Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A 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 Rule 14a-11(c) or Rule 14a-12
WHG Bancshares Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/x/ Fee computed on table below per Section 14(g) of the Exchange Act.
(1) Title of each class of securities to which transaction applies: Common
Stock
(2) Aggregate number of securities to which transaction applies: 1,285,050
shares and 292,054 options
(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):Each of the
1,285,050 issued and outstanding shares of Common Stock will, upon
consummation of the merger, be converted into the right to receive
$14.25 in cash. In exchange for the cancellation of the 292,054
options to purchase Registrant's common stock, holders thereof will
receive, in the aggregate, $1,143,898 in cash.
(4) Proposed maximum aggregate value of transaction: $19,455,860.
(5) Total fee paid: $1,789.94.
/ / Fee paid previously with preliminary 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:_____________________________________________
[WHG Bancshares Corporation letterhead]
________, 2002
Dear Fellow Stockholder:
We cordially invite you to attend a special meeting of the stockholders
of WHG Bancshares Corporation. The meeting will be held at __________________
on __________, __________ __, 2002 at __:__ _.m., Eastern Time.
At the special meeting, you will be asked to approve an Agreement and
Plan of Merger which provides for the merger of WHG Bancshares Corporation with
a subsidiary of Baltimore County Savings Bank, F.S.B. If the merger is
completed, you will be entitled to receive a cash payment of $14.25 for each
share of WHG Bancshares Corporation stock that you own. Upon completion of the
merger, you will not own any stock or other interest in WHG Bancshares
Corporation nor will you receive, as a result of the merger, any stock of
Baltimore County Savings Bank or its parent holding company, BCSB Bankcorp, Inc.
Your exchange of shares of WHG Bancshares Corporation stock for cash
generally will cause you to recognize 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
applicable to you.
Completion of the merger is subject to certain conditions, including
receipt of various regulatory approvals and approval of the Agreement and Plan
of Merger by the affirmative vote of two-thirds of our outstanding shares of
common stock. As of __________ __, 2002, the directors and executive officers of
WHG Bancshares Corporation beneficially owned _____% of the shares of stock. We
expect that all of the shares held by our directors and executive officers will
be voted in favor of the merger.
We urge you to read the attached proxy statement carefully. It
describes the Agreement and Plan of Merger in detail and includes a copy of the
Agreement and Plan of Merger as Appendix A.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AGREEMENT AND PLAN
OF MERGER AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE AGREEMENT AND PLAN
OF MERGER BECAUSE THE BOARD BELIEVES IT TO BE IN THE BEST INTERESTS OF OUR
STOCKHOLDERS.
It is very important that your shares be represented at the special
meeting. 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.
Sincerely,
-------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
WHG Bancshares Corporation
1505 York Road
Lutherville, Maryland 21093
(410) 583-8700
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ____________ __, 2002
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of WHG
Bancshares Corporation will be held at ____________________________________ on
__________, __________ __, 2002 commencing at __:__ _.m., Eastern Time.
A proxy form and a proxy statement for the special meeting are
enclosed. The meeting is for the purpose of considering and acting upon:
1. The approval of the Agreement and Plan of Merger, dated February 27,
2002, between BCSB Bankcorp, Inc., Baltimore County Savings Bank, F.S.B. and WHG
Bancshares Corporation and Heritage Savings Bank, F.S.B. Pursuant to the terms
of the Agreement and Plan of Merger, we will be merged with a wholly owned
subsidiary of Baltimore County Savings Bank and ultimately will be merged with
Baltimore County Savings Bank. You will be entitled to receive $14.25 in cash
for each share of WHG Bancshares Corporation common stock that you own. A copy
of the Agreement and Plan of Merger is included as Appendix A to the
accompanying proxy statement; and
2. Such other matters as may properly come before the special meeting
or any adjournments or postponements thereof.
As of the date of this notice, we are not aware of any business to be
acted upon at the special meeting other than the proposal to approve the
Agreement and Plan of Merger. If such other matters are properly brought before
the special meeting or any adjournment or postponement of the special meeting,
our Board of Directors will have the discretion to vote or act on such matters
according to their best judgment.
Our stockholders of record at the close of business on ____________ __,
2002 are entitled to vote at the special meeting, and any adjournments or
postponements of the special meeting.
You are cordially invited to attend the special meeting. However, to
ensure your representation at the special meeting, please complete, sign, date
and promptly mail your proxy form in the enclosed postage-paid envelope. The
proxy form will not be used if you attend and vote at the special meeting in
person. If you are a stockholder whose shares are not registered in your name,
you will need additional documentation from the holder of record of your shares
to vote in person at the meeting. The prompt return of your proxy will save us
the expense of further requests for proxies.
By Order of the Board of Directors,
-----------------------------------
Diana L. Rohrback
Secretary
Lutherville, Maryland
____________ __, 2002
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AGREEMENT AND PLAN OF
MERGER AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE AGREEMENT AND PLAN OF
MERGER.
TABLE OF CONTENTS
Page
----
Questions and Answers About Voting Procedures for the Special Meeting........................................ 1
Summary Term Sheet........................................................................................... 2
Information About WHG Bancshares Corporation................................................................. 5
Where You Can Find More Information.......................................................................... 5
The Special Meeting.......................................................................................... 5
Place, Time and Date................................................................................ 5
Matters to Be Considered ........................................................................... 5
Record Date; Vote Required.......................................................................... 6
Beneficial Ownership of WHG Common Stock............................................................ 6
WHG Common Stock.................................................................................... 6
Proxies............................................................................................. 6
The Merger................................................................................................... 8
General............................................................................................. 8
The Companies....................................................................................... 8
Background of the Merger............................................................................ 9
Our Reasons for the Merger; Recommendation of Your Board of Directors............................... 10
The Consideration is Fair According to FinPro, Inc., Our Financial Advisor.......................... 11
Market Value........................................................................................ 13
Select Merger Multiples............................................................................. 13
Investment Value.................................................................................... 14
Net Present Value of Dividends Stream and Terminal Value............................................ 14
Prior Relationships................................................................................. 14
Compensation for Services Rendered.................................................................. 15
You Will Receive Cash for Your Shares of WHG Stock.................................................. 15
Dissenters' Appraisal Rights........................................................................ 15
Treatment of Options................................................................................ 15
Procedure for Surrendering Your Certificates........................................................ 15
Representations and Warranties Made by Us, BCSB
and Baltimore County Savings...................................................................... 16
Conditions to the Merger............................................................................ 17
Conduct of Business Prior to the Completion of the Merger........................................... 18
Approvals Needed to Complete the Merger............................................................. 21
Waiver and Amendment of the Agreement; Alternative Structure........................................ 22
Termination of the Agreement........................................................................ 22
Interests of Directors and Officers in the Merger that are Different from Your Interests............ 24
Employees and Benefit Plans......................................................................... 25
Federal Income Tax Consequences of the Merger to You................................................ 26
Accounting Treatment of the Merger.................................................................. 26
Who Pays for What................................................................................... 26
Certain Related Agreements................................................................................... 27
Plan of Liquidation................................................................................. 27
Voting Agreement.................................................................................... 27
i
Page
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Beneficial Ownership of WHG Common Stock....................................................................... 27
Stockholder Proposals.......................................................................................... 29
Other Matters.................................................................................................. 29
Appendix A -- Agreement and Plan of Merger (excluding the exhibits thereto).................................... A-1
Appendix B -- Opinion of Our Financial Advisor................................................................. B-1
ii
QUESTIONS AND ANSWERS
ABOUT VOTING PROCEDURES OF THE SPECIAL MEETING
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.
Q: Why is my vote important?
A: The Agreement and Plan of Merger must be approved by two-thirds of the
outstanding shares of WHG Bancshares Corporation common stock. If you do
not return your proxy form or vote in person at the special meeting, it
will have the same effect as a vote against the Agreement and Plan of
Merger.
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 in favor of the
Agreement and Plan of Merger without instructions from you. You should
instruct your broker to vote your shares, following the directions your
broker provides. If you fail to instruct your broker to vote your shares,
it will have the same effect as a vote against the Agreement and Plan of
Merger.
Q: Can 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 in person at
the special meeting.
Q: Can I change my vote?
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 form.
* 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.
* Second, you may complete and submit a new proxy form. Any earlier
proxies will be revoked automatically.
* 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 receive 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 WHG Bancshares Corporation stock
certificates in exchange for $14.25 per share in cash will be sent to you
after we complete the merger.
Q: Whom should I call with questions?
A: You should call our proxy solicitor, __________________________________ at
______________________.
1
SUMMARY TERM SHEET
This summary term sheet highlights selected information from this proxy
statement. It does not contain all the information that may be important to you.
We urge you to read carefully the entire document and the other documents to
which we refer, including the Agreement and Plan of Merger, to fully understand
the merger.
You Will Be Entitled to Receive $14.25 in Cash Per Share of WHG Bancshares
Corporation Common Stock (see pages 8 and 15).
When the merger is completed, each WHG Bancshares Corporation
stockholder will be entitled to receive $14.25 in cash for each share of WHG
Bancshares Corporation common stock held. For example, if you own 100 shares of
WHG Bancshares Corporation common stock, you will be entitled to receive $1,425
upon the surrender of your certificate for those shares.
Our Reasons for the Merger (see page 10).
Our Board of Directors believes that the merger is in the best
interests of WHG Bancshares Corporation and its stockholders and recommends that
stockholders vote "FOR" approval of the Agreement and Plan of Merger. The merger
will enable our stockholders to realize significant value on their investment in
WHG Bancshares Corporation. In reaching its decision to approve the Agreement
and Plan of Merger, our Board considered various factors which are discussed in
detail in this proxy statement.
Some Material Terms of the Agreement and Plan of Merger.
Through a series of mergers, both WHG Bancshares Corporation and
Heritage Savings Bank, F.S.B. will be acquired by BCSB Bankcorp, Inc. Both WHG
Bancshares Corporation and Heritage Savings Bank, F.S.B. will cease to exist
after the merger. (see page 8).
* The merger cannot occur unless our stockholders approve the Agreement and
Plan of Merger by the affirmative vote of two-thirds of the outstanding
shares of WHG Bancshares Corporation common stock and we receive approvals
from banking regulators (see pages 6, 17, 21 and 22).
* If the merger is not completed on or before September 30, 2002, the merger
may be terminated by either BCSB Bankcorp, Inc., Baltimore County Savings
Bank, F.S.B. or WHG Bancshares Corporation, unless the failure to complete
the merger is due to a breach of the party seeking to terminate (see pages
22 and 23).
* In connection with the merger, each of our directors entered into a voting
agreement with Baltimore County Savings Bank, F.S.B. and BCSB Bankcorp,
Inc. Each of our directors agreed, among other things, to cause all of
their shares of WHG Bancshares Corporation common stock to be voted in
favor of the approval of the Agreement and Plan of Merger (see page 27).
* We have agreed not to solicit or encourage a competing transaction to
acquire us or Heritage Savings Bank, F.S.B., except where failure to do so
would
2
cause our Board to breach its fiduciary duties (see page 20).
* We will pay Baltimore County Savings Bank, F.S.B. a fee of $1.0 million
upon the occurrence of certain events (see pages 23 and 24).
* We and Heritage Savings Bank, F.S.B. have agreed to conduct our business
according to particular requirements (see pages 18-19).
* The completion of the merger depends on a number of conditions being
satisfied or waived (see page 17).
The Merger Will Be Taxable to Our Stockholders (see page 26).
Our stockholders will recognize gain or loss for federal, and possibly
state and local, income tax purposes, on the exchange of their WHG Bancshares
Corporation shares for cash. Generally, you will recognize gain or loss equal to
the difference between the amount of cash you receive and your tax basis in your
WHG Bancshares Corporation shares. You should determine the actual tax
consequences of the merger applicable to you. They 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 merger's specific tax consequences
to you.
Our Board of Directors Recommends Stockholder Approval (see page 10).
Our Board of Directors believes that the merger is in the best
interests of WHG Bancshares Corporation and its stockholders and has unanimously
approved the Agreement and Plan of Merger. Our Board recommends that WHG
Bancshares Corporation stockholders vote "FOR" approval of the Agreement and
Plan of Merger.
Our Financial Advisor Says the Merger Consideration is Fair from a Financial
Point of View to Our Stockholders (see pages 11-14).
Our financial advisor, FinPro, Inc., has given our Board of Directors a
written opinion dated February 27, 2002 that states the cash consideration to be
paid to our stockholders is fair from a financial point of view. The opinion
does not address any other aspect of the merger or any related transaction, nor
does it constitute a recommendation to any stockholder as to how to vote at the
special meeting or any adjournment thereof. A copy of the 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 FinPro a
fee equal to 1.0% of the total merger consideration, which is estimated to be
approximately $200,000. Of this amount, $84,000 has been paid.
Stockholders of WHG Bancshares Corporation do not have dissenters'
appraisal rights (see page 15).
Under State law, our stockholders do not have dissenters' appraisal
rights with respect to their WHG Bancshares Corporation shares.
The Merger Is Expected to Be Completed in the Third Quarter of Year 2002 (see
page 18).
The merger will only occur after all the conditions to its completion
have been satisfied or waived. Currently, we anticipate that the merger will be
completed in the third quarter of 2002.
Financial Interests of WHG Bancshares Corporation's Officers and Directors in
the Merger (see pages 24-25).
Our directors and executive officers have interests in the merger as
individuals in addition to, or different from their interests as stockholders,
such as receiving severance payments, indemnification and insurance coverage,
and other benefits.
* In the event that the employment of Ms. Stewart, Mr. Lufburrow, and four
other current officers of WHG Bancshares Corporation is terminated
following the merger, such individuals will be eligible
3
to receive severance payments. (See page 25).
* Members of WHG Bancshares Corporation Board of Directors will also be
entitled to severance payments following the merger following their
termination of service.
* Options to purchase our common stock held by directors, officers and
employees will be cancelled in exchange for a cash payment equal to the
difference between $14.25 and the option exercise price for each option
held at the merger effective date. Payments in exchange for such options
will be made for all options, even for such options not yet exercisable as
of the merger effective date.
* BCSB Bankcorp, Inc. has agreed to indemnify our and Heritage Savings Bank,
F.S.B.'s officers and directors for a six year period after the merger for
events that occurred before the merger, and to provide directors' and
officers' insurance coverage for a period of three years after the merger.
Our Board of Directors was aware of these interests and considered them
in its decision to approve the Agreement and Plan of Merger.
4
INFORMATION ABOUT WHG BANCSHARES CORPORATION
WHG Bancshares Corporation ("WHG" or the "Company") was formed as a
Maryland Corporation in November 1995 to act as the holding company for Heritage
Savings Bank, F.S.B. ("Heritage Savings"). At December 31, 2001, we had $163.9
million in assets and stockholders' equity of $16.9 million or 10.3% of total
assets.
Heritage Savings is a federally chartered stock savings bank which
conducts business through five full service offices located in Howard and
Baltimore counties and Baltimore City, Maryland. Heritage Savings was founded in
1902 as West Baltimore Building Association and continues to be a community-
oriented institution whose business consists of accepting deposits from
customers and investing those funds, together with borrowings, primarily in
residential loans, including those secured by single-family residential
properties.
Upon completion of the merger, BCSB Bankcorp, Inc. ("BCSB") the holding
company for Baltimore County Savings Bank, F.S.B. ("Baltimore County Savings")
will have approximately $540 million in total assets and will have a total of
sixteen offices in the Baltimore region.
WHERE YOU CAN FIND MORE INFORMATION
As a public company, we are obligated to file 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 we file at the
SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. In addition, our public filings are available to
the public from commercial document retrieval services and on the Internet World
Wide Website maintained by the SEC at "http://www.sec.gov."
THE SPECIAL MEETING
Place, Time and Date
The special meeting is scheduled to be held at __:__ _.m., Eastern
Time, on __________, ____________ __,2002, at ____________________________.
Matters to Be Considered
At the special meeting, you will be asked to approve a proposal to
adopt the Agreement and Plan of Merger ("Agreement"). As of __________ __, 2002,
we do not know of any other business that will be presented for consideration at
the special meeting. If such other matters are properly brought before the
special meeting, or any adjournments or postponements of the special meeting,
our Board of Directors will have the discretion to vote or act on such matters
according to their best judgment.
5
Record Date; Vote Required
Only our stockholders of record at the close of business on __________
__, 2002 are entitled to notice of and to vote at the special meeting. As
provided in our articles of incorporation, other than our Employee Stock
Ownership Plan, no one who beneficially owns, either directly or indirectly, in
excess of 10% of our outstanding shares will be entitled to vote any shares held
in excess of the 10% limit. As of __________ __, 2002 there were _______________
shares of our common stock outstanding and entitled to vote at the special
meeting.
Each outstanding share of our common stock will be entitled to cast one
vote per share at the special meeting. You may vote in person or by submitting a
properly executed proxy. The presence, in person or by properly executed
proxies, of the holders of at least one-third of all the shares entitled to vote
at the special meeting will constitute a quorum. Abstentions and broker
non-votes will be treated as shares present at the meeting for purposes of
determining the presence of a quorum. A broker non-vote is an unvoted proxy
submitted by a broker. Under applicable rules, brokers or other nominees who
hold shares in street name for customers who are the beneficial owners of such
shares may not vote those shares with respect to the Agreement unless they have
received specific instructions from their customers.
To approve the Agreement, the holders of two-thirds of the outstanding
shares of WHG common stock entitled to vote must vote in favor of approval of
the Agreement. Consequently, a failure to vote, an abstention or a broker
non-vote will have the same effect as voting against the Agreement. Broker
non-votes will have no effect on this proposal.
Approval of the Agreement by our stockholders is one of the conditions
that must be satisfied to complete the merger. See "The Merger - Conditions to
the Merger."
Beneficial Ownership of WHG Common Stock
As of __________ __, 2002, our directors and executive officers and
their affiliates beneficially owned in the aggregate _______________ shares of
our common stock, or _____% of our outstanding shares of common stock entitled
to vote at the special meeting. Each of our directors have entered into a voting
agreement with Baltimore County Savings agreeing to vote their shares of WHG
common stock in favor of approval of the Agreement. As of __________ __, 2002,
Baltimore County Savings did not own any shares of WHG common stock.
WHG Common Stock
Our common stock is traded on the Nasdaq Small Cap Market under the
symbol "WHGB." On February 26, 2002, the last trading day prior to the joint
announcement by WHG and BCSB that they had entered into the Agreement, the
closing price per share of our common stock was $13.40. On __________ __, 2002,
which is the last practicable date prior to printing this proxy statement, the
closing price per share of our common stock was $_____.
Proxies
Shares of our common stock represented by properly executed proxies
received prior to or at the special meeting will, unless they have been revoked,
be voted at the special meeting in accordance with the instructions indicated in
the proxies. If no instructions are indicated on a properly executed proxy, the
shares will be voted "FOR" approval of the Agreement.
6
You should complete and return the proxy form accompanying this proxy
statement to ensure that your vote is counted at the special meeting, regardless
of whether you plan to attend the special meeting. If you are the record holder
of your shares, you can revoke your proxy at any time before the vote is taken
at the special meeting by:
* submitting written notice of revocation to the Secretary of WHG,
* submitting a properly executed proxy of a later date, or
* voting in person at the special meeting, but simply attending the
special meeting without voting will not revoke an earlier proxy.
Written notice of revocation and other communications about revoking
your proxy should be addressed to:
WHG Bancshares Corporation
1505 York Road
Lutherville, Maryland 21093
Attention: Diana L. Rohrback, Secretary
If any other matters are properly presented at the special meeting for
consideration, the proxy holders will have discretion to vote on such matters in
accordance with their best judgment. As of __________ __, 2002, we know of no
other matters to be presented at the meeting.
Certain material events or changes in circumstances including a
material amendment to the Agreement may result in a resolicitation of your vote
for approval of the Agreement. Under those circumstances, we will provide you
with supplemental information about the material event or change in
circumstances and give you an opportunity to recast your vote. However, any
change in the structure of the merger that does not change the consideration or
tax consequences of the merger need not be submitted to a vote of stockholders.
If your WHG common stock is held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow to
have your shares voted for approval of the Agreement. Your broker, bank or other
nominee may allow you to deliver your voting instructions via telephone or the
Internet. Please see your instruction form provided by your broker, bank or
other nominee that accompanies this proxy statement.
In addition to solicitation by mail, our directors, officers and
employees, who will not receive additional compensation for such services, may
solicit proxies from our stockholders, personally or by telephone, telegram or
other forms of communication. Brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward soliciting materials to beneficial
owners and will be reimbursed for their reasonable expenses incurred in sending
proxy material to beneficial owners. We will bear our own expenses in connection
with the solicitation of proxies for the special meeting.
In addition to solicitations by mail, our directors, officers and
employees may solicit proxies personally or by telephone without additional
compensation. We have retained ____________________, a professional proxy
solicitation firm, to assist in the solicitation of proxies. We will pay
____________________ a fee of $__________ inclusive of expenses.
7
You are requested to complete, date and sign the accompanying proxy
form and to return it promptly in the enclosed postage-paid envelope.
You should not forward stock certificates with your proxy form.
THE MERGER
The information in this proxy statement concerning the terms of the
merger is qualified in its entirety by reference to the full text of the
Agreement, which is attached as Appendix A and incorporated by reference herein.
All stockholders are urged to read the Agreement in its entirety, as well as the
opinion of our financial advisor attached as Appendix B.
General
As soon as possible after the conditions to completion of the merger
described below have been satisfied or waived, and unless the Agreement has been
terminated or an alternative structure used as discussed below, WHG and a
subsidiary of Baltimore County Savings will merge in accordance with Maryland
law. WHG will be the surviving corporation of the merger and will become a
subsidiary of Baltimore County Savings. Simultaneously with the merger, WHG will
be liquidated and dissolved by transferring all of its assets and liabilities to
Baltimore County Savings. Immediately after the liquidation is completed,
Heritage Savings will merge with and into Baltimore County Savings. Baltimore
County Savings will be the surviving bank.
Upon completion of the merger, our stockholders will be entitled to
receive $14.25 in cash for each share of WHG common stock they hold and will
cease to be stockholders of WHG.
The Companies
WHG Bancshares Corporation
1505 York Road
Lutherville, Maryland 21093
(410) 583-8700
WHG is a Maryland corporation and is the unitary savings and loan
holding company for Heritage Savings. Heritage Savings is a federally-chartered
savings bank which is headquartered in Lutherville, Maryland. Heritage Savings
operates five branch offices located in Howard and Baltimore Counties and
Baltimore City, Maryland. All references to WHG herein, unless otherwise
indicated, include references to Heritage Savings.
BCSB Bankcorp, Inc.
Baltimore County Savings Bank, F.S.B.
4111 E. Joppa Road
Baltimore, Maryland
(410) 256-5000
Baltimore County Savings is a federally-chartered savings bank and the
wholly owned subsidiary of BCSB, a corporation chartered under the laws of the
United States. Baltimore County Savings operates 11 full-service branch offices
serving Baltimore and Harford Counties, Maryland.
8
Background of the Merger
Over the last several years, the financial services industry has become
increasingly competitive and has undergone industry-wide consolidation. The
market in which BCSB and WHG operate has been affected by this trend,
experiencing a period of rapid acquisition and consolidation that has affected
many banks and thrift institutions. In addition, large financial institutions
have entered this market through acquisitions of local financial institutions.
In response to these developments, the Board of WHG has, on an ongoing basis,
considered strategic options for increasing stockholder value, including the
sale of WHG.
To this end, in June 1999, the Board engaged FinPro, Inc. ("FinPro") to
assist WHG in strategic planning and ways to enhance franchise and stockholder
value. The Board of Directors has also, from time to time, considered adding new
members to the Board. In June 2001, for example, the Board of Directors of WHG
initiated the process of interviewing prospective new members for election to
the Board. Several candidates were invited to meet with the Board, including a
shareholder with over 5% ownership in WHG. Prior to the date of the meeting to
which the 5% shareholder was invited, the shareholder submitted nominations for
director, suggesting the possibility of a hostile and expensive proxy contest
for WHG Board seats. In light of this shareholder's apparent hostile intentions,
the invitation to meet informally with the Board was withdrawn. The shareholder
subsequently filed proxy materials with the SEC in late December 2001. In the
face of a proxy contest which would disrupt the business of WHG, the WHG Board
of Directors considered their options with particular emphasis on what would be
in the best interests of its shareholders. In November 2001, WHG again retained
FinPro to assist it in exploring and evaluating strategic options which could
enhance shareholder value in WHG. As part of this process, FinPro considered
strategic alternatives available to WHG in a business combination.
Upon completion of FinPro's analysis, it was determined that the
opportunities for WHG to maximize shareholder value were far greater in a
business combination in which WHG was the seller instead of the buyer. The WHG
Board of Directors agreed with the recommendation of FinPro and thereafter
directed FinPro to contact potential merger partners for WHG. In December 2001,
FinPro contacted approximately thirty potential acquirors to ascertain whether
such institutions had any interest in a strategic combination with WHG. In order
to make the process manageable and to minimize the impact of the process on the
day-to-day operations of the Heritage Savings, WHG chose to maintain a
confidential bidding process. In December 2001, several institutions expressed
an interest in the possible acquisition of WHG.
At that time, the Board of Directors decided to pursue discussions with
BCSB because the proposal submitted by BCSB was determined by the Board to be of
superior value to its shareholders in comparison to those submitted by the
remaining potential suitors. Beginning in January 2002, WHG and BCSB engaged in
discussions regarding a possible business combination. In February 2002,
extensive due diligence was conducted by the parties, and a discussion of
material terms and conditions of the proposed acquisition began. Negotiations
between the parties and due diligence continued throughout February 2002. After
receiving the written and oral fairness opinion of WHG's financial advisor that
the proposed merger consideration was fair from a financial point of view to
WHG's stockholders, and in view of the potentially disruptive and costly effect
of an election contest, WHG's Board of Directors approved the Agreement.
9
On February 27, 2002, the parties entered into the Agreement and
announced the transaction to the public in a press release.
Our Reasons for the Merger; Recommendation of Your Board of Directors
Our Board of Directors believes that the terms of the Agreement, which
are the product of arm's length negotiations between representatives of BCSB and
Baltimore County Savings and WHG and Heritage Savings, are in the best interests
of our stockholders. In the course of reaching its determination, our Board of
Directors considered the following factors:
* the merger consideration to be paid to our stockholders in
relation to the market value, book value, earnings per share of
our common stock, and potential future market conditions,
* information concerning our financial condition, results of
operations, capital levels, asset quality and prospects,
* industry and economic conditions,
* our assessment of BCSB's ability to pay the aggregate merger
consideration,
* the opinion of our financial advisor as to the fairness of the
merger consideration from a financial point of view to the
holders of our common stock,
* the general structure of the transaction and the compatibility of
management and business philosophy,
* the greater resources and product offerings that BCSB will have
after the merger than we currently have,
* the impact of the merger on the depositors, employees, customers
and communities served by us through expanded commercial,
consumer and retail banking products and services,
* the results of our due diligence investigation of BCSB, including
the likelihood of receiving the requisite regulatory approvals in
a timely manner, and
* the ability of BCSB, after the merger to compete in relevant
banking and non-banking markets.
In making its determination, our Board 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 Board of Directors believes that the merger is in the best
interests of WHG and our stockholders. The Board of Directors unanimously
recommends that our stockholders vote for approval of the Agreement.
10
The Consideration is Fair According to FinPro, Inc., Our Financial Advisor.
We retained FinPro, a financial consulting firm, on the basis of its
experience, to render a written opinion to us and our shareholders as to the
fairness, from a financial point of view, of the per share price to be paid for
each outstanding share of WHG common stock, as set forth in the Agreement. We
placed no limitations on FinPro with respect to the investigation made, or
procedures followed by FinPro in rendering its opinion.
FinPro has been in the business of consulting for the bank and thrift
industry for fourteen years, including the appraisal and valuation of bank and
thrift institutions and their securities in connection with mergers,
acquisitions and other securities transactions. FinPro has knowledge of and
experience with the Mid Atlantic bank and thrift market and financial
organizations operating in that market. FinPro reviewed the negotiated terms of
the Agreement.
On February 27, 2002, in connection with its consideration of the
Agreement, FinPro issued an oral opinion to the Board of Directors of WHG that
the proposed per share cash consideration value, $14.25, of the merger as
provided in the Agreement is fair and equitable, from a financial perspective,
to WHG and its shareholders. The analysis presented in the oral opinion was
subsequently updated and confirmed in writing. A copy of the written opinion is
attached as Appendix B to this proxy statement and should be read in its
entirety by WHG shareholders. FinPro's written opinion does not constitute an
endorsement of the merger or a recommendation to any shareholder as to how such
shareholder should vote at the special meeting. FinPro has consented to the
inclusion of this summary of its opinion to WHG's Board of Directors in writing
and to reference the entire opinion attached as Appendix B.
In rendering its opinion, FinPro reviewed certain publicly available
information concerning WHG and BCSB, including each party's audited financial
statements and annual reports. FinPro considered many factors in making its
evaluation. In arriving at its opinion regarding the fairness of the per share
price, FinPro reviewed: (i) the Agreement and the exhibits thereto; (ii) changes
in the market for bank and thrift stocks; (iii) the performance of BCSB and WHG
common stock; (iv) trends and changes in the financial condition of BCSB and
WHG; (v) the most recent annual report to shareholders of BCSB and WHG; (vi)
quarterly reports on Form 10-QSB of BCSB and WHG; (vii) the budget of WHG and
(vii) other market data, studies and analyses that were considered appropriate.
In addition, FinPro discussed with the management of WHG its operating
performance and future prospects, primarily with respect to the current level of
WHG's earnings and future expected operating results, giving weight to FinPro's
assessment of the future of the thrift industry and WHG's performance within the
industry. FinPro compared the results of operation of WHG with the results of
operation of all publicly traded thrift institutions and a selected Comparable
Trading Group.
11
- -------------------------------------------------------------------------------------------------------
For the Last Twelve Months
----------------------------------------------------
Comparable All
Trading Publicly
Group Traded Thrift
WHG Median Median
---------------------------------------------------
Balance Sheet:
Assets ($000's) 163,892 148,576 479,484
Asset Growth -1.92% 5.34% 5.86%
Loans to Assets 68.66% 65.43% 69.01%
Deposits to Assets 75.69% 68.27% 67.25%
Borrowing to Assets 13.42% 14.34% 19.80%
Tangible Equity to Tangible Assets 10.33% 11.43% 9.03%
Asset Quality:
Nonperforming Loans to Loans 0.40% 0.37% 0.45%
Nonperforming Assets to Assets 0.29% 0.26% 0.38%
Reserves to Nonperforming Loans 81.08% 83.85% 136.35%
Reserves to Loans 0.32% 0.53% 0.89%
Income Statement and Profitability:
Return on Ave. Assets 0.25% 0.48% 0.80%
Return on Ave. Equity 2.42% 3.70% 8.01%
Yield on Earning Assets 7.15% 7.32% 7.37%
Cost of Funds 5.19% 4.96% 4.71%
Net Interest Margin 2.38% 2.90% 3.14%
Noninterest Income to Ave. Assets 0.09% 0.40% 0.51%
Noninterest Expense to Ave. Assets 2.01% 2.38% 2.31%
Efficiency Ratio 82.82% 75.19% 62.78%
Dividends:
Current Dividend Yield 2.57% 2.50% 2.41%
LTM Dividend Payout Ratio 112.50% 47.06% 33.01%
Market Pricing at March 8, 2002
Price to LTM EPS 43.75x 21.08x 14.28x
Price to LTM Core EPS 43.75x 19.55x 14.52x
Price to Book Value 106.22% 82.47% 111.10%
Price to Tangible Book Value 106.22% 82.47% 116.65%
- -------------------------------------------------- ---------------------------------------------------
Source: The SNL DataSource, data is for the last twelve months updated through
March 8, 2002 unless otherwise noted.
The Comparable Trading Group is composed of: BFFC, BYFC, CBES, EFBC,
FFED, FBEI, FKAN, GCFC, PEDE, GSLA, HFFB, HSTD, LXMO, NBSI, PSFC, SFBI, SSFC,
SRN and SZB.
Many variables affect the value of financial institutions, not the
least of which is the uncertainty of future events, so that the relative
importance of the different valuation variables differs in different situations,
with the result that appraisal theorists argue about which variables are the
most appropriate ones on which to focus. However, most appraisers agree that the
primary financial variables to be considered are earnings, equity, dividends or
dividend-paying capacity, asset quality and cash flow. In addition, in most
instances, if not all, value is further tempered by non-financial factors such
as marketability, voting rights or block size, history of past sales of the
entity's stock and special ownership or management considerations.
12
FinPro analyzed the total deal price on a cash equivalent fair market
value basis using the standard evaluation techniques (as discussed below)
including, but not limited to, comparable sales multiples and the net present
value of dividends and terminal value based on certain assumptions of projected
growth, earnings and dividends.
Market Value
Market value is generally defined as the price, established on an
"arms-length" basis, at which knowledgeable, unrelated buyers and sellers would
agree to transfer shares. The market value is frequently used to determine the
price of a minority block of stock when both the quantity and the quality of the
"comparable" data are deemed sufficient. However, the relative thinness of the
specific market for the stock of the thrift institution being appraised may
result in the need to review alternative markets for comparative pricing
purposes. The "hypothetical" market value for a small thrift with a thin market
for its stock is normally determined by comparison to the median price to
earnings, price to equity and dividend yield of local or regional
publicly-traded thrift institutions, adjusting for significant differences in
financial performance criteria and for any lack of marketability or liquidity.
The market value in connection with the evaluation of control of a thrift is
determined by the previous sales of thrifts. In valuing a business enterprise,
when sufficient comparable trade data is available, the market value deserves
similar emphasis as the investment value as discussed below.
FinPro maintains substantial files concerning the prices paid for
thrift institutions nationwide. The database includes transactions involving
Maryland thrift institutions and thrift institutions in the Mid- Atlantic region
of the United States over the last five years. The database provides comparable
pricing and financial performance data for thrift institutions sold or acquired.
Organized by different peer groups, the data present averages of financial
performance and purchase price levels, thereby facilitating a valid comparative
purchase price analysis. In analyzing the transaction value of WHG, FinPro has
considered the market approach and has evaluated price to earnings, price to
equity, price to tangible equity and franchise premium to core deposits for a
defined comparable group.
Select Merger Multiples
During FinPro's analysis of recent merger multiples in relationship to
the proposed transaction, FinPro placed a heavy reliance on the "Comparable
Group" multiples. The "Comparable Group" was composed of all fully converted
thrift institutions that announced sales between January 1, 2000 and March 8,
2002 where the target institution had total assets between $100 million and $250
million and a return on average equity less than 5.00%. The following table
illustrates the maximum, minimum and median multiples of the "Comparable Group".
Price to Price to Franchise
Price to Tangible LTM Premium to
Book Book Earnings Core Deposits
- -------------------------------------- --------------- ------------------- --------------- --------------------
Maximum 138.06% 138.06% 57.83x 8.09%
Minimum 91.68% 91.68% 25.74x 0.85%
Median 111.64% 111.64% 31.38x 2.30%
WHG Acquisition Multiples 108.12% 108.12% 44.53x 1.24%
- -------------------------------------- --------------- ------------------- --------------- --------------------
Source: SNL Securities, FinPro Calculations
13
The financial performance characteristics of the selected thrift
organizations vary, sometimes substantially, from those of WHG. As such, this
analysis is not a simple mathematical formula, but rather a series of
considerations and judgements, regarding the financial performance and value of
each of the companies.
Investment Value
The investment value is sometimes referred to as the income value or
earnings value. One investment value method frequently used estimates the
present value of an enterprise's future earnings or cash flow. Another popular
investment value method is to determine the level of current annual benefits
(earnings, cash flow, dividends, etc.), and then capitalize one or more of the
benefit types using an appropriate capitalization rate such as an earnings or
dividend yield. Yet another method of calculating investment value is a cash
flow analysis of the ability of a thrift to service acquisition debt obligations
(at a certain price level) while providing sufficient earnings for reasonable
dividends and capital adequacy requirements. In connection with the cash flow
analysis, the return on investment that would accrue to a prospective buyer at
the transaction value is calculated. The investment value method, which was
analyzed in connection with this transaction, was the net present value of
dividends stream and terminal value, which is discussed below.
Net Present Value of Dividends Stream and Terminal Value
The investment of earnings value of any banking institution's stock is
an estimate of present value of the future benefits, usually earnings, cash flow
or dividends, which will accrue to the stock. FinPro calculated a net present
value of dividends stream and terminal value through 2006 under a number of
iterations. Earnings for 2002 and 2003 were based on WHG's budget. The annual
earnings growth rates for years 2004 to 2006 ranged from 5.00% to 15.00%, with
dividend estimates based upon historical levels. The terminal value was
approximated using an acquisition price to earnings multiple of 31.38x, which
resulted in acquisition price to book multiples ranging from 90.84% to 148.20%.
Discount rates between 8.00% and 12.00% were utilized. Based on these
assumptions, FinPro's calculation of the net present value of the dividends
stream and terminal value per share ranged between $8.05 and $15.26. FinPro's
computations were based on an analysis of the thrift industry, the economic and
competitive situations currently existing in WHG's market area and its current
financial condition.
When the market value and investment value methods are subjectively
weighed, using the appraiser's experience and judgment, it is FinPro's opinion
that the proposed merger consideration is fair from a financial prospective to
the holders of WHG's common stock.
In rendering its opinion, FinPro or BCSB did not independently verify
the asset quality and financial condition of WHG or BCSB, but instead relied
upon the data provided by or on behalf of WHG and BCSB to be true and accurate
in all material respects.
Prior Relationships
Prior to being retained as WHG's financial advisor, FinPro has provided
financial advisory and consulting services to WHG. The revenues derived from
these services are insignificant when compared to the firm's total gross
revenues.
14
Compensation for Services Rendered
FinPro acted as WHG's financial advisor in connection with the merger
and will receive a fee equal to 1.00% of the aggregate deal value, or
approximately $200 thousand, a portion of which is contingent upon completion of
the merger. In addition, FinPro will be reimbursed for reasonable expenses
related to the merger and WHG has indemnified FinPro in connection with any
matter related to the merger.
You Will Receive Cash for Your Shares of WHG Stock
Upon completion of the merger, each outstanding share of WHG common
stock shall be converted into and represent the right to receive $14.25 in cash
without any interest paid thereon. The aggregate amount of the cash payment
represents the merger consideration. The merger consideration to be paid in
connection with the merger is expected to be approximately $19,455,860 including
payment for the cancellation of all outstanding WHG stock options.
Dissenters' Appraisal Rights
Our stockholders do not have dissenters' appraisal rights under
Maryland law. This means that you do not have the right to dissent from the
merger and seek a judicial appraisal of the value of your shares.
Treatment of Options
At the effective time of the merger, each outstanding stock option to
purchase WHG common stock, whether or not such option is then exercisable,
issued pursuant to the 1996 and 2001 WHG Stock Option Plans, will be canceled
and the holder of the unexercised stock option will be entitled to receive a
cash payment equal to $14.25 less the exercise price per share of the stock
option, multiplied by the number of shares of WHG common stock subject to the
stock option, less any required tax withholding.
Procedure for Surrendering Your Certificates
At or prior to the effective time of the merger, BCSB will deposit in
trust with ________________, (the "exchange agent"), an amount of cash equal to
the aggregate merger consideration. The exchange agent receiving the deposit
will act as paying agent for the benefit of the holders of certificates of WHG
common stock in exchange for the merger consideration. Each holder of WHG common
stock who surrenders his or her WHG shares to the exchange agent will be
entitled to receive a cash payment of $14.25 per share of WHG common stock upon
acceptance of the shares by the exchange agent.
No later than five business days after the effective time of the
merger, a letter of transmittal will be mailed by the exchange agent to WHG
stockholders. The letter of transmittal will contain instructions for
surrendering your certificates of WHG common stock. Each holder of a WHG stock
certificate who surrenders such certificate to the exchange agent will, upon
acceptance thereof by the exchange agent, be entitled to the merger
consideration to be paid promptly following acceptance by the exchange agent.
You should not return your WHG 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.
15
If a certificate for WHG common stock has been lost, stolen or
destroyed, the exchange agent is not obligated to deliver payment until the
holder of the shares delivers:
* an appropriate affidavit by the person claiming the loss, theft
or destruction of his or her certificate,
* an indemnity agreement, and
* if required by the exchange agent or BCSB, a bond.
After twelve months following the effective time of the merger, the
exchange agent will deliver to BCSB any funds not claimed by former WHG
stockholders. Thereafter, the payment obligation for any certificate
representing WHG common stock which has not been satisfied will become the
responsibility of BCSB.
Representations and Warranties Made by Us, Baltimore County Savings and BCSB
The Agreement contains representations and warranties made by us,
Baltimore County Savings and BCSB which are customary for this type of merger
transaction, including, among others, representations and warranties concerning:
* the organization, standing and authority of WHG, Heritage
Savings, Baltimore County Savings and BCSB,
* the due authorization, execution, delivery and performance of the
Agreement,
* the financial statements of BCSB and us,
* the receipt of a fairness opinion from WHG's financial advisor
regarding the merger consideration,
* the regulatory reports filed by WHG and BCSB and their
subsidiaries,
* governmental approvals required for the consummation of the
merger,
* the absence of actions, facts or circumstances that would
materially impede or delay consummation of the merger, and
* the accuracy of the information in this proxy statement.
We made certain additional representations and warranties (which are
also customary), among others, regarding our capitalization, our subsidiaries,
the absence of certain interim events, the absence of any broker's and finder's
fees other than that owed FinPro, other material agreements, employee and
officer benefit plans, registration of our securities, our compliance with laws,
absence of certain violations as a result of the merger, litigation and
environmental matters, the adequacy of insurance coverage, labor matters, the
status of our loan portfolios, the absence of certain defaults, tax matters, the
absence of derivative contracts, real estate owned or leased by us, material
interests of certain persons and the accuracy of our disclosures. BCSB has
represented that it will have the funds sufficient to pay the merger
consideration required of it under the Agreement.
16
Some of the representations and warranties made by us are qualified by
materiality. The representations, warranties, agreements and covenants in the
Agreement will expire at the effective time of the merger, except for agreements
and covenants that by their terms are to be performed after the effective time
of the merger. If the Agreement is terminated, there will be no liability on the
part of either us, BCSB or Baltimore County Savings other than the possible
payment of a fee to Baltimore County Savings as discussed below under
"-Termination of the Agreement," and except that no party shall be relieved or
released from any liability arising out of a willful breach by it of any
covenant, undertaking representation or warranty in the Agreement.
Conditions to the Merger
The respective obligations of BCSB, Baltimore County Savings and WHG to
effect the merger are subject to the satisfaction or waiver of the following
conditions specified in the Agreement:
* all corporate action to be taken by the respective Boards of
Directors to authorize the execution, delivery and performance of
the Agreement is effected and evidenced by certified copies of
resolutions provided to both parties;
* the performance by the other party of its obligations and
covenants contained in the Agreement in all material respects;
* the accuracy of the other party's representations and warranties
in all material respects;
* the receipt of all required regulatory approvals and the
termination or expiration of all required notice and waiting
periods thereunder, provided that none of such approvals,
consents or waivers contain, in the reasonable opinion of BCSB or
Baltimore County Savings, any conditions or requirements that
would materially reduce the economic or business benefits of the
merger to BCSB or Baltimore County Savings;
* the absence of any order, decree or injunction issued by a court
or agency of competent jurisdiction which prevents completion of
the merger; and
* the receipt of certain certificates by officers of each party.
WHG's obligation to effect the merger is also subject to the following
conditions:
* the approval of the Agreement by our stockholders; and
* the deposit by BCSB and Baltimore County Savings of an amount of
cash equal to the aggregate merger consideration with the
exchange agent that WHG shareholders are entitled to receive
pursuant to the Agreement.
BCSB and Baltimore County Savings' obligation to effect the merger is
also subject to the following conditions:
* the absence of a material adverse effect on the financial
condition, assets or results of operations of WHG other than that
caused by market fluctuations, federal or state law or
regulations, as a result of actions taken at the request of BCSB
or Baltimore County Savings, or due to expenses incurred in
connection with the Agreement; and
17
* the absence of an increase of more than $2.75 million in
commercial loans and multi- family loans delinquent ninety days
or more as of any moth end prior to the date the transaction is
closed in comparison to the amount of such delinquencies at the
end of January 2002.
There can be no assurance that the conditions to consummation of the
merger will be satisfied or waived. The merger will become effective when the
articles of merger are filed with the Secretary of State of the State of
Maryland. It is currently anticipated that the effective time of the merger will
occur during the third quarter of 2002.
Conduct of Business Prior to the Completion of the Merger
We and Baltimore County Savings have agreed that during the period from
the date of the Agreement to the effective time of the merger (except as
expressly provided in the Agreement), we and Baltimore County Savings and our
respective subsidiaries will:
* conduct our business in the ordinary course consistent with our
past practice;
* preserve intact our business organization;
* maintain good relationships with employees;
* preserve the goodwill of our customers and business
relationships;
* take all necessary action, in good faith, to permit the
completion of the merger; and
* meet on a regular basis to discuss systems conversions.
We also have agreed, among other things, that, except as contemplated
by the Agreement or unless BCSB provides its written consent, we and our
subsidiaries will not:
* amend our articles of incorporation, bylaws, charter or similar
organizational documents;
* issue, grant, modify, authorize or purchase shares of our common
stock, with certain exceptions;
* declare, set aside, make or pay any dividend or other
distribution, except for regularly quarterly dividends not to
exceed $0.09 per share of WHG common stock with payment and
record dates consistent with past practice;
* increase the rate of compensation of our directors, officers or
employees, or pay or agree to pay any bonus, severance or any
other new benefit to our directors, officers or employees, with
certain exceptions;
* enter into or, except as may be required by law, modify any
employee benefit plan, or make any contributions to or materially
amend certain employee benefit plans, with certain exceptions;
* merge or consolidate WHG or any of its subsidiaries with any
other corporation;
18
* sell or lease all or any substantial portion of the assets or
business of WHG or any of its subsidiaries;
* 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 WHG or any of its subsidiaries and any
other person;
* enter into a purchase and assumption transaction with respect to
deposits and liabilities; permit the revocation or surrender by
any of WHG's subsidiaries 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;
* sell or otherwise dispose of the capital stock or any asset of
WHG or any of its subsidiaries other than in the ordinary course
of business consistent with past practice;
* subject any asset of WHG or any of its subsidiaries to a lien,
pledge, security interest or other encumbrance (other than in
connection with deposits, repurchase agreements, bankers
acceptances, "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;
* take any action which would result in any of the representations
and warranties of WHG or Heritage Savings set forth in the
Agreement not to be true after the effective time of the merger
except as may be required by law;
* change any method, practice or principle of accounting, except as
may be required from time to time by laws, regulations or
generally accepted accounting principles;
* 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 WHG or any of its subsidiaries
is a party, other than in the ordinary course of business,
consistent with past practice;
* 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 otherwise alter, in any material
respect, the mix, maturity, credit or interest rate risk profile
of its portfolio of investment securities or its portfolio of
mortgage-backed securities;
* purchase any security with a remaining term to maturity greater
than three years;
* 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 $400,000
in the aggregate, or increase, compromise, extend, renew or
modify any existing loan or commitment outstanding in excess of
$500,000, with certain exceptions;
19
* enter into, renew, extend or modify any other transaction with
certain persons associated and/or affiliated with WHG, with
certain exceptions;
* enter into any futures contract, option, interest rate caps,
interest rate floors, interest rate exchange agreement or other
agreement or take any other action for purposes of hedging the
exposure of its interest-earning assets and interest-bearing
liabilities to changes in market rates of interest;
* 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 certain employee benefit plans, with certain exceptions;
* 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
accounting policies and except as may be necessitated in the
reasonable opinion of WHG due to changes in interest rates, and
in accordance with safe and sound banking practices;
* make any capital expenditures in excess of $25,000 individually
or $50,000 in the aggregate, with certain exceptions;
* 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;
* undertake or enter into 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 WHG or any of its subsidiaries of more than $25,000
annually, or containing a material financial commitment and
extending beyond February 27, 2003;
* sell any real estate owned ("REO") or loan, or capitalize any
further expenses relating to REO; or
* agree to do any of the foregoing.
In addition, we have agreed that neither us nor any of our subsidiaries
or any of our officers, directors, employees, representatives or agents will
solicit or encourage inquiries or proposals that constitute or may reasonably be
expected to lead to an acquisition proposal, as defined below, nor will WHG or
its representatives furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, purchase of all or a
substantial portion of the assets of, or any equity interest in, WHG or Heritage
Savings. We are permitted, however, to furnish information to or engage in
discussions or negotiations with third parties if, after having consulted with
and considered the advice of our counsel, we determine that the failure to do so
may cause our Board of Directors to breach its fiduciary duties. We are required
to promptly inform BCSB, in writing, of any such requests for information or of
any negotiations or discussions.
20
If our Board of Directors determines, after consultation with our
financial advisor and legal counsel, that we have received an offer from a third
party that is superior to BCSB's, we must promptly notify BCSB of such offer. A
superior offer means an unsolicited written, bona fide proposal to acquire WHG
pursuant to a merger, consolidation, share exchange, business combination,
tender or exchange offer or other similar transaction, if, and only to the
extent that, (i) the Board of Directors of WHG receives an opinion from its
independent financial advisor that such proposal may be superior to the merger
from a financial point-of-view to WHG's stockholders, and (ii) the Board of
Directors of WHG, after consultation with and after considering the advice of
independent legal counsel, determines in good faith that failure to take such
action may cause the Board of Directors of WHG to breach its fiduciary duties to
stockholders under applicable law.
For purposes of the Agreement, an acquisition proposal is any proposal
or offer as to any of the following (other than the transactions contemplated
under the Agreement) involving WHG or any of its subsidiaries: (i) any merger,
consolidation, share exchange, business combination, or other similar
transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 25% or more of the assets of WHG, taken as a whole, in a
single transaction or series of transactions; (iii) any tender offer or exchange
offer for 25% or more of the outstanding shares of capital stock of WHG or the
filing of a registration statement under the Securities Act 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.
In the event that WHG or any of its subsidiaries has entered into an
acquisition agreement with regards to a superior proposal, WHG and BCSB may be
permitted to terminate the Agreement, and BCSB will be entitled to a termination
fee of $1 million, subject to certain conditions. See "Termination of the
Agreement."
Approvals Needed to Complete the Merger
In addition to the approval of the Agreement by our stockholders,
completion of the merger and the transactions contemplated by the Agreement are
subject to the prior approval of the Office of Thrift Supervision ("OTS"). The
required applications for OTS approval will be filed by the second quarter of
2002. In reviewing applications filed under the Home Owners' Loan Act of 1933,
as amended ("HOLA"), and under the Bank Merger Act, 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 savings
institution acquisition or merger 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 Heritage Savings and Baltimore County
Savings in meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by each institution. As part of the review
process, the banking agencies frequently receive comments and protests from
community groups and others. Heritage Savings and Baltimore County Savings each
received a "satisfactory" rating during their most recent respective Community
Reinvestment Act examinations.
In addition, a period of not less than 15 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.
21
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 WHG
stockholders. Furthermore, regulatory approvals do not constitute an endorsement
or recommendation of the merger.
There can be no assurances that the requisite regulatory approvals will
be received in a timely manner, in which event the consummation of the merger
may be delayed. If the merger is not consummated on or before September 30,
2002, the Agreement may be terminated by either BCSB, Baltimore County Savings
or us.
It is a condition to the consummation of the merger that the regulatory
approvals be obtained without any conditions or requirements that are unduly
burdensome or would materially reduce the economic or business benefits of the
merger to BCSB or Baltimore County Savings. No assurance can be provided that
any such approvals will not contain terms, conditions or requirements which fail
to satisfy this condition of the merger.
Waiver and Amendment of the Agreement; Alternative Structure
By written approval of a duly authorized officer, each party to the
Agreement may extend the time for the performance of any of the obligations or
acts of the other party and may waive:
* any inaccuracies in the representations and warranties contained
in the Agreement or any document delivered pursuant to the
Agreement,
* compliance with any covenant, undertaking or agreement,
* to the extent permitted by law, satisfaction of any condition of
the Agreement, or
* the performance by the other party of any of its obligations
under the Agreement.
The Agreement may be amended at any time prior to the occurrence of the
transactions contemplated by the Agreement by mutual agreement of the parties as
approved by their respective Boards of Directors, in writing; provided, however,
that after our stockholders have approved the Agreement, no amendment can modify
the form or decrease the amount of the merger consideration or otherwise
materially adversely affect our stockholders without their approval.
Termination of the Agreement
The Agreement may be terminated in writing prior to the effective time
of the merger by:
* the mutual written consent of the Boards of BCSB and WHG,
* by the Boards of BCSB or WHG if:
22
* the merger is not consummated by September 30, 2002;
* our stockholders fail to approve the Agreement;
* any applicable regulatory authority formally denies the requisite
regulatory approval necessary to consummate the transaction
provided that such denial is not due to a breach of any provision
of the Agreement by the party seeking to terminate;
* at the time of such termination, any of the representations and
warranties of the party seeking to terminate are not true and
correct to the extent that the merger may be consummated as
contemplated by the Agreement;
* the other party has materially breached any of its covenants,
agreements or representations and warranties and the breach has
not been cured within 15 days after the giving of written notice
of such breach; or
* any event occurs such that a condition to consummation of the
merger cannot be fulfilled by the party in breach of the
Agreement and the non-breaching party has failed to waive
satisfaction of the condition.
* by the Board of BCSB or Baltimore County Savings if approval by
an applicable regulatory authority contains a condition or
requirement such that it would not be economically feasible for
BCSB or Baltimore County Savings to consummate the transaction;
* by the Board of BCSB or Baltimore County Savings if WHG has
received a superior proposal to that of BCSB and Baltimore County
Savings and WHG has either entered into an acquisition agreement
in regards to the superior proposal, terminates the Agreement, or
withdraws its recommendation, fails to recommend, or otherwise
changes its recommendation in a manner adverse to BCSB to
encourage its stockholders vote in favor of the Agreement with
BCSB and Baltimore County Savings;
* by the Board of WHG if WHG has received a superior proposal and
has determined to accept the superior proposal after the
expiration of three business days following submission of written
notification of such superior proposal to BCSB and Baltimore
County Savings and BCSB and Baltimore County Savings' failure to
timely match the superior proposal.
In the event that the Agreement is terminated, the Agreement will
become void and have no effect, except for:
* provisions relating to confidential information;
* provisions relating to potential data processing conversion
costs; and
* provisions relating to a fee in the amount of $1.0 million (the
"Break-Up Fee") payable to Baltimore County Savings by WHG
following the occurrence of:
23
* Our receipt of a superior proposal and our Board's decision to
enter into an acquisition agreement in regards to such superior
proposal provided that (i) BCSB and Baltimore County Savings do
not match such superior proposal within three business days of
receipt of notice of such proposal by WHG; and (ii) WHG either
terminates the Agreement with BCSB and Baltimore County Savings,
withdraws, fails to recommend or changes its recommendation to
its stockholders in a manner adverse to BCSB and Baltimore County
Savings so as to not recommend approval of the Agreement with
BCSB and Baltimore County Savings by its stockholders; or
* our entering into an agreement with a third party relating to an
acquisition proposal to acquire us or Heritage Savings or the
consummation of such an agreement within 12 months after the
occurrence of (i) the termination of the Agreement by BCSB or
Baltimore County Savings due to the material breach of any
covenant by WHG and WHG's failure to remedy such breach within
fifteen days of notice of such breach by BCSB or Baltimore County
Savings; (ii) the failure of our stockholders to approve the
Agreement with BCSB and Baltimore County Savings after receipt by
WHG of a superior proposal; or (iii) the failure to obtain
shareholder approval of the Agreement with BCSB and Baltimore
County Savings by September 30, 2002.
A breaching party will not be relieved from any liability or damages
for its willful or fraudulent breach of any provision of the
Agreement. If demand is made to us to pay the Break-Up Fee and we
timely pay such fee, then we are not liable for any other fees under
the Agreement.
Interests of Directors and Officers in the Merger that are Different from Your
Interests
Some members of our management and Board of Directors may have
interests in the merger that are in addition to or different from the interests
of our stockholders. Our Board was aware of these interests and considered them
in approving the Agreement.
WHG Stock Options. As of __________ __, 2002, directors and executive
officers held options to purchase in the aggregate 251,450 shares of WHG common
stock under our 1996 and 2001 stock option plans. Accordingly, each director and
executive officer will receive payment for their stock options as described
earlier in this proxy statement. The aggregate value of the payout for these
stock options will be approximately $972,626. See " - Treatment of Options."
WHG Employee Stock Ownership Plan. As of July 31, 2001, our ESOP held
48,807 shares of our common stock which had not yet been allocated to
participants and which were pledged as collateral for the remaining $386,216
loan to the ESOP. The ESOP will be terminated upon completion of the merger, at
which time the loan will be repaid with the cash received by the ESOP in the
merger. Based on the number of unallocated shares and the current loan balance,
the ESOP will have approximately a $165,061 cash profit after repayment of the
ESOP loan, which cash will be allocated to the participants in accordance with
the terms of the ESOP and distributed to participants in the ESOP following
receipt of a favorable determination letter from the Internal Revenue Service.
Officers Stewart and Lufburrow will receive allocations to their ESOP accounts
of approximately $39,889, and $17,967, respectively, based upon a $165,061 cash
profit related to the unallocated shares.
24
Employment Agreement. Effective December 11, 1995, and as subsequently
amended and renewed, Heritage Savings entered into an employment agreement with
Peggy J. Stewart, President and CEO of the Bank. Under the Employment Agreement,
Ms. Stewart is entitled to receive a severance payment upon termination of her
employment. In the event of the termination of employment in connection with any
change in control of the Bank during the term of the Agreement, Ms. Stewart will
be paid in a lump sum an amount equal to 2.99 times the five year average of her
annual taxable compensation. For purposes of the change in control provision,
the merger with Baltimore County Savings and BCSB constitutes a "change in
control." Ms. Stewart will receive a payment of approximately $542,000 pursuant
to her agreement.
Directors Change in Control Severance Plan. Heritage Savings entered
into change of control severance plan with its directors. The plan provides for
a payment to each of the directors equal to 1.5 times their annual Board
retainer and monthly meeting fees. In addition, as set forth in the Agreement,
John E. Lufburrow, the Chairman of the Board of WHG, will be provided with a
six-month severance benefit in the amount of $24,050 in addition to his Board
severance benefit pursuant to the Heritage Savings Bank Directors Change in
Control Severance Plan. For purposes of the plan, the merger will constitute a
"change in control." The aggregate amount that may be payable under the plan is
approximately $138,600.
Officer Change in Control Severance Agreements. Heritage Savings
entered into change in control severance agreements with four of its Officers.
The change in control agreements provide for a payment to each of the officers
upon involuntary termination of employment upon a change in control, other than
for cause, equal to 2.00 times such person's compensation for the year
immediately preceding the termination, subject to certain exceptions, plus costs
associated with maintaining certain medical and dental coverage. For purposes of
the change in control agreements, the merger will constitute a "change in
control." The aggregate amount that may be payable under the change in control
agreements is approximately $675,000.
Protection of Directors, Officers and Employees Against Claims. In the
Agreement, BCSB and Baltimore County Savings agreed to indemnify our and our
subsidiaries' directors and officers after the completion of the merger. BCSB
also has agreed to maintain, for a period of three years after the effective
time of the merger, our and our subsidiaries' current directors' and officers'
liability insurance policies, provided that BCSB may substitute insurance
policies of at least the same coverage and amount containing terms and
conditions which are substantially no less advantageous than WHG's current
insurance policies, provided that BCSB shall not be required to expend more than
150% of the current annual amount expended by Heritage Savings to maintain such
coverage.
Employees and Benefit Plans
The Agreement provides that our and our subsidiaries' employees who
remain employed by Baltimore County Savings after the effective time of the
merger will be eligible to participate in the benefit plans of Baltimore County
Savings that are generally available to their employees subject to the terms and
provisions of the benefit plans. Continuing employees will receive credit for
years of service with us and our subsidiaries for purposes of determining
eligibility for participation and vesting (but not for purposes of accrual or
restoration of benefits that are calculated on an actuarial basis, including any
qualified or non-qualified defined benefit plan or restoration plan) with
Baltimore County Savings.
Severance Payments. In the event Baltimore County Savings terminates
the employment of any employee of WHG or Heritage Savings who is an employee of
WHG or Heritage Savings within five days of the effective date of the merger,
within six months of the effective date of the merger, other than
25
voluntary termination and termination for cause, Baltimore County Savings agreed
to provide each such employee severance payments equal to two weeks' pay for
every year of service with WHG or Heritage Savings up to a maximum of 26 weeks.
Federal Income Tax Consequences of the Merger to You
The exchange of our common stock for cash pursuant to the terms of the
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 WHG 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 WHG common stock exchanged by
such stockholder pursuant to the merger.
Gain or loss must be determined separately for each block of WHG common
stock surrendered pursuant to the merger. For purposes of federal tax law, a
block consists of shares of WHG common stock acquired by the stockholder at the
same time and price. Gain or loss recognized by the stockholder exchanging his
or her WHG common stock pursuant to the merger will be capital gain or loss if
such WHG common stock is a capital asset in the hands of the stockholder. If the
WHG 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 38.6% 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 BCSB nor WHG has requested or will request a ruling from the
Internal Revenue Service as to any of the tax effects to WHG's stockholders of
the transactions discussed in this proxy statement, and no opinion of counsel
has been or will be rendered to WHG's 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.
Accounting Treatment of the Merger
The merger will be accounted for under the purchase method of
accounting. Under this method of accounting, BCSB and WHG will be treated as one
company as of the date of the merger, and BCSB will record the fair value of
WHG's assets (including intangible assets which arise from either contractual or
other legal rights or are separable) and liabilities on its consolidated
financial statements. Acquisition costs in excess of the fair value of the net
assets acquired will be recorded as goodwill. Goodwill will not be amortized for
financial accounting purposes, but instead will be tested for impairment
annually. Our results of operations will be included in BCSB's consolidated
income statement after completion of the merger.
Who Pays for What
All out-of-pocket costs and expenses incurred in connection with the
merger (including, but not limited to, counsel fees) will be paid by the party
incurring such costs and expenses.
26
CERTAIN RELATED AGREEMENTS
Plan of Liquidation
In connection with the merger, WHG will adopt a plan of liquidation
under which WHG, immediately after the completion of the merger, will be
liquidated and dissolved by transferring all of its assets and liabilities to
BCSB.
Voting Agreement
As an inducement for BCSB and Baltimore County Savings to enter into
the Agreement, each director of WHG and Heritage Savings entered into a voting
agreement with BCSB and Baltimore County Savings. Pursuant to the voting
agreement, our directors agreed to vote all of their shares of WHG common stock
owned, controlled or for which they possess voting power in favor of approval of
the Agreement.
BENEFICIAL OWNERSHIP OF WHG COMMON STOCK
Stockholders of record as of the close of business on __________, 2002
will be entitled to one vote for each share of our common stock then held. As of
that date, we had _____________ shares of common stock issued and outstanding.
The following table sets forth information regarding the share ownership of:
* each holder of more than 5% of our outstanding common stock,
including our Employee Stock Ownership Plan,
* each member of our Board of Directors and each executive officer
who is not a director, and
* all of our and Heritage Saving's directors and executive officers
as a group.
Amount and Percent of Shares
Nature of of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership (1) Outstanding (%)
------------------------ ----------------
Heritage Savings Bank, F.S.B.
Employee Stock Ownership Plan and Trust
("ESOP")
1505 York Road 138,568 10.8%
Lutherville, Maryland 21093 (2)
Jeffrey L. Gendell
Tontine Financial Partners, L.P.
Tontine Management, L.L.C.
200 Park Avenue, Suite 3900
New York, New York 10166 (3) 74,605 5.8%
27
Gary R. Dowell
Janet M. Dowell
1720 Content Lane
Reisterstown, MD 21136 (4) 67,000 5.2%
Terrence S. Walsh (5) 66,444 5.2%
John E. Lufburrow
1505 York Road
Lutherville, Maryland 21093 104,903 7.7%
Peggy J. Stewart
1505 York Road
Lutherville, Maryland 21093 132,736 9.8%
Philip W. Chase, Jr. 29,129 2.3%
Edwin C. Muhly, Jr. 22,697 1.8%
Urban P. Francis, Jr. 28,816 2.2%
Hugh P. McCormick 33,516 2.6%
Herbert A. Davis 21,197 1.6%
D. Edward Lauterbach, Jr. 23,425 1.8%
Daniel J. Gallagher 16,425 1.3%
Diana L. Rohrback 26,055 2.0%
Robin L. Taylor 27,896 2.1%
Directors and Executive Officers as a
Group (11 persons) 466,795 30.8%
- -------------
(1) The nature of beneficial ownership for shares reported in this column is
sole voting and dispositive power, except as otherwise noted in these
footnotes. Included in the shares beneficially owned by the named
individuals are options to purchase shares of common stock, which are
currently exercisable or which will become exercisable within 60 days of
the Voting Record Date, as follows: 8,605 shares for Mr. Chase, Jr., Mr.
Muhly, Jr., Mr. Francis, Jr., Mr. McCormick, Mr. Davis and Mr. Lauterbach,
Jr; 8,334 shares for Mr. Gallagher and 13,980 shares for each of Ms.
Rohrback and Ms. Taylor.
(2) The ESOP purchased such shares for the exclusive benefit of plan
participants with funds borrowed from the Company. As of the record date,
89,761 shares have been allocated under the ESOP to participant accounts.
(3) The information with respect to Jeffrey L. Gendell, Tontine Financial
Partners, L.P., and Tontine Management, L.L.C., (collectively, the
"Reporting Persons"), is derived from a Schedule 13D, dated January 5,
2001, which states that the Reporting Persons, through certain of its
affiliates, had shared voting power and shared dispositive power with
regard to 74,605 shares.
(4) The information with respect to Gary R. Dowell and Janet M. Dowell is
derived from an amended Schedule 13D, dated November 14, 2001, which states
that Gary R. Dowell has sole voting and dispositive power with respect to
51,300 shares and shared voting and dispositive power with his spouse Janet
M. Dowell with respect to 13,700 shares, and shared voting and dispositive
power with Liberty Financial Group, Inc. with respect to 2,000 shares.
(5) The information with respect to Terrance S. Walsh is derived from a
Schedule 13D filed with the Securities and Exchange Commission on November
28, 2001.
28
STOCKHOLDER PROPOSALS
If the merger is not consummated prior to the next regularly scheduled
annual meeting of our stockholders, all stockholder proposals, other than those
made by or at the direction of the Board of Directors, must be submitted to the
Secretary of the Company at its offices at 1505 York Road, Lutherville, Maryland
21093, within a reasonable time prior to the mailing of the Company's 2002 proxy
materials. Under the Company's Articles of Incorporation and Bylaws, however,
stockholder nominations for director and proposals not included in the Company's
2002 proxy statement, in order to be considered for possible action by
stockholders at the 2002 annual meeting of stockholders, must have been
submitted to the Secretary of the Company, at the address set forth above, by
November 16, 2001.
OTHER MATTERS
Each proxy solicited also confers discretionary authority on our Board
of Directors to vote the proxy with respect to matters incident to the conduct
of the meeting and upon such other matters as may properly come before the
special meeting. Our Board of Directors is not aware of any business to come
before the special meeting other than those matters described above in this
proxy statement. However, if any other matter should properly come before the
special meeting, it is intended that proxy holders will act in accordance with
their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
---------------------------------------
Diana L. Rohrback
Corporate Secretary
Lutherville, Maryland
_______________, 2002
29
WHG BANCSHARES CORPORATION Please mark your FOR
SPECIAL MEETING OF STOCKHOLDERS vote as indicated [X]
in this example
The undersigned hereby appoints the Board of Directors of WHG
Bancshares Corporation ("WHG"), and its successors, with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of WHG which the undersigned is entitled to vote at WHG's
Special Meeting of Stockholders (the "Meeting"), to be held on ____________,
__________ __, 2002, at _______________________________ at _:__ _.m., Eastern
Time, and at any and all adjournments and postponements thereof as follows:
1. Approval of the Agreement and Plan of Merger, FOR AGAINST ABSTAIN
dated as of February 27, 2002, by and between [ ] [ ] [ ]
BCSB Bankcorp, Inc., Baltimore County Savings
Bank, F.S.B., WHG, and Heritage Savings Bank,
F.S.B.
Your Board of Directors I plan to attend the WHG YES NO
recommends a vote "FOR" Special Meeting. [ ] [ ]
proposal 1.
In their discretion, the proxies are authorized to vote on any other business
that may property come before the Special Meeting or any adjournment or
postponement thereof.
This Proxy will be voted as directed. If you date, sign and return this proxy
but do not provide specific voting instructions, this proxy will be voted FOR
Proposal 1. If any other business is presented at the Special Meeting, this
proxy will be voted by those named in this proxy in their best judgment. At the
present time, the Board of Directors knows of no other business to be presented
at the Special Meeting. The stockholder may revoke this proxy at any time before
it is voted.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned acknowledges receipt from WHG prior to the execution of
this proxy, of Notice of the Special Meeting and the Proxy Statement.
Dated:
--------------------------- ---------------------------------------
Print Name of Stockholder(s)
--------------------------- ---------------------------------------
Signature of Stockholder Signature of Stockholder
Please sign exactly as your name appears above on this form. When signing as
attorney, executor, administrator, trustee, guardian or corporate officer,
please give your full title. If shares are held jointly, each holder should
sign.
- --------------------------------------------------------------------------------
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
APPENDIX A
AGREEMENT AND PLAN OF MERGER
By and Among
BCSB BANKCORP, INC.
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
And
WHG BANCSHARES CORPORATION
And
HERITAGE SAVINGS BANK, F.S.B.
Dated as of February 27, 2002
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
RECITALS..........................................................................................................1
- --------
ARTICLE I CERTAIN DEFINITIONS.....................................................................................2
- -----------------------------
Section 1.01 Definitions.......................................................................................2
-------------------------
ARTICLE II THE MERGER AND EXCHANGE OF SHARES......................................................................6
- --------------------------------------------
Section 2.01 Effects of Merger; Surviving Corporation..........................................................6
------------------------------------------------------
Section 2.02 Conversion of Shares..............................................................................7
----------------------------------
Section 2.03 Exchange Procedures...............................................................................8
---------------------------------
Section 2.04 Stock Options....................................................................................9
----------------------------
Section 2.05 MSBP Awards......................................................................................9
--------------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES
- ------------------------------------------------
OF WHG AND Heritage Bank........................................................................9
------------------------
Section 3.01 Organization.....................................................................................10
--------------------------
Section 3.02 Capitalization...................................................................................10
----------------------------
Section 3.03 Authority; No Violation..........................................................................11
-------------------------------------
Section 3.04 Consents.........................................................................................12
----------------------
Section 3.05 Financial Statements.............................................................................12
----------------------------------
Section 3.06 Taxes............................................................................................13
-------------------
Section 3.07 No Material Adverse Effect.......................................................................13
----------------------------------------
Section 3.08 Contracts........................................................................................13
-----------------------
Section 3.09 Ownership of Property; Insurance Coverage........................................................15
-------------------------------------------------------
Section 3.10 Legal Proceedings................................................................................15
-------------------------------
Section 3.11 Compliance With Applicable Law...................................................................16
--------------------------------------------
Section 3.12 ERISA/Employee Compensation......................................................................16
-----------------------------------------
Section 3.13 Brokers, Finders and Financial Advisors.........................................................19
------------------------------------------------------
Section 3.14 Environmental Matters............................................................................19
-----------------------------------
Section 3.15 Loan Portfolio...................................................................................20
----------------------------
Section 3.16 Information to be Supplied.......................................................................21
----------------------------------------
Section 3.17 Related Party Transactions.......................................................................22
----------------------------------------
Section 3.18 Schedule of Termination Benefits.................................................................22
----------------------------------------------
Section 3.19 Deposits.........................................................................................22
----------------------
Section 3.20.Business Combination.............................................................................22
------------------------------------
Section 3.21 Fairness Opinion.................................................................................23
------------------------------
Section 3.22 Risk Management Instruments......................................................................23
-----------------------------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES
- -----------------------------------------
OF BALTIMORE COUNTY SAVINGS BANK AND BCSB BANKCORP.............................................23
-------------------------------------------------
Section 4.01 Organization.....................................................................................23
--------------------------
Section 4.02 Authority; No Violation..........................................................................24
-------------------------------------
Section 4.03 Consents.........................................................................................25
----------------------
Section 4.04 Compliance With Applicable Law...................................................................25
--------------------------------------------
i
Section 4.05 Information to be Supplied.......................................................................26
----------------------------------------
Section 4.06 Financing........................................................................................26
-----------------------
Section 4.07 BCSB Financials.............................................................................26
------------ ----------------
Section 4.08 Litigation..................................................................................26
------------ -----------
ARTICLE V COVENANTS OF THE PARTIES...............................................................................27
- ----------------------------------
Section 5.01 Conduct of Heritage Bank's Business..............................................................27
-------------------------------------------------
Section 5.02 Access; Confidentiality..........................................................................30
------------------------------------
Section 5.03 Regulatory Matters and Consents..................................................................31
---------------------------------------------
Section 5.04 Taking of Necessary Action.......................................................................31
----------------------------------------
Section 5.05 Certain Agreements...............................................................................32
--------------------------------
Section 5.06 No Other Bids and Related Matters................................................................33
-----------------------------------------------
Section 5.07 Duty to Advise; Duty to Update Heritage Bank's Disclosure Schedules..............................34
--------------------------------------------------------------------------------
Section 5.08 Conduct of Baltimore County Bank's Business......................................................35
---------------------------------------------------------
Section 5.09 Board and Committee Minutes......................................................................35
-----------------------------------------
Section 5.10 Undertakings by the Parties......................................................................35
-----------------------------------------
Section 5.11 Employee and Termination Benefits................................................................37
-----------------------------------------------
Section 5.12 Duty to Advise; Duty to Update Baltimore County Bank's
--------------------------------------------------------------------
Disclosure Schedules........................................................................39
---------------------
ARTICLE VI CONDITIONS............................................................................................39
- ---------------------
Section 6.01 Conditions to WHG and Heritage Bank's Obligations under this Agreement...........................39
------------------------------------------------------------------------------------
Section 6.02 Conditions to BCSB and Baltimore County Bank's Obligations under this Agreement..................40
---------------------------------------------------------------------------------------------
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT....................................................................41
- ---------------------------------------------
Section 7.01 Termination......................................................................................42
-------------------------
Section 7.02. Effect of Termination...........................................................................43
------------------------------------
ARTICLE VIII MISCELLANEOUS.......................................................................................43
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Section 8.01 Expenses.........................................................................................43
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Section 8.02 Non-Survival of Representations and Warranties...................................................44
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Section 8.03 Amendment, Extension and Waiver..................................................................44
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Section 8.04 Entire Agreement.................................................................................44
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Section 8.05 No Assignment....................................................................................45
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Section 8.06 Notices..........................................................................................45
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Section 8.07 Captions.........................................................................................46
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Section 8.08 Counterparts.....................................................................................46
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Section 8.09 Severability.....................................................................................46
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Section 8.10 Governing Law....................................................................................46
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Exhibits:
Exhibit A Form of Heritage Bank Voting Agreement
ii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
February 27, 2002, is by and among BCSB Bankcorp, Inc., a federal corporation
("BCSB"), Baltimore County Savings Bank, F.S.B., a federally chartered savings
bank ("Baltimore County Bank"), and WHG Bancshares Corporation ("WHG"), a
Maryland corporation, and Heritage Savings Bank, F.S.B., a federally chartered
savings bank ("Heritage Bank"). Each of BCSB, Baltimore County Bank, WHG and
Heritage Bank is sometimes individually referred to herein as a "party," and
BCSB, Baltimore County Bank, WHG and Heritage Bank are sometimes collectively
referred to herein as the "parties."
RECITALS
WHEREAS, BCSB, a registered savings and loan holding company, with
principal offices in Baltimore, Maryland, owns all of the issued and outstanding
capital stock of Baltimore County Bank, a federally-chartered savings bank
organized under the laws of the United States, with principal offices in
Baltimore, Maryland.
WHEREAS, WHG, a registered savings and loan holding company, with
principal offices in Lutherville, Maryland, owns all of the issued and
outstanding capital stock of Heritage Bank, a federally-chartered savings bank
organized under the laws of the United States, with principal offices in
Lutherville, Maryland.
WHEREAS, the Boards of Directors of the respective parties hereto deem
it advisable and in the best interests of the respective companies and their
stockholders to consummate the business combination transaction contemplated
herein in which: (i) Baltimore County Bank shall incorporate a to-be-formed
company, which shall be merged with and into WHG, with WHG surviving the merger,
and in connection therewith each share of WHG Common Stock outstanding
immediately prior to the Closing Date shall be canceled in exchange for the
right to receive the cash payments specified herein, (the "Merger") (ii) to be
followed by the liquidation of WHG into Baltimore County Bank; and (iii)
immediately thereafter Heritage Bank shall merge with and into Baltimore County
Bank, with Baltimore County Bank surviving the merger (the "Bank Merger") with
the result that Baltimore County Bank will acquire all the assets and
liabilities of Heritage Bank, and Heritage Bank shall cease to exist (the
transactions are sometimes collectively referred to as the "Mergers");
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
Mergers, and the other transactions contemplated by this Agreement
(collectively, the "Merger Documents").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
1
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 any Person who directly, or indirectly,
through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer or director
of such Person and any Affiliate of such executive officer or director.
"Agreement" means this agreement, and any amendment or
supplement hereto, which constitutes a "plan of merger" between BCSB,
Baltimore County Bank, a to-be-formed interim company, and WHG.
"Applications" means the applications for regulatory approval
that are required by the transactions contemplated hereby.
"Baltimore County Bank Employee Plan" means all pension,
retirement, group insurance, and other tax-qualified employee benefit
plan and arrangements, including, but not limited to, "employee benefit
plans," as defined in Section 3(3) of ERISA, incentive and welfare
policies, plans and arrangements with respect to employees of Baltimore
County Bank.
"Bank Merger" means the merger of Heritage Bank with and into
Baltimore County Bank, with Baltimore County Bank as the surviving
institution, and shall include the liquidation of WGH, as the surviving
corporation of the Merger, into Baltimore County Bank.
"Bank Merger Effective Date" shall mean the date, after the
OTS approves the Bank Merger, that all filings are made with the OTS to
perfect the Bank Merger.
"BCSB Financials" means (i) the audited consolidated financial
statements of BCSB as of September 30, 2000 and 2001 and for the two
years ended September 30, 2001, including the notes thereto, and (ii)
the unaudited interim consolidated financial statements of BCSB as of
each calendar quarter thereafter included in the documents filed by
BCSB pursuant to the Exchange Act.
"BCSB Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by BCSB
or Baltimore County Bank, except any corporation the stock of which is
held as security by Baltimore County Bank in the ordinary course of its
lending activities.
2
"BCSB Disclosure Schedules" means the Disclosure Schedules
delivered by BCSB to Heritage Bank pursuant to Article IV of this
Agreement.
"Closing Date" means the date determined by BCSB, in its sole
discretion, upon five (5) days prior written notice to WHG, 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 BCSB and WHG shall mutually agree.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation and Benefit Plans" has the meaning given to such
term in Section 3.12(a).
"DOL" means the U.S. Department of Labor.
"Environmental Law" means any Federal or state law, statute,
rule, regulation, code, order, judgment, decree, injunction, common law
or agreement with any Federal or state governmental authority relating
to (i) the protection, preservation or restoration of the environment
(including air, water vapor, 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 Material, in each case as amended and now in
effect.
"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 entity selected by BCSB, subject to
the approval of WHG, to perform the functions described in Section 2.03
of this Agreement.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLB of Atlanta" means the Federal Home Loan Bank of Atlanta.
"FRB" means the Board of Governors of the Federal Reserve
System.
"GAAP" means generally accepted accounting principles as in
effect at the relevant date and consistently applied.
3
"Hazardous Material" means any substance (whether solid,
liquid or gas) which is or could be detrimental to human health or
safety or to the environment, currently or hereafter 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 substance 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,
asbestos, asbestos-containing material, urea formaldehyde foam
insulation, lead and polychlorinated biphenyl.
"HOLA" means the Home Owners' Loan Act, as amended, 12 U.S.C.
ss.1464 et al.
"Interim" means the to-be-formed subsidiary of Baltimore
County Bank that will be merger with and into WHG.
"IRS" means the Internal Revenue Service.
"Knowledge" as used with respect to a Person (including
references to such Person being aware of a particular matter) means
those facts that are known by the officers and directors of such
Person, and includes any facts, matters or circumstances set forth in
any written notice from a Regulatory Authority or any other material
written notice received by that Person. References to the "Knowledge"
of WHG includes the "Knowledge" of Heritage Bank.
"Loan" includes loan participations.
"Loan Property" shall have the meaning given to such term in
Section 3.14(b) of this Agreement.
"MGCL" means the Maryland General Corporation Law.
"Material Adverse Effect" shall mean, with respect to BCSB or
Heritage Bank, 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 market
value of the assets of BCSB or Heritage Bank 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, (iii) any action taken by Heritage Bank or a WHG Subsidiary
at the request of Baltimore County Bank, (iv) expenses incurred to
complete the transaction contemplated by this Agreement; or (v) an
increase by the FDIC, pursuant to Section 327.9 of the FDIC Regulations
(12 CFR ss.327.9), in the BIF or SAIF Assessment Schedule.
4
"Merger" means the merger of the to-be-formed subsidiary of
Baltimore County Bank with and into WHG, with WHG as the surviving
entity.
"Merger Effective Date" means that date upon which the last of
the corporate transactions that comprise the Merger becomes effective,
in accordance with applicable laws and regulations.
"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).
"Proxy Statement" means the proxy statement, together with any
supplements thereto, to be transmitted to holders of WHG Common Stock
in connection with the transactions contemplated by this Agreement.
"Regulatory Agreement" has the meaning given to that term in
Section 3.11 of this Agreement.
"Regulatory Authority" means any agency or department of any
federal or state government, including without limitation the OTS, the
FDIC, the FRB, the SEC or the respective staffs thereof.
"Rights" means warrants, options, rights, convertible
securities and other capital stock equivalents that obligate an entity
to issue its securities.
"SAIF" means the Savings Association Insurance Fund, as
administered by the FDIC.
"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.
"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
5
which is held as security by either BCSB or WHG, as the case may be,
in the ordinary course of its lending activities.
"Superior Proposal" has the meaning given to such term in
Section 5.06 of this Agreement.
"WHG Common Stock" has the meaning given to that term in
Section 3.02(a) of this Agreement.
"WHG Disclosure Schedules" means the Disclosure Schedules
delivered by Heritage Bank to Baltimore County Bank pursuant to Article
III of this Agreement.
"WHG Financials" means (i) the audited consolidated financial
statements of WHG as of September 30, 2000 and 2001 and for the two
years ended September 30, 2001, including the notes thereto, and (ii)
the unaudited interim consolidated financial statements of WHG as of
each calendar quarter thereafter included in Securities Documents filed
by WHG.
"WHG Regulatory Reports" means the Thrift Financial Reports of
Heritage Bank and accompanying schedules, as filed with the OTS, for
each calendar quarter beginning with the quarter ended March 31, 2001,
through the Closing Date, and all Annual, Quarterly and Current Reports
filed on Form H(b)-11 with the OTS by WHG from March 31, 2001 through
the Closing Date.
"WHG Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by WHG,
including Heritage Bank, except any corporation the stock of which is
held as security by WHG or Heritage Bank in the ordinary course of its
lending activities.
ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
Section 2.01 Effects of Merger; Surviving Corporation.
(a) (i) On the Merger Effective Date, a to-be-formed company
formed by Baltimore County Bank ("Interim") shall merge with and into WHG; the
separate existence of Interim shall cease; WHG shall be the surviving
corporation in the Merger (the "Surviving Corporation") and a wholly-owned
subsidiary of Baltimore County Bank; and all of the property (real, personal and
mixed), rights, powers and duties and obligations of Interim shall be taken and
deemed to be transferred to and vested in WHG, as the Surviving Corporation in
the Merger, without further act or deed; all in accordance with federal law.
(ii) On the Merger Effective Date: the Articles of
Incorporation of the Surviving Corporation shall continue as in effect
immediately prior to the Merger Effective Date; and the
6
Bylaws of the Surviving Corporation shall continue as in effect immediately
prior to the Merger Effective Date, until thereafter altered, amended or
repealed in accordance with applicable law.
(iii) On the Merger Effective Date, the directors of Interim
duly elected and holding office immediately prior to the Effective Date shall be
the directors of the Surviving Corporation in the Merger, each to hold office
until his or her successor is elected and qualified or otherwise in accordance
with the Articles of Incorporation and Bylaws of the Surviving Corporation.
(iv) On the Merger Effective Date, the officers of Interim
duly elected and holding office immediately prior to the Effective Date shall be
the officers of the Surviving Corporation in the Merger, each to hold office
until his or her successor is elected and qualified or otherwise in accordance
with the Articles of Incorporation and the Bylaws of the Surviving Corporation.
(b) Notwithstanding any provision of this Agreement to the
contrary, BCSB 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 contemplated hereby, and the parties shall enter into such
alternative transactions, so long as (i) there are no adverse tax consequences
to the stockholders, directors or officers of WHG 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 be likely to materially delay or jeopardize receipt of any required
regulatory approvals.
Section 2.02 Conversion of Shares.
(i) Each outstanding share of WHG Common Stock issued and
outstanding at the Merger Effective Date, except as provided in clause (ii) and
(iii) of this Section, shall cease to be outstanding, shall cease to exist and
shall be converted into the right to receive $14.25 in cash (the "Merger
Consideration").
(ii) Any shares of WHG 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 as promptly as practicable be canceled, such shares shall not be converted
into the Merger Consideration, and no cash or shares of capital stock of BCSB
shall be issued or exchanged therefor.
(iii) Each share of BCSB Common Stock issued and outstanding
immediately before the Merger Effective Date shall remain an outstanding share
of Common Stock of the Surviving Corporation.
(iv) The holders of certificates representing shares of WHG
Common Stock as of the Merger Effective Date (any such certificate being
hereinafter referred to as a "Certificate") shall cease to have any rights as
stockholders of WHG, except such rights, if any, as they may have pursuant to
applicable law.
7
Section 2.03 Exchange Procedures.
(a) As promptly as practicable after the Effective Date (but in no
event later than five (5) business days after the Effective Date), the Exchange
Agent shall mail to each holder of record of an outstanding share Certificate or
Certificates a Letter of Transmittal containing instructions for the surrender
of the Certificate or Certificates held by such holder for payment therefor.
Upon surrender of the Certificate or Certificates 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,
without interest thereon. Approval of this Agreement by the stockholders of
Heritage Bank shall constitute authorization for BCSB to designate and appoint
such Exchange Agent, with the approval of WHG. Neither BCSB nor the Exchange
Agent shall be obligated to deliver the Merger Consideration to a former
stockholder of WHG until such former stockholder surrenders his Certificate or
Certificates or, in lieu thereof, any such appropriate affidavit of loss and
indemnity agreement and bond as may be reasonably required by BCSB.
(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 for 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, BCSB 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 WHG stockholders shall be
entitled to receive on the Merger Effective Date pursuant to Section 2.02
hereof.
(d) The payment of the Merger Consideration, and cash in lieu of
any fractional shares, upon the conversion of WHG Common Stock in accordance
with the above terms and conditions shall be deemed to have been issued and paid
in full satisfaction of all rights pertaining to such WHG Common Stock.
(e) Promptly following the date which is twelve months after the
Merger Effective Date, the Exchange Agent shall deliver to BCSB 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 WHG
Common Stock may surrender such Certificate to Baltimore County Bank and
(subject to applicable abandoned property, escheat and similar laws) receive in
consideration therefor the Merger Consideration multiplied by the number of
shares of WHG 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 WHG of the shares of
WHG Common Stock that are outstanding
8
immediately prior to the Merger Effective Date, and the stock transfer books of
WHG 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 WHG Common Stock shall have
been lost, stolen or destroyed, the Exchange Agent shall deliver (except as
otherwise provided in Section 2.02(iii)) in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of the fact by the holder
thereof, the cash to be paid in the Merger as provided for herein; provided,
however, that BCSB 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 BCSB may require as
indemnity against any claim that may be made against WHG, BCSB or any other
party with respect to the certificate alleged to have been lost, stolen or
destroyed.
(h) BCSB is hereby authorized, after consulting with WHG, to adopt
additional requirements with respect to the matters referred to in this Section
2.03 not inconsistent with the provisions of this Agreement or unduly burdensome
to the shareholders of WHG.
Section 2.04 Stock Options.
At the Merger Effective Date, each option granted by WHG (a "WHG
Option") to purchase shares of WHG Common Stock issued and outstanding pursuant
to the WHG 1996 Stock Option Plan or the WHG 2001 Stock Option Plan (the "WHG
Stock Option Plans"), whether or not such option is exercisable on the Merger
Effective Date, shall, by reason of the Merger, cease to be outstanding and each
holder of an option shall receive from WHG, at the Closing Date, cash in an
amount equal to (i) the difference (if a positive number) between (A) $14.25 and
(B) the exercise price of each such option multiplied by (ii) the number of
shares of WHG Common Stock subject to the option.
Section 2.05 MSBP Awards.
As set forth in WHG DISCLOSURE SCHEDULE 2.05, holders of stock awards
under the WHG Management Stock Bonus Plan ("MSBP") that are not vested prior to
the Merger Effective Date shall be canceled and exchanged for a payment to be
made by Heritage Bank (or if requested by Baltimore County Bank, such payment
may be made by Baltimore County Bank) to the recipient of such awards not later
than the Merger Effective Date in an amount equal to the product of the number
of shares of WHB Common Stock subject to such awards and the Merger
Consideration, less applicable tax withholding; provided that such recipient
shall deliver a cancellation agreement in form and substance reasonably
satisfactory to the BCSB prior to receipt of such payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WHG AND HERITAGE BANK
WHG and Heritage Bank represent and warrant to BCSB and Baltimore
County Bank that the statements contained in this Article III are correct and
complete as of the date of this Agreement
9
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 WHG Disclosure
Schedules delivered by WHG to BCSB on or prior to the date hereof. WHG and
Heritage Bank have made a good faith effort to ensure that the disclosure on
each schedule of the WHG Disclosure Schedules corresponds to the section
reference herein. However, for purposes of the WHG Disclosure Schedules, any
item disclosed on any schedule is deemed to be fully disclosed with respect to
all schedules under which such item may be relevant.
Section 3.01 Organization.
(a) WHG is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland, and is duly registered as
a savings and loan holding company under the HOLA. WHG has full corporate 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 WHG. Heritage Bank is
the only subsidiary of WHG.
(b) Heritage Bank is a stock savings bank organized, validly
existing and in good standing under federal law. Heritage Bank is the only WHG
Subsidiary. The deposits of Heritage Bank are insured by the FDIC through the
SAIF to the fullest extent permitted by law, and all premiums and assessments
required to be paid in connection therewith have been paid by Heritage Bank when
due. Heritage Bank has no subsidiaries.
(c) Heritage Bank is a member of the FHLB of Atlanta and owns the
requisite amount of stock therein.
(d) The respective minute books of WHG and each WHG Subsidiary
accurately records, in all material respects, all material corporate actions of
their respective shareholders and boards of directors (including committees)
through the date of this Agreement.
(e) Prior to the date of this Agreement, WHG has made available to
BCSB true and correct copies of the articles or certificate of incorporation and
bylaws of WHG and Heritage Bank.
Section 3.02 Capitalization.
(a) The authorized capital stock of WHG consists of 4,000,000
shares of common stock, $0.10 par value ("WHG Common Stock"), of which 1,285,050
shares are outstanding, validly issued, fully paid and non-assessable and free
of preemptive rights, and 1,000,000 shares of preferred stock, $0.10 par value
("WHG Preferred Stock"), none of which are outstanding. There are no shares of
WHG Common Stock held by WHG as treasury stock. Neither WHG nor any WHG
Subsidiary has or is bound by any Rights of any character relating to the
purchase, sale or issuance or voting of, or right to receive dividends or other
distributions on any shares of WHG Common Stock, or any other security of WHG or
any securities representing the right to vote, purchase or otherwise receive any
shares of WHG Common Stock or any other security of WHG, other than shares
issuable under the WHG Stock Option Plans and the WHG MSBP. WHG DISCLOSURE
SCHEDULE 3.02(a) sets
10
forth, as of the date hereof, the name of each holder of an option to purchase
WHG Common Stock, the number of shares each such individual may acquire pursuant
to the exercise of such options, the vesting dates, and the exercise price
relating to the options held, and the name of each grantee of an award under the
MSBP, the number of shares subject to each award, and the vesting schedule of
each award.
(b) WHG owns all of the capital stock of Heritage Bank, free and
clear of any lien or encumbrance.
Section 3.03 Authority; No Violation.
(a) WHG and Heritage Bank each has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by WHG and Heritage Bank and the completion by WHG and Heritage Bank of the
transactions contemplated hereby, up to and including the Merger, have been duly
and validly approved by the Board of Directors of WHG and Heritage Bank,
respectively, and, except for approval of the shareholders of WHG and Regulatory
Authorities, no other corporate proceedings on the part of WHG or Heritage Bank
are necessary to complete the transactions contemplated hereby, up to and
including the Merger. This Agreement has been duly and validly executed and
delivered by WHG and Heritage Bank, and the Bank Merger has been duly and
validly approved by the Board of Directors of Heritage Bank, and by WHG in its
capacity as sole stockholder of Heritage Bank, and subject to approval by the
shareholders of WHG and receipt of the required approvals of Regulatory
Authorities described in Section 4.03 hereof, constitutes the valid and binding
obligations of WHG and Heritage Bank, enforceable against WHG and Heritage Bank
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and as to Heritage Bank, the
conservatorship or receivership provisions of the FDIA, and subject, as to
enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by WHG and
Heritage Bank, (B) subject to receipt of approvals from the Regulatory
Authorities referred to in Section 4.03 hereof, and WHG's and BCSB's compliance
with any conditions contained therein, and subject to the receipt of the
approval of WHG's stockholders, the consummation of the transactions
contemplated hereby, and (C) compliance by WHG and Heritage Bank with any of the
terms or provisions hereof will not: (i) conflict with or result in a breach of
any provision of the articles of incorporation or bylaws of WHG or any WHG
Subsidiary or the charter and bylaws of Heritage Bank; (ii) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to WHG or any WHG 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 WHG or Heritage Bank 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 WHG or Heritage Bank is a party, or by which they or any of
their respective properties or assets may be bound or affected, except for such
violations, conflicts, breaches or defaults under clause (ii) or (iii)
12
hereof which, either individually or in the aggregate, will not have a Material
Adverse Effect on WHG and the WHG Subsidiaries taken as a whole.
Section 3.04 Consents.
Except for the consents, waivers, approvals, filings and registrations
from or with the Regulatory Authorities referred to in Section 4.03 hereof and
compliance with any conditions contained therein, and the approval of this
Agreement by the requisite vote of the shareholders of WHG, no consents, waivers
or approvals of, or filings or registrations with, any Regulatory Authority are
necessary, and, to WHG's Knowledge, 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 WHG and
Heritage Bank, and (b) the completion by WHG and Heritage Bank of the Merger and
the Bank Merger. WHG and Heritage Bank have no reason to believe that (i) any
required Regulatory Approvals or other required consents or approvals will not
be received, or that (ii) any public body or authority, the consent or approval
of which is not required or to which a filing is not required, will object to
the completion of the transactions contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) WHG has previously made available to BCSB the WHG Regulatory
Reports. The WHG Regulatory Reports have been prepared in all material respects
in accordance with applicable regulatory accounting principles and practices
throughout the periods covered by such statements, and fairly present in all
material respects, the consolidated financial position, results of operations
and changes in shareholders' equity of WHG as of and for the periods ended on
the dates thereof, in accordance with applicable regulatory accounting
principles applied on a consistent basis.
(b) WHG has previously made available to BCSB the WHG Financials.
The WHG Financials have been prepared in accordance with GAAP, and (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 position, results of
operations and cash flows of WHG and the WHG Subsidiaries on a consolidated
basis as of and for the respective periods ending on the dates thereof, in
accordance with GAAP applied on a consistent basis during the periods involved,
except as indicated in the notes thereto, or in the case of unaudited
statements, as permitted by Form 10-QSB.
(c) At the date of each balance sheet included in the WHG
Financials or the WHG Regulatory Reports, WHG did 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 WHG
Financials or WHG Regulatory Reports or in the footnotes thereto which are not
fully reflected or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss contingencies which are
not material 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 which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
12
Section 3.06 Taxes.
WHG and the WHG Subsidiaries are members of the same affiliated group
within the meaning of Code Section 1504(a). WHG has duly filed all federal,
state and material local tax returns required to be filed by or with respect to
WHG and all WHG Subsidiaries on or prior to the Closing Date (all such amounts
shown to be due have been paid) and has duly paid or 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 WHG and any WHG Subsidiary by any taxing
authority or pursuant to any written tax sharing agreement on or prior to the
Closing Date 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 WHG or any of its Subsidiaries, and no claim has been made by any
authority in a jurisdiction where WHG or any of its Subsidiaries do not file tax
returns that WHG or any such Subsidiary is subject to taxation in that
jurisdiction. WHG and its Subsidiaries have 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. WHG and each of its Subsidiaries 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, stockholder or other third party, and WHG and each of its Subsidiaries
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.
Section 3.07 No Material Adverse Effect.
WHG and the WHG Subsidiaries, taken as a whole, have not suffered any
Material Adverse Effect since September 30, 2001, and no event has occurred or
circumstance arisen since that date which, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on WHG and the WHG
Subsidiaries.
Section 3.08 Contracts.
(a) Except as set forth in WHG DISCLOSURE SCHEDULE 3.08(a),
neither WHG nor any WHG Subsidiary is 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 WHG nor any WHG Subsidiary,
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 WHG or any WHG
Subsidiary; (iii) any collective bargaining agreement with any labor union
relating to employees of WHG or any WHG Subsidiary; (iv) any agreement which by
its terms limits the payment of dividends by Heritage Bank; (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 WHG or any WHG
Subsidiary is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, borrowings from the FHLB of Atlanta,
repurchase agreements, bankers' acceptances, and "treasury tax and loan"
accounts established in the ordinary course of business and transactions in
"federal funds" or which contains financial covenants or other restrictions
(other than
13
those relating to the payment of principal and interest when due) which would be
applicable on or after the Closing Date to BCSB or any BCSB Subsidiary; (vi) any
agreement, written or oral, that obligates WHG or any WHG Subsidiary for the
payment of more than $25,000 annually; or (vii) any contract (other than this
Agreement) limiting the freedom, in any material respect, of WHG to engage in
any type of banking or bank-related business which it or Heritage Bank is
permitted to engage in under applicable law as of the date of this Agreement.
(b) True and correct copies of agreements, plans, contracts,
arrangements and instruments referred to in Section 3.08(a), have been provided
to BCSB on or before the date hereof, are listed on WHG DISCLOSURE SCHEDULE
3.08(a) and are in full force and effect on the date hereof and neither WHG nor
any WHG Subsidiary (nor, to the knowledge of Heritage Bank, any other party to
any such contract, plan, arrangement or instrument) has 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 WHG
DISCLOSURE SCHEDULE 3.08(b), 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 WHG DISCLOSURE SCHEDULE 3.08(b), none of the employees
(including officers) of WHG or any WHG Subsidiary, possess the right to
terminate their employment and receive or be paid (or cause WHG or any WHG
Subsidiary to accrue on their 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 WHG DISCLOSURE SCHEDULE 3.08(b), no plan,
contract, employment agreement, termination agreement, or similar agreement or
arrangement to which WHG or any WHG Subsidiary is a party or under which WHG or
any WHG Subsidiary may be liable contains provisions which permit an employee or
independent contractor to terminate it without cause and continue to accrue
future benefits thereunder. Except as set forth in WHG DISCLOSURE SCHEDULE
3.08(b), 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 WHG or any WHG Subsidiary or
upon the occurrence of a subsequent event; or (y) requires WHG or any WHG
Subsidiary to provide a benefit in the form of WHG Common Stock or determined by
reference to the value of WHG Common Stock. Except as set forth in WHG
DISCLOSURE SCHEDULE 3.08(b) no such agreement, plan or arrangement with respect
to officers or directors of WHG or Heritage Bank or to its employees, provides
for benefits that may cause an "excess parachute payment" or the disallowance of
a federal income tax deduction under IRC Section 280G.
(c) Each real estate lease that may require the consent of the lessor
or its agent resulting from the Merger by virtue of a prohibition or restriction
relating to assignment, by operation of law or otherwise, or change in control,
is listed in WHG DISCLOSURE SCHEDULE 3.08 identifying the section of the lease
that contains such prohibition or restriction. Neither WHG nor any WHG
Subsidiary is in default in any material respect under any material contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party, by which its assets, business, or operations may be
bound or affected, or under which it or its assets, business, or operations
receive benefits, and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
14
Section 3.09 Ownership of Property; Insurance Coverage.
(a) WHG and the WHG Subsidiaries have good and, as to real
property, marketable title to all material assets and properties owned by WHG or
any WHG Subsidiary in the conduct of their businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the WHG Regulatory Reports
and in the WHG 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 a WHG Subsidiary acting in a
fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or which
are being contested in good faith, and (iii) items permitted under Article V.
WHG and the WHG Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by WHG and its
Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them. Except as disclosed
in WHG DISCLOSURE SCHEDULE 3.09, such existing leases and commitments to lease
constitute or will constitute operating leases for both tax and financial
accounting purposes and the lease expense and minimum rental commitments with
respect to such leases and lease commitments are as disclosed in the Notes to
the WHG Financials.
(b) With respect to all material agreements pursuant to which WHG
or any WHG Subsidiary has purchased securities subject to an agreement to
resell, if any, WHG or such WHG Subsidiary, as the case may be, has a lien or
security interest (which to WHG `s knowledge 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) WHG and each WHG Subsidiary currently maintains insurance
considered by WHG to be reasonable for their respective operations, in
accordance with good business practice. WHG 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 WHG or any WHG Subsidiary under such policies. All such insurance
is valid and enforceable and in full force and effect, and within the last three
years WHG and each WHG Subsidiary has received each type of insurance coverage
for which it has applied and during such periods has not been denied
indemnification for any material claims submitted under any of its insurance
policies.
Section 3.10 Legal Proceedings.
Except as disclosed in WHG DISCLOSURE SCHEDULE 3.10, neither WHG nor
any WHG Subsidiary is a party to any, and there are no pending or, to WHG's
knowledge, threatened legal, administrative, arbitration or other proceedings,
claims, actions or governmental investigations or inquiries of any nature (i)
against WHG or any WHG Subsidiary, (ii) to which WHG or any WHG Subsidiary's
assets are or may be subject, (iii) challenging the validity or propriety of any
of the transactions contemplated by or relating to this Agreement, or (iv) which
could adversely affect the
15
ability of WHG or Heritage Bank to perform under this Agreement, except for any
proceedings, claims, actions, investigations or inquiries referred to in clauses
(i) or (ii) which, if adversely determined, individually or in the aggregate,
could not be reasonably expected to have a Material Adverse Effect on WHG and
the WHG Subsidiaries, taken as a whole.
Section 3.11 Compliance With Applicable Law.
(a) WHG and all WHG Subsidiaries hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under, and have complied in all material respects with, applicable
laws, statutes, orders, rules or regulations of any federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their respective businesses.
(b) Except as disclosed in WHG DISCLOSURE SCHEDULE 3.11, neither
WHG nor any WHG Subsidiary has received any notification or communication from
any Regulatory Authority (i) asserting that WHG or any WHG Subsidiary 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 WHG or any
WHG Subsidiary; (iii) requiring or threatening to require WHG or any WHG
Subsidiary, or indicating that WHG or any WHG Subsidiary 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 WHG or any WHG Subsidiary,
including without limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to direct, restrict or
limit, in any manner the operations of WHG or any WHG Subsidiary, including
without limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Neither WHG nor any WHG
Subsidiary has consented to or entered into any currently effective Regulatory
Agreement, except as set forth in WHG DISCLOSURE SCHEDULE 3.11.
Section 3.12 ERISA/Employee Compensation.
(a) WHG DISCLOSURE SCHEDULE 3.12 includes a descriptive list of
all existing bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, phantom stock, severance, welfare and fringe
benefit plans, employment, severance and change in control agreements and all
other benefit practices, policies and arrangements maintained by WHG or any WHG
Subsidiary in which any employee or former employee, consultant or former
consultant or director or former director of WHG or any WHG Subsidiary
participates or to which any such employee, consultant or director is a party or
is otherwise entitled to receive benefits (the "Compensation and Benefit
Plans"). A true and correct copy of each Compensation and Benefit Plan has
previously been delivered to Baltimore County Bank and is attached to WHG
DISCLOSURE SCHEDULE 3.12(a). Neither WHG nor any of its Subsidiaries has any
commitment to create any
16
additional Compensation and Benefit Plan or to modify, change or renew any
existing Compensation and Benefit Plan.
(b) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the Age
Discrimination in Employment Act, and any regulations or rules promulgated
thereunder, and all material filings, disclosures and notices required by ERISA,
the Code, the Age Discrimination in Employment Act and any other applicable law
have been timely made. Each Compensation and Benefit Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension
Plan") and which is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the IRS, and WHG is not aware
of any circumstances which are reasonably likely to result in revocation of any
such favorable determination letter. There is no material pending or, to the
best knowledge of WHG and Heritage Bank, threatened action, suit or claim
relating to any of the Compensation and Benefit Plans (other than routine claims
for benefits). Neither WHG nor any WHG Subsidiary has engaged in a transaction,
or omitted to take any action, with respect to any Compensation and Benefit Plan
that would reasonably be expected to subject WHG or any WHG Subsidiary to a tax
or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA,
assuming for purposes of Section 4975 of the Code that the taxable period of any
such transaction expired as of the date hereof and subsequently expires as of
the day next preceding the Merger Effective Date.
(c) No liability under Title IV of ERISA has been incurred by WHG
or any WHG Subsidiary with respect to any Compensation and Benefit Plan which is
subject to Title IV of ERISA, or with respect to any "single-employer plan" (as
defined in Section 4001(a) of ERISA) ("WHG Pension Plan") currently or formerly
maintained by WHG, a WHG Subsidiary or any entity which is considered one
employer with WHG under Section 4001(b)(1) of ERISA or Section 414 of the IRC
(an "ERISA Affiliate") since the effective date of ERISA that has not been
satisfied in full, and, to their knowledge, no condition exists that presents a
material risk to WHG or any ERISA Affiliate of incurring a liability under such
Title. No WHG or WHG Subsidiary had an "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, as of the last day of
the most recent plan year ending prior to the date hereof; the fair market value
of the assets of each WHG Pension Plan exceeds the present value of the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) under such WHG Pension
Plan as of the end of the most recent plan year with respect to the WHG 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 WHG Pension
Plan as of the date hereof; except as disclosed at Disclosure Schedule 3.12,
there is not currently pending with the PBGC any filing with respect to any
reportable event under Section 4043 of ERISA nor has any reportable event
occurred as to which a filing is required and has not been made (other than as
might be required with respect to this Agreement and the transactions
contemplated thereby). Neither WHG or a WHG Subsidiary nor any ERISA Affiliate
has contributed to any "multiemployer plan," as defined in Section 3(37) of
ERISA, on or after September 26, 1980. Except as set forth in WHG's Disclosure
Schedule 3.12, neither WHG, a WHG Subsidiary, nor any ERISA Affiliate, nor any
Compensation and Benefit Plan, including any WHG Pension Plan, nor any trust
created thereunder, nor any trustee or administrator thereof has engaged in a
transaction in connection with which WHG, a WHG Subsidiary, an ERISA Affiliate,
or any Compensation and Benefit Plan, including any WHG Pension Plan or any such
trust or any trustee
17
or administrator thereof, could reasonably be expected to be subject to either a
civil liability or penalty pursuant to Section 409, 502(i) or 502(l) of ERISA or
a tax imposed pursuant to Chapter 43 of the IRC.
(d) All material contributions required to be made under the
terms of any Compensation and Benefit Plan or ERISA Affiliate Plan or any
employee benefit arrangements to which WHG or any WHG Subsidiary is a party or a
sponsor have been timely made, and all anticipated contributions and funding
obligations are accrued monthly on WHG's consolidated financial statements. WHG
and its Subsidiaries have expensed and accrued as a liability the present value
of future benefits under each applicable Compensation and Benefit Plan for
financial reporting purposes as required by GAAP. Neither any Pension Plan nor
any ERISA Affiliate Plan has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
None of WHG, any of its Subsidiaries or any ERISA Affiliate (x) has provided, or
would reasonably be expected to be required to provide, security to any Pension
Plan or to any ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code,
or (y) has taken any action, or omitted to take any action, that has resulted,
or would reasonably be expected to result, in the imposition of a Lien under
Section 412(n) of the Code or pursuant to ERISA.
(e) Except as set forth in WHG DISCLOSURE SCHEDULE 3.12(e),
neither WHG nor any WHG Subsidiary has any obligations to provide retiree
health, life insurance, disability insurance, or other retiree death benefits
under any Compensation and Benefit Plan, other than benefits mandated by Section
4980B of the Code. There has been no communication to employees by WHG or any
WHG Subsidiary that would reasonably be expected to promise or guarantee such
employees retiree health, life insurance, disability insurance, or other retiree
death benefits.
(f) WHG and its Subsidiaries do not maintain any Compensation and
Benefit Plans covering foreign employees.
(g) With respect to each Compensation and Benefit Plan, if
applicable, Heritage Bank has provided or made available to Baltimore County
Bank copies of the: (A) trust instruments and insurance contracts; (B) two most
recent Forms 5500 filed with the IRS; (C) most recent actuarial report and
financial statement; (D) the most recent summary plan description; (E) most
recent determination letter issued by the IRS; (F) any Form 5310 or Form 5330
filed with the IRS; and (G) most recent participant benefits statements.
(h) Except as set forth in WHG DISCLOSURE SCHEDULE 3.12(h), the
consummation of the Merger will not, directly or indirectly (including, without
limitation, as a result of any termination of employment or service at any time
prior to or following the Merger Effective Date) (A) entitle any employee,
consultant or director to any payment or benefit (including severance pay,
change in control benefit, or similar compensation) or any increase in
compensation, (B) result in the vesting or acceleration of any benefits under
any Compensation and Benefit Plan or (C) result in any material increase in
benefits payable under any Compensation and Benefit Plan.
18
(i) WHG DISCLOSURE SCHEDULE 3.12(i) sets forth all salary
adjustments, employee and officer promotions, and changes to any Compensation
and Benefit Plan since September 30, 2001.
Section 3.13 Brokers, Finders and Financial Advisors.
Except for WHG's engagement of FinPro, Inc. in connection with
transactions contemplated by this Agreement, a copy of which engagement
agreement is attached to WHG DISCLOSURE SCHEDULE 3.13, neither WHG nor any WHG
Subsidiary, nor any of their respective officers, directors, employees or
agents, has employed any broker, finder or financial advisor in connection with
the transactions contemplated by this Agreement, or 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
WHG Financials.
Section 3.14 Environmental Matters.
(a) With respect to WHG and each of the WHG Subsidiaries, and
except as set forth in WHG DISCLOSURE SCHEDULE 3.14:
(i) To its knowledge, each of WHG and its Subsidiaries are,
and have been, in substantial compliance with, and are not liable under, any
Environmental Laws;
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
WHG's knowledge, threatened, before any court, governmental agency or board or
other forum against it or any of the WHG Subsidiaries or any Participation
Facility (x) for 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, whether or not occurring
at or on a site owned, leased or operated by it or any of the WHG Subsidiaries
or any Participation Facility;
(iii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
WHG's knowledge threatened, before any court, governmental agency or board or
other forum relating to or against any Loan Property (or Heritage Bank 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, whether or not occurring at or on a site owned, leased or operated by
a Loan Property;
(iv) To WHG's knowledge, the properties currently owned or
operated by WHG or any of the WHG Subsidiaries (including, without limitation,
soil, groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) are not contaminated with and do not otherwise contain any
Hazardous Material other than as permitted under applicable Environmental Law;
(v) Neither WHG nor any of the WHG Subsidiaries has received
any notice, demand letter, executive or administrative order, directive or
request for information from any federal, state,
19
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 WHG's knowledge, there are no underground storage
tanks on, in or under any properties owned or operated by WHG or any of the WHG
Subsidiaries, and no underground storage tanks have been closed or removed from
any properties owned or operated by WHG or any of the WHG Subsidiaries or any
Participation Facility; and
(vii) To WHG's knowledge, during the period of (s) WHG's or
any of the WHG Subsidiaries' ownership or operation of any of their respective
current properties or (t) WHG's or any of the WHG Subsidiaries' participation in
the management of any Participation Facility, there has been no contamination by
or release of Hazardous Materials in, on, under or affecting such properties. To
WHG's knowledge, prior to the period of (x) WHG's or any of the WHG
Subsidiaries' ownership or operation of any of their respective current
properties or (y) WHG's or any of the WHG Subsidiaries' participation in the
management of any Participation Facility, there was no contamination by or
release of Hazardous Material in, on, under or affecting such properties.
(viii) WHG has not conducted any environmental studies
during the past ten years with respect to any properties owned or leased by it
or any of its Subsidiaries.
(b) "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property. "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,
but only with respect to such property.
Section 3.15 Loan Portfolio.
(a) The allowance for possible losses reflected in WHG's statement
of condition at September 30, 2001 was, and the allowance for possible losses
shown on the balance sheets in WHG's Regulatory Reports for periods ending after
September 30, 2001 will be, adequate, as of the dates thereof, under GAAP.
(b) WHG DISCLOSURE SCHEDULE 3.15 sets forth a listing, as of
January 31, 2002, by account, of: (A) all loans (including loan participations)
of Heritage Bank or any of the Heritage Bank Subsidiaries that have been
accelerated during the past twelve months; (B) all loan commitments or lines of
credit of Heritage Bank or any of the Heritage Bank Subsidiaries which have been
terminated by Heritage Bank or any of the Heritage Bank Subsidiaries during the
past twelve months by reason of a default or adverse developments in the
condition of the borrower or other events or circumstances affecting the credit
of the borrower; (C) all loans, lines of credit and loan commitments as to which
Heritage Bank or any of the Heritage Bank Subsidiaries has given written notice
of its intent to terminate during the past twelve months; (D) with respect to
all commercial loans (including commercial real estate loans), all notification
letters and other written communications from Heritage Bank or any of the
Heritage Bank Subsidiaries to any of their
20
respective borrowers, customers or other parties during the past twelve months
wherein Heritage Bank or any of the Heritage Bank Subsidiaries has requested or
demanded that actions be taken to correct existing defaults or facts or
circumstances which may become defaults; (E) each borrower, customer or other
party which has notified Heritage Bank or any of the Heritage Bank Subsidiaries
during the past twelve months of, or has asserted against Heritage Bank or any
of the Heritage Bank Subsidiaries, in each case in writing, any "lender
liability" or similar claim, and, to the knowledge of Heritage Bank, each
borrower, customer or other party which has given Heritage Bank or any of the
Heritage Bank Subsidiaries any oral notification of, or orally asserted to or
against Heritage Bank or any of the Heritage Bank Subsidiaries, any such claim;
(F) all loans, (1) that are contractually past due 90 days or more in the
payment of principal and/or interest, (2) that are on non-accrual status, (3)
that as of the date of this Agreement are classified as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Watch list" or words of similar import, together with the
principal amount of and accrued and unpaid interest on each such Loan and the
identity of the obligor thereunder, (4) where the interest rate terms have been
reduced and/or the maturity dates have been extended subsequent to the agreement
under which the loan was originally created due to concerns regarding the
borrower's ability to pay in accordance with such initial terms, or (5) where a
specific reserve allocation exists in connection therewith, and (G) all assets
classified by WHG or any WHG Subsidiary as real estate acquired through
foreclosure or in lieu of foreclosure, including in-substance foreclosures, and
all other assets currently held that were acquired through foreclosure or in
lieu of foreclosure.
(c) All loans receivable (including discounts) and accrued
interest entered on the books of Heritage Bank arose out of bona fide
arm's-length transactions, were made for good and valuable consideration in the
ordinary course of Heritage Bank's or the appropriate Subsidiary's respective
business, and the notes or other evidences of indebtedness with respect to such
loans (including discounts) are true and genuine and are what they purport to
be. To the knowledge of Heritage Bank, the loans, discounts and the accrued
interest reflected on the books of Heritage Bank and the Heritage Bank
Subsidiaries are subject to no defenses, set-offs or counterclaims (including,
without limitation, those afforded by usury or truth-in-lending laws), except as
may be provided by bankruptcy, insolvency or similar laws affecting creditors'
rights generally or by general principles of equity. All such loans are owned by
Heritage Bank or the appropriate Subsidiary free and clear of any Liens.
(d) The notes and other evidences of indebtedness evidencing the
loans described in clause (c) above, and all pledges, mortgages, deeds of trust
and other collateral documents or security instruments relating thereto are, in
all material respects, valid, true and genuine, and what they purport to be.
Section 3.16 Information to be Supplied.
The information to be provided by WHG for inclusion in the Proxy
Statement will not, at the time the Proxy Statement is mailed to WHG
shareholders, 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 WHG and Heritage
Bank for inclusion
21
in the Applications will, at the time such documents are filed with any
Regulatory Authority, be accurate in all material aspects.
Section 3.17 Related Party Transactions.
Except as disclosed in WHG DISCLOSURE SCHEDULE 3.17, neither WHG nor
any WHG Subsidiary is a party to any transaction (including any loan or other
credit accommodation) with any Affiliate of WHG. Except as disclosed in WHG
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 collectibility or present other unfavorable features. Except as set
forth on WHG DISCLOSURE SCHEDULE 3.17, no loan or credit accommodation to any
Affiliate of WHG or any WHG Subsidiary is presently in default or, during the
three year period prior to the date of this Agreement, has been in default or
has been restructured, modified or extended. Neither WHG nor any WHG Subsidiary
has been notified that principal and interest with respect to any such loan or
other credit accommodation will not be paid when due or that the loan grade
classification accorded such loan or credit accommodation by Heritage Bank or
WHG is inappropriate.
Section 3.18 Schedule of Termination Benefits.
WHG DISCLOSURE SCHEDULE 3.18 includes a schedule of all termination
benefits and related payments that would be payable to the individuals
identified thereon, 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 WHG
or any WHG Subsidiary for the benefit of officers or directors of WHG or any WHG
Subsidiary (the "Benefits Schedule"), assuming their employment or service is
terminated as of March 31, 2002 and the Closing Date occurs as of such date. No
other individuals are entitled to benefits under any such plans.
Section 3.19 Deposits.
None of the deposits of Heritage Bank is a "brokered" deposit as
defined in 12 U.S. Code Section 1831f(g).
Section 3.20. Business Combination.
The Board of Directors of WHG have taken, or will take, the necessary
action by board resolution and otherwise to exempt BCSB and Baltimore County
Bank from the definition of "Interested Stockholder" and to exempt the Merger
under Article XIV of the WHG Articles of Incorporation, to the extent
applicable.
22
Section 3.21 Fairness Opinion.
WHG has received an opinion from FinPro, Inc. to the effect that,
subject to the terms, conditions and qualifications set forth therein, as of the
date thereof, the Merger Consideration to be received by the stockholders of WHG
pursuant to this Agreement is fair to such stockholders from a financial point
of view. Such opinion has not been amended or rescinded as of the date of this
Agreement.
Section 3.22 Risk Management Instruments.
All material interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management arrangements,
whether entered into for Heritage Bank's own account, or for the account of one
or more of its Subsidiaries or their customers (all of which are set forth in
WHG DISCLOSURE SCHEDULE 3.22), were entered into in accordance with prudent
business practices and in all material respects in compliance with all
applicable laws, rules, regulations and regulatory policies and with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of WHG or one of its
Subsidiaries, enforceable in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and is in full
force and effect. Neither WHG nor any of its Subsidiaries, nor to the Knowledge
of WHG any other party thereto, is in breach of any of its obligations under any
such agreement or arrangement in any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
BALTIMORE COUNTY SAVINGS BANK
AND BCSB BANKCORP
Baltimore County Bank and BCSB each represents and warrants to Heritage
Bank and WHG 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 Baltimore County Bank Disclosure Schedules delivered to WHG
and Heritage Bank prior to the date hereof. Baltimore County Bank has made a
good faith effort to ensure that the disclosure on each schedule of the
Baltimore County Bank Disclosure Schedules corresponds to the section reference
herein. However, for purposes of the Baltimore County Bank 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) BCSB is a corporation duly organized and validly existing
under the laws of the United States, and is duly registered as a savings and
loan holding company under the HOLA. BCSB has full corporate power and authority
to carry on its business as now conducted and is duly licensed
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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 Baltimore County Bank.
(b) Baltimore County Bank is a stock savings association duly
organized and validly existing under the laws of the United States. The deposits
of Baltimore County Bank are insured by the FDIC through the SAIF 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 Baltimore County Bank. Each
other BCSB Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization.
(c) Baltimore County Bank is a member in good standing of the FHLB
of Atlanta and owns the requisite amount of stock therein.
(d) Prior to the date of this Agreement, Baltimore County Bank has
delivered to Heritage Bank true and correct copies of the charter and bylaws of
Baltimore County Bank and BCSB.
Section 4.02 Authority; No Violation.
(a) BCSB and Baltimore County Bank have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by BCSB and Baltimore County Bank and the completion by BCSB and Baltimore
County Bank of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of BCSB and Baltimore County Bank and, no
other corporate proceedings on the part of BCSB or Baltimore County Bank other
than the incorporation of Interim are necessary to complete the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by BCSB and Baltimore County Bank and, subject to receipt of the
required approvals of Regulatory Authorities described in Section 4.03 hereof,
constitutes the valid and binding obligation of BCSB and Baltimore County Bank
enforceable against BCSB and Baltimore County Bank in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally.
(b) (A) The execution and delivery of this Agreement by BCSB and
Baltimore County Bank, (B) subject to receipt of approvals from the Regulatory
Authorities referred to in Section 4.03 hereof and WHG and Heritage Bank's
compliance with any conditions contained therein, the consummation of the
transactions contemplated hereby, and (C) compliance by BCSB and Baltimore
County Bank 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 BCSB,
Baltimore County Bank or any BCSB Subsidiary; (ii) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to BCSB, Baltimore County Bank or any BCSB 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 BCSB or
Baltimore County Bank under, any of the terms, conditions
24
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other investment or obligation to which BCSB or Baltimore
County Bank is a party, or by which they or any of their respective properties
or assets may be bound or affected, except for such violations, conflicts,
breaches or defaults under clause (ii) or (iii) hereof which, either
individually or in the aggregate, will not have a Material Adverse Effect on
Baltimore County Bank or BCSB.
Section 4.03 Consents.
Except for consents, approvals, filings and registrations from or with
the OTS and compliance with any conditions contained therein, and the approval
of this Agreement by the shareholders of WHG, the filing of a such certificates
and other documents with the OTS as necessary, no consents or approvals of, or
filings or registrations with, any public body or authority are necessary, and
no consents or approvals of any third parties are necessary, or will be, in
connection with (a) the execution and delivery of this Agreement by BCSB and
Baltimore County Bank, and (b) the completion by BCSB and Baltimore County Bank
of the transactions contemplated hereby. BCSB 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 BCSB's ability to complete the transactions contemplated by
this Agreement or that (ii) any public body or authority, the consent or
approval of which is not required or any filing with which is not required, will
object to the completion of the transactions contemplated by this Agreement.
Section 4.04 Compliance With Applicable Law.
(a) Baltimore County Bank, BCSB and each BCSB Subsidiary hold all
licenses, franchises, permits and authorizations necessary for the lawful
conduct of their businesses under, and have complied in all material respects
with, applicable laws, statutes, orders, rules or regulations of any federal,
state or local governmental authority relating to them, other than where such
failure to hold or such noncompliance will neither result in a limitation in any
material respect on the conduct of their businesses nor otherwise have a
Material Adverse Effect on BCSB and its Subsidiaries taken as a whole.
(b) Except as set forth in Baltimore County Bank Disclosure
SCHEDULE 4.04(b), neither BCSB nor Baltimore County Bank has received any
notification or communication from any Regulatory Authority (i) asserting that
BCSB or any Baltimore County Bank 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 BCSB or Baltimore County Bank; (iii)
requiring or threatening to require BCSB or any BCSB Subsidiary, or indicating
that BCSB or Baltimore County Bank 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 BCSB or Baltimore County Bank, including without limitation any
restriction on the payment of dividends; or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any manner the
operations of BCSB or Baltimore County Bank, including without limitation any
restriction on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither BCSB nor Baltimore
25
County Bank is a party to, nor has consented to any Regulatory Agreement. The
most recent regulatory rating given to Baltimore County Bank as to compliance
with the CRA is satisfactory or better.
Section 4.05 Information to be Supplied.
The information to be supplied by BCSB and Baltimore County Bank for
inclusion in the Proxy Statement will not, at the time the Proxy Statement is
mailed to WHG shareholders, 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 BCSB and
Baltimore County Bank for inclusion in the Applications will, at the time such
documents are filed with any Regulatory Authority, be accurate in all material
aspects.
Section 4.06 Financing.
As of the date hereof Baltimore County Bank has, and at the Merger
Effective Date, Baltimore County Bank will have, funds that are sufficient,
under all applicable legal and regulatory standards, and available to meet its
obligations under this Agreement and to consummate in a timely manner the
transactions contemplated hereby and thereby. Neither BCSB nor Baltimore County
Bank shall enter into any plan of reorganization or plan of merger with any
party to form a new parent corporation of either entity without such party
assuming all obligations of BCSB and Baltimore County Bank under this Agreement.
Section 4.07 BCSB Financials.
BCSB has made available to WHG the BCSB Financials. The BCSB Financials
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered by such statements, and (including the related
notes where applicable) fairly present the consolidated financial position,
results of operations and cash flows of BCSB and the BCSB Subsidiaries as of and
for the respective periods ending on the dates thereof, except as indicated in
the notes thereto.
Section 4.08 Litigation.
As of the date of execution of this Agreement, neither BCSB, nor any
BCSB Subsidiary, is a party to any, and there are no pending or, to BCSB's
Knowledge, threatened legal, administrative, arbitration or other proceedings,
claims (whether asserted or unasserted), actions or governmental investigations
or inquiries of any nature challenging the validity or propriety of any of the
transactions contemplated by this Agreement, or which could adversely affect the
ability of BCSB to perform under this Agreement.
26
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of Heritage Bank's Business.
(a) From the date of this Agreement to the Closing Date, WHG and
each WHG Subsidiary will conduct their business and engage in transactions,
including extensions of credit, only in the ordinary course and consistent with
past practice and policies, except as otherwise required or contemplated by this
Agreement or with the written consent of Baltimore County Bank (which consent
will not be unreasonably withheld or delayed), WHG and each of the Heritage Bank
Subsidiaries will use its reasonable good faith efforts, to (i) preserve their
business organizations intact, (ii) maintain good relationships with employees,
and (iii) preserve for themselves the good will of their customers and others
with whom business relationships exist. From the date hereof to the Closing
Date, except as otherwise consented to or approved by BCSB in writing (which
approval will not be unreasonably withheld or delayed) or as contemplated or
required by this Agreement, WHG and Heritage Bank will not, and WHG will not
permit any WHG Subsidiary to:
(i) amend or change any provision of its articles of
incorporation, charter, or bylaws;
(ii) except as required by the WHG Stock Option Plans and
MSBP, and as may be required by legally binding commitments existing on the date
hereof as set forth in WHG Disclosure Schedule 5.01(a)(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, other than the
quarterly cash dividend of $0.09 per share payable by WHG, with payment and
record dates consistent with past practice. In addition, if the Closing Date is
more than forty-five (45) days after the next preceding WHG dividend payment
date, WHG may declare and pay a final cash dividend at the quarterly rate of
$0.09 per share, with the exact amount per share to be an amount that is pro
rated through the payment date from the preceding payment date;
(iii) except as set forth in WHG DISCLOSURE SCHEDULE 5.11,
grant or agree to pay any bonus, severance or termination to, or enter into or
amend 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 normal increases in
the ordinary course of business consistent with past practice, and except as may
be required pursuant to legally binding commitments existing on the date hereof
and set forth on WHG DISCLOSURE SCHEDULES 3.08 and 3.12;
(iv) enter into or, except as may be required by law, 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
27
defined contribution or defined benefit plan not in the ordinary course of
business consistent with past practice; or materially amend any Compensation and
Benefit Plan except to the extent such modifications or amendments do not result
in an increase in cost;
(v) merge or consolidate WHG or any WHG Subsidiary with any
other corporation; sell or lease all or any substantial portion of the assets or
business of WHG or any WHG Subsidiary; 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 WHG,
or any WHG Subsidiary, and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit the
revocation or surrender by any WHG Subsidiary 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 WHG or
any WHG Subsidiary or sell or otherwise dispose of any asset of WHG or of any
WHG Subsidiary other than in the ordinary course of business consistent with
past practice; subject any asset of WHG or of any WHG Subsidiary to a lien,
pledge, security interest or other encumbrance (other than in connection with
deposits, repurchase agreements, bankers acceptances, "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;
(vii) take any action which would result in any of the
representations and warranties of WHG or Heritage Bank set forth in 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;
(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 WHG or Heritage Bank;
(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 WHG or any WHG Subsidiary 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 otherwise alter, in any material respect, the mix, maturity,
credit or interest rate risk profile of its portfolio of investment securities
or its portfolio of mortgage-backed securities;
28
(xi) purchase any security with a remaining term to maturity
greater than three years;
(xii) 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 $400,000 in the
aggregate, or increase, compromise, extend, renew or modify any existing loan or
commitment outstanding in excess of $500,000, except for any commitment
disclosed on the WHG DISCLOSURE SCHEDULE 5.01(a)(xi);
(xiii) except as set forth on the WHG DISCLOSURE SCHEDULE
5.01(a)(xii), enter into, renew, extend or modify any other transaction with any
Affiliate;
(xiv) enter into any futures contract, option, interest rate
caps, interest rate floors, interest rate exchange agreement or other agreement
or take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest;
(xv) except for the execution of this Agreement and the
documents related to 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
Compensation and Benefit Plan;
(xvi) 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 and except as may be necessitated in the reasonable opinion of WHG or
Heritage Bank due to changes in interest rates, and in accordance with safe and
sound banking practices;
(xvii) except as set forth in WHG DISCLOSURE SCHEDULE
5.01(xix), make any capital expenditures in excess of $25,000 individually or
$50,000 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;
(xviii) 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;
(xix) undertake or enter into 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 WHG or any
WHG Subsidiary of more than $25,000 annually, or containing a material financial
commitment and extending beyond 12 months from the date hereof;
(xx) sell any REO or loan, or capitalize any further expenses
relating to REO; or
29
(xxi) agree to do any of the foregoing.
Section 5.02 Access; Confidentiality
(a) Heritage Bank shall permit Baltimore County Bank and its
representatives reasonable access to its properties during normal business
hours, and shall disclose and make available to them all books, papers and
records relating to the assets, properties, operations, obligations and
liabilities of Heritage Bank, 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, except as necessary to preserve any attorney/client privilege,
plans affecting employees, and any other business activities or prospects in
which BCSB may have a reasonable interest. Heritage Bank shall make its
officers, employees and agents and authorized representatives (including counsel
and independent public accountants) available to confer with Baltimore County
Bank and its representatives. WHG and Heritage Bank shall each permit a
representative of Baltimore County Bank to attend any meeting of its Board of
Directors or the Executive Committees thereof (provided that neither WHG nor
Heritage Bank shall be required to permit the Baltimore County Bank
representative to remain present during any confidential discussion of the
Agreement and the transactions contemplated thereby). The parties will hold all
such information delivered in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement, dated January
7, 2002, between FinPro, Inc., on behalf of Heritage Bank, and BCSB (the
"Confidentiality Agreement"). Heritage Bank shall permit Baltimore County Bank,
at Baltimore County Bank's sole 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 Heritage Bank, provided that any phase I
environmental audit is contracted for within thirty days of the date of this
Agreement and commenced as soon as practicable thereafter.
(b) BCSB 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, Heritage Bank and each
WHG Subsidiary shall permit employees of Baltimore County Bank reasonable access
to information relating to problem loans, loan restructurings and loan work-outs
of Heritage Bank.
(d) If the transactions contemplated by this Agreement shall not
be consummated, Heritage Bank and Baltimore County Bank will each destroy or
return all documents and records obtained from the other party or its
representatives during the course of its investigation and will cause all
information with respect to the other party obtained pursuant to this Agreement
or preliminarily thereto to be kept confidential, except to the extent such
information becomes public through no fault of the party to whom the information
was provided or any of its representatives or agents and except to the extent
disclosure of any such information is legally required. Heritage Bank
30
and Baltimore County Bank shall each give prompt written notice to the other
party of any contemplated disclosure where such disclosure is so legally
required.
Section 5.03 Regulatory Matters and Consents.
(a) Except for the WHG Proxy Statement, BCSB and Baltimore County
Bank will prepare all Applications and make all filings for, and use their best
efforts to obtain as promptly as practicable after the date hereof, all
necessary permits, consents, approvals, waivers and authorizations of all
Regulatory Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement.
(b) Heritage Bank will furnish Baltimore County Bank with all
information concerning Heritage Bank and the Heritage Bank Subsidiaries as may
be necessary or advisable in connection with any Application or filing made by
or on behalf of Baltimore County Bank or BCSB to any Regulatory Authority in
connection with the transactions contemplated by this Agreement.
(c) Baltimore County Bank, BCSB and WHG, and Heritage Bank will
promptly furnish each other with copies of all material written communications
to, or received by them from any Regulatory Authority in respect of the
transactions contemplated hereby, except information that is filed by either
party, which is designated, as confidential.
(d) The parties hereto agree that they will consult with each
other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities. Baltimore County
Bank and BCSB will furnish WHG and Heritage Bank with (i) copies of all
Applications prior to filing with any Regulatory Authority and provide Heritage
Bank a reasonable opportunity to provide changes to such Applications and (ii)
copies of all Applications filed.
(e) Heritage Bank, WHG, Baltimore County Bank and BCSB 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
(including the Proxy Statement) made by or on behalf of Baltimore County Bank,
BCSB, WHG or Heritage Bank 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.
Section 5.04 Taking of Necessary Action.
(a) Baltimore County Bank, BCSB, WHG and Heritage Bank shall each
use its best efforts in good faith, and each of them shall cause its
Subsidiaries to use their 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 or
desirable for consummation of the
31
transactions contemplated hereby (including assignment of leases without any
change in terms), provided that neither WHG nor any WHG Subsidiary shall agree
to make any payments or modifications to agreements in connection therewith
without the prior written consent of Baltimore County Bank, 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, except for the
exercise of its rights under this Agreement.
(b) WHG shall prepare, subject to the review, and consent of BCSB
with respect to matters relating to Baltimore County Bank and BCSB, a Proxy
Statement to be mailed to the shareholders of WHG in connection with the
meetings of its shareholders and transactions contemplated hereby, which Proxy
statement shall conform to all applicable legal requirements. The parties shall
cooperate with each other with respect to the preparation of the Proxy
Statement. WHG shall, as promptly as practicable following the preparation
thereof, file the Proxy Statement with the SEC, and WHG shall use all reasonable
efforts to have the Proxy Statement mailed to stockholders as promptly as
practicable after such filing. WHG will promptly advise BCSB of the time when
the Proxy Statement has been filed and mailed, or of any comments from the SEC
or any request by the SEC for additional information.
Section 5.05 Certain Agreements.
(a) For a period of six years from and after the Merger Effective
Date, BCSB shall, to the fullest extent permitted to it under applicable law,
indemnify, defend and hold harmless each present and former director and officer
of WHG (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 prior written approval of
BCSB, 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 WHG or any WHG Subsidiary,
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 WHG
would have been entitled under WHG's articles of incorporation and applicable
federal law and regulations. 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.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.05, upon learning of any Claim, shall promptly notify BCSB, but the
failure to so notify shall not relieve BCSB of any liability it may have to such
Indemnified Party except to the extent that such failure prejudices BCSB. In the
event of any Claim, (i) BCSB shall have the right to assume the defense thereof
(with counsel reasonably satisfactory to the Indemnified Party) and shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that, if BCSB elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
issues
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which raise conflicts of interest between BCSB and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and BCSB shall pay
all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received, provided further that BCSB 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) BCSB shall not be liable for any
settlement effected without its prior written consent (which consent shall not
unreasonably be withheld).
(c) In the event BCSB or any of is 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 BCSB assume the obligations set forth in this Section
5.05.
(d) BCSB shall maintain in effect for three years from the Closing
Date, if available, the current directors' and officers' liability insurance
policy maintained by WHG (provided that BCSB may substitute therefor policies of
at least the same coverage containing terms and conditions which are not
materially less favorable) with respect to matters occurring at or prior to the
Closing Date, provided, however, that in no event shall BCSB be required to
expend pursuant to this Section 5.05(d) more than an amount equal to 150% of the
current annual amount expended by Heritage Bank to maintain or procure insurance
coverage pursuant hereto (which amount, if applicable, shall be used to maintain
the directors' and officers' liability insurance policy for such period less
than three years as is available for such payment). In connection with the
foregoing, WHG agrees to provide such insurer or substitute insurer with such
representations as such insurer may reasonably request with respect to the
reporting of any prior claims. WHG DISCLOSURE SCHEDULE 5.05(d) sets forth all
claims made or notices provided to WHG's present insurers and the extent to
which any present insurance coverage has been impaired due to either defense
expense or settlements.
(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.
From and after the date hereof until the termination of this Agreement,
neither WHG, nor any WHG Subsidiary, nor any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by WHG or any
of its Subsidiaries), 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 WHG shall notify BCSB orally (within
one business day) and in writing
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(as promptly as practicable) of all of the relevant details relating to all
inquiries and proposals which it or any of its Subsidiaries 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 of WHG 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 WHG 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 WHG
receives an opinion from its independent financial advisor that such proposal
may be superior to the Merger from a financial point-of-view to WHG's
stockholders, (B) the Board of Directors of WHG, after consultation with and
after considering the advice of independent legal counsel, determines in good
faith that failure to take such action may cause the Board of Directors of WHG
to breach its fiduciary duties to stockholders under applicable law (such
proposal that satisfies (A) and (B) being referred to herein as a "Superior
Proposal"); and (C) WHG promptly notifies BCSB of such inquiries, proposals or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with WHG or any of its
representatives indicating, in connection with such notice, the name of such
person and the material terms and conditions of any inquiries, proposals or
offers. For purposes of this Agreement, "Acquisition Proposal" shall mean any
proposal or offer as to any of the following (other than the transactions
contemplated hereunder) involving WHG or any of its subsidiaries: (i) any
merger, consolidation, share exchange, business combination, or other similar
transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 25% or more of the assets of WHG, taken as a whole, in a
single transaction or series of transactions; (iii) any tender offer or exchange
offer for 25% or more of the outstanding shares of capital stock of WHG or the
filing of a registration statement under the Securities Act 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 Heritage Bank's Disclosure
Schedules
WHG shall promptly advise BCSB of any change or event having a Material
Adverse Effect on it or on any WHG Subsidiary or which it believes would or
would be reasonably likely to cause or constitute a material breach of any of
its representations, warranties or covenants set forth herein. WHG and Heritage
Bank shall update their 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 WHG
DISCLOSURE SCHEDULES. The delivery of such updated Schedule shall not relieve
WHG or Heritage Bank 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. BCSB and Baltimore County Bank
shall update their 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 Baltimore County
Bank DISCLOSURE SCHEDULES. The delivery of such updated Schedule shall not
relieve Baltimore County Bank 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. Baltimore County Bank shall
promptly advise WHG
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of any change or event that it believes would or would be reasonably likely to
cause or constitute a material breach of any of its representations, warranties
or covenants set forth herein.
Section 5.08 Conduct of Baltimore County Bank's Business.
From the date of this Agreement to the Closing Date, Baltimore County
Bank will use its best efforts to (x) preserve its business organizations
intact, (y) maintain good relationships with employees, and (z) preserve for
itself the goodwill of customers of Baltimore County Bank. From the date of this
Agreement to the Closing Date, neither BCSB nor Baltimore County Bank will (i)
amend its certificate of incorporation, charter or bylaws in any manner
inconsistent with the prompt and timely consummation of the transactions
contemplated by this Agreement, (ii) take any action which would result in any
of the representations and warranties of BCSB or Baltimore County Bank set forth
in 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 which
would or is reasonably likely to adversely effect or materially delay the
receipt of the necessary approvals from the Regulatory Authorities; (iv) take
action which would or is reasonably likely to materially and adversely affect
Baltimore County Bank or BCSB's ability to perform their covenants and
agreements under this Agreement; or (v) agree to do any of the foregoing.
Section 5.09 Board and Committee Minutes.
WHG and Heritage Bank shall provide to Baltimore County Bank, within
thirty (30) days after any meeting of their respective Board of Directors, or
any executive committee thereof, a copy of the minutes of such meeting,
excluding any matters related to this Agreement or the transactions contemplated
hereby, except that with respect to any meeting held within thirty (30) days of
the Closing Date, such minutes shall be provided to each party prior to the
Closing Date.
Section 5.10 Undertakings by the Parties.
(a) From and after the date of this Agreement:
(i) Voting by Directors. Concurrent with the execution of
this Agreement, the Directors of WHG shall have entered into and delivered to
BCSB the agreement set forth as Exhibit A to this Agreement;
(ii) Systems Conversions. Heritage Bank and Baltimore County
Bank shall meet on a regular basis to discuss and plan for the conversion of
Heritage Bank's data processing and related electronic informational systems to
those used by Baltimore County Bank, which planning shall include, but not be
limited to, discussion of the possible termination by Heritage Bank of
third-party service provider arrangements effective at the Merger Effective Date
or at a date thereafter, non-renewal of personal property leases and software
licenses used by Heritage Bank in connection with its systems operations,
retention of outside consultants and additional employees to assist with the
conversion, and outsourcing, as appropriate, of proprietary or self-provided
system services, it being understood that Heritage Bank shall not be obligated
to take any such action prior to the Merger Effective Date and, unless Heritage
Bank otherwise agrees, no conversion shall take place
35
prior to the Merger Effective Date. In the event that Heritage Bank takes, at
the request of Baltimore County Bank, any action relative to third parties to
facilitate the conversion that results in the imposition of any termination fees
or charges, Baltimore County Bank shall indemnify Heritage Bank for any such fee
and charges, and the costs of reversing the conversion process, if for any
reason the Bank Merger is not consummated for any reason other than a breach of
this Agreement by Heritage Bank, or a termination of this Agreement under
Section 7.01(c)(iv) or (d)(iv).
(iii) List of Nonperforming Assets and Lending Activities.
Heritage Bank shall provide Baltimore County Bank, within ten (10) days of the
end of each calendar month, a written list (which shall include the outstanding
principal amount of the loan, where applicable) of the following: (i) loans on
nonaccrual, (ii) real estate owned, (iii) all loans delinquent sixty (60) days
or more as to principal or interest as of the end of such month and (iv) and
impaired loans. Also within twenty (20) days of the end of each calendar month,
Heritage Bank shall also provide Baltimore County Bank with a status report on
each loan with an unpaid principal balance of $500,000 or more. On a monthly
basis, Heritage Bank shall provide Baltimore County Bank with a listing of all
loan approvals, which listing shall indicate the loan amount, loan type and
other material features of the loan; and
(iv) Reserves and Merger-Related Costs. On or immediately
before the Effective Date, and at the request of Baltimore County Bank and to
the extent not inconsistent with GAAP, WHG 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 WHG to
those of BCSB (as such practices and methods are to be applied to WHG from and
after the Closing Date) and BCSB's plans with respect to the conduct of the
business of WHG and Heritage Bank following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by WHG and Heritage Bank, provided,
however, that WHG shall not be required to take such action unless Baltimore
County Bank and BCSB agree 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); and no accrual or reserve made by WHG or any WHG
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 to constitute a termination
event within the meaning of Section 7.01(b) hereof.
(v) Shareholders Meeting. Subject to delays, if any, which may
be occasioned by the review of proxy materials by a Regulatory Authority, WHG
shall submit this Agreement to its shareholders for approval at a meeting to be
held within 90 days of the date of this Agreement, or as soon thereafter as is
practicable, and, if consistent with its fiduciary obligation at the time and
subject to Section 5.06, its Board of Directors shall recommend approval of this
Agreement to the WHG shareholders.
(b) From and after the date of this Agreement, Baltimore County Bank,
BCSB, WHG and Heritage Bank shall each:
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(i) Filings and Approvals. Cooperate with the other in the
preparation and filing, as soon as practicable, of (A) the Applications, (B) the
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, (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 shareholders, 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;
(iii) Maintenance of Insurance. Maintain, and cause their
respective Subsidiaries to maintain, insurance in such amounts as are reasonable
to cover such risks as are customary in relation to the character and location
of its properties and the nature of its business;
(iv) Maintenance of Books and Records. Maintain, and cause
their respective Subsidiaries to maintain, books of account and records in
accordance with GAAP applied on a basis consistent with those principles used in
preparing the financial statements heretofore delivered; or
(v) Taxes. File all federal, state, and local tax returns
required to be filed by them or their respective Subsidiaries on or before the
date such returns are due (including any extensions) and pay all taxes shown to
be due on such returns on or before the date such payment is due.
Section 5.11 Employee and Termination Benefits.
(a) As of or after the Merger Effective Date, and at Baltimore County
Bank's election and subject to the requirements of the Code and ERISA, the
Heritage Bank Compensation and Benefit Plans, other than ESOP, which will be
terminated, may be continued and maintained separately, consolidated, or
terminated. Heritage Bank employees who continue employment with Baltimore
County Bank following the Merger Effective Date ("Continuing Employees") shall
participate in all Baltimore County Bank Employee Plans (including, without
limitation, Baltimore County Bank's defined benefit pension plan, ESOP, and its
401(k) plan) as of the first entry date coincident with or following the Merger
Effective Date, with recognition of prior service with Heritage Bank for
purposes of eligibility to participate and vesting, but not benefits accrual.
Continuing Employees shall be enrolled in the Baltimore County Bank
medical, dental, life insurance and disability insurance programs available to
other Baltimore County employees immediately upon the termination of the
Heritage Bank plans without such Continuing Employees incurring any uninsured
waiting periods or pre-existing conditions exclusions for such Continuing
Employees and dependents participating in such similar Heritage Bank plans at
such time. Further, any plan year deductibles under such plans incurred as of
the date of termination of the respective
37
Heritage Bank plans shall be credited to the first plan year deductibles under
the comparable Baltimore County plans upon enrollment in such Baltimore County
plans.
(b) At and for a period of six months following the Merger Effective
Date, any terminated employees of WHG or Heritage Bank whose employment is
terminated, other than voluntary termination and termination for cause, shall be
provided with severance benefits equal to two (2) weeks pay for every year of
service with WHG or Heritage Bank, up to a maximum of 26 weeks. The benefit set
forth in this section 5.11(b) shall be payable to any person who is an employee
of WHG or Heritage Bank five business days prior to the Merger Effective Date
(other than an employee who is a party to an employment or change in control
agreement) and whose employment is terminated by Baltimore County Bank (other
than voluntary termination and termination for cause) during the period ending
six months after the Merger Effective Date. The benefits shall be payable within
14 days of the date of termination of employment.
(c) The employment agreements identified in WHG DISCLOSURE SCHEDULE
3.18 will be honored by Baltimore County Savings Bank. The payments required to
be made under those agreements are set forth in WHG DISCLOSURE SCHEDULE 3.18
(which payment shall be made by Heritage Bank, or if requested by Baltimore
County Bank, by Baltimore County Bank) shall be in complete satisfaction of all
of their rights under the employment agreement, neither BCSB, Baltimore County
Bank, WHG nor Heritage Bank shall have further obligation under the employment
agreements, and each individual shall execute a cancellation agreement and
release, in form and substance reasonably satisfactory to Baltimore County Bank
in connection with such payment. To the extent that BCSB has notified WHG prior
to the Merger Effective Date that employees with employment agreements or change
in control severance agreements will not be retained by BCSB or Baltimore County
Bank after the Merger Effective Date, then WHG shall make such termination
payments in accordance with such agreements as of the Merger Effective Date
(which payments, at the request of Baltimore County Bank, may be made by
Baltimore County Bank).
(d) The Heritage Bank Employee Stock Ownership Plan (the "ESOP") shall
be terminated as of the Merger Effective Date in accordance with its terms in
effect as of the date of this Agreement (all shares held by the ESOP shall be
converted into the right to receive the Merger Consideration), all outstanding
ESOP indebtedness shall be repaid, and the balance shall be allocated and
distributed to WHG employees (subject to the receipt of a determination letter
from the IRS to be filed by WHG promptly following the date of this Agreement),
as provided for in the WHG ESOP and unless otherwise required by applicable law;
provided, however, in the event that the Merger Effective Date is prior to July
31, 2002, Heritage Bank may, to the extent permitted under the Code, make
contributions to the ESOP in an amount equal to the normal contribution amount
for the complete twelve month plan year as if the Merger Effective Date was July
31, 2002.
(e) As of the Closing Date, payments may be made to the directors, and
in the amounts, specified in WHG DISCLOSURE SCHEDULE 5.11(e), pursuant to the
Heritage Bank Directors Change in Control Severance Plan. The Chairman of the
Board of WHG shall be provided with a six-month severance benefit in the amount
set forth on the WHG DISCLOSURE SCHEDULE
38
5.11(e) in addition to his Board severance benefit pursuant to the Heritage Bank
Directors Change in Control Severance Plan.
(f) On or before the Merger Effective Date, all Heritage Bank employees
shall be paid for all accrued (consistent with past practice) but unused
vacation leave determined as of such Merger Effective Date, and may also receive
payments in accordance with the Heritage Bank Employee Retention Program in
accordance with WHG DISCLOSURE SCHEDULE 5.11(f), provided that Heritage Bank has
been accruing for such payments prior to the date of this Agreement (and in such
case such accruals may continue through the Closing Date, consistent with
current practice).
(g) Heritage Bank may continue to accrue for contributions to be made
to its 401(k) plan at the annual rate of 5% of participant compensation through
the Merger Effective Date and may make such contribution to such plan not later
than the Merger Effective Date; provided, however, in the event that the Merger
Effective Date is prior to July 31, 2002, Heritage Bank may, to the extent
permitted under the Code, make a contribution to such 401(k) plan in an amount
equal to the 5% contribution projected for such final plan year as if the Merger
Effective Date was as of July 31, 2002.
(h) Heritage Bank shall continue to accrue for its annual bonus plan
(consistent with past practice) and may pay such bonus amounts as of the Merger
Effective Time in accordance with WHG Disclosure Schedule 5.11(h).
Section 5.12 Duty to Advise; Duty to Update Baltimore County Bank's
Disclosure Schedules.
BCSB and Baltimore County Bank shall promptly advise Heritage Bank of
any change or event having a Material Adverse Effect on it or on any BCSB
Subsidiary or which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants set forth herein. BCSB and Baltimore County Bank shall update their
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 a DISCLOSURE SCHEDULE. The delivery of
such updated Schedules shall not relieve BCSB 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 6.01(c) hereof.
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to WHG and Heritage Bank's Obligations under
this Agreement.
The obligations of WHG and Heritage Bank hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by WHG and Heritage Bank pursuant to Section 8.03
hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, BCSB and Baltimore County Bank to authorize the execution, delivery
and performance of this Agreement,
39
and the consummation of the transactions contemplated by this Agreement, shall
have been duly and validly taken by BCSB and Baltimore County Bank; and Heritage
Bank and WHG shall have received certified copies of the resolutions evidencing
such authorizations;
(b) Covenants. The obligations and covenants of BCSB and Baltimore
County Bank required by this Agreement to be performed by BCSB and Baltimore
County Bank 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 BCSB and Baltimore County Bank set forth in this Agreement which
is qualified as to materiality shall be true and correct and each such
representational 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 as of
the Closing Date as though made on and as of the Closing Date (other than
Section 4.08 and except as to any representation or warranty which specifically
relates to an earlier date);
(d) Approvals of Regulatory Authorities. The parties to this Agreement
shall have received all required approvals from the Regulatory Authorities with
respect to the Mergers; 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 that enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) Approval of WHG's Shareholders. This Agreement shall have been
approved by the shareholders of WHG by such vote as is required under applicable
law, and WHG's articles of incorporation and bylaws;
(g) Officer's Certificate. BCSB and Baltimore County Bank shall have
delivered to Heritage Bank a certificate, dated the Closing Date and signed,
without personal liability, by its president, to the effect that the conditions
set forth in subsections (a) through (e) of this Section 6.01 have been
satisfied; and
(h) Funds Deposited with the Exchange Agent. Baltimore County Bank
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
holders of WHG Common Stock shall be entitled to receive on the Merger Effective
Date pursuant to Section 2.02 of this Agreement.
Section 6.02 Conditions to BCSB and Baltimore County Bank's Obligations
under this Agreement.
The obligations of Baltimore County Bank and BCSB hereunder shall be
subject to satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by BSCB or Baltimore County Bank pursuant to Section
8.03 hereof:
40
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, WHG and Heritage Bank 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 WHG
and Heritage Bank; and Baltimore County Bank shall have received certified
copies of the resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of WHG and each WHG
Subsidiary 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 WHG, Heritage Bank and each WHG Subsidiary set forth in this
Agreement which is qualified as to materiality shall be true and correct and
each such representation and 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 as of the Closing Date as though made on and as of the Closing Date (except
as to any representation or warranty which specifically relates to an earlier
date);
(d) Approvals of Regulatory Authorities. All required approvals from
the Regulatory Authorities with respect to the Mergers have been received; and
all notice and waiting periods required thereunder shall have expired or been
terminated; provided, however, that no approval or consent referred to herein
shall be deemed to have been received if it shall include any condition or
requirement that, in the aggregate, would so materially reduce the economic or
business benefits of the Merger to BCSB that had such condition or requirement
been known, BCSB, in its reasonable judgment, would not have entered into this
Agreement.
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction that enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since September 30, 2001, there shall
not have occurred any Material Adverse Effect with respect to WHG or Heritage
Bank;
(g) Certain Loans. There shall not have been an increase of more than
$2.75 million ($2,750,000) in commercial loans and multi-family loans delinquent
ninety days or more (90) days as of any month end prior to the Closing Date,
compared to the amount of such delinquencies as of the month end prior to the
date of this Agreement; and
(h) Officer's Certificate. WHG shall have delivered to BCSB 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 (g) of this Section 6.02 have been satisfied.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
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Section 7.01 Termination.
This Agreement may be terminated at any time prior to the Merger
Effective Date:
(a) by mutual written consent of the parties authorized by their
respective boards of directors;
(b) by BCSB or Baltimore County Bank, or WHG or Heritage Bank (i) if
the Merger Effective Date shall not have occurred on or prior to September 30,
2002, (ii) if a vote of the stockholders of WHG is taken and such stockholders
fail to approve this Agreement at the meeting of stockholders (or any
adjournment thereof) of WHG contemplated by Section 5.04(b) hereof, or (iii) any
applicable regulatory authority formally disapproves the issuance of any
required regulatory approval, unless in the case of clauses (i) and (ii) of this
Section 7.01(b) such failure is due to the failure of the party seeking to
terminate this Agreement to perform or observe its agreements set forth herein
to be performed or observed by such party on or before September 30, 2002 or
such meeting of stockholders, as the case may be.
(c) by BCSB or Baltimore County Bank if (i) at the time of such
termination any of the representations and warranties of WHG or Heritage Bank
contained in this Agreement shall not be true and correct to the extent that the
condition set forth in Section 6.02(b) or (c) hereof cannot be satisfied, (ii)
there shall have been any material breach of any covenant, agreement or
obligation of WHG or Heritage Bank hereunder and such breach shall have not been
remedied by WHG or Heritage Bank within fifteen business days after receipt by
them of notice in writing from BCSB or Baltimore County Bank specifying the
nature of such breach and requesting that it be remedied, (iii) any applicable
Regulatory Authority approves the transactions contemplated but with conditions
attached such that the requirements of Section 6.02(d) are not satisfied, (iv)
WHG has received a Superior Proposal, and in accordance with Section 5.06 of
this Agreement, the Board of Directors of WHG has entered into an acquisition
agreement with respect to the Superior Proposal, terminated this Agreement, or
withdraws its recommendation of this Agreement, fails to make such
recommendation or modifies or qualifies its recommendation in a manner adverse
to BCSB, or (v) any event occurs such that a condition set forth in Sections
6.02 hereof which must be fulfilled before BCSB or Baltimore County Bank is
obligated to consummate the Merger cannot be fulfilled and non-fulfillment is
not waived by BCSB or Baltimore County Bank.
(d) by WHG or Heritage Bank if (i) at the time of such termination any
of the representations and warranties of Baltimore County Bank and BCSB
contained in this Agreement shall not be true and correct to the extent that the
condition set forth in Section 6.01(b) or (c) hereof cannot be satisfied, (ii)
there shall have been any material breach of any covenant, agreement or
obligation of Baltimore County Bank or BCSB hereunder and such breach shall not
have been remedied within fifteen business days after receipt by Baltimore
County Bank of notice in writing from Heritage Bank specifying the nature of
such breach and requesting that it be remedied, (iii) any event occurs such that
a condition set forth in Sections 6.01 hereof which must be fulfilled before
Heritage Bank is obligated to consummate the Merger cannot be fulfilled and
non-fulfillment is not waived by Heritage Bank, or (iv) WHG has received a
Superior Proposal, and in accordance with Section 5.06 of this Agreement, the
Board of Directors of WHG has made a determination to accept
42
such Superior Proposal; provided that WHG shall not terminate this Agreement
pursuant to this Section 7.01(d)(iv) and enter in a definitive agreement with
respect to the Superior Proposal until the expiration of three (3) business days
following BCSB and Baltimore County Bank's receipt of written notice advising
BCSB and Baltimore County Bank that WHG has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal (and
including a copy thereof with all accompanying documentation, if in writing)
identifying the person making the Superior Proposal and stating whether WHG
intends to enter into a definitive agreement with respect to the Superior
Proposal. After providing such notice, WHG shall provide a reasonable
opportunity to BCSB and Baltimore County Bank during the three-day period to
make such adjustments in the terms and conditions of this Agreement as would
enable WHG to proceed with the Merger on such adjusted terms.
Section 7.02. Effect of Termination.
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 Section 8.01 and the last sentences of Sections 5.02 and
5.10(a)(ii), which shall remain in full force and effect), and there shall be no
further liability on the part of Baltimore County Bank, BCSB, WHG or Heritage
Bank to the other, except that no party shall be relieved or released from any
liabilities or damages arising out of its willful or fraudulent breach of any
provision of this Agreement.
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. Section 8.01(a) shall not be construed to
relieve or release a breaching party from any liability or damages arising out
of its willful breach of any provision of this Agreement.
(b) As a condition of BCSB and Baltimore County Bank's willingness, and
in order to induce BCSB and Baltimore County Bank to enter into this Agreement
and to reimburse BCSB and Baltimore County Bank for incurring the costs and
expenses related to entering into this Agreement and consummating the
transactions contemplated by this Agreement, WHG and Heritage Bank hereby agrees
to pay Baltimore County Bank, and Baltimore County Bank shall be entitled to
payment of a fee of $1,000,000 (the "Fee"), within three business days after
written demand for payment is made by Baltimore County Bank, following the
occurrence of any of the events set forth below:
(i) WHG terminates this Agreement pursuant to Section 7.01(d)(iv) or
BCSB or Baltimore County Bank terminates this Agreement pursuant to Section
7.01(c)(iv); or
43
(ii) the entering into a definitive agreement by WHG relating to an
Acquisition Proposal or the consummation of an Acquisition Proposal involving
WHG within twelve months after the occurrence of any of the following: (i) the
termination of the Agreement by BCSB or Baltimore County Bank pursuant to
Section 7.01(c)(ii); (ii) the failure of the stockholders of WHG to approve this
Agreement after the occurrence of an Acquisition Proposal, or (iii) September
30, 2002 if prior thereto the WHG stockholders have not approved this Agreement.
If demand for payment of the Fee is made pursuant to this Section
8.01(b) and payment is timely made, then neither BCSB nor Baltimore County Bank
will have any other rights or claims against WHG or Heritage Bank, their
Subsidiaries, and their respective officers and directors, under this Agreement,
it being agreed that the acceptance of the Fee under this Section 8.01(b) will
constitute the sole and exclusive remedy of BCSB and Baltimore County Bank
against WHG and Heritage Bank, their Subsidiaries and their respective officers
and directors.
Section 8.02 Non-Survival of Representations and Warranties.
All representations, warranties and, except to the extent specifically
provided otherwise herein, agreements and covenants, other than those covenants
set forth in Sections 2.02, 5.05, 5.10(a)(ii) and 5.11, which will survive the
Merger, shall terminate on the Closing Date.
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.
Section 8.04 Entire Agreement.
This Agreement, including the documents and other writings referred to
herein or delivered pursuant hereto, contains the entire agreement and
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior arrangements and understandings between the parties, both
written 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, 2.03, 5.05 and 5.11(c), (d) and (e).
44
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 Baltimore County Bank or BCSB to:
Baltimore County Savings Bank
4111 E. Joppa Road
Baltimore, Maryland
Attention: Gary C. Loraditch
President
with a copy to:
Luse Lehman Gorman Pomerenk & Schick, PC
5335 Wisconsin Avenue, NW
Suite 400
Washington, D.C. 20015
Attention: John J. Gorman, Esq.
Eric Luse, Esq.
(b) If to WHG or Heritage Bank, to:
Heritage Savings Bank
1505 York Road
Lutherville, Maryland 21093
Attention: Mrs. Peggy J. Stewart
President and Chief Executive Officer
with a copy to:
Malizia Spidi & Fisch, PC
1100 New York Avenue, N.W.
Suite 340 West
Washington, DC 20005
Attention: John J. Spidi, Esq.
45
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.
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 Maryland.
46
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.
BCSB BANKCORP, INC.
By: /s/Gary C. Loraditch
----------------------------------------------
Gary C. Loraditch
President
BALTIMORE COUNTY SAVINGS BANK
By: /s/Gary C. Loraditch
----------------------------------------------
Gary C. Loraditch
President
HERITAGE SAVINGS BANK
By: /s/Peggy J. Stewart
----------------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
WHG BANCSHARES CORPORATION
By: /s/Peggy J. Stewart
----------------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
47
APPENDIX B
February 27, 2002
Board of Directors
WHG Bancshares Corporation
Heritage Savings Bank, F.S.B.
1505 York Road
Lutherville, Maryland 21093
Members of the Board:
WHG Bancshares Corporation ("WHGB") has requested our written opinion, as an
independent financial advisor to WHGB and its wholly owned subsidiary Heritage
Savings Bank, F.S.B. (the "Bank"), Lutherville, Maryland as to the fairness,
from a financial point of view to the common shareholders of WHGB, of the merger
consideration proposed in the Agreement and Plan of Merger dated February 27,
2002 (the "Agreement"), pursuant to which WHGB will be acquired by BCSB
Bankcorp, Inc. ("BCSB"), Baltimore, Maryland.
Pursuant to the Agreement and discussions with management, 100% of the issued
and outstanding shares of WHGB common stock will be acquired for $14.25 per
share in cash (the "Merger Consideration") by BCSB. The Merger Consideration may
be taxable to WHGB shareholders.
This letter is directed to the Board of Directors of WHGB and the Bank in its
consideration of the Agreement, and does not constitute a recommendation to any
shareholder of WHGB to vote for or against the Agreement or to take any other
action.
FinPro, Inc. ("FinPro") provides investment-banking services to the bank and
thrift industry, including appraisals and valuations of bank and thrift
institutions and their securities in connection with mergers, acquisitions,
public offerings and other securities transactions. FinPro has knowledge of and
experience with the mid-atlantic bank and thrift market and financial
institutions operating in that market. The WHGB Board chose FinPro because of
its expertise, experience and familiarity with the bank and thrift industries.
In connection with its opinion, FinPro reviewed and considered, among other
things: (i) the Agreement and the exhibits thereto; (ii) changes in the market
for bank and thrift stocks; (iii) the performance of WHGB's and BCSB's common
stock; (iv) trends and changes in the financial condition of WHGB and BCSB; (v)
the most recent annual report to shareholders of WHGB and BCSB; (vi) quarterly
reports on Form 10-Q of WHGB and BCSB; (vii) the budget of WHGB.
In rendering its opinion, FinPro did not independently verify the financial data
provided by or on behalf of WHGB and BCSB, but instead relied upon and assumed
the accuracy and completeness of the data provided.
WHGB Bancorp, Inc. Page: 2
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We have also had discussions with the management of WHGB and BCSB regarding
their respective financial results and have analyzed the most current financial
data available for WHGB and BCSB. We also considered such other information,
financial studies, analyses and investigations, and economic and market criteria
which we deemed relevant.
We have considered certain financial data of WHGB and have compared that data
with similar data for other financial institutions and their holding companies
which have recently merged or been acquired. Furthermore, we have considered the
financial terms of these business combinations involving said financial
institutions and their holding companies.
In reaching our opinion, we took into consideration the financial benefits of
the proposed transaction to WHGB shareholders. Based on all factors that we deem
relevant and assuming the accuracy and completeness of the information and data
provided to us by WHGB and BCSB, it is our opinion as of this date, that the
proposed Merger Consideration is fair and equitable to WHGB shareholders from a
financial point of view.
FinPro understands that this opinion may be included in its entirety in a
communication by WHGB or its Board of Directors to the shareholders of WHGB and
may be included in its entirety in regulatory filings by WHGB and BCSB. Except
as described above, this opinion may not be summarized, excerpted from or
otherwise publicly referred to without FinPro's prior written consent.
WHGB retained FinPro to act as independent financial advisor, to render general
financial advisory services and also to specifically advise WHGB in connection
with its merger and acquisition activities. Pursuant to its engagement, WHGB
will pay FinPro a fee equal to 1.00% of the transaction value plus reasonable
expenses. In addition, WHGB has indemnified FinPro in connection with any matter
related to the merger.
Prior to being retained as WHGB's financial advisor, FinPro had provided
consulting services to WHGB. The revenues derived from these services are
insignificant when compared to the firm's total gross revenues.
Respectfully Submitted,
/s/FinPro, Inc.
FinPro, Inc.
Liberty Corner, New Jersey