pre-existing
condition, limitation or exclusion in the Northwest health plan shall not apply
to Continuing Employees or their covered dependents who have satisfied such
pre-existing condition exclusion waiting period under a Leeds health plan with
respect to such pre-existing condition on the Merger Effective Date and who then
change that coverage to Northwest's health plan at the time such Continuing
Employee is first given the option to enroll in such Northwest health plan. In
the event of a termination of or consolidation of any Leeds health plan with any
Northwest health plan, Continuing Employees will be required to seek
reimbursement of claims arising prior to the Merger Effective Date from the
Leeds health plan and shall not be entitled to seek reimbursement of claims
arising prior to the Merger Effective Date from the Northwest health plan.
(c) Nothing contained in this Agreement shall be construed to grant a
contract of employment to any employee of Leeds who becomes an employee of
Northwest. Any Leeds employee whose employment is terminated involuntarily
(other than for cause) within one year of the Merger Effective Date shall
receive a lump sum severance payment from Leeds Savings or Northwest equal to
two weeks pay at the rate then in effect, for each full year of employment with
Leeds Savings, up to a maximum of twelve weeks. Such Leeds employees will have
the right to continued health coverage under group health plans of Northwest in
accordance with IRC Section 4980B(f) and ERISA Sections 601-609.
41
(d) Directors Marguerite E. Wolf, John F. Doyle, Raymond J. Hartman,
Jr. and Gordon E. Clark shall continue as directors of Leeds Savings following
the Merger Effective Date ("Continuing Directors"). Continuing Directors other
than Continuing Directors who are also employees of Leeds Savings shall receive
an annual fee (payable in quarterly installments) equal to the annual rate paid
to such Continuing Director as of the Merger Effective Date, provided that the
annual fee shall be increased by 5% each year. If Northwest Bancorp causes Leeds
Savings to merge with Northwest Bank prior to June 30, 2003, Northwest Bank
shall establish a Leeds Savings Advisory Board of Directors to consist of the
Continuing Directors and any other person designated by Northwest Bancorp, and
such persons shall commence service on the Advisory Board of Directors
immediately following such merger. The Advisory Board shall be maintained for a
period ending no earlier than June 30, 2003 and Northwest will consult with the
Advisory Board as to whether the Advisory Board will be continued or
discontinued after the initial term. The Advisory Board shall meet no less than
quarterly and each Advisory Board member who was a Continuing Director ("Leeds
Advisory Directors") shall receive an annual fee (payable in quarterly
installments) equal to the annual rate paid to such Continuing Director at the
time of such merger, provided that the annual fee paid to Leeds Advisory
Directors shall be increased by 5% each year through June 30, 2003. Beginning
July 1, 2003, the annual fee paid to Leeds Advisory Directors shall be
determined by Northwest in its sole discretion. Continuing Directors who are
also employees of Leeds Savings shall be compensated as employees and shall not
receive separate compensation for service as a director of Leeds Savings or a
member of the Advisory Board.
(e) Supplemental health benefits currently provided to retired
directors, retired employees and the active employee identified in Leeds
Disclosure Schedule 5.11(e) shall be continued, and similar supplemental health
benefits shall be made available to directors of Leeds Savings who retire on or
prior to the Merger Effective Date and Continuing Directors of the Leeds Savings
Board of Directors or the Advisory Board. Supplemental post-retirement health
benefits shall be provided to the four (4) employees identified in Leeds
Disclosure Schedule 5.11(e) if their employment with Leeds or Northwest
continues through their retirement after reaching age 65 and they satisfy all
other terms of the program, provided that the annual cost of such benefit for
any such employee shall be limited to $1,300 increased by 5% each year after the
Merger Effective Date. Such supplemental health benefits shall continue for the
life of the applicable director or employee and shall otherwise be provided
pursuant to the terms of the program described in Leeds Disclosure Schedule
5.11(e). No amendment to such supplemental health benefits shall be made after
the Merger Effective Date that would in any way adversely affect the
supplemental health benefits available on the Merger Effective Date.
Notwithstanding the foregoing or the terms of the current supplemental health
benefits arrangement, Gordon E. Clark and Dale R. Douglas shall be entitled to
receive supplemental health benefits as currently provided to retired directors
and the employees identified on Schedule 5.11(e) commencing at age 65,
regardless of whether Gordon E. Clark and Dale R. Douglas are employed by
Northwest or its successor upon their attainment of age 65.
42
(f) At or prior to the Merger Effective Date, the Leeds Federal Savings
Bank Employee Stock Ownership Plan (the "ESOP") shall be terminated on such
terms and conditions as contained in the ESOP (as of the date of this Agreement)
and any outstanding balance on an existing ESOP loan shall be repaid from Leeds
Savings contributions, to the extent permitted under the IRC, with the remaining
outstanding balance paid from the sale of shares in the ESOP suspense account.
Any remaining consideration received from the sale of shares in the ESOP
suspense account after such repayment shall be allocated as investment earnings
to the ESOP accounts of those employees of Leeds who are ESOP participants and
beneficiaries (the "ESOP Participants") in accordance with the terms of the ESOP
as amended with respect to such termination and as in effect on the Merger
Effective Date. All ESOP Participants shall fully vest and have a nonforfeitable
interest in their accounts under the ESOP (including allocations of the
consideration received from the sale of the shares in the ESOP suspense account)
determined in accordance with the terms of the plan as of the Merger Effective
Date. As soon as practicable after the receipt of a favorable determination
letter from the Internal Revenue Service ("IRS") as to the tax qualified status
of the ESOP upon its termination under Section 401(a) of the IRC (the "Final
Determination Letter"), distributions of the benefits under the ESOP shall be
made to the ESOP Participants. From and after the date of this Agreement, in
anticipation of such termination and distribution, Leeds and its representatives
before the Merger Effective Date, and Northwest and its representatives after
the Merger Effective Date, shall use their best efforts to apply for and to
obtain such favorable Final Determination Letter from the IRS. If Leeds and its
representatives, before the Merger Effective Date, and Northwest and its
representatives after the Merger Effective Date, reasonably determine that the
ESOP cannot obtain a favorable Final Determination Letter, or that the amounts
held therein cannot be so applied, allocated or distributed without causing the
ESOP to lose its tax-qualified status, Leeds before the Merger Effective Date,
and Northwest after the Merger Effective Date, shall take such action as they
may reasonably determine with respect to the distribution of benefits to the
ESOP Participants, provided that the assets of the ESOP shall be held or paid
only for the benefit of the ESOP Participants, as determined on the Merger
Effective Date, and provided further that in no event shall any portion of the
amounts held in the ESOP revert, directly or indirectly, to Leeds or to
Northwest or any affiliate thereof. At the time distribution of benefits is made
under the ESOP on or after the Merger Effective Date, at the election of the
ESOP Participant, the amount thereof that constitutes an "eligible rollover
distribution" (as defined in Section 402(f)(2)(A) of the IRC) may be rolled over
by such ESOP Participant to any qualified Northwest benefit plan that permits
rollover distributions or to any eligible individual retirement account.
(g) The Leeds Federal Savings Bank 401(k) Plan (the "401(k) Plan")
shall be terminated prior to the Merger Effective Date, and in connection
therewith the accounts held for those employees of Leeds who are Leeds 401(k)
Plan participants and beneficiaries (the "401(k) Plan Participants") shall be
fully vested on the date of such termination. Prior to the Merger Effective Date
pursuant to board resolutions entered into prior to the Merger Effective Date,
Leeds shall make matching company contributions pursuant to the 401(k) Plan for
the portion of the plan year that ends on the 401(k) Plan termination date.
Subject to and as soon as practicable after receipt of a favorable determination
letter from the IRS as to the tax-qualified status of the 401(k) Plan under
Sections 401(a) and 501(a) of the IRC upon its termination (the "401(k)
Determination Letter"), all remaining account balances held under the 401(k)
Plan shall be distributed to, or rolled over by, 401(k) Plan Participants
pursuant to the distribution options available to participants under the 401(k)
Plan. Leeds and its representatives prior to the Merger Effective Date, and
Northwest and its representatives after the Merger Effective Date, shall use
their best efforts to apply for and obtain such 401(k) Determination Letter from
the IRS. In the event that Leeds and its representatives prior to the Merger
Effective Date, and Northwest and its representatives after the Merger Effective
Date, reasonably determine that the 401(k) Plan cannot obtain a favorable 401(k)
Determination Letter, Leeds and its representatives prior to the Merger
Effective Date and Northwest and its representatives after the Merger Effective
Date, shall take such actions as they may reasonable determine, with respect to
the distribution of benefits to the 401(k) Plan Participants, provided that the
assets of the 401(k) Plan shall be held or paid only for the benefit of such
401(k) Plan Participants. At the time distribution of benefits is made under the
401(k) Plan on or after the Merger Effective Date, at the election of the 401(k)
Participant, the amount thereof that constitutes an "eligible rollover
distribution" (as defined in Section 402(f)(2)(A) of the IRC) may be rolled over
by such 401(k) Participant to any qualified Northwest benefit plan that permits
rollover distributions or to any eligible individual retirement account.
43
(h) Northwest and Leeds Savings shall honor all obligations under the
Directors Retirement Plan. Each Director currently participating in the
Directors Retirement Plan shall receive an annual benefit equal to the amount,
and at the time, set forth in Leeds Disclosure Schedule 5.11(h). Such annual
benefit shall be paid to each Director, and to his or her beneficiary in the
event of his or her death, pursuant to the applicable provisions of the
Directors Retirement Plan in effect on the Merger Effective Date. For purposes
of the Directors Retirement Plan, service on the Leeds Savings Board of
Directors shall also include both service on the Leeds Savings Board of
Directors and the Leeds Savings Advisory Board following the Merger Effective
Date, provided that the total annual benefit shall not exceed the amount
identified on Schedule 5.11(h).
(i) Northwest and Leeds Savings shall honor all obligations under the
1993 and 1998 Directors Deferred Compensation Plans (collectively, the
"Directors Deferred Compensation Plans") and shall continue the Directors
Deferred Compensation Plans for directors participating in the Directors
Deferred Compensation Plans on the Merger Effective Date until the date the last
such participating director terminates service on both the Leeds Savings Board
of Directors and the Leeds Savings Advisory Board. In the event that a
Continuing Director becomes ineligible to continue participation in the 1993
Directors Deferred Compensation Plan on or after the Merger Effective Date, such
Continuing Director shall be authorized to participate in the 1998 Directors
Deferred Compensation Plan, provided that such Continuing Director satisfies the
eligibility requirements for participation in the 1998 Directors Deferred
Compensation Plan. For purposes of the Directors Deferred Compensation Plans,
service on the Leeds Savings Board of Directors shall also include both service
on the Leeds Savings Board of Directors and the Leeds Savings Advisory Board
following the Merger Effective Date.
(j) The Trust Agreement related to the Directors Retirement Plan and
the Directors Deferred Compensation Plans identified in Leeds Disclosure
Schedule 3.12(a) shall continue in full force and effect from and after the
Merger Effective Date until all obligations under each such Plan have been fully
satisfied, provided, however, that Leeds shall amend the Trust Agreement prior
to the Merger Effective Date to permit Leeds or its successor to invade the
principal of the Trust Agreement so long as sufficient assets remain in the
Trust Agreement immediately after such invasion to fully satisfy at least 120%
of all obligations under the Directors Retirement Plan and the Directors
Deferred Compensation Plans. An enrolled actuary, mutually selected by Northwest
and Gordon E. Clark, shall calculate the amount necessary to satisfy all
obligations under the Directors Retirement Plan and the Directors Deferred
Compensation Plans.
44
(k) At the written request of Northwest delivered to Leeds prior to the Merger
Effective Date, all Remaining Contributions to one or more of the secular trusts
under the Senior Management Supplemental Executive Retirement Plans ("SERPs") as
set forth in Leeds Disclosure Schedule 3.12(a) shall be made at or prior to the
Merger Effective Date. For purposes of this Section 5.11(k), Remaining
Contributions shall be equal to the lump sum present value (using an interest
rate of 8% for Gordon Clark and Dale Douglas, and 6% for Margaret Balsalmo and
Kathleen Trumpler) of all amounts sufficient to provide the aggregate of (i) all
supplemental retirement benefits earned under the applicable SERP as of the
Merger Effective Date, and (ii) all additional benefits that would be earned
under such SERP from and after the Merger Effective Date in the event that the
applicable executive remained employed by Leeds and continued to earn a benefit
under the SERPs until his or her Benefit Age as defined in the applicable SERP,
provided, however, that the Remaining Contributions made to the SERP and secular
trust of any executive shall not exceed the aggregate amount of annual
contributions set forth on Leeds Disclosure Schedule 5.11(k). Any such request
by Northwest to fund all Remaining Contributions shall be delivered to Leeds no
less than ten (10) business days prior to the date as of which Northwest
requests that the Remaining Contributions be made. In the event that Northwest
requires all Remaining Contributions to be made to the secular trusts under the
SERPs prior to the Merger Effective Date, Northwest shall have no further
responsibility to make contributions to such secular trusts and no executive
participating in a secular trust SERP shall accrue any additional benefit under
his or her secular trust and SERP from and after the date such Remaining
Contributions are made to the secular trust. In the event that Northwest
requires the acceleration of a Remaining Contribution by Leeds or Northwest to a
secular trust under a SERP which results in a parachute payment under Section
280G of the IRC, Leeds or Northwest, as applicable, shall provide the affected
executive, in addition to any other amounts payable under this Agreement, a lump
sum payment equal to (i) the amount of the excise tax incurred under Section
4999 of the IRC as a result of such parachute payment (the "Gross-Up Payment"),
plus (ii) an amount sufficient to cover the full cost of such federal, state and
local income and employment taxes (at the highest marginal tax rate applicable
to the affected executive) on such Gross-Up Payment. In the event that Northwest
or Leeds makes all Remaining Contributions to the secular trusts, each executive
participating in a secular trust SERP shall enter into an agreement and release,
satisfactory in form to Leeds and Northwest, that such Remaining Contributions
shall be in full satisfaction of all obligations of Leeds and Northwest under
the applicable SERP. In the event Northwest does not request Leeds to make all
Remaining Contributions under the secular trusts prior to the Merger Effective
Date, Northwest shall honor the secular trusts and SERPs following the Merger
Effective Date, provided, however, that Northwest shall, or Leeds shall prior to
the Merger Effective Date, amend each secular trust and SERP to provide that
from and after the Merger Effective Date, each executive shall be entitled to
continue to accrue a future benefit under the applicable secular trust and SERP
equal to the supplemental retirement benefit that he or she would have earned
under his or her secular trust and SERP if the executive remained in the employ
of Leeds until his or her Benefit Age, reduced by the benefit earned by such
executive under the Northwest qualified defined benefit plan for the period from
the Merger Effective Date through termination of employment or retirement;
provided that in such event Leeds and/or Northwest shall make a contribution on
or before the Merger Effective Date to the applicable secular trust pursuant to
the terms of the applicable SERP and secular trust sufficient to provide the
supplemental retirement benefit earned under the applicable SERP as of the
Merger Effective Date, and provided that Leeds and/or Northwest shall continue
to make all contributions to the applicable secular trust sufficient to fund the
future benefit earned from and after the Merger Effective Date pursuant to the
terms of the applicable SERP and secular trust. In the event Northwest does not
request Leeds to make all Remaining Contributions to the secular trust prior to
the Merger Effective Date, Northwest may elect whether or not to treat a
subsequent merger of Leeds into Northwest as a change in control for purposes of
the SERPs and the secular trusts.
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(l) Until the Merger Effective Date, Leeds shall be liable for all obligations
for continued health coverage pursuant to Section 4980B of the IRC and Sections
601 through 609 of ERISA ("COBRA") with respect to each Leeds Savings qualifying
beneficiary (as defined in COBRA) who incurs a qualifying event (as defined in
COBRA) before the Merger Effective Date. Northwest shall be liable for (i) all
obligations for continued health coverage under COBRA with respect to each Leeds
Savings qualified beneficiary (as defined in COBRA) who incurs a qualifying
event (as defined in COBRA) from and after the Merger Effective Date, and (ii)
for continued health coverage under COBRA from and after the Merger Effective
Date for each Leeds Savings qualified beneficiary who incurs a qualifying event
before the Merger Effective Date.
(m) Notwithstanding anything contained in any existing employment or severance
agreement, as of the Merger Effective Date, Gordon E. Clark shall execute a
termination and release to his employment agreement substantially in the form
set forth in Leeds Disclosure Schedule 6.02(i), which shall provide that such
employment agreement shall terminate as of the Merger Effective Date and, in
lieu of any rights and payments under such employment agreement, Mr. Clark shall
be entitled to the rights and payments identified in such termination and
release agreement.
Section 5.12 Duty to Advise; Duty to Update the Northwest Disclosure
Schedules
Northwest shall promptly advise Leeds of any change or event having a
Material Adverse Effect on Northwest or which Northwest believes would or would
be reasonably likely to cause or constitute a material breach of any of its
representations, warranties or covenants set forth herein. Northwest shall
update Northwest' Disclosure Schedules as promptly as practicable after the
occurrence of an event or fact which, if such event or fact had occurred prior
to the date of this Agreement, would have been disclosed in the Northwest
Disclosure Schedule. The delivery of such updated Schedules shall not relieve
Northwest from any breach or violation of this Agreement and shall not have any
effect for the purposes of determining the satisfaction of the condition set
forth in Section 6.01(c) hereof.
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ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Obligations of Leeds Under this Agreement
The obligations of Leeds under this Agreement shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Leeds pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, Northwest to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated by this
Agreement, shall have been duly and validly taken by Northwest, and Leeds
Bankshares shall have received certified copies of the resolutions evidencing
such authorizations;
(b) Covenants. The obligations and covenants of Northwest required by
this Agreement to be performed by Northwest at or prior to the Closing Date
shall have been duly performed and complied with in all material respects;
(c) Representations and Warranties. Each of the representations and
warranties of Northwest in this Agreement which is qualified as to materiality
shall be true and correct, and each such representation or warranty that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement, and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date.
(d) Approvals of Regulatory Authorities. The MHC Merger and the
Mid-Tier Merger shall have received all required approvals of Regulatory
Authorities and all notice and waiting periods required thereunder shall have
expired or been terminated.
(e) No Injunction. There shall not be in effect any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby;
(f) Officer's Certificate. Northwest shall have delivered to Leeds
Bankshares a certificate, dated the Closing Date and signed, without personal
liability, by its chairman of the board or president, to the effect that the
conditions set forth in subsections (a) through (e), (h) and (j) of this Section
6.01 have been satisfied, to the best knowledge of the officer executing the
same;
(g) Approval of the Stockholders of Leeds Bankshares and the Members of
Leeds MHC. This Agreement and the transactions contemplated hereby shall have
been approved by:
(i) the stockholders of Leeds Bankshares by such vote as is
required under the HOLA and regulations and policy of the Regulatory
Authorities, the charter and bylaws of Leeds Bankshares, and under
Nasdaq requirements applicable to it; and
47
(ii) to the extent required by the Regulatory Authorities, by
the members of Leeds MHC by such vote as is required.
(h) Funds Deposited with the Exchange Agent. On or prior to the Closing
Date, Northwest Bancorp shall have deposited or caused to be deposited, in trust
with the Exchange Agent, an amount of cash equal to the Aggregate Merger
Consideration that the Leeds Bankshares stockholders shall be entitled to
receive on the Merger Effective Date pursuant to Section 2.02 of this Agreement.
(i) Updated Fairness Opinion. Prior to the mailing of the
Stockholder Proxy Statement, Leeds shall have received the Updated Fairness
Opinion.
(j) Employment Agreement. Northwest Bancorp shall have executed the
employment agreements and Noncompetition Agreements with Gordon E. Clark
and Dale R. Douglas substantially in the forms set forth as part of Leeds
Disclosure Schedule 6.01(j).
Section 6.02 Conditions to the Obligations of Northwest Under this
Agreement
The obligations of Northwest hereunder shall be subject to satisfaction
at or prior to the Closing Date of each of the following conditions, unless
waived by Northwest pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, Leeds to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, shall have been duly and validly taken by Leeds and Northwest shall
have received certified copies of the resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of Leeds required
by this Agreement to be performed at or prior to the Closing Date shall have
been duly performed and complied with in all material respects;
(c) Representations and Warranties. Each of the representations and
warranties of Leeds in this Agreement which is qualified as to materiality shall
be true and correct, and each such representation or warranty that is not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement, and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date.
(d) Approvals of Regulatory Authorities. The Merger shall have received
all required approvals of Regulatory Authorities (without the imposition of any
conditions adversely affecting in a material respect the economic benefit
Northwest reasonably expects to accrue in the transaction, excluding standard
conditions that are normally imposed by the Regulatory Authorities in merger
transactions); and all notice and waiting periods required thereunder shall have
expired or been terminated.
48
(e) No Injunction. There shall not be in effect any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since June 30, 2000, there shall
not have occurred any Material Adverse Effect with respect to Leeds
Bankshares and Leeds Savings; and
(g) Officer's Certificate. Leeds MHC, Leeds Bankshares and Leeds
Savings shall have delivered to Northwest a certificate, dated the Closing Date
and signed, without personal liability, by the chairman of the board or
president of each, to the effect that the conditions set forth in subsections
(a) through (f) of this Section 6.02 have been satisfied, to the best knowledge
of the officer executing the same.
(h) Employment Agreements. Gordon E. Clark and Dale R. Douglas shall have
executed the employment agreements with Leeds Savings and Northwest Bancorp,
and the Noncompetition Agreements with Northwest Bancorp, substantially in
the forms set forth as part of Leeds Disclosure Schedule 6.01(j).
(i) Termination Agreement. Gordon E. Clark shall have executed a
Termination and Release Agreement, substantially in the form set forth as
part of Leeds Disclosure Schedule 6.02(i).
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination
This Agreement may be terminated on or at any time prior to the Closing
Date:
(a) By the mutual written consent of the parties hereto;
(b) By either Northwest, Leeds Bankshares or Leeds MHC acting
individually:
(i) if there shall have been a material breach of any
representation, warranty, covenant or other obligation of the other
party and the breach cannot be, or shall not have been, remedied within
thirty (30) days after receipt by such other party of notice in writing
specifying the nature of such breach and requesting that it be
remedied;
(ii) if the Closing Date shall not have occurred on or before
April 30, 2002, unless the failure of such occurrence shall be due to
the failure of the party seeking to terminate this Agreement to perform
or observe its obligations set forth in this Agreement required to be
performed or observed by such party on or before the Closing Date;
provided, however, the parties shall in good faith agree to extend such
deadline for a period of an additional one hundred and twenty (120)
days thereafter in the event that such parties determine that it is
reasonably likely that such Closing Date will in fact occur during such
extension period.
49
(iii) if either party has been informed in writing by a
Regulatory Authority whose approval or consent has been requested that
such approval or consent is denied, or is granted subject to any change
that adversely affects in a material respect the economic benefit that
either Party reasonably expects to accrue in the transactions unless
the failure of such occurrence shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe its
agreements set forth herein required to be performed or observed by
such party on or before the Closing Date;
(iv) if the approval of the stockholders of Leeds Bankshares
and any approval of the members of Leeds MHC required for the
consummation of the Merger shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of
stockholders or members, as the case may be, or at any adjournment or
postponement thereof; or
(c) By Northwest if (i) as provided in Section 5.06(a)(iii), the Board
of Directors of Leeds MHC or Leeds Bankshares withdraws its recommendation of
this Agreement, fails to make such recommendation or modifies or qualifies its
recommendation in a manner adverse to Northwest, or (ii) Leeds MHC or Leeds
Bankshares enters into an agreement to be acquired by, or merge or combine with,
a third party in connection with a Superior Proposal.
(d) By Leeds Bankshares or Leeds MHC, upon two days' prior notice to
Northwest, if, as a result of a Superior Proposal, the Board of Directors of
Leeds Bankshares or Leeds MHC determines, in good faith and in consultation with
counsel, that its fiduciary duties require that such Superior Proposal be
accepted.
Section 7.02 Effect of Termination
(a) Except as otherwise provided in this Agreement, if this Agreement
is terminated pursuant to Section 7.01 hereof, this Agreement shall forthwith
become void (other than the confidentiality provisions of Section 5.02(a) and
Section 8.01 hereof, which shall remain in full force and effect), and there
shall be no further liability on the part of Northwest or Leeds to the other,
except that no party shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
(b) As a condition of Northwest' willingness, and in order to induce
Northwest to enter into this Agreement and to reimburse Northwest for incurring
the costs and expenses related to entering into this Agreement and consummating
the transactions contemplated by this Agreement, Leeds Bankshares will make an
aggregate cash payment to Northwest of $2.2 million (the "Expense Fee") if
Northwest has terminated this Agreement pursuant to Section 7.01(c) or Leeds
Bankshares or Leeds MHC has terminated this Agreement pursuant to Section
7.01(d), and in such event Leeds Bankshares and Leeds MHC shall have no further
liability to Northwest. Any payment required under this Section 7.02(b) shall be
paid by Leeds Bankshares to Northwest (by wire transfer of immediately available
funds to an account designated by Northwest) within five (5) business days after
written demand by Northwest.
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ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses
(a) Except as provided herein, each party hereto shall bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of its own financial
consultants, accountants and counsel.
(b) In the event of any termination of this Agreement pursuant to
Section 7.01(b)(i) hereof because of a breach of this Agreement by one of the
parties, in addition to any other damages and remedies that may be available to
the non-breaching party, the non-breaching party shall be entitled to payment
of, and the breaching party shall pay to the non-breaching party, all reasonable
out-of-pocket costs and expenses, including, without limitation, reasonable
legal, accounting and investment banking fees and expenses, incurred by the
non-breaching party in connection with entering into this Agreement and carrying
out of any and all acts contemplated hereunder; provided, however, that this
clause shall not be construed to relieve or release a breaching party from any
additional liabilities or damages arising out of its willful breach of any
provision of this Agreement.
Section 8.02 Non-Survival of Representations and Warranties
All representations, warranties and, except to the extent specifically
provided otherwise herein, agreements and covenants shall terminate on the
Closing Date, other than those covenants set forth in Sections 2.01(a), 5.05 and
5.11, which will survive the Merger.
Section 8.03 Amendment, Extension and Waiver
Subject to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may (a) amend this
Agreement, (b) extend the time for the performance of any of the obligations or
other acts of either party hereto, (c) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained in Articles V and VI hereof or otherwise. This Agreement
may not be amended except by an instrument in writing authorized by the
respective Boards of Directors and signed by duly authorized officers on behalf
of the parties hereto. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed by a duly authorized officer on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
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Section 8.04 Entire Agreement
Except as set forth in this Agreement, this Agreement, including the
documents and other writings referred to herein or delivered pursuant hereto,
contains the entire agreement and understanding of the parties with respect to
its subject matter. Except as set forth in this Agreement, this Agreement
supersedes all prior arrangements and understandings between the parties, both
written and oral, with respect to its subject matter. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors; provided, however, that nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 2.02(a)(i), 2.03, 5.05 and 5.11.
Section 8.05 No Assignment
Neither party hereto may assign any of its rights or obligations
hereunder to any other person, without the prior written consent of the other
party hereto.
Section 8.06 Notices
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy, addressed as
follows:
(a) If to Northwest to:
Northwest Bancorp, Inc.
Liberty and Second Streets
Warren, PA 16365
Attn: William J. Wagner
President and CEO
Fax: (814) 728-7716
with a copy to:
Luse Lehman Gorman Pomerenk & Schick
5335 Wisconsin Avenue, NW
Washington, DC 20016
Attn: Eric Luse, Esq.
Kenneth R. Lehman, Esq.
Fax: (202) 362-2902
(b) If to Leeds to:
Leeds Federal Bankshares, Inc.
1101 Maiden Choice Lane
Baltimore, MD 21229
Attn: Gordon E. Clark
President, and Chief Executive Officer
Fax: (410) 242-7549
52
with a copy to:
Schiff Hardin & Waite
6600 Sears Tower
Chicago, IL 60606
Attn: Christopher J. Zinski, Esq.
Fax: (312) 258-5700
Section 8.07 Captions
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
Section 8.08 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section 8.09 Severability
If any provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law. If however, any provision of this
Agreement is held invalid by a court of competent jurisdiction, then the parties
hereto shall in good faith amend this Agreement to include an alternative
provision that accomplishes a result that is as substantially similar to the
result originally intended as possible.
Section 8.10 Governing Law
This Agreement shall be governed by and construed in accordance with
the domestic internal law (including the law of conflicts of law) of the State
of Pennsylvania, except to the extent that Federal law shall be deemed to
preempt such State law.
Section 8.11 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.
53
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
NORTHWEST SAVINGS BANK
/s/ William J. Wagner
--------------------------------------------
By: William J. Wagner, President
NORTHWEST BANCORP, INC.
/s/ William J. Wagner
--------------------------------------------
By: William J. Wagner, President
NORTHWEST BANCORP, MHC
/s/ William J. Wagner
--------------------------------------------
By: William J. Wagner, President
LEEDS FEDERAL SAVINGS BANK
/s/ Gordon E. Clark
--------------------------------------------
By: Gordon E. Clark, President
LEEDS FEDERAL BANKSHARES, INC.
/s/ Gordon E. Clark
--------------------------------------------
By: Gordon E. Clark, President
LEEDS FEDERAL BANKSHARES, MHC
/s/ Gordon E. Clark
--------------------------------------------
By: Gordon E. Clark, President
54
EXHIBIT A
FORM OF
AGREEMENT OF MERGER BETWEEN
LEEDS FEDERAL BANKSHARES, MHC
AND NORTHWEST BANCORP, MHC
THIS AGREEMENT OF MERGER (this "MHC Merger Agreement") dated as of
________ ___, 2001, is made by and between Leeds Federal Bankshares, MHC ("Leeds
MHC"), a federal mutual holding company and Northwest Bancorp, MHC ("Northwest
MHC"), a federal mutual holding company.
R E C I T A L S :
1. Northwest Savings Bank, a Pennsylvania savings bank ("Northwest
Bank"), Northwest Bancorp, Inc., a Federal corporation ("Northwest Bancorp"),
Northwest Bancorp, MHC, a Federal mutual holding company ("Northwest MHC"), and
Leeds Federal Savings Bank, a Federal savings bank ("Leeds Savings"), Leeds
Federal Bankshares, Inc., a Federal corporation ("Leeds Bankshares"), and Leeds
Federal Bankshares, MHC, a Federal mutual holding company ("Leeds MHC") have
executed and delivered the Agreement and Plan of Merger, dated as of August 16,
2001 (the "Merger Agreement"), pursuant to which: (i) Leeds MHC shall merge with
and into Northwest MHC with Northwest MHC as the surviving entity; (ii)
immediately thereafter, Leeds Bankshares shall merge with and into Northwest
Bancorp with Northwest Bancorp as the surviving entity; (iii) each issued and
outstanding share of Leeds Bankshares common stock held by Leeds MHC shall be
transferred to Northwest MHC as the surviving entity in the MHC Merger (as
defined below); (iv) each issued and outstanding share of Leeds Bankshares
common stock (except shares held by Northwest MHC as a result of the MHC Merger)
shall cease to be outstanding, shall cease to exist and shall be converted into
the right to receive $32.00 in cash; and (v) each issued and outstanding share
of Leeds Bankshares common stock held by Northwest MHC as a result of the MHC
Merger shall cease to be outstanding and shall cease to exist.
2. At least two-thirds of the members of the boards of directors of
Leeds MHC and Northwest MHC have approved this MHC Merger Agreement and
authorized the execution and delivery of this MHC Merger Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto have agreed as follows:
1. Merger. At and on the MHC Merger Effective Date (as defined below),
Leeds MHC shall merge with and into Northwest MHC (the "MHC Merger") with
Northwest MHC as the resulting entity (the "Resulting Entity"). The separate
existence of Leeds MHC shall cease. As a result of the MHC Merger, each borrower
member of Leeds MHC and holder of a deposit account in Leeds Savings as of the
Merger Effective Date shall have the same rights and privileges in Northwest MHC
as if such borrowing and/or deposit account, respectively, had been established
at Northwest Bank, and all deposit accounts established at Leeds Savings prior
to the Merger Effective Date shall confer on a depositor the same rights and
privileges in Northwest MHC as if such deposit account had been established at
Northwest Bank on the date established at Leeds Savings and the borrower members
of Leeds MHC identified by Leeds prior to the Merger Effective Date will be
given subscription rights to the extent permitted by regulatory authorities in
any conversion of Northwest MHC to stock form that occurs prior to any merger of
Leeds Savings with and into Northwest Bank if such borrowing remains outstanding
at the time of such mutual-to-stock conversion.
2. Effective Date. The MHC Merger Effective Date shall be the date,
after all regulatory approvals required in connection with the transactions
contemplated by the Merger Agreement have been received, upon which the articles
of combination are filed with and endorsed by the Director of the Office of
Thrift Supervision.
3. Name. The name of the Resulting Entity shall be Northwest Bancorp,
MHC.
4. Offices. The main office of the Resulting Entity shall be Liberty and
Second Streets, Warren, Pennsylvania.
5. Directors and Officers. The directors and officers of Northwest MHC
immediately prior to the Effective Date shall be the directors and officers of
the Resulting Entity after the Effective Date.
6. Rights and Duties of the Resulting Entity. At the MHC Merger
Effective Date, Leeds MHC shall be merged with and into Northwest MHC, and
Northwest MHC shall be the Resulting Entity. The business of the Resulting
Entity shall be that of a federal mutual holding company as provided in its
charter. All assets, rights, interests, privileges, powers, franchises and
property (real, personal and mixed) of Leeds MHC shall be automatically
transferred to and vested in the Resulting Entity by virtue of such merger
without any deed or other document of transfer. The Resulting Entity, without
any order or action on the part of any court or otherwise and without any
documents of assumption or assignment, shall hold and enjoy all of the
properties, franchises and interests, including appointments, powers,
designations, nominations and all other rights and interests as the agent or
other fiduciary in the same manner and to the same extent as such rights,
franchises, and interests and powers were held or enjoyed by Leeds MHC. The
Resulting Entity shall be responsible for all of the liabilities, restrictions
and duties of every kind and description of Leeds MHC, immediately prior to the
MHC Merger, including liabilities for all debts, obligations and contracts of
Leeds MHC, matured or unmatured, whether accrued, absolute, contingent or
otherwise and whether or not reflected or reserved against on balance sheets,
books or accounts or records of Leeds MHC. All rights of creditors and other
obligees and all liens on property of Leeds MHC shall be preserved and shall not
be released or impaired.
7. Other Terms. All terms used in this MHC Merger Agreement shall,
unless defined herein, have the meanings set forth in the Merger Agreement.
A-2
IN WITNESS WHEREOF, Leeds MHC and Northwest MHC have caused this MHC
Merger Agreement to be executed as of the date first above written.
Northwest Bancorp, MHC
ATTEST:
By:
--------------------------------------- -----------------------------
Gregory C. LaRocca, Corporate Secretary William J. Wagner, President
Leeds Bankshares, MHC
ATTEST:
By:
--------------------------------------- -----------------------------
Margaret Balsamo, Corporate Secretary Gordon E. Clark, President
A-3
EXHIBIT B
FORM OF
AGREEMENT OF MERGER BETWEEN
LEEDS FEDERAL BANKSHARES, INC.
AND
NORTHWEST BANCORP, INC.
THIS AGREEMENT OF MERGER (this "Mid-Tier Merger Agreement") dated as of
_____ ___, 2001, is made by and between Leeds Federal Bankshares, Inc. ("Leeds
Bankshares"), a federal corporation, and Northwest Bancorp, Inc. ("Northwest
Bancorp"), a federal corporation.
R E C I T A L S :
1. Northwest Savings Bank, a Pennsylvania savings bank ("Northwest
Bank"), Northwest Bancorp, Inc., a Federal corporation ("Northwest Bancorp"),
Northwest Bancorp, MHC, a Federal mutual holding company ("Northwest MHC"), and
Leeds Federal Savings Bank, a Federal savings bank ("Leeds Savings"), Leeds
Federal Bankshares, Inc., a Federal corporation ("Leeds Bankshares"), and Leeds
Federal Bankshares, MHC, a Federal mutual holding company ("Leeds MHC") have
executed and delivered the Agreement and Plan of Merger dated as of August 16,
2001 (the "Merger Agreement"), pursuant to which: (i) Leeds MHC shall merge with
and into Northwest MHC with Northwest MHC as the surviving entity; (ii)
immediately thereafter, Leeds Bankshares shall merge with and into Northwest
Bancorp with Northwest Bancorp as the surviving entity; (iii) each issued and
outstanding share of Leeds Bankshares common stock held by Leeds MHC shall be
transferred to Northwest MHC as the surviving entity in the MHC Merger (as
defined below); (iv) each issued and outstanding share of Leeds Bankshares
common stock (except shares held by Northwest MHC) shall cease to be
outstanding, shall cease to exist and shall be converted into the right to
receive $32.00 in cash; and (v) each issued and outstanding share of Leeds
Bankshares common stock held by Northwest MHC shall cease to be outstanding and
shall cease to exist.
2. Immediately prior to the transactions contemplated by this Mid-Tier
Merger Agreement, Leeds MHC shall have merged with and into Northwest MHC, with
Northwest MHC as the resulting entity (the "MHC Merger").
3. At least two-thirds of the members of the boards of directors of
Leeds Bankshares and Northwest Bancorp have approved this Mid-Tier Merger
Agreement and authorized the execution and delivery of the Mid-Tier Merger
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto have agreed as follows:
1. Merger. At and on the Mid-Tier Merger Effective Date (as defined
below), Leeds Bankshares shall merge with and into Northwest Bancorp (the
"Mid-Tier Merger") with Northwest Bancorp as the resulting entity. The separate
existence of Leeds Bankshares shall cease. On the Mid-Tier Merger Effective
Date, each issued and outstanding share of Leeds Bankshares common stock (except
shares held by Northwest MHC), shall cease to be outstanding, shall cease to
exist and shall be converted automatically into the right to receive $32.00 in
cash, and each issued and outstanding share of Leeds Bankshares common stock
held by Northwest MHC shall cease to be outstanding and shall cease to exist and
in exchange therefore Northwest Bancorp shall issue Northwest MHC an additional
1,000 shares of Northwest Bancorp common stock.
2. Effective Date. The Mid-Tier Merger Effective Date shall be the date,
after all regulatory approvals required in connection with the transactions
contemplated by the Merger Agreement have been received, upon which articles of
combination are filed with and endorsed by the Director of the Office of Thrift
Supervision.
3. Name. The name of the Resulting Institution shall be Northwest
Bancorp, Inc.
4. Offices. The main office of the Resulting Institution shall be
Liberty and Second Streets, Warren, Pennsylvania.
5. Directors and Officers. The directors and officers of Northwest
Bancorp immediately prior to the Mid-Tier Merger Effective Date shall be the
directors and officers of the Resulting Institution after the Mid-Tier Merger
Effective Date.
6. Rights and Duties of the Resulting Institution. At the Mid-Tier
Merger Effective Date, Leeds Bankshares shall be merged with and into Northwest
Bancorp, and Northwest Bancorp shall be the Resulting Institution. The business
of the Resulting Institution shall be that of a Federal corporation as provided
in its charter. All assets, rights, interests, privileges, powers, franchises
and property (real, personal and mixed) of Leeds Bankshares shall be
automatically transferred to and vested in the Resulting Institution by virtue
of such merger without any deed or other document of transfer. The Resulting
Institution, without any order or action on the part of any court or otherwise
and without any documents of assumption or assignment, shall hold and enjoy all
of the properties, franchises and interests, including appointments, powers,
designations, nominations and all other rights and interests as the agent or
other fiduciary in the same manner and to the same extent as such rights,
franchises, and interests and powers were held or enjoyed by Leeds Bankshares.
The Resulting Institution shall be responsible for all of the liabilities,
restrictions and duties of every kind and description of Leeds Bankshares,
immediately prior to the Mid-Tier Merger, including liabilities for all debts,
obligations and contracts of Leeds Bankshares, matured or unmatured, whether
accrued, absolute, contingent or otherwise and whether or not reflected or
reserved against on balance sheets, books or accounts or records of Leeds
Bankshares. All rights of creditors and other obligees and all liens on property
of Leeds Bankshares shall be preserved and shall not be released or impaired.
B-2
7. Other Terms. All terms used in this Mid-Tier Merger Agreement shall,
unless defined herein, have the meanings set forth in the Merger Agreement.
IN WITNESS WHEREOF, Leeds Bankshares and Northwest Bancorp have caused
this Mid-Tier Merger Agreement to be executed as of the date first above
written.
Northwest Bancorp, Inc.
ATTEST:
By:
--------------------------------------- ----------------------------
Gregory C. LaRocca, Corporate Secretary William J. Wagner, President
Leeds Bankshares, Inc.
ATTEST:
By:
--------------------------------------- ----------------------------
Margaret Balsamo, Corporate Secretary Gordon E. Clark, President
B-3
Appendix B
----------
[Letterhead of RP Financial, LC.]
December ___, 2001
Boards of Directors
Leeds Federal Bankshares, Inc.
Leeds Federal Bankshares, MHC
1101 Maiden Choice Lane
Baltimore, Maryland 21229-5411
Members of the Boards:
You have requested that RP Financial, LC. ("RP Financial") provide you
with its opinion as to the fairness from a financial point of view to the
members of Leeds Federal Bankshares, MHC, Baltimore, Maryland, a Federal mutual
holding company ("Leeds MHC"), and stockholders of Leeds Federal Bankshares,
Inc., Baltimore, Maryland, a Federal corporation ("Leeds Bankshares"), of the
Agreement and Plan of Merger (the "Agreement"), dated August 16, 2001, by and
among Northwest Savings Bank, a Pennsylvania savings bank ("Northwest Bank"),
Northwest Bancorp, Inc., a Federal corporation ("Northwest Bancorp"), Northwest
Bancorp, MHC, a Federal mutual holding company ("Northwest MHC"), and Leeds
Federal Savings Bank ("Leeds Savings"), Leeds Bankshares, and Leeds MHC. The
Agreement, inclusive of exhibits, is incorporated herein by reference. Unless
otherwise defined, all capitalized terms incorporated herein have the meanings
ascribed to them in the Agreement.
Summary Description of Merger Consideration and Membership Conversion
At the Merger Effective Date and in accordance with the MHC Merger and
the Mid-Tier Merger:
(i) Each borrower member of Leeds MHC and holder of a deposit
account in Leeds Savings as of the Merger Effective Date shall
have the same rights and privileges in Northwest MHC as if such
borrowing and/or deposit account, respectively, had been
established at Northwest Bank, and all deposit accounts
established at Leeds Savings prior to the Merger Effective Date
shall confer on a depositor the same rights and privileges in
Northwest MHC as if such deposit account had been established at
Northwest Bank on the date established at Leeds Savings and the
borrower members of Leeds MHC identified by Leeds prior to the
Merger Effective Date will be given subscription rights to the
extent permitted by regulatory authorities in any conversion of
Northwest MHC to stock form that occurs prior to any merger of
Leeds Savings with and into Northwest Bank if such borrowing
remains outstanding at the time of such mutual-to-stock
conversion (collectively, the "Membership Conversion").
(ii) Each issued and outstanding share of Leeds Bankshares Common
Stock held by Leeds MHC shall be transferred to Northwest MHC as
the surviving entity in the MHC Merger.
(iii) Each issued and outstanding share of Leeds Bankshares Common
Stock (except shares held by Northwest MHC) shall cease to be
outstanding, shall cease to exist and shall be converted into the
right to receive $32.00 in cash (the "Merger Consideration").
(iv) Each issued and outstanding share of Leeds Bankshares Common
Stock held by Northwest MHC shall cease to be outstanding and
shall cease to exist.
Shares of Leeds Bankshares Common Stock which are owned or held by
either party hereto or any of their respective Subsidiaries (other than in a
fiduciary capacity or in connection with debts previously contracted) at the
Merger Effective Date shall cease to exist, the certificates for such shares
shall be canceled as promptly as practicable, such shares shall not be converted
into the Merger Consideration, and no cash shall be issued or exchanged
therefor.
The holders of certificates representing shares of Leeds Bankshares
Common Stock (any such certificate being hereinafter referred to as a
"Certificate") shall cease to have any rights as stockholders of Leeds
Bankshares.
Each option to purchase shares of Leeds Bankshares Common Stock
outstanding pursuant to the Leeds Stock Option Plans, whether or not such option
is exercisable as of the Merger Effective Date, shall, by reason of the Merger,
cease to be outstanding and shall automatically be converted into the right to
receive in cash an amount equal to (i) the difference (if a positive number)
between (A) the Merger Consideration and (B) the exercise price of each such
option multiplied by (ii) the number of shares of Leeds Bankshares Common Stock
subject to such option.
RP Financial Background and Experience
RP Financial, as part of its financial institution valuation and
consulting practice, is regularly engaged in the valuation of insured financial
institution securities in connection with mergers and acquisitions, initial and
secondary stock offerings, mutual-to-stock conversions of thrift institutions,
and business valuations for other purposes. As specialists in the securities of
insured financial institutions, RP Financial has experience in, and knowledge
of, the markets for the securities of such institutions, including institutions
operating in Maryland and in the Mid-Atlantic U.S.
Materials Reviewed
In rendering this opinion, RP Financial reviewed the following material:
(1) the Agreement, dated August 16, 2001, including exhibits; (2) the following
information from Leeds Bankshares -- (a) audited financial statements for the
fiscal years ended September 30, 1998 through 2001, and (b) stockholder,
regulatory and internal financial and other reports through September 30, 2001
-- all with regard to balance sheet and off-balance sheet composition,
profitability, interest rates, volumes, maturities, market values, trends,
credit risk, interest rate risk, liquidity risk and operations; (3) discussions
with Leeds Bankshares' management regarding past and current business,
operations, financial condition, and future prospects; (4) an analysis of the
pro forma impact on stockholders and depositors of Leeds Bankshares of
alternative strategies as an independent institution, including the option of
remaining in mutual holding company form and various options regarding the
timing and pro forma impact of pursuing a second step conversion; (5)
competitive, economic and demographic characteristics in the local market area;
(6) the potential impact of regulatory and legislative changes on savings
institutions; (7) the financial terms of recently completed second step
conversions of mutual holding companies, regionally and nationally, and the
terms of the three recent similar transactions announced involving the merger of
mutual holding company institutions with and into larger mutual institutions;
(8) the impact on depositors of Leeds Savings resulting from having their rights
in Leeds MHC converted into similar rights in Northwest MHC and gaining access
to the broader product line, significantly greater number of branches and ATMs
and greater resources of Northwest Bancorp; and (9) Northwest Bancorp's
financial condition as of September 30, 2001 regarding the ability to complete
the merger from a cash and capital perspective.
In rendering its opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information concerning
Leeds Bankshares furnished by Leeds Bankshares to RP Financial for review for
purposes of its opinion, as well as publicly-available information regarding
other financial institutions and economic and demographic data. Leeds Bankshares
did not restrict RP Financial as to the material it was permitted to review. RP
Financial did not perform or obtain any independent appraisals or evaluations of
the assets and liabilities and potential and/or contingent liabilities of Leeds
Bankshares.
RP Financial expresses no opinion on matters of a legal, regulatory, tax
or accounting nature or the ability of the merger as set forth in the Agreement
to be consummated. In rendering its opinion, RP Financial assumed that, in the
course of obtaining the necessary regulatory and governmental approvals for the
proposed merger, no restriction will be imposed on Northwest MHC, Northwest
Bancorp or Northwest Bank that would have a material adverse effect on the
ability of the merger to be consummated as set forth in the Agreement.
Opinion
It is understood that this letter is directed to the Boards of Directors
of Leeds Bankshares and Leeds MHC in their consideration of the Agreement, and
does not constitute a recommendation to any stockholder of Leeds Bankshares or
depositor/member of Leeds MHC as to any action that they should take in
connection with the Agreement, or otherwise.
It is understood that this opinion is based on market conditions and
other circumstances existing on the date hereof.
It is understood that this opinion may be included in its entirety in
any communication by Leeds Bankshares, Leeds MHC, or their Boards of Directors
to the stockholders of Leeds Bankshares or depositor/members of Leeds MHC. It is
also understood that this opinion may be included in its entirety in any
regulatory filing by Leeds Bankshares, Leeds MHC, Northwest Bancorp or Northwest
MHC, and that RP Financial consents to the summary of this opinion in the proxy
materials relating to these parties, and any amendments thereto. Except as
described above, this opinion may not be summarized, excerpted from or otherwise
publicly referred to without RP Financial's prior written consent.
Based upon and subject to the foregoing and other such matters we
consider relevant, it is RP Financial's opinion that, as of the date hereof, the
Membership Conversion is fair from a financial point of view to the
depositor/members of Leeds MHC and the Merger Consideration to be received by
the holders of Leeds Bankshares Common Stock, as described in the Agreement, is
fair to such stockholders from a financial point of view.
Respectfully submitted,
RP FINANCIAL, LC.
REVOCABLE PROXY
LEEDS FEDERAL BANKSHARES, INC.
SPECIAL MEETING OF STOCKHOLDERS
JANUARY __, 2002
The undersigned hereby appoints the official proxy committee consisting
of the entire Board of Directors with full powers of substitution to act as
attorneys and proxies for the undersigned to vote all shares of Common Stock of
Leeds Federal Bankshares, Inc. which the undersigned is entitled to vote at the
Special Meeting of Stockholders ("Meeting") to be held at 1101 Maiden Choice
Lane, Baltimore, Maryland, on January __, 2002 at __:__ p.m, and at any and all
adjournments thereof. The official proxy committee is authorized to cast all
votes to which the undersigned is entitled as follows:
FOR AGAINST ABSTAIN
--- ------- -------
_ _ _
1. To approve the Agreement and Plan of |_| |_| |_|
Merger, dated as of August 16, 2001,
by and among Northwest Savings Bank,
Northwest Bancorp, Inc. and Northwest
Bancorp, MHC and Leeds Federal Savings
Bank, Leeds Federal Bankshares, Inc.
and Leeds Federal Bankshares, MHC, and
the transactions contemplated thereby.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE LISTED PROPOSAL.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITION STATED ABOVE. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE MAJORITY OF THE BOARD
OF DIRECTORS IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at any
adjournment thereof and after notification to the Secretary of Leeds Federal
Bankshares, Inc. at the Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect. This proxy may also be revoked by sending
written notice to the Secretary of Leeds Federal Bankshares, Inc. at the address
set forth on the Notice of Special Meeting of Stockholders, or by the filing of
a later proxy prior to a vote being taken on a particular proposal at the
Meeting.
The undersigned acknowledges receipt from Leeds Federal Bankshares, Inc. prior
to the execution of this proxy of notice of the Meeting and a proxy statement
dated December __, 2001.
Dated: _________________, 2002 --- Check Box if You Plan
--- to Attend Meeting
_______________________________ ___________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
_______________________________ ___________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
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PLEASE COMPLETE AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
--------------------------------------------------------------------------------