AGREEMENT
by and between
COMMUNITY BANKS, INC.
and
BUCS FINANCIAL CORP
TABLE OF CONTENTS
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Page
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ARTICLE I- GENERAL................................................................................................2
1.01 Definitions...............................................................................................2
1.02 The Merger...............................................................................................12
1.03 Bank Merger..............................................................................................14
ARTICLE II- CONSIDERATION; EXCHANGE PROCEDURES...................................................................14
2.01 CMTY Common Stock........................................................................................14
2.02 BFC Common Stock.........................................................................................14
2.03 Cancellation of Certain Common Stock.....................................................................19
2.04 Fractional Shares........................................................................................19
2.05 Dissenting BFC Shareholders..............................................................................19
2.06 Stock Options............................................................................................20
2.07 Surrender and Exchange of BFC Stock Certificates.........................................................20
2.08 Anti-Dilution Provisions.................................................................................22
ARTICLE III- REPRESENTATIONS AND WARRANTIES OF BFC...............................................................23
3.01 Organization.............................................................................................23
3.02 Capitalization...........................................................................................25
3.03 Authority; No Violation..................................................................................26
3.04 Consents.................................................................................................27
3.05 Financial Statements.....................................................................................27
3.06 No Material Adverse Change...............................................................................28
3.07 Taxes....................................................................................................28
3.08 Contracts................................................................................................29
3.09 Ownership of Property; Insurance Coverage................................................................31
3.10 Legal Proceedings........................................................................................33
3.11 Compliance with Applicable Law and Agreements............................................................33
3.12 ERISA....................................................................................................35
3.13 Brokers and Finders......................................................................................37
3.14 Environmental Matters....................................................................................38
3.15 Business of BFC..........................................................................................38
3.16 CRA Compliance...........................................................................................39
3.17 Bank Merger..............................................................................................39
3.18 Information to be Supplied...............................................................................40
3.19 Related Party Transactions...............................................................................41
3.20 Loans....................................................................................................41
3.21 Allowance for Loan Losses................................................................................41
3.22 Reorganization...........................................................................................41
3.23 Fairness Opinion.........................................................................................42
3.24 Securities Documents.....................................................................................42
3.25 "Well Capitalized".......................................................................................42
3.26 Quality of Representations...............................................................................42
(i)
TABLE OF CONTENTS
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(Cont'd)
Page
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ARTICLE IV- REPRESENTATIONS AND WARRANTIES OF CMTY...............................................................42
4.01 Organization.............................................................................................43
4.02 Capitalization...........................................................................................44
4.03 Authority; No Violation..................................................................................45
4.04 Consents.................................................................................................46
4.05 Financial Statements.....................................................................................46
4.06 No Material Adverse Change...............................................................................47
4.07 Taxes....................................................................................................47
4.08 Contracts................................................................................................48
4.09 Ownership of Property; Insurance Coverage................................................................48
4.10 Financing................................................................................................50
4.11 Legal Proceedings........................................................................................50
4.12 Compliance with Applicable Law and Agreements............................................................52
4.13 ERISA....................................................................................................54
4.14 Brokers and Finders......................................................................................54
4.15 CRA Compliance...........................................................................................54
4.16 Bank Merger..............................................................................................55
4.17 Information to be Supplied...............................................................................56
4.18 Reorganization...........................................................................................56
4.19 CMTY Common Stock........................................................................................56
4.20 Securities Documents.....................................................................................56
4.21 Rights Agreement.........................................................................................57
4.22 "Well Capitalized".......................................................................................57
4.23 Quality of Representations...............................................................................57
4.24 Environmental............................................................................................57
4.25 Allowance for Loan Losses................................................................................58
ARTICLE V- COVENANTS OF THE PARTIES..............................................................................58
5.01 Conduct of BFC's Business................................................................................58
5.02 Access; Confidentiality..................................................................................61
5.03 Regulatory Matters.......................................................................................62
5.04 Taking of Necessary Actions..............................................................................62
5.05 No Solicitation..........................................................................................63
5.06 Update of Disclosure Schedules...........................................................................64
5.07 Other Undertakings by CMTY and BFC.......................................................................64
ARTICLE VI- CONDITIONS...........................................................................................73
6.01 Conditions to the Obligations of BFC under this Agreement................................................73
6.02 Conditions to CMTY's Obligations under this Agreement....................................................75
ARTICLE VII- TERMINATION.........................................................................................77
7.01 Termination prior to the Closing Date....................................................................77
7.02 Effect of Termination....................................................................................78
(ii)
TABLE OF CONTENTS
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(Cont'd)
Page
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ARTICLE VIII- MISCELLANEOUS......................................................................................79
8.01 Expenses and Other Fees..................................................................................79
8.02 Non-Survival of Representations and Warranties; Disclosure Schedules.....................................79
8.03 Amendment, Extension and Waiver..........................................................................80
8.04 Entire Agreement.........................................................................................80
8.05 No Assignment............................................................................................81
8.06 Notices..................................................................................................81
8.07 Disclosure Schedules.....................................................................................82
8.08 Tax Disclosure...........................................................................................82
8.09 Captions.................................................................................................82
8.10 Counterparts.............................................................................................83
8.11 Severability.............................................................................................83
8.12 Governing Law............................................................................................83
(iii)
EXHIBITS:
Exhibit 1 - Form of Letter Agreement For Directors
Exhibit 1.03 - Form of Bank Plan of Merger
Exhibit 2 Form of Letter Agreement For Executives
Exhibit 5.07(c)(vii) - Form of Moltzan Employment Agreement
SCHEDULES:
BFC Schedule 2.06 Stock Options
BFC Schedule 3.01(d) - Subsidiaries
BFC Schedule 3.02(b) - Equity Interests
BFC Schedule 3.02(c) - 5% Stockholders
BFC Schedule 3.03(b)(C) - Adverse Effects of Merger
BFC Schedule 3.04 - Third Party Consents
BFC Schedule 3.05(b) - Liabilities and Obligations
BFC Schedule 3.08(a) - Employment Agreements and Material Contracts
BFC Schedule 3.09(a) - Title to Properties
BFC Schedule 3.09(a)(i) - Collateral for Obligations
BFC Schedule 3.10 - Legal Proceedings
BFC Schedule 3.11(c) - Regulatory Investigations
BFC Schedule 3.11(d) - Regulatory Agreements
BFC Schedule 3.11(f) - Unresolved Matters re: Regulatory Agreements
BFC Schedule 3.12(a) - ERISA
BFC Schedule 3.12(f) - Services Performed under ERISA
BFC Schedule 3.14(a) - Environmental Matters
BFC Schedule 3.17(b)(iii) Effects of Bank Merger
BFC Schedule 3.19 - Related Party Transactions
BFC Schedule 5.01(d)(ii) Bonuses
BFC Schedule 5.01(p) Capital Expenditures
CMTY Schedule 4.01(d) - Subsidiaries
CMTY Schedule 4.02(c) 5% Shareholders
CMTY Schedule 4.08 - Contracts
CMTY Schedule 4.09 - Titles to Properties
CMTY Schedule 4.11 - Legal Proceedings
CMTY Schedule 4.13 - ERISA
CMTY Schedule 4.24(a) Environmental Matters
(iv)
AGREEMENT
---------
THIS AGREEMENT, dated as of September 5, 2006 ("Agreement"), is made by
and between COMMUNITY BANKS, INC., a Pennsylvania corporation ("CMTY"), and BUCS
FINANCIAL CORP, a Maryland corporation ("BFC").
BACKGROUND
A. CMTY owns directly all of the outstanding capital stock of
CommunityBanks, a bank and trust company chartered by the Commonwealth of
Pennsylvania ("Community").
B. BFC owns directly all of the outstanding capital stock of BUCS
Federal Bank, a federal savings bank ("BUCS").
C. CMTY and BFC desire for BFC to merge with and into CMTY, with CMTY
surviving such merger, in accordance with the applicable laws of the
Commonwealth of Pennsylvania and this Agreement. Promptly thereafter, CMTY
desires to merge BUCS with and into Community, with Community surviving such
merger as a wholly-owned subsidiary of CMTY, in accordance with the applicable
laws of the United States and the Commonwealth of Pennsylvania and the terms of
this Agreement.
D. As a condition and inducement to CMTY to enter into this Agreement,
the directors and the Executives of BFC are each concurrently executing a Letter
Agreement in the form attached hereto as Exhibit 1 (for Directors) and Exhibit 2
(for Executives) (collectively, the "Letter Agreement").
E. Each of the parties, by signing this Agreement, adopts it as a plan
of reorganization as defined in IRC Section 368(a), and intends the Merger to be
a reorganization as defined in IRC Section 368(a).
F. CMTY and BFC desire to provide the terms and conditions governing
the transactions contemplated herein.
1
NOW THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I- GENERAL
1.01 Definitions. As used in this Agreement, the following terms shall
have the indicated meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Acquisition Proposal" has the meaning given to that term in Section
5.05 of this Agreement.
"Acquisition Transaction" shall mean one of the following transactions
with a party other than CMTY or an affiliate of CMTY: (i) a merger or
consolidation, or any similar transaction, involving BFC or BUCS, (ii) a
purchase, lease or other acquisition of all or a substantial portion of the
assets or liabilities of BFC or BUCS or (iii) a purchase or other acquisition
(including by way of share exchange, tender offer, exchange offer or otherwise)
of 24.9% or more of any class or series of equity securities of BFC or BUCS.
"Affiliate" means, with respect to any corporation, any person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such corporation and, without
limiting the generality of the foregoing, includes any executive officer,
director or 10% equity owner of such corporation.
"Aggregate Cash Consideration" has the meaning given to that term in
Section 2.02(a) of this Agreement.
"Aggregate Common Stock Consideration" has the meaning given to that
term in Section 2.02(a) of this Agreement.
"Agreement" means this Agreement, including any amendment or supplement
hereto.
"Application" means an application for regulatory approval which is
required by the Contemplated Transactions.
2
"Articles of Merger" mean the articles of merger to be executed by CMTY
and BFC and to be filed in the PDS and the MDAT in accordance with the
applicable laws of the Commonwealth of Pennsylvania and the State of Maryland,
respectively.
"Bank Merger" means the merger of BUCS with and into Community, with
Community surviving such merger, contemplated by Section 1.03 of this Agreement.
"Bank Plan of Merger" has the meaning given to that term in Section
1.03 of this Agreement.
"BCL" means the Pennsylvania Business Corporation Law of 1988, as
amended.
"BFC" means BUCS Financial Corp, a Maryland corporation and savings and
loan holding company.
"BFC Benefit Plans" has the meaning given to that term in Section
3.12(a) of this Agreement.
"BFC Certificate" has the meaning given to that term in Section 2.02(b)
of this Agreement.
"BFC Common Stock" has the meaning given to that term in Section
3.02(a) of this Agreement.
"BFC Disclosure Schedules" means, collectively, the disclosure
schedules delivered by BFC to CMTY at or prior to the execution and delivery of
this Agreement.
"BFC ERISA Affiliate" has the meaning given to that term in Section
3.12(a) of this Agreement.
"BFC Financials" means (a) the audited consolidated financial
statements of BFC as of December 31, 2005 and 2004 and for each of the two years
in the period ended December 31, 2005, including the notes thereto, and (b) the
unaudited interim consolidated financial statements of BFC for each calendar
quarter after December 31, 2005.
3
"BFC Option" has the meaning given to that term in Section 2.06(a) of
this Agreement.
"BFC Option Plans" means the BUCS Financial Corp 2002 Stock Option Plan
and the BUCS Federal Bank Employee 2002 Restricted Stock Plan and Trust
Agreement.
"BFC Stockholders Meeting" has the meaning given to that term in
Section 5.07(a)(i) of this Agreement.
"BFC Subsidiary" means each direct and indirect Subsidiary of BFC and
of BUCS.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"BUCS" means the BUCS Federal Bank, a federal savings bank, all the
outstanding capital stock of which is owned by BFC.
"BUCS Designees" has the meaning given to that term in Section
1.02(e)(iv) of this Agreement.
"BUCS ESOP" means the BUCS Federal Bank Employee Stock Ownership Plan.
"Business Day" means any day other than (i) a Saturday, Sunday or
federal holiday or (ii) a day on which Community is authorized or obligated by
law or executive order to close.
"CareFirst Agreement" means the July 29, 2002 Financial Services
Agreement between CareFirst of Maryland, Inc. and BUCS.
"Cash Consideration" has the meaning given to that term in Section
2.02(a)(ii) of this Agreement.
"Cash Election Shares" has the meaning given to such term in Section
2.02(b)(ii).
"CERCLA" has the meaning given to that term in Section 3.14(b) of this
Agreement.
"Closing" has the meaning given to that term in Section 1.02(a) of this
Agreement.
4
"Closing Date" means the date mutually agreed to by the parties as soon
as practicable after the last condition precedent provided in this Agreement
(other than those conditions which are to be fulfilled at the Closing) has been
fulfilled or waived.
"CMTY" means Community Banks, Inc., a Pennsylvania corporation.
"CMTY Acquisition Transaction" means a person or group (as those terms
are defined in Section 13(d) of the Exchange Act and the rules and regulations
thereunder) (A) acquires beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 24.9% or more of the then outstanding shares of
Community Common Stock; or (B) enters into an agreement or a publicly announced
letter of intent or memorandum of understanding with CMTY pursuant to which such
person or group or any affiliate of such person or group would: (1) merge or
consolidate, or enter into any similar transaction, with CMTY or Community, in
which CMTY or Community is not the surviving entity; (2) acquire all or
substantially all of the assets or liabilities of CMTY or Community; or (3)
acquire beneficial ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 24.9% or more, of the
then outstanding shares of Community Common Stock.
"CMTY Benefit Plans" has the meaning given to that term in Section
4.13(a) of this Agreement.
"CMTY Certificate" has the meaning given to that term in Section
2.07(c) of this Agreement.
"CMTY Common Stock" means the shares of common stock of CMTY, with such
par value as is set forth in CMTY's Articles of Incorporation.
"CMTY Disclosure Schedules" means, collectively, the disclosure
schedules delivered by CMTY to BFC at or prior to the execution and delivery of
this Agreement.
"CMTY ERISA Affiliate" has the meaning given to that term in Section
4.13(a) of this Agreement.
"CMTY Financials" means (a) the audited consolidated financial
statements of CMTY as of December 31, 2005 and 2004 and for each of the three
years in the period ended
5
December 31, 2005, including the notes thereto and (b) the unaudited interim
consolidated financial statements of CMTY for each calendar quarter after
December 31, 2005.
"CMTY Market Value" means, as of any date, the average of the closing
sales price of a share of CMTY Common Stock, as reported on Nasdaq, for the ten
(10) consecutive trading days ending on the second trading day preceding the
date as of which the CMTY Market Value is determined.
"CMTY Subsidiary" means each direct and indirect Subsidiary of CMTY and
Community.
"Common Stock Consideration" has the meaning given to that term in
Section 2.02(a)(i) of this Agreement.
"Common Stock Election Shares" has the meaning given to such term in
Section 2.02(b)(i).
"Comparable Employment" has the meaning given to that term in Section
5.07(c)(i)(A) of this Agreement.
"Confidentiality Agreement" means the confidentiality agreement, dated
June 8, 2006, between CMTY and BFC.
"Contemplated Transactions" means all of the transactions contemplated
by this Agreement, including: (a) the merger of BFC with and into CMTY, with
CMTY surviving such merger; (b) the merger of BUCS with and into Community, with
Community surviving such merger as a wholly-owned subsidiary of CMTY; (c) the
performance by CMTY and BFC of their respective covenants and obligations under
this Agreement; and (d) the performance by Community and BUCS of their
respective covenants and obligations under the Bank Plan of Merger.
"CRA" means the Community Reinvestment Act of 1977, as amended, and the
rules and regulations promulgated from time to time thereunder.
6
"Dissenting BFC Shares" has the meaning given to that term in Section
2.05 of this Agreement.
"D&O Insurance" has the meaning given to that term in Section
5.07(c)(iv)(C)(1) of this Agreement.
"Effective Date" means the date upon which the Articles of Merger shall
be filed in the PDS and shall be the same as the Closing Date or as soon
thereafter as is practicable.
"Election" means either an election to receive Cash Consideration, an
election to receive Common Stock Consideration, or a Mixed Election.
"Election Deadline" means 5:00 p.m., prevailing Eastern Time, on the
day that is two (2) Business Days prior to the Closing Date.
"Election Form" means a form, in such form as CMTY and BFC shall
mutually agree, on which holders of BFC Common Stock shall make an Election.
"Eligible BFC Employee" has the meaning given to that term in Section
5.07(c)(i)(C) of this Agreement.
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Regulatory
Authority relating to (i) the protection, preservation or restoration of the
environment, including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource, and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated for the protection of human health, safety or the
environment, whether by type or by quantity, including any material containing
any such substance as a component.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
7
"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 agent designated by CMTY and
acceptable to BFC (as soon as practicable following execution of this Agreement)
to act as the exchange agent for purposes of conducting exchange procedure
described in Section 2.07.
"Exchange Fund" has the meaning given to that term in Section 2.07(a)
of this Agreement.
"Executives" means Matthew J. Ford, Debra J. Vinson, James E. Shinsky,
and William H. Howard, Jr.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLB" means the Federal Home Loan Bank.
"FinPro" means FinPro, Inc.
"Fixed Exchange Ratio" means 1.1485.
"Floating Exchange Ratio" means a quotient (a) whose numerator is
$24.00 and (b) whose denominator is the CMTY Market Value on the Effective Date,
provided however, that in no event shall the Floating Exchange Ratio be greater
than 1.1485, subject to adjustment pursuant to Section 2.08 hereof.
"FRB" means the Board of Governors of the Federal Reserve System.
"GAAP" means accounting principles generally accepted in the United
States.
"Indemnified Party" has the meaning given to that term in Section
5.07(c)(iv)(A) of this Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
8
"IRS" means the Internal Revenue Service.
"Knowledge of CMTY" means the actual knowledge of CMTY's executive
officers and directors.
"Knowledge of BFC" means the actual knowledge of BFC's executive
officers and directors.
"Letter Agreement" has the meaning given to that term in the Background
Section of this Agreement.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition or results of operations of BFC on a consolidated
basis or CMTY on a consolidated basis or the ability of a party to consummate
the Contemplated Transactions, other than, in each case, any change,
circumstance or effect relating to (i) any change in the value of the respective
assets and liabilities of CMTY or BFC resulting from a change in interest rates
generally, (ii) any change occurring after the date hereof in any federal or
state law, rule or regulation or in GAAP, which change affects banking or thrift
institutions generally, including any change affecting the Deposit Insurance
Fund, (iii) changes in general economic (except in the context of determining a
Material Adverse Effect for purposes of asset quality), legal, regulatory or
political conditions affecting banking institutions generally, (iv) expenses
(including legal fees, costs and expenses relating to any litigation arising as
a result of the Contemplated Transactions) incurred in connection with this
Agreement and the transactions contemplated hereby, (v) actions or omissions of
a party (or any of its Subsidiaries) taken pursuant to the terms of this
Agreement or with the prior written consent of the other party in contemplation
of the transactions contemplated hereby (including without limitation any
actions taken by BFC pursuant to Section 5.07 of this Agreement), (vi) any
effect with respect to a party hereto caused, in whole or in substantial part,
by the other party.
"Material Contract" means a material contract as described in 17 C.F.R.
ss.229.601(b)(10).
"Maximum Amount" has the meaning given to that term in Section
5.07(c)(iv)(C) of this Agreement.
9
"Merger" means the merger of BFC with and into CMTY, contemplated by
this Agreement.
"Merger Consideration" means Cash Consideration and Common Stock
Consideration.
"MDAT" means the Maryland Department of Assessments and Taxation.
"MGCL" means the Maryland General Corporation Law.
"Mixed Election" has the meaning given to that term in Section 2.02(c)
of this Agreement.
"MOFR" means the Maryland Office of Financial Regulation.
"Moltzan" means Herbert J. Moltzan, President and CEO of BFC.
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means the Global Market tier of The Nasdaq Stock Market
operated by the NASD.
"OTS" means the Office of Thrift Supervision.
"PDB" means the Department of Banking of the Commonwealth of
Pennsylvania.
"PDS" means the Department of State of the Commonwealth of
Pennsylvania.
"Prior Acts" has the meaning given to that term in Section
5.07(c)(iv)(A) of this Agreement.
"Prospectus/Proxy Statement" means the prospectus/proxy statement,
together with any supplements thereto, to be sent to holders of BFC Common Stock
in connection with the Contemplated Transactions.
"Reallocated Common Stock Share" has the meaning given to that term in
Section 2.02(e)(ii)(B) of this Agreement.
10
"Registration Statement" means the registration statement on Form S-4,
including any pre-effective or post-effective amendments or supplements thereto,
as filed with the SEC under the Securities Act with respect to the CMTY Common
Stock to be issued in connection with the Contemplated Transactions.
"Regulatory Agreement" has the meaning given to that term in Sections
3.11(d)(iv) and 4.12(d)(iv) of this Agreement.
"Regulatory Authority" means any agency or department of any federal,
state or local government or of any self-regulatory organization, including
without limitation the SEC, the MDAT, the MOFR, the PDB, the FRB, the OTS, the
FDIC, the NASD, and the respective staffs thereof.
"Rights" means warrants, options, rights, convertible securities and
other capital stock equivalents which obligate an entity to issue its
securities.
"Rights Agreement" means the rights agreement dated February 28, 2002,
between CMTY and Community, as rights agent.
"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 with the SEC under the Securities Laws.
"Securities Laws" means the Securities Act and the Exchange Act and the
rules and regulations promulgated from time to time thereunder.
"Subsidiary" means any corporation or limited liability company, 25% or
more of the capital stock or membership interests of which is owned, either
directly or indirectly, by another
11
entity, except any corporation the stock of which is held in the ordinary course
of the lending activities of a bank.
"Termination Fee" means $900,000.
"Well Capitalized" has the meaning given to that term in Sections 3.25
and 4.22 of this Agreement.
1.02 The Merger.
(a) Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place on the Closing Date at a time and
place to be agreed upon by the parties hereto; provided, in any case, that all
conditions to closing set forth in Article VI of this Agreement (other than the
delivery of certificates, opinions, and other instruments and documents to be
delivered at the Closing) have been satisfied or waived at or prior to the
Closing Date. On the Closing Date, CMTY and BFC shall cause the Articles of
Merger to be duly executed and filed with the PDS and the MDAT.
(b) The Merger. Subject to the terms and conditions of this Agreement
and in accordance with the BCL and the MGCL, on the Effective Date:
(i) BFC shall merge with and into CMTY;
(ii) the separate existence of BFC shall cease;
(iii) CMTY shall be the surviving corporation in the Merger; and
(iv) all of the property (real, personal and mixed), rights,
powers, duties, obligations and liabilities of BFC shall be taken and deemed to
be transferred to and vested in CMTY, as the surviving corporation in the
Merger, without further act or deed; all in accordance with the applicable laws
of the Commonwealth of Pennsylvania and the State of Maryland.
(c) Change to Structure of Merger. The parties may at any time change
the method of effecting the combination (including by providing for the merger
of BFC and a wholly owned subsidiary of CMTY) if and to the extent requested by
either party and consented to by the other
12
party (such consent not to be unreasonably withheld); provided, however, that no
such change shall (i) alter or change the amount or kind of Merger
Consideration, (ii) adversely affect the tax treatment of BFC's stockholders as
a result of receiving the Merger Consideration or the tax treatment of either
party pursuant to this Agreement or (iii) materially impede or delay completion
of the transactions contemplated by this Agreement.
(d) CMTY's Articles of Incorporation and Bylaws. On and after the
Effective Date, the articles of incorporation and bylaws of CMTY, as in effect
immediately prior to the Effective Date, shall automatically be and remain the
articles of incorporation and bylaws of CMTY, as the surviving corporation in
the Merger, until thereafter altered, amended or repealed.
(e) Board of Directors and Officers of CMTY and Community.
(i) On and after the Effective Date, the Board of Directors of
CMTY, as the surviving corporation in the Merger, shall consist of those persons
holding such office immediately prior to the Effective Date.
(ii) On and after the Effective Date, the (A) officers of
CMTY duly appointed and holding office immediately prior to the Effective Date
and (B) such officers of BFC as are offered and accept positions of employment
with CMTY shall be the officers of CMTY, as the surviving corporation in the
Merger, each to hold office until his or her successor is appointed and
qualified or otherwise in accordance with applicable law, the articles of
incorporation and bylaws of CMTY.
(iii) On the effective date of the Bank Merger, the Board of
Directors of Community, as the surviving institution in the Bank Merger, shall
consist of those persons holding such office immediately prior to such effective
date.
(iv) Immediately upon completion of the Bank Merger, Community
shall establish an advisory board for the Metropolitan Baltimore region of
Maryland, whose members shall include such members of the BFC Board of Directors
immediately before the Effective Date who are designated by Moltzan (the "BUCS
Designees"). CMTY shall cause each of the BUCS Designees to be appointed as a
member of the advisory board for the Metropolitan Baltimore region as of the
effective date of the Bank Merger, to hold office for at least two years
13
after the effective date of the Bank Merger. In exchange for their service as
members of the advisory board, the BUCS Designees, other than Moltzan, shall
receive annualized compensation equal to the aggregate annual fees they received
as members of the Boards of Directors of BFC and BUCS during the twelve months
immediately prior to the Effective Date.
(v) On the effective date of the Bank Merger, the officers
of Community, as the surviving institution in the Bank Merger, shall consist of
(A) the officers of Community duly elected and holding office immediately prior
to such effective date and (B) such officers of BUCS as are offered and accept
positions of employment as officers of Community.
1.03 Bank Merger. CMTY and BFC shall each use their best efforts to
cause BUCS to merge with and into Community, with Community surviving such
merger (the "Bank Merger") on, or as soon as practicable after, the Effective
Date. Concurrently with the execution and delivery of this Agreement, CMTY shall
cause Community to execute and deliver, and BFC shall cause BUCS to execute and
deliver, the Bank Plan of Merger, a form of which is attached hereto as Exhibit
1.03 (the "Bank Plan of Merger"). The Bank Merger shall not be effected prior to
the Effective Date.
ARTICLE II- CONSIDERATION; EXCHANGE PROCEDURES
2.01 CMTY Common Stock.
(a) Outstanding Shares. Each share of CMTY Common Stock issued and
outstanding immediately prior to the Effective Date shall, on and after the
Effective Date, continue to be issued and outstanding as an identical share of
CMTY Common Stock.
(b) Treasury Stock. Each share of CMTY Common Stock issued and held in
the treasury of CMTY immediately prior to the Effective Date, if any, shall, on
and after the Effective Date, continue to be issued and held in the treasury of
CMTY.
2.02 BFC Common Stock.
(a) Conversion Alternatives. Subject to Sections 2.03, 2.04 and 2.05
below with respect to treasury stock, fractional shares and Dissenting BFC
Shares, each share of BFC Common Stock issued and outstanding immediately prior
to the Effective Date, shall, on the Effective Date,
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by reason of the Merger and without any action on the part of the holder
thereof, cease to be outstanding and be converted into the right to receive, at
the election of the holder thereof:
(i) a number of shares of CMTY Common Stock calculated on the
basis of the Floating Exchange Ratio (unless prior to the Effective Date there
has occurred a CMTY Acquisition Transaction, in which event the Fixed Exchange
Ratio shall be used in lieu of the Floating Exchange Ratio), including the
associated rights to purchase securities pursuant to the Rights Agreement,
subject to adjustment as provided in Section 2.07 below (the "Common Stock
Consideration"); or
(ii) $24.00 (the "Cash Consideration" and, collectively with
the Common Stock Consideration, the "Merger Consideration").
Notwithstanding the foregoing, (A) the number of shares of BFC Common Stock to
be converted into the right to receive the Common Stock Consideration on the
Effective Date (the "Aggregate Common Stock Consideration") shall be equal,
subject to the determination by CMTY in its sole discretion as of a date at
least five (5) Business Days prior to the mailing of the Prospectus/Proxy
Statement, to a minimum of fifty percent (50%) and a maximum of sixty-five
percent (65%) of the total number of shares of BFC Common Stock issued and
outstanding on the Effective Date and (B) the number of shares of BFC Common
Stock to be converted into the right to receive the Cash Consideration on the
Effective Date shall be equal, subject to the determination by CMTY in its sole
discretion as of the mailing of the Prospectus/Proxy Statement, to a maximum of
fifty percent (50%) and a minimum of thirty-five percent (35%) of the total
number of shares of BFC Common Stock issued and outstanding on the Effective
Date, minus (1) the aggregate number of shares with respect to which cash is
paid in lieu of fractional shares pursuant to Section 2.04 and (2) the number of
shares of Dissenting BFC Shares, if any, with respect to which dissenters'
rights have been duly exercised (the "Aggregate Cash Consideration").
(b) Election Procedures. An Election Form shall be included with each
copy of the Prospectus/Proxy Statement/Prospectus mailed to holders of BFC
Common Stock. Each Election Form shall permit the holder (or in the case of
nominee record holders, the beneficial owner through proper instructions and
documentation):
15
(i) to elect to receive the Common Stock Consideration with
respect to all or a portion of his/her/its shares of BFC Common Stock (the
"Common Stock Election Shares"); or
(ii) to elect to receive the Cash Consideration with respect to
all or a portion of his/her/its shares of BFC Common Stock (the "Cash Election
Shares").
The Exchange Agent shall use reasonable efforts to make the Election Form
available to all persons who become holders of BFC Common Stock during the
period between the record date for the mailing of the Election Form and the
Election Deadline. Any holder's election shall have been properly made only if
the Exchange Agent shall have received at its designated office, by the Election
Deadline, a properly completed and signed Election Form accompanied by
certificates that immediately prior to the Effective Date represented issued and
outstanding shares of BFC Common Stock (the "BFC Certificates") to which such
Election Form relates, in form acceptable for transfer (or by an appropriate
guarantee of delivery of such BFC Certificates as set forth in such Election
Form from a firm which is an "eligible guarantor institution" (as defined in
Rule 17Ad-15 under the Exchange Act) provided that such BFC Certificates are in
fact delivered to the Exchange Agent by the time set forth in such guarantee of
delivery). If a holder of BFC Common Stock either: (i) does not submit a
properly completed Election Form before the Election Deadline; (ii) revokes an
Election Form prior to the Election Deadline and does not resubmit a properly
completed Election Form prior to the Election Deadline or (iii) fails to perfect
his, her or its dissenters' rights pursuant to subsection 2.05 of this
Agreement, the shares of BFC Common Stock held by such holder shall be
designated "No-Election Shares." Nominee record holders who hold BFC Common
Stock on behalf of multiple beneficial owners shall be required to indicate how
many of the shares held by them are Common Stock Election Shares, Cash Election
Shares and No-Election Shares. For purposes of this Section 2.02, any Dissenting
BFC Shares shall be deemed to be Cash Election Shares and, with respect to such
shares, the holders thereof shall in no event be classified as holders of
Reallocated Common Stock Shares.
(c) Mixed Election. Subject to the immediately following sentence, each
record holder of shares of BFC Common Stock immediately prior to the Effective
Date shall be entitled to elect to receive shares of CMTY Common Stock for a
portion of such holder's shares of BFC Common Stock and cash for the remaining
portion of such holder's shares of BFC Common Stock (the
16
"Mixed Election"). With respect to each holder of BFC Common Stock who makes a
Mixed Election, the shares of BFC Common Stock that such holder elects to be
converted into the right to receive the Common Stock Consideration shall be
treated as Common Stock Election Shares and the shares such holder elects to be
converted into the right to receive the Cash Consideration shall be treated as
Cash Election Shares.
(d) Effective Election. Any Election shall be properly made only if the
Exchange Agent shall have actually received a properly completed Election Form
by the Election Deadline. Any Election Form may be revoked or changed by the
person submitting such Election Form to the Exchange Agent by written notice to
the Exchange Agent only if such written notice is actually received by the
Exchange Agent at or prior to the Election Deadline. The Exchange Agent shall
have reasonable discretion to (i) determine whether any election, modification
or revocation is received, (ii) determine whether any election, modification or
revocation has been properly made, and (iii) disregard immaterial defects in any
Election Form. Good faith determinations made by the Exchange Agent regarding
such matters shall be binding and conclusive. Neither CMTY, BFC nor the Exchange
Agent shall be under any obligation to notify any person of any defect in an
Election Form.
(e) Allocation. The Exchange Agent shall effect the allocation among
the holders of BFC Common Stock of rights to receive CMTY Common Stock or cash
in accordance with the Election Forms as follows:
(i) Aggregate Cash Consideration Undersubscribed. If the amount
of cash represented by the aggregate Cash Election Shares is less than the
Aggregate Cash Consideration, then:
(A) all Cash Election Shares (subject to Section 2.05
with respect to Dissenting BFC Shares) shall be converted into the right to
receive cash;
(B) No-Election Shares shall be deemed to be Cash
Election Shares to the extent necessary to have the amount of cash represented
by the aggregate Cash Election Shares equal the Aggregate Cash Consideration. If
less than all of the No-Election Shares need to be treated as Cash Election
Shares, then the Exchange Agent shall select which No-Election Shares
17
shall be treated as Cash Election Shares in such manner as the Exchange Agent,
in its sole discretion, shall determine. All remaining No-Election Shares shall
thereafter be treated as Common Stock Election Shares;
(C) If all of the No-Election Shares are treated as
Cash Election Shares under the preceding subsection and the amount of cash
represented by the aggregate Cash Election Shares remains less than the
Aggregate Cash Consideration, then the Exchange Agent shall convert, on a pro
rata basis described in subsection 2.02(e)(iv) below, a sufficient number of
Common Stock Election Shares into Cash Election Shares ("Reallocated Cash
Shares") such that the amount of cash represented by the aggregate Cash Election
Shares, including the Reallocated Cash Shares, equals the Aggregate Cash
Consideration, and thereafter all Reallocated Cash Shares will be converted into
the right to receive cash; and
(D) the Common Stock Election Shares which are not
Reallocated Cash Shares shall be converted into the right to receive CMTY Common
Stock.
(ii) Aggregate Cash Consideration Oversubscribed. If the amount
of cash represented by the aggregate Cash Election Shares is more than the
Aggregate Cash Consideration, then:
(A) all Common Stock Election Shares and No-Election
Shares shall be converted into the right to receive CMTY Common Stock;
(B) the Exchange Agent shall convert, on a pro rata
basis described in subsection 2.02(e)(iv) below, a sufficient number of Cash
Election Shares into Common Stock Election Shares ("Reallocated Common Stock
Shares") such that the amount of cash represented by the remaining aggregate
Cash Election Shares equals the Aggregate Cash Consideration, and thereafter all
Reallocated Common Stock Shares will be converted into the right to receive CMTY
Common Stock; and
(C) the Cash Election Shares which are not Reallocated
Common Stock Shares shall be converted into the right to receive cash.
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(iii) Aggregate Cash Consideration and Aggregate Common
Stock Consideration Satisfied. If the amount of cash represented by the
aggregate Cash Election Shares is equal to the Aggregate Cash Consideration,
then subsections (e)(i) and (ii) shall not apply, and all Cash Election shares
shall be converted into the right to receive cash and all Common Stock Election
Shares and all No-Election Shares shall be converted into the right to receive
CMTY Common Stock.
(iv) Pro Rata Reallocations. If the Exchange Agent is required
pursuant to subsection 2.02(e)(i)(C) to convert some Common Stock Election
Shares into Reallocated Cash Shares, each holder of Common Stock Election Shares
shall be allocated a pro rata portion of the total Reallocated Cash Shares. If
the Exchange Agent is required pursuant to subsection 2.02(e)(ii)(B) to convert
some Cash Election Shares into Reallocated Common Stock Shares, each holder of
Cash Election Shares shall be allocated a pro rata portion of the total
Reallocated Common Stock Shares.
2.03 Cancellation of Certain Common Stock. Each share of BFC Common
Stock which is owned by CMTY, BFC or any of their Subsidiaries on the Effective
Date (other than shares that are held in trust, managed, custodial or nominee
accounts and the like and which are beneficially owned by third parties) shall
be canceled and cease to be issued and outstanding, and no consideration shall
be delivered therefor.
2.04 Fractional Shares. No fractional shares of CMTY Common Stock and
no scrip or certificates therefor shall be issued in connection with the Merger.
Any former holder of BFC Common Stock who would otherwise be entitled to receive
a fraction of a share of CMTY Common Stock shall receive, in lieu thereof, cash
in an amount equal to such fraction of a share multiplied by the closing price
of CMTY Common Stock on the Effective Date.
2.05 Dissenting BFC Shareholders.
(a) The outstanding shares of BFC Common Stock, the holders of which
have timely filed written notices of an intention to demand appraisal for their
shares ("Dissenting BFC Shares") pursuant to the MGCL and have not effectively
withdrawn or lost their dissenters' rights under the MGCL, shall not be
converted into or represent a right to receive the Merger Consideration under
19
this Agreement, and the holders thereof shall be entitled only to such rights as
are granted by the MGCL.
(b) If any such holder of Dissenting BFC Shares shall have failed to
perfect or effectively shall have withdrawn or lost such right, and if such
holder shall have delivered a properly completed Election Form to the Exchange
Agent by the Election Deadline, the Dissenting BFC Shares held by such holder
shall be converted into a right to receive the Common Stock Consideration or the
Cash Consideration in accordance with the applicable provisions of this
Agreement. If any such holder of BFC Common Stock shall have failed to perfect
or effectively shall have withdrawn or lost such right, and if such holder shall
not have delivered a properly completed Election Form to the Exchange Agent by
the Election Deadline, the Dissenting BFC Shares held by such holder shall be
designated No-Election Shares and shall be converted on a share by share basis
into either the right to receive the Common Stock Consideration or the Cash
Consideration in accordance with the applicable provisions of this Agreement.
(c) All payments in respect of Dissenting BFC Shares, if any, will be
made by CMTY.
2.06 Stock Options. At the Effective Date, each option to purchase
shares of BFC Common Stock (each, a "BFC Option") that is outstanding
immediately prior to the Effective Date and has been granted pursuant to the BFC
Option Plans, shall be converted automatically into the fully vested right to
receive a cash payment equal to the product of (a) the number of shares subject
to such BFC Option and (b) a dollar amount equal to (i) $24.00 less (ii) the
exercise price for such BFC Option. Such cash payment shall be made by BFC
immediately prior to the Effective Date but not until the option holder has
submitted an Acknowledgement and Release Form substantially in the form attached
as BFC Disclosure Schedule 2.06. Such cash payment shall not be considered
compensation for purposes of any other payment obligation of CMTY under this
Agreement.
2.07 Surrender and Exchange of BFC Stock Certificates.
(a) Exchange Fund. On or prior to the Effective Date, CMTY shall
deposit with the Exchange Agent, in trust for the benefit of holders of shares
of BFC Common Stock, sufficient cash and certificates representing shares of
CMTY Common Stock to make all payments and deliveries to
20
stockholders of BFC pursuant to this Article II other than pursuant to Section
2.06. Any cash and certificates for CMTY Common Stock deposited with the
Exchange Agent shall hereinafter be referred to as the "Exchange Fund."
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Date (and in any case no later than ten (10) Business Days
thereafter), CMTY shall cause the Exchange Agent to mail to each record holder
of BFC Common Stock immediately prior to the Effective Date a letter of
transmittal which shall specify that delivery of the certificates for shares of
BFC Common Stock (each, a "BFC Certificate") shall be effected, and risk of loss
and title to the BFC Certificates shall pass, only upon delivery of the BFC
Certificates to the Exchange Agent, and which letter shall be in customary form
and have such other provisions as CMTY may reasonably specify and instructions
for effecting the surrender of such BFC Certificates in exchange for the Merger
Consideration, as the case may be. Upon surrender of a BFC Certificate to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Exchange Agent, the holder of such BFC
Certificate shall be entitled to receive within ten (10) Business Days
thereafter and in exchange therefor (i) a direct registration statement
evidencing, in the aggregate, the whole number of shares of CMTY Common Stock
that such holder has the right to receive pursuant to this Article II and (ii) a
check in the amount equal to any cash that such holder has the right to receive
pursuant to this Article II. No interest will be paid or will accrue on any cash
payment pursuant to this Section 2.07.
(c) Each certificate for shares of CMTY Common Stock (each, a "CMTY
Certificate") issued in exchange for BFC Certificates pursuant to this Section
2.07 shall be dated as of the date the certificate is issue and be entitled to
dividends, distributions and all other rights and privileges pertaining to such
shares of CMTY Common Stock from the Effective Date. Until surrendered, each BFC
Certificate shall, from and after the Effective Date, evidence solely the right
to receive the Merger Consideration.
(d) If a BFC Certificate is exchanged on a date following one or more
record dates after the Effective Date for the payment of dividends or any other
distribution on shares of CMTY Common Stock, CMTY shall pay to the holder of
such BFC Certificate cash in an amount equal to
21
dividends payable on the shares of CMTY Common Stock issued in exchange therefor
and pay or deliver any other distribution to which such shareholder is entitled.
Upon surrender of certificates for shares of BFC Common Stock in exchange for
certificates for CMTY Common Stock, CMTY also shall pay any dividends to which
such holder of BFC Common Stock may be entitled as a result of the declaration
of a dividend on the BFC Common Stock by BFC in accordance with the terms of
this Agreement with a record date prior to the Effective Date and a payment date
after the Effective Date. No interest shall accrue or be payable in respect of
dividends or any other distribution otherwise payable under this Section 2.07(d)
upon surrender of BFC Certificates. Notwithstanding the foregoing, no party
hereto shall be liable to any holder of BFC Common Stock for any amount paid in
good faith to a public official or agency pursuant to any applicable abandoned
property, escheat or similar law. Until such time as BFC Certificates are
surrendered to CMTY for exchange, CMTY shall have the right to withhold
dividends or any other distributions on the shares of CMTY Common Stock issuable
to such shareholder.
(e) Upon the Effective Date, the stock transfer books for BFC Common
Stock will be closed and no further transfers of BFC Common Stock will
thereafter be made or recognized. All BFC Certificates surrendered pursuant to
this Section 2.07 will be cancelled.
(f) If there is a transfer of ownership of BFC Common Stock which is
not registered in the transfer records of BFC, one or more CMTY Certificates
evidencing, in the aggregate, the proper number of shares of CMTY Common Stock,
a check in the proper amount of cash in lieu of any fractional shares and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.07(d), as applicable and appropriate, may be issued with respect to
such BFC Common Stock to such a transferee if the BFC Certificate representing
such shares of BFC Common Stock is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid.
(g) If any BFC Certificate shall have been lost, stolen or destroyed,
the Exchange Agent shall deliver in exchange for such lost, stolen or destroyed
BFC Certificate, upon the making of a sworn affidavit of that fact by the holder
thereof in form satisfactory to the Exchange Agent, the Merger Consideration,
and any dividends or other distributions to which such holder is entitled
pursuant to this Section 2.07 as may be required pursuant to this Agreement;
provided, however, that
22
the Exchange Agent may, in its sole discretion and as a condition precedent to
the delivery of the Merger Consideration to which the holder of such BFC
Certificate is entitled as a result of the Merger, require the owner of such
lost, stolen or destroyed BFC Certificate to deliver a bond in such amount as it
may direct as indemnity against any claim that may be made against BFC, CMTY or
the Exchange Agent or any other party with respect to the BFC Certificate
alleged to have been lost, stolen or destroyed.
2.08 Anti-Dilution Provisions. If CMTY shall, at any time before the
Effective Date:
(a) declare a dividend in shares of CMTY Common Stock with a record
date on or prior to the Closing Date;
(b) combine the outstanding shares of CMTY Common Stock into a smaller
number of shares;
(c) resolve to effect a split or subdivide the outstanding shares of
CMTY Common Stock with a record date on or prior to the Closing Date; or
(d) reclassify the shares of CMTY Common Stock;
then, in any such event, the number of shares of CMTY Common Stock to be
delivered to BFC stockholders who are entitled to receive shares of CMTY Common
Stock in exchange for shares of BFC Common Stock shall be adjusted so that each
BFC shareholder shall be entitled to receive such number of shares of CMTY
Common Stock as such shareholder would have been entitled to receive if the
Effective Date had occurred prior to the happening of such event. In addition,
in the event that, prior to the Effective Date, CMTY enters into an agreement
pursuant to which shares of CMTY Common Stock would be converted into shares or
other securities or obligations of another corporation, proper provision shall
be made in such agreement so that each BFC shareholder entitled to receive
shares of CMTY Common Stock in the Merger shall be entitled to receive such
number of shares or other securities or amount or obligations of such other
corporation as such shareholder would be entitled to receive if the Effective
Date had occurred immediately prior to the happening of such event.
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ARTICLE III- REPRESENTATIONS AND WARRANTIES OF BFC
BFC hereby represents and warrants, on the date hereof and on the
Closing Date, to CMTY that:
3.01 Organization.
(a) BFC is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Maryland. BFC is a savings and loan
holding company, duly registered under Home Owners Loan Act. BFC has the
corporate power and authority to carry on its businesses and operations as now
being conducted and to own and operate the properties and assets now owned and
being operated by it. BFC is duly licensed, registered or qualified to do
business 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, registration or qualification necessary and all such
licenses, registrations and qualifications are in full force and effect in all
material respects, except where the failure to be so licensed, registered or
qualified would not have a Material Adverse Effect.
(b) BUCS is a savings association duly organized and validly existing
under the laws of the United States of America. BUCS has the corporate power and
authority to carry on its business and operations as now being conducted and to
own and operate the properties and assets now owned and being operated by it.
BUCS is duly licensed, registered or qualified to do business 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, registration or qualification necessary and all such licenses,
registrations and qualifications are in full force and effect in all material
respects, except where the failure to be so licensed, registered or qualified
would not have a Material Adverse Effect.
(c) The deposits of BUCS are insured by the Deposit Insurance Fund of
the FDIC to the extent provided in the Federal Deposit Insurance Reform Act of
2005.
(d) BFC has no direct or indirect Subsidiaries other than BUCS and
those identified in BFC Disclosure Schedule 3.01(d).
24
(e) The respective minute books of BFC and each BFC Subsidiary
accurately reflect all material corporate actions of their respective
stockholders and boards of directors, including committees, in each case in
accordance with normal business practice of BFC and each BFC Subsidiary.
(f) BFC has delivered or made available to CMTY true and correct copies
of the articles of incorporation and bylaws of BFC and the federal stock charter
and bylaws of BUCS, and the articles of incorporation and bylaws of each other
BFC Subsidiary, each as in effect on the date hereof.
(g) Each BFC Subsidiary is (i) duly organized, validly existing and in
good standing under the laws of either the United States of America or of the
Subsidiary's state of organization, (ii) has the corporate power and authority
to carry on its business and operations as now being conducted and to own and
operate the properties and assets now owned and being operated by it, (iii) is
duly licensed, registered or qualified to do business 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,
registration or qualification necessary and all such licenses, registrations and
qualifications are in full force and effect in all material respects, except
where the failure to be so licensed, registered or qualified would not have a
Material Adverse Effect.
3.02 Capitalization.
(a) The authorized capital stock of BFC consists of 5,000,000 shares of
common stock, par value $0.10 per share ("BFC Common Stock"), of which at the
date hereof 882,108 shares are validly issued and outstanding, fully paid and
nonassessable, and free of preemptive rights, and zero are held as treasury
shares; and 2,000,000 shares of preferred stock, par value $0.10 per share, of
which at the date hereof none have been issued. BFC has not issued, nor is BFC
bound by, any subscription, option, warrant, call, commitment, agreement or
other Right of any character relating to the purchase, sale, or issuance of, or
right to receive dividends or other distributions on, any shares of BFC Common
Stock or any other security of BFC or any securities representing the right to
vote, purchase or otherwise receive any shares of BFC Common Stock or any other
security of BFC, except for BFC Options for 95,586 shares of BFC Common Stock
issued and outstanding under the BFC Stock Option Plans and BFC Junior
Subordinated Debentures due April 7, 2033
25
issued and outstanding under the Indenture dated as of March 27, 2003, between
BFC and Wells Fargo Bank, National Association, as trustee.
(b) Except as set forth in BFC Disclosure Schedule 3.02(b), BFC owns,
directly or indirectly, all of the capital stock of BUCS and the other BFC
Subsidiaries, free and clear of any liens, security interests, pledges, charges,
encumbrances, agreements and restrictions of any kind or nature. Except for the
Bank Plan of Merger, there are no subscriptions, options, warrants, calls,
commitments, agreements or other Rights outstanding with respect to the capital
stock of BUCS or any other BFC Subsidiary. Except for the BFC Subsidiaries, BFC
does not possess, directly or indirectly, any material equity interest in any
corporation, except for equity interests in BFC's investment portfolio, equity
interests held in connection with BUCS' commercial loan activities, and as set
forth in BFC Disclosure Schedule 3.02(b).
(c) To the Knowledge of BFC, except as may be disclosed in any
subsequent Schedule 13D or 13G filed with the SEC and as set forth in BFC
Disclosure Schedule 3.02(c), no person or group is the beneficial owner of 5% or
more of the outstanding shares of BFC Common Stock (the terms "person," "group"
and "beneficial owner" are as defined in Section 13(d) of the Exchange Act, and
the rules and regulations thereunder).
3.03 Authority; No Violation.
(a) BFC has full corporate power and authority to execute and deliver
this Agreement and, subject to the receipt of the approval of the BFC
stockholders, the approvals of all Regulatory Authorities described in Section
4.04 hereof and the expiration of all waiting periods, to consummate the
Contemplated Transactions. The execution and delivery of this Agreement by BFC
and the consummation by BFC of the Contemplated Transactions have been duly and
validly approved by the Board of Directors of BFC and, except for approval by
the stockholders of BFC as required by the MGCL, no other corporate proceedings
on the part of BFC are necessary to consummate the Merger. This Agreement has
been duly and validly executed and delivered by BFC and, subject to approval by
the stockholders of BFC and subject to receipt of the required approvals of
Regulatory Authorities described in Section 4.04 hereof and expiration of all
waiting periods, constitutes the valid and binding obligation of BFC,
enforceable against BFC in accordance with its
26
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity.
(b) Subject to (i) receipt of approval from the stockholders of BFC,
(ii) receipt of approvals from the Regulatory Authorities referred to in Section
4.04 hereof and (iii) BFC's and CMTY's compliance with any conditions contained
therein, the execution and delivery of this Agreement by BFC, the consummation
of the Merger, and compliance by BFC or any BFC Subsidiary with any of the terms
or provisions hereof, do not and will not:
(A) conflict with or result in a breach of any provision
of the respective articles of incorporation, charter or bylaws of BFC or any BFC
Subsidiary;
(B) violate any statute, rule, regulation, judgment, order,
writ, decree or injunction applicable to BFC or any BFC Subsidiary or any of
their respective properties or assets; or
(C) except as set forth in BFC Disclosure Schedule 3.03(b)(C),
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, or acceleration of,
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 BFC or any BFC Subsidiary under any of the
terms or conditions of any note, bond, mortgage, indenture, license, lease,
agreement, commitment or other instrument or obligation to which BFC or any BFC
Subsidiary is a party, or by which they or any of their respective properties or
assets may be bound or affected, excluding from clauses (B) and (C) hereof, any
items which, in the aggregate, would not have a Material Adverse Effect.
3.04 Consents. Except as described in Section 4.04 of this Agreement,
no consents or approvals of, or filings or registrations with, any public body
or authority are necessary and, except as set forth in BFC Disclosure Schedule
3.04 or where the failure to obtain any consent or approval would constitute a
Material Adverse Effect, no consents or approvals of any third party to a
Material Contract are (or will be ) necessary in connection with the execution
and delivery of this Agreement by BFC or the Bank Plan of Merger by BUCS or,
subject to the
27
consents, approvals, filings and registrations from or with the Regulatory
Authorities referred to in Section 4.04 hereof and compliance with any
conditions contained therein and subject to the approval of this Agreement by
the stockholders of BFC as required under the MGCL, the consummation by BFC or
BUCS of the Contemplated Transactions.
3.05 Financial Statements.
(a) BFC has filed the BFC Financials with the SEC, except those
pertaining to quarterly periods commencing after June 30, 2006, which it will
file on or before the applicable deadline. The filed BFC Financials fairly
present, in all material respects, the consolidated financial position, results
of operations and cash flows of BFC as of and for the periods ended on the dates
thereof, in accordance with GAAP consistently applied, except in each case as
may be noted therein, and subject to normal year-end adjustments and as
permitted by Form 10-QSB in the case of unaudited statements.
(b) To the Knowledge of BFC and except as set forth in BFC Disclosure
Schedule 3.05(b), BFC did not, as of June 30, 2006, have any liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
which are not fully reflected or reserved against in the balance sheets included
in the BFC Financials at the date of such balance sheets which would have been
required to be reflected therein in accordance with GAAP consistently applied or
disclosed in a footnote thereto, except for liabilities and obligations which
were incurred in the ordinary course of business consistent with past practice,
and except for liabilities and obligations which are within the subject matter
of a specific representation and warranty herein or which otherwise have not had
a Material Adverse Effect.
3.06 No Material Adverse Change. Neither BFC nor any BFC Subsidiary has
suffered any adverse change in their respective assets, business, financial
condition or results of operations since June 30, 2006, which change has had a
Material Adverse Effect.
3.07 Taxes.
(a) BFC and the BFC Subsidiaries are members of the same affiliated
group within the meaning of IRC Section 1504(a) of which BFC is a common parent.
BFC has filed, and will file, all material federal, state and local tax returns
required to be filed by, or with respect to, BFC and the
28
BFC Subsidiaries on or prior to the Closing Date, except to the extent that any
failure to file or any inaccuracies would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid or will pay, or made or will make,
provisions for the payment of all federal, state and local taxes which are shown
on such returns to be due for the periods covered thereby from BFC or any BFC
Subsidiary to any applicable taxing authority, on or prior to the Closing Date,
other than taxes which (i) are not delinquent or are being contested in good
faith, (ii) have not been finally determined, or (iii) the failure to pay would
not, individually or in the aggregate, have a Material Adverse Effect.
(b) No consent pursuant to IRC Section 341(f) has been filed, or will
be filed prior to the Closing Date, by or with respect to BFC or any BFC
Subsidiary.
(c) To the Knowledge of BFC, there are no material disputes pending, or
claims asserted in writing, for taxes or assessments upon BFC or any BFC
Subsidiary, nor has BFC or any BFC Subsidiary been requested in writing to give
any currently effective waivers extending the statutory period of limitation
applicable to any federal, state, county or local income tax return for any
period.
(d) Proper and accurate amounts have been withheld by BFC and each BFC
Subsidiary from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable federal,
state and local laws, except where failure to do so is not reasonably likely to
have a Material Adverse Effect.
3.08 Contracts.
(a) Except as set forth in BFC Disclosure Schedule 3.08(a) or BFC
Disclosure Schedule 3.12(a) or in documents listed as exhibits to BFC's
Securities Documents, neither BFC nor any BFC Subsidiary is a party to or
subject to:
(i) any employment, consulting, severance, "change-in-control"
or termination contract or arrangement with any officer, director, employee,
independent contractor, agent or other person, except for "at will"
arrangements;
29
(ii) any plan, arrangement or contract providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit sharing or
similar arrangements for or with any officer, director, employee, independent
contractor, agent or other person;
(iii) any collective bargaining agreement with any labor union
relating to employees;
(iv) any agreement which by its terms limits the payment of
dividends by BFC or any BFC Subsidiary other than generally applicable
regulatory restrictions and this Agreement;
(v) except in the ordinary course of business, any material
instrument evidencing or related to indebtedness for borrowed money, whether
directly or indirectly, by way of purchase money obligation, conditional sale,
lease purchase, guaranty or otherwise, in respect of which BFC or any BFC
Subsidiary is an obligor to any person, other than deposits, repurchase
agreements, bankers acceptances and treasury tax and loan accounts established
in the ordinary course of business, instruments relating to transactions entered
into in the customary course of the banking business of BUCS, including FHLB
advances 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;
(vi) any contract, other than this Agreement, which restricts
or prohibits it from engaging in any type of business permissible under
applicable law;
(vii) any contract, plan or arrangement which provides for
payments or benefits in certain circumstances which, together with other
payments or benefits payable to any participant therein or party thereto, might
render any portion of any such payments or benefits subject to disallowance of
deduction therefor as a result of the application of Section 280G of the IRC;
(viii) any lease for real property;
(ix) any contract or arrangement with any broker-dealer or
investment adviser;
30
(x) any investment advisory contract with any investment
company registered under the Investment Company Act of 1940;
(xi) any contract or arrangement with, or membership in,
any local clearing house or self-regulatory organization;
(xii) any contract or arrangement for the acquisition of,
or any payment in connection with the acquisition of, any equity interest in, or
substantially all the assets of, any business organization; or
(xiii) any Material Contract.
(b) (i) All the contracts, plans, arrangements and instruments listed
in BFC Disclosure Schedule 3.08(a) or BFC Disclosure Schedule 3.12(a) are in
full force and effect on the date hereof, and neither BFC, any BFC Subsidiary,
nor, to the Knowledge of BFC, any other party to any such contract, plan,
arrangement or instrument, has breached any provision of, or is in default under
any term of, any such contract, plan, arrangement or instrument the breach of
which or default under which will have a Material Adverse Effect, and no party
to any such contract, plan, arrangement or instrument will have the right to
terminate any or all of the provisions thereof as a result of the Contemplated
Transactions, the termination of which will have a Material Adverse Effect.
(ii) Except as otherwise set forth in BFC Disclosure Schedule
3.08(a) or BFC Disclosure Schedule 3.12(a), no plan, employment agreement,
termination agreement or similar agreement or arrangement to which BFC or any
BFC Subsidiary is a party or by which BFC or any BFC Subsidiary may be bound:
(A) contains provisions which permit an employee or
an independent contractor to terminate it without cause and continue to accrue
future benefits thereunder;
(B) provides for acceleration in the vesting of
benefits thereunder upon the occurrence of a change in ownership or control or
merger or other acquisition of BFC or any BFC Subsidiary; or
31
(C) requires BFC or any BFC Subsidiary to provide a
benefit in the form of BFC Common Stock or determined by reference to the value
of BFC Common Stock.
3.09 Ownership of Property; Insurance Coverage.
(a) BFC Disclosure Schedule 3.09(a) contains a list of all real
property in which BFC or any BFC Subsidiary has legal or equitable title or a
leasehold interest. BFC and each BFC Subsidiary has, and will have as to
property acquired after the date hereof, good, and as to real property,
marketable, title to all material assets and properties owned by BFC or such BFC
Subsidiary, whether real or personal, tangible or intangible, including
securities, assets and properties reflected in the balance sheets contained in
the BFC Financials or acquired subsequent thereto (except to the extent that
such securities are held in any fiduciary or agency capacity and except to the
extent that such assets and properties have been disposed of for fair value, in
the ordinary course of business, or have been disposed of as obsolete since the
date of such balance sheets), subject to no encumbrances, liens, mortgages,
security interests or pledges, except:
(i) those items that secure liabilities for borrowed money and
that are set forth in BFC Disclosure Schedule 3.09(a)(i) or permitted under
Article V hereof;
(ii) statutory liens for amounts not yet delinquent or which
are being contested in good faith;
(iii) liens for current taxes not yet due and payable;
(iv) pledges to secure deposits and other liens incurred
in the ordinary course of banking business;
(v) such imperfections of title, easements and encumbrances, if
any, as are not material in character, amount or extent; and
(vi) dispositions and encumbrances for adequate consideration
in the ordinary course of business.
32
BFC and each BFC Subsidiary have the right under leases of material properties
used by them in the conduct of their respective businesses to occupy and use all
such properties in all material respects as presently occupied and used by them.
(b) With respect to all agreements pursuant to which BFC or any BFC
Subsidiary has purchased securities subject to an agreement to resell, if any,
BFC or such BFC Subsidiary has a valid, perfected first lien or security
interest in the securities or other collateral securing the repurchase
agreement, and the value of such collateral equals or exceeds the amount of the
debt secured thereby, except to the extent that any failure to obtain such a
lien or maintain such collateral would not, individually or in the aggregate,
have a Material Adverse Effect.
(c) BFC and each BFC Subsidiary maintain insurance in amounts
considered by BFC to be reasonable for their respective operations, and such
insurance is similar in scope and coverage in all material respects to that
maintained by other businesses similarly situated. Neither BFC nor any BFC
Subsidiary has received notice from any insurance carrier that:
(i) such insurance will be cancelled or that coverage thereunder
will be reduced or eliminated; or
(ii) premium costs with respect to such insurance will be
substantially increased; except to the extent such cancellation, reduction,
elimination or increase would not have a Material Adverse Effect.
(d) BFC and each BFC Subsidiary maintain such fidelity bonds,
directors' and officers' liability insurance and errors and omissions insurance
as may be customary or required under applicable laws or regulations.
3.10 Legal Proceedings. Except as set forth in BFC Disclosure Schedule
3.10, neither BFC nor any BFC Subsidiary is a party to any, and there are no
pending or, to the Knowledge of BFC, threatened, legal, administrative,
arbitration or other proceedings, claims, actions, customer complaints, or
governmental investigations or inquiries of any nature:
(a) against BFC or any BFC Subsidiary;
(b) to which the assets of BFC or any BFC Subsidiary are subject;
33
(c) challenging the validity or propriety of any of the Contemplated
Transactions; or
(d) which could materially adversely affect the ability of BFC, BUCS or
any other BFC Subsidiary to perform their respective obligations under this
Agreement and the Bank Plan of Merger; except for any proceedings, claims,
actions, investigations, or inquiries referred to in clauses (a) or (b) of this
Section 3.10 which, individually or in the aggregate, would not have a Material
Adverse Effect.
3.11 Compliance with Applicable Law and Agreements.
(a) BFC and each BFC Subsidiary hold all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under, and have complied in all material respects with, applicable
laws, statutes, orders, rules or regulations of any Regulatory Authority
relating to them, other than where such failure to hold or such noncompliance
will neither result in a limitation in any material respect on the conduct of
its businesses or otherwise have a Material Adverse Effect.
(b) BFC and each BFC Subsidiary have filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that they were required to file with any Regulatory Authority, and have
filed all other reports and statements required to be filed by them, including
without limitation any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, any state or any Regulatory
Authority, and have paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report, registration or
statement or to pay such fees and assessments, either individually or in the
aggregate, would not have a Material Adverse Effect.
(c) Except as set forth on BFC Disclosure Schedule 3.11(c), no
Regulatory Authority has initiated any proceeding or, to the Knowledge of BFC,
investigation into the business or operations of BFC or any BFC Subsidiary
(other than routine banking regulatory examinations), except where any such
proceedings or investigations will not, individually or in the aggregate, have a
Material Adverse Effect, or such proceedings or investigations have been
terminated or otherwise resolved.
34
(d) Except as set forth on BFC Disclosure Schedule 3.11(d), neither BFC
nor any BFC Subsidiary has received any notification or communication from any
Regulatory Authority:
(i) asserting that BFC or any BFC Subsidiary is not in
substantial compliance with any of the statutes, regulations or ordinances which
such Regulatory Authority enforces, unless such assertion has been waived,
withdrawn or otherwise resolved;
(ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to BFC or any BFC Subsidiary;
(iii) requiring or threatening to require BFC or any BFC
Subsidiary, or indicating that BFC or any BFC Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement restricting or limiting, or purporting to restrict or limit,
in any manner the operations of BFC or any BFC Subsidiary, including without
limitation any restriction on the payment of dividends other than generally
applicable regulatory restrictions; or
(iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any manner the operations of BFC or any BFC
Subsidiary (any such notice, communication, memorandum, agreement or order
described in this sentence herein referred to as a "Regulatory Agreement").
(e) Neither BFC nor any BFC Subsidiary has consented to or entered into
any pending Regulatory Agreement.
(f) To the Knowledge of BFC, except as set forth in BFC Disclosure
Schedule 3.11(f), there is no unresolved violation, criticism, or exception by
any Regulatory Authority with respect to any Regulatory Agreement which if
resolved in a manner adverse to BFC or any BFC Subsidiary would have a Material
Adverse Effect.
(g) There is no injunction, order, judgment or decree imposed upon BFC
or any BFC Subsidiary or the assets of BFC or any BFC Subsidiary which has had,
or, to the Knowledge of BFC, would have, a Material Adverse Effect.
35
(h) Neither BFC nor any BFC Subsidiary has breached or defaulted on any
agreement, contract, commitment, arrangement or other instrument to which any of
them is a party or by which any of them may be bound, other than any breach or
default that would not have a Material Adverse Effect.
3.12 ERISA.
(a) BFC has made available or delivered to CMTY true and complete
copies of any employee pension benefit plans within the meaning of ERISA Section
3(2), profit sharing plans, employee stock ownership plans, stock purchase
plans, deferred compensation and supplemental income plans, supplemental
executive retirement plans, annual incentive plans, group insurance plans, and
all other employee welfare benefit plans within the meaning of ERISA Section
3(1) (including vacation pay, sick leave, short-term disability, long-term
disability, and medical plans) and all other employee benefit plans, policies,
agreements and arrangements, all of which are listed in BFC Disclosure Schedule
3.12(a), currently maintained or contributed to for the benefit of the employees
or former employees (including retired employees) and any beneficiaries thereof
or directors or former directors of BFC or any other entity (a "BFC ERISA
Affiliate") that, together with BFC, is treated as a single employer under IRC
Sections 414(b), (c), (m) or (o) (collectively, the "BFC Benefit Plans"),
together with:
(i) the most recent actuarial reports (if any) and financial
reports relating to those BFC Benefit Plans which constitute "qualified plans"
under IRC Section 401(a);
(ii) the most recent Form 5500 (if any) relating to such BFC
Benefit Plans filed by them, respectively, with the IRS; and
(iii) the most recent IRS determination letters which pertain
to any such BFC Benefit Plans.
(b) Neither BFC nor any BFC ERISA Affiliate, and no pension plan
(within the meaning of ERISA Section 3(2)) maintained or contributed to by BFC
or any BFC ERISA Affiliate, has incurred any liability to the Pension Benefit
Guaranty Corporation or to the IRS with respect to any pension plan qualified
under IRC Section 401(a), except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has
36
any reportable event under ERISA Section 4043(b) (with respect to which the 30
day notice requirement has not been waived) occurred with respect to any such
pension plan.
(c) Neither BFC nor any BFC ERISA Affiliate has ever contributed to or
otherwise incurred any liability with respect to a multi-employer plan (within
the meaning of ERISA Section 3(37)).
(d) To the Knowledge of BFC, each BFC Benefit Plan has been maintained,
operated and administered in compliance in all respects with its terms and
related documents or agreements and the applicable provisions of all laws,
including ERISA and the IRC, except where any such non-compliance would not have
a Material Adverse Effect.
(e) There is no existing, or, to the Knowledge of BFC, contemplated,
audit of any BFC Benefit Plan by the IRS, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation or any other governmental authority. In
addition, there are no pending or threatened claims by, on behalf of or with
respect to any BFC Benefit Plan, or by or on behalf of any individual
participant or beneficiary of any BFC Benefit Plan, alleging any violation of
ERISA or any other applicable laws, or claiming benefits (other than claims for
benefits not in dispute and expected to be granted promptly in the ordinary
course of business), nor to the Knowledge of BFC, is there any basis for such
claim.
(f) Except as set forth in BFC Disclosure Schedule 3.12(f), with
respect to any services which BFC or any BFC Subsidiary may provide as a
record-keeper, consultant, administrator, custodian, fiduciary, trustee or
otherwise for any plan, program, or arrangement subject to ERISA (other than any
BFC Benefit Plan), to the Knowledge of BFC, BFC or the relevant BFC Subsidiary:
(i) has correctly computed all contributions, payments or other
amounts in accordance with the applicable documents of any such plan, program or
arrangement;
(ii) has not engaged in any prohibited transactions (as defined
in ERISA Section 406 for which an exemption does not exist);
37
(iii) has not breached any duty imposed on BFC or the relevant
BFC Subsidiary acting as a record-keeper, consultant, administrator, custodian,
fiduciary or trustee by ERISA: and
(iv) has not otherwise incurred any liability to the IRS,
the Department of Labor, the Pension Benefit Guaranty Corporation, or to any
beneficiary, fiduciary or sponsor of any ERISA plan in the performance (or
non-performance) of services; except as previously disclosed to CMTY and except
where any such action or inaction would not have a Material Adverse Effect.
3.13 Brokers and Finders. Neither BFC, any BFC Subsidiary, nor any of
their respective officers, directors, employees, independent contractors or
agents, has employed any broker, finder, investment banker or financial advisor,
or incurred any liability for any fees or commissions to any such person, in
connection with the Contemplated Transactions, except for Fin Pro.
3.14 Environmental Matters.
(a) Except as set forth in BFC Disclosure Schedule 3.14(a), to the
Knowledge of BFC, neither BFC nor any BFC Subsidiary, nor any property owned or
operated by BFC or any BFC Subsidiary, has been or is in violation of or liable
under any Environmental Law, except for such violations or liabilities that,
individually or in the aggregate, would not have a Material Adverse Effect.
There are no actions, suits or proceedings, or demands, claims or notices,
including without limitation notices, demand letters or requests for information
from any Regulatory Authority, instituted or pending, or to the Knowledge of
BFC, threatened, or any investigation pending, relating to the liability of BFC
or any BFC Subsidiary with respect to any property owned or operated by BFC or
any BFC Subsidiary under any Environmental Law, except as to any such actions or
other matters which would not result in a Material Adverse Effect.
(b) To the Knowledge of BFC, no property, now or formerly owned or
operated by BFC or any BFC Subsidiary or on which BFC or any BFC Subsidiary
holds or held a mortgage or other security interest or has foreclosed or taken a
deed in lieu of foreclosure, has been listed or proposed for listing on the
National Priority List under the Comprehensive Environmental Response
38
Compensation and Liability Act of 1980, as amended ("CERCLA"), on the
Comprehensive Environmental Response Compensation and Liabilities Information
System, or any similar state list, or which is the subject of federal, state or
local enforcement actions or other investigations which may lead to claims
against BFC or any BFC Subsidiary for response costs, remedial work,
investigation, damage to natural resources or for personal injury or property
damage claim, including, but not limited to, claims under CERCLA, which would
have a Material Adverse Effect.
3.15 Business of BFC. Since June 30, 2006, neither BFC nor any BFC
Subsidiary has, in any material respect:
(a) increased the wages, salaries, compensation, pension or other
employee benefits payable to any executive officer, employee or director, except
as is permitted in Section 5.01(d);
(b) terminated any material employee benefit plans;
(c) deferred routine maintenance of real property or leased premises;
(d) eliminated a reserve where the liability related to such reserve
has remained;
(e) failed to depreciate capital assets in accordance with past
practice or to eliminate capital assets which are no longer used in its
business; or
(f) had extraordinary reduction or deferral of ordinary or necessary
expenses.
3.16 CRA Compliance. BFC and BUCS are in material compliance with the
applicable provisions of the CRA, and, as of the date hereof, BUCS has received
a CRA rating of "satisfactory" or better from the OTS. To the Knowledge of BFC,
there is no fact or circumstance or set of facts or circumstances which would
cause BFC or BUCS to fail to comply with such provisions in a manner which would
have a Material Adverse Effect.
3.17 Bank Merger.
(a) BUCS has full corporate power and authority to execute and deliver
the Bank Plan of Merger and to consummate the Bank Merger. The execution and
delivery of the Bank Plan of Merger by BUCS and the consummation by BUCS of the
Bank Merger have been (or will be) duly
39
and validly approved by the Board of Directors of BUCS and by BFC as sole
shareholder of BUCS, and no other corporate proceedings on the part of BUCS are
necessary to consummate the Bank Merger. Subject to receipt of required
approvals of Regulatory Authorities and the expiration of all required waiting
periods, the Bank Plan of Merger, upon its execution and delivery by BUCS
concurrently with the execution and delivery of this Agreement, will constitute
the valid and binding obligation of BUCS, enforceable against BUCS in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity.
(b) The execution and delivery of the Bank Plan of Merger and the
consummation of the Bank Merger will not:
(i) conflict with or result in a breach of any provision
of the respective articles of incorporation or bylaws of BFC, BUCS or any
Subsidiary of BUCS;
(ii) subject to receipt of required Regulatory Approvals
and the expiration of all required waiting periods, violate any statute, rule,
regulation, judgment, order, writ, decree or injunction applicable to BFC, BUCS,
any Subsidiary of BUCS or any of their respective properties or assets; or
(iii) except as disclosed in BFC Disclosure Schedule 3.17(b)
(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, or acceleration
of 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 respective properties or assets of BFC or BUCS
under, any of the terms or conditions of any note, bond, mortgage, indenture,
license, lease, agreement, commitment or other instrument or obligation to which
BFC or BUCS is a party, or by which they or any of their respective properties
or assets may be bound or affected; excluding from clauses (ii) and (iii) any
such items which, in the aggregate, would not have a Material Adverse Effect.
40
3.18 Information to be Supplied.
(a) The information supplied by BFC for inclusion in the Registration
Statement (including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act, and
as of the date the Prospectus/Proxy Statement is mailed to stockholders of BFC,
and up to and including the date of the BFC Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
in which they were made, not misleading.
(b) The information supplied by BFC for inclusion in the Applications
will, at the time each such document is filed with any Regulatory Authority and
up to and including the dates of any required regulatory approvals or consents,
as such Applications may be amended by subsequent filings, be accurate in all
material respects.
3.19 Related Party Transactions.
(a) Except as set forth on BFC Disclosure Schedule 3.19, or as is
disclosed in the footnotes to the BFC Financials, as of the date hereof, neither
BFC nor any BFC Subsidiary is a party to any transaction (including any loan or
other credit accommodation but excluding deposits in the ordinary course of
business) with any Affiliate of BFC or any BFC Subsidiary, and all such
transactions were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other "persons" (as defined in Section 13(d) of the Exchange Act, and the rules
and regulations thereunder), except with respect to variations in such terms as
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Except as set forth in BFC Disclosure Schedule 3.19, as of the date
hereof, no loan or credit accommodation to any BFC Affiliate is presently in
default or, during the three-year period prior to the date of this Agreement,
has been in material default or has been restructured, modified or extended in
any manner which would have a Material Adverse Effect. To the Knowledge of BFC,
as of the date hereof, principal and interest with respect to any such loan or
41
other credit accommodation will be paid when due and the loan grade
classification accorded such loan or credit accommodation is appropriate.
3.20 Loans. To the Knowledge of BFC, all loans reflected as assets in
the BFC Financials are evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and correct, and to the extent secured, are
secured by valid liens and security interests which have been perfected,
excluding loans as to which the failure to satisfy the foregoing standards would
not have a Material Adverse Effect.
3.21 Allowance for Loan Losses. The allowance for loan losses shown,
and to be shown, on the balance sheets contained in the BFC Financials have
been, and will be, established in accordance with GAAP and all applicable
regulatory criteria.
3.22 Reorganization. As of the date hereof, BFC does not have any
reason to believe that the Merger will fail to qualify as a reorganization under
Section 368(a) of the IRC.
3.23 Fairness Opinion. BFC has received a written opinion from FinPro
to the effect that, as of the date hereof, the transaction is fair to the
stockholders of BFC from a financial point of view.
3.24 Securities Documents.
(a) BFC has delivered or made available to CMTY copies of the annual
reports to stockholders for the years 2003, 2004 and 2005 that were delivered
with its proxy statements for such years.
(b) BFC's annual reports on SEC Form 10-KSB for the years ended
December 31, 2004 and 2005, quarterly report on SEC Form 10-QSB for the quarters
ended March 31, 2006 and June 30, 2006, all other reports, registration
statements and filings of BFC filed with the SEC since January 1, 2006 and proxy
materials used in connection with its meetings of stockholders held in 2005 and
2006 complied, in all material respects, and all future SEC reports, filings,
and proxy materials will comply, in all material respects, with the rules and
regulations of the SEC to the extent applicable thereto, and all such SEC
reports, filings and proxy materials did not and will not, at the time of their
filing, contain any untrue statement of a material fact or omit to state a
material
42
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances in which they were made, not misleading.
3.25 "Well Capitalized". BUCS is "well capitalized" within the meaning
of applicable banking regulations.
3.26 Quality of Representations. To the Knowledge of BFC, no
representation made by BFC in this Agreement contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
ARTICLE IV- REPRESENTATIONS AND WARRANTIES OF CMTY
CMTY hereby represents and warrants, on the date hereof and on the
Closing Date, to BFC that:
4.01 Organization.
(a) CMTY is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. CMTY is a bank
holding company duly registered under the BHC Act and has made a valid financial
holding company election. CMTY has the corporate power and authority to carry on
its businesses and operations as now being conducted and to own and operate the
properties and assets now owned and being operated by it. CMTY is duly licensed,
registered or qualified to do business 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, registration or
qualification necessary, except where the failure to be so licensed, registered
or qualified will not have a Material Adverse Effect, and all such licenses,
registrations and qualifications are in full force and effect in all material
respects.
(b) Community is a bank and trust company duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Community has the corporate power and authority to carry on its
business and operations as now being conducted and to own and operate the
properties and assets now owned and being operated by it. Community is duly
licensed, registered or qualified to do business 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
43
such licensing, registration or qualification necessary, except where the
failure to be so licensed, registered or qualified will not have a Material
Adverse Effect, and all such licenses, registrations and qualifications are in
full force and effect in all material respects.
(c) The deposits of Community are insured by the Deposit Insurance Fund
of the FDIC to the extent provided in the Federal Deposit Insurance Reform Act
of 2005.
(d) CMTY has no direct or indirect Subsidiaries other than those
identified in CMTY Disclosure Schedule 4.01(d).
(e) The respective minute books of CMTY and each CMTY Subsidiary
accurately reflect all material corporate actions of their respective
shareholders and boards of directors, including committees, in each case in
accordance with the normal business practice of CMTY and each CMTY Subsidiary.
(f) CMTY has delivered or made available to BFC true and correct copies
of the respective articles of incorporation, articles of association and bylaws
of CMTY and each CMTY Subsidiary, as in effect on the date hereof.
(g) Each CMTY Subsidiary is (i) duly organized, validly existing and in
good standing under the laws of either the United States of America or of the
Subsidiary's state of organization, (ii) has the corporate power and authority
to carry on its business and operations as now being conducted and to own and
operate the properties and assets now owned and being operated by it, (iii) is
duly licensed, registered or qualified to do business 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,
registration or qualification necessary, except where the failure to be so
licensed, registered or qualified would not have a Material Adverse Effect, and
all such licenses, registrations and qualifications are in full force and effect
in all material respects.
4.02 Capitalization.
(a) The authorized capital stock of CMTY consists of (a) 50,000,000
shares of common stock, par value of $5.00 ("CMTY Common Stock"), of which
1,019,202 shares are validly issued and held by CMTY as treasury stock and
24,478,472 shares are validly issued and
44
outstanding, fully paid and nonassessable and free of preemptive rights, and (b)
500,000 shares of preferred stock, without par value, of which none are issued.
CMTY has not issued nor is CMTY bound by any subscription, option, warrant,
call, commitment, agreement or other Right of any character relating to the
purchase, sale, or issuance of, or right to receive dividends or other
distributions on, any shares of CMTY Common Stock or any other security of CMTY
or any securities representing the right to vote, purchase or otherwise receive
any shares of CMTY Common Stock or any other security of CMTY, except (i) for
options to acquire shares of CMTY Common Stock issued under CMTY's various stock
option plans, (ii) pursuant to CMTY's employee stock purchase plan and dividend
reinvestment plan, (iii) pursuant to the Rights Agreement and (iv) this
Agreement.
(b) CMTY owns, directly or indirectly, all of the capital stock of
Community and the capital stock and membership interests of the other CMTY
Subsidiaries, free and clear of any liens, security interests, pledges, charges,
encumbrances, agreements and restrictions of any kind or nature. There are no
subscriptions, options, warrants, calls, commitments, agreements or other Rights
outstanding with respect to the capital stock of Community or any other CMTY
Subsidiary. Except for the CMTY Subsidiaries, CMTY does not possess, directly or
indirectly, any material equity interest in any corporation, except for equity
interests in the investment portfolios of CMTY's Subsidiaries, equity interests
held by CMTY or CMTY's Subsidiaries in a fiduciary capacity, and equity
interests held in connection with the commercial loan activities of Community.
(c) To the Knowledge of CMTY, except as may be disclosed in any
subsequent Schedule 13D or 13G filed with the SEC and as set forth in CMTY
Disclosure Schedule 4.02(c), no person or group is the beneficial owner of 5% or
more of the outstanding shares of CMTY Common Stock (the terms "person," "group"
and "beneficial owner" are as defined in Section 13(d) of the Exchange Act, and
the rules and regulations thereunder).
4.03 Authority; No Violation.
(a) CMTY has full corporate power and authority to execute and deliver
this Agreement and to consummate the Contemplated Transactions. The execution
and delivery of this Agreement by CMTY and the consummation by CMTY of the
Contemplated Transactions have been duly and validly approved by the Board of
Directors of CMTY by unanimous vote, and no
45
other corporate proceedings on the part of CMTY are necessary to consummate the
Merger. This Agreement has been duly and validly executed and delivered by CMTY
and, subject to receipt of the required approvals of Regulatory Authorities
described in Section 4.04 hereof, constitutes the valid and binding obligation
of CMTY, enforceable against CMTY in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of equity.
(b) Subject to (i) receipt of approvals from the Regulatory Authorities
referred to in Section 4.04 hereof and (ii) CMTY's and BFC's compliance with any
conditions contained therein, the execution and delivery of this Agreement by
CMTY, the consummation of the Contemplated Transactions, and compliance by CMTY
or any CMTY Subsidiary with any of the terms or provisions hereof, do not and
will not:
(A) conflict with or result in a breach of any provision
of the respective articles of incorporation, articles of association or bylaws
of CMTY or any CMTY Subsidiary;
(B) violate any statute, rule, regulation, judgment, order,
writ, decree or injunction applicable to CMTY or any CMTY Subsidiary or any of
their respective properties or assets; or
(C) 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,
or acceleration of 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 CMTY or any
CMTY Subsidiary under, any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other instrument
or obligation to which CMTY or any CMTY Subsidiary is a party, or by which they
or any of their respective properties or assets may be bound or affected,
excluding from clauses (B) and (C) any such items which, in the aggregate, would
not have a Material Adverse Effect.
46
4.04 Consents.
Except for consents and approvals of, or filings with, the SEC, the
FRB, the FDIC, the OTS, the PDB, the PDS, the NASD and state securities
authorities, no consents or approvals of, or filings or registrations with, any
public body or authority are necessary and, except where the failure to obtain
any consent or approval would constitute a Material Adverse Effect, no consents
or approvals of any third party to a Material Contract are (or will be)
necessary in connection with the execution and delivery of this Agreement by
CMTY or the consummation of the Contemplated Transactions.
4.05 Financial Statements.
(a) CMTY has filed the CMTY Financials with the SEC, except those
pertaining to quarterly periods commencing after June 30, 2006, which it will
file on or before the applicable deadline. The filed CMTY Financials fairly
present, in all material respects, the consolidated financial position, results
of operations and cash flows of CMTY as of and for the periods ended on the
dates thereof, in accordance with GAAP consistently applied, except in each case
as may be noted therein, and subject to normal year-end adjustments and as
permitted by Form 10-Q in the case of unaudited statements.
(b) To the Knowledge of CMTY, CMTY did not have any liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
which are not fully reflected or reserved against in the balance sheets included
in the CMTY Financials as of June 30, 2006, which would have been required to be
reflected therein in accordance with GAAP consistently applied or disclosed in a
footnote thereto, except for liabilities and obligations which were incurred in
the ordinary course of business consistent with past practice, and except for
liabilities and obligations which are within the subject matter of a specific
representation and warranty herein or which otherwise have not had a Material
Adverse Effect.
4.06 No Material Adverse Change. Neither CMTY nor any CMTY Subsidiary
has suffered any adverse change in their respective assets, financial condition
or results of operations since June 30, 2006 which change has had a Material
Adverse Effect.
47
4.07 Taxes.
(a) CMTY and the CMTY Subsidiaries are members of the same affiliated
group within the meaning of IRC Section 1504(a) of which CMTY is the common
parent. CMTY has filed, and will file, all material federal, state and local tax
returns required to be filed by, or with respect to, CMTY and the CMTY
Subsidiaries on or prior to the Closing Date, except to the extent that any
failure to file or any inaccuracies would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid or will pay, or made or will make,
provisions for the payment of all federal, state and local taxes which are shown
on such returns to be due for the periods covered thereby from CMTY or any CMTY
Subsidiary to any applicable taxing authority, on or prior to the Closing Date,
other than taxes which (i) are not delinquent or are being contested in good
faith, (ii) have not been finally determined, or (iii) the failure to pay would
not, individually or in the aggregate, have a Material Adverse Effect.
(b) No consent pursuant to IRC Section 341(f) has been filed, or will
be filed prior to the Closing Date, by or with respect to CMTY or any CMTY
Subsidiary.
(c) To the Knowledge of CMTY, there are no material disputes pending,
or claims asserted in writing, for taxes or assessments upon CMTY or any CMTY
Subsidiary, nor has CMTY nor any CMTY Subsidiary been requested in writing to
give any currently effective waivers extending the statutory period of
limitation applicable to any federal, state, county or local income tax return
for any period.
(d) Proper and accurate amounts have been withheld by CMTY and each
CMTY Subsidiary from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable federal,
state and local laws, except where failure to do so is not reasonably likely to
have a Material Adverse Effect.
4.08 Contracts. Except as described on CMTY Disclosure Schedule 4.08 or
in documents listed as exhibits to CMTY's Securities Documents, neither CMTY nor
any CMTY Subsidiary is a party to or subject to: (i) any agreement which by its
terms limits the payment of dividends by CMTY or any CMTY Subsidiary, (ii) any
contract, other than this Agreement, which restricts or prohibits it from
engaging in any type of business permissible under applicable
48
law or (iii) any agreement which may adversely affect the ability of CMTY or any
CMTY Subsidiary to consummate the Contemplated Transactions.
4.09 Ownership of Property; Insurance Coverage.
(a) CMTY and each CMTY Subsidiary has, and will have as to property
acquired after the date hereof, good, and as to real property, marketable, title
to all material assets and properties owned by CMTY or such CMTY Subsidiary,
whether real or personal, tangible or intangible, including securities, assets
and properties reflected in the balance sheets contained in the CMTY Financials
or acquired subsequent thereto (except to the extent that such securities are
held in any fiduciary or agency capacity and except to the extent that such
assets and properties have been disposed of for fair value, in the ordinary
course of business, or have been disposed of as obsolete since the date of such
balance sheets), subject to no encumbrances, liens, mortgages, security
interests or pledges, except:
(i) those items that secure liabilities for borrowed money and
that are set forth in CMTY Disclosure Schedule 4.09 or permitted under Article V
hereof;
(ii) statutory liens for amounts not yet delinquent or which
are being contested in good faith;
(iii) liens for current taxes not yet due and payable;
(iv) pledges to secure deposits and other liens incurred
in the ordinary course of banking business;
(v) such imperfections of title, easements and encumbrances, if
any, as are not material in character, amount or extent; and
(vi) dispositions and encumbrances for adequate consideration
in the ordinary course of business.
CMTY and each CMTY Subsidiary have the right under leases of material properties
used by CMTY or such CMTY Subsidiary in the conduct of their respective
businesses to occupy and use all such properties in all material respects as
presently occupied and used by them.
49
(b) With respect to all agreements pursuant to which CMTY or any CMTY
Subsidiary has purchased securities subject to an agreement to resell, if any,
CMTY or such CMTY Subsidiary has a valid, perfected first lien or security
interest in the securities or other collateral securing the repurchase
agreement, and the value of such collateral equals or exceeds the amount of the
debt secured thereby, except to the extent that any failure to obtain such a
lien or maintain such collateral would not, individually or in the aggregate,
have a Material Adverse Effect.
(c) CMTY and each CMTY Subsidiary maintain insurance in amounts
considered by CMTY to be reasonable for their respective operations, and such
insurance is similar in scope and coverage in all material respects to that
maintained by other businesses similarly situated. Neither CMTY nor any CMTY
Subsidiary has received notice from any insurance carrier that:
(i) such insurance will be cancelled or that coverage thereunder
will be reduced or eliminated; or
(ii) premium costs with respect to such insurance will be
substantially increased; except to the extent such cancellation, reduction,
elimination or increase would not have a Material Adverse Effect.
(d) CMTY and each CMTY Subsidiary maintain such fidelity bonds,
directors' and officers' liability insurance and errors and omissions insurance
as may be customary or required under applicable laws or regulations.
4.10 Financing. At the Effective Date, CMTY will have available cash
sufficient to pay the amounts required to be paid to BFC stockholders pursuant
to this Agreement and shares available and reserved to pay the Common Stock
Consideration, upon consummation of the Merger.
4.11 Legal Proceedings. Except as set forth in CMTY Disclosure Schedule
4.11, neither CMTY nor any CMTY Subsidiary is a party to any, and there are no
pending or, to the Knowledge of CMTY, threatened, legal, administrative,
arbitration or other proceedings, claims, actions, customer complaints, or
governmental investigations or inquiries of any nature:
(a) against CMTY or any CMTY Subsidiary;
50
(b) to which the assets of CMTY or any CMTY Subsidiary are subject;
(c) challenging the validity or propriety of any of the Contemplated
Transactions; or
(d) which could materially adversely affect the ability of CMTY or any
other CMTY Subsidiary to perform their respective obligations under this
Agreement and the Bank Plan of Merger; except for any proceedings, claims,
actions, investigations, or inquiries referred to in clauses (a) or (b) which,
individually or in the aggregate, would not have a Material Adverse Effect.
4.12 Compliance with Applicable Law and Agreements.
(a) CMTY and each CMTY Subsidiary hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under, and have complied in all material respects with, applicable
laws, statutes, orders, rules or regulations of any Regulatory Authority
relating to them, other than where such failure to hold or such noncompliance
will neither result in a limitation in any material respect on the conduct of
their respective businesses nor otherwise have a Material Adverse Effect.
(b) CMTY and each CMTY Subsidiary have filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that they were required to file with any Regulatory Authority, and have
filed all other reports and statements required to be filed by them, including
without limitation any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, any state or any Regulatory
Authority, and have paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report, registration or
statement or to pay such fees and assessments, either individually or in the
aggregate, would not have a Material Adverse Effect.
(c) No Regulatory Authority has initiated any proceeding or, to the
Knowledge of CMTY, investigation into the businesses or operations of CMTY or
any of its Subsidiaries, except where any such proceedings or investigations
will not, individually or in the aggregate, have a Material Adverse Effect, or
such proceedings or investigations have been terminated or otherwise resolved.
51
(d) Neither CMTY nor any CMTY Subsidiary has received any notification
or communication from any Regulatory Authority:
(i) asserting that CMTY or any CMTY Subsidiary is not in
substantial compliance with any of the statutes, regulations or ordinances which
such Regulatory Authority enforces, unless such assertion has been waived,
withdrawn or otherwise resolved;
(ii) threatening to revoke any license, franchise, permit
or governmental authorization which is material to CMTY or any CMTY Subsidiary;
(iii) requiring or threatening to require CMTY or any CMTY
Subsidiary, or indicating that CMTY or any CMTY Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement restricting or limiting, or purporting to restrict or limit,
in any manner the operations of CMTY or any CMTY Subsidiary, including without
limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any manner the operations of CMTY or any CMTY
Subsidiary (any such notice, communication, memorandum, agreement or order
described in this sentence herein referred to as a Regulatory Agreement"); in
each case except as heretofore disclosed to BFC.
(e) Neither CMTY nor any CMTY Subsidiary has received, consented to, or
entered into any pending Regulatory Agreement.
(f) To the Knowledge of CMTY, there is no unresolved violation,
criticism, or exception by any Regulatory Authority with respect to any
Regulatory Agreement which if resolved in a manner adverse to CMTY or any CMTY
Subsidiary would have a Material Adverse Effect.
(g) There is no injunction, order, judgment or decree imposed upon CMTY
or any CMTY Subsidiary or the assets of CMTY or any CMTY Subsidiary which has
had, or, to the Knowledge of CMTY, would have, a Material Adverse Effect.
(h) Neither CMTY nor any CMTY Subsidiary has breached or defaulted on
any agreement, contract, commitment, arrangement or other instrument to which
any of them is a party
52
or by which any of them may be bound, other than any breach or default that
would not have a Material Adverse Effect.
4.13 ERISA.
(a) CMTY has delivered or made available to BFC true and complete
copies of any employee pension benefit plans within the meaning of ERISA Section
3(2), profit sharing plans, stock purchase plans, deferred compensation and
supplemental income plans, supplemental executive retirement plans, annual
incentive plans, group insurance plans, and all other employee welfare benefit
plans within the meaning of ERISA Section 3(1) (including vacation pay, sick
leave, short-term disability, long-term disability, and medical plans) and all
other employee benefit plans, policies, agreements and arrangements, all of
which are listed in CMTY Disclosure Schedule 4.13, currently maintained or
contributed to for the benefit of the employees or former employees (including
retired employees) and any beneficiaries thereof or directors or former
directors of CMTY or any other entity (a "CMTY ERISA Affiliate") that, together
with CMTY, is treated as a single employer under IRC Sections 414(b), (c), (m)
or (o) (collectively, the "CMTY Benefit Plans"), together with:
(i) the most recent actuarial reports (if any) and financial
reports relating to those CMTY Benefit Plans which constitute "qualified plans"
under IRC Section 401(a);
(ii) the most recent Form 5500 (if any) relating to such CMTY
Benefit Plans filed by them, respectively, with the IRS; and
(iii) the most recent IRS determination letters which pertain
to any such CMTY Benefit Plans.
(b) Neither CMTY nor any CMTY ERISA Affiliate, and no pension plan
(within the meaning of ERISA Section 3(2)) maintained or contributed to by CMTY
or any CMTY ERISA Affiliate, has incurred any liability to the Pension Benefit
Guaranty Corporation or to the IRS with respect to any pension plan qualified
under IRC Section 401(a), except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has any reportable event under ERISA Section 4043(b) (with respect to which
the 30 day notice requirement has not been waived) occurred with respect to any
such pension plan.
53
(c) Neither CMTY nor any CMTY ERISA Affiliate has ever contributed to
or otherwise incurred any liability with respect to a multi-employer plan
(within the meaning of ERISA Section 3(37)).
(d) Each CMTY Benefit Plan has been maintained, operated and
administered in compliance in all respects with its terms and related documents
or agreements and the applicable provisions of all laws, including ERISA and the
IRC, except where any such non-compliance would not have a Material Adverse
Effect.
(e) There is no existing, or, to the Knowledge of CMTY, contemplated,
audit of any CMTY Benefit Plan by the IRS, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation or any other governmental authority. In
addition, there are no pending or threatened claims by, on behalf of or with
respect to any CMTY Benefit Plan, or by or on behalf of any individual
participant or beneficiary of any CMTY Benefit Plan, alleging any violation of
ERISA or any other applicable laws, or claiming benefits (other than claims for
benefits not in dispute and expected to be granted promptly in the ordinary
course of business), nor to the Knowledge of CMTY, is there any basis for such
claim.
4.14 Brokers and Finders. Neither CMTY, any CMTY Subsidiary, nor any of
their respective officers, directors, employees, independent contractors or
agents, has employed any broker, finder, investment banker or financial advisor,
or incurred any liability for any fees or commissions to any such person, in
connection with the Contemplated Transactions, except for Boenning &
Scattergood, Inc.
4.15 CRA Compliance. CMTY and Community are in material compliance with
the applicable provisions of the CRA, and, as of the date hereof, Community has
received a CRA rating of "satisfactory" or better from the FDIC. To the
Knowledge of CMTY, there is no fact or circumstance or set of facts or
circumstances which would cause Community to fail to comply with such provisions
in a manner which would have a Material Adverse Effect.
4.16 Bank Merger.
(a) Community has full corporate power and authority to execute and
deliver the Bank Plan of Merger and to consummate the Bank Merger. The execution
and delivery of the Bank Plan
54
of Merger by Community and the consummation by Community of the Bank Merger have
been (or will be) duly and validly approved by the Board of Directors of
Community and by CMTY as sole shareholder of Community, and no other corporate
proceedings on the part of Community are necessary to consummate the Bank
Merger. Subject to receipt of required approvals of Regulatory Authorities, the
Bank Plan of Merger, upon its execution and delivery by Community concurrently
with the execution and delivery of this Agreement, will constitute the valid and
binding obligation of Community, enforceable against Community in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity.
(b) The execution and delivery of the Bank Plan of Merger and the
consummation of the Bank Merger will not:
(i) conflict with or result in a breach of any provision
of the respective articles of incorporation or association or bylaws of CMTY or
Community;
(ii) subject to receipt of required approvals of Regulatory
Authorities, violate any statute, rule, regulation, judgment, order, writ,
decree or injunction applicable to CMTY or Community 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,
or acceleration of 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 respective properties or assets of
CMTY or Community under, any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other instrument
or obligation to which CMTY or Community is a party, or by which they or any of
their respective properties or assets may be bound or affected; excluding from
clauses (ii) and (iii) any such items which, in the aggregate, would not have a
Material Adverse Effect.
55
4.17 Information to be Supplied.
(a) The information supplied by CMTY for inclusion in the Registration
Statement (including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act, and
as of the date the Prospectus/Proxy Statement is mailed to stockholders of BFC,
and up to and including the date of the BFC Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
in which they were made, not misleading.
(b) The information supplied by CMTY for inclusion in the Applications
will, at the time each such document is filed with any Regulatory Authority and
up to and including the dates of any required regulatory approvals or consents,
as such Applications may be amended by subsequent filings, be accurate in all
material respects.
4.18 Reorganization. As of the date hereof, CMTY does not have any
reason to believe that the Merger will fail to qualify as a reorganization under
Section 368(a) of the IRC. CMTY shall not take any action which would preclude
the Merger from qualifying as a reorganization within the meaning of Section 368
of the IRC.
4.19 CMTY Common Stock. The shares of CMTY Common Stock to be issued
and delivered to BFC stockholders in accordance with this Agreement, when so
issued and delivered, will be validly authorized and issued and fully paid and
non-assessable, and no shareholder of CMTY shall have any pre-emptive right with
respect thereto.
4.20 Securities Documents. CMTY has delivered to or made available to
BFC copies of:
(a) the annual reports to shareholders for the years 2003, 2004 and
2005 that were delivered with its proxy statements for such years;
(b) all other reports, registration statements and filings of CMTY
filed with the SEC since January 1, 2006; and
(c) CMTY's proxy materials used in connection with its meetings of
shareholders held in 2005 and 2006.
56
Such reports and proxy materials complied, in all material respects,
and any future SEC reports, filings, and proxy materials will comply, in all
material respects, with the rules and regulations of the SEC to the extent
applicable thereto. All such SEC reports, filings and proxy materials did not
and will not, at the time of their filing, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading.
4.21 Rights Agreement. No event or circumstance has occurred resulting
in, and neither the execution nor consummation of this Agreement by CMTY will
result in the grant, issuance or triggering of any right or entitlement or the
obligation to grant or issue any interest in CMTY Common Stock or enable or
allow any right or other interest associated with the Rights Agreement to be
exercised, distributed or triggered.
4.22 "Well Capitalized". CMTY and Community are "well capitalized"
within the meaning of the FRB's and FDIC's regulations, respectively. CMTY and
Community will be "well capitalized" on the Closing Date.
4.23 Quality of Representations. To the Knowledge of CMTY, no
representation made by CMTY in this Agreement contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
4.24 Environmental.
(a) Except as set forth in CMTY Disclosure Schedule 4.24(a), to the
Knowledge of CMTY, neither CMTY nor any CMTY Subsidiary, nor any property owned
or operated by CMTY or any CMTY Subsidiary, has been or is in violation of or
liable under any Environmental Law, except for such violations or liabilities
that, individually or in the aggregate, would not have a Material Adverse
Effect. There are no actions, suits or proceedings, or demands, claims or
notices, including without limitation notices, demand letters or requests for
information from any Regulatory Authority, instituted or pending, or, to the
Knowledge of CMTY, threatened, or any investigation pending, relating to the
liability of CMTY or any CMTY Subsidiary with respect to any property
57
owned or operated by CMTY or any CMTY Subsidiary under any Environmental Law,
except as to any such actions or other matters which would not result in a
Material Adverse Effect.
(b) To the Knowledge of CMTY, no property, now or formerly owned or
operated by CMTY or any CMTY Subsidiary or on which CMTY or any CMTY Subsidiary
holds or held a mortgage or other security interest or has foreclosed or taken a
deed in lieu of foreclosure, has been listed or proposed for listing on the
National Priority List under the CERCLA, on the Comprehensive Environmental
Response Compensation and Liabilities Information System, or any similar state
list, or which is the subject of federal, state or local enforcement actions or
other investigations which may lead to claims against CMTY or any CMTY
Subsidiary for response costs, remedial work, investigation, damage to natural
resources or for personal injury or property damage claim, including, but not
limited to, claims under CERCLA, which would have a Material Adverse Effect.
4.25 Allowance for Loan Losses. The allowance for loan losses shown,
and to be shown, on the balance sheets contained in the CMTY Financials have
been, and will be, established in accordance with GAAP and all applicable
regulatory criteria.
ARTICLE V- COVENANTS OF THE PARTIES
5.01 Conduct of BFC's Business. From the date hereof through the
Closing Date, except as otherwise set forth herein, BFC shall, and shall cause
each BFC Subsidiary to, in all material respects, conduct its businesses and
engage in transactions only in the ordinary course and consistent with past
practice, except as otherwise required or contemplated by this Agreement or with
the written consent of CMTY. BFC shall, and shall cause each BFC Subsidiary to,
use its reasonable good faith efforts to preserve its business organization
intact, maintain good relationships with employees, and preserve the good will
of customers of BFC or the BFC Subsidiaries and others with whom business
relationships exist. From the date hereof through the Closing Date, except as
otherwise consented to in writing by CMTY (such consent shall not be
unreasonably withheld) or as permitted by this Agreement, BFC shall not, and
shall not permit any BFC Subsidiary to:
(a) change any provision of its articles of incorporation or of its
bylaws;
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(b) change the number of authorized or issued shares of its capital
stock; repurchase any shares of capital stock; or issue or grant any option,
warrant, call, commitment, subscription, Right or agreement of any character
relating to its authorized or issued capital stock or any securities convertible
into shares of capital stock; declare, set aside or pay any dividend or other
distribution in respect of capital stock; initiate a dividend reinvestment plan;
or redeem or otherwise acquire any shares of BFC capital stock; except that:
(i) subject to applicable regulatory restrictions, if any, BUCS
may pay cash dividends to BFC sufficient for BFC to fund any dividend by BFC
permitted hereunder;
(ii) any BFC Subsidiary may pay dividends to BFC in the ordinary
course of business consistent with past practice;
(c) grant any severance or termination pay to (other than pursuant to
policies or agreements of BFC or any BFC Subsidiary in effect on the date
hereof) or enter into or amend any employment, consulting, severance,
"change-in-control" or termination contract or arrangement with any officer,
director, employee, independent contractor, agent or other person associated
with BFC or any BFC Subsidiary;
(d) grant job promotions or increase the rate of compensation of, or
pay any bonus to, any director, officer, employee, independent contractor, agent
or other person associated with BFC or any BFC Subsidiary, except for:
(i) routine periodic pay increases, selective merit pay
increases and pay-raises in connection with promotions, all in accordance with
past practice; provided, however, that such pay increases and raises shall not
exceed five percent (5%) in the aggregate;
(ii) subject to the approval of CMTY, which shall not be
unreasonably withheld, annual bonuses in the ordinary course (other than timing
of payment) for 2006 as scheduled at BFC Disclosure Schedule 5.01(d)(ii),
determined consistently with past practice and in accordance with policies or
agreements of BFC or any BFC Subsidiary in effect on the date hereof, to be
payable on or before December 31, 2006, to persons designated by BFC; and
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(e) merge or consolidate with any other corporation; sell or lease all
or any substantial portion of its assets or businesses; make any acquisition of
all or any substantial portion of the business or assets of any other person,
firm, association, corporation or business organization; enter into a purchase
and assumption transaction with respect to deposits, loans or liabilities;
relocate or surrender its certificate of authority to maintain, or file an
application for the relocation of, any existing office; file an application for
a certificate of authority to establish a new office; change the status of any
office as to its supervisory jurisdiction; or fail to maintain and enforce in
any material respect its code of ethics and applicable compliance procedures;
(f) sell or otherwise dispose of any material asset, other than in the
ordinary course of business, consistent with past practice; subject any asset to
a lien, pledge, security interest or other encumbrance, other than in the
ordinary course of business consistent with past practice; modify in any
material manner the manner in which it has heretofore conducted its business or
enter into any new line of business; incur any indebtedness for borrowed money,
except in the ordinary course of business, consistent with past practice;
(g) take any action which would result in any of the conditions set
forth in Article VI hereof not being satisfied;
(h) change any method, practice or principle of accounting, except as
required by changes in GAAP concurred in by its independent certified public
accountants; or change any assumption underlying, or any method of calculation
of, depreciation of any type of asset or establishment of any reserve;
(i) waive, release, grant or transfer any rights of material value or
modify or change in any material respect any existing material agreement to
which it is a party, other than in the ordinary course of business, consistent
with past practice;
(j) implement any pension, retirement, profit-sharing, bonus, welfare
benefit or similar plan or arrangement that was not in effect on the date of
this Agreement, or except as may otherwise be provided for herein, amend any
existing plan or arrangement except as required by law;
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(k) materially amend or otherwise modify its underwriting and other
lending guidelines and policies in effect as of the date hereof or otherwise
fail to conduct its lending activities in the ordinary course of business
consistent with past practice;
(l) enter into, renew, extend or modify any other transaction with any
Affiliate, other than deposit and loan transactions in the ordinary course of
business and which are in compliance with the requirements of applicable laws
and regulations;
(m) enter into any interest rate swap, floor or cap or similar
commitment, agreement or arrangement; (n) take any action that would accelerate
any right of payment to any individual under any employment agreement, except
(i) in the ordinary course of business consistent with past practice, (ii) for
the execution of this Agreement or (iii) pursuant to Sections 5.01(c) and
5.01(d)(i) of this Agreement;
(o) purchase any security for its investment portfolio rated less than
"AAA" or higher by either Standard & Poor's Corporation or higher by Moody's
Investor Services, Inc., except as approved by CMTY (which approval shall not be
unreasonably withheld);
(p) except as set forth in BFC Disclosure Schedule 5.01(p), make any
capital expenditure of $25,000 or more; or undertake or enter into any lease,
contract or other commitment for its account, other than in the ordinary course
of business, involving an unbudgeted expenditure by BFC of more than $25,000, or
extending beyond twelve (12) months from the date hereof;
(q) take any action that would preclude the Merger from qualifying as a
reorganization within the meaning of Section 368 of the IRC; or
(r) agree to do any of the foregoing.
5.02 Access; Confidentiality. From the date hereof through the Closing
Date:
(a) Each party hereto shall afford to the other, including its
authorized agents and representatives, reasonable access to its and its
Subsidiaries' businesses, properties, assets, books and records and personnel,
at reasonable hours and after reasonable notice; and the officers of each
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party shall furnish the other party making such investigation, including its
authorized agents and representatives, with such financial and operating data
and other information with respect to such businesses, properties, assets, books
and records and personnel as the party making such investigation, or its
authorized agents and representatives, shall from time to time reasonably
request.
(b) Each party hereto agrees that it, and its authorized agents and
representatives, will conduct such investigation and discussions hereunder in a
confidential manner and otherwise in a manner so as not to interfere
unreasonably with the other party's normal operations and customer and employee
relationships. Neither BFC, CMTY, nor any of their respective Subsidiaries,
shall be required to provide access to or disclose information where such access
or disclosure would violate or prejudice the rights of customers, jeopardize
attorney-client privilege or similar privilege with respect to such information
or contravene any law, rule, regulation, decree, order, fiduciary duty or
agreement entered into prior to the date hereof.
(c) All information furnished to CMTY or BFC by the other in connection
with the Contemplated Transactions, whether prior to the date of this Agreement
or subsequent hereto, shall be held in confidence to the extent required by, and
in accordance with, the Confidentiality Agreement.
5.03 Regulatory Matters. From the date hereof through the Closing Date:
(a) CMTY and BFC shall cooperate with one another in the preparation
and filing of the Registration Statement (including the Prospectus/Proxy
Statement) and all Applications and the making of all filings for, and shall use
their reasonable best efforts to obtain, as promptly as practicable, all
necessary permits, consents, approvals, waivers and authorizations of all
Regulatory Authorities necessary or advisable to consummate the Contemplated
Transactions. CMTY and BFC shall each give the other reasonable time to review
and comment on any Application to be filed by it prior to the filing of such
Application with the relevant Regulatory Authority, and each shall consult the
other with respect to the substance and status of such filings. The Registration
Statement and the Applications shall be filed within 90 days of the date hereof.
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(b) BFC and CMTY shall each promptly furnish the other with copies of
written communications to, or received by them from, any Regulatory Authority in
respect of the Contemplated Transactions.
(c) BFC and CMTY shall cooperate with each other in the foregoing
matters and shall furnish the other with all information concerning itself as
may be necessary or advisable in connection with any Application or filing,
including any report filed with the SEC, made by or on behalf of such party to
or with any Regulatory Authority in connection with the Contemplated
Transactions, and in each such case, such information shall be accurate and
complete in all material respects. In connection therewith, BFC and CMTY shall
use their reasonable good faith efforts to provide each other certificates and
other documents reasonably requested by the other.
5.04 Taking of Necessary Actions. From the date hereof through the
Closing Date, in addition to the specific agreements contained herein, each
party hereto shall use reasonable best efforts to take, or cause to be taken by
each of its Subsidiaries, all actions, and to do, or cause to be done by each of
its Subsidiaries, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the Contemplated
Transactions including, if necessary, appealing any adverse ruling in respect of
any Application.
5.05 No Solicitation. BFC shall not, nor shall it authorize or permit
any of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it to:
(a) initiate, solicit, encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes an Acquisition Proposal (as defined
herein);
(b) enter into or maintain or continue discussions or negotiate with
any person in furtherance of an Acquisition Proposal, unless the failure to do
so, in the good faith judgment of the BFC board of directors, after consultation
with its legal counsel, could reasonably constitute a breach of fiduciary duty
by the directors of BFC under the laws of the State of Maryland; or
(c) agree to or endorse any Acquisition Proposal, unless the failure to
do so, in the good faith judgment of the BFC board of directors, after
consultation with its legal counsel, could
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reasonably constitute a breach of fiduciary duty by the directors of BFC under
the laws of the State of Maryland.
BFC shall notify CMTY as promptly as practicable, in reasonable detail, as to
any inquiries and proposals which it or any of its representatives or agents may
receive.
As used herein, the term "Acquisition Proposal" means a bona fide
proposal (including a written communication) from a party other than CMTY or an
Affiliate of CMTY for: (A) any merger, consolidation or acquisition of all or
substantially all the assets or liabilities of BFC or BUCS, or any other
business combination involving BFC or BUCS; or (B) a transaction involving the
transfer of beneficial ownership of securities representing, or the right to
acquire beneficial ownership or to vote securities representing, 24.9% or more
of the then outstanding shares of BFC Common Stock or the then outstanding
shares of common stock of BUCS.
5.06 Update of Disclosure Schedules. Through the Closing Date, BFC
shall update the BFC Disclosure Schedules, and CMTY shall update the CMTY
Disclosure Schedules, as promptly as practicable after the occurrence of any
event which, if such event had occurred prior to the date hereof, would have
been disclosed on such schedule.
5.07 Other Undertakings by CMTY and BFC.
(a) Undertakings of BFC.
(i) Stockholder Approval. BFC shall submit this Agreement
to its stockholders for approval at a meeting (the "BFC Stockholders Meeting")
with the recommendation (unless it believes, after consultation with its legal
counsel, that such recommendation could reasonably violate the BFC Board of
Directors' fiduciary duties) of its Board of Directors to such stockholders to
approve this Agreement. The BFC Stockholders Meeting shall be held not later
than 45 days (subject to the effectiveness of the Registration Statement) after
all consents of Regulatory Authorities have been received and all other
conditions have been satisfied or waived (other than those conditions which are
to be fulfilled at the Closing). In the event BFC receives an Acquisition
Proposal and it has not violated Section 5.05 of this Agreement, nothing set
forth in this Agreement shall prohibit BFC from submitting an Acquisition
Proposal to its stockholders for consideration.
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(ii) Environmental Audit. BFC shall permit CMTY, if CMTY elects
to do so, at CMTY's own cost and expense, to cause a "Phase I environmental
audit" to be performed at any physical location owned by BFC or any BFC
Subsidiary. In the event any such Phase I audit indicates that further study is
necessary, BFC shall permit CMTY to cause a Phase II audit to be performed at
CMTY's expense as well
(b) Undertakings of CMTY and BFC.
(i) Filings and Approvals. CMTY and BFC shall cooperate with
each other in the preparation and filing, as soon as practicable, of:
(A) the Applications;
(B) the Registration Statement (including the
Prospectus/Proxy Statement) and related filings, if any, under state securities
laws relating to the Merger; and
(C) all other documents necessary to obtain any other
approvals and consents required to effect consummation of the Contemplated
Transactions.
(ii) Public Announcements. CMTY and BFC shall agree upon the
form and substance of any press release related to this Agreement and the
Contemplated Transactions, but nothing contained herein shall prohibit either
party, following notification to the other party, from making any disclosure
which its counsel deems necessary under applicable law.
(iii) Maintenance of Insurance. CMTY and each CMTY Subsidiary,
and BFC and each BFC Subsidiary, shall maintain insurance in such amounts as
CMTY and BFC, respectively, believe are reasonable to cover such risks as are
customary in relation to the character and location of its and their respective
Subsidiaries' properties and the nature of its and their respective
Subsidiaries' businesses.
(iv) Maintenance of Books and Records. CMTY and each CMTY
Subsidiary, and BFC and each BFC Subsidiary, shall maintain books of account and
records on a basis consistent with past practice.
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(v) Taxes. CMTY and each CMTY Subsidiary, and BFC and each
BFC Subsidiary, shall file all federal, state, and local tax returns required to
be filed by it 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
dates such payments are due, except those being contested in good faith.
(vi) Integration Team. CMTY and BFC shall cooperate with each
other in the selection of an integration team, which team shall plan and
implement an orderly, cost-effective consolidation of the deposit and
information technology operations of Community and BUCS.
(vii) In-House Operations. CMTY and BFC shall, subject to
applicable legal requirements, cooperate with each other in an orderly,
cost-effective consolidation of operations.
(viii) Delivery of Financial Statements. CMTY and BFC shall
each deliver to the other, as soon as practicable after the end of each month
and after the end of each calendar quarter prior to the Effective Date,
commencing with the month ended September 30, 2006, an unaudited consolidated
balance sheet as of such date and related unaudited consolidated statements of
income for the periods then ended, which financial statements shall fairly
present, in all material respects, its consolidated financial condition, results
of operations for the periods then ended in accordance with GAAP, subject to
year-end audit adjustments and footnotes.
(c) Undertakings of CMTY.
(i) Employee Severance Policy.
(A) After consultation with BFC, prior to or soon
after the Closing Date, inform each BFC employee of the likelihood of such
employee having continued employment with CMTY, Community or any other CMTY
Subsidiary following the Closing, and will permit any BFC employee to apply for
any employment position posted as available with CMTY, Community or any other
CMTY Subsidiary. If CMTY elects to eliminate a position or does not offer the
employee a position of substantially similar job descriptions or
responsibilities at substantially the same salary level in a work location
within twenty-five (25) miles of the employee's then current work location with
BFC (referred to herein as "Comparable
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Employment"), CMTY will make severance payments to the displaced employee as set
forth in this Section 5.07(c)(i).
(B) Subject to the following minimum benefits, CMTY
will grant an Eligible BFC Employee two (2) weeks of severance pay (at his then
current pay rate) for each year of service with BFC or any BFC Subsidiary prior
to the employment termination date, provided however, that the minimum benefit
for employees shall be four (4) weeks' salary, and the maximum severance benefit
will be twenty-six (26) weeks' salary for BFC employees.
(C) All employees of BFC or of any BFC Subsidiary who
are employed by BFC or any BFC Subsidiary as of the date of this Agreement and
who continued to be employed as of the Closing Date, and to whom CMTY does not
offer Comparable Employment (as defined in Section 5.07(c)(i)(A)) with CMTY or a
CMTY Subsidiary (each, an "Eligible BFC Employee") will be eligible for
severance benefits set forth in this Section 5.07(c)(i), except that no employee
of BFC or of any BFC Subsidiary who shall receive any payment or benefit
pursuant to any "change in control" agreement or similar plan or right shall be
an Eligible BFC Employee.
(D) Each Eligible BFC Employee will remain eligible for
such benefits if his or her employment is terminated, other than for "cause,"
within nine (9) months after the Effective Date.
(E) CMTY shall make general outplacement services and
job counseling services available to each Eligible BFC Employee who was a
management employee of BFC as of the date of this Agreement and to any
individual who was employed by BFC as of the date of this Agreement and who
receives any payment or benefit pursuant to any "change in control" agreement or
similar plan or right in connection with the Merger, on a basis to be mutually
agreed upon by BFC and CMTY prior to the Effective Date.
(F) For purposes of this Section 5.07(c)(i), "cause"
means the employer's good faith reasonable belief that the employee (1)
committed fraud, theft or embezzlement; (2) falsified corporate records; (3)
disseminated confidential information concerning customers, CMTY, any CMTY
Subsidiary or any of its or their employees in violation of any applicable
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confidentiality agreement or policy; (4) had documented continuing
unsatisfactory job performance; or (5) violated CMTY's Code of Conduct.
(ii) Employee Benefits
(A) As of the Effective Date, each employee of BFC
or of any BFC Subsidiary who becomes an employee of CMTY or of any CMTY
Subsidiary shall be entitled to full credit for each year of service with BFC or
the BFC Subsidiary for purposes of determining eligibility for participation and
vesting and other appropriate benefits, but not benefit accrual, in CMTY's, or
as appropriate, in the CMTY Subsidiary's, employee benefit plans, programs and
policies. CMTY shall use the original date of hire by BFC or a BFC Subsidiary in
making these determinations.
(B) The employee benefits provided to former employees
of BFC or a BFC Subsidiary after the Effective Date shall be equivalent in the
aggregate to the employee benefits provided by CMTY or its Subsidiaries to their
similarly situated employees. The medical, dental and life insurance plans,
programs or policies, if any, that become applicable to former employees of BFC
or any BFC Subsidiary shall not contain any waiting period for coverage or
exclusion or limitation with respect to any pre-existing condition of any such
employees or their dependents. In the event that the parties' medical or dental
welfare benefit plans are merged prior to December 31, 2006, any deductibles,
co-payments or other out-of-pocket expenses paid by a participant under any BFC
or BFC Subsidiary medical or dental welfare benefit plan with respect to the
period from January 1, 2006 through the Effective Date shall be credited towards
the satisfaction of any like deductible, co-payment or other out-of-pocket
expenses under the applicable CMTY or CMTY Subsidiary medical or dental welfare
benefit plan.
(C) Prior to the Effective Date, BFC shall amend the
BUCS 401(k) Plan to freeze participation and contributions under the plan. As of
the Effective Date, or as soon as practicable thereafter, the BUCS 401(k) Plan
shall be merged into CMTY's 401(k) plan. Prior to the Effective Date,
contributions to the BUCS 401(k) Plan shall be made consistent with past
practices on the regularly scheduled payment dates.
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(D) With respect to the BUCS ESOP, the BUCS ESOP shall
terminate as of the Effective Date in accordance with the terms of such plan in
effect as of the date of this Agreement. Prior to the Effective Date,
contributions and accruals of such contributions to the BUCS ESOP by BUCS shall
continue in the ordinary course of business and consistent with past practice.
As of and immediately prior to the Effective Date, BUCS shall make a pro rata
contribution for the period from the beginning of such most recent ESOP Plan
Year beginning prior to the Effective Date and ending with the Effective Date
and pro rata payment on the BUCS ESOP loan shall be made for such final Plan
Year or short plan year. The aggregate Merger Consideration received by the BUCS
ESOP trust in connection with the Merger with respect to the unallocated shares
of BFC Common Stock existing after the Effective Date shall be first applied by
the ESOP trustee for the full repayment of the ESOP loan. The balance of the
Merger Consideration (if any) received by the ESOP trust with respect to such
unallocated shares of BFC Common Stock shall be allocated as earnings to the
accounts of all participants in the BUCS ESOP who have account assets held by
such ESOP trust (whether or not such participants are then actively employed
BUCS) and beneficiaries in proportion to the account balances of such
participants and beneficiaries, in accordance with the BUCS ESOP's terms and
conditions in effect as of the date of the Agreement, to the maximum extent
permitted under the Code and applicable law. The accounts of all participants
and beneficiaries in the BUCS ESOP immediately prior to the Effective Date shall
become 100% vested as of the Effective Date. As soon as practicable after the
date hereof, but in no event later than 60 days after the date of this
Agreement, BFC, BUCS and its counsel shall file or cause to be filed all
necessary documents with the IRS for a determination letter for termination of
the BUCS ESOP as of the Effective Date, with a copy to be provided to CMTY. As
soon as practicable after the later of the Effective Date or the receipt of a
favorable determination letter for termination from the IRS, the account
balances in the BUCS ESOP shall be distributed to participants and beneficiaries
or transferred to an eligible individual retirement account as a participant or
beneficiary may direct. In no event shall any assets f the BUCS ESOP trust be
utilized in a manner other than for the benefit of BUCS ESOP participants and
beneficiaries existing as of the Effective Date.
(E) Subject to the other provisions of this Section
5.07(c)(ii), after the Effective Date, CMTY may discontinue, amend, convert to,
or merge with, an CMTY or CMTY
69
Subsidiary plan any BFC Benefit Plan other than the BUCS ESOP, subject to such
plan's provisions and applicable law.
(F) Each employee of BFC or a BFC Subsidiary who remains
an employee of BFC or a BFC Subsidiary, or CMTY or a CMTY Subsidiary, as
applicable, until or after the Effective Date, shall be entitled to carry over
any accrued but unused vacation time up to a maximum of 80 hours in accordance
with BFC's policies as a continuing employee of CMTY and receive a cash payment
at the Effective Date calculated at such employee's rate of pay as of the
Effective Date equal to such employee's accrued but unused BFC vacation time
(determined as of the Effective Date) in excess of any accrued vacation time
carried over. Further, any accrued but unused CMTY vacation time including any
vacation carryover up to a maximum of 80 hours (from the Effective Date through
the date of termination of employment) shall be paid out upon termination of
employment with BFC or a BFC Subsidiary, or CMTY or a CMTY Subsidiary, as
applicable. Each employee of BFC or a BFC Subsidiary who becomes an employee of
CMTY or a CMTY Subsidiary shall receive, for purposes of CMTY vacation policy,
credit for all service with BFC or a BFC Subsidiary credited to each such
employee under BFC's vacation policy. The cash payment to be made following
termination of employment will be made on CMTY's next available payroll date
following termination of employment.
(G) CMTY shall honor the existing employment and
change in control agreements in effect as of the date of this Agreement as set
forth in BFC Disclosure Schedule 3.08(a). As of the Effective Time BUCS shall
make a payment to each individual who is a party to an employment agreement or
change in control severance agreement as set forth at Disclosure Schedule
3.08(a) as payment for termination of such written agreement.
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(iii) Use of the "BUCS" name. Following consummation of the
Contemplated Transactions, and for a period of one year, CMTY shall cause
Community, in accordance with applicable banking regulations, to use the "BUCS"
name in the operation of the BUCS' branch offices which are in operation in
Owings Mills, Maryland on the Effective Date, subject to Community's discretion
to use the "BUCS" name in conjunction with Community's name and brand.
(iv) Indemnification, Insurance.
(A) CMTY shall indemnify, defend, and hold harmless
the present and former directors, officers, employees and agents of BFC and the
BFC Subsidiaries (each, an "Indemnified Party") against all losses, expenses
(including reasonable attorneys' fees), claims, damages or liabilities and
amounts paid in settlement arising out of actions or omissions or alleged acts
or omissions (collectively, "Prior Acts") occurring at or prior to the Effective
Date (including the Contemplated Transactions) to the fullest extent permitted
by Pennsylvania law, including provisions relating to advances of expenses
incurred in the defense of any proceeding to the fullest extent permitted by
Pennsylvania law upon receipt of any undertaking required by Pennsylvania law.
Without limiting the foregoing, in a case (if any) in which a determination by
CMTY is required to effectuate any indemnification, CMTY shall direct, at the
election of the Indemnified Party, that the determination shall be made by
independent counsel mutually agreed upon between CMTY and the Indemnified Party.
(B) CMTY shall, and it shall cause Community to,
keep in effect provisions in its articles of incorporation or association and
bylaws providing for exculpation of director and officer liability and its
indemnification of the Indemnified Parties to the fullest extent permitted by
applicable law, which provisions shall not be amended except as required by
applicable law or except to make changes permitted by law that would enlarge the
Indemnified Parties' right to indemnification.
(C) CMTY shall use its reasonable best efforts (and BFC
shall cooperate and assist prior to the Effective Date in these efforts), at no
expense to the beneficiaries, to:
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(1) maintain directors' and officers' liability insurance ("D&O
Insurance") with respect to matters occurring at or prior to the
Effective Date, issued by a carrier assigned a claims-paying ability
rating by A.M. Best & Co. of "A (Excellent)" or higher; or
(2) obtain coverage for Prior Acts of the Indemnified Parties under the
D&O Insurance policies currently maintained by CMTY;
in either case, providing at least the same coverage as the D&O Insurance
currently maintained by BFC, for a period of at least six (6) years from the
Effective Date; provided, that CMTY shall not be obligated to make annual
premium payments for such six-year period in respect of the D&O Insurance which
exceed, for the portion related to BFC's directors and officers, 200% of the
annual premium payment, as of the date hereof, under BFC's current policy in
effect on the date of this Agreement (the "Maximum Amount"). If the amount of
the premiums necessary to maintain or procure such insurance coverage exceeds
the Maximum Amount, CMTY shall use its reasonable best efforts to maintain the
most advantageous policies of D&O Insurance obtainable for a premium equal to
the Maximum Amount.
(D) If any claim is made against an Indemnified Party
who is covered or potentially covered by insurance, neither Community nor CMTY
shall do anything that would forfeit, jeopardize, restrict or limit the
insurance coverage available for that claim until the final disposition thereof.
(E) If CMTY or any of its successors or assigns shall
consolidate with or merge into any other person and shall not be the continuing
or surviving person of such consolidation or merger or shall transfer all or
substantially all of its assets to any person, then and in each case, proper
provision shall be made so that the successors and assigns of CMTY shall assume
the obligations set forth in this Section 5.07(c)(iv).
(F) The provisions of this Section 5.07(c)(iv) are
intended to be for the benefit of and shall be enforceable by, each Indemnified
Party, his or her heirs and representatives.
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(G) CMTY shall pay all expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided for in this Section 5.07(c)(iv).
(v) Reorganization. From the date hereof through the Closing
Date, CMTY shall not take any action that would preclude the Merger from
qualifying as a reorganization within the meaning of Section 368 of the IRC.
(vi) Conduct of CMTY's Business. From the date hereof through
the Closing Date, CMTY shall (A) use its reasonable good faith efforts to
preserve its business organization intact, maintain good relationships with
employees, and preserve the good will of customers of CMTY and others with whom
business relationships exist, (B) not take any action that, individually or in
the aggregate, could result in the Merger not being consummated or materially
delay or otherwise materially adversely affect the ability of CMTY to consummate
the Contemplated Transactions by this Agreement in a timely manner, or (C) not
enter into any contract with respect to, or otherwise agree to commit to do, any
of foregoing contained in clause (B) of this Section 5.07(c)(vi).
(vii) Employment Agreement. CMTY shall offer an employment
agreement to Moltzan, effective as of the Effective Date, that provides for (A)
employment for a term of three (3) years following the Effective Date, with
rolling two-year renewal terms after the first year of the term, (B) an annual
salary of at least $150,000, (C) participation by Moltzan in CMTY's management
incentive and stock option plans, (D) appointment of Moltzan as regional
president of the Metropolitan Baltimore region of Community, (E) payment on the
Effective Date in the amount set forth in BFC Disclosure Schedule 3.08(a) for
cancellation of his existing employment agreement including a change-of-control
provision, (F) continued accrual and maintenance of BUCS supplemental retirement
plan and existing life insurance benefits consistent with agreements between BFC
and Moltzan as of the date of this Agreement and (G) such other terms and
conditions as are generally contained in CMTY's employment agreements with its
other regional presidents. Such employment agreement with Mr. Moltzan will be in
form and substance consistent with such agreement set forth at Exhibit
5.07(c)(vii).
73
(viii) CMTY shall pay retention bonuses on account of the
Contemplated Transactions in amounts to be reasonably agreed upon prior to the
Effective Date to persons designated by BFC and approved by CMTY (which approval
shall not be unreasonably withheld.
ARTICLE VI- CONDITIONS
6.01 Conditions to the Obligations of BFC under this Agreement. The
obligations of BFC hereunder shall be subject to satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by BFC pursuant
to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, CMTY and Community to authorize the execution, delivery and
performance of this Agreement and the Bank Plan of Merger, respectively, and the
consummation of the Contemplated Transactions, shall have been duly and validly
taken by CMTY and Community, respectively, and BFC shall have received certified
copies of the resolutions evidencing such authorizations.
(b) Covenants; Representations. The obligations of CMTY and Community
required by this Agreement to be performed by CMTY or Community at or prior to
the Closing Date shall have been duly performed and complied with in all
material respects; and the representations and warranties of CMTY set forth in
this Agreement shall be true and correct in all material respects, as of the
date of this Agreement, and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty which specifically
relates to an earlier date and except as to any representation or warranty to
the extent the breach of such representation or warranty does not have a
Material Adverse Effect.
(c) Approvals of Regulatory Authorities. Procurement by BFC and CMTY of
all requisite approvals and consents of Regulatory Authorities and the
expiration of the statutory waiting period or periods relating thereto for the
Contemplated Transactions; and no such approval or consent shall have imposed
any condition or requirement which would so materially and adversely impact the
economic or business benefits to BFC or CMTY of the Contemplated Transactions
that, had such condition or requirement been known, such party would not, in its
reasonable judgment, have entered into this Agreement.
74
(d) 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 Contemplated Transactions.
(e) Officer's Certificate. CMTY shall have delivered to BFC a
certificate, dated the Closing Date and signed, without personal liability, by
its Chairman or President or Chief Executive Officer, to the effect that the
conditions set forth in subsections (a) through (d) of this Section 6.01 have
been satisfied.
(f) Registration Statement. The Registration Statement shall be
effective under the Securities Act, and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; and all approvals deemed necessary by CMTY's counsel from state
securities or authorities with respect to the transactions contemplated by this
Agreement shall have been obtained.
(g) Tax Opinion. BFC shall have received an opinion of Malizia Spidi &
Fisch, PC, legal counsel to BFC, in form and substance reasonably satisfactory
to BFC, dated the Closing Date, substantially to the effect that, on the basis
of the facts, representations and assumptions set forth in such opinion, the
Merger will constitute a reorganization described in Section 368(a) of the IRC;
in rendering its opinion, such counsel may require and rely upon representations
and reasonable assumptions, including those contained in certificates of
officers of BFC, CMTY and others.
(h) Approval by BFC's Stockholders. This Agreement shall have been
approved by the stockholders of BFC at the BFC Stockholders Meeting by such vote
as is required by the MGCL and the articles of incorporation and bylaws of BFC.
(i) Other Documents. BFC shall have received such other certificates,
documents or instruments from CMTY or its officers or others as BFC shall have
reasonably requested in connection with accounting or income tax treatment of
the Contemplated Transactions, or related securities law compliance.
(j) Nasdaq Listing. The CMTY Common Stock, including the CMTY Common
Stock to be issued in the Merger, shall have been authorized for quotation on
Nasdaq.
75
(k) Exchange Agent Certificate. BFC shall have received a certificate
from the Exchange Agent certifying that it has received adequate cash to pay the
Aggregate Cash Consideration and sufficient cash for the payment of fractional
shares and irrevocable authorization to issue sufficient shares for the
Aggregate Stock Consideration.
(l) Updated Fairness Opinion. BFC shall have received an updated
fairness opinion dated as of the date that the Prospectus/Proxy Statement is
mailed to BFC stockholders stating that the Merger Consideration is fair to BFC
stockholders from a financial point of view.
6.02 Conditions to CMTY's Obligations under this Agreement. The
obligations of CMTY hereunder shall be subject to satisfaction at or prior to
the Closing Date of each of the following conditions, unless waived by CMTY
pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, BFC and BUCS, including the approval of the stockholders of BFC, to
authorize the execution, delivery and performance of this Agreement and the Bank
Plan of Merger, respectively, and the consummation of the Contemplated
Transactions, shall have been duly and validly taken by BFC and BUCS,
respectively, and CMTY shall have received certified copies of the resolutions
evidencing such authorizations.
(b) Covenants; Representations. The obligations of BFC and BUCS
required by this Agreement to be performed by BFC and BUCS at or prior to the
Closing Date shall have been duly performed and complied with in all material
respects; and the representations and warranties of BFC set forth in this
Agreement shall be true and correct in all material respects, as of the date of
this Agreement, and as of the Closing Date as though made on and as of the
Closing Date, except as to any representation or warranty which specifically
relates to an earlier date and except as to any representation or warranty to
the extent the breach of such representation or warranty does not have a
Material Adverse Effect.
(c) Approvals of Regulatory Authorities. Procurement by CMTY and BFC of
all requisite approvals and consents of Regulatory Authorities and the
expiration of the statutory waiting period or periods relating thereto for the
Contemplated Transactions; and no such approval or consent shall have imposed
any condition or requirement which would so materially and
76
adversely impact the economic or business benefits to CMTY or BFC of the
Contemplated Transactions that, had such condition or requirement been known,
such party would not, in its reasonable judgment, have entered into this
Agreement.
(d) 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 Contemplated Transactions.
(e) Continuation of Current Leases and Related Agreements. The
CareFirst Agreement and the real property leases to which BFC, BUCS or any BFC
Subsidiary is a party as of the date of this Agreement shall not have expired or
been terminated, and BFC shall have obtained all necessary consents to Community
succeeding to the rights and responsibilities of BUCS under such leases and the
CareFirst Agreement.
(f) Officer's Certificate. BFC shall have delivered to CMTY a
certificate, dated the Closing Date and signed, without personal liability, by
its Chairman or President or Chief Executive Officer, to the effect that the
conditions set forth in subsections (a) through (e) of this Section 6.02 have
been satisfied.
(g) Registration Statement. The Registration Statement shall be
effective under the Securities Act, and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; and all approvals deemed necessary by CMTY's counsel from state
securities authorities with respect to the transactions contemplated by this
Agreement shall have been obtained.
(h) Tax Opinion. CMTY shall have received an opinion of Mette, Evans &
Woodside, legal counsel to CMTY, in form and substance reasonably satisfactory
to CMTY, dated the Closing Date, to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion, the Merger will
constitute a reorganization described in Section 368(a) of the IRC; in rendering
its opinion, such counsel may require and rely upon representations and
reasonable assumptions, including those contained in certificates of officers of
BFC, CMTY and others.
77
(i) Approval by BFC's Stockholders. This Agreement shall have been
approved by the stockholders of BFC at the BFC Stockholders Meeting by such vote
as is required by the MGCL and the articles of incorporation and bylaws of BFC.
(j) Other Documents. CMTY shall have received such other certificates
documents or instruments from BFC or its officers or others as CMTY shall have
reasonably requested in connection with accounting or income tax treatment of
the Contemplated Transactions or related securities law compliance
(k) Environmental Audit Results. The results of any Phase II
environmental audit conducted pursuant to Section 5.07(a)(ii) hereof shall not
result in a Material Adverse Effect on BFC; provided, however that (i) any such
Phase II environmental audit must be completed within forty-five (45) days of
the date of this Agreement, (ii) a copy of any such environmental audit must be
delivered to BFC within five (5) days after the completion of such environmental
audit and (iii) CMTY must terminate or irrevocably waive its right to terminate
the Agreement for failure of the condition set forth in this Section 6.02(k)
within ten (10) days of receiving the results of such environmental audit.
ARTICLE VII- TERMINATION
7.01 Termination prior to the Closing Date. This Agreement may be
terminated on or at any time
(a) By the mutual written consent of the parties hereto
(b) By CMTY or BFC:
(i) If there shall have been any breach of any representation,
warranty or obligation of the other party hereto (subject to the same standards
as set forth in Sections 6.01(b) or 6.02(b), as the case may be) and such breach
cannot be, or shall not have been, remedied within 30 days after receipt by such
party of written notice specifying the nature of such breach and requesting that
it be remedied; provided, that, if such breach cannot reasonably be cured within
such 30-day period but may reasonably be cured within 60 days, and such cure is
being diligently pursued, no such termination shall occur prior to the
expiration of such 60-day period;
78
(ii) If the Closing Date shall not have occurred prior to on
or before April 1, 2007, provided that, if the Closing Date shall not have
occurred by such date because of a breach of this Agreement by a party hereto,
such breaching party shall not be entitled to terminate this Agreement in
accordance with this provision; and provided further that such date shall be
extended to July 1, 2007 if the conditions set forth in Article VI have not been
completely satisfied and the failure of such conditions to be satisfied has not
been caused by CMTY's breach of its obligations hereunder;
(iii) If any Regulatory Authority whose approval or consent is
required for consummation of the Contemplated Transactions shall issue a
definitive written denial of such approval or consent and the time period for
appeals and requests for reconsideration has run.
(c) By CMTY, (i) if BFC shall have breached, in any material respect,
the provisions of Section 5.05 of this Agreement, (ii) if the BFC stockholders
vote but fail to approve the Merger at the BFC Stockholders Meeting or (iii) if
the BFC stockholders approve an Acquisition Transaction.
(d) By BFC, in order to concurrently enter into an agreement for an
Acquisition Transaction in accordance with and following compliance with Section
5.05 of this Agreement.
7.02 Effect of Termination. If this Agreement is terminated pursuant to
Section 7.01 hereof or otherwise, this Agreement shall forthwith become void,
other than Section 5.02(b), this Section 7.02 and Section 8.01 hereof which
shall remain in full force and effect, and there shall be no further liability
on the part of CMTY or BFC to the other, except for any liability of CMTY or BFC
under such sections of this Agreement and except for any liability arising out
of a willful breach of this Agreement giving rise to such termination.
ARTICLE VIII- MISCELLANEOUS
8.01 Expenses and Other Fees.
(a) Except as set forth in Sections 8.01(b) and 8.01(c), each party
hereto shall bear and pay all costs and expenses incurred by it in connection
with the Contemplated Transactions, including fees and expenses of its own
financial consultants, accountants and counsel.
79
(b) In the event this Agreement is terminated by: (i) BFC pursuant to
Section 7.01(d) or (ii) CMTY pursuant to 7.01(c) (with the further conditions
that, (A) in the case of a termination pursuant to Section 7.01(c)(ii), BFC
received notice of an Acquisition Proposal prior to such vote of BFC
stockholders and (B) in the case of a termination by CMTY pursuant to Section
7.01(c)(i) or 7.01(c)(ii) BFC enters into an agreement for an Acquisition
Transaction within 18 months of the date hereof), then BFC shall make a single
cash payment, as liquidated damages, to CMTY in the amount of the Termination
Fee. Any payment required under this Section 8.01(b) shall be payable by BFC to
CMTY (by wire transfer of immediately available funds to an account designated
by CMTY) within two (2) Business Days after CMTY shall have become entitled
thereto and shall have made demand therefor.
(c) Notwithstanding anything set forth in this Agreement to the
contrary, if BFC pays or causes to be paid to CMTY the Termination Fee, payment
of the Termination Fee shall be the sole and exclusive remedy of the CMTY
hereunder and BFC will not have any further obligations or liabilities to CMTY
with respect to this Agreement or the Contemplated Transactions, except that
CMTY shall have the right to enforce the provisions of Section 5.02(c) and the
Confidentiality Agreement. CMTY and BFC agree that the Termination Fee is fair
and reasonable in the circumstances. If a court of competent jurisdiction shall
nonetheless, by a final, nonappealable judgment, determine that the amount of
any such Termination Fee exceeds the maximum amount permitted by law, then the
amount of such Termination Fee shall be reduced to the maximum amount permitted
by law in the circumstances, as determined by such court of competent
jurisdiction.
8.02 Non-Survival of Representations and Warranties; Disclosure
Schedules. All representations, warranties and, except to the extent
specifically provided otherwise herein, agreements and covenants shall terminate
on the Closing Date. Without limiting the foregoing, Sections 1.02(e), 2.06, and
5.07(c) (i), (ii), (iii), (iv), (vii) and (viii) shall survive the Closing.
8.03 Amendment, Extension and Waiver. Subject to applicable law, at any
time prior to the Closing Date, the parties may:
(a) amend this Agreement;
80
(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) to the extent permitted by law, 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 signed, by
authorized officers, on behalf of the parties hereto. Any agreement on the part
of a party hereto to any extension or waiver shall be valid only if set forth in
an instrument in writing signed by a duly authorized officer on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
8.04 Entire Agreement.
(a) This Agreement, including the documents referred to herein or
delivered pursuant hereto, contains the entire agreement and understanding of
the parties with respect to its subject matter. This Agreement supersedes all
prior arrangements and understandings between the parties, both written and
oral, with respect to its subject matter other than the Confidentiality
Agreement.
(b) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and its 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, except that: any BUCS Designee may enforce Section
1.02(e)(iv) and any Indemnified Party may enforce Section 5.07(c)(iv).
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.
8.06 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given upon delivery if delivered personally, two
business days after mailing if
81
mailed by prepaid registered or certified mail, return receipt requested, or
upon confirmation of good transmission if sent by telecopy, addressed as
follows:
(a) If to CMTY or Community, to:
Community Banks, Inc.
777 East Park Drive
Harrisburg, Pennsylvania 17111
Attention: Eddie L. Dunklebarger, Chairman, President and CEO
Telecopy No.: 717-920-8040
with copy to:
James A. Ulsh, Esquire
Timothy A. Hoy, Esquire
Mette, Evans & Woodside
P.O. Box 5950
3401 North Front Street
Harrisburg, Pennsylvania 17110-0950
Telecopy No.: 717-236-1816
(b) If to BFC, to:
BUCS Financial Corp
10445 Mill Run Circle
Owings Mills, MD 21117
Attention: Herbert J. Moltzan, President and CEO
Telecopy No.: 443-394-6819
with a copy to:
Richard Fisch, Esquire
Malizia Spidi & Fisch, PC
901 New York Avenue, N.W.
Suite 210 East
Washington, D.C. 20001
Telecopy No.: 202-434-4661
8.07 Disclosure Schedules. Information contained on either the BFC
Disclosure Schedules or the CMTY Disclosure Schedules shall be deemed to cover
the express disclosure requirement contained in a representation or warranty of
this Agreement and any other representation or warranty of this Agreement of
such party where it is readily apparent it applies to such provision. The mere
inclusion of an item in a Disclosure Schedule as an exception to a
82
representation or warranty shall not be deemed an admission by a party that such
item represents a material exception or fact, event or circumstance or that such
item is or could result in a Material Adverse Effect.
8.08 Tax Disclosure. Notwithstanding anything else in this Agreement to
the contrary, each party hereto (and each employee, representative or other
agent of any party) may disclose to any and all persons, without limitation of
any kind, the federal income tax treatment and federal income tax structure of
any and all transaction(s) contemplated herein and all materials of any kind
(including opinions or other tax analyses) that are or have been provided to any
party (or to any employee, representative, or other agent of any party) relating
to such tax treatment or tax structure; provided, however, that this
authorization of disclosure shall not apply to restrictions reasonably necessary
to comply with securities laws. This authorization of disclosure is not
effective until the earlier of (i) the date of the public announcement of
discussions relating to the Contemplated Transactions, (ii) the date of the
public announcement of the Contemplated Transactions, or (iii) the date of
execution of an agreement (with or without conditions) to enter into the
Contemplated Transactions.
8.09 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
8.10 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.
8.11 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.
8.12 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic internal law of the Commonwealth of Pennsylvania
and applicable laws of the United States of America.
[SIGNATURES ON FOLLOWING PAGE]
83
[SIGNATURE PAGE FOR MERGER AGREEMENT BETWEEN COMMUNITY BANKS, INC. AND
BUCS FINANCIAL CORP]
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers under seal as of the day and year
first above written.
COMMUNITY BANKS, INC. Attest:
By: /s/Eddie L. Dunklebarger (SEAL) /s/Patricia E. Hoch
- ----------------------------------- -----------------------------------------
Eddie L. Dunklebarger Patricia E. Hoch, Senior VP and Secretary
Chairman, President and CEO
BUCS FINANCIAL CORP Attest:
By: /s/Herbert J. Moltzan (SEAL) /s/M. Robin Copeland
- ----------------------------------- -----------------------------------------
Herbert J. Moltzan, President and CEO
Exhibit 1
---------
Form of Letter Agreement For Directors
--------------------------------------
, 2006
Community Banks, Inc.
777 East Park Drive
Harrisburg, PA 17111
Ladies and Gentlemen:
Community Banks, Inc. ("CMTY") and BUCS Financial Corp ("BFC") are
considering entering into an Agreement (the "Merger Agreement"), pursuant to
which, and subject to the terms and conditions set forth therein: (a) CMTY will
acquire BFC by a merger of BFC with and into CMTY; (b) stockholders of BFC will
receive shares of CMTY common stock and/or cash in exchange for their shares of
BFC common stock owned on the closing date; and (c) option holders of BFC will
receive cash in exchange for options exercisable for common stock of BFC
outstanding on the closing date (the foregoing, collectively, the
"Transactions").
I have been advised that I may be deemed to be an "affiliate" of BFC
for purposes of certain rules issued by the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933.
I understand that CMTY is requiring, as a condition to its execution
and delivery to BFC of the Agreement, that I execute and deliver to CMTY this
Letter Agreement. Intending to be legally bound hereby, I irrevocably agree and
represent as follows:
1. I agree to vote or cause to be voted for approval of the Merger
Agreement all shares of BFC common stock over which I exercise sole or shared
voting power (other than shares held in a fiduciary capacity) as of the record
date of the BFC shareholder meeting at which the Merger Agreement will be
presented for approval.
2. Through the conclusion of the Transactions, I agree not to offer,
sell, exercise, transfer or otherwise dispose of, or to permit the offer, sale,
transfer or other disposition of, any shares of BFC common stock over which I
exercise sole or shared voting power (other than shares held in a fiduciary
capacity) or any options that I hold to acquire shares of BFC common stock.
3. I have sole or shared voting power (other than shares held in a
fiduciary capacity) over the number of shares of BFC common stock, and hold
stock options for the number of shares of BFC common stock, if any, set forth
below opposite my signature line. CMTY recognizes that with respect to any such
shares which have been pledged to a third party (which are specifically
identified below), I will not be able to control the voting or disposition of
such shares in the event of a default.
4. I agree not to offer, sell, transfer or otherwise dispose of any
shares of CMTY common stock received pursuant to the Transactions, except:
1
(a) at such time as a registration statement under the Securities Act
of 1933, as amended ("Securities Act"), covering sales of such CMTY common stock
is effective and a prospectus is made available under the Securities Act;
(b) within the limits, and in accordance with the applicable provisions
of, Rule 145 under the Securities Act ("Rule 145");
or
(c) in a transaction which, in an opinion of counsel satisfactory to
CMTY or as described in a "no-action" or interpretive letter from the staff of
the SEC (a "No Action Letter"), is not required to be registered under the
Securities Act;
and I acknowledge and agree that CMTY is under no obligation to
register the sale, transfer or other disposition of CMTY common stock by me or
on my behalf, or to take any other action necessary to make an exemption from
registration available.
5. CMTY shall take all steps necessary to ensure that CMTY is in
compliance with all those requirements of Rule 145 and Rule 144 with which CMTY
must comply in order for the resale provisions of Rule 145(d) to be available to
me.
6. I agree that CMTY shall not be bound by any attempted sale of any
shares of CMTY common stock acquired by me pursuant to the Transactions, and
CMTY's transfer agent shall be given appropriate stop transfer orders and shall
not be required to register any such attempted sale, unless the sale has been
effected in compliance with the terms of this Letter Agreement; and I further
agree that the certificate representing shares of CMTY common stock acquired by
me pursuant to the Transactions by me may be endorsed with a restrictive legend
consistent with the terms of this Letter Agreement, stating in substance as
follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED (A)
IN CONFORMITY WITH RULE 145(d), OR (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(C) IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY
ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
The undersigned understands and hereby further acknowledges that the legend set
forth above will be removed from any such certificate (by delivery of a
substitute certificate without such legend) and CMTY will instruct its transfer
agent to remove such legend from any such certificate, if the undersigned
delivers to CMTY (i) satisfactory written evidence that the shares of CMTY
common stock represented by any such certificate have been sold in compliance
with Rule 145(d) (as such rule may be hereafter amended) (in which case, the
substitute certificate will be issued in the name of the transferee), (ii) a No
Action Letter, or (iii) an opinion of counsel, in form and substance reasonably
satisfactory to CMTY, to the effect that public sale of shares represented by
such certificate by the holder thereof is no longer subject to the restrictions
imposed by Rule 145.
2
7. I agree not to engage in any Competition with CMTY or any Affiliate
of CMTY for a period of one (1) year after the later to occur of the Effective
Date or my ceasing to be a member of the advisory board for the Metropolitan
Baltimore area. For purposes of this Letter Agreement, "Competition" means
becoming an employee, a director, an advisory director, a founder or a
shareholder or other equity holder (other than acquisitions of not more than one
percent (1%) of the outstanding capital stock of, or a similar equity interest
in a corporation or other entity that is listed on a national securities
exchange or traded in the over-the-counter market) of any business organization
that is doing business or intends to do business in the states of Maryland or
Pennsylvania and that is engaged or intends to engage in the provision of
financial services to the public, including but not necessarily limited to
commercial banks, savings associations, trust companies and credit unions, but
not including the provision of pension consulting services or investment banking
services in which I am involved as of the date of this Letter Agreement.
8. I represent that I have the capacity to enter into this Letter
Agreement and that it is a valid and binding obligation enforceable against me
in accordance with its terms, subject to bankruptcy, insolvency and other laws
affecting creditors' rights and general equitable principles.
I am signing this Letter Agreement in my capacity as a shareholder of
BFC and not in any other capacity (including as a director or Executive). This
Letter Agreement shall be effective upon acceptance by CMTY.
Execution of this Agreement by the undersigned is not an admission by
the undersigned that he or she is an "affiliate" for purposes of the Rule 145 of
the Securities Act.
This Letter Agreement shall terminate concurrently with, and
automatically upon, any termination of the Merger Agreement in accordance with
its terms, except that any such termination shall be without prejudice to CMTY's
rights arising out of any willful breach of any covenant or representation
contained herein.
Very truly yours,
_______________________________________ _______________________________________
Witness Name:
Number of shares held:
Sole voting power: _______ Shared voting power: _______
Number of pledged
shares: _______
Accepted:
COMMUNITY BANKS, INC.
By: __________________________________________________
Name: Eddie L. Dunklebarger, Chairman, President and CEO
3
Exhibit 1.03
------------
Form of Bank Plan of Merger
---------------------------
THIS BANK PLAN OF MERGER ("Bank Plan of Merger") dated September __,
2006, is by and between COMMUNITYBANKS, a Pennsylvania bank and trust company
("Community") and BUCS FEDERAL BANK, a federal savings association ("BUCS").
BACKGROUND
----------
A. Community is a wholly-owned subsidiary of Community Banks, Inc., a
Pennsylvania corporation ("CMTY").
B. BUCS is a wholly-owned subsidiary of BUCS Financial Corp, a Maryland
corporation ("BFC").
C. CMTY and BFC have executed an Agreement dated September __, 2006
(the "Agreement"). The Agreement provides for the merger of BUCS with and into
Community, with Community surviving such merger, but only after closing of the
"Merger" provided for in the Agreement. After closing of the "Merger," Community
and BUCS will each be direct wholly-owned subsidiaries of CMTY. This Bank Plan
of Merger is being executed by Community and BUCS pursuant to the Agreement.
D. Capitalized terms used in this Bank Plan of Merger that are not
otherwise defined herein shall have the meanings given them in the Agreement.
In consideration of the premises and of the mutual covenants and
agreements herein contained, and in accordance with the applicable laws and
regulations of the United States of America, the State of Maryland and the
Commonwealth of Pennsylvania, Community and BUCS, intending to be legally bound
hereby, agree:
ARTICLE I - MERGER
------------------
Subject to the terms and conditions of this Bank Plan of Merger, and in
accordance with the applicable laws and regulations of the United States of
America, the State of Maryland and
1
the Commonwealth of Pennsylvania, on the Effective Date (as that term is defined
in Article V hereof):
(a) BUCS shall merge with and into Community, under the charter of
Community;
(b) the separate existence of BUCS shall cease; and
(c) Community shall be the surviving bank.
Such transaction is referred to herein as the "Bank Merger," and Community, as
the surviving bank in the Bank Merger, is referred to herein as the "Surviving
Bank."
ARTICLE II - NAME AND BUSINESS OF BANK
--------------------------------------
The name of the Surviving Bank shall be Community. The business of the
Surviving Bank shall be that of a state, non-member bank with trust powers. This
business shall be conducted by the Surviving Bank at its main office which shall
be located at 150 Market Square, Millersburg, Pennsylvania, and its legally
established branches and other facilities.
ARTICLE III - ARTICLES OF INCORPORATION AND BYLAWS
--------------------------------------------------
3.1 Articles of Incorporation. On and after the Effective Date, the
articles of Community, as in effect immediately prior to the Effective Date,
shall automatically be and remain the articles of incorporation of the Surviving
Bank, until changed in accordance with applicable law, such articles of
incorporation, and the Surviving Bank's bylaws.
3.2 Bylaws. On and after the Effective Date, the bylaws of Community,
as in effect immediately prior to the Effective Date, shall automatically be and
remain the bylaws of the Surviving Bank, until changed in accordance with
applicable law, the Surviving Bank's articles of association, and such bylaws.
ARTICLE IV - BOARD OF DIRECTORS AND OFFICERS
--------------------------------------------
4.1 Board of Directors. On and after the Effective Date, the directors
of Community duly elected and holding office immediately prior to the Effective
Date shall be the directors of the Surviving Bank, each to hold office until his
or her successor is elected and qualified or
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otherwise in accordance with applicable law, the articles of incorporation and
bylaws of the Surviving Bank.
4.2 Officers. On and after the Effective Date, the officers of
Community duly elected and holding office immediately prior to the Effective
Date shall be the officers of the Surviving Bank, together with those officers
of BUCS who have been offered and who have accepted positions of employment with
Community, and such other officers as may be appointed from time to time, each
to hold office until his or her successor is elected and qualified or otherwise
in accordance with applicable law, the articles of association and bylaws of the
Surviving Bank.
ARTICLE V - CONVERSION OF SHARES
--------------------------------
5.1 Community Capital Stock. Each share of Community capital stock
issued and outstanding immediately prior to the Effective Date shall, on and
after the Effective Date, continue to be issued and outstanding as a share of
identical capital stock of the Surviving Bank.
5.2 BUCS Capital Stock. Each share of BUCS capital stock issued and
outstanding immediately prior to the Effective Date shall, on the Effective
Date, be cancelled, and no cash, stock or other property shall be delivered in
exchange therefor.
ARTICLE VI - EFFECTIVE DATE OF THE MERGER
-----------------------------------------
The Bank Merger shall be effective at the time specified in the
articles of merger filed with the Department of Banking of the Commonwealth of
Pennsylvania (the "Effective Date"), provided that in no event may the Bank
Merger be effective unless or until any required consent from or notice to the
Office of Thrift Supervision has been received or made and any requisite waiting
period has expired.
ARTICLE VII - EFFECT OF THE MERGER
----------------------------------
On the Effective Date the separate existence of BUCS shall cease, and
all of the property (real, personal and mixed), rights, powers, duties and
obligations of BUCS shall be taken and deemed to be transferred to and vested in
the Surviving Bank, without further act or deed, as provided by applicable laws
and regulations. The savings accounts of BUCS shall become savings accounts of
the Surviving Bank on the same basis as prior to the Effective Date.
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ARTICLE VIII - CONDITIONS PRECEDENT
-----------------------------------
The obligations of Community and BUCS to effect the Bank Merger shall
be subject to closing of the "Merger" provided for in the Agreement.
ARTICLE IX - TERMINATION
------------------------
This Bank Plan of Merger shall terminate automatically upon any
termination of the Agreement in accordance with its terms; provided, however,
that any such termination of this Bank Plan of Merger shall not relieve any
party hereto from liability on account of a breach by such party of any of the
terms hereof or thereof.
ARTICLE X - AMENDMENT
---------------------
This Bank Plan of Merger may be amended at any time prior to
consummation of the Bank Merger, but only by an instrument in writing signed by
duly authorized officers on behalf of the parties hereto.
ARTICLE XI - MISCELLANEOUS
--------------------------
11.1 Extensions; Waivers. Each party, by a written instrument signed by
a duly authorized officer, may extend the time for the performance of any of the
obligations or other acts of the other party hereto and may waive compliance
with any of the covenants, or performance of any of the obligations, of the
other party contained in this Bank Plan of Merger.
11.2 Notices. Any notice or other communication required or permitted
under this Bank Plan of Merger shall be given, and shall be effective, in
accordance with the provisions of Section 8.06 of the Agreement.
11.3 Captions. The headings of the several Articles herein are intended
for convenience of reference only and are not intended to be part of, or to
affect the meaning or interpretation of, this Bank Plan of Merger.
11.4 Counterparts. For the convenience of the parties hereto, this Bank
Plan of Merger may be executed in several counterparts, each of which shall be
deemed the original, but all of which together shall constitute one and the same
instrument.
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11.5 Governing Law. This Bank Plan of Merger shall be governed by and
construed in accordance with applicable laws of the United States of America and
in accordance with the laws of the Commonwealth of Pennsylvania.
11.6 Liquidation Account. The liquidation account established by BUCS
in connection with its conversion from mutual to stock form shall be assumed by
the Surviving Bank.
IN WITNESS WHEREOF, Community and BUCS have caused this Bank Plan of
Merger to be executed by their duly authorized officers on the date first
written above, each pursuant to a resolution of its board of directors, acting
by at least two-thirds of the Board.
COMMUNITYBANKS Attest:
By: _____________________________ By: _________________________________________
Eddie L. Dunklebarger Patricia E. Hoch, Senior VP and Secretary
President and CEO
BUCS FEDERAL BANK Attest:
By: _________________________________ _________________________________________
Herbert J. Moltzan, President and CEO , Secretary
5
Exhibit 2
---------
Form of Letter Agreement for Executives
---------------------------------------
, 2006
Community Banks, Inc.
777 East Park Drive
Harrisburg, PA 17111
Ladies and Gentlemen:
Community Banks, Inc. ("CMTY") and BUCS Financial Corp ("BFC") are
considering entering into an Agreement (the "Merger Agreement"), pursuant to
which, and subject to the terms and conditions set forth therein: (a) CMTY will
acquire BFC by a merger of BFC with and into CMTY; (b) stockholders of BFC will
receive shares of CMTY common stock and/or cash in exchange for their shares of
BFC common stock owned on the closing date; and (c) option holders of BFC will
receive cash in exchange for options exercisable for common stock of BFC
outstanding on the closing date (the foregoing, collectively, the
"Transactions").
I have been advised that I may be deemed to be an "affiliate" of BFC
for purposes of certain rules issued by the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933.
I understand that CMTY is requiring, as a condition to its execution
and delivery to BFC of the Agreement, that I execute and deliver to CMTY this
Letter Agreement. Intending to be legally bound hereby, I irrevocably agree and
represent as follows:
1. I agree to vote or cause to be voted for approval of the Merger
Agreement all shares of BFC common stock over which I exercise sole or shared
voting power (other than shares held in a fiduciary capacity) as of the record
date of the BFC shareholder meeting at which the Merger Agreement will be
presented for approval.
2. Through the conclusion of the Transactions, I agree not to offer,
sell, exercise, transfer or otherwise dispose of, or to permit the offer, sale,
transfer or other disposition of, any shares of BFC common stock over which I
exercise sole or shared voting power (other than shares held in a fiduciary
capacity) or any options that I hold to acquire shares of BFC common stock.
3. I have sole or shared voting power (other than shares held in a
fiduciary capacity) over the number of shares of BFC common stock, and hold
stock options for the number of shares of BFC common stock, if any, set forth
below opposite my signature line. CMTY recognizes that with respect to any such
shares which have been pledged to a third party (which are specifically
identified below), I will not be able to control the voting or disposition of
such shares in the event of a default.
4. I agree not to offer, sell, transfer or otherwise dispose of any
shares of CMTY common stock received pursuant to the Transactions, except:
1
(a) at such time as a registration statement under the Securities Act
of 1933, as amended ("Securities Act"), covering sales of such CMTY common stock
is effective and a prospectus is made available under the Securities Act;
(b) within the limits, and in accordance with the applicable provisions
of, Rule 145 under the Securities Act ("Rule 145");
or
(c) in a transaction which, in an opinion of counsel satisfactory to
CMTY or as described in a "no-action" or interpretive letter from the staff of
the SEC (a "No Action Letter"), is not required to be registered under the
Securities Act;
and I acknowledge and agree that CMTY is under no obligation to
register the sale, transfer or other disposition of CMTY common stock by me or
on my behalf, or to take any other action necessary to make an exemption from
registration available.
5. CMTY shall take all steps necessary to ensure that CMTY is in
compliance with all those requirements of Rule 145 and Rule 144 with which CMTY
must comply in order for the resale provisions of Rule 145(d) to be available to
me.
6. I agree that CMTY shall not be bound by any attempted sale of any
shares of CMTY common stock acquired by me pursuant to the Transactions, and
CMTY's transfer agent shall be given appropriate stop transfer orders and shall
not be required to register any such attempted sale, unless the sale has been
effected in compliance with the terms of this Letter Agreement; and I further
agree that the certificate representing shares of CMTY common stock acquired by
me pursuant to the Transactions by me may be endorsed with a restrictive legend
consistent with the terms of this Letter Agreement, stating in substance as
follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED (A)
IN CONFORMITY WITH RULE 145(d), OR (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(C) IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY
ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
The undersigned understands and hereby further acknowledges that the legend set
forth above will be removed from any such certificate (by delivery of a
substitute certificate without such legend) and CMTY will instruct its transfer
agent to remove such legend from any such certificate, if the undersigned
delivers to CMTY (i) satisfactory written evidence that the shares of CMTY
common stock represented by any such certificate have been sold in compliance
with Rule 145(d) (as such rule may be hereafter amended) (in which case, the
substitute certificate will be issued in the name of the transferee), (ii) a No
Action Letter, or (iii) an opinion of counsel, in form and substance reasonably
satisfactory to CMTY, to the effect that public sale of shares represented by
such certificate by the holder thereof is no longer subject to the restrictions
imposed by Rule 145.
2
7. I represent that I have the capacity to enter into this Letter
Agreement and that it is a valid and binding obligation enforceable against me
in accordance with its terms, subject to bankruptcy, insolvency and other laws
affecting creditors' rights and general equitable principles.
I am signing this Letter Agreement in my capacity as a shareholder of
BFC and not in any other capacity (including as a director or Executive). This
Letter Agreement shall be effective upon acceptance by CMTY.
Execution of this Agreement by the undersigned is not an admission by
the undersigned that he or she is an "affiliate" for purposes of the Rule 145 of
the Securities Act.
This Letter Agreement shall terminate concurrently with, and
automatically upon, any termination of the Merger Agreement in accordance with
its terms, except that any such termination shall be without prejudice to CMTY's
rights arising out of any willful breach of any covenant or representation
contained herein.
Very truly yours,
__________________________________________
Name:
___________________________________
Witness
Number of shares held:
Sole voting power: _______ Shared voting power: _______
Number of pledged
shares: _______
Accepted:
COMMUNITY BANKS, INC.
By: __________________________________________________
Name: Eddie L. Dunklebarger, Chairman, President and CEO
3
Exhibit 5.07(c)(vii)
Form of Moltzan Employment Agreement
THIS EMPLOYMENT AGREEMENT ("Agreement") made this day of , 200 , by and
among Community Banks, Inc., a Pennsylvania corporation ("CMTY"),
CommunityBanks, a Pennsylvania bank and trust company ("Community"; CMTY and
Community are collectively referred to from time to time herein as the
"Company"), and Herbert J. Moltzan, an adult individual (hereinafter referred to
as "Executive").
BACKGROUND:
A. Pursuant to an agreement between CMTY and BUCS Financial Corp
("BFC") dated September __, 2006 ("Merger Agreement"), CMTY has acquired BFC
through a merger in which CMTY was the surviving corporation. Initially
capitalized terms used but not defined herein and that are also used in the
Merger Agreement shall have the same meanings as in the Merger Agreement.
B. The Company believes that the future services of the Executive will
be of great value to the Company, and the Executive is willing to be employed by
the Company upon terms and conditions mutually satisfactory to the Executive and
the Company.
C. Executive is party to (i) an employment agreement with BFC's bank
subsidiary dated March __, 2006 ("BFC Employment Agreement" or "Original
Agreement") and (ii) an Executive Supplemental Retirement Plan Agreement and
related Endorsement Method Split Dollar Plan Agreement with BFC's bank
subsidiary dated ________, 2003 ("SERP").
D. The Company and Executive wish to set forth the terms and conditions
of (i) Executive's employment by Company and (ii) the termination of the BFC
Employment Agreement.
NOW, THEREFORE, in consideration of the agreements hereinafter
contained, and intending to be legally bound hereby, the parties agree as
follows:
1. Duties as Executive. Company shall employ Executive and Executive
shall serve Company as a Regional President of Community or to such comparable
executive position to which he may be reasonably appointed by the Company's CEO
in light of his experience and abilities. During his employment by the Company,
Executive shall serve Company under the direction of, and in a manner
satisfactory to the CEO of the Company. He shall perform his duties faithfully,
diligently, and to the best of his ability and shall devote his full time and
best efforts to the affairs of the Company.
2. Compensation as Executive. As compensation for all services
performed by Executive for Company while employed thereby, Company shall:
a. As of and immediately prior to the Effective Date of the
Merger, pay, or consent to BFC or BUCS paying, Executive the lump sum amount of
$___________________;
1
b. During the term of this Agreement, pay Executive, in
regular installments, an annual salary of at least $150,000;
c. Pay Executive bonuses as declared from time to time by the
Company;
d. Enable Executive to participate in the stock option and
management incentive plans of the Company;
e. Continue to maintain and perform the obligations of BFC's
bank subsidiary under the SERP in accordance with the terms and conditions
thereof, including an annual contribution to the Pre-Retirement Benefit Account
accrual under the Executive Supplemental Retirement Plan Agreement of $50,000
plus applicable earnings credited on the aggregate prior year accruals for each
year during the term of this Agreement; and
f. Provide Executive with such health, accident, disability,
life insurance, retirement benefits and such other benefits as are provided to
similarly situated employees of the Company.
3. Reimbursement of Expenses. Company shall reimburse Executive within
thirty (30) days from billing date for necessary and properly documented travel
and business expenses, not otherwise reimbursed, incurred by Executive on behalf
of Company.
4. Term of Employment. The term of the Executive's employment under
this Agreement shall commence as of the Effective Date of the Merger of CMTY and
BFC and shall continue for a period of three (3) years. On each anniversary of
the effective date of this Agreement ("Anniversary"), the term of this Agreement
and the period of the Executive's employment hereunder will be automatically
extended for successive two-year periods unless, no later than ninety (90) days
prior to an Anniversary, either the Company or the Executive gives written
notification to the other of an intention not to renew this Agreement.
Notwithstanding the foregoing provisions, upon the occurrence of a Change of
Control (as hereinafter defined), the term of this Agreement shall automatically
renew and be extended for two (2) years from the date thereof.
5. Termination of Employment.
a. Disability. If the Executive becomes permanently disabled
(as certified by a licensed physician chosen by the Company and the Executive or
in the event that the Company and the Executive cannot agree upon a physician,
each shall designate a licensed physician, and the licensed physicians so
designated shall appoint a third physician whose decision shall be binding upon
the parties) because of sickness, physical or mental disability, or any other
reason, and is unable to perform or complete his duties under this Agreement for
a period of ninety (90) consecutive days (or time equal to the elimination
period under any disability insurance program provided by the Company to the
Executive), the Company shall have the option to terminate this Agreement by
giving not less than 180 days' written notice of termination to the Executive.
Such termination shall be without prejudice to any right the Executive has under
any disability insurance program maintained by the Company.
2
b. Cause. The Company may terminate this Agreement and the
Executive's employment hereunder for Cause at any time. For the purposes of this
Agreement, the Company shall have "Cause" to terminate the Executive's
employment upon (1) the engaging by the Executive in willful misconduct
materially injurious to Community; (2) gross negligence or dishonesty of the
Executive in the performance of his duties; (3) the commission by the Executive
of an act constituting a felony or the conviction of the Executive of a first
degree misdemeanor based on dishonesty; (4) the willful and material breach by
the Executive of any of his other obligations under this Agreement; (5) the
refusal or failure of the Executive to carry out reasonable directives of the
CEO (after the Company's delivery of written notice to the Executive of its
intention to terminate the Executive and the Executive's failure to cure or
remedy such action or failure within 30 days of such notice); (6) receipt of a
final written directive or order of any governmental body or entity having
jurisdiction over the Company requiring termination or removal of the Executive
as an officer of the Company; (7) repeated and consistent failure of the
Executive to be present and work during normal business hours unless the absence
is due to disability described in Section 6(a) below (after the Company's
delivery of written notice to the Executive of its intention to terminate the
Executive and the Executive's failure to cure or remedy such action or failure
within 30 days of such notice); or (8) insubordinate, gross incompetence or
gross misconduct in the performance of, or gross neglect of, the Executive's
duties hereunder.
c. Good Reason. The Executive may terminate his employment
hereunder for Good Reason, provided that such termination occurs within three
months following the occurrence of the Good Reason. The term "Good Reason" shall
mean (i) any assignment to the Executive, without his consent, of any duties
other than those contemplated by Section 1 hereof, or any reduction in the
Executive's duties or responsibilities for the Company; (ii) any removal of the
Executive from any of the positions indicated in Section 1 hereof, except in
connection with termination of the Executive's employment for Cause, a promotion
of Executive to a higher position or an assignment to Executive of a title and
duties and responsibilities approximately comparable to the those involved in
the positions indicated in Section 1 above; (iii) breach by the Company of its
obligations under Section 2 hereof (after the Executive's notice to the Company
and the Company's failure to cure such breach within thirty (30) days of such
notice); (iv) relocation of Executive's principal office to a location that is
more than thirty (30) miles from Owings Mills, Maryland; or (v) any other
willful and material breach by the Company of this Agreement (after the
Executive's notice to the Company and the Company's failure to cure such breach
within thirty (30) days of such notice).
6. Payments Upon Termination.
a. Death, Disability or for Cause. If the Executive's
employment shall be terminated because of death, disability or for Cause, the
Company shall pay the Executive his full salary through the date of termination
at the rate in effect at the time of termination, and other amounts owing to the
Executive at the date of termination, and the Company shall have no further
obligations to the Executive under this Agreement.
b. Unilateral and Good Reason Termination (Not Including
Change of Control). In the event of a Unilateral Termination or if the Executive
shall terminate his employment for Good Reason (except for a termination by the
Executive for Good Reason
3
following a Change of Control), then the Company shall pay the Executive his
full salary from the date of termination for the remaining term of this
Agreement. The Company shall not be required to maintain employee benefit plans
and programs to which the Executive was entitled prior to the date of
termination. "Unilateral Termination" means termination by the Company of the
Executive's employment for any reason other than for Cause prior to the
expiration hereof but does not include termination as a result of disability or
notice by the Company of its intention not to renew this Agreement.
c. Termination Following Change of Control. If the Executive
terminates his employment for Good Reason following a Change of Control or the
Company, or any successor thereto, terminates Executive's employment following a
Change of Control (both, a "Change of Control Termination"), the Executive shall
be entitled to compensation equal to two (2) times the Executive's gross salary
and bonus compensation for the calendar year preceding the date of such
termination. The Executive shall receive the compensation provided for in this
Section 6(c) in twenty-four (24) equal monthly installments payable beginning on
the first day of the month succeeding the month in which the Change of Control
Termination shall occur, provided that the obligation to pay the compensation
provided for in this Section 6(c) shall terminate immediately upon the
Executive's violation of the terms and conditions of the non-disclosure and
non-competition provisions set forth in paragraph 8 of this Agreement.
7. Definition of Change of Control. For purposes of this Agreement, the
term "Change of Control" shall mean:
a. An acquisition by any "person" or "group" (as those terms
are defined or used in Section 13(d) of the Exchange Act, as enacted and in
force on the date hereof) of "beneficial ownership" (within the meaning of Rule
13d-3 under the Exchange Act, as enacted and in force on the date hereof) of
securities of the Company representing 24.99% or more of the combined voting
power of the Company's securities then outstanding;
b. A merger, consolidation or other reorganization of the
Company, except where the resulting entity is controlled, directly or
indirectly, by the Company;
c. A merger, consolidation or other reorganization of the
Company, except where shareholders of the Company immediately prior to
consummation of any such transaction continue to hold as least a majority of the
voting power of the outstanding voting securities of the legal entity resulting
from or existing after any transaction and a majority of the members of the
Board of Directors of the legal entity resulting from or existing after a
transaction are former members of the Company's Board of Directors;
d. A sale, exchange, transfer or other disposition of
substantially all of the assets of the Company to another entity, except to an
entity controlled, directly or indirectly, by the Company or a corporate
division involving the Company;
e. A contested proxy solicitation of the Company's
shareholders that results in the contesting party obtaining the ability to cast
twenty-five percent (25%) or more of the votes entitled to be cast in an
election of directors of the Company; or
4
f. During any period of two (2) consecutive years during the
term of this Agreement and any renewal hereof, individuals who at the beginning
of such period constitute the Board of Directors of the Company cease for any
reason (other than for health, disability or other medical incapacity or
voluntary retirement) to constitute at least a majority thereof.
8. Non-disclosure and Non-competition. The Executive recognizes and
acknowledges that during the course of his employment with the Company and
during the course of his future employment with the Company he has acquired
and/or may subsequently acquire privileged and confidential information
concerning the Company's or its affiliates' current and prospective customers,
their methods and ways of doing business, their plans and goals for future
activities, and other confidential or proprietary information belonging to the
Company or its subsidiaries or relating to the Company's or its affiliates'
affairs (collectively referred to herein as the "Confidential Information"). The
Executive further acknowledges and agrees that the Confidential Information is
the property of the Company and that any misappropriation or unauthorized use or
disclosure of the Confidential Information would constitute a breach of trust
causing irreparable injury to the Company, and it is essential to the protection
of the Company and its goodwill and to the maintenance of the Company's
competitive position that the Confidential Information be kept secret and not be
disclosed to others or used to the Executive's own advantage or the advantage of
others. Accordingly, the Executive agrees that:
(a) Non-disclosure of Confidential Information. During his
employment and following the termination thereof, Executive shall hold and
safeguard the Confidential Information in trust for Company, its successors and
assigns, and shall not without the prior written consent of the Company
misappropriate or disclose or make available to anyone for use outside of the
Company at any time, either during his employment or subsequent to the
termination of his employment, any of the Confidential Information whether or
not developed by the Executive; and
(b) Restrictions on Competition. Further, the Executive agrees
that he shall not, either during his employment with the Company or during the
Restricted Period (as defined below) following the termination of Executive's
employment for any reason (except for a Unilateral Termination, in which case
the noncompetition covenant contained in this Section 8(b) shall not apply),
without first obtaining the written consent of the CEO of the Company, directly
or indirectly, as an officer, director, employee, consultant, agent, partner,
joint venturer, proprietary or otherwise, engage in, become interested in, or
assist any business which is in competition with the Company or any of its
affiliates or subsidiaries, in the areas of commercial banking, mortgage
banking, leasing, or the taking of deposits and is located or operating in any
of the counties in which the Company or any of its present or future
subsidiaries may now or at any time prior to the termination of Executive's
employment have offices or any of the counties contiguous thereto, other than as
a shareholder holding not more than one (1%) percent of the outstanding shares
of any class of securities registered under the Securities Exchange Act of 1934.
"Restricted Period" shall mean (i) in the event of a Change of Control
Termination, a period of two years following such termination and (ii) in all
other cases, the remainder of the term at the time that the termination
occurred.
9. Not Salary. Any deferred compensation payable under this agreement
shall not be deemed salary or other compensation to the Executive for the
purpose of computing benefits
5
to which he may be entitled under any pension plan or other arrangement of the
Company for the benefit of its Executives.
10. No Assignment. The right of the Executive or any other person to
the payment of deferred compensation or other benefits under this agreement
shall not be assigned, transferred, pledged, or encumbered except by will or by
the laws of the descent and distribution.
11. Binding Effect. This agreement shall be binding upon and inure to
the benefit of the Company, its successors and assigns and the Executive and his
heirs, executors, administrators, and legal representatives.
12. Governing Law. This agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Pennsylvania.
13. Severability. If any provision of this Agreement shall be found by
any count of competent jurisdiction to be unenforceable, the parties hereby
waive such provision to the extent that it is found to be unenforceable. Such
provision may be modified by such court so that it becomes enforceable, and, as
modified, will be enforced as any other provision hereof, all other provisions
continuing in full force and effect.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and no prior promises, agreements or warranties, verbal or
written, shall be of any force unless embodied herein. This Agreement is
intended to supersede and replace the Original Agreement. No modification of
this agreement shall be of any force or effect unless reduced to writing and
signed by both parties.
IN WITNESS WHEREOF, the Company has caused this agreement to be
executed by its duly authorized officers and the Executive has hereunto set his
hand and seal as of the date first above written.
Community Banks, Inc.
___________________________ By _________________________________________
Witness Eddie L. Dunklebarger, President and CEO
CommunityBanks
___________________________ By _________________________________________
Witness Eddie L. Dunklebarger, President and CEO
Executive:
___________________________ By _________________________________________
Witness Herbert J. Moltzan
6