UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss.240.14a-12
SKIBO FINANCIAL CORP.
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(Name of Registrant as Specified in Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[SKIBO FINANCIAL CORP. LETTERHEAD]
January 16, 2004
Dear Stockholder:
We cordially invite you to attend the special meeting of the
stockholders of Skibo Financial Corp. The meeting will be held at Southpointe
Golf Club, 360 Southpointe Boulevard, Canonsburg, Pennsylvania, on Thursday,
February 19, 2004 at 9:00 a.m., Eastern Time.
At the special meeting, you will be asked to approve an Agreement and
Plan of Merger by and among Northwest Savings Bank, Northwest Bancorp, Inc.,
Northwest Bancorp, MHC, First Carnegie Deposit, Skibo Financial Corp. and Skibo
Bancshares, M.H.C. which provides for (i) the merger of Skibo Bancshares, M.H.C.
with and into Northwest Bancorp, MHC and (ii) the conversion of Skibo Financial
to an interim savings bank and subsequent merger with and into First Carnegie
Deposit (together with (i), the "merger"). As a result of the merger, you will
be entitled to receive a cash payment of $17.00 for each share of Skibo
Financial Corp. stock that you own. Moreover, as a result of the merger you will
no longer own any stock or other interest in Skibo Financial Corp. nor will you
receive, as a result of the merger, any stock of Northwest Bancorp, Inc.,
Northwest Savings Bank, or Northwest Bancorp, MHC.
The completion of the merger is subject to certain conditions,
including the approval of the merger agreement by the stockholders of Skibo
Financial Corp. and the receipt of all required regulatory approvals.
YOUR VOTE IS VERY IMPORTANT. THE MERGER AGREEMENT MUST BE
APPROVED BY THE AFFIRMATIVE VOTE OF:
o TWO-THIRDS OF ALL VOTES ENTITLED TO BE CAST AT THE MEETING BY ALL SKIBO
FINANCIAL CORP. STOCKHOLDERS, INCLUDING SKIBO BANCSHARES, M.H.C.; AND
o A MAJORITY OF ALL VOTES ENTITLED TO BE CAST AT THE MEETING BY ALL SKIBO
FINANCIAL CORP. STOCKHOLDERS, OTHER THAN SKIBO BANCSHARES, M.H.C.
We urge you to read the attached proxy statement carefully. It
describes the merger agreement in detail and includes a copy of the merger
agreement as Appendix A.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
Whether or not you plan to attend the special meeting, please complete,
date and sign the enclosed proxy form and return it promptly in the postage-paid
envelope provided. On behalf of the board of directors, I thank you for your
prompt attention to this important matter.
Sincerely,
/s/Walter G. Kelly
-------------------------------
Walter G. Kelly
President
P.O. Box 664 Carnegie, PA 15106 Telephone: 412-276-2424 Facsimile: 412-276-2424
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SKIBO FINANCIAL CORP.
242 EAST MAIN STREET
CARNEGIE, PENNSYLVANIA 15106
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 19, 2004
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Notice is hereby given that the special meeting of stockholders of
Skibo Financial Corp. will be held at Southpointe Golf Club, 360 Southpointe
Boulevard, Canonsburg, Pennsylvania, on Thursday, February 19, 2004 at 9:00
a.m., Eastern Time, for the following purposes:
1. The approval of the Agreement and Plan of Merger, dated as of September
11, 2003, by and among Northwest Savings Bank, Northwest Bancorp, Inc.,
Northwest Bancorp, MHC, and First Carnegie Deposit, Skibo Financial
Corp. and Skibo Bancshares, M.H.C. Upon completion of the merger, you
will be entitled to receive $17.00 in cash for each share of Skibo
Financial Corp. stock that you own. A copy of the merger agreement is
included as Appendix A to the accompanying proxy statement; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof. The board of directors is not aware of any
other business to come before the meeting.
Any action may be taken on the foregoing proposals at the meeting on
the date specified above, or on any date or dates to which the meeting may be
adjourned. Only stockholders of record at the close of business on January 5,
2004 are entitled to vote at the meeting or any adjournments of the meeting. The
merger agreement must be approved by the affirmative vote of two-thirds of all
shares outstanding including the shares held by Skibo MHC and a majority of all
shares outstanding and held by stockholders other than Skibo MHC. Each director
and executive officer has agreed to vote his or her shares in favor of the
merger agreement. Shares held by directors and executive officers represented
6.7% of the shares outstanding (exclusive of options) as of the record date.
YOUR VOTE IS VERY IMPORTANT
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You are requested to complete and sign the enclosed proxy card which is
solicited on behalf of the board of directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the meeting and vote
in person. Remember, if your shares are held in the name of a broker, only your
broker can vote your shares and only after receiving your instructions on the
merger proposal. Please contact the person responsible for your account and
instruct him/her to execute a proxy card on your behalf. You should also sign,
date and mail your proxy at your earliest convenience. Please review the
document accompanying this notice for more complete information regarding the
matters proposed for your consideration at the special meeting. Should you have
any questions or require assistance, please call us at (412) 276-2424.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Carol A. Gilbert
Carol A. Gilbert
Secretary
Carnegie, Pennsylvania
January 16, 2004
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE SKIBO FINANCIAL CORP. THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
THE BOARD OF DIRECTORS OF SKIBO FINANCIAL CORP. UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE MERGER AGREEMENT. YOUR SUPPORT IS APPRECIATED.
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PLEASE NOTE
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No one has been authorized to provide Skibo Financial Corp.
stockholders with any information other than the information included in this
proxy statement and the documents that are referred to in this proxy statement.
Stockholders of Skibo Financial Corp. should not rely on other information as
being authorized by Skibo Financial Corp.
This proxy statement is first being mailed to stockholders on or about
January 16, 2004.
As used in this proxy statement, First Carnegie Deposit is sometimes
referred to as "First Carnegie," Skibo Financial Corp. is sometimes referred to
as "Skibo Financial," and Skibo Bancshares, M.H.C. is sometimes referred to as
"Skibo MHC." First Carnegie Deposit, Skibo Financial Corp. and Skibo Bancshares,
M.H.C. are sometimes collectively referred to as "Skibo." Additionally,
Northwest Bancorp, Inc. is sometimes referred to as "Northwest Bancorp" and
Northwest Bancorp, MHC is sometimes referred to as "Northwest MHC." Northwest
Savings Bank, Northwest Bancorp and Northwest MHC are sometimes collectively
referred to as "Northwest."
WHO CAN HELP ANSWER YOUR QUESTIONS
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If you want additional copies of this document, or if you want to ask
any questions about the merger agreement you should contact:
Mr. Walter G. Kelly
President and Chief Executive
Officer First Carnegie Deposit
242 East Main Street
Carnegie, Pennsylvania 15106-2792
Telephone: (412) 276-2424
TABLE OF CONTENTS
Page
----
SUMMARY TERM SHEET...............................................................1
QUESTIONS AND ANSWERS ABOUT THE VOTING
PROCEDURES FOR THE SPECIAL MEETING............................................ 5
THE SPECIAL MEETING............................................................. 7
Place, Time and Date.................................................. 7
Matters to Be Considered.............................................. 7
Voting Rights of Stockholders; Votes Required for Approval..............7
Solicitation and Revocability of Proxies................................8
Principal Stockholders..................................................9
Security Ownership of Directors and Management..........................9
THE MERGER......................................................................10
Overview...............................................................10
The Parties to the Merger..............................................11
Background to the Merger...............................................12
Skibo's Reasons for the Merger.........................................13
Opinion of Financial Advisor...........................................14
Interests of Certain Persons in the Merger and Related Transactions....19
Conditions of the Merger...............................................21
Federal Income Tax Consequences of the Merger to You...................23
Accounting Treatment of the Merger.....................................24
Effective Time.........................................................24
Procedures for Surrendering Your Certificates..........................24
Regulatory Approvals...................................................25
Time Period for Completing the Merger..................................26
Other Provisions of the Merger Agreement...............................26
Voting Agreements......................................................28
No Dissenters' Rights..................................................28
MARKET FOR COMMON STOCK AND DIVIDENDS...........................................28
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING...............................29
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS......................29
WHERE YOU CAN FIND MORE INFORMATION.............................................30
Appendix A - Agreement and Plan of Merger......................................A-1
Appendix B - Opinion of FinPro, Inc............................................B-1
SUMMARY TERM SHEET
------------------
This summary term sheet highlights selected information from this proxy
statement regarding the merger proposal and may not contain all of the
information that is important to you. You should carefully read this entire
document and the other documents we refer to in this document. These will give
you a more complete description of the transactions we are proposing. We have
included page references in this summary term sheet to direct you to other
places in this proxy statement where you can find a more complete description of
the topics we discuss below.
The Companies (Page 11)
Skibo Financial is a federally-chartered stock holding company
headquartered in Carnegie, Pennsylvania. Skibo Financial operates through its
wholly-owned subsidiary bank, First Carnegie, a federally-chartered savings bank
headquartered in Carnegie, Pennsylvania which has branch offices in McKees Rocks
and Washington, Pennsylvania. Skibo MHC, a federal mutual holding company, also
headquartered in Carnegie, Pennsylvania, owns 60.2% of the common stock of Skibo
Financial.
Northwest Bancorp is a federally-chartered stock holding company
headquartered in Warren, Pennsylvania. Northwest Bancorp operates through its
wholly-owned subsidiaries, Northwest Savings Bank, a Pennsylvania-chartered
savings bank, and Jamestown Savings Bank, a New York-chartered savings bank.
Northwest Bancorp, through its subsidiaries, provides a wide range of commercial
and consumer banking services through 144 community banking offices throughout
its market area in northwest, southwest and central Pennsylvania, southwestern
New York and northeastern Ohio.
Northwest MHC is a federally-chartered mutual holding company that
currently owns approximately 59.0% of Northwest Bancorp's issued and outstanding
common stock. Northwest MHC also owns all of the issued and outstanding stock of
Leeds Federal Savings Bank, a federally-chartered savings bank headquartered in
Baltimore, Maryland.
Our Reasons for the Merger (Page 13)
Our board of directors believes that the merger is in the best
interests of Skibo Financial and its stockholders. The merger will enable our
stockholders to realize significant value on their investment in Skibo
Financial. The board of directors of Skibo MHC also believes that the merger is
in the best interests of Skibo MHC and its members. In reaching its decision to
approve the merger agreement, our board considered various factors which are
discussed in detail in this proxy statement.
Our Board of Directors Recommends Stockholder Approval (Page 14)
Our board of directors believes that the transactions contemplated by
the merger agreement are in the best interests of Skibo Financial and all of our
stockholders. The board has approved the merger agreement. Our board of
directors recommends that you vote "FOR" approval of the merger agreement.
Our Financial Advisor Says the Merger Consideration is Fair from a Financial
Point of View (Page 14).
Our financial advisor, FinPro, Inc. ("FinPro"), has given our board of
directors a written opinion, dated September 11, 2003 and updated as of January
16, 2004, that states that the cash consideration to be paid to our stockholders
is fair to the holders of our common stock from a financial point of view and
the merger is fair to the members of Skibo MHC. A copy of the updated opinion is
attached to this proxy
1
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
of approximately $250,000 as consideration for its services. Of this amount,
$70,000 has already been paid.
Material Terms of the Merger Agreement (Pages 10 and 26)
o Skibo Financial will exchange its charter for an interim stock savings
association charter which will then merge with and into First Carnegie with
First Carnegie as the surviving association. As a result of this merger,
each issued and outstanding share of Skibo Financial common stock held by
stockholders other than Skibo MHC will cease to be outstanding, and will be
converted automatically into the right to receive $17.00 in cash. Each
issued and outstanding share of Skibo Financial common stock held by Skibo
MHC will be exchanged for one share of First Carnegie common stock.
o On the effective date of the merger, First Carnegie will become a
wholly-owned subsidiary of Skibo MHC. Skibo MHC will then merge with and
into Northwest MHC, with Northwest MHC as the resulting entity. The
separate existence of Skibo MHC will cease.
o As a result of the above merger, each issued and outstanding share of First
Carnegie common stock held by Skibo MHC will be transferred to Northwest
MHC as the surviving entity in that merger, and First Carnegie will become
a wholly-owned subsidiary of Northwest MHC. It is anticipated that First
Carnegie will continue to operate as a separately chartered financial
institution until June 30, 2005.
o All deposit accounts established at First Carnegie prior to the merger
effective date will confer on each depositor the same rights and privileges
in Northwest MHC as if such deposit account had been established at
Northwest Savings Bank on the date established at First Carnegie. To the
extent permitted by regulatory authorities, any borrower members of Skibo
MHC as of the merger effective date (i.e., borrowers of First Carnegie as
of August 22, 1996 who continue their borrower relationship as of the
merger effective date), whose borrowings remain outstanding as of the date
established to determine depositors eligible to vote on any mutual-to-stock
conversion of Northwest MHC, will be given subscription rights in any
conversion of Northwest MHC to stock form that occurs prior to any merger
of First Carnegie with and into Northwest Savings Bank.
o The merger cannot occur unless: (1) our stockholders approve the merger
agreement; (2) if required, the members of Skibo MHC approve the merger
agreement; (3) we receive required regulatory approvals; and (4) certain
other conditions to the merger are satisfied or waived.
o We have agreed not to solicit or encourage a competing transaction to
acquire us. However, if its fiduciary duties require it, our board of
directors may furnish information to or negotiate with someone who makes an
unsolicited proposal that would be superior to Northwest Bancorp's
proposal.
o If we terminate the merger agreement with Northwest because we receive a
superior proposal, or if our board of directors changes its recommendation
to approve the merger agreement, we may be obligated to pay Northwest a fee
of $1.2 million.
2
The Merger Agreement may be Amended or Terminated (Page 27)
Skibo Financial and Northwest Bancorp may mutually agree to terminate
the merger agreement and elect not to complete the merger at any time before the
effective date of the merger.
The parties also may terminate the merger if other circumstances occur
that are described in the merger agreement, including the failure to complete
the merger by August 1, 2004.
The merger agreement may be amended by the written agreement of Skibo
and Northwest. However, after you approve the merger agreement, any subsequent
amendment or waiver that reduces or changes the amount or form of the
consideration that you will receive as a result of the merger transactions
cannot be completed without your prior approval. Similarly, if any subsequent
amendment or waiver changes the tax treatment of the merger to you, we must
first obtain your approval.
What Skibo Financial Stockholders will Receive (Page 10)
All Skibo Financial stockholders, except for Skibo MHC, will be
entitled to receive $17.00 in cash for each share of Skibo Financial common
stock that they own on the effective date of the merger.
Skibo Financial Stock Options will be Terminated (Page 19)
The Skibo Financial stock option plan will terminate on the effective
date of the merger. In addition, stock options to purchase Skibo Financial
common stock pursuant to the Skibo Financial stock option plan will become
immediately vested and holders of these options will receive a cash payment
equal to the excess of $17.00 over the per share exercise price of the option
multiplied by the number of shares that may be purchased by the holders of
options.
Skibo Financial Stockholders Must Approve the Merger Agreement (Page 7)
The merger agreement must be approved by the affirmative vote of:
o Two-thirds of all votes entitled to be cast at the meeting by
all Skibo Financial stockholders, including Skibo MHC, and
o A majority of all votes entitled to be cast at the meeting by
all Skibo Financial stockholders, other than Skibo MHC.
Skibo MHC, which owns 60.2% of our common stock, is required to vote
for the merger agreement, pursuant to the terms thereof. Each director and
executive officer has agreed to vote his or her shares in favor of the merger
agreement. Shares held by directors and executive officers represented 6.7% of
the shares outstanding as of the record date.
3
The Merger Will Be Taxable to Our Stockholders (Page 23)
Our stockholders will generally recognize gain for federal, and
possibly state and local, income tax purposes, on the exchange of their Skibo
Financial common stock for cash. You will recognize gain equal to the difference
between the amount of cash you receive and your tax basis in your Skibo
Financial common stock. The actual tax consequences of the exchange to you 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 tax
consequences of the merger to you.
Accounting Treatment (Page 24)
Northwest Bancorp intends to account for the merger transactions under
both the "pooling of interests" and "purchase" of minority interests under
accounting principles generally accepted in the United States.
You Do Not Have Dissenters' Rights (Page 28)
Under federal law, you do not have dissenters' appraisal rights with
respect to your Skibo Financial shares.
The Merger and Related Transactions are Expected to be Completed by June 30,
2004 (Page 24)
The merger and the related transactions will only occur after all the
conditions to its completion have been satisfied or waived. Currently, we
anticipate that the merger transactions will be completed by June 30, 2004.
Regulatory Approvals are Needed (Page 25)
The merger and related acquisition of Skibo by Northwest must be
approved by the Office of Thrift Supervision. The U.S. Department of Justice
also may review the impact of the merger on competition.
Northwest has filed all the regulatory applications and notices with
the Office of Thrift Supervision. We cannot assure you that these regulatory
approvals will be received, or that regulatory approvals received will not
contain a condition or requirement that fails to satisfy the conditions set
forth in the merger agreement.
Skibo's Officers and Directors Have Financial Interests in the Merger (Page 19)
Our directors and executive officers have interests in the merger as
individuals in addition to their interests as stockholders, such as receiving
severance payments, indemnification and insurance coverage, and other benefits.
Our board of directors was aware of these interests and considered them
in its decision to approve the merger agreement.
4
QUESTIONS AND ANSWERS ABOUT THE
VOTING PROCEDURES FOR 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.
If you sign, date and send in your proxy but you do not indicate how you
want to vote, your proxy will be voted in favor of the proposal to approve
the merger agreement.
If you do not sign and send in your proxy or attend and vote at the special
meeting, it will have the effect of a vote against the merger agreement.
Q: If my shares are held in street name by my broker, will my broker
automatically vote my shares for me to approve the merger agreement?
A: No. Your broker will not be able to vote your shares to approve the merger
agreement without instructions from you. You should instruct your broker to
vote your shares on the merger agreement, following the directions your
broker provides.
Q: What if I fail to instruct my broker?
A: If you fail to instruct your broker to vote your shares, your shares will
not be voted on the merger agreement and it will have the same effect as a
vote against the merger agreement.
Q: May I attend the meeting and vote my shares in person?
A: Yes. All stockholders are invited to attend the special meeting.
Stockholders of record can vote in person at the special meeting. If your
shares are held in street name, then you are not the stockholder of record
and you must ask your broker or other nominee how you can vote at the
special meeting.
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. If you have not voted through your broker or other nominee, there are
three ways you can change your vote after you have sent in your proxy card.
o First, you may send a written notice to the person to whom you
submitted your proxy stating that you would like to revoke your proxy.
o Second, you may complete and submit a new proxy form. Any earlier
proxies will be revoked automatically.
o Third, you may attend the special meeting and vote in person. Any
earlier proxy will be revoked. However, simply attending the special
meeting without voting in person will not revoke your proxy.
5
If you have instructed a broker or other nominee to vote your shares,
you must follow directions you received from your broker or other
nominee to change your vote.
Q: Should I send in my stock certificates now?
A: No. You should not send in your stock certificates at this time.
Instructions for surrendering your stock certificates in exchange for
$17.00 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 Walter G. Kelly, President, or Carol A. Gilbert,
Secretary at (412) 276-2424.
6
THE SPECIAL MEETING
Place, Time and Date
The special meeting is scheduled to be held at Southpointe Golf Club,
360 Southpointe Boulevard, Canonsburg, Pennsylvania, at 9:00 a.m. on Thursday,
February 19, 2004.
Matters to Be Considered
At the special meeting you will be asked to approve the merger
agreement as more fully discussed on pages 10 through 28. You may also consider
and vote upon any other matters that may properly come before the Skibo
Financial special meeting, including approval of any adjournment of the special
meeting. No proxy that is voted against approval of the merger agreement will be
voted in favor of an adjournment to solicit additional proxies for this
proposal. As of the date of this document, the board of directors of Skibo
Financial is not aware of any other business to be presented for consideration
at the meeting.
Voting Rights of Stockholders; Votes Required for Approval
The Skibo Financial board has fixed the close of business on January 5,
2004, as the record date for determining Skibo Financial stockholders entitled
to receive notice of and to vote at the special meeting. Each share of Skibo
Financial common stock you own entitles you to one vote. Only holders of record
of Skibo Financial common stock as of the record date are entitled to notice of
and to vote at the special meeting. As of the record date, there were issued and
outstanding 3,153,344 shares of Skibo Financial common stock.
The presence, in person or by properly executed proxy, of the holders
of a majority of the outstanding shares of Skibo Financial common stock entitled
to vote is necessary to constitute a quorum at the special meeting. Abstentions
and broker non-votes (as described below) will be counted solely for the purpose
of determining whether a quorum is present. Brokers or members who hold shares
in street name for customers who are the beneficial owners of such shares are
prohibited from giving a proxy to vote those shares with respect to the approval
of the merger agreement in the absence of specific instructions from such
customers ("broker non-votes"). Abstentions and broker non-votes will not be
deemed to be cast either "FOR" or "AGAINST" the merger agreement.
Approval of the merger requires the affirmative vote of:
o Two-thirds of all votes entitled to be cast at the meeting by
all Skibo Financial stockholders, including Skibo MHC, and
o A majority of all votes entitled to be cast at the meeting by
all Skibo Financial stockholders, other than Skibo MHC.
Under this voting standard, an abstention, broker non-vote or failure
to vote will have the same effect as a vote "AGAINST" the merger agreement.
Skibo MHC is the mutual holding company for First Carnegie. Skibo MHC
owns 60.2%, or 1,897,500 shares, of the outstanding common stock of Skibo
Financial. While Skibo MHC is obligated under the terms of the merger agreement
to vote such shares "FOR" the approval of the merger agreement, the proposal to
adopt the merger agreement also requires the approval of a majority of the total
votes of the Skibo
7
Financial common stock outstanding as of January 5, 2004, the record date for
voting, exclusive of the shares owned by Skibo MHC.
The directors and executive officers of Skibo are entitled to vote
approximately 6.7% of the outstanding shares of Skibo Financial common stock in
their individual capacities (excluding options exercisable within 60 days of the
record date). These directors have already agreed to vote their shares in favor
of the merger agreement.
Solicitation and Revocability of Proxies
Proxies in the form accompanying this document are being solicited by
the board of directors. Shares represented by properly executed proxies, if such
proxies are received in time and are not revoked, will be voted in accordance
with the instructions indicated on the proxies. Except for broker non-votes, if
no instructions are indicated on a properly executed proxy, such proxies will be
voted "FOR" approval of the merger agreement and as determined by a majority of
the board of directors as to any other matter that may come before the special
meeting including, among other things, a motion to adjourn or postpone the
special meeting to another time and/or place for the purpose of soliciting
additional proxies or otherwise. No proxy with instructions to vote against the
proposal to approve the merger agreement, however, will be voted in favor of any
adjournment or postponement of the special meeting.
A stockholder who has given a proxy may revoke it at any time prior to
its exercise at the special meeting by:
o Giving written notice of revocation to the Secretary of Skibo
Financial;
o Properly submitting a duly executed proxy bearing a later date;
or
o Voting in person at the special meeting.
All written notices of revocation and other communications with respect
to the revocation of proxies should be addressed to Carol A. Gilbert, Secretary,
242 East Main Street, Carnegie, Pennsylvania 15106. A stockholder whose shares
are held in street name should follow the instructions of his or her broker
regarding revocation of proxies. A proxy appointment will not be revoked by the
death or incapacity of the stockholder executing the proxy unless, before the
shares are voted, notice of such death or incapacity is filed with the Secretary
of Skibo Financial or other person responsible for tabulating votes on behalf of
Skibo Financial.
In addition to this mailing, Skibo directors, officers and employees
may also solicit proxies personally, or by telephone, or by other forms of
communication. Skibo also will reimburse brokers and other nominees for their
expenses in sending these materials to you and obtaining your voting
instructions.
8
Principal Stockholders
Persons and groups owning in excess of 5% of Skibo Financial common
stock are required to file certain reports regarding such ownership pursuant to
the Securities Exchange Act of 1934, as amended. The following table sets forth,
as of January 5, 2004, persons or groups who own more than 5% of the common
stock. Other than as noted below, management knows of no person or group that
owns more than 5% of the outstanding shares of common stock as of such date.
Name and Address Percent of Shares of
of Beneficial Owner Number of Shares Common Stock Outstanding
- ------------------- ---------------- ------------------------
Skibo Bancshares, M.H.C.
242 East Main Street
Carnegie, Pennsylvania 15106 1,897,500 60.2%
Security Ownership of Directors and Management
The following table shows Skibo Financial's common stock beneficially
owned by each director and executive officer of Skibo Financial and all
directors and executive officers of Skibo Financial as a group, as of January 5,
2004.
Shares of
Common Stock
Beneficially
Name Owned Percent of Class
- ---- ----- ----------------
John C. Burne 35,850(1)(2) 1.1
Walter G. Kelly 106,425(3) 3.4
John T. Mendenhall, Jr. 24,675(1)(2) *
Renaloy J. Senules 53,864(1)(2) 1.7
Carol A. Gilbert 81,379(4) 2.6
All Executive Officers and Directors 302,193(5) 9.6
as a Group (5 persons)
_________________
* Less than 1%.
(1) Includes options to purchase 10,867 shares of Skibo Financial common stock
that may be exercised within 60 days of the record date under the 1998
Stock Option Plan.
(2) Excludes 143,273 shares of Skibo Financial common stock held under the
employee stock ownership plan for which such individual serves as either a
member of the ESOP Committee or as an ESOP Trustee. Such individual
disclaims beneficial ownership with regard to shares held in a fiduciary
capacity. The Board of Directors has appointed Messrs. Senules, Mendenhall
and Burne to serve on the ESOP Committee and to serve as ESOP Trustees. The
ESOP Committee or the Board instructs the ESOP Trustee regarding investment
of ESOP plan assets. The ESOP Trustees must vote all shares allocated to
participant accounts under the ESOP as directed by ESOP participants.
Shares for which no timely voting direction is received will be voted by
the
9
ESOP Trustees as directed by the Board or the ESOP Committee. As of the
record date, the entire 143,273 shares had been allocated under the ESOP to
participant accounts.
(3) Includes 38,812 shares of Skibo Financial common stock that may be acquired
through options that are exercisable within 60 days of the record date and
30,215 shares of Skibo Financial common stock allocated to the account of
Mr. Kelly under the ESOP.
(4) Includes options to purchase 20,460 shares of Skibo Financial common stock
that may be exercised within 60 days of the record date under the Stock
Option Plan and 17,383 shares of Skibo Financial common stock allocated to
the account of Ms. Gilbert under the ESOP.
(5) Includes options to purchase 91,873 shares of Skibo Financial common stock
that may be exercised within 60 days of the record date to purchase shares
of Skibo Financial common stock under the Stock Option Plan. Includes
47,598 shares of Skibo Financial common stock held by the ESOP and
allocated to executive officers (2 persons) of the Skibo Financial.
THE MERGER
The following information describes certain information pertaining to
the merger. This description is not complete and is qualified in its entirety by
reference to the full text of the merger agreement, which is attached as
Appendix A and incorporated by reference herein. All stockholders are urged to
read the merger agreement in its entirety, as well as the opinion of our
financial advisor attached as Appendix B.
Overview
As soon as possible after the conditions to consummation of the merger
described below have been satisfied or waived, and unless the merger agreement
has been terminated or an alternative structure used as discussed below, the
merger will be effected as follows:
o Skibo Financial will exchange its charter for an interim stock
savings association charter which will then merge with and into
First Carnegie with First Carnegie as the surviving association.
The separate existence of Skibo Financial and Interim will cease.
o As part of the merger of Interim into First Carnegie, each issued
and outstanding share of Skibo Financial common stock held by
stockholders other than Skibo MHC will be converted automatically
into the right to receive $17.00 in cash. Each issued and
outstanding share of Skibo Financial common stock held by Skibo
MHC will be exchanged for one share of First Carnegie common
stock.
o On the effective date of the merger, First Carnegie will become a
wholly-owned subsidiary of Skibo MHC.
o Skibo MHC will then merge with and into Northwest MHC, with
Northwest MHC as the resulting entity. The separate existence of
Skibo MHC will cease.
o As a result of the above merger, each issued and outstanding
share of First Carnegie common stock held by Skibo MHC will be
transferred to Northwest MHC as the surviving entity in that
merger, and First Carnegie will become a wholly-owned subsidiary
of Northwest MHC.
o All deposit accounts established at First Carnegie prior to the
merger effective date will confer on each depositor the same
rights and privileges in Northwest MHC as if such deposit account
had been established at Northwest Savings Bank on the date
established at First Carnegie. To the extent permitted by
regulatory authorities, any borrower members of Skibo
10
MHC as of the merger effective date (i.e., borrowers of First
Carnegie as of August 22, 1996 who continue their borrower
relationship as of the merger effective date), whose borrowings
remain outstanding as of the date established to determine
depositors eligible to vote on any mutual-to-stock conversion of
Northwest MHC, will be given subscription rights in any
conversion of Northwest MHC to stock form that occurs prior to
any merger of First Carnegie with and into Northwest Savings
Bank.
The merger agreement provides that Northwest Bancorp may modify the
structure of the acquisition of Skibo provided that:
o The consideration to be received by Skibo Financial's
stockholders is not changed or reduced;
o There are no adverse tax consequences for Skibo Financial's
stockholders; or
o The merger is not materially delayed or jeopardized.
The Parties to the Merger
Skibo. Skibo MHC is a federally-chartered mutual holding company that
currently owns approximately 60.2% of the outstanding shares of common stock of
Skibo Financial. As a mutual holding company, Skibo MHC has no stockholders.
Skibo MHC has no significant operations. Skibo Financial is a
federally-chartered mid-tier stock holding company that owns 100% of the
outstanding shares of common stock of First Carnegie. Skibo Financial was
organized in connection with the two-tier reorganization of Skibo that was
completed in October 1998. The principal business activity of Skibo Financial is
the ownership of all of the issued and outstanding common stock of First
Carnegie.
First Carnegie is a federally-chartered savings bank headquartered in
Carnegie, Pennsylvania. First Carnegie's deposits are insured by the Federal
Deposit Insurance Corporation under the Savings Association Insurance Fund.
First Carnegie is a member of the Federal Home Loan Bank System.
First Carnegie is a community-oriented savings bank providing mortgage
loans and consumer loans. Skibo Financial is primarily engaged in attracting
deposits from the general public through its offices and using those and other
available sources of funds to purchase and originate one- to four-family,
multi-family and commercial mortgage loans, including farms, and to invest in
mortgage-backed and other securities, Small Business Administration and other
government agency guaranteed commercial and consumer loans. Because Skibo
Financial faces strong competition in originating traditional residential
mortgage loans, Skibo Financial has emphasized other forms of lending, including
the purchase of SBA and other government agency guaranteed loans, and commercial
real estate loans, including farms. At September 30, 2003, Skibo Financial had
total consolidated assets of approximately $156.1 million, total consolidated
deposits of approximately $81.0 million, and total consolidated stockholders'
equity of approximately $23.5 million.
The executive offices of Skibo Financial, First Carnegie and Skibo MHC
are located at 242 East Main Street, Carnegie, Pennsylvania. Their telephone
number at that address is (412) 276-2424.
11
Northwest. Northwest MHC is a federally-chartered mutual holding
company that currently owns approximately 59% of the common stock of Northwest
Bancorp. As a mutual holding company, Northwest MHC has no stockholders.
Northwest MHC has no significant operations. Northwest MHC also owns all of the
issued and outstanding stock of Leeds Federal Savings Bank, a
federally-chartered savings bank headquartered in Baltimore, Maryland. Northwest
Bancorp is a federally-chartered mid-tier stock holding company that owns 100%
of the outstanding common stock of Northwest Savings Bank and Jamestown Savings
Bank. Northwest Bancorp became the stock holding company of Northwest Savings
Bank in a two- tier reorganization that was completed in February 1998. The
principal business activity of Northwest Bancorp is the ownership of all of the
issued and outstanding common stock of Northwest Savings Bank and of Jamestown.
Northwest Savings Bank is a Pennsylvania-chartered stock savings bank
headquartered in Warren, which is located in northwestern Pennsylvania.
Northwest Savings Bank's deposits are insured by the FDIC. Northwest Savings
Bank is a member of the FHLB System. Northwest Savings Bank is a community bank
that offers traditional deposit and loan products, and through a subsidiary,
consumer finance services. Northwest Savings Bank's mutual savings bank
predecessor was founded in 1896. Northwest Savings Bank in its current stock
form was established on November 2, 1994, as a result of the reorganization of
Northwest Savings Bank's mutual predecessor into a mutual holding company
structure. Jamestown was formed in November of 1995 as a de novo New
York-chartered savings bank headquartered in Jamestown, New York. At September
30, 2003, Northwest Bancorp had total consolidated assets of approximately $6.0
billion, total consolidated deposits of approximately $4.9 billion and total
consolidated stockholders' equity of approximately $477 million.
As of September 30, 2003, Northwest Savings Bank and Jamestown operated
144 community banking offices throughout their market area in northwest,
southwest and central Pennsylvania, southwestern New York, and northeastern
Ohio. Northwest Savings Bank and its wholly owned subsidiaries also operate 47
consumer lending offices throughout Pennsylvania and two consumer lending
offices in New York. Northwest Savings Bank has focused its lending activities
primarily on the origination of loans secured by first mortgages on
owner-occupied, one- to four-family residences. Northwest Savings Bank, directly
or through its subsidiaries, also emphasizes the origination of consumer loans,
including home equity, second mortgage, education and other consumer loans. To a
lesser extent, Northwest Savings Bank also originates multi-family residential
and commercial real estate loans and commercial business loans.
Northwest Savings Bank's principal sources of funds are deposits,
borrowed funds and the principal and interest payments on loans and marketable
securities. Its principal source of income is interest received from loans and
marketable securities. Northwest Savings Bank's principal expenses are the
interest paid on deposits and the cost of employee compensation and benefits.
The principal executive offices of Northwest Bancorp, Northwest Savings
Bank and Northwest MHC are located at Liberty and Second Streets, Warren,
Pennsylvania. Their telephone number at that address is (814) 726-2140.
Background to the Merger
o On February 14, 2001, the Skibo Financial board of directors
hired FinPro to assist Skibo Financial in the role of a financial
advisor.
o Skibo Financial had preliminary discussion with Northwest Bancorp
regarding a potential transaction.
12
o Due to the untested nature of transactions and uncertain
regulatory responses, Skibo Financial elected to wait until the
Danvers Savings Bank/Revere Federal Savings Bank transaction
received regulatory approval.
o Northwest announced the Leeds Federal Savings Bank transaction.
As a result, both Skibo Financial and Northwest Bancorp opted to
wait for regulatory approval of the Leeds Federal Savings Bank
transaction prior to deciding whether to engage in additional
discussions.
o In June 2002, Skibo Financial asked FinPro to find another merger
partner. Since remutualizations can only occur between mutual
holding companies and mutual institutions or possibly mutual
holding companies and other mutual holding companies, the pool of
possible acquirers was limited. Sixteen mutuals were approached.
There was no significant interest expressed by these potential
partners.
o After the Leeds Federal Savings Bank transaction was approved,
preliminary discussions with Northwest Bancorp began.
o Terms originally discussed were adjusted for special dividend
levels and changes in First Carnegie's financial statements,
although several material terms remained subject to negotiation.
o During this period, the OTS issued the approval letter for the
Kearny Federal Savings Bank/West Essex Bank transaction which
contained parameters for the regulatory evaluation of future
remutualizations. The proposed transaction exceeded some of the
parameters. As a result, members of Skibo Financial, Northwest
Bancorp and their agents had a meeting with the OTS in
Washington, D.C. to discuss any foreseeable impediments to
completing the proposed deal. The OTS reviewed the information
furnished and did not indicate that they foresee any impediments
to processing an application for approval of this proposed
transaction.
Skibo's Reasons for the Merger
Our board of directors believes that the terms of the merger agreement,
which are the product of arm's length negotiations between representatives of
Skibo and Northwest, are in the best interests of our stockholders. In the
course of reaching its determination, our board of directors considered the
following factors:
o The merger consideration to be paid to our minority stockholders
in relation to the market value, book value and earnings per
share of our common stock;
o Information concerning our financial condition, results of
operations, capital levels, asset quality and prospects;
o The opinion of our financial advisor as to the fairness of the
merger consideration from a financial point of view to the
minority stockholders of Skibo Financial;
o The opinion of our financial advisor as to the fairness of the
merger to the members of Skibo MHC;
o Industry and economic conditions;
13
o The general structure of the transaction and the compatibility of
management and business philosophy;
o The greater resources and expanded branch network that Northwest
Bancorp, through its subsidiaries, will have after the merger;
o Depositors of First Carnegie will have the same rights in
Northwest MHC as other depositors of Northwest Savings Bank;
o In the event of a stock offering transaction by Northwest MHC,
depositors of First Carnegie will retain their subscription
rights as of the date of their original deposit at First
Carnegie;
o To the extent permitted by regulatory authorities, any borrower
members of Skibo MHC as of the merger effective date, whose
borrowings remain outstanding as of the date established to
determine depositors eligible to vote on any mutual-to-stock
conversion of Northwest MHC, will be given subscription rights in
any conversion of Northwest MHC to stock form that occurs prior
to any merger of First Carnegie with and into Northwest Savings
Bank;
o The results of our due diligence investigation of Northwest,
including the likelihood of receiving the requisite regulatory
approvals in a timely manner;
o The ability of Northwest, after the merger, to compete in
relevant banking and non-banking markets; and
o Our strategic alternatives to the merger, including the continued
operation of First Carnegie as an independent financial
institution.
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 of directors 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 Skibo Financial and our stockholders. Accordingly, our board of
directors unanimously recommends that our stockholders vote "FOR" the approval
of the merger agreement.
Opinion of Financial Advisor
Skibo Financial retained FinPro, a financial consulting firm, on the
basis of its experience, to render a written opinion to us and our stockholders
as to the fairness, from a financial point of view, of the per share price to be
paid for each outstanding minority share of Skibo Financial common stock, and
that the treatment of First Carnegie depositors is equitable, as set forth in
the merger agreement. Skibo Financial 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 14 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. In addition, FinPro is experienced in the area of remutualizations.
We selected FinPro as a result of this experience. FinPro reviewed the
negotiated terms of the merger agreement.
14
On September 11, 2003, in connection with its consideration of the
merger agreement, FinPro issued an opinion to the Board of Directors of Skibo
Financial that the proposed per share merger consideration to the minority
stockholders of $17.00, as provided in the merger agreement, is fair from a
financial point of view, to Skibo Financial, and its minority stockholders and
that the proposed merger agreement is equitable to the depositors of First
Carnegie. A copy of the opinion as updated to the date hereof, is attached as
Appendix B to this proxy statement and should be read in its entirety by Skibo
Financial stockholders. FinPro's written opinion does not constitute an
endorsement of the merger or a recommendation to any stockholder as to how such
stockholder should vote at the special meeting.
In connection with issuing the opinion, FinPro reviewed the following
material: (i) the merger agreement and the exhibits thereto; (ii) changes in the
market for bank and thrift stocks; (iii) the performance of Skibo Financial's
common stock; (iv) trends and changes in the financial condition of Skibo
Financial and Northwest Bancorp; (v) the most recent annual report to
shareholders of Skibo Financial and Northwest Bancorp; (vi) the quarterly report
on Form 10-QSB of Skibo Financial for the quarter ended June 30, 2003 and the
Form 10-Q of Northwest Bancorp for the quarter ended June 30, 2003; (vii)
quarterly regulatory reports of Northwest Savings Bank and First Carnegie
Deposit; and (viii) the most recent audit letters to each of Skibo Financial and
Northwest Bancorp.
In addition, FinPro discussed with the management of Skibo Financial
its operating performance and future prospects, primarily with respect to the
current level of Skibo Financial's earnings and future expected operating
results, giving weight to FinPro's assessment of the future of the thrift
industry, the mutual holding company market and Skibo Financial's performance
within the industry. FinPro compared the results of operation of Skibo Financial
with the results of operation of all publicly-traded thrift mutual holding
companies and a selected Comparable Trading Group.
The selected Comparable Trading Group was comprised of liquidly-traded
Mid-Atlantic mutual holding companies with assets between $50 million and $500
million. Any institution involved in a remutualization or second-step conversion
was eliminated from the Comparable Trading Group.
15
All Mutual
Holding
Comparable Companies
Skibo Trading Group - Nationally -
Financial Median Median
--------- ------ ------
Dividends:
Current Dividend Yield (%)............ 3.57 2.36 2.35
LTM Dividend Payout Ratio(%).......... NM 73.33 72.00
Market Pricing at September 9, 2003
Price to LTM EPS (x).................. 168.25 41.92 34.11
Price to LTM Core EPS (x)............. 168.25 40.22 34.21
Price to Book Value (%)............... 180.43 207.27 209.30
Price to Tangible Book Value (%)...... 180.43 224.75 228.44
- -------------
Sources: SNL Securities's market data and FinPro calculations.
The selected Comparable Trading Group is composed of: BCSB Bankcorp,
Inc., Gouverneur Bancorp Inc., Greater Delaware Valley Savings Bank, Greene
County Bancorp, Inc., Oneida Financial Corp, Pathfinder Bancorp, Inc., and Rome
Bancorp, Inc.
FinPro analyzed the aggregate merger consideration 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 the sale 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 a database containing files concerning the prices paid
for thrift institutions nationwide. The database includes transactions involving
Pennsylvania thrift institutions and thrift institutions in the Mid-Atlantic
region of the United States. The database provides comparable pricing and
financial performance data for thrift institutions sold or acquired. Organized
by different peer groups, the
16
data presents averages of financial performance and purchase price levels,
thereby facilitating a valid comparative purchase price analysis. In analyzing
the transaction value of Skibo Financial, 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 recently announced
remutualization transactions.
During FinPro's analysis of recent remutualization multiples in
relationship to the proposed transaction, FinPro placed a heavy reliance on the
remutualization multiples with less emphasis on fully converted thrift
acquisition multiples. The remutualization group was composed of institutions
that announced sales between February 15, 2000 and September 11, 2003. The
following table illustrates the maximum, minimum and median multiples calculated
on a generally accepted accounting principles in the United States basis of
these remutualization transactions.
Franchise
Price Price to Price to LTM Premium to
GAAP Basis to Book Tangible Book EPS Earnings Core Deposits
- ---------- ------- ------------- ------------ -------------
Maximum.......................... 334.60% 356.71% 62.08x 49.68%
Minimum.......................... 140.92% 140.92% 36.11x 14.61%
Median........................... 253.27% 253.27% 50.00x 23.66%
Skibo Financial Acquisition
Multiples...................... 227.88% 227.88% 212.50x 43.24%
- ------------
Sources: SNL Securities data, Skibo Financial's data and FinPro calculations.
Note: Skibo per share data utilized was as of June 30, 2003.
FinPro also analyzed the pricing multiples of the same remutualization
group on a minority basis, relative to the Skibo Financial acquisition
multiples.
Franchise
Price Price to Price to LTM Premium to
Minority Basis to Book Tangible Book EPS Earnings Core Deposits
- -------------- ------- ------------- ------------ -------------
Maximum....................... 131.71% 140.45% 27.76x 7.83%
Minimum....................... 59.98% 59.98% 13.02x (15.75)%
Median........................ 101.53% 101.53% 20.78x 0.21%
Skibo Financial Acquisition
Multiples................... 90.27% 90.27% 79.21x (3.29)%
- ------------
Sources: SNL Securities data, Skibo Financial data and FinPro calculations.
Note: The per share data utilized was as of June 30, 2003. (Although the
minority basis data in the above table does not conform with generally accepted
accounting principles in the United States, FinPro deems this information
relevant due to the mutual holding company structure of Skibo Financial.)
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
17
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.
The investment value of any banking institution's or its holding
company'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 dividend stream and terminal value through
2006. It was assumed that Skibo Financial would undertake a second-step
conversion, closing at the assumed super maximum of the range, which would
result in a $14.73 per share exchange value to existing minority stockholders.
The annual income growth rate for years 2004 to 2006 was assumed at 12%. To
manage capital after the second- step conversion, it was assumed that Skibo
Financial would maintain a $0.17 per share quarter dividend based on the fully
converted shares and would repurchase shares. The terminal value was
approximated using an acquisition price to tangible book multiple of 133% which
resulted in an acquisition price to earnings multiple of 32x. A discount rate of
10% was utilized.
Based on these assumptions, FinPro's calculation of the net present
value of the dividend stream and terminal value per share was $14.93. FinPro
also prepared various scenarios by increasing or decreasing the net income
growth, acquisition multiple for terminal value and discount rate assumptions.
The value calculated reflecting downward adjustments was $11.81. The value
calculated by reflecting upward adjustments was $18.00. FinPro's computations
were based on an analysis of the thrift industry, the economic and competitive
situations currently existing in Skibo Financial's market area and its current
financial condition.
Conclusion. 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
point of view to the holders of Skibo Financial's minority shares. Additionally,
it is FinPro's opinion that the treatment of the depositors in the proposed
merger is equitable.
In rendering its opinion, FinPro did not independently verify the asset
quality and financial condition of Skibo Financial or Northwest Bancorp, but
instead relied upon the data provided by or on behalf of Skibo Financial and
Northwest Bancorp to be true and accurate in all material respects.
FinPro acted as Skibo Financial's financial advisor in connection with
the merger and will receive a fee equal to 1.10% of the aggregate deal value, or
approximately $250,000, a significant portion of which is contingent upon
consummation of the merger. In addition, FinPro will be reimbursed for
reasonable expenses related to the merger and Skibo Financial has indemnified
FinPro in connection with any matter related to the merger. As of the record
date, FinPro has been paid $70,000.
18
Interests of Certain Persons in the Merger and Related Transactions
General. Some members of our management and board of directors may have
interests in the merger and related transactions that are in addition to or
different from the interests of our stockholders. Our board of directors was
aware of these interests and considered them in approving the merger agreement
and the transactions contemplated by it. Included below is a summary of some of
the benefit plans under which officers or directors participate, and under which
benefits will be paid in accordance with the merger agreement.
Termination of Employment Agreements with Walter G. Kelly and Carol A.
Gilbert. Pursuant to the merger agreement, Walter G. Kelly, our President and
Chief Executive Officer, and Carol A. Gilbert, our Chief Financial and Chief
Operating Officer, executed termination and release agreements to their existing
employment agreements with Skibo which provide that the employment agreements
will terminate on the date of the merger, and in lieu of any payments under the
employment agreements, Mr. Kelly and Ms. Gilbert will be entitled to receive
payments of approximately $690,000 and $335,000, respectively, subject to
reduction to the extent that such amounts, combined with any other payments to
the individuals, would constitute excess parachute payments under the Internal
Revenue Code of 1986, as amended. The termination and release agreements also
provide that from the effective date of the merger through June 30, 2005,
Northwest will retain Mr. Kelly as managing officer of First Carnegie and Ms.
Gilbert as Chief Financial Officer of First Carnegie. During that period, Mr.
Kelly shall be paid his current base salary of $14,392 per month and Ms. Gilbert
shall be paid her current base salary of $7,637 per month.
Consulting Agreements. After June 30, 2005, Mr. Kelly will be retained
as a consultant to Northwest for a period of fifteen months at his current rate
of pay. Similarly, after June 30, 2005, Ms. Gilbert will be retained as a
consultant for twelve months at her current rate of pay. Mr. Kelly and Ms.
Gilbert will continue to receive medical and dental benefits while serving as
consultants for Northwest. For as long as Mr. Kelly performs services as an
employee or consultant of Northwest, he shall have continued use of an
automobile provided by First Carnegie and at the expiration of such term he will
be permitted to purchase such automobile at its then fair market value.
Northwest Savings Bank may terminate Mr. Kelly's and/or Ms. Gilbert's engagement
as a consultant at any time for any reason (or for no reason) by written
notification. If termination occurs without cause, the individual will receive
his or her monthly fee payable through the end of his or her respective term.
Stock Option Plan. The merger agreement provides that the Stock Option
Plan will be terminated as of the effective date of the merger. At the effective
date of the merger, each Skibo Financial option which is unexercised and
outstanding, whether or not vested, will be terminated and converted into the
right to receive cash in an amount equal to the difference between $17.00 and
the option exercise price, multiplied by the number of shares of Skibo Financial
common stock subject to the option.
19
The following table reflects the number of options held by each
director and executive officer and the payment that each will receive in
exchange for their options.
Total Payment for
Name Number of Options Options
- ---- ----------------- -------
John C. Burne 10,867 $110,517
Walter G. Kelly 38,812 $394,718
John T. Mendenhall, Jr. 10,867 $110,517
Renaloy J. Senules 10,867 $110,517
Carol A. Gilbert 20,460 $208,078
Supplemental Executive Retirement Plan. First Carnegie maintains an
unfunded supplemental executive retirement plan for the benefit of Walter G.
Kelly and Carol A. Gilbert. The merger agreement provides that the SERP will be
terminated as of the effective date of the merger. Upon the effective date of
the merger, Mr. Kelly and Ms. Gilbert will receive a lump sum payment of
approximately $1,869,242, and $942,803, respectively. Upon receipt of payment of
benefits, the participant will recognize taxable ordinary income in the amount
of such payments received and First Carnegie will be entitled to recognize a
tax- deductible compensation expense at that time for tax return purposes.
Employee Stock Ownership Plan. The merger agreement provides that the
First Carnegie Employee Stock Ownership Plan will be terminated at or prior to
the merger effective date. The employee stock ownership plan has applied for a
favorable determination letter from the Internal Revenue Service on its
termination. It is the intention of First Carnegie to distribute the assets of
the employee stock ownership plan as soon as administratively feasible after a
favorable determination letter from the IRS. In accordance with the terms of the
employee stock ownership plan, all participants are fully vested and have a
nonforfeitable interest in their accounts under the employee stock ownership
plan.
Continuing Directors; First Carnegie Advisory Board. All directors of
First Carnegie as of the merger effective date shall continue as directors of
First Carnegie following the merger effective date ("Continuing Directors")
until June 30, 2005 at the current rate of compensation. As of July 1, 2005,
Northwest shall establish a First Carnegie Advisory Board of Directors (the
"Skibo Advisory Board") to be appointed annually, comprising the Continuing
Directors and any other person designated by Northwest Bancorp. Subject to the
exercise of fiduciary duties of the Northwest Directors, such Skibo Advisory
Board will be maintained until December 31, 2006. The Advisory Board shall meet
no less than quarterly and each Advisory Board member who was a Continuing
Director shall receive a fee as an advisory director of $1,800 per month for
such service. Continuing Directors who are also employees of First Carnegie
shall be compensated as employees and shall not receive separate compensation
for service as a director of First Carnegie or a member of the Advisory Board
during such time as they continue to be compensated as an employee of First
Carnegie or Northwest.
Indemnification and Continuance of Director and Officer Liability
Insurance Coverage. For a period of six years from the merger effective date,
Northwest Bancorp has agreed to indemnify the present and former directors and
officers of Skibo against all losses, claims, damages, costs, expenses,
liabilities, judgments or amounts paid in settlement or in connection with any
claim, action, suit, proceeding or investigation arising out of matters existing
or occurring at or prior to the effective date of the merger in which an
indemnified party is, or is threatened to be made, a party or a witness arising
out of the fact that
20
such person is or was a director or officer of Skibo, 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 Skibo are entitled under
Federal law, or Skibo's charters and bylaws.
Northwest has also agreed to maintain a policy of directors' and
officers' liability insurance coverage for the benefit of Skibo's directors and
officers for three years following the consummation of the merger, subject to
certain limitations on the amount of premiums paid.
Other Employee Benefit Matters. The merger agreement also provides for
the following regarding other employee benefit plans and arrangements of Skibo:
o Skibo's defined benefit plan will be terminated and the benefits
paid to the participants in such plan;
o Northwest may elect to maintain separate benefit plans for the
benefit of Skibo or may terminate or freeze such plans after the
effectiveness of the merger (other than the ESOP, the
supplemental executive retirement plan and the defined benefit
plan);
o If Northwest opts to terminate or freeze other such plans,
employees of Skibo who are participants in such plans and who
continue employment with Northwest will receive credit for their
service with Skibo for purposes of determining eligibility and
vesting but not for benefit accrual under Northwest's plans,
other than Northwest's employee stock ownership plan, the
post-retirement health provisions of the health care plan and the
holiday bonus plan;
o Prior service credit will also be given for purposes of
satisfying any waiting periods, actively-at-work requirements and
insurability requirements under Northwest's health, disability
and life insurance policies if Northwest opts to terminate
Skibo's plans; and
o Any Skibo employee whose employment is terminated involuntarily
(other than for cause) within 12 months following the merger
effective date will be entitled to a lump sum severance payment
from Northwest or First Carnegie equal to two weeks pay for each
full year of employment with First Carnegie with a minimum of
four weeks and a maximum of 26 weeks severance to be received.
Conditions of the Merger
Completion of the merger is subject to the satisfaction or waiver of a
number of conditions specified in the merger agreement.
Each of the parties' obligations is subject to the following
conditions:
o All corporate action required to be taken by th other party to
execute and deliver the merger agreement and perform its
obligations must have been taken and each party must provide
evidence of this to the other party;
o The other party must have performed its obligations under the
merger agreement in all material respects;
o The representations and warranties made by the other party in the
merger agreement which
21
are qualified as to materiality must be true and correct as of
the closing date and all other representations and warranties
must be true and correct in all material respects as of the
closing date;
o All required regulatory approvals must have bee received and all
waiting periods expired;
o There must not be any injunction, order or decree enjoining or
prohibiting the merger; and
o Each party must provide the other with officer' certificates
evidencing its compliance with all conditions.
Skibo's obligation to close the merger is also subject to the following
additional conditions:
o The stockholders of Skibo Financial must have approved the merger
agreement and, if required by the regulatory authorities, the
members of Skibo MHC must have approved the merger agreement;
o Prior to the mailing of the proxy statement, Skibo must have
received an updated fairness opinion from its financial advisor;
o Northwest must have executed the termination an release
agreements and consulting agreements with Walter G. Kelly and
Carol A. Gilbert; and
o Northwest must have received a tax opinion from its counsel or
accountants to the effect that the merger consideration to be
received by Skib Financial stockholders will not be taxed as a
dividend but will be taxed as an exchange in accordance with the
Internal Revenue Code.
Northwest's obligation to close the merger is also subject to the
following additional conditions:
o The approvals of the regulatory authorities required to complete
the merger must not contai any adverse condition adversely
affecting in a material respect the economic benefit it
reasonably expects to obtain as a result of the merger;
o Since March 31, 2002, there shall not have occurred any "material
adverse effect" (as such term is defined in the merger agreement)
with respect to Skibo Financial and First Carnegie;
o Walter G. Kelly and Carol A. Gilbert shall have executed the
Termination and Release Agreements and consulting agreements; and
o On or prior to the closing date, Skibo Financia shall have
deposited sufficient funds with the exchange agent to pay the
aggregate merger consideration to be paid to stockholders of
Skibo Financial.
22
Federal Income Tax Consequences of the Merger to You
The following discussion is a general summary of the material United
States federal income tax consequences of the merger. This discussion is based
upon the Internal Revenue Code of 1986, as amended, final and temporary
regulations promulgated by the United States Treasury Department, judicial
authorities and current rulings and administrative practice of the Internal
Revenue Service, as currently in effect, all of which are subject to change at
any time, possibly with retroactive effect. This discussion assumes that Skibo
Financial common stock is held as a capital asset by each holder and does not
address all aspects of federal income taxation that might be relevant to
particular holders of Skibo Financial common stock in light of their status or
personal investment circumstances, such as foreign persons, dealers in
securities, regulated investment companies, life insurance companies, other
financial institutions, tax-exempt organizations, pass-through entities,
taxpayers who hold Skibo Financial common stock as part of a "straddle," "hedge"
or "conversion transaction" or who have a "functional currency" other than
United States dollars or individual persons who have received Skibo Financial
common stock as compensation or otherwise in connection with the performance of
services. Further, this discussion does not address state, local or foreign tax
consequences of the merger.
The exchange of our common stock for cash pursuant to the terms of the
merger agreement will be a taxable transaction for federal income tax purposes
under the Internal Revenue Code, and may also be a taxable transaction under
state, local and other tax laws. A stockholder of Skibo Financial 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 Skibo Financial
common stock exchanged by such stockholder pursuant to the merger.
Gain or loss recognized by the stockholder exchanging his or her Skibo
Financial common stock pursuant to the merger will be capital gain or loss if
such Skibo Financial common stock is a capital asset in the hands of the
stockholder. If the Skibo Financial 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 35%
for short-term capital gains and 15% 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%.
A holder of Skibo Financial common stock may be subject to backup
withholding at the rate of 28% with respect to payments of cash consideration
received pursuant to the merger, unless the holder (a) provides a correct
taxpayer identification number, or TIN, in the manner required or (b) is a
corporation or other exempt recipient and, when required, demonstrates this
fact. To prevent the possibility of backup federal income tax withholding, each
holder must provide the disbursing agent with his, her or its correct TIN by
completing a Form W-9 or Substitute Form W-9. A holder of Skibo Financial common
stock who does not provide the disbursing agent with his, her or its correct TIN
may be subject to penalties imposed by the Internal Revenue Service, as well as
backup withholding. Any amount withheld will be creditable against the holder's
federal income tax liability. Skibo Financial (or its agent) will report to the
holders of Skibo Financial common stock and the Internal Revenue Service the
amount of any "reportable payments," as defined in Section 3406 of the Internal
Revenue Code, and the amount of tax, if any, withheld with respect thereto.
Neither Skibo nor Northwest has requested or will request a ruling from
the Internal Revenue Service as to any of the tax effects to Skibo Financial
stockholders of the transactions discussed in this proxy statement, and no
opinion of counsel has been or will be rendered to Skibo Financial stockholders
with respect to any of the tax effects of the merger to stockholders. It is a
condition to our obligation to close,
23
however, that Northwest shall have received the favorable opinion of KPMG LLP or
Luse Gorman Pomerenk & Schick, P.C., dated as of the merger effective date,
substantially to the effect that the merger consideration paid by First Carnegie
to Skibo Financial stockholders shall not be taxed to the Skibo Financial
stockholders as a dividend but instead will be taxed as an exchange as described
above.
The federal income tax discussion set forth above is based upon current
law and is intended for general information only. You are urged to consult your
tax advisor concerning the specific tax consequences of the merger to you,
including the applicability and effect of state, local or other tax laws and of
any proposed changes in those tax laws and the Internal Revenue Code. We also
note that any stock held in an individual retirement account or other
tax-deferred account may not be subject to immediate taxation upon receipt of
the cash consideration in the merger.
Accounting Treatment of the Merger
The merger will be accounted for under both the purchase and the
pooling-of-interests accounting methods. That is, the purchase of the minority
interest will be accounted for using the purchase method where the minority
owners' interest in the assets and liabilities are recorded at fair market
value. The total cost of the minority shares, at $17.00 per share, will be
compared to the fair value of the net assets and the excess will be recorded as
goodwill. The acquisition of the majority interest owned by Skibo MHC will be
recorded at historic cost under the pooling-of-interests method of accounting.
Effective Time
The merger will become effective on the date that articles of
combinations are endorsed by the OTS, or such later date or time as may be
indicated in the endorsement of the articles of combination. Skibo and Northwest
have agreed to cause the effective date to occur no later than 15 days after the
last of the conditions to the consummation of the merger have been satisfied or
waived, including the expiration of any applicable waiting periods. We expect
the merger to close by June 30, 2004. However, it is possible that factors
outside of the control of the parties could prevent us from completing the
transaction by that date.
We cannot assure you that the necessary approvals of the merger will be
obtained or that other conditions to consummation of the merger can or will be
satisfied. If the merger is not completed by August 1, 2004, both Skibo and
Northwest have the right to terminate the merger agreement, unless the failure
to close is due to a breach of the party seeking to terminate.
Procedures for Surrendering your Certificates
On or prior to the merger effective date, Skibo Financial will deposit
with the exchange agent an amount of cash equal to the aggregate merger
consideration. The exchange agent will act as paying agent for the benefit of
the holders of certificates of Skibo Financial common stock in exchange for the
merger consideration. Each holder of Skibo Financial common stock who surrenders
his or her Skibo Financial shares to the exchange agent will be entitled to
receive a cash payment of $17.00 per share of Skibo Financial common stock upon
acceptance of the shares by the exchange agent.
No later than five business days after the merger effective date, a
letter of transmittal will be mailed by the exchange agent to Skibo Financial
stockholders. The letter of transmittal will contain instructions for
surrendering your certificates of Skibo Financial common stock.
24
YOU SHOULD NOT RETURN YOUR SKIBO FINANCIAL COMMON STOCK CERTIFICATES
---
WITH THE ENCLOSED PROXY, AND YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL.
If a certificate for Skibo Financial common stock has been lost, stolen
or destroyed, the exchange agent is not obligated to deliver payment until the
holder of the shares delivers:
o An appropriate affidavit by the person claiming the loss, theft
or destruction of his or her certificate,
o an indemnity agreement, and
o if required by Northwest, a bond.
Twelve months following the merger effective date, the exchange agent
will deliver to Northwest Bancorp all cash, certificates, and other documents in
its possession. Thereafter, the payment obligation for any certificate
representing Skibo Financial common stock which has not been satisfied will
become the responsibility of Northwest.
If certificates for Skibo Financial common stock are not surrendered
prior to the date on which such payments would otherwise escheat to or become
the property of any governmental agency, the unclaimed amounts will become the
property of Northwest to the extent permitted by applicable law, free and clear
of all claims or interest of any person previously entitled to such property.
None of Northwest, Skibo, the exchange agent or any other party to the merger
will be liable to any former holder of Skibo Financial common stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
Regulatory Approvals
In addition to the approval of the merger agreement by our
stockholders, completion of the merger and the transactions contemplated by the
merger agreement are subject to the prior approval of the OTS. In determining
whether to approve the merger transaction, the OTS must consider, among other
factors, the financial and managerial resources and future prospects of the
existing and resulting institutions, and the convenience and needs of the
communities to be served. In addition, the OTS may not approve a transaction if
it will result in a monopoly or otherwise be anti-competitive.
Under the Community Reinvestment Act of 1977, the OTS must take into
account the record of performance of First Carnegie and Northwest Savings Bank
in meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by each institution. First Carnegie and
Northwest Savings Bank received a "satisfactory" rating during their last
Community Reinvestment Act examinations.
Northwest filed its application with the OTS on or about November 21,
2003. From the date the application is deemed complete, the OTS has 60 calendar
days, to review the application. By the end of this period, the OTS must approve
or disapprove the application. This 60-day period may be extended by the OTS
under particular circumstances.
In addition, a period of up to 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 antitrust
25
laws. Although we believe that the likelihood of such action by the Department
of Justice is remote in this merger, there can be no assurance that the
Department of Justice will not initiate such proceeding. If such proceeding is
instituted or challenge is made, we cannot ensure a favorable result.
We are not aware of any other regulatory approvals required for
completion of the merger, except as described above. Should any other approvals
be required, it is presently contemplated that such approvals would be sought.
There can be no assurance that any other approvals, if required, will be
obtained.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which does not include review of the merger
from the standpoint of the adequacy of the consideration to be received by Skibo
Financial stockholders. Furthermore, regulatory approvals do not constitute an
endorsement or recommendation of the merger.
Time Period for Completing the Merger
If the merger is not consummated on or before August 1, 2004, the
merger agreement may be terminated by either Northwest or Skibo Financial.
Other Provisions of the Merger Agreement
Although the completion of the merger requires stockholder approval,
many provisions of the merger agreement became effective immediately upon its
signing. Your vote was not required to make these provisions binding obligations
of Skibo Financial and Northwest.
Representations and Warranties. Each party has made representations and
warranties to the other party with respect to various matters, including its
financial statements, capital structure, business, loans, investments,
regulatory filings and benefit plans. These representations and warranties must
be true and correct upon both signing of the merger agreement and the completion
of the merger. A party can terminate the merger agreement if the other party's
representations and warranties are not true and correct in all material
respects. If the merger is completed, or if the merger agreement is terminated
for some unrelated reason, the representations and warranties become void. You
can find details of these obligations in Articles III and IV of the merger
agreement.
Cooperation and Conduct of Business. Each party has agreed to cooperate
in completing the merger and to avoid extraordinary transactions between the
signing of the merger agreement and the completion of the merger. In addition,
we have agreed not to solicit or encourage a competing transaction to acquire
us. However, we can furnish information to or negotiate with someone who makes
an unsolicited written bona fide proposal if, among other things, the board of
directors, after consultation with independent legal counsel, determines in good
faith that such action is necessary to comply with its fiduciary duties. These
provisions become void if the merger is completed. These provisions also become
void if the merger agreement is terminated, except for those related to
confidentiality and shared expenses. You can find details of these obligations
in Article V of the merger agreement.
Waiver and Amendment. The merger agreement allows either Skibo or
Northwest to extend the time for the performance of any obligation by the other
party, to waive (to the extent permitted by law) any condition or obligation of
the other party, and to amend the merger agreement. The parties have previously
waived the time period set forth in the merger agreement for First Carnegie to
prepare and file preliminary proxy material with the SEC.
26
Termination. The merger agreement may be terminated under any of the
following circumstances:
The merger agreement may be terminated by the mutual consent of Skibo
Financial and Northwest.
The merger agreement may be terminated by either Skibo Financial, Skibo
MHC or Northwest if:
o A material breach by or failure to perform on the part of a party
of any representation, warranty, covenant or agreement contained
in the merger agreement has occurred and cannot be or has not
been cured within 30 days after the giving of written notice of
such breach by the other party;
o The merger is not completed by August 1, 2004, provided however,
that the right to terminate the merger agreement will not be
available to any party whose breach of any obligation under the
merger agreement has been the cause of or resulted in the failure
of the merger to occur on or before August 1, 2004 provided that
the parties may extend the deadline by 120 days;
o Any party has been informed by a regulatory authority whose
approval or consent has been requested that the approval or
consent is denied, or is granted subject to any change that
adversely affects in a material respect the economic benefit that
either party reasonably expects to receive in the transactions;
or
o The approval of the stockholders of Skibo Financial or, if
required, the members of Skibo MHC is not obtained at a duly held
meeting of stockholders or members.
The merger agreement may be terminated by Northwest:
o If the boards of directors of Skibo Financial or Skibo MHC
withdraw their recommendation to approve the merger agreement,
fail to make such recommendation or modify their recommendation
in a manner adverse to Northwest, as set forth in the merger
agreement, or Skibo Financial enters into an agreement to be
acquired by, or merge or combine with, a third party in
connection with a superior proposal.
The merger agreement may be terminated by Skibo Financial or Skibo MHC
upon two days' notice to Northwest:
o If our boards of directors determine, after consultation with our
advisors, that it is their fiduciary duty to accept a superior
proposal (as defined in the merger agreement).
You can find details of the termination provisions in Article VII of
the merger agreement.
Termination Fee. If the merger agreement is terminated due to either of
the immediately preceding two reasons, Skibo Financial will, within five
business days after written demand by Northwest, make a cash payment of $1.2
million to Northwest to reimburse Northwest for incurring the costs and expenses
related to entering into the merger agreement and consummating the transactions
contemplated by the merger agreement.
27
Voting Agreements
Concurrently with or following the execution of the merger agreement,
each director and executive officer of Skibo (collectively the "Stockholders")
separately entered into voting agreements under which the Stockholders: (1)
agreed to restrict their ability to transfer or dispose of their shares of Skibo
Financial's common stock; (2) agreed to vote their shares of common stock of
Skibo Financial to approve the merger agreement; and (3) agreed to vote all
votes over which they have power at any meeting of members of Skibo MHC in favor
of approval of the merger agreement. The Stockholders agreed to enter into the
voting agreements as an indication of their support for the merger agreement and
the transactions contemplated by it and their willingness to vote their shares
of Skibo Financial common stock in favor of the merger agreement at the special
meeting. The voting agreements terminate automatically upon the termination of
the merger agreement.
No Dissenters' Rights
Federal law does not grant dissenters' rights to the stockholders of
Skibo Financial in connection with the merger.
MARKET FOR COMMON STOCK AND DIVIDENDS
The Skibo Financial common stock currently is traded on the Nasdaq
Stock Market Inc.'s SmallCap Market under the symbol "SKBO."
As of the record date, there were 3,153,344 shares of Skibo Financial
common stock outstanding, including 1,897,500 shares held by Skibo MHC which
were held by approximately 271 holders of record. Such numbers of stockholders
do not reflect the number of individuals or institutional investors holding
stock in nominee name through banks, brokerage firms and others.
The following table sets forth during the periods indicated the high
and low sales prices of the Skibo Financial common stock as reported on the
Nasdaq Stock Market Inc.'s SmallCap Market and the dividends declared per share
of Skibo Financial common stock.
Fiscal Year Market Price
----------- ------------
Dividends
Declared
March 31, 2004 High Low Per Share($)
- -------------- ---- --- ------------
First Quarter 15.10 13.08 --
Second Quarter 17.91 12.00 0.25
Third Quarter 18.88 16.87 --
March 31, 2003
- --------------
First Quarter 14.50 11.88 0.42
Second Quarter 13.50 11.61 0.26
Third Quarter 14.00 12.00 0.52
Fourth Quarter 15.50 13.46 0.12
March 31, 2002
- --------------
First Quarter 8.70 7.20 0.32
Second Quarter 13.50 8.75 0.12
Third Quarter 11.50 10.35 0.32
Fourth Quarter 13.30 10.50 0.12
28
On September 10, 2003, the most recent trading day prior to the
announcement of the execution of the merger agreement, the closing per share
sale price of the Skibo Financial common stock was $13.46 and on January 12,
2004, the last trading day before the printing of this proxy statement, the
closing per share sale price of the Skibo Financial common stock was $17.10.
Pursuant to the merger agreement, Skibo Financial may pay a quarterly
dividend of $0.12 per share not to exceed Skibo Financial's net income. Skibo
Financial may not declare or pay a cash dividend on any of its stock if the
effect thereof would cause First Carnegie's regulatory capital to be reduced
below (1) the amount required for the liquidation account established in
connection with Skibo's reorganization from mutual to stock form, or (2) the
regulatory capital requirements imposed by the Office of Thrift Supervision.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
For the next Annual Meeting, which will only be held if the merger is
not consummated prior thereto, all business to be submitted by stockholders
shall be stated in writing and filed with the Secretary of Skibo Financial no
later than five days prior to that Annual Meeting.
In order to be eligible for inclusion in Skibo Financial's next annual
proxy materials relating to the next Annual Meeting of Stockholders held, any
stockholder proposal to take action at such meeting must be received by Skibo
Financial at 242 East Main Street, Carnegie, Pennsylvania 15106, no later than a
reasonable time before Skibo Financial prints and mails its proxy statement. In
the event that such a meeting is to be held, Skibo Financial will publish the
precise deadline in one of its quarterly reports on Form 10-QSB or under cover
of a Form 8-K. Any such proposals shall be subject to the requirements of the
proxy rules adopted under the Securities Exchange Act of 1934, as amended.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements and
information with respect to the financial condition, results of operations,
plans, objectives, future performance, business and other matters relating to
Skibo Financial or the merger that are based on the beliefs of, as well as
assumptions made by and information currently available to, Skibo Financial's
management. When used in this proxy statement, the words "anticipate,"
"believe," "estimate," "expect" and "intend" and words or phrases of similar
import are intended to identify forward-looking statements. These statements
reflect the current view of Skibo Financial with respect to future events and
are subject to risks, uncertainties and assumptions that include, without
limitation, the risk factors set forth in Skibo Financial's 2003 Annual Report
on Form 10-KSB and other filings with the Securities and Exchange Commission,
the risk that the merger will not be completed and risks associated with
competitive factors, general economic conditions, geographic credit
concentration, customer relations, interest rate volatility, governmental
regulation and supervision, defaults in the repayment of loans, changes in
volume of loan originations, and changes in industry practices. Should any one
or more of these risks or uncertainties materialize, or should any underlying
assumptions prove incorrect, actual results may vary materially from those
described in this proxy statement as anticipated, believed, estimated, expected
or intended.
29
WHERE YOU CAN FIND MORE INFORMATION
Skibo Financial is subject to the informational requirements of the
Securities Exchange Act of 1934 and files annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information that Skibo Financial files at the SEC's
public reference room located at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. The public filings of Skibo Financial
also are available to the public from commercial document retrieval services and
at the internet website maintained by the SEC at "http://www.sec.gov." You may
also access our filings through the Stockholder Reports section of our website
at http://www.skibofin.com.
-----------------------
30
- --------------------------------------------------------------------------------
SKIBO FINANCIAL CORP.
242 EAST MAIN STREET
CARNEGIE, PENNSYLVANIA 15106
(412) 276-2424
- --------------------------------------------------------------------------------
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 19, 2004
- --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of Skibo
Financial Corp. ("Skibo Financial"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of common stock of Skibo Financial which the undersigned is entitled to
vote at the Special Meeting of Stockholders (the "Meeting"), to be held at
Southpointe Golf Club, 360 Southpointe Boulevard, Canonsburg, Pennsylvania, on
Thursday, February 19, 2004 at 9:00 a.m., Eastern Time, and at any and all
adjournments thereof, as follows:
FOR AGAINST ABSTAIN
--- ------- -------
1. Proposal to approve and adopt an agreement
and plan of merger, dated September 11, 2003,
by and among Northwest Savings Bank,
Northwest Bancorp, Inc. and Northwest
Bancorp, MHC, and First Carnegie Deposit,
Skibo Financial Corp. and Skibo Bancshares,
M.H.C., and the transactions contemplated thereby. |_| |_| |_|
The Board of Directors recommends a vote "FOR" the above listed
proposition.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
SIGNED PROXY WILL BE VOTED FOR THE PROPOSITION STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH 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 MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elects to vote at the Meeting,
or at any adjournments thereof, and after notification to the Secretary of Skibo
Financial at the Meeting of the stockholder's decision to terminate this proxy,
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect. The undersigned may also revoke this proxy by filing a
subsequently dated proxy or by notifying the Secretary of Skibo Financial of his
or her decision to terminate this proxy.
The undersigned acknowledges receipt from Skibo Financial prior to the
execution of this proxy of a Notice of Special Meeting and a Proxy Statement
dated January 16, 2004.
Please check here if you
Dated: _______________ __, 2004 |_| plan to attend the Meeting.
- ------------------------------------------ ----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
- ------------------------------------------ ----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
Please sign exactly as your name appears on this form of proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
APPENDIX A
AGREEMENT AND PLAN OF MERGER
By and Among
NORTHWEST SAVINGS BANK,
NORTHWEST BANCORP, INC.,
NORTHWEST BANCORP, MHC
And
FIRST CARNEGIE DEPOSIT,
SKIBO FINANCIAL CORP.,
SKIBO BANCSHARES, M.H.C.
Dated as of September 11, 2003
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions..................................................................................2
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01 Effects of Merger; Surviving Institutions....................................................7
Section 2.02 Conversion and Cancellation of Shares........................................................8
Section 2.03 Exchange Procedures..........................................................................9
Section 2.04. Stock Options...............................................................................10
Section 2.05. Restricted Stock............................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SKIBO
Section 3.01 Organization................................................................................11
Section 3.02 Capitalization..............................................................................12
Section 3.03 Authority; No Violation.....................................................................13
Section 3.04 Consents....................................................................................14
Section 3.05 Skibo Financial Statements..................................................................14
Section 3.06 Taxes.......................................................................................15
Section 3.07 No Material Adverse Effect..................................................................15
Section 3.08 Contracts...................................................................................15
Section 3.09 Ownership of Property; Insurance Coverage...................................................17
Section 3.10 Legal Proceedings...........................................................................18
Section 3.11 Compliance With Applicable Law..............................................................18
Section 3.12 Employee Benefit Plans......................................................................19
Section 3.13 Brokers, Finders and Financial Advisors.....................................................21
Section 3.14 Environmental Matters.......................................................................22
Section 3.15 Loan Portfolio..............................................................................23
Section 3.16 Securities Documents........................................................................24
Section 3.17 Related Party Transactions..................................................................24
Section 3.18 Schedule of Termination Benefits............................................................24
Section 3.19 Deposits....................................................................................25
Section 3.20 Fairness Opinion............................................................................25
Section 3.21 Required Vote of Stockholders...............................................................25
Section 3.22 Derivative Transactions.....................................................................25
A-(i)
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NORTHWEST
Section 4.01 Organization................................................................................26
Section 4.02 Authority; No Violation.....................................................................26
Section 4.03 Consents....................................................................................27
Section 4.04 Northwest Financial Statements..............................................................28
Section 4.05 Material Adverse Effect.....................................................................28
Section 4.06 Legal Proceedings...........................................................................28
Section 4.07 Compliance With Applicable Law..............................................................28
Section 4.08 Northwest Benefit Plans.....................................................................29
Section 4.09 Regulatory Approvals........................................................................29
Section 4.10 Securities Documents........................................................................30
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of the Business of Skibo............................................................30
Section 5.02 Access; Confidentiality.....................................................................33
Section 5.03 Regulatory Matters and Consents.............................................................34
Section 5.04 Taking of Necessary Action..................................................................35
Section 5.05 Certain Agreements..........................................................................36
Section 5.06 No Other Bids and Related Matters...........................................................38
Section 5.07 Duty to Advise; Duty to Update the Skibo Financial Schedules................................39
Section 5.08 Conduct of Northwest's Business.............................................................39
Section 5.09 Board and Committee Minutes.................................................................40
Section 5.10 Undertakings by the Parties.................................................................40
Section 5.11 Employee and Termination Benefits; Directors and Management.................................43
Section 5.12 Duty to Advise; Duty to Update the Northwest Disclosure Schedules...........................47
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Obligations of Skibo Under this Agreement.....................................48
Section 6.02 Conditions to the Obligations of Northwest Under this Agreement.............................49
A-(ii)
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination.................................................................................50
Section 7.02 Effect of Termination.......................................................................51
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses....................................................................................52
Section 8.02 Non-Survival of Representations and Warranties..............................................52
Section 8.03 Amendment, Extension and Waiver.............................................................52
Section 8.04 Entire Agreement............................................................................53
Section 8.05 No Assignment...............................................................................53
Section 8.06 Notices.....................................................................................53
Section 8.07 Captions....................................................................................54
Section 8.08 Counterparts................................................................................54
Section 8.09 Severability................................................................................54
Section 8.10 Governing Law...............................................................................54
Section 8.11 Specific Performance........................................................................55
Exhibit A Form of Merger Agreement Relating to the MHC Merger
Exhibit B Form of Merger Agreement Relating to the Mid-Tier Merger
Exhibit C Form of Skibo Voting Agreement
A-(iii)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this Agreement"), dated as of
September 11, 2003, is by and among (i) Northwest Savings Bank, a Pennsylvania
savings bank ("Northwest Bank"), Northwest Bancorp, Inc., a Federal corporation
("Northwest Bancorp"), Northwest Bancorp, MHC, a Federal mutual holding company
("Northwest MHC"), and First Carnegie Deposit, a Federal savings association
("First Carnegie"), Skibo Financial Corp., a Federal corporation ("Skibo
Financial"), and Skibo Bancshares, M.H.C., a Federal mutual holding company
("Skibo MHC"). Each of Northwest Bank, Northwest Bancorp, Northwest MHC, First
Carnegie, Skibo Financial and Skibo MHC is sometimes individually referred to
herein as a "party," and collectively as the "parties."
RECITALS
1. Northwest MHC owns a majority of the outstanding capital stock of
Northwest Bancorp, which owns all of the outstanding capital stock of Northwest
Bank. Each of Northwest Bank, Northwest Bancorp and Northwest MHC has its
principal offices in Warren, Pennsylvania.
2. Skibo MHC owns a majority of the outstanding capital stock of Skibo
Financial, which owns all of the outstanding capital stock of First Carnegie.
Each of First Carnegie, Skibo Financial and Skibo MHC has its principal offices
in Carnegie, Pennsylvania.
3. The Boards of Directors of the respective parties deem it advisable
and in the best interests of the parties, including the depositors of Northwest
Bank and First Carnegie, and the stockholders of Northwest Bancorp and Skibo
Financial, for Skibo MHC to merge with and into Northwest MHC with Northwest MHC
as the surviving entity, and for Skibo Financial to convert to an interim
savings bank and then merge with and into First Carnegie, with First Carnegie as
the surviving entity, all pursuant to the terms, conditions and procedures set
forth in this Agreement.
4. The parties desire to provide for certain undertakings, conditions,
representations, warranties and covenants in connection with the transactions
contemplated by this Agreement;
5. Simultaneously with the execution of this Agreement, each director
of Skibo Financial is entering into the letter agreement included as Exhibit C
to this Agreement; and
6. In consideration of the premises and of the mutual representations,
warranties and covenants herein contained and intending to be legally bound
hereby, the parties hereby agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions
Except as otherwise provided herein, as used in this Agreement, the
following terms shall have the indicated meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to any Person, any Person who directly,
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with such Person and, without limiting the
generality of the foregoing, includes any executive officer or director of such
Person and any Affiliate of such executive officer or director.
"Agreement" means this agreement, and any amendment or supplement
hereto, which constitutes a "plan of merger" between the Northwest Parties and
the Skibo Parties.
"Applications" means the applications to be filed with the appropriate
Regulatory Authorities requesting approval or nonobjection of the transactions
described in this Agreement.
"Board of Directors" means the Board of Directors of Skibo MHC, Skibo
Financial, First Carnegie, Northwest Bancorp or Northwest Bank, or the Board of
Trustees of Northwest MHC, as applicable.
"Closing Date" means the date determined by Northwest, in consultation
with and upon no less than five (5) days prior written notice to Skibo
Financial, but in no event later than fifteen (15) days after the last condition
precedent pursuant to this Agreement has been fulfilled or waived (including the
expiration of any applicable waiting period), or such other date as to which the
parties shall mutually agree. Notwithstanding anything to the contrary herein,
in the event that the transactions contemplated by this Agreement are not
consummated prior to December 31, 2003, the Closing Date will not be prior to
February 2, 2004.
"Compensation and Benefit Plans" means any bonus, incentive, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
stock appreciation, 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 Skibo Financial or First
Carnegie in which any employee or former employee, consultant or former
consultant or director or former director of Skibo Financial or First Carnegie
participates or to which any such employee, consultant or director is a party or
is otherwise entitled to receive benefits.
"Defined Benefit Plan" means the First Carnegie benefit pension plan.
"Environmental Law" means any Federal or state law, statute, rule,
regulation, code, judgment, common law or agreement with any Federal or state
governmental authority, and any
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decree, injunction or order entered with or by any governmental authority that
is binding upon Skibo relating to (i) the protection, preservation or
restoration of the environment (including air, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource), (ii) human health or safety, or (iii) exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of, hazardous
substances, in each case as amended and now in effect. "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated from time to time thereunder.
"Exchange Agent" means the third party entity selected by Northwest and
reasonably acceptable to Skibo, as provided in Section 2.03(a) of this
Agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"First Carnegie" means First Carnegie Deposit, a federal stock savings
association.
"FHLB" means the Federal Home Loan Bank.
"FinPro" means FinPro, Inc., the financial advisor to Skibo in
connection with the transactions provided for in this Agreement.
"GAAP" means generally accepted accounting principles as in effect at
the relevant date and consistently applied.
"Hazardous Material" means any substance (whether solid, liquid or gas)
that is detrimental to human health or safety or to the environment and
currently listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any material containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum, or any
derivative or by-product thereof, radon, radioactive material, friable
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
"HOLA" means the Home Owners' Loan Act of 1956.
"Interim" means the federal interim stock savings association resulting
from the exchange by Skibo Financial of its federal mutual holding company
subsidiary charter for an interim stock savings association charter.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
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"Loan Property" shall have the meaning given to such term in Section
3.14(b) of this Agreement.
"Material Adverse Effect" shall mean, with respect to Northwest Bancorp
or Skibo Financial, any adverse effect on its assets, financial condition or
results of operations which is material to its assets, financial condition or
results of operations on a consolidated basis, except for any material adverse
effect caused by (i) any change in the value of the assets of Northwest Bancorp
or Skibo Financial 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) expenses incurred in connection with
this Agreement and the transactions contemplated hereby; or (iv) the effects of
any action or omission taken pursuant to this Agreement or with the written
consent of the other parties hereto.
"Member Proxy Statement" means any proxy statement, if any, together
with any supplements thereto, to be transmitted by Skibo MHC to its members in
connection with the transactions contemplated by this Agreement if a vote of
such members is required by any Regulatory Authority.
"Merger" shall mean collectively the MHC Merger and the Mid-Tier
Merger, and any other mergers by interim corporate entities necessary to
effectuate the transactions contemplated by this Agreement.
"Merger Consideration" has the meaning given to that term in Section
2.02(a) of this Agreement.
"Merger Effective Date" means the date as of which the articles of
combination as to the Merger are endorsed by the OTS, or such other date
specified in the endorsement of the articles of combination by the OTS.
"MHC Merger" means the merger of Skibo MHC with and into Northwest MHC
with Northwest MHC as the surviving entity.
"Mid-Tier Merger" means the merger of Interim with and into First
Carnegie with First Carnegie as the surviving association.
"Northwest" means Northwest Bank, Northwest Bancorp, Northwest MHC
and/or any direct or indirect Subsidiary of such entities.
"Northwest Bancorp" means Northwest Bancorp, Inc., a federal
corporation.
"Northwest Bank" means Northwest Savings Bank, a Pennsylvania stock
savings bank.
"Northwest Disclosure Schedules" means the Disclosure Schedules
delivered by Northwest to Skibo pursuant to Article III of this Agreement.
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"Northwest Financials" means (i) the audited consolidated financial
statements of Northwest Bancorp as of June 30, 2002 and 2001 and for the three
years ended June 30, 2002, including the notes thereto, included in Securities
Documents filed by Northwest Bancorp, and (ii) the unaudited interim
consolidated financial statements of Northwest Bancorp as of each calendar
quarter following June 30, 2002 included in Securities Documents filed by
Northwest Bancorp.
"Northwest MHC" means Northwest Bancorp, MHC, a federal mutual holding
company.
"Northwest Parties" means Northwest Bank, Northwest Bancorp and
Northwest MHC.
"Northwest Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by Northwest
Bancorp, and includes Northwest Bank, except that it does not include any
corporation the stock of which is held in the ordinary course of the lending
activities of Northwest Bank.
"OTS" means the Office of Thrift Supervision.
"Participation Facility" shall have the meaning given to such term in
Section 3.14(b) of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any individual, corporation, partnership, joint venture,
association, trust or "group" (as that term is defined under the Exchange Act).
"Regulatory Agreement" has the meaning given to that term in Section
3.11(b) of this Agreement.
"Regulatory Authority" or "Regulatory Authorities" means any agency or
department of any Federal or state government, including without limitation the
OTS, the FDIC, the SEC and the respective staffs thereof.
"Right" means any warrant, option, right, convertible security and
other capital stock equivalent that obligate an entity to issue its securities.
"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.
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"SERP" means the First Carnegie Deposit Supplemental Executive
Retirement Plan.
"Skibo" means First Carnegie, Skibo Financial, Skibo, MHC and/or any
direct or indirect Subsidiary of such entities.
"Skibo Financial" means Skibo Financial Corp., a Federal corporation or
any successor in interest thereto, as the context requires.
"Skibo Financials" means (i) the audited consolidated financial
statements of Skibo Financial as of March 31, 2003 and 2002 and for the two
years ended March 31, 2003, including the notes thereto, included in Securities
Documents filed by Skibo Financial, and (ii) the unaudited interim consolidated
financial statements of Skibo Financial as of each calendar quarter following
March 31, 2003 included in Securities Documents filed by Skibo Financial.
"Skibo Financial Common Stock" means the common stock of Skibo
Financial described in Section 3.02(a) or the common stock of a successor in
interest of Skibo Financial, as the context requires.
"Skibo Financial Option" means issued and outstanding options granted
by Skibo Financial to purchase shares of Skibo Financial Common Stock pursuant
to the Skibo Financial Stock Option Plan.
"Skibo Financial Restricted Stock Plan" means the First Carnegie
Deposit 1998 Restricted Stock Plan.
"Skibo Financial Schedules" means the Disclosure Schedules delivered by
Skibo to Northwest pursuant to Article III of this Agreement.
"Skibo Compensation and Benefit Plan" has the meaning given to that
term in Section 3.12 of this Agreement.
"Skibo MHC" means Skibo Bancshares, M.H.C., a federal mutual holding
company.
"Skibo Parties" means First Carnegie, Skibo Financial and Skibo MHC.
"Skibo Regulatory Reports" means the Thrift Financial Reports of First
Carnegie and accompanying schedules, as filed with the OTS, for each calendar
quarter beginning with the quarter ended March 31, 2003, through the Closing
Date, and all Annual, Quarterly and Current Reports filed on Form H-(b)11 with
the OTS by Skibo Financial and Skibo MHC from March 31, 2003 through the Closing
Date.
"Skibo Financial Stock Option Plan" means the Skibo Financial Corp.
1998 Stock Option Plan.
"Skibo Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by Skibo Financial, and
includes First Carnegie, except that
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it does not include any corporation the stock of which is held in the ordinary
course of the lending activities of First Carnegie.
"Stockholder Proxy Statement" means the proxy statement together with
any supplements thereto to be transmitted to holders of Skibo Financial Common
Stock in connection with the transactions contemplated by this Agreement.
"Subsidiary" means any corporation, 50% or more of the capital stock of
which is owned, either directly or indirectly, by another entity, except any
corporation the stock of which is held as security by either Northwest Bank or
First Carnegie, as the case may be, in the ordinary course of their lending
activities.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01 Effects of Merger; Surviving Institutions.
On the Merger Effective Date the Merger will be effected as follows:
(a) The Mid-Tier Merger. Skibo Financial will exchange its federal
stock holding company charter for an interim stock savings association charter
to become Interim, and Interim will merge with and into First Carnegie with
First Carnegie as the surviving association pursuant to the merger agreement
substantially in the Form of Exhibit A hereto. Thereafter, First Carnegie shall
be a wholly-owned subsidiary of Skibo MHC. As a result of the Mid-Tier Merger,
the separate existence of Skibo Financial and Interim shall cease, and all of
the property (real, personal and mixed), rights, powers, duties and obligations
of Skibo Financial and Interim shall be transferred to and assumed by First
Carnegie as the surviving entity in the Mid-Tier Merger, without further act or
deed, all in accordance with the HOLA and regulations of the OTS.
(b) The MHC Merger. Immediately after the Mid-Tier Merger, Skibo MHC
will merge with and into Northwest MHC with Northwest MHC as the surviving
entity pursuant to the merger agreement substantially in the form of Exhibit B
hereto. The separate existence of Skibo MHC shall cease, and all of the property
(real, personal and mixed), rights, powers and duties and obligations of Skibo
MHC shall be transferred to and assumed by Northwest MHC as the surviving entity
in the MHC Merger, without further act or deed, all in accordance with the HOLA,
and regulations of the OTS. As a result of the MHC Merger, each borrower member
of Skibo MHC and holder of a deposit account in First Carnegie as of the Merger
Effective Date shall have the same rights and privileges in Northwest MHC as if
such borrowing and/or deposit account, respectively, had been established at
Northwest Bank, and all deposit accounts established at First Carnegie prior to
the Merger Effective Date shall confer on a depositor the same rights and
privileges in Northwest MHC as if such deposit account had been established at
Northwest Bank on the date established at First Carnegie and the borrower
members of Skibo MHC identified by Skibo prior to the Merger Effective Date will
be given subscription rights to
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the extent permitted by regulatory authorities in any conversion of Northwest
MHC to stock form that occurs prior to any merger of First Carnegie with and
into Northwest Bank if such borrowing remains outstanding at the time of such
mutual-to-stock conversion (collectively, the "Membership Conversion").
(c) Modification of Structure. Notwithstanding any provision of this
Agreement to the contrary, Northwest Bancorp may elect, subject to the filing of
all necessary applications and the receipt of all required regulatory approvals,
to modify the structure of the transactions described in this Section 2.01, and
the parties shall enter into such alternative transactions, so long as (i) there
are no adverse tax consequences to any of the stockholders of Skibo Financial as
a result of such modification, (ii) the Merger Consideration is not thereby
changed in kind or reduced in amount because of such modification and (iii) such
modification will not materially delay or jeopardize receipt of any required
regulatory approvals required under Sections 6.02(d).
Section 2.02 Conversion and Cancellation of Shares
(a) On the Merger Effective Date and in accordance with the MHC Merger
and the Mid-Tier Merger:
(i) Each issued and outstanding share of Skibo Financial
Common Stock held by Skibo MHC shall be exchanged for one share of
First Carnegie Common Stock.
(ii) Each issued and outstanding share of Skibo Financial
Common Stock (except shares held by Skibo MHC and except as otherwise
provided in this subsection (a) of Section 2.02) shall cease to be
outstanding, shall cease to exist and shall be converted automatically
into the right to receive $17.00 in cash (the "Merger Consideration").
(b) Any shares of Skibo Financial Common Stock (other than those held
by Skibo MHC) which are owned or held by either party hereto or any of their
respective Subsidiaries (other than in a fiduciary capacity or in connection
with debts previously contracted) at the Merger Effective Date shall cease to
exist, the certificates for such shares shall be canceled as promptly as
practicable, such shares shall not be converted into the Merger Consideration
and no cash shall be issued or exchanged therefor.
(c) The holders of certificates representing shares of Skibo Financial
Common Stock (other than Skibo MHC) (any such certificate being hereinafter
referred to as a "Certificate") shall cease to have any rights as stockholders
of Skibo Financial.
(d) Each option to purchase shares of Skibo Financial Common Stock
issued and outstanding pursuant to the Skibo Stock Option Plan, whether or not
such option is exercisable as of the Merger Effective Date, shall, by reason of
the Merger, cease to be outstanding and shall automatically be converted into
the right to receive in cash an amount equal to (i) the difference (if a
positive number) between (A) the Merger Consideration and (B) the exercise price
of each such option multiplied by (ii) the number of shares of Skibo Financial
Common Stock subject to such option.
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Section 2.03 Exchange Procedures
(a) As promptly as practicable after the Merger Effective Date, and in
any event within five business days of the Merger Effective Date, the Exchange
Agent shall mail to each holder of record of an outstanding Certificate(s) a
Letter of Transmittal containing instructions for the surrender of the
Certificate(s) held by such holder for payment if applicable. Upon surrender of
the Certificate(s) to the Exchange Agent in accordance with the instructions set
forth in the Letter of Transmittal, such holder shall promptly receive in
exchange therefor the Merger Consideration if applicable, without interest
thereon. Approval of this Agreement by the stockholders of Skibo Financial shall
constitute authorization for Northwest Bancorp to designate and appoint the
Exchange Agent, which appointment shall be reasonably acceptable to Skibo
Financial. Neither Northwest Bancorp nor the Exchange Agent shall be obligated
to deliver the Merger Consideration to a former stockholder of Skibo Financial
until such former stockholder surrenders his Certificate(s) or, in lieu thereof,
any such appropriate affidavit of loss and indemnity agreement and bond as may
be reasonably required by Northwest Bancorp.
(b) If payment of the Merger Consideration is to be made to a person
other than the person in whose name a Certificate surrendered in exchange
therefor is registered, it shall be a condition of payment that the Certificate
so surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(c) On or prior to the Merger Effective Date, Skibo Financial shall
deposit or cause to be deposited in trust with the Exchange Agent, an amount of
cash equal to the aggregate Merger Consideration that Skibo Financial
stockholders shall be entitled to receive on the Merger Effective Date pursuant
to Section 2.02 hereof (determined by multiplying the Merger Consideration by
the number of shares of Skibo Financial Common Stock which are issued and
outstanding immediately prior to the Merger Effective Date, other than shares
referenced in Section 2.02(b) hereof).
(d) The payment of the Merger Consideration in exchange for each share
of Skibo Financial Common Stock in accordance with the above terms and
conditions shall be in full satisfaction of all rights pertaining to such Skibo
Financial Common Stock.
(e) Promptly following the date which is 12 months after the Merger
Effective Date, the Exchange Agent shall deliver to Northwest Bancorp all cash,
certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing shares of Skibo
Financial Common Stock may surrender such Certificate to Northwest Bancorp and
(subject to applicable abandoned property, escheat and similar laws) receive in
consideration therefor the Merger Consideration multiplied by the number of
shares of
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Skibo Financial 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 Skibo Financial of Skibo
Financial Common Stock which are outstanding immediately prior to the Merger
Effective Date, and the stock transfer books of Skibo Financial 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 Skibo Financial Common Stock shall
have been lost, stolen or destroyed, the Exchange Agent shall deliver (except as
otherwise provided in Section 2.02) in exchange for such lost, stolen or
destroyed certificate, upon receipt of an affidavit of such fact by the holder
thereof, the cash to be paid in the Merger as provided for herein; provided,
however, that Northwest Bancorp may, in its sole discretion and as a condition
precedent to the delivery thereof, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such reasonable sum as Northwest
Bancorp may specify as indemnity against any claim that may be made against
Skibo Financial, Northwest Bancorp or any other party with respect to the
certificate alleged to have been lost, stolen or destroyed.
(h) Northwest Bancorp is hereby authorized, with the written consent of
Skibo Financial, to adopt additional reasonable rules and regulations with
respect to the matters referred to in this Section 2.03 not inconsistent with
the provisions of this Agreement and which do not adversely affect the rights of
stockholders of Skibo Financial.
Section 2.04. Stock Options.
Skibo Disclosure Schedule 2.04 sets forth all of the outstanding Skibo
Financial Options as of the date hereof, including vesting dates. At the Merger
Effective Date, each Skibo Financial Option which is unexercised and
outstanding, whether or not vested, immediately prior thereto shall, by reason
of the Merger, be terminated and converted into the right to receive in cash an
amount equal to (i) the difference between (A) the Merger Consideration and (B)
the exercise price of each such Skibo Financial Option multiplied by (ii) the
number of shares of Skibo Financial Common Stock subject to the Skibo Financial
Option. Skibo Financial agrees to take or to cause to be taken all actions
necessary to provide for such payment at or prior to the Merger Effective Date,
and shall use its reasonable best efforts to obtain the written acknowledgement
of each holder of a then outstanding Skibo Financial Option with regard to the
termination of such Option and the full payment therefor in accordance with the
terms of this Agreement.
Section 2.05. Restricted Stock.
Skibo Disclosure Schedule 2.05 sets forth all outstanding unvested
awards under the Skibo Financial Restricted Stock Plan. At the Merger Effective
Date, each unvested restricted share of Skibo Financial Common Stock granted
under the Skibo Financial Restricted Stock Plan
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which is outstanding at such time shall vest and become free of all
restrictions. Each holder of such a share of restricted Skibo Financial Common
Stock shall have the same right to receive the Merger Consideration as is
provided to each holder of Skibo Common Stock. Skibo Financial agrees to take or
to cause to be taken all actions necessary to provide for such payment at or
prior to the Merger Effective Date, and shall use its reasonable best efforts to
obtain the written acknowledgement of each holder of a share of restricted Skibo
Financial Common Stock with regard to the payment for such shares and the full
payment therefor in accordance with the terms of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SKIBO
Skibo represents and warrants to Northwest that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article III), except as set forth in the Skibo
Financial Schedules delivered to Northwest on the date hereof, and except as to
any representation or warranty which relates to a specific date.
Section 3.01 Organization
(a) Skibo MHC is a Federal mutual holding company organized, validly
existing and in good standing under the laws of the United States, and is duly
registered as a savings and loan holding company under the HOLA. Skibo MHC has
full power and authority to carry on its business as now conducted and is duly
licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on Skibo. Except
as set forth in Skibo Disclosure Schedule 3.01(a), Skibo MHC has no subsidiary
other than Skibo Financial and First Carnegie.
(b) Skibo Financial is a Federal corporation organized, validly
existing and in good standing under the laws of the United States, and is duly
registered as a savings and loan holding company under the HOLA. Skibo Financial
has the full corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on Skibo. Other than shares of capital stock in First Carnegie and its
subsidiaries, as identified below (collectively, the "Skibo Subsidiaries"),
Skibo Financial does not own or control, directly or indirectly, or have the
right to acquire directly or indirectly, an equity interest in any corporation,
company, association, partnership, joint venture or other entity.
(c) First Carnegie is a Federal savings bank organized, validly
existing and in good standing under the laws of the United States. Except as set
forth in Skibo Disclosure Schedule
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3.01(c), First Carnegie is the only Skibo Subsidiary. The deposits of First
Carnegie are insured by the FDIC to the fullest extent permitted by law, and all
premiums and assessments required to be paid in connection therewith have been
paid when due by First Carnegie. Each Skibo Subsidiary is identified in Skibo
Disclosure Schedule 3.01(c), and is a corporation organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization.
(d) First Carnegie is a member in good standing of the FHLB of
Pittsburgh and owns the requisite amount of stock therein.
(e) Except as disclosed in Skibo Disclosure Schedule 3.01(e), the
respective minute books of Skibo MHC, Skibo Financial, First Carnegie and each
Skibo Subsidiary accurately records, in all material respects, all material
corporate actions of their respective stockholders and boards of directors
(including committees) through the date of this Agreement.
(f) Prior to the date of this Agreement, Skibo has made available to
Northwest true and correct copies of the charters and bylaws of First Carnegie,
Skibo Financial and Skibo MHC, and the certificates of incorporation and bylaws
of each Skibo Subsidiary.
Section 3.02 Capitalization
(a) The authorized capital stock of Skibo Financial consists of
10,000,000 shares of common stock, $0.10 par value ("Skibo Financial Common
Stock"), and 5,000,000 shares of Preferred Stock, without par value (the "Skibo
Preferred Stock"), of which 3,153,344 shares of Skibo Financial Common Stock are
outstanding, validly issued, fully paid and nonassessable and free of preemptive
rights. There are no shares of Skibo Financial Preferred Stock issued and
outstanding. There are 296,630 shares of Skibo Financial Common Stock held by
Skibo Financial as treasury stock. Neither Skibo Financial nor any Skibo
Subsidiary has or is bound by any Right of any character relating to the
purchase, sale, issuance or voting of, or right to receive dividends or other
distributions on, any shares of Skibo Financial Common Stock, or any other
security of Skibo Financial or any Skibo Subsidiary, or any securities
representing the right to vote, purchase or otherwise receive any shares of
Skibo Financial Common Stock or any other security of Skibo Financial, other
than 142,535 shares issuable upon the exercise of Skibo Financial Options (as
set forth in the Skibo Disclosure Schedule 2.04 which are not considered
outstanding shares), and shares held pursuant to the First Carnegie ESOP (which
are outstanding). Skibo Disclosure Schedule 3.02(a) sets forth (i) each holder
of awards of Stock Options under the Skibo Financial Stock Option Plan, the
number of shares each such individual may acquire pursuant to the exercise of
Skibo Financial Stock Options and the exercise price relating to the Skibo
Financial Stock Options, and (ii) the name of each participant under the First
Carnegie ESOP, the number of shares of Skibo Financial Common Stock allocated to
each such participant and the number of allocated and unallocated shares of
Skibo Financial Common Stock held by the First Carnegie ESOP. Except as set
forth in Skibo Disclosure Schedule 3.02(a), there are no shares of restricted
stock of Skibo Financial outstanding, or authorized to be issued pursuant to any
Compensation and Benefit Plan of Skibo Financial.
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(b) Skibo MHC owns 1,897,500 shares of Skibo Financial Common Stock,
free and clear of any lien or encumbrance except as set forth in Skibo
Disclosure Schedule 3.02(b). Except as disclosed in Skibo Disclosure Schedule
3.02(b) and except for shares of Skibo Financial Common Stock (and any equity
interests that may be attributed to Skibo MHC due to its ownership of Skibo
Financial Common Stock), Skibo MHC does not possess, directly or indirectly, any
equity interest in any corporation.
(c) To the best knowledge of Skibo Financial, no Person or "group" (as
that term is used in Section 13(d)(3) of the Exchange Act) other than Skibo MHC,
is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5%
or more of the outstanding shares of Skibo Financial Common Stock, except as
disclosed in the Skibo Disclosure Schedule 3.02(c).
(d) The authorized capital stock of First Carnegie consists of
10,000,000 shares of common stock, $1.00 par value, and 5,000,000 shares of
Preferred Stock, no par value. There are 2,300,000 shares of First Carnegie
common stock issued and outstanding, all of which are validly issued, fully paid
and nonassessable and free of preemptive rights, and all of which are owned by
Skibo Financial free and clear of any liens, encumbrances, charges, restrictions
or rights of third parties of any kind whatsoever.
Section 3.03 Authority; No Violation
(a) Skibo has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Skibo and the completion by Skibo of the
transactions contemplated hereby have been duly and validly approved by the
requisite vote of the Boards of Directors of the Skibo Parties and, except for
approval of the stockholders of Skibo Financial and, if required, the members of
Skibo MHC, no other proceedings on the part of the Skibo Parties are necessary
to complete the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Skibo and, subject to approval by the
stockholders of Skibo Financial and, if required, the members of Skibo MHC and
receipt of the required approvals of the Regulatory Authorities, constitutes the
valid and binding obligations of Skibo, enforceable against Skibo in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally, and as to First Carnegie, the
conservatorship or receivership provisions of the FDIA, and subject, as to
enforceability, to general principles of equity.
(b) Subject to the receipt of approvals from the Regulatory Authorities
referred to in Section 5.03 hereof and the compliance by Skibo and Northwest
with any conditions contained therein,
(A) the execution and delivery of this Agreement by Skibo,
(B) the consummation of the transactions contemplated hereby, and
(C) compliance by Skibo with any of the terms or provisions hereof,
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will not (i) conflict with or result in a material breach of any provision of
the charters or bylaws of any of the Skibo Parties or the certificate of
incorporation of any Skibo Subsidiary; (ii) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Skibo Parties or any of the properties or assets of the Skibo
Parties; or (iii) violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of Skibo 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
Skibo is a party, or by which they or any of their respective properties or
assets may be bound or affected, except in the case of clauses (ii) and (iii)
above for violations which, individually or in the aggregate, would not have a
Material Adverse Effect on Skibo.
Section 3.04 Consents
Except as set forth in Skibo Disclosure Schedule 3.04, and except for
the consents, waivers, approvals, filings and registrations from or with the
Regulatory Authorities referred to in Section 5.03 hereof and compliance with
any conditions contained therein, and the approval of this Agreement by the
requisite vote of the stockholders of Skibo Financial and, if required, the
members of Skibo MHC, no consents, waivers or approvals of, or filings or
registrations with, any public body or governmental authority are necessary,
and, to the best knowledge of Skibo, 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 Skibo, and
(b) the completion by Skibo of the transactions described in this Agreement. The
Skibo Parties have no reason to believe that (i) any Regulatory Approvals will
not be received or (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 Skibo Financial Statements
(a) Skibo Financial has previously made available to Northwest the
Skibo Regulatory Reports. The Skibo Regulatory Reports have been, or will be,
prepared in all material respects in accordance with applicable regulatory
accounting principles and practices throughout the periods covered by such
statements, and fairly present, or will fairly present in all material respects,
the consolidated financial position, results of operations and changes in
stockholders' equity of each of the Skibo Parties as of and for the periods
ended on the dates thereof, in accordance with applicable regulatory accounting
principles applied on a consistent basis.
(b) Skibo Financial has previously made available to Northwest the
Skibo Financials (the availability of the Skibo Financials will be assumed if
they are included in SEC Documents filed on EDGAR). The Skibo Financials
(including the related notes where applicable) fairly present in each case in
all material respects (subject in the case of the unaudited interim statements
to normal year-end adjustments), the consolidated financial condition, results
of operations and cash flows of Skibo Financial as of and for the respective
periods ending on the
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dates thereof and have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved, except as indicated therein, or in
the case of unaudited statements, as permitted by Form 10-QSB.
(c) At the date of each balance sheet included in the Skibo Financials
or the Skibo Regulatory Reports, Skibo did not have, and will not have, any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such
Skibo Financials or Skibo Regulatory Reports or in the footnotes thereto which
are not fully reflected or reserved against therein or fully disclosed in a
footnote thereto, except for liabilities, obligations and loss contingencies
that are not material individually or in the aggregate or which are incurred in
the ordinary course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies that are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
Section 3.06 Taxes
Skibo Financial and the Skibo Subsidiaries are members of the same
affiliated group within the meaning of IRC Section 1504(a). Skibo has duly filed
all Federal, state and material local tax returns required to be filed by or
with respect to it on or prior to the date hereof (all such returns being
accurate and correct in all material respects) and has duly paid or has made
provisions for the payment of, all material Federal, state and local taxes which
have been incurred by or are due or claimed to be due from Skibo by any taxing
authority or pursuant to any written tax sharing agreement on or prior to the
date hereof other than taxes or other charges which (i) are not delinquent, (ii)
are being contested in good faith, or (iii) have not yet been fully determined.
As of the date of this Agreement, there is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to any taxes of
Skibo, and no claim has been made by any authority in a jurisdiction where Skibo
does not file tax returns that Skibo is subject to taxation in that
jurisdiction. Skibo has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. Skibo has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor or stockholder, and Skibo 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
Skibo has not suffered any Material Adverse Effect since March 31,
2002.
Section 3.08 Contracts
(a) Except as set forth in Skibo Disclosure Schedule 3.08(a), and
except for this Agreement, the Merger Agreement for the MHC Merger, the Merger
Agreement for the Mid-Tier Merger, and those agreements and other documents
filed as exhibits to Skibo Financial's Securities Documents, Skibo is not a
party to or subject to:
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(i) any employment, consulting or severance contract or
material arrangement with any past or present officer, director or
employee of Skibo 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 Skibo;
(iii) any collective bargaining agreement with any labor union
relating to employees of Skibo;
(iv) any agreement which by its terms limits the payment of
dividends by First Carnegie or Skibo Financial;
(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 Skibo is an obligor to any
person, which instrument evidences or relates to indebtedness other
than deposits, repurchase agreements, bankers' acceptances, advances
from the FHLB of Pittsburgh, and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in
"Federal funds" or which contains financial covenants or other
restrictions (other than those relating to the payment of principal and
interest when due) which would be applicable on or after the Closing
Date to Northwest; or
(vi) any contract (other than this Agreement) limiting the
freedom, in any material respect, of Skibo to engage in any type of
banking or bank-related business in which Skibo is permitted to engage
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 made
available to Northwest on or before the date hereof, are listed in and attached
to Skibo Disclosure Schedule 3.08(a) and are in full force and effect on the
date hereof, and Skibo (nor, to the knowledge of Skibo, any other party to any
such contract, plan, arrangement or instrument) has not materially breached any
provision of, or is in default in any respect under any term of, any such
contract, plan, arrangement or instrument. Except as set forth in the Skibo
Disclosure Schedule 3.08(b)(i), no party to any material contract, plan,
arrangement or instrument will have the right to terminate any or all of the
provisions of any such contract, plan, arrangement or instrument as a result of
the execution of, and the transactions contemplated by, this Agreement. Except
as set forth in Skibo Disclosure Schedule 3.08(b)(i), none of the employees
(including officers) of Skibo possesses the right to terminate his/her
employment and receive or be paid (or cause Skibo to accrue on his/her behalf)
benefits solely as a result of the execution of this Agreement or the
consummation of the transactions contemplated thereby. Except as set forth in
Skibo Disclosure Schedule 3.08(b)(i), no plan, contract, employment agreement,
termination agreement, or similar agreement or arrangement to which Skibo is a
party or under which Skibo may be liable contains provisions
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which permit any employee or independent contractor to terminate it without
cause and continue to accrue future benefits thereunder. Except as set forth in
Skibo Disclosure Schedule 3.08(b)(i), no such agreement, plan, contract, or
arrangement: (x) provides for acceleration in the vesting of benefits or
payments due thereunder upon the occurrence of a change in ownership or control
of Skibo or upon the occurrence of a subsequent event; or (y) requires Skibo to
provide a benefit in the form of Skibo Financial Common Stock or determined by
reference to the value of Skibo Financial Common Stock. Except as disclosed in
Skibo Disclosure Schedule 3.08(b)(ii), no such agreement, plan or arrangement
with respect to officers or directors of Skibo or to any of their respective
employees, provides for benefits which may cause an "excess parachute payment"
or the disallowance of a Federal income tax deduction under IRC Section 280G.
Section 3.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in Skibo Disclosure Schedule 3.09(a), Skibo has
good and, as to real property, marketable title to all material assets and
properties owned by Skibo in the conduct of its business, whether such assets
and properties are real or personal, tangible or intangible, including assets
and property reflected in the balance sheets contained in the Skibo Regulatory
Reports and in the Skibo 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
Pittsburgh, inter-bank credit facilities, or any transaction by Skibo acting in
a fiduciary capacity, and (ii) statutory liens for amounts not yet delinquent or
which are being contested in good faith. Skibo, as lessee, has the right under
valid and subsisting leases of real and personal properties used by Skibo in the
conduct of its businesses to occupy or use all such properties as presently
occupied and used by each of them. Except as disclosed in Skibo Disclosure
Schedule 3.09(a), such existing leases and commitments to lease constitute
operating leases for both tax and financial accounting purposes and the lease
expense and minimum rental commitments with respect to such leases and lease
commitments are as disclosed in the notes to the Skibo Financials.
(b) With respect to all material agreements pursuant to which Skibo has
purchased securities subject to an agreement to resell, if any, Skibo has a lien
or security interest (which to the knowledge of Skibo 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) Skibo currently maintains insurance considered by Skibo to be
reasonable for its operations, in accordance with good business practice. Skibo
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 Skibo under such policies. All such
insurance is valid and enforceable and in full force and effect, and within the
last three years Skibo has received each type of insurance coverage for which it
has applied and during such periods has
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not been denied indemnification for any material claims submitted under any of
its insurance policies. Skibo Disclosure Schedule 3.09(c) identifies all
policies of insurance maintained by Skibo.
Section 3.10 Legal Proceedings.
Except as disclosed in Skibo Disclosure Schedule 3.10, Skibo is not a
party to any, and there are no pending or, to the best of the knowledge of
Skibo, threatened legal, administrative, arbitration or other proceedings,
actions or governmental investigations of any nature (i) against Skibo, (ii) to
which the assets of Skibo are or may be subject, (iii) challenging the validity
or propriety of any of the transactions contemplated by this Agreement, or (iv)
which could adversely affect the ability of Skibo to perform under this
Agreement, except for any proceedings, claims, actions, investigations or
inquiries referred to in clauses (i) or (ii) which, if adversely determined,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Skibo.
Section 3.11 Compliance With Applicable Law
(a) Skibo holds all licenses, franchises, permits and authorizations
necessary for the lawful conduct of its businesses under, and has complied in
all material respects with, applicable laws, statutes, orders, rules or
regulations of any Federal, state or local governmental authority relating to
it, other than where such failure to hold or such noncompliance will neither
result in a limitation in any material respect on the conduct of its business
nor otherwise have a Material Adverse Effect on Skibo. Skibo, directly or
indirectly, owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights
and any applications therefor, technology, know-how and tangible or intangible
proprietary information or material that are material to the business of Skibo.
(b) Except as disclosed in Skibo Disclosure Schedule 3.11(b), Skibo has
not received any notification or communication from any Regulatory Authority (i)
asserting that Skibo 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 Skibo; (iii) requiring or threatening to
require Skibo, or indicating that Skibo 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 Skibo, including without limitation any
restriction on the payment of dividends; or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any material manner the
operations of Skibo, 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"). Skibo has not consented to or entered into any currently effective
Regulatory Agreement, except as set forth in Skibo Disclosure Schedule 3.11(b).
The most recent regulatory rating given to First
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Carnegie as to compliance with the Community Reinvestment Act ("CRA") is
satisfactory or better.
Section 3.12 Employee Benefit Plans.
(a) Skibo Disclosure Schedule 3.12 includes a list of all existing
Compensation and Benefit Plans. Each Compensation and Benefit Plan that is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) and which
is intended to be qualified under Section 401(a) of the IRC (a "Skibo Qualified
Plan") has received a favorable determination letter from the IRS or was a
prototype document that has received a favorable opinion letter from the IRS,
and Skibo Financial and First Carnegie have no knowledge of any circumstances
likely to result in revocation of any such favorable determination or opinion
letter. There has been no announcement or commitment by Skibo Financial, First
Carnegie or any Skibo Subsidiary to create an additional Compensation and
Benefit Plan, or to amend any Compensation and Benefit Plan, except for
amendments required by applicable law to maintain its qualified status or
otherwise, which do not increase the cost of such 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 IRC, the Securities
Act, the Exchange Act, the Age Discrimination in Employment Act, and any
regulations or rules promulgated thereunder, and all filings, disclosures and
notices required by ERISA, the IRC, the Securities Act, the Exchange Act, the
Age Discrimination in Employment Act and any other applicable law have been
timely made. Except as set forth in Skibo Disclosure Schedule 3.12(b), there is
no pending, or to the Knowledge of Skibo Financial threatened, litigation,
administrative action, suit or claim relating to any of the Compensation and
Benefit Plans (other than routine claims for benefits). Neither Skibo Financial
nor First Carnegie 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 Skibo Financial or First Carnegie to a tax or penalty
imposed by either Section 4975 of the IRC or Section 502 of ERISA, assuming for
purposes of Section 4975 of the IRC 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. Except as set forth in Skibo
Disclosure Schedule 3.12(b), each of the Compensation and Benefit Plans can be
terminated in accordance with its terms upon sixty (60) days written notice.
(c) No liability under Title IV of ERISA has been incurred by Skibo
Financial or First Carnegie or any Skibo 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)
("Skibo Pension Plan") currently or formerly maintained by Skibo Financial or
First Carnegie or any entity which is considered one employer with Skibo
Financial or First Carnegie 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 no condition exists that presents a risk to Skibo
Financial or First Carnegie or any ERISA Affiliate of incurring a liability
under such Title. Except as disclosed in Skibo Disclosure Schedule 3.12(c), no
Skibo Pension Plan had an "accumulated funding deficiency" (as defined in
Section 302 of
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ERISA), whether or not waived, as of the last day of the end of the most recent
plan year ending prior to the date hereof; the fair market value of the assets
of each Skibo Pension Plan exceeds the present value of the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) under such Skibo
Pension Plan as of the end of the most recent plan year with respect to the
respective Skibo 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 Skibo Pension Plan as of the date hereof; 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 Skibo
Financial or First Carnegie 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 Skibo Financial's Disclosure Schedule
3.12(c), neither Skibo Financial or First Carnegie, nor any ERISA Affiliate, nor
any Compensation and Benefit Plan, including any Skibo Pension Plan, nor any
trust created thereunder, nor any trustee or administrator thereof has engaged
in a transaction in connection with which Skibo Financial or First Carnegie, any
ERISA Affiliate, and any Compensation and Benefit Plan, including any Skibo
Pension Plan any such trust or any trustee 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 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 Skibo Financial or First Carnegie is a party or a sponsor
have been timely made, and all anticipated contributions and funding obligations
are accrued monthly on Skibo Financial's consolidated financial statements to
the extent required and in accordance with GAAP. Except as disclosed on Skibo
Disclosure Schedule 3.12(d), Skibo Financial and any Skibo Subsidiary has
expensed and accrued as a liability the present value of future benefits under
each applicable Compensation and Benefit Plan in accordance with applicable laws
and GAAP consistently applied. None of Skibo Financial, First Carnegie nor any
ERISA Affiliate (x) has provided, or would reasonably be expected to be required
to provide, security to any Skibo Pension Plan or to any ERISA Affiliate plan
pursuant to Section 401(a)(29) of the IRC, 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 IRC or
pursuant to ERISA.
(e) Except as set forth in Skibo Disclosure Schedule 3.12(e), neither
Skibo Financial nor First Carnegie 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 IRC. There has been no communication to employees by Skibo
Financial or First Carnegie that would reasonably be expected to promise or
guarantee such employees retiree health, life insurance, disability insurance,
or other retiree death benefits.
(f) With respect to each Compensation and Benefit Plan, if applicable,
Skibo Financial has provided or made available to Northwest Bancorp copies of
the: (A) trust
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instruments and insurance contracts; (B) most recent Form 5500 filed with the
Department of Labor; (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 nondiscrimination tests performed under ERISA and the IRC
(including 401(k) and 401(m) tests). Skibo Disclosure Schedule 3.12(f) sets
forth the name of each participant under the First Carnegie ESOP and the number
of shares of Skibo Financial Common Stock allocated to such participant.
(g) Except as set forth in Skibo Disclosure Schedules 3.12(a) and 3.18,
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 increase in benefits
payable under any Compensation and Benefit Plan.
(h) Neither Skibo Financial nor First Carnegie maintains any
compensation plans, programs or arrangements under which any payment is
reasonably likely to become non-deductible, in whole or in part, for tax
reporting purposes as a result of the limitations under Section 162(m) of the
IRC and the regulations issued thereunder.
(i) Except as set forth in Skibo Disclosure Schedule 3.12(i), 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), entitle any current or former
employee, director or independent contractor of Skibo Financial or First
Carnegie to any actual or deemed payment (or benefit) which would constitute a
"parachute payment" (as such term is defined in Section 280G of the IRC).
(j) Except as set forth in Skibo Disclosure Schedule 3.12(a), there are
no stock appreciation or similar rights, earned dividends or dividend
equivalents, or shares of restricted stock, outstanding under any Compensation
and Benefit Plan or otherwise as of the date hereof and none will be granted,
awarded, or credited after the date hereof.
Section 3.13 Brokers, Finders and Financial Advisors
Except the engagement of FinPro in connection with transactions
contemplated by this Agreement, neither Skibo, nor any of its officers,
directors, employees or agents, has engaged or retained any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement, or, except for the commitments disclosed in Skibo Disclosure Schedule
3.13, incurred any liability or commitment for any fees or commissions to any
such person in connection with the transactions contemplated by this Agreement,
which has not been reflected in the Skibo Financials.
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Section 3.14 Environmental Matters
(a) Except as set forth in Skibo Disclosure Schedule 3.14(a):
(i) To the knowledge of Skibo, the Participation Facilities
(as defined below) and the Loan Properties are, and have been, in
substantial compliance with all Environmental Laws;
(ii) There is no suit, claim, action, notice, demand,
executive or administrative order, directive, investigation or
proceeding pending or, to the knowledge of Skibo, threatened before any
court, governmental agency or board or other forum against Skibo (x)
for alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence
of or release (as defined herein) into the environment of any Hazardous
Material (as defined herein), whether or not occurring at or on a site
owned, leased or operated by Skibo or any Participation Facility;
(iii) To the knowledge of Skibo, there is no suit, claim,
action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened before any court,
governmental agency or board or other forum relating to or against any
Loan Property (or Skibo in respect of such Loan Property) (x) relating
to alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence
of or release into the environment of any Hazardous Material;
(iv) The properties currently owned or operated by Skibo
(including, without limitation, soil, groundwater or surface water on
or under the properties, and buildings thereon) are not contaminated
with and do not otherwise contain any Hazardous Material other than as
permitted under any applicable Environmental Law;
(v) Skibo has not received any notice, demand letter,
executive or administrative order, directive or request for information
from any Federal, state, local or foreign governmental entity or any
third party indicating that it may be in violation of, or liable under,
any Environmental Law;
(vi) To the knowledge of Skibo, there are no underground
storage tanks on, in or under any properties owned or operated by Skibo
and no underground storage tanks have been closed or removed from any
properties owned or operated by Skibo; and
(vii) During the period of ownership or operation by Skibo of
any of its respective current properties, or during the period of
participation in the management of any Participation Facility by Skibo,
to the knowledge of Skibo there has been no contamination by or release
of Hazardous Materials in, on, under or affecting such properties.
Prior to the period of ownership or operation by Skibo of any of its
current properties, or prior to the period of participation in the
management of any Participation Facility by Skibo, there was no
contamination by or release of Hazardous Material in, on, under or
affecting such properties to the knowledge of Skibo.
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(b) As used in this section the term "Loan Property" means any property
in which the applicable party (or a Subsidiary of it) holds a security interest.
The term "Participation Facility" means any facility in which the applicable
party (or a Subsidiary of it) participates in the management (including all
property held as trustee or in any other fiduciary capacity) and, where required
by the context, includes the owner or operator of such property.
Section 3.15 Loan Portfolio.
(a) With respect to each loan owned by Skibo in whole or in part (each,
a "Loan"):
(i) the note and the related security documents are each
legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their
terms;
(ii) neither Skibo nor any prior holder of a Loan, has
modified the note or any of the related security documents in any
material respect or satisfied, canceled or subordinated the note or any
of the related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(iii) Skibo is the sole holder of legal and beneficial title
to each Loan (or any applicable participation interest, as
appropriate), except as otherwise referenced on the books and records
of Skibo;
(iv) the note and the related security documents, copies of
which are included in the Loan files, are true and correct copies of
the documents they purport to be and have not been suspended, amended,
modified, canceled or otherwise changed except as otherwise disclosed
by documents in the applicable Loan file;
(v) there is no pending or threatened condemnation proceeding
or similar proceeding affecting the property that serves as security
for a Loan, except as otherwise referenced on the books and records of
Skibo;
(vi) there is no litigation or proceeding pending or
threatened relating to the property that serves as security for a Loan
that would have a Material Adverse Effect upon the related Loan, except
as otherwise disclosed by documents in the applicable Loan file;
(vii) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding
and enforceable, except as otherwise disclosed by documents in the
applicable Loan file; and
(viii) no representation or warranty set forth in this Section
3.15(a) shall be deemed to be breached unless such breach, individually
or in the aggregate, has had or is reasonably likely to have a Material
Adverse Effect on Skibo.
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(b) The allowance for possible losses reflected in the audited
statement of condition of Skibo Financial at March 31, 2003 was, and the
allowance for possible losses shown on the balance sheets in the Securities
Documents of Skibo Financial for periods ending after March 31, 2003 have been
and will be adequate, as of the dates thereof, under GAAP.
(c) Skibo Disclosure Schedule 3.15(c) sets forth by category all loans,
leases, advances, credit enhancements, other extensions of credit, commitments
and interest-bearing assets of Skibo, including the amounts thereof and the name
of the obligor, that have been classified (whether regulatory or internal) as
"Special Mention," "Substandard," "Doubtful," "Loss" or words of similar import
as of March 31, 2003. The real estate owned ("REO") included in any
non-performing assets of Skibo is carried net of reserves at the lower of cost
or fair value, less estimated selling costs, based on current independent
appraisals or evaluations or current management appraisals or evaluations;
provided, however, that "current" shall mean within the past 12 months.
Section 3.16 Securities Documents
Skibo Financial has made available to Northwest copies of its (i)
annual reports on Form 10-KSB for the years ended March 31, 2003 and 2002, (ii)
quarterly reports on Form 10-QSB for the quarters ended December 31, 2002 and
June 30, 2003, and (iii) proxy materials used in connection with its most recent
meeting of stockholders (the availability of the preceding documents will be
assumed if such documents are filed on EDGAR). Such reports and such proxy
materials, at the time filed, did not contain any untrue statements of material
fact or omit to state any material fact necessary in order to make the
statements therein not misleading.
Section 3.17 Related Party Transactions
Except as disclosed in Skibo Disclosure Schedule 3.17, or as described
in the proxy statement of Skibo Financial distributed in connection with the
2002 annual meeting of stockholders (which previously has been provided to
Northwest), Skibo is not a party to any transaction (including any loan or other
credit accommodation) with an Affiliate. Except as disclosed in Skibo Disclosure
Schedule 3.17, all such transactions (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. Except as set
forth in Skibo Disclosure Schedule 3.17, no loan or credit accommodation to an
Affiliate is presently in default or, during the three-year period prior to the
date of this Agreement, has been in default or has been restructured, modified
or extended. Skibo has not been notified that principal and interest with
respect to any such loan or other credit accommodation will not be paid when due
or that the loan grade classification accorded such loan or credit accommodation
is inappropriate.
Section 3.18 Schedule of Termination Benefits
Skibo Disclosure Schedule 3.18 includes a description of all
termination benefits and related payments (including dollar amounts) that would
or will be payable to the individuals
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identified thereon, excluding any Skibo Financial Options granted to such
individuals, under any and all employment agreements, special termination
agreements, change in control 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 Skibo Financial or First Carnegie for the benefit of
officers or directors of Skibo Financial or First Carnegie (the "Benefits
Schedule"), assuming their employment or service is terminated as of September
30, 2003, and the Closing Date occurs prior to such termination, and provided,
however, that the dollar amounts of such benefits and payments need not be
provided for any tax-qualified pension plan, any insured welfare benefit plan,
the Skibo Financial Stock Option Plan, the Skibo Financial Restricted Stock
Plan, the severance provisions of Section 5.11(c) of this Agreement or the
miscellaneous benefits set forth in Skibo Disclosure Schedule 3.12(a). No other
individuals are entitled to benefits under any such plans.
Section 3.19 Deposits
Except as set forth in Skibo Disclosure Schedule 3.19, none of the
deposits of Skibo is a "brokered" deposit as defined in 12 U.S.C. Section
1831f(g).
Section 3.20 Fairness Opinion
Skibo Financial and Skibo MHC have received a written opinion from
FinPro to the effect that, subject to the terms, conditions and qualifications
set forth therein, as of the date hereof, the Merger Consideration to be
received by the stockholders of Skibo Financial pursuant to this Agreement is
fair to such stockholders from a financial point of view, and the Membership
Conversion is equitable to the members of Skibo MHC (the "Fairness Opinion").
Section 3.21 Required Vote of Stockholders
The affirmative vote of (i) two-thirds of all votes entitled to be cast
by all the stockholders of Skibo Financial, including Skibo MHC and (ii) a
majority of votes cast by the stockholders of Skibo Financial other than Skibo
MHC is necessary to approve this Agreement and the transactions contemplated
hereby, in each case at a meeting of the stockholders of Skibo Financial.
Section 3.22 Derivative Transactions
Except as set forth in Skibo Disclosure Schedule 3.22, Skibo has not
entered into any future or option contracts, exchange rate swaps, caps or
floors, or other interest rate or exchange rate risk management instruments or
arrangements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NORTHWEST
Northwest represents and warrants to Skibo 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
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of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article IV), except
as set forth in the Northwest Disclosure Schedules delivered by Northwest on the
date hereof, and except as to any representation or warranty that relates to a
specific date.
Section 4.01 Organization
(a) Northwest MHC is a Federal mutual holding company organized,
validly existing and in good standing under the laws of the United States, and
is duly registered as a savings and loan holding company under the HOLA.
Northwest MHC has full power and authority to carry on its business as now
conducted and is duly licensed or qualified to do business in the states of the
United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification, except
where the failure to be so licensed or qualified would not have a Material
Adverse Effect on Northwest MHC.
(b) Northwest Bancorp is a Federal corporation organized, validly
existing and in good standing under the laws of the United States, and is duly
registered as a savings and loan holding company under the HOLA. Northwest
Bancorp has the full corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on Northwest Bancorp.
(c) Northwest Bank is a savings bank organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. The deposits
of Northwest Bank are insured by the FDIC to the fullest extent permitted by
law, and all premiums and assessments required to be paid in connection
therewith have been paid when due by Northwest Bank. Each Northwest Subsidiary
is identified in exhibits to Northwest Bancorp's Form 10-K for the fiscal year
ended June 30, 2002, filed with the SEC, and is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization.
(d) Northwest Bank is a member in good standing of the FHLB of
Pittsburgh and owns the requisite amount of stock therein.
(e) Prior to the date of this Agreement, Northwest has made available
to Skibo true and correct copies of the charters and bylaws of Northwest MHC and
Northwest Bancorp, and the articles of incorporation and bylaws of Northwest
Bank.
Section 4.02 Authority; No Violation
(a) Northwest has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Northwest and the completion by Northwest of
the transactions contemplated hereby have been duly and validly approved by the
requisite vote of the Boards of Directors of
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the Northwest Parties, and no other corporate proceedings on the part of
Northwest are necessary to complete the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Northwest and,
subject to receipt of the required approvals of Regulatory Authorities described
in Section 4.03 hereof, constitutes the valid and binding obligation of
Northwest, enforceable against Northwest in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally.
(b) Subject to the receipt of approvals from the Regulatory Authorities
referred to in Section 5.03 hereof and the compliance by Skibo and Northwest
with any conditions contained therein,
(A) the execution and delivery of this Agreement by Northwest,
(B) the consummation of the transactions contemplated hereby, and
(C) compliance by Northwest with any of the terms or provisions hereof,
will not (i) conflict with or result in a breach of any provision of the charter
or bylaws of Northwest MHC or Northwest Bancorp, or the articles of
incorporation or bylaws of Northwest Bank or any Northwest Subsidiary; (ii)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Northwest or any Northwest Subsidiary or any
of their respective properties or assets; or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default),
under, result in the termination of, accelerate the performance required by, or
result in a right of termination or acceleration or the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of Northwest under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other investment or obligation to which Northwest is a party, or by which it or
any of its properties or assets may be bound or affected, except in the case of
clauses (i) and (iii) above, for violations which individually or in the
aggregate would not have a Material Adverse Effect on Northwest.
Section 4.03 Consents
Except for consents, waivers, approvals, filings and registrations from
or with the OTS and the SEC, and compliance with any conditions contained
therein, and the approval of this Agreement by the stockholders of Skibo
Financial and, if necessary, the members of Skibo MHC, no consents, waivers or
approvals of, or filings or registrations with, any public body or governmental
authority are necessary, and no consents, waivers or approvals of, or filings or
registrations with, any third parties are necessary in connection with (a) the
execution and delivery of this Agreement by Northwest, and (b) the completion by
Northwest of the transactions contemplated hereby. Northwest has no reason to
believe that (i) any required consents or approvals will not be received or will
be received with conditions, limitations or restrictions unacceptable to it or
which would adversely impact Northwest' ability to complete the transactions
described in this Agreement or that (ii) any public body or authority, the
consent
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or approval of which is not required or any filing which is not required, will
object to the completion of the transactions described in this Agreement.
Section 4.04 Northwest Financial Statements
Northwest Bancorp has previously made available to Skibo the Northwest
Financials. The Northwest Financials (including the related notes where
applicable) fairly present in each case in all material respects (subject in the
case of the unaudited interim statements to normal year-end adjustments), the
consolidated financial condition, results of operations and cash flows of
Northwest Bancorp as of and for the respective periods ending on the dates
thereof and have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved, except as indicated therein, or in the case
of unaudited statements, as permitted by Form 10-Q.
Section 4.05 Material Adverse Effect
Northwest has not suffered any Material Adverse Effect since June 30,
2002.
Section 4.06 Legal Proceedings
Northwest is not a party to any, and there are no pending or, to the
best of Northwest's knowledge, threatened legal, administrative, arbitration or
other proceedings, actions or governmental investigations of any nature (i)
against Northwest, (ii) to which Northwest's assets are or may be subject, (iii)
challenging the validity or propriety of any of the transactions contemplated by
this Agreement, or (iv) which could adversely affect the ability of Northwest to
perform under this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii) which, if
adversely determined, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Northwest.
Section 4.07 Compliance With Applicable Law
(a) Northwest holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its businesses under, and has
complied in all material respects with, applicable laws, statutes, orders, rules
or regulations of any Federal, state or local governmental authority relating to
it, other than where such failure to hold or such noncompliance will neither
result in a limitation in any material respect on the conduct of its businesses
nor otherwise have a Material Adverse Effect on Northwest.
(b) Northwest has not received any notification or communication from
any Regulatory Authority (i) asserting that Northwest is not in compliance with
any of the statutes, regulations or ordinances which such Regulatory Authority
enforces; (ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to Northwest; (iii) requiring or
threatening to require Northwest, or indicating that Northwest may be required,
to enter into a cease and desist order, agreement or memorandum of understanding
or any other agreement restricting or limiting, or purporting to restrict or
limit, in any manner the operations of Northwest; or (iv) directing, restricting
or limiting, or purporting to direct, restrict or limit, in
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any manner the operations of Northwest, including without limitation any
restriction on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Northwest has not consented to or
entered into any currently effective Regulatory Agreement. The most recent
regulatory rating given to Northwest Bank as to compliance with the CRA is
satisfactory or better.
Section 4.08 Northwest Benefit Plans
(a) Northwest has provided Skibo with a complete and accurate list of
all pension, retirement, group insurance, and other employee benefit plans and
arrangements, including, but not limited to, "employee benefit plans," as
defined in Section 3(3) of ERISA, incentive and welfare policies, contracts,
plans and arrangements with respect to any present employees of Northwest
(hereinafter collectively referred to as the "Northwest Employee Plans" and
individually as a "Northwest Employee Plan"). Each of the Northwest Employee
Plans complies in all material respects with all applicable requirements of
ERISA, the IRC and other applicable laws.
(b) No Northwest Employee Plan which is subject to Title IV of ERISA
(each such plan shall be referred to herein as a "Northwest Pension Plan") had
an "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, as of the last day of the end of the most recent plan
year ending prior to the date hereof; the fair market value of the assets of
each Northwest Pension Plan exceeds the present value of the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) under such Northwest
Pension Plan as of the end of the most recent plan year with respect to the
respective Northwest Pension Plan ending prior to the date hereof, calculated on
the basis of the actuarial assumptions used in the most recent actuarial
valuation for such Northwest Pension Plan as of the date hereof; and no notice
of a "reportable event" (as defined in Section 4043 of ERISA) for which the
30-day reporting requirement has not been waived has been required to be filed
for any Northwest Pension Plan within the 12-month period ending on the date
hereof.
(c) Each Northwest Employee Plan that is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the IRC has received a favorable determination
letter from the IRS, and Northwest is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. There is no
pending or, to Northwest's knowledge, threatened litigation, administrative
action or proceeding relating to any Northwest Employee Plan.
Section 4.09 Regulatory Approvals
Northwest is not aware of any reason that it cannot obtain any of the
approvals of Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement, and Northwest has not received any advice or
information from any regulatory authority indicating that such approvals will be
denied or are doubtful or will be unduly delayed.
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Section 4.10 Securities Documents
Northwest Bancorp has made available to Skibo copies of its (i) annual
reports on Form 10-K for the years ended June 30, 2002 and 2001, (ii) quarterly
reports on Form 10-Q for the quarters ended December 31, 2002 and March 31,
2003, and (iii) proxy materials used in connection with its most recent meeting
of stockholders (the availability of the preceding documents will be assumed if
such documents are filed on EDGAR). Such reports and such proxy materials, at
the time filed, did not contain any untrue statements of a material fact or omit
to state any material fact necessary in order to make the statements therein not
misleading.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of the Business of Skibo
(a) From the date of this Agreement to the Closing Date, Skibo will
conduct its business and engage in transactions, including extensions of credit,
only in the ordinary course and consistent with past practice and policies in
existence on the date hereof, except as otherwise required or contemplated by
this Agreement or with the written consent of Northwest Bank. Skibo will use its
reasonable good faith efforts to (i) preserve its business organizations intact,
(ii) maintain good relationships with its employees, and (iii) preserve the
goodwill of its customers and others with whom business relationships exist.
From the date hereof to the Closing Date, except as otherwise consented to or
approved by Northwest in writing (which approval will not be unreasonably
delayed or withheld) or as contemplated or required by this Agreement, Skibo
will not:
(i) amend or change any provision of its certificate of
incorporation, charter, or bylaws;
(ii) change the number of authorized or issued shares of its
capital stock or issue or grant any Right or agreement of any character
relating to its authorized or issued capital stock or any securities
convertible into shares of such stock, or split, combine or reclassify
any shares of capital stock, or declare, set aside or pay any dividend
or other distribution in respect of capital stock or redeem or
otherwise acquire any shares of capital stock, except that (I) Skibo
Financial may pay quarterly cash dividends to stockholders (other than
Skibo MHC) only to the extent that such dividend payments do not exceed
Skibo Financial's net income as recorded in its financial statements
(with net income defined as including all nonrecurring or extraordinary
items such as extraordinary expenses related to this Agreement and the
transactions contemplated hereby) for that quarter, and (II) Skibo
Financial may issue Skibo Financial Common Stock upon the valid
exercise of presently outstanding options to acquire Skibo Financial
Common Stock in accordance with the information set forth in Skibo
Disclosure Schedule 3.02(a) and the Skibo Compensation and Benefit
Plans;
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(iii) except as required by this Agreement, grant or agree to
pay any bonus, severance or termination payment to, enter into or
amend, or take any action (other than executing this Agreement) that
would trigger obligations under any employment agreement, severance
agreement, supplemental executive agreement, or similar agreement or
arrangement with any of its directors, officers or employees, or
increase in any manner the compensation or fringe benefits of any
employee, officer or director, except for salary increases in the
ordinary course of business consistent with past practice or as may be
required pursuant to legally binding commitments existing on the date
hereof set forth in Skibo Financial Schedules 3.08 and 3.12; and
provided further, that bonuses may be paid to employees with respect to
the year ending December 31, 2003 as set forth in Skibo Disclosure
Schedule 5.01(a)(iii) to the extent that the related expense has been
accrued and the bonuses are generally consistent (with respect to
amounts and persons covered) with past practices;
(iv) enter into or, except as may be required by law or by the
terms of this Agreement, modify any pension, retirement, stock option,
stock purchase, stock appreciation right, stock grant, savings, profit
sharing, deferred compensation, supplemental retirement, consulting,
bonus, group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or employees; or make any
contributions to any defined contribution or defined benefit plan not
in the ordinary course of business consistent with past practice other
than contributions necessary to terminate and pay out benefits of the
First Carnegie Defined Benefit Pension Plan (the "Defined Benefit
Plan") and the First Carnegie Deposit Supplemental Executive Retirement
Plan (the "SERP"); or materially amend any Skibo Compensation and
Benefit Plan other than amendments that are required by law to be made
prior to the Merger Effective Date, or amendments required by the terms
of this Agreement;
(v) except as otherwise provided in Section 5.06 of this
Agreement, merge or consolidate Skibo with any other corporation; sell
or lease all or any substantial portion of the assets or business of
Skibo; 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 Skibo and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit
the revocation or surrender by Skibo 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 Skibo
or sell or otherwise dispose of any asset of Skibo other than in the
ordinary course of business consistent with past practice; subject any
asset of Skibo to any lien, pledge, security interest or other
encumbrance (other than in connection with deposits, repurchase
agreements, bankers acceptances, FHLB of Pittsburgh advances, "treasury
tax and loan" accounts established
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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 Skibo set forth in Article III of
this Agreement becoming untrue as of any date after the date hereof
(except as to any representation or warranty which specifically relates
to an earlier date) or in any of the conditions set forth in Article VI
hereof not being satisfied, except in each case as may be required by
applicable law;
(viii) change any method, practice or principle of accounting,
except as may be required from time to time by GAAP (without regard to
any optional early adoption date) or any Regulatory Authority
responsible for regulating Skibo;
(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 Skibo is a party, other than in the
ordinary course of business, consistent with past practice;
(x) purchase any security for its investment portfolio not
rated "A" or higher by either Standard & Poor's Corporation or Moody's
Investor Services, Inc, or with a remaining term to maturity of more
than five (5) years;
(xi) make any new loan or other credit facility commitment
(including without limitation, lines of credit and letters of credit)
to any borrower or group of affiliated borrowers in excess of $100,000
in the aggregate, or increase, compromise, extend, renew or modify any
existing loan or commitment outstanding in excess of $100,000, except
for loans secured by one- to four- family, residential real property in
an amount not exceeding $300,000 (on the basis of and consistent with
existing lending policies);
(xii) enter into, renew, extend or modify any other
transaction with any Affiliate;
(xiii) enter into any futures contract, option, interest rate
caps, interest rate floors, interest rate exchange agreement or other
agreement or, except in the ordinary course of business and consistent
with past practice, take any other action for purposes of hedging the
exposure of its interest-earning assets and interest-bearing
liabilities to changes in market rates of interest;
(xiv) except for the execution of, and as otherwise provided
in or contemplated by, this Agreement, take any action that would give
rise to a right of payment to any individual under any employment
agreement, or take any action that would give rise to a right of
payment to any individual under any Skibo Compensation and Benefit
Plan;
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(xv) make any change in policies with regard to the extension
of credit, the establishment of reserves with respect to the possible
loss thereon or the charge off of losses incurred thereon, investment,
asset/liability management or other material banking policies in any
material respect except as may be required by changes in applicable law
or regulations or in GAAP or by applicable regulatory authorities;
(xvi) make any capital expenditures in excess of $25,000
individually or $100,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(xvii) purchase or otherwise acquire, or sell or otherwise
dispose of, any assets or incur any liabilities other than in the
ordinary course of business consistent with past practices and
policies;
(xviii) incur any non-deposit liability in excess of $250,000
other than in the ordinary course of business consistent with past
practice; or
(xix) agree to do any of the foregoing.
(b) For purposes of this Section 5.01, unless provided for in a
business plan, budget or similar document delivered to Northwest prior to the
date of this Agreement, it shall not be considered in the ordinary course of
business for Skibo to do any of the following: (i) make any sale, assignment,
transfer, pledge, hypothecation or other disposition of any assets having a book
or market value, whichever is greater, in the aggregate in excess of $100,000,
other than pledges of assets to secure government deposits, to exercise trust
powers, sales of assets received in satisfaction of debts previously contracted
in the normal course of business, issuance of loans, sales of previously
purchased government guaranteed loans, or transactions in the investment
securities portfolio by Skibo or repurchase agreements made, in each case, in
the ordinary course of business; or (ii) undertake or enter any lease, contract
or other commitment for its account, other than in the normal course of
providing credit to customers as part of its banking business, involving a
payment by Skibo of more than $50,000 annually, or containing a material
financial commitment and extending beyond 12 months from the date hereof.
Section 5.02 Access; Confidentiality
(a) Skibo shall permit Northwest and its representatives reasonable
access to its properties and make available to them all books, papers and
records relating to the assets, properties, operations, obligations and
liabilities of Skibo, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of boards
of directors (and any committees thereof) (other than minutes of any
confidential discussion of this Agreement and the transactions contemplated
hereby), and stockholders, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, plans affecting employees, and any other business activities
or prospects in which Northwest may have a reasonable interest (provided that
Skibo shall not be required to provide access to any information that would
violate its attorney-client
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privilege or any employee or customer privacy policies, laws or regulations).
Skibo shall make its respective officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with Northwest and its representatives. First Carnegie shall provide
in a timely manner to Northwest Bank's officer in charge of retail banking
copies of current rate sheets for all deposit and loan products. Skibo shall
permit Northwest, at its expense, to cause a "phase I environmental audit" and a
"phase II environmental audit" to be performed at any physical location owned or
occupied by Skibo, provided that such audit is contracted for within forty-five
(45) days of the date of this Agreement and commenced as soon as practicable
thereafter. The Northwest Parties agree to abide and be bound by the
confidentiality letter between FinPro (in FinPro's capacity as an agent for
Skibo) and Northwest Bancorp dated and acknowledged on January 17, 2003, (the
"Confidentiality Letter") as if each such party had executed such
Confidentiality Letter originally and the Northwest Parties will hold all
information delivered pursuant to this Section 5.02 in confidence to the extent
required by, and in accordance with, the provisions of the Confidentiality
Letter.
(b) Northwest agrees to conduct such investigations and discussions
hereunder in a manner so as not to interfere unreasonably with normal operations
and customer and employee relationships of the other party.
(c) In addition to the access permitted by subparagraph (a) above, from
the date of this Agreement through the Closing Date, Skibo shall permit
employees of Northwest Bank reasonable access to information relating to problem
loans, loan restructurings and loan work-outs of First Carnegie.
Section 5.03 Regulatory Matters and Consents
(a) Northwest will, in consultation with Skibo, prepare all
Applications (other than the Stockholder Proxy Statement and, if necessary, the
Member Proxy Statement) and make all filings for, and use its best efforts to
obtain as promptly as practicable after the date hereof, all necessary permits,
consents, approvals, waivers and authorizations of all Regulatory Authorities or
other Persons necessary or advisable to consummate the transactions contemplated
by this Agreement. Northwest shall file the Applications within forty-five (45)
days of the date of this Agreement, or as soon as practicable thereafter.
(b) Skibo will furnish Northwest with all information concerning Skibo
as may be necessary or advisable in connection with any Application or filing
made by or on behalf of Northwest to any Regulatory Authority in connection with
the transactions contemplated by this Agreement.
(c) Northwest and Skibo will promptly furnish the other with copies of
all material written communications to, or received by them from any Regulatory
Authority regarding the transactions contemplated hereby, except for information
filed by either party that is designated confidential.
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(d) Northwest will use its best efforts to obtain all necessary
regulatory approvals to effectuate the transactions contemplated by this
Agreement and related exhibits and appendices.
(e) Skibo will use its best efforts to cooperate with Northwest to
obtain all necessary regulatory approvals to effectuate the transactions
contemplated by this Agreement and related exhibits and appendices.
(f) The parties agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities. Northwest will furnish Skibo
Financial and its counsel with copies of all Applications prior to filing with
any Regulatory Authority and provide Skibo Financial a reasonable opportunity to
provide changes to such Applications, and copies of all Applications filed by
Northwest.
(g) Skibo and Northwest will cooperate with each other in the foregoing
matters and will furnish the responsible party with all information concerning
it and its subsidiaries as may be necessary or advisable in connection with any
Application or filing made by or on behalf of Northwest or Skibo to any
Regulatory Authority in connection with the transactions contemplated by this
Agreement, and such information will be accurate and complete in all material
respects. In connection therewith, each party will provide certificates and
other documents reasonably requested by the other.
(h) If any (i) Regulatory Authority objects to a term or condition set
forth in this Agreement, and (ii) that term or condition is modified to the
satisfaction of the Regulatory Authority or is eliminated in order to satisfy
the Regulatory Authority, and (iii) such modification or elimination would cause
a reduction in benefits to the party for whom the term or condition was meant to
benefit, then the parties shall use their best efforts to enter into an
alternative arrangement so that such benefits are not reduced, provided such
alternative arrangement is permissible under applicable law and is not
disapproved by any Regulatory Authority and provided further that such
alternative arrangement shall not be more costly than the original benefit that
has been or would be reduced as a result of an objection by a Regulatory
Authority.
Section 5.04 Taking of Necessary Action
(a) Subject to the terms and conditions of this Agreement, Northwest
and Skibo shall each use its reasonable best efforts in good faith, and each of
them shall cause its Subsidiaries to use their reasonable best efforts in good
faith, to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws so as to
permit consummation of the Merger and the other transactions contemplated hereby
as soon as practicable after the date hereof, and otherwise to enable
consummation of such transactions, including the satisfaction of the conditions
set forth in Article VI hereof, and shall cooperate fully with the other parties
hereto to that end. 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 and the other transactions contemplated
hereby pursuant to this
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Agreement; provided that nothing herein contained shall preclude a party to this
Agreement from exercising its rights under this Agreement.
(b) Skibo Financial shall prepare, subject to the review of Northwest
with respect to matters relating to Northwest and the transactions contemplated
by this Agreement, the Stockholder Proxy Statement, which shall be filed by
Skibo Financial with the SEC and mailed to the stockholders of Skibo Financial
in connection with the meeting of its stockholders and transactions contemplated
hereby, and which shall conform to all applicable legal requirements. Should it
be required by Regulatory Authorities, Skibo MHC shall prepare, subject to the
review and consent of Northwest with respect to matters relating to Northwest
and the transactions contemplated by this Agreement, the Member Proxy Statement,
which shall be filed by Skibo MHC with the Regulatory Authorities and mailed to
members of Skibo MHC in connection with any meeting of depositors and the
transactions contemplated hereby. The parties shall cooperate with each other
with respect to the preparation of the Stockholder Proxy Statement and any
Member Proxy Statement. Skibo Financial and Skibo MHC shall, as promptly as
practicable following the preparation thereof, file any proxy statement with the
Regulatory Authorities, and use all reasonable efforts to have the Stockholder
Proxy Statement mailed to stockholders, and if necessary the Member Proxy
Statement mailed to members, as promptly as practicable after such filing,
provided that Skibo Financial and Skibo MHC shall have received an updated
Fairness Opinion as of a date no more than three days prior to the date of the
Stockholder Proxy Statement (the "Updated Fairness Opinion"). Skibo Financial
and First Carnegie will promptly advise Northwest of the time when the
Stockholder Proxy Statement and any Member Proxy Statement has been filed and
mailed, and of any comments from any Regulatory Authority and any request by any
Regulatory Authority for additional information.
(c) Northwest agrees that the information to be supplied by Northwest
for inclusion in the Stockholder Proxy Statement and any Member Proxy Statement
will not, at the time they are mailed, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or to be supplied,
by Northwest for inclusion in the Applications will be, at the time such
documents are filed with any Regulatory Authority, accurate in all material
respects.
(d) Skibo agrees that, except for any information provided by Northwest
concerning Northwest for inclusion therein, the Stockholder Proxy Statement and
any Member Proxy Statement will not, at the time it or they are mailed, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein not misleading. The
information supplied, or to be supplied, by Skibo for inclusion in the
Applications will be, at the time such documents are filed with any Regulatory
Authority, accurate in all material aspects.
Section 5.05 Certain Agreements
(a) Northwest shall maintain in effect for three years from the Merger
Effective Date, if available, the current directors' and officers' liability
insurance policy maintained by Skibo Financial (provided that Northwest may
substitute therefor policies of substantially the same
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coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring at or prior to the Closing Date;
provided however that in no event shall Northwest be required to expend annually
pursuant to this section more than the amount equal to 125% of the current
annual amount expended by Skibo to maintain or procure insurance coverage
pursuant hereto. In connection with the foregoing, Skibo Financial agrees to
provide such insurer or substitute insurer with such representations as such
insurer may request with respect to the reporting of any prior claims.
(b) For a period of six years from the Merger Effective Date, Northwest
agrees to indemnify, defend and hold harmless each present and former director
and officer of Skibo determined as of the Closing Date (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
reasonable attorneys' fees and expenses), liabilities, judgments or amounts paid
in settlement (with the approval of Northwest, which approval shall not be
unreasonably withheld) or in connection with any claim, action, suit, proceeding
or investigation arising out of matters existing or occurring at or prior to the
Merger Effective Date (a "Claim") in which an Indemnified Party is, or is
threatened to be made, a party or a witness based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director or officer of Skibo, 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 Skibo are entitled under Federal law, or Skibo'
charters and bylaws, or other applicable law as in effect on the date hereof
(and Northwest shall pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the extent permissible to
a Federal corporation or savings bank, or Skibo' charters and bylaws; provided,
that the person to whom expenses are advanced provides an undertaking to repay
such expenses if it is ultimately determined that such person is not entitled to
indemnification). All rights to indemnification in respect of a Claim asserted
or made within the period described in the preceding sentence shall continue
until the final disposition of such Claim.
(c) Any Indemnified Party wishing to claim indemnification under
Section 5.05(b), upon learning of any Claim, shall promptly notify Northwest,
but the failure to so notify shall not relieve Northwest of any liability it may
have to such Indemnified Party except to the extent that such failure materially
prejudices Northwest. In the event of any Claim, (i) Northwest shall have the
right to assume the defense thereof (with counsel reasonably satisfactory to the
Indemnified Party) and shall not be liable to the Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof, except that, if
Northwest elects not to assume such defense or counsel for the Indemnified Party
advises that there are issues which raise conflicts of interest between
Northwest and the Indemnified Party, the Indemnified Party may retain counsel
satisfactory to them, and Northwest shall pay all reasonable fees and expenses
of such counsel for the Indemnified Party promptly as statements therefor are
received, provided further that Northwest shall in all cases be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (ii) the Indemnified Parties will cooperate in the defense
of any such Claim and (iii) Northwest shall not be liable for any settlement
effected without its prior written consent (which consent shall not unreasonably
be withheld).
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(d) In the event Northwest or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not continue or
survive such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Northwest assume the obligations set forth in this
Section 5.05.
(e) The provisions of this Section 5.05 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
Section 5.06 No Other Bids and Related Matters
(a) From and after the date hereof until the termination of this
Agreement, neither Skibo nor any of its officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by Skibo), 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 Skibo shall notify Northwest
orally (within two business days) and in writing (as promptly as practicable) of
all of the relevant details relating to all inquiries and proposals which it or
any such officer, director, employee, investment banker, financial advisor,
attorney, accountant or other representative may receive relating to any of such
matters; provided, however, that nothing contained in this Section 5.06 shall
prohibit the Board of Directors from:
(i) furnishing information to, or entering into discussions or
negotiations with any person or entity that makes an unsolicited
written, bona fide proposal, to acquire Skibo Financial and/or First
Carnegie 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 Skibo Financial
receives a written opinion from its independent financial
advisor that such proposal is superior to the Merger from a
financial point of view to Skibo Financial stockholders;
(B) the Board of Directors of Skibo Financial, after
consultation with and receipt of the advice of independent
legal counsel (including whether the proposed acquiror may
legally acquire Skibo and the prospects of regulatory approval
under regulations and policies of the OTS), determines in good
faith that such action is necessary for the Board of Directors
of Skibo Financial to comply with its fiduciary duties to
stockholders under applicable law (such proposal that
satisfies (A) and (B) being referred to herein as a "Superior
Proposal");
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(C) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or
entity, Skibo Financial provides reasonable notice to
Northwest to the effect that it is furnishing information to,
or entering into discussions or negotiations with, such person
or entity and Skibo Financial receives from such person or
entity an executed confidentiality agreement; and
(D) the Skibo Financial special meeting of
stockholders convened to approve this Agreement has not
occurred;
(ii) complying with Rule 14e-2 promulgated under the Exchange
Act with regard to a tender or exchange offer; or
(iii) prior to the Skibo Financial meeting of stockholders
convened to approve this Agreement, failing to make or withdrawing or
modifying its recommendation to stockholders, if the Board of Directors
of Skibo Financial, after consultation with and based upon the advice
of independent legal counsel, determined in good faith that such action
is necessary for such Board of Directors to comply with its fiduciary
duties to stockholders under applicable law.
(b) For purposes of this Agreement, "Acquisition Proposal" shall mean
any of the following (other than the transactions contemplated hereunder)
involving Skibo: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 20% or more of the assets of
Skibo Financial or First Carnegie, taken as a whole, in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for 20% or more
of the outstanding shares of capital stock of Skibo Financial or the filing of a
registration statement under the Securities Laws in connection therewith; or
(iv) any bona fide public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
Section 5.07 Duty to Advise; Duty to Update the Skibo Financial
Schedules
Skibo shall promptly advise Northwest of any change or event having a
Material Adverse Effect on Skibo or which Skibo 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. Skibo shall update
the Skibo Financial 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 Skibo Financial Schedules. The
delivery of such updated Skibo Disclosure Schedule shall not relieve Skibo 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.
Section 5.08 Conduct of Northwest's Business
(a) From the date of this Agreement to the Closing Date, Northwest will
use its best efforts to preserve its business organizations intact, maintain
good relationships with employees,
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and preserve for itself the goodwill of customers of Northwest. From the date of
this Agreement to the Closing Date, Northwest will not
(i) amend its charter or bylaws in any manner inconsistent
with the prompt and timely consummation of the transactions
contemplated by this Agreement;
(ii) take any action that would result in any of the
representations and warranties of Northwest set forth in Article IV of
this Agreement becoming untrue as of any date after the date hereof or
in any of the conditions set forth in Article VI hereof not being
satisfied, except in each case as may be required by applicable law;
(iii) take any action that would or is reasonably likely to
adversely effect or materially delay the receipt of the necessary
approvals from the Regulatory Authorities;
(iv) take action that would or is reasonably likely to
materially and adversely affect Northwest's ability to perform its
covenants and agreements under this Agreement;
(v) take any action that would result in any of the conditions
to the transactions contemplated by this Agreement not being satisfied;
or
(vi) agree to do any of the foregoing.
Section 5.09 Board and Committee Minutes
Each of the Skibo Parties shall provide to Northwest, within
twenty-five (25) days after any meeting of their respective Board of Directors,
or any committee thereof, or any senior management committee, a copy of the
minutes of such meeting, except that with respect to any meeting held within
twenty-five (25) days of the Closing Date, such minutes shall be provided to
each party prior to the Closing Date. Skibo may exclude from the minutes matters
(i) relating to merger negotiations, (ii) associated with Section 5.06, or (iii)
relating to discussions of possible breaches of this Agreement by Northwest.
Section 5.10 Undertakings by the Parties
(a) From and after the date of this Agreement:
(i) Voting by Directors and Executive Officers. Concurrently
with the execution of this Agreement, or within five (5) business days
thereof, all Directors and the Executive Officers of Skibo set forth in
Skibo Disclosure Schedule 5.10(a)(i), shall have entered into the
agreement set forth as Exhibit C to this Agreement;
(ii) Proxy Solicitor. If requested to do so by Northwest,
Skibo Financial and/or Skibo MHC shall retain a proxy solicitor in
connection with the solicitation of stockholders and if necessary Skibo
MHC member approval of this Agreement and the transaction contemplated
hereby;
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(iii) Outside Service Bureau Contracts. If requested to do so
by Northwest, First Carnegie shall use its best efforts to obtain an
extension of any contract with an outside service bureau or other
vendor of services to First Carnegie, on terms and conditions mutually
acceptable to First Carnegie and Northwest Bank;
(iv) Board Meetings. Each of the Skibo Parties shall permit a
representative of Northwest to attend meetings of their Boards of
Directors or the Executive Committees thereof (provided that they shall
not be required to permit the Northwest representative to remain
present during any confidential discussion of the Agreement and the
transactions contemplated thereby or any matter associated with Section
5.06);
(v) List of Nonperforming Assets. First Carnegie shall provide
Northwest Bank, within ten (10) days of the end of each calendar month,
a written list of nonperforming assets (the term "nonperforming
assets," for purposes of this subsection, means (i) loans that are
"troubled debt restructuring" as defined in Statement of Financial
Accounting Standards No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring," (ii) loans on nonaccrual, (iii) real
estate owned, (iv) all loans ninety (90) days or more past due as of
the end of such month and (v) and impaired loans); and
(vi) Reserves and Merger-Related Costs. On or before the
Merger Effective Date, and at the request of Northwest, Skibo Financial
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 Skibo Financial to
those of Northwest Bancorp (as such practices and methods are to be
applied to Northwest Bancorp from and after the Closing Date) and
Northwest Bancorp plans with respect to the conduct of the business of
Skibo Financial following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by Skibo Financial,
provided, however, that Skibo Financial shall not be required to take
such action unless Northwest Bancorp agrees in writing that all
conditions to closing set forth in Section 6.02 have been satisfied or
waived (except for the expiration of any applicable waiting periods);
prior to the delivery by Northwest Bancorp of the writing referred to
in the preceding clause, Skibo Financial shall provide Northwest
Bancorp a written statement, certified without personal liability by
the chief executive officer of Skibo Financial and dated the date of
such writing, that the representations made in Section 3.15 hereof are
true as of such date or, alternatively, setting forth in detail the
circumstances that prevent such representation from being true as of
such date; and no accrual or reserve made by Skibo Financial or any
Skibo Subsidiary pursuant to this subsection, or any litigation or
regulatory proceeding arising out of any such accrual or reserve, shall
constitute or be deemed to be a breach or violation of any
representation, warranty, covenant, condition or other provision of
this Agreement or constitute a termination event within the meaning of
Section 7.01(b) hereof. No action shall be required to be taken by
Skibo Financial pursuant to this Section 5.10(vi) if, in the opinion of
the independent auditor of Skibo Financial, such action would
contravene GAAP.
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(vii) Stockholders and Depositors Meetings.
(A) Skibo Financial shall use its best efforts to
file with the SEC, within sixty (60) days of the date of this
Agreement, preliminary proxy materials relating to this
Agreement, and shall mail the Stockholder Proxy Statement
within thirty (30) days thereafter, or such longer period as
may be necessitated by SEC review and comment with respect to
the Stockholder Proxy Statement, and shall submit this
Agreement to its stockholders for approval at a meeting to be
held within thirty-five (35) days after the date of the
mailing of the Stockholder Proxy Statement. Subject to the
receipt of the Updated Fairness Opinion, the Board of
Directors shall recommend approval of this Agreement to the
Skibo Financial stockholders. The Board of Directors of Skibo
Financial may fail to make such a recommendation, or withdraw,
modify or change any such recommendation only in connection
with a Superior Proposal, as set forth in Section 5.06 of this
Agreement, and only if such Board of Directors, after having
consulted with and considered the advice of outside counsel to
such Board, has determined that the making of such
recommendation, or the failure so to withdraw, modify or
change its recommendation, would constitute a breach of the
fiduciary duties of such Board.
(B) If required by Regulatory Authorities, as soon as
practicable Skibo MHC shall submit this Agreement to Skibo MHC
members for approval, and the Board of Directors of Skibo MHC
shall, subject to its fiduciary duties, recommend approval of
this Agreement to the members of Skibo MHC. Skibo MHC shall
take all steps necessary in order to hold a special meeting of
members for the purpose of approving this Agreement as soon as
practicable. At the meeting of stockholders of Skibo Financial
held to approve this Agreement, the Board of Directors of
Skibo MHC shall vote the shares of Skibo Financial held by
Skibo MHC as determined by the vote of the Skibo MHC members,
and if no such members' vote is taken, the Board of Directors
of Skibo MHC shall vote the shares of Skibo Financial held by
Skibo MHC in favor of this Agreement, subject to its fiduciary
duties.
(b) From and after the date of this Agreement, Northwest and Skibo
shall each:
(i) Filings and Approvals. Cooperate with the other in the
preparation and filing, as soon as practicable, of (A) the
Applications, (B) the Stockholder Proxy Statement and any Member Proxy
Statement, (C) all other documents necessary to obtain any other
approvals and consents required to effect the completion of the Merger,
and the transactions contemplated by this Agreement, and (D) all other
documents contemplated by this Agreement;
(ii) Public Announcements. Cooperate and cause their
respective officers, directors, employees and agents to cooperate in
good faith, consistent with their respective legal obligations, in the
preparation and distribution of, and agree upon the
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form and substance of, any press release related to this Agreement and
the transactions contemplated hereby, and any other public disclosures
related thereto, including without limitation communications to
stockholders, internal announcements and customer disclosures, but
nothing contained herein shall prohibit either party from making any
disclosure which its counsel deems necessary, provided that the
disclosing party notifies the other party reasonably in advance of the
timing and contents of such disclosure;
(iii) Maintenance of Insurance. Maintain insurance in such
amounts as are reasonable to cover such risks as are customary in
relation to the character and location of its properties and the nature
of its business;
(iv) Maintenance of Books and Records. Maintain books of
account and records in accordance with GAAP applied on a basis
consistent with those principles used in preparing the financial
statements heretofore delivered;
(v) Delivery of Securities Documents. Deliver to the other
copies of all Securities Documents simultaneously with the filing
thereof; and
(vi) Taxes. File all Federal, state, and local tax returns
required to be filed by them on or before the date such returns are due
(including any extensions) and pay all taxes shown to be due on such
returns on or before the date such payment is due.
Section 5.11 Employee and Termination Benefits; Directors and
Management
(a) Employee Benefits. Except as otherwise provided in this Section
5.11, as of or after the Merger Effective Date, and at Northwest's election and
subject to the requirements of the IRC and ERISA, the Skibo Compensation and
Benefit Plans may continue to be maintained separately, consolidated, terminated
or frozen, provided, however, that the Defined Benefit Plan and the SERP will
terminate at the Merger Effective Date and benefits shall be paid to
participants in the SERP on the Merger Effective Date and under the Defined
Benefit Plan in accordance with the plan documents and the requirements of the
IRC and the PBGC. In connection with the termination of the defined benefit
plan, Skibo prior to the Merger Effective Date, and Northwest on and after the
Merger Effective Date, shall file a determination letter request for a ruling on
the tax-qualified status of the defined benefit plan under IRC Section 401(a) on
termination and will make all applicable filings with the PBGC. In the event of
a consolidation of any or all of such plans or in the event of termination (or
freeze) of any Skibo Compensation and Benefit Plan, Skibo employees who are
participants in the Skibo Compensation and Benefit Plans and who continue
employment with Northwest ("Continuing Employees") shall receive credit for
service with First Carnegie (for purposes of eligibility and vesting
determination but not for benefit accrual purposes) under any existing Northwest
benefit plan other than the Northwest ESOP, the post-retirement provisions of
the Northwest health care plan (which post-retirement provisions have been
frozen) and the Holiday Bonus Plan, and any future Northwest benefit plan in
which such employees or their dependents would be eligible to enroll to the
extent that prior service is also not recognized for other Northwest employees,
subject to any pre-existing conditions or other exclusions to which such persons
were subject
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under the Skibo Compensation and Benefit Plans. Notwithstanding anything to the
contrary herein, Continuing Employees shall be eligible to participate in the
Northwest ESOP and the Holiday Bonus Plan at the same time and in the same
manner as new employees of Northwest.
(b) In the event of any termination or consolidation of any Skibo
health, disability or life insurance plan with any Northwest health, disability
or life insurance plan, Northwest shall make available to Continuing Employees
and their dependents employer-provided health, disability or life insurance
coverage on the same basis as it provides such coverage to Northwest employees.
Unless a Continuing Employee affirmatively terminates coverage under a Skibo
health, disability or life insurance plan prior to the time that such Continuing
Employee becomes eligible to participate in the Northwest health, disability or
life insurance plan, no coverage of any of the Continuing Employees or their
dependents shall terminate under any of the Skibo health, disability or life
insurance plans prior to the time such Continuing Employees and their dependents
become eligible to participate in the health, disability or life insurance
plans, programs and benefits common to all employees of Northwest and their
dependents. A Continuing Employee's prior service with Skibo or a Skibo
Subsidiary shall also apply for purposes of satisfying any waiting periods,
actively-at-work requirements, and evidence of insurability requirements.
Continuing Employees who become covered under a Northwest health plan shall be
required to satisfy the deductible limitations of the Northwest health plan for
the plan year in which coverage commences, without offset for deductibles
satisfied under the Skibo health plan, except to the extent, Skibo and/or the
Continuing Employee shall provide substantiation in a form satisfactory to
Northwest, of the dollar amount of such deductibles that have been satisfied for
such Continuing Employees. In the event of any termination of any Skibo health
plan, or consolidation of any Skibo health plan with any health plan of
Northwest Bancorp and/or Northwest Bancorp Subsidiaries, the Health Insurance
Portability Accountability Act of 1996 ("HIPAA") will govern any coverage
limitations due to pre-existing conditions. In the event of a termination of or
consolidation of any Skibo health plan with any Northwest health plan,
Continuing Employees will be required to seek reimbursement of claims arising
prior to the Merger Effective Date from the Skibo health plan and shall not be
entitled to seek reimbursement of claims arising prior to the Merger Effective
Date from the Northwest health plan.
(c) Nothing contained in this Agreement shall be construed to grant a
contract of employment to any employee of Skibo who becomes an employee of
Northwest. Any Skibo employee whose employment is terminated involuntarily
(other than for cause) within twelve months of the Merger Effective Date shall
receive a lump sum severance payment from First Carnegie or Northwest equal to
two weeks pay at the rate then in effect, for each full year of employment with
First Carnegie, with a minimum of four weeks and a maximum of twenty-six weeks.
Such Skibo employees will have the right to continued health coverage under
group health plans of Northwest in accordance with IRC Section 4980B(f) and
ERISA Sections 601-609.
(d) All Directors of First Carnegie as of the Merger Effective Date
shall continue as directors of First Carnegie following the Merger Effective
Date ("Continuing Directors") until June 30, 2005 at the current rate of
compensation. As of July 1, 2005, Northwest shall establish
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a First Carnegie Advisory Board of Directors of the ("Skibo Advisory Board"), to
be appointed annually, comprising the Continuing Directors and any other person
designated by Northwest Bancorp. Subject to the exercise of fiduciary duties of
the Northwest Board of Directors, such Skibo Advisory Board will be maintained
until December 31, 2006. The Advisory Board shall meet no less than quarterly
and each Advisory Board member who was a Continuing Director ("Skibo Advisory
Directors") shall receive a fee as an advisory director of $1,800 per month for
such service. Continuing Directors who are also employees of First Carnegie
shall be compensated as employees and shall not receive separate compensation
for service as a director of First Carnegie or a member of the Advisory Board
during such time as they continue to be compensated as an employee of First
Carnegie or Northwest.
(e) At or prior to the Merger Effective Date, the First Carnegie
Deposit Employee Stock Ownership Plan (the "ESOP") shall be terminated on such
terms and conditions as contained in the ESOP (as of the date of this
Agreement). All ESOP Participants shall fully vest and have a nonforfeitable
interest in their accounts under the ESOP determined in accordance with the
terms of the plan as of the Merger Effective Date. As soon as practicable after
the receipt of a favorable determination letter from the Internal Revenue
Service ("IRS") as to the tax qualified status of the ESOP upon its termination
under Section 401(a) of the IRC (the "Final Determination Letter"),
distributions of the benefits under the ESOP shall be made to the ESOP
Participants. From and after the date of this Agreement, in anticipation of such
termination and distribution, Skibo and its representatives before the Merger
Effective Date, and Northwest and its representatives after the Merger Effective
Date, shall use their best efforts to apply for and to obtain such favorable
Final Determination Letter from the IRS. If Skibo and its representatives,
before the Merger Effective Date, and Northwest and its representatives after
the Merger Effective Date, reasonably determine that the ESOP cannot obtain a
favorable Final Determination Letter, or that the amounts held therein cannot be
so applied, allocated or distributed without causing the ESOP to lose its
tax-qualified status, Skibo before the Merger Effective Date, and Northwest
after the Merger Effective Date, shall take such action as they may reasonably
determine with respect to the distribution of benefits to the ESOP Participants,
provided that the assets of the ESOP shall be held or paid only for the benefit
of the ESOP Participants, as determined on the Merger Effective Date, and
provided further that in no event shall any portion of the amounts held in the
ESOP revert, directly or indirectly, to Skibo or to Northwest or any affiliate
thereof. At the time distribution of benefits is made under the ESOP on or after
the Merger Effective Date, at the election of the ESOP Participant, the amount
thereof that constitutes an "eligible rollover distribution" (as defined in
Section 402(f)(2)(A) of the IRC) may be rolled over by such ESOP Participant to
any qualified Northwest benefit plan that permits rollover distributions or to
any eligible individual retirement account.
(f) Northwest and First Carnegie shall honor all obligations under the
Directors Retirement Plan to Director Craig's beneficiary. Such beneficiary
shall receive an annual benefit equal to the amount, and at the time, set forth
in Skibo Disclosure Schedule 5.11(f). Such annual benefit shall be paid pursuant
to the applicable provisions of the Directors Retirement Plan in effect on the
Merger Effective Date. No other directors shall receive any benefit under the
Directors Retirement Plan.
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(g) Except as otherwise provided in this Agreement, Northwest and Skibo
shall honor all obligations under the SERP to the executive participants therein
as set forth in Skibo Disclosure Schedule 3.08(a). The SERP shall be terminated
and the payments required thereunder, as set forth in Skibo Disclosure Schedule
5.11(g), shall be made as of the Merger Effective Date; provided, however, that
neither Northwest nor Skibo shall be obligated to make any payment to any
recipient that will exceed the amount that is tax deductible to Northwest or
Skibo under section 280G or section 162(m) of the IRC; and provided, further,
that not later than the tenth day prior to Skibo's making any payment under the
SERP that is or may be characterized as contingent on a change in ownership or
control of the corporation (under section 280G of the IRC), Skibo shall furnish
Northwest with a calculation by Skibo or Skibo's accountant, together with
related work papers, demonstrating that such payment will not result in a
payment to the recipient, when aggregated with other payments that are or may be
characterized as contingent on a change in ownership or control, of any amount
that is not tax deductible to Skibo or Northwest, if applicable, under section
280G or section 162(m) of the IRC. In the event it is determined that a payment
will or may fail to be tax deductible under Section 162(m) of the Code or cause
an excess parachute payment under Section 280G of the Code, and delaying such
payment until termination of employment will avoid the loss of tax deduction or
characterization as an excess parachute payment, then such payment shall be
delayed until termination of employment of the executive and will be paid within
thirty (30) days thereafter. In connection with the termination and distribution
of the SERP and contemporaneously therewith, First Carnegie and each of Walter
G. Kelly and Carol A. Gilbert shall terminate the endorsement split dollar
arrangements on each of the four life insurance policies disclosed in Skibo
Disclosure Schedule 3.08 that cover Mr. Kelly and Ms. Gilbert.
(h) Until the Merger Effective Date, Skibo shall be liable for all
obligations for continued health coverage pursuant to Section 4980B of the IRC
and Sections 601 through 609 of ERISA ("COBRA") with respect to each Skibo
qualifying beneficiary (as defined in COBRA) who incurs a qualifying event (as
defined in COBRA) before the Merger Effective Date. Northwest shall be liable
for (i) all obligations for continued health coverage under COBRA with respect
to each Skibo qualified beneficiary (as defined in COBRA) who incurs a
qualifying event (as defined in COBRA) from and after the Merger Effective Date,
and (ii) for continued health coverage under COBRA from and after the Merger
Effective Date for each First Carnegie qualified beneficiary who incurs a
qualifying event before the Merger Effective Date. In the event of a termination
or consolidation of any Skibo health plan, terminated Skibo employees and
qualified beneficiaries will have the right to continued coverage under group
health plans of Northwest in accordance with IRC Section 4980B(f) and ERISA
Sections 601-609, consistent with the provisions of sub-section (b) above.
(i) Notwithstanding anything contained in any existing employment or
severance agreement, as of the Merger Effective Date, Walter G. Kelly and Carol
A. Gilbert shall each execute a termination and release to his or her employment
agreement, respectively, substantially in the form set forth in Skibo Disclosure
Schedule 6.02(i), which shall provide that such employment agreement shall
terminate as of the Merger Effective Date and, in lieu of any rights and
payments under such employment agreement, Mr. Kelly and Ms. Gilbert shall be
entitled to the rights and payments identified in such termination and release
agreement. In addition, Mr.
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Kelly and Ms. Gilbert shall be retained as employees of First Carnegie from the
Merger Effective Date through June 30, 2005, at their current rates of base pay.
After June 30, 2005, Mr. Kelly will be retained as a consultant to Northwest and
First Carnegie for a period of fifteen months at his current rate of pay.
Similarly, after June 30, 2005, Ms. Gilbert will be retained as a consultant for
twelve months at her current rate of pay. Northwest and/or First Carnegie shall
continue to provide each of Mr. Kelly and Ms. Gilbert with health benefits
including dependent coverage to the extent such individual is enrolled in such
coverage immediately prior to becoming a consultant for the fifteen and twelve
months periods respectively, that they perform services as consultants,
provided, however, that the COBRA coverage period shall run concurrently with
the period that Northwest provides the consultants continued health coverage.
For so long as Mr. Kelly performs services as an employee or consultant, he
shall continue to have the use of an automobile provided by First Carnegie and
at the expiration of such term he shall be permitted to purchase such automobile
at its then fair market value.
(j) Prior to the Merger Effective Date, Skibo shall take all actions
necessary to terminate the Skibo Financial Stock Option Plan and Skibo Financial
Restricted Stock Plan, effective as of the Merger Effective Date.
(k) Skibo Disclosure Schedule 3.18 sets forth the accrued but unpaid
vacation pay for employees of Skibo and First Carnegie as of December 31, 2003.
Upon a Skibo non-executive employee's actual termination prior to December 31,
2004 for whom vacation pay was accrued based on employment before or during 2003
with Skibo Financial or First Carnegie or for whom vacation pay was accrued
during 2004 prior to the Merger Effective Date, such non-executive employee
shall be paid any such accrued vacation pay. Any Continuing Employee will be
entitled to any such unused vacation during 2004, provided, however if such
Continuing Employee does not use such accrued vacation on or prior to December
31, 2004, such accrued but unused vacation pay shall be paid to such Continuing
Employee as of December 31, 2004.
Section 5.12 Duty to Advise; Duty to Update the Northwest Disclosure
Schedules
Northwest shall promptly advise Skibo of any change or event having a
Material Adverse Effect on Northwest or which Northwest believes would or would
be reasonably likely to cause or constitute a material breach of any of its
representations, warranties or covenants set forth herein. Northwest shall
update Northwest' Disclosure Schedules as promptly as practicable after the
occurrence of an event or fact which, if such event or fact had occurred prior
to the date of this Agreement, would have been disclosed in the Northwest
Disclosure Schedule. The delivery of such updated Schedules shall not relieve
Northwest from any breach or violation of this Agreement and shall not have any
effect for the purposes of determining the satisfaction of the condition set
forth in Section 6.01(c) hereof.
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ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Obligations of Skibo Under this Agreement
The obligations of Skibo under this Agreement shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Skibo pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, Northwest to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated by this
Agreement, shall have been duly and validly taken by Northwest, and Skibo
Financial shall have received certified copies of the resolutions evidencing
such authorizations;
(b) Covenants. The obligations and covenants of Northwest required by
this Agreement to be performed by Northwest at or prior to the Closing Date
shall have been duly performed and complied with in all material respects;
(c) Representations and Warranties. Each of the representations and
warranties of Northwest in this Agreement which is qualified as to materiality
shall be true and correct, and each such representation or warranty that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement, and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date.
(d) Approvals of Regulatory Authorities. The MHC Merger and the
Mid-Tier Merger shall have received all required approvals of Regulatory
Authorities and all notice and waiting periods required thereunder shall have
expired or been terminated.
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) Officer's Certificate. Northwest shall have delivered to Skibo
Financial a certificate, dated the Closing Date and signed, without personal
liability, by its chairman of the board or president, to the effect that the
conditions set forth in subsections (a) through (e), and (j) of this Section
6.01 have been satisfied, to the best knowledge of the officer executing the
same;
(g) Approval of the Stockholders of Skibo Financial and the Members of
Skibo MHC. This Agreement and the transactions contemplated hereby shall have
been approved by:
(i) the stockholders of Skibo Financial by such vote as is
required under the HOLA and regulations and policy of the Regulatory
Authorities, the charter and bylaws of Skibo Financial, and under
Nasdaq requirements applicable to it; and
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(ii) to the extent required by the Regulatory Authorities, by
the members of Skibo MHC by such vote as is required.
(h) Updated Fairness Opinion. Prior to the mailing of the Stockholder
Proxy Statement, Skibo shall have received the Updated Fairness Opinion.
(i) Employment Agreements. Northwest Bancorp shall have executed the
Termination and Release Agreements and Consulting Agreements with Walter G.
Kelly and Carol A. Gilbert substantially in the forms set forth as part of Skibo
Disclosure Schedule 6.01(i).
(j) Tax opinion. Northwest shall have received the favorable opinion of
KPMG LLP or Luse Gorman Pomerenk & Schick, P.C., dated as of the Merger
Effective Date, to the effect that the Merger Consideration paid by Northwest or
Seller Bank to Skibo Financial stockholders shall not be taxed to the Skibo
Financial stockholders as a dividend under IRC Section 301 but instead will be
taxed as an exchange under IRC Section 302(b)(3) whereby the Skibo Financial
stockholders completely terminate their interests in Skibo Financial.
Section 6.02 Conditions to the Obligations of Northwest Under this
Agreement
The obligations of Northwest hereunder shall be subject to satisfaction
at or prior to the Closing Date of each of the following conditions, unless
waived by Northwest pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, Skibo 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 Skibo and Northwest shall
have received certified copies of the resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of Skibo 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 Skibo in this Agreement which is qualified as to materiality shall
be true and correct, and each such representation or warranty that is not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement, and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date.
(d) Approvals of Regulatory Authorities. The Merger shall have received
all required approvals of Regulatory Authorities (without the imposition of any
conditions adversely affecting in a material respect the economic benefit
Northwest reasonably expects to accrue in the transaction, excluding standard
conditions that are normally imposed by the Regulatory Authorities in merger
transactions); and all notice and waiting periods required thereunder shall have
expired or been terminated.
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(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since March 31, 2002, there shall not
have occurred any Material Adverse Effect with respect to Skibo Financial and
First Carnegie; and
(g) Officer's Certificate. Skibo MHC, Skibo Financial and First
Carnegie shall have delivered to Northwest a certificate, dated the Closing Date
and signed, without personal liability, by the chairman of the board or
president of each, to the effect that the conditions set forth in subsections
(a) through (f) of this Section 6.02 have been satisfied, to the best knowledge
of the officer executing the same.
(h) Employment Agreements. Walter G. Kelly and Carol A. Gilbert shall have
executed the Termination and Release Agreements and Consulting Agreements with
Northwest, substantially in the forms set forth as part of Skibo Disclosure
Schedule 6.01(i).
(i) Funds Deposited with the Exchange Agent. On or prior to the Closing
Date, Skibo Financial 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 Skibo Financial stockholders shall be entitled to receive
on the Merger Effective Date pursuant to Section 2.02 of this Agreement
(determined by multiplying the Merger Consideration by the number of shares of
Skibo Financial Common Stock which are issued and outstanding immediately prior
to the Merger Effective Date, other than shares referenced in Section 2.02(b)
hereof). Northwest will provide a line of credit for the benefit of Skibo for
the sole purpose of ensuring Skibo's compliance with Section 2.02 and this
Section, at the request of Skibo. Such request should be made by Skibo no later
than ten (10) business days prior to the Closing Date and will be made at the
rates and terms substantially similar to those then offered to unaffiliated
customers of Northwest.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination
This Agreement may be terminated on or at any time prior to the Closing
Date:
(a) By the mutual written consent of the parties hereto;
(b) By either Northwest, Skibo Financial or Skibo MHC acting
individually:
(i) if there shall have been a material breach of any
representation, warranty, covenant or other obligation of the other
party and the breach cannot be, or shall not have been, remedied within
thirty (30) days after receipt by such other party of notice in writing
specifying the nature of such breach and requesting that it be
remedied;
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(ii) if the Closing Date shall not have occurred on or before
August 1, 2004, unless the failure of such occurrence shall be due to
the failure of the party seeking to terminate this Agreement to perform
or observe its obligations set forth in this Agreement required to be
performed or observed by such party on or before the Closing Date;
provided, however, the parties shall in good faith agree to extend such
deadline for a period of an additional one hundred and twenty (120)
days thereafter in the event that such parties determine that it is
reasonably likely that such Closing Date will in fact occur during such
extension period.
(iii) if either party has been informed in writing by a
Regulatory Authority whose approval or consent has been requested that
such approval or consent is denied, or is granted subject to any
condition that adversely affects in a material respect the economic
benefit that either Party reasonably expects to accrue in the
transactions unless the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe its agreements set forth herein required to be performed or
observed by such party on or before the Closing Date;
(iv) if the approval of the stockholders of Skibo Financial
and any approval of the members of Skibo MHC required for the
consummation of the Merger shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of
stockholders or members, as the case may be, or at any adjournment or
postponement thereof; or
(c) By Northwest if (i) as provided in Section 5.06(a)(iii), the Board
of Directors of Skibo MHC or Skibo Financial withdraws its recommendation of
this Agreement, fails to make such recommendation or modifies or qualifies its
recommendation in a manner adverse to Northwest, or (ii) Skibo MHC or Skibo
Financial enters into an agreement to be acquired by, or merge or combine with,
a third party in connection with a Superior Proposal.
(d) By Skibo Financial or Skibo MHC, upon two days' prior notice to
Northwest, if, as a result of a Superior Proposal, the Board of Directors of
Skibo Financial or Skibo MHC determines, in good faith and in consultation with
counsel, that its fiduciary duties require that such Superior Proposal be
accepted.
Section 7.02 Effect of Termination
(a) Except as otherwise provided in this Agreement, if this Agreement
is terminated pursuant to Section 7.01 hereof, this Agreement shall forthwith
become void (other than the confidentiality provisions of Section 5.02(a) and
Section 8.01 hereof, which shall remain in full force and effect), and there
shall be no further liability on the part of Northwest or Skibo to the other,
except that no party shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
(b) As a condition of Northwest's willingness, and in order to induce
Northwest to enter into this Agreement and to reimburse Northwest for incurring
the costs and expenses related to entering into this Agreement and consummating
the transactions contemplated by this
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Agreement, Skibo Financial will make an aggregate cash payment to Northwest of
$1.2 million (the "Expense Fee") if Northwest has terminated this Agreement
pursuant to Section 7.01(c) or Skibo Financial or Skibo MHC has terminated this
Agreement pursuant to Section 7.01(d), and in such event Skibo Financial and
Skibo MHC shall have no further liability to Northwest. Any payment required
under this Section 7.02(b) shall be paid by Skibo Financial to Northwest (by
wire transfer of immediately available funds to an account designated by
Northwest) within five (5) business days after written demand by Northwest.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses
(a) Except as provided herein, each party hereto shall bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of its own financial
consultants, accountants and counsel.
(b) In the event of any termination of this Agreement pursuant to
Section 7.01(b)(i) hereof because of a breach of this Agreement by one of the
parties, in addition to any other damages and remedies that may be available to
the non-breaching party, the non-breaching party shall be entitled to payment
of, and the breaching party shall pay to the non-breaching party, all reasonable
out-of-pocket costs and expenses, including, without limitation, reasonable
legal, accounting and investment banking fees and expenses, incurred by the
non-breaching party in connection with entering into this Agreement and carrying
out of any and all acts contemplated hereunder; provided, however, that this
clause shall not be construed to relieve or release a breaching party from any
additional liabilities or damages arising out of its willful breach of any
provision of this Agreement.
Section 8.02 Non-Survival of Representations and Warranties
All representations, warranties and, except to the extent specifically
provided otherwise herein, agreements and covenants shall terminate on the
Closing Date, other than those covenants set forth in Sections 2.01(a), 5.05 and
5.11, which will survive the Merger.
Section 8.03 Amendment, Extension and Waiver
Subject to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may (a) amend this
Agreement, (b) extend the time for the performance of any of the obligations or
other acts of either party hereto, (c) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained in Articles V and VI hereof or otherwise. This Agreement
may not be amended except by an instrument in writing authorized by the
respective Boards of Directors and signed by duly authorized officers on behalf
of the parties hereto. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed by a duly authorized officer on behalf of such party, but such waiver or
failure to insist on strict
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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
Except as set forth in this Agreement, this Agreement, including the
documents and other writings referred to herein or delivered pursuant hereto,
contains the entire agreement and understanding of the parties with respect to
its subject matter. Except as set forth in this Agreement, this Agreement
supersedes all prior arrangements and understandings between the parties, both
written and oral, with respect to its subject matter. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors; provided, however, that nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 2.02(a)(ii), 2.02(d), 2.03, 5.05 and 5.11.
Section 8.05 No Assignment
Neither party hereto may assign any of its rights or obligations
hereunder to any other person, without the prior written consent of the other
party hereto.
Section 8.06 Notices
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy, addressed as
follows:
(a) If to Northwest to:
Northwest Bancorp, Inc.
Liberty and Second Streets
Warren, PA 16365
Attn: William J. Wagner
President and CEO
Fax: (814) 728-7716
with a copy to:
Luse Gorman Pomerenk & Schick
5335 Wisconsin Avenue, NW
Washington, DC 20015
Attn: Eric Luse, Esq.
Marc Levy, Esq.
Fax: (202) 362-2902
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(b) If to Skibo to:
Skibo Financial Corp.
242 East Main Street
Carnegie, Pennsylvania 15106
Attn: Walter G. Kelly
President, and Chief Executive Officer
Fax: (412) 276-2424
with a copy to:
Malizia Spidi & Fisch, PC
1100 New York Avenue, N.W.
Suite 340 West
Washington, DC 20005
Attention: Richard Fisch, Esq.
Fax: (202) 434-4661
Section 8.07 Captions
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
Section 8.08 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section 8.09 Severability
If any provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law. If however, any provision of this
Agreement is held invalid by a court of competent jurisdiction, then the parties
hereto shall in good faith amend this Agreement to include an alternative
provision that accomplishes a result that is as substantially similar to the
result originally intended as possible.
Section 8.10 Governing Law
This Agreement shall be governed by and construed in accordance with
the domestic internal law (including the law of conflicts of law) of the State
of Pennsylvania, except to the extent that Federal law shall be deemed to
preempt such State law.
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Section 8.11 Specific Performance
The parties hereto agree that irreparable damage would occur in the
event that the provisions contained in this Agreement were not performed in
accordance with its specific terms or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions thereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
NORTHWEST SAVINGS BANK
/s/ William J. Wagner
--------------------------------
By: William J. Wagner, President
NORTHWEST BANCORP, INC.
/s/ William J. Wagner
--------------------------------
By: William J. Wagner, President
NORTHWEST BANCORP, MHC
/s/ William J. Wagner
--------------------------------
By: William J. Wagner, President
FIRST CARNEGIE DEPOSIT
/s/ Walter G. Kelly
--------------------------------
By: Walter G. Kelly, President
SKIBO FINANCIAL CORP.
/s/ Walter G. Kelly
--------------------------------
By: Walter G. Kelly, President
SKIBO BANCSHARES, M.H.C.
/s/ Walter G. Kelly
--------------------------------
By: Walter G. Kelly, President
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APPENDIX B
FINPRO 20 Church Street o P.O. Box 323
Liberty Corner, NJ 07938-0323
(908) 604-9336 o 604-5951 (FAX)
finpro@finpronj.com o www.finproj.com
- --------------------------------------------------------------------------------
January 16, 2004
Board of Directors
Skibo Bancshares, M.H.C.
Skibo Financial Corp. (MHC)
First Carnegie Deposit
242 East Main Street
Carnegie, PA 15106
Dear Board Member:
You have requested our written opinion, as an independent financial advisor to
Skibo Bancshares, M.H.C., Skibo Financial Corp. (MHC) ("SKBO") and First
Carnegie Deposit, (the three entities collectively referred to as "Skibo") as to
the fairness, from a financial point of view to SKBO minority shareholders, of
the cash consideration to be paid for the minority shares as well as to the
equitable treatment of the Skibo depositors as proposed in the Agreement and
Plan of Merger dated September 11, 2003 (the "Agreement"), pursuant to which
Northwest Bancorp (MHC), Northwest Bancorp, Inc. and Northwest Savings Bank (the
three entities collectively referred to as "Northwest") will acquire Skibo.
Pursuant to the Agreement and discussions with management, all of the minority
shares of SKBO common stock will be acquired for cash by Northwest. The cash
consideration will be $17.00 per minority share of SKBO common stock. All of the
majority shares of SKBO will be canceled and the mutual ownership interest of
Skibo depositors will be merged with Northwest mutual ownership interests.
The merger may be taxable to SKBO minority shareholders receiving cash as
consideration.
In general, 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 and
other securities transactions. FinPro has knowledge of and experience with the
Pennsylvania bank and thrift market and financial institutions operating in that
market. Skibo's Board chose FinPro because of its expertise, experience and
familiarity with the bank and thrift industry.
Skibo retained FinPro to act as an independent financial advisor, to render
general advisory services and also to specifically advise the Board of Directors
of Skibo in connection with its merger and acquisition activities. Pursuant to
its engagement, FinPro will be paid a fee for rendering its fairness opinions
relating to the merger. Skibo will pay FinPro a fee equal to 1.1% of the
Aggregate Purchase Price, as defined in the engagement letter, or approximately
$250,000 for rendering its fairness opinion and for its financial advisory
assistance. A portion of FinPro's fee is contingent upon the consummation of the
proposed acquisition.
Prior to being retained as Skibo's financial advisor for this transaction,
FinPro has provided consulting and financial advisory services to Skibo
including strategic planning and appraisal services. FinPro appraised Skibo as
part of Skibo's mutual holding company reorganization and stock offering.
Furthermore, prior to serving as Skibo's financial advisor for this transaction,
FinPro previously provided financial advisory services to Prestige Bancorp,
Inc., which merged with Northwest in 2002. To assist with the accounting for the
Northwest/Prestige Bancorp, Inc. merger, FinPro provided consulting services to
Northwest for which FinPro received a consulting
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Fairness Opinion of January 16, 2004 Page 2
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fee. The fees for the services provided to Skibo and Northwest prior to serving
as Skibo's financial advisor for this transaction are immaterial relative to
FinPro's annual gross revenue.
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 SKBO's common stock;
(iv) trends and changes in the financial condition of SKBO and Northwest;
(v) the most recent annual report to shareholders of SKBO and Northwest;
(vi) quarterly reports on Form 10-QSB of SKBO and the Form 10-Q of Northwest;
(vii) quarterly regulatory Thrift Financial Reports of Northwest Savings Bank
and First Carnegie Deposit; and
(viii) the most recent audit letter to SKBO and Northwest.
We also had discussions with the management of Skibo and Northwest regarding
their respective financial results and have analyzed the most current financial
data available for Skibo and Northwest. In addition, we considered financial
studies, analyses and investigations and economic and market information that we
deemed relevant.
We considered certain financial data of Skibo and compared that data to other
thrift institutions and their holding companies that were recently merged or
acquired, including the merger of other mutual holding companies. Furthermore,
we considered the financial terms of these business combinations involving these
thrift institutions and their holding companies.
FinPro did not independently verify the financial data provided by or on behalf
of Skibo and Northwest, but instead relied upon and assumed the accuracy and
completeness of the data provided.
In reaching our opinion, we took into consideration the financial benefits of
the proposed transaction to SKBO minority shareholders. Based on all factors
deemed relevant and assuming the accuracy and completeness of the information
and data provided by Skibo and Northwest, it is FinPro's opinion as of this
date, that the cash consideration is fair from the financial point of view of
SKBO minority shareholders. Furthermore, the treatment of Skibo depositors is
equitable.
Respectfully Submitted,
/s/FinPro, Inc.
FinPro, Inc.
Liberty Corner, New Jersey
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