EXHIBIT 2
AGREEMENT OF AFFILIATION AND
PLAN OF MERGER
BY AND BETWEEN
FIRSTFEDERAL FINANCIAL SERVICES CORP
AND FIRST SHENANGO BANCORP, INC.
Dated February 6, 1998
INDEX
Page
ARTICLE I
Definitions.....................................................................................1
1.1 Defined Terms..........................................................................1
1.2 Accounting Terms.......................................................................7
ARTICLE II
Merger and Conversion of Shares.................................................................7
2.1 The Merger.............................................................................7
2.2 Effective Time.........................................................................7
2.3 Articles of Incorporation and Regulations..............................................8
2.4 Directors and Officers.................................................................8
2.5 Conversion and Exchange of Capital Stock...............................................8
2.6 Stock Options.........................................................................10
2.7 RESERVED..............................................................................10
ARTICLE III
Representations and Warranties of First Shenango Bancorp, Inc..................................10
3.1 Organization of First Shenango........................................................11
3.2 Authority and Approval................................................................11
3.3 Capital Stock.........................................................................12
3.4 SEC Documents/Regulatory Filings......................................................13
3.5 Subsidiaries..........................................................................13
3.6 Affiliate Transactions................................................................13
3.7 Books and Records.....................................................................14
3.8 Financial Statements..................................................................14
3.9 Absence of Changes....................................................................14
3.10 Consent...............................................................................14
3.11 Taxes.................................................................................14
3.12 Litigation............................................................................15
3.13 Compliance with Laws..................................................................16
3.14 Benefit Plans.........................................................................16
3.15 Real Property.........................................................................18
3.16 Assets................................................................................19
3.17 Intellectual Property.................................................................20
3.18 Contracts.............................................................................20
3.19 Pooling of Interests..................................................................21
3.20 Reserved..............................................................................21
3.21 Licenses..............................................................................21
3.22 Insurance.............................................................................22
3.23 Brokers and Finders...................................................................22
3.24 Employees; Labor Relations............................................................22
3.25 Hazardous Substances..................................................................23
3.26 Loans.................................................................................24
3.27 Agreements with Regulators............................................................24
3.28 Vote Required.........................................................................24
3.29 Securities............................................................................24
3.30 Indemnification.......................................................................25
3.31 Disclosure............................................................................25
ARTICLE IV
Representations and Warranties of FirstFederal Financial.......................................25
4.1 Organization of FirstFederal..........................................................25
4.2 Authority and Approval................................................................26
4.3 Capital Stock.........................................................................26
4.4 SEC Documents/Regulatory Filings......................................................27
4.5 Subsidiaries..........................................................................27
4.6 Affiliate Transactions................................................................28
4.7 Books and Records.....................................................................28
4.8 Financial Statements..................................................................28
4.9 Absence of Changes....................................................................28
4.10 Consent...............................................................................29
4.11 Taxes.................................................................................29
4.12 Litigation............................................................................30
4.13 Compliance with Laws..................................................................30
4.14 Benefit Plans.........................................................................31
4.15 Real Property.........................................................................32
4.16 Assets................................................................................33
4.17 Intellectual Property.................................................................34
4.18 Contracts.............................................................................34
4.19 Pooling of Interests..................................................................36
4.20 Reserved..............................................................................36
4.21 Licenses..............................................................................36
4.22 Insurance.............................................................................36
4.23 Brokers and Finders...................................................................37
4.24 Employees; Labor Relations............................................................37
4.25 Hazardous Substances..................................................................37
4.26 Loans.................................................................................38
4.27 Agreements with Regulators............................................................38
4.28 Reserved..............................................................................38
4.29 Securities............................................................................38
4.30 Disclosure............................................................................39
ARTICLE V
Covenants......................................................................................39
5.1 First Shenango's Covenants............................................................39
5.1.1 Access to Information.................................................................39
5.1.2 Conduct of Business...................................................................39
5.1.3 Corporate Matters.....................................................................40
5.1.4 Distribution and Stock................................................................40
5.1.5 Insurance.............................................................................40
5.1.6 Employees.............................................................................40
5.1.7 New Business..........................................................................40
5.1.8 Agreements............................................................................41
5.1.9 Books and Records.....................................................................41
5.1.10 Compliance with Laws..................................................................41
5.1.11 Shareholders' Meeting.................................................................41
5.1.12 Solicitations.........................................................................42
5.1.13 Break-Up Fee..........................................................................42
5.1.14 Confidentiality.......................................................................44
5.1.15 Exercise of Stock Options.............................................................44
5.1.16 ESOP..................................................................................44
5.1.17 Defined Benefit Plan..................................................................44
5.1.18 Two Additional Benefit Plans..........................................................45
5.1.19 Employment Agreements.................................................................45
5.2 FirstFederal's Covenants..............................................................45
5.2.1 Listing...............................................................................45
5.2.2 Shareholders' Meeting.................................................................45
5.2.3 Employee Benefit Plans................................................................46
5.2.4 Confidentiality.......................................................................46
5.2.6 Employment Agreements.................................................................46
5.3 Mutual Covenants......................................................................46
5.3.1 Pooling of Interest...................................................................46
5.3.2 Proxy Statement; Registration Statement...............................................47
5.3.3 Disclosure............................................................................47
5.3.4 Applications..........................................................................48
5.3.5 Indemnity.............................................................................48
5.3.6 Best Efforts..........................................................................49
5.3.7 Delivery of Supplements to Disclosure Schedules.......................................50
5.3.8 Internal Procedures...................................................................50
ARTICLE VI
Conditions Precedent to FirstFederal's Performance.............................................50
6.1 Representations and Warranties True...................................................50
6.2 Performance of First Shenango.........................................................51
6.3 No Material Changes...................................................................51
6.4 Corporate Approval....................................................................51
6.5 Consents..............................................................................51
6.6 Reserved..............................................................................51
6.7 Opinion of Counsel....................................................................51
6.8 FirstFederal's Due Diligence..........................................................51
6.9 Regulatory Approval...................................................................51
6.10 Pooling of Interest...................................................................52
6.11 Accountant's Letters..................................................................52
6.12 Thrift Subsidiary Board of Directors..................................................52
6.13 Officer's Certificates................................................................52
6.14 Fairness Opinion......................................................................52
6.15 Department of Labor and Industry Certificate..........................................52
6.16 Certified Rent Roll...................................................................53
ARTICLE VII
Conditions to Obligations of First Shenango....................................................53
7.1 FirstFederal's Warranties.............................................................53
7.2 FirstFederal's Performance............................................................53
7.3 Opinion of FirstFederal's Counsel.....................................................53
7.4 Corporate Approval....................................................................53
7.5 Fairness Opinion......................................................................53
7.6 No Material Changes...................................................................53
ARTICLE VIII
The Closing....................................................................................54
8.1 Time and Place........................................................................54
8.2 Closing Escrow........................................................................54
ARTICLE IX
Post Closing Obligations.......................................................................54
9.1 Options...............................................................................54
9.2 FirstFederal Board of Directors.......................................................54
ARTICLE X
Costs and Publicity............................................................................54
10.1 Expenses..............................................................................54
10.2 Publicity.............................................................................54
ARTICLE XI
Form of Agreement and Parties..................................................................55
11.1 Headings..............................................................................55
11.2 Modification and Waiver...............................................................55
11.3 Counterparts..........................................................................55
11.4 Rights of Parties.....................................................................55
11.5 Assignment............................................................................55
ARTICLE XII
Termination....................................................................................55
12.1 Termination...........................................................................55
12.2 Effect of Termination.................................................................56
12.3 Liquidated Damages....................................................................57
ARTICLE XIII
Disclosure Schedules...........................................................................57
ARTICLE XIV
Miscellaneous..................................................................................57
14.1 Notices...............................................................................57
14.2 Entire Agreement......................................................................58
14.3 Costs.................................................................................58
14.4 Fair Interpretation...................................................................58
14.5 Severability..........................................................................58
14.6 Effect of Closing.....................................................................58
14.7 Arbitration of Disputes...............................................................59
14.8 No Third Party Beneficiaries..........................................................59
14.9 Governing Law.........................................................................59
AGREEMENT OF AFFILIATION AND PLAN OF MERGER
-------------------------------------------
This AGREEMENT OF AFFILIATION AND PLAN OF MERGER ("Merger Agreement")
dated as of February 6, 1998, is made and entered into by and between
FIRSTFEDERAL FINANCIAL SERVICES CORP, an Ohio corporation with its principal
office located in Wooster, Wayne County, Ohio ("FirstFederal"), and FIRST
SHENANGO BANCORP, INC., a Pennsylvania corporation with its principal office
located in New Castle, Lawrence County, Pennsylvania ("First Shenango").
WHEREAS, FirstFederal and First Shenango desire to effect a merger
under the authority and provisions of the corporation laws of the State of Ohio
and the Commonwealth of Pennsylvania pursuant to which, at the effective time,
First Shenango will be merged into FirstFederal with FirstFederal to be and
become the surviving corporation;
WHEREAS, for federal income tax purposes, it is intended that the
merger shall qualify as a reorganization under the provisions of Section 368 of
the Code;
WHEREAS, for accounting purposes, it is intended that the merger be
accounted for as a "pooling of interests."
WHEREAS, FirstFederal presently intends to operate First Federal
Savings Bank of New Castle as an autonomous wholly owned Thrift Subsidiary of
FirstFederal.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Merger Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
---------
Definitions
-----------
1.1 Defined Terms. As used in this Merger Agreement, the following
terms have the following meanings unless the context clearly indicates otherwise
(terms defined in the singular to have the same meaning when used in the plural
and vice versa):
"Acquisition Transactions" has the meaning set out in Section 5.1.12.
"Affiliate" means any Person that directly or indirectly controls or is
controlled by or is under common control with a Person.
"Articles of Merger" has the meaning set out in Section 2.2.
"Assets" means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether tangible or
intangible, whether absolute, accrued, contingent, fixed or otherwise and
wherever situated), including the goodwill related thereto,
operated, owned or leased by First Shenango or FirstFederal, including without
limitation cash, cash equivalents, notes, securities, loans, chattel paper,
documents, instruments, general intangibles, real estate, equipment, goods and
Intellectual Property, regardless of whether such items appear on the Financial
Statements.
"Bank Subsidiary" means Signal Bank, National Association, a federally
chartered national bank and Summit Bank, National Association, a federally
chartered national bank.
"Books and Records" mean all files, documents, instruments, papers,
books and records relating to the Business or Condition of First Shenango or
FirstFederal, as the case may be, including without limitation Financial
Statements, tax returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, minute books, stock transfer
ledgers, Contracts, Licenses, loans, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"Business or Condition of First Shenango" means the business, condition
(financial or otherwise), results of operations, Assets and prospects of First
Shenango taken as a whole.
"Business or Condition of FirstFederal" means the business, condition
(financial or otherwise), results of operations, Assets and prospects of
FirstFederal taken as a whole.
"Certificate" has the meaning set out in Section 2.5(e).
"Certificate of Merger" has the meaning set out in Section 2.2.
"Closing" and "Closing Date" shall be on or before August 31, 1998, or
as promptly as possible after Regulatory Approval is received, but in no event
later than December 31, 1998.
"Code" means the Internal Revenue Code of 1986 and any amendments,
predecessor laws or successor laws, and all applicable interpretive authority
(including, but not limited to, regulations and revenue rulings).
"Constituent Corporations" has the meaning set out in Section 2.1.
"Contract" means any agreement, lease, evidence of indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral) to which First Shenango or FirstFederal is a party or bound other than as
a creditor in the ordinary course of business.
"Disclosure Schedule" means the record delivered to FirstFederal by
First Shenango and to First Shenango by FirstFederal herewith and dated as of
the date hereof, containing all lists, descriptions, exceptions and other
information and materials as are required to be included therein by First
Shenango and FirstFederal respectively pursuant to this Merger Agreement.
"Documents of Merger" has the meaning set out in Section 2.2.
2
"ERISA" has the meaning set out in Section 3.14(a).
"Exchange Act" has the meaning set out in Section 5.1.13(a)(i)(A).
"Effective Time" has the meaning set out in Section 2.2.
"Employee Benefit Plans" has the meaning set out in Section 3.14(a).
"Employment Agreements" means the agreements by and between Thrift
Subsidiary and Francis A. Bonadio and Lonny D. Robinson in the form set forth in
Exhibit A-1 and Exhibit A- 2.
"Environmental Law" means any law relating to human health, safety, or
protection of the environment or to omissions, discharges, releases, or
threatened releases of pollutants, contaminants, or hazardous substances in the
environment (including, without limitation, ambient air, surface water, ground
water, land surface, or subsurface strata) or otherwise relating to the
treatment, storage, disposal, transport, or handling of any hazardous substance.
"Exchange Ratio" has the meaning set out in Section 2.5.
"Financial Statements" means the FirstFederal Financial Statements
and/or the First Shenango Financial Statements, as the case may be.
"FirstFederal" means collectively FirstFederal Financial Services Corp
and each Subsidiary thereof, except in Articles II and XI, FirstFederal means
solely FirstFederal Financial Services Corp.
"FirstFederal Common Stock" means $1.00 par value common stock of
FirstFederal Financial Services Corp, of which 6,725,535 shares are issued and
outstanding as of December 31, 1997.
"FirstFederal Entity" has the meaning set out in Section 5.1.13(a)(i)(A).
"FirstFederal Financial" means FirstFederal Financial Services Corp.
"FirstFederal Financial Statements" means the consolidated balance
sheets of FirstFederal as of December 31, 1995, and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for the
years ending on those dates as audited by Deloitte & Touche, LLP, the
independent, certified public accountant for FirstFederal for 1995 and KPMG Peat
Marwick LLP, the independent, certified public accountant for FirstFederal for
1996, including the independent auditors' reports of such accountants with
respect to the Financial Statements. Financial Statements also means the
unaudited balance sheet as of December 31, 1997, and related statements of
income, shareholders' equity and cash flows for the period ending on such date.
Said Statements are set out in Section 4.8 of the Disclosure Schedule.
3
"FirstFederal Share Price Change" means a fraction expressed as a
percentage, the numerator of which is the difference between the average closing
Sales Price of FirstFederal Common Stock as recorded on Nasdaq for the 10
consecutive Trading Days ending on the Trading Day prior to the Trading Day this
Merger Agreement is executed by all parties and the average closing Sales Price
of FirstFederal Common Stock as recorded on Nasdaq for the 10 consecutive
Trading Days ending on the third Trading Day prior to the Closing Date and the
denominator of which is the average closing Sales Price of FirstFederal Common
Stock as recorded on Nasdaq for the 10 consecutive Trading Days ending on the
Trading Day prior to the Trading Day this Merger Agreement is executed by all
parties.
"First Shenango" means collectively First Shenango Bancorp, Inc. and
each Subsidiary thereof, except in Articles II and XII, First Shenango means
solely First Shenango Bancorp, Inc.
"First Shenango Articles" has the meaning set out in Section 3.1(b).
"First Shenango Bylaws" has the meaning set out in Section 3.1(b).
"First Shenango Common Stock" means the common stock, $0.10 par value
per share of First Shenango Bancorp, Inc., of which 2,058,640 shares are issued
and outstanding as of the date hereof.
"First Shenango Financial Statements" means the consolidated balance
sheets of First Shenango as of December 31, 1995 and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for the
years ending on those dates as audited by Ernst & Young LLP, the independent,
certified public accountant for First Shenango, including the reports of such
accountant with respect to the Financial Statements. Financial Statements also
mean the unaudited balance sheet as of December 31, 1997, and related statements
of income, shareholders' equity and cash flows for the period ending on such
date. Said Statements are set out in Section 3.8 of the Disclosure Schedule.
"GAAP" means American Institute of Certified Public Accountants'
generally accepted accounting principles, consistently applied.
"Intellectual Property" means all patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service mark rights, service names and service name rights, brand names,
inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, trade secrets, processes, designs,
methodologies, computer programs (including all source codes) and related
documentation, and all pending applications for and registrations of patents,
trademarks, service marks and copyrights licensed or owned by First Shenango.
"Knowledge" means the actual knowledge of any director or senior
management officer.
"KPMG" means KPMG Peat Marwick LLP.
4
"Liabilities" means all indebtedness, obligations, guarantees, and
other liabilities (whether absolute, accrued, contingent, fixed or otherwise,
liquidated or unliquidated, or whether due or to become due).
"Licenses" means all licenses, permits, charters, trade association
memberships, certificates of authority, authorizations, approvals,
registrations, franchises and similar consents.
"Lien" means any mortgage, pledge assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale contract, title retention contract or other contract to convey
any of the foregoing.
"Material Adverse Effect" means with respect to FirstFederal or First
Shenango, as the case may be, a material adverse effect on the business, results
of operations, or financial condition of such party and its Subsidiaries taken
as a whole.
"Material Adverse Impact of FirstFederal" means a material
misrepresentation or breach of warranty by FirstFederal or any other matter not
adequately disclosed on the Disclosure Schedule by FirstFederal which, in the
aggregate, would have potential pre-tax liability to FirstFederal in excess of
$3,000,000 (excluding therefrom change in financial position resulting from
general market fluctuations in the value of FirstFederal's investment securities
and loans).
"Material Adverse Impact of First Shenango" means a material
misrepresentation or breach of warranty by First Shenango or any other matter
not adequately disclosed on the Disclosure Schedule by First Shenango which, in
the aggregate, would have potential pre-tax liability to First Shenango in
excess of $1,000,000 (excluding therefrom change in financial position resulting
from general market fluctuations in the value of First Shenango's investment
securities and loans).
"Material Contract" means any Contract that involves the payment or
potential payment, pursuant to the terms of any such contract, by or to First
Shenango of more than $100,000.00 or any Contract that cannot be terminated
within 360 calendar days after giving notice of termination without resulting in
any material cost or penalty to First Shenango.
"McDonald" has the meaning set out in Section 3.23.
"Merger" has the meaning set out in Section 2.1.
"Merger Agreement" means this Agreement of Affiliation and Plan of
Merger, Exhibits and Schedules hereto and all certificates and documents
delivered in accordance herewith.
"NASD" has the meaning set out in Section 5.2.1.
"Nasdaq" means the Nasdaq National Stock Market System.
"OGCL" has the meaning set out in Section 2.1.
5
"Order" means any writ, judgment, decree, injunction or similar order
of any governmental or regulatory authority (in each such case whether
preliminary or final).
"PBGC" has the meaning set out in Section 3.14(b).
"PBCL" has the meaning set out in Section 2.1.
"Person" means any natural person, corporation, general partnership,
trust, proprietorship, limited liability company or other business organization.
"Real Property" means all interests in real estate wherever located and
owned or leased.
"Registration Statement" means the original filing and subsequent
amendments under Form S-4 with the Securities and Exchange Commission (SEC)
pursuant to the Securities Act of 1933 referred to in Articles V and VI.
"Regulatory Approval" means the approval of this Merger Agreement by
the appropriate agencies, commissions, and other instrumentalities of the United
States.
"Robinson" means Lonny D. Robinson.
"Sales Price" means the average of the closing bid and ask price of
FirstFederal Common Stock, as reported on Nasdaq as adjusted for stock splits
and stock dividends.
"SEC" means the Securities and Exchange Commission.
"SNL Index" means the value as of a given date of the SNL Securities
National Bank and Thrift Index as reported by SNL Securities, which represents a
market value weighted average of the companies composing such index.
"SNL Index Price Change" means a fraction expressed as a percentage the
numerator of which is the difference between the average closing value of the
SNL Index for the 10 consecutive Trading Days ending on the Trading Day prior to
the Trading Day this Merger Agreement is executed by all parties and the average
closing value of the SNL Index for the ten (10) consecutive Trading Days ending
on the third Trading Day prior to the Closing Date and the denominator of which
is the average closing value of the SNL Index for the 10 consecutive Trading
Days ending on the Trading Day prior to the Trading Day this Merger Agreement is
executed by all parties.
"Stock Option" means any stock option granted under the Stock Option
Plan.
"Stock Option Plan" means First Shenango Bancorp, Inc. 1993 Stock
Option Plan for the benefit of First Shenango's directors and the Thrift
Subsidiary's officers as more fully disclosed on Section 3.18(a)(i) of the
Disclosure Schedule.
6
"Subsidiary" means any corporation or other entity in which First
Shenango or FirstFederal, as the case may be, directly or indirectly through
Subsidiaries or otherwise, beneficially owns any equity interests in, or the
voting control of, such corporation or other entity.
"Surviving Corporation" has the meaning set out in Section 2.1.
"Thrift Subsidiary" means First Federal Savings Bank of New Castle, a
federally chartered stock savings bank.
"Trading Day" means a day stock is exchanged on Nasdaq.
"Transfer Agent" means Chase Mellon Shareholder Services, LLC, or such
successor transfer agent selected by FirstFederal.
1.2 Accounting Terms. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP. All
financial data supplied pursuant to this Merger Agreement shall be prepared in
accordance with such principles, unless otherwise noted.
ARTICLE II
----------
Merger and Conversion of Shares
-------------------------------
2.1 The Merger. At the Effective Time, upon the terms and subject to
the conditions of this Merger Agreement, First Shenango shall be merged (the
"Merger") with and into FirstFederal in accordance with the Ohio General
Corporation Law (the "OGCL") and Pennsylvania Business Corporations Law
("PBCL"). FirstFederal shall be the surviving corporation in the Merger (the
"Surviving Corporation"), and the Surviving Corporation shall be an Ohio
corporation. The Surviving Corporation's name shall be Signal Corp. FirstFederal
and First Shenango are sometimes referred to herein as the "Constituent
Corporations." As a result of the Merger, the outstanding shares of capital
stock of First Shenango shall be converted or canceled in the manner provided in
Section 2.5.
2.2 Effective Time. As soon as practicable following the Closing, the
Constituent Corporations shall cause a certificate of merger complying with the
requirements of Section 1701.81 of the OGCL (the "Certificate of Merger")
attached hereto as Exhibit B and articles of merger complying with the
requirements of Section 1926 of the PBCL (the "Articles of Merger") attached
hereto as Exhibit C, (together the "Documents of Merger"), to be filed with the
Secretary of State of the State of Ohio and the Department of State of the
Commonwealth of Pennsylvania, respectively. The Merger will become effective at
the time and date the Documents of Merger are filed with the Secretary of the
State of Ohio and the Department of State of the Commonwealth of Pennsylvania
(the "Effective Time"). The Effective Time may not be prior to April 5, 1998.
7
2.3 Articles of Incorporation and Regulations. The amended Articles of
Incorporation, as further amended by the Certificate of Merger, and Code of
Regulations of FirstFederal effective immediately before the Effective Time will
be the Articles of Incorporation and Code of Regulations of the Surviving
Corporation, until duly amended in accordance with the OGCL and their respective
terms.
2.4 Directors and Officers. The directors and officers of FirstFederal
immediately prior to the Effective Time will be the directors and officers,
respectively, of the Surviving Corporation, until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the terms of FirstFederal's amended
Articles of Incorporation and Code of Regulations and the OGCL. Likewise, the
directors of Thrift Subsidiary prior to the Effective Time will remain directors
of Thrift Subsidiary after the Effective Time subject to the provisions of its
Articles, Bylaws and the provisions of applicable law.
2.5 Conversion and Exchange of Capital Stock.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, each then outstanding
share of common stock, $0.10 par value per share, of First Shenango
Common Stock will, by virtue of the Merger, automatically be canceled
and extinguished in consideration and exchange for the right to receive
1.143 shares ("Exchange Ratio") of FirstFederal Common Stock.
(b) All shares of First Shenango Common Stock that are owned
by First Shenango as treasury stock and any shares of First Shenango
Common Stock owned by FirstFederal shall be canceled and retired and
shall cease to exist and no consideration whatsoever shall be delivered
in exchange therefor in connection with the Merger.
(c) Each outstanding share of FirstFederal Common Stock prior
to the Effective Time shall continue to be an issued and outstanding
common share $1.00 par value of the Surviving Corporation and each
share of FirstFederal Common Stock held in treasury prior to the
Effective Time shall continue to be held in treasury by the Surviving
Corporation.
(d) If, between the date of this Merger Agreement and the
Effective Time, the shares of FirstFederal Common Stock shall be
changed into a different number of shares by reason of any
reclassification, recapitalization, split-up combination, or exchange
of shares, or by stock dividend or stock split thereon, declared with a
record date within said period, the applicable adjustment or
adjustments shall be made to the Exchange Ratio established by Section
2.5(a) and to the definition of "Sales Price."
(e) As soon as practicable after the Effective Time, the
Transfer Agent shall send a notice and form of letter of transmittal to
each holder of record of First Shenango Common Stock at the Effective
Time advising such shareholder of the effectiveness of the Merger and
the procedures for surrendering to the Transfer Agent outstanding
Certificates formerly evidencing shares of First Shenango Common Stock.
On and after the Effective
8
Time, each holder of a certificate or certificates theretofore
representing outstanding shares of First Shenango Common Stock(any such
certificate being hereinafter referred to as a "Certificate") may
surrender the same to the Transfer Agent for cancellation and each such
holder shall be entitled upon such surrender to receive in exchange
therefor certificate(s) representing the number of whole shares of
FirstFederal Common Stock to which such holder is entitled as provided
herein and a check in an amount equal to the amount of cash to be paid
pursuant to subsection (f) of Section 2.5, without interest, to which
such holder is entitled.Until so surrendered, each Certificate shall be
deemed for all purposes to evidence ownership of the number of shares
of FirstFederal Common Stock into which the shares represented by
such Certificates have been changed or converted as aforesaid. No
dividends or other distributions declared after the Effective Time with
respect to FirstFederal Common Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Section 2.5. After the surrender of
a Certificate in accordance with this Section 2.5, the record holder
thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had
become payable with respect to shares of FirstFederal Common Stock
represented by such Certificate. Holders of unsurrendered Certificates
shall be entitled to vote after the Effective Time, at any meeting of
FirstFederal shareholders, the number of whole shares of FirstFederal
Common Stock represented by such Certificates, regardless of whether
such holders have exchanged their Certificates; provided that no holder
of unsurrendered Certificates may vote at any meeting of FirstFederal
shareholders that is held more than 30 days after the Effective Time.
Certificates surrendered for exchange by any person who is an
"affiliate" of First Shenango or an affiliate of an affiliate for
purposes of Rule 145(c) under the Securities Act of 1933, as amended,
shall not be exchanged for certificates representing shares of
FirstFederal Common Stock until FirstFederal has received the written
agreement of such person contemplated by Section 5.3.1. If any
certificate for shares of FirstFederal Common Stock is to be issued in
a name other than that in which a Certificate surrendered for exchange
is issued, the Certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer.
Upon the Effective Time, the stock transfer books of First
Shenango shall be closed and no transfer of First Shenango Common Stock
shall thereafter be made or recognized. Any other provision of this
Merger Agreement notwithstanding, neither FirstFederal or the Transfer
Agent nor any party to this Merger Agreement shall be liable to a
holder of First Shenango Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Notwithstanding any other provision hereof, each holder of
shares of First Shenango Common Stock who would otherwise have been
entitled to receive a fraction of a share of FirstFederal Common Stock
(after taking into account all Certificates delivered by such holder)
shall receive, in lieu thereof, cash in an amount equal to such
fractional part of a share of FirstFederal Common Stock valued as
follows: the average closing Sales Price as recorded on Nasdaq for the
ten consecutive Trading Days ending on the third
9
Trading Day prior to the Closing Date. No such holder shall be entitled
to dividends, voting rights or any other shareholder right in respect
of any fractional share.
(g) To the extent applicable under the PBCL, each outstanding
share of First Shenango Common Stock the holder of which has perfected
his right to dissent under the PBCL and has not effectively withdrawn
or lost such right as of the Effective Time (the "First Shenango
Dissenting Shares") will not be converted into or represent a right to
receive shares of FirstFederal Common Stock (including cash for
fractional shares), and the holder will be entitled only to such rights
as are granted by the PBCL. First Shenango will give FirstFederal
prompt notice upon receipt by First Shenango of any such written
demands for payment of the fair value of such shares of First Shenango
Common Stock and of withdrawals of such demands and any other
instruments provided pursuant to PBCL (any shareholder duly making
such demand being hereinafter called a "Dissenting Shareholder"). Any
payments made in respect of First Shenango Dissenting Shares will be
made by FirstFederal. If any Dissenting Shareholder effectively
withdraws or loses (through failure to perfect or otherwise) his right
to such payment prior to or at or after the Effective Time, such
holder's shares of First Shenango Common Stock will be converted into
a right to receive FirstFederal Common Stock in accordance with the
applicable provisions of this Merger Agreement.
2.6 Stock Options. Except for those Stock Options exercised pursuant to
Section 5.1.15, Stock Options outstanding immediately prior to the Effective
Time entitling the holders thereof to purchase shares of First Shenango Common
Stock will remain unchanged and will remain outstanding when the Merger becomes
effective, except that upon the Effective Time, (i) the holders thereof shall
become entitled to purchase the number of shares of FirstFederal Common Stock
(rounded up to the nearest whole share) to which such holders would have been
entitled to receive pursuant to Section 2.5(a) if immediately preceding the
Effective Time, such securities were converted into such number of shares of
First Shenango Common Stock to which the holders would be entitled under the
terms of the governing documents for such securities, disregarding for purposes
of this Section any limitations on exercise or vesting thereof; and (ii) the
exercise price of each respective Stock Option shall be divided by the Exchange
Ratio. The Stock Options, and the FirstFederal Common Stock delivered upon
exercise of the Stock Option, shall be registered under the Securities Act of
1933.
2.7 RESERVED
ARTICLE III
-----------
Representations and Warranties of First Shenango Bancorp, Inc.
--------------------------------------------------------------
Representations and Warranties. In order to induce FirstFederal
Financial to enter into this Merger Agreement and to consummate the transactions
contemplated hereunder, First Shenango Bancorp, Inc. makes the following
representations, warranties, covenants and agreements:
10
3.1 Organization of First Shenango.
(a) First Shenango Bancorp, Inc., is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has all necessary corporate power and
authority to conduct its business as and to the extent now conducted
and to own, use and lease its Assets. Section 3.1 of the Disclosure
Schedule lists all states in which First Shenango is engaged in
business, or owns, uses, or leases Assets. First Shenango is qualified
to do business and is in good standing in those jurisdictions specified
in Section 3.1 of the Disclosure Schedule, which are the only
jurisdictions in which such qualification is legally required, except
where the failure to be so qualified or in good standing (considering
all such failures together) does not and will not have a Material
Adverse Effect upon the Business or Condition of First Shenango.
(b) The copies of First Shenango Bancorp, Inc.'s Articles of
Incorporation as amended to date, certified by the Secretary of the
Commonwealth of Pennsylvania ("First Shenango Articles"), and the
Amended and Restated Bylaw as amended to date, certified by First
Shenango Bancorp, Inc.'s Secretary ("First Shenango Bylaws "), all of
which have been heretofore delivered to FirstFederal, are and at
Closing will be accurate and complete. Further, the minute books and
stock record books of First Shenango are accurate and complete and at
Closing will be complete and correct. Such minute books and stock
record books will be available for inspection at any reasonable time
by FirstFederal's duly authorized representatives, and copies of any
minutes of any meeting held or documents otherwise constituting
corporate action by First Shenango after the date of such inspection
will be furnished to FirstFederal promptly and in no event later than
Closing.
(c) First Shenango does not own any FirstFederal Common Stock.
3.2 Authority and Approval.
(a) Provided the Effective Time is subsequent to April 5,
1998, First Shenango Bancorp, Inc., has all requisite corporate power
and authority to enter into and perform all of its obligations under
this Merger Agreement. The execution and delivery of this Merger
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of First Shenango Bancorp, Inc, other
than the shareholder vote as contemplated in Section 5.1.11 hereof.
(b) Provided the Effective Time is subsequent to April 5,
1998, the consummation of the transactions contemplated hereby and the
compliance by First Shenango with the terms of this Merger Agreement do
not and will not conflict with, result in, or constitute any of the
following:
(i) A breach of any term or provision of this Merger
Agreement;
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(ii) Except for the matters set out on Section 3.2 of
the Disclosure Schedule, a default or an event that, with
notice or lapse of time, or both, would be a default, breach
or violation of the First Shenango Articles or First Shenango
Bylaws or any Contract, License, commitment, or other
agreement, instrument, or arrangement to which First Shenango
is a party or by which First Shenango or its Assets are bound;
(iii) Except as to matters set out on Section 3.2 of
the Disclosure Schedule, an event that would permit any party
to terminate any agreement with First Shenango or to
accelerate the maturity of any obligation of First Shenango;
or
(iv) The creation or imposition of any Lien on any of
its Assets.
3.3 Capital Stock. The authorized capital stock of First Shenango
Bancorp, Inc., consists of:
(a) 15,000,000 shares of common stock, $0.10 par value per
share, of which 2,058,640 shares are issued and outstanding; and
274,091 shares are held in treasury; and 10,367 shares are held in a
benefit plan reserve.
(b) 10,000,000 shares of serial preferred stock without par
value, none of which is issued and outstanding.
All issued and outstanding shares of First Shenango Common Stock are
validly issued, fully paid and nonassessable and were not issued in violation of
any preemptive right of any stockholder of First Shenango Bancorp, Inc. All of
the issued and outstanding shares of First Shenango Common Stock will be
entitled to vote to approve this Merger Agreement. As of the date hereof, no
shares of First Shenango Common Stock were reserved for issuance, except that
109,074 shares were reserved for issuance upon the exercise of options granted
heretofore pursuant to the Stock Option Plan. First Shenango has no outstanding
restricted stock that has not completely and fully vested. First Shenango has no
stock appreciation rights outstanding. Options have been granted with respect to
109,074 shares of First Shenango Common Stock, all of which are presently held
by the present or former employees, officers, and directors of Thrift
Subsidiary, all of which Stock Options are fully vested as of the execution of
the Merger Agreement. There are no other outstanding subscriptions, options,
rights, warrants, convertible securities, or other agreements or commitments
obligating First Shenango to issue (or to transfer from treasury) any additional
shares of its capital stock of any class. Section 3.3 of the Disclosure Schedule
lists all Persons who owned unexercised Stock Options which have lapsed for any
reason, which have not otherwise been awarded thereafter to other parties.
First Shenango has taken all action necessary so that the execution of
this Merger Agreement and the consummation of the transactions contemplated
hereby do not and will not result in the grant of any rights to any person under
any agreements or enable rights to any capital
12
stock of First Shenango to be exercised, distributed, or triggered, except as
otherwise provided in this Merger Agreement.
3.4 SEC Documents/Regulatory Filings. First Shenango Bancorp, Inc., has
filed all SEC documents required by the security laws and such SEC documents
complied as of their respective dates of filing in all material respects with
security laws. First Shenango has filed all reports required by statute or
regulation to be filed with any federal or state regulatory agency except where
the failure to so file would not have a Material Adverse Effect on First
Shenango, and such reports were prepared in accordance with the applicable
statutes, regulations, and instructions in existence as of the date of filing of
such reports in all material respects.
3.5 Subsidiaries.
(a) First Shenango does not own, directly or indirectly, 5% or
more of the outstanding capital stock or other voting securities of any
corporation, bank, or other organization, except as disclosed on
Section 3.5 of the Disclosure Schedule. The outstanding shares of
capital stock of each Subsidiary are validly issued and outstanding,
fully paid and nonassessable, and all such shares are directly owned by
First Shenango , free and clear of all liens, claims, and encumbrances.
No Subsidiary has any outstanding securities of any kind, nor any
outstanding options, warrants, or other rights entitling another
person to acquire any securities of a Subsidiary of any kind other
than the shares of capital stock owned by First Shenango.
(b) Each Subsidiary is a duly organized corporation or banking
association validly existing and in good standing under applicable
laws. Each Subsidiary (i) has all requisite corporate power and
authority to carry on its business as now conducted; and (ii) is duly
licensed or qualified to do business in the states of the United States
where its ownership or leasing of property or the conduct of its
business requires such licensing or qualification and where failure to
be so licensed or qualified would have a Material Adverse Effect on
First Shenango. Each Subsidiary has all federal, state, and local
governmental authorizations necessary for it to own or lease its
properties or assets and to carry on its business as is now being
conducted, except where the failure to be so authorized would not have
a Material Adverse Effect on First Shenango.
3.6 Affiliate Transactions. Except as disclosed in Section 3.6 of
the Disclosure Schedule, as of the date of this Merger Agreement:
(i) There are no Liabilities between First Shenango,
on the one hand, and the officers and directors of First
Shenango, on the other hand;
(ii) No executive officer, director, or Affiliate of
a director or executive officer provides, provided, or caused
or causes to be provided any Assets, services, or facilities
to First Shenango or otherwise does business with First
Shenango.
13
3.7 Books and Records. The Books and Records of First Shenango fairly
reflect in all material respects the transactions to which it is a party and by
which its properties are subject or bound. Such Books and Records have been
properly kept and maintained in compliance in all material respects with GAAP
and all applicable legal requirements.
3.8 Financial Statements. The First Shenango Financial Statements, all
previously provided to FirstFederal, fairly present the consolidated financial
position of First Shenango Bancorp, Inc., and its consolidated Subsidiaries as
of the date indicated, and the consolidated results of operations, changes in
shareholders' equity and cash flows of First Shenango Bancorp, Inc., and its
consolidated Subsidiaries for the period then ended in conformity with GAAP.
There are no material Liabilities of First Shenango required to be disclosed in
First Shenango's Financial Statements other than the Liabilities disclosed in
such Financial Statements (including footnotes). All monetary Liabilities and
material non-monetary Liabilities incurred after the date of the Financial
Statements were incurred in the ordinary course of business consistent with past
practices and in the aggregate are not material to First Shenango's business.
Except for those Subsidiaries listed in Section 3.8 of the Disclosure Schedule,
the statements of financial condition and results of operations of each
Subsidiary are, and for all periods referred to in this Section 3.8 have been,
consolidated with those of First Shenango Bancorp, Inc.
3.9 Absence of Changes. Since December 31, 1997: (i) there has not been
any material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
Material Adverse Impact of First Shenango; (ii) neither First Shenango's chief
executive officer nor its chief financial officer is aware of any events which
have occurred since December 31, 1997, or which are reasonably certain to occur
in the future and which reasonably can be expected to result in any Material
Adverse Impact of First Shenango; and (iii) there have been no material changes
in the methods of business operation of First Shenango.
3.10 Consent. Except as set forth in Section 3.10 of the Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any federal or state governmental authority is
required by or with respect to First Shenango in connection with the execution
and delivery of this Merger Agreement or the consummation of the transactions
contemplated hereby.
3.11 Taxes.
(a) Filing of Tax Returns. Except where properly extended,
within the times and in the manner prescribed by law, First Shenango
has filed all federal, state, and local tax returns required by law.
Except as disclosed in Section 3.11 of the Disclosure Schedule, the
federal income tax returns of First Shenango have not been audited or
investigated by the Internal Revenue Service for the preceding five
years. Except as reflected on Section 3.11 of the Disclosure Schedule,
there are no present disputes as to taxes payable by First Shenango. In
addition, all tax returns and reports required by applicable law or
governmental regulations have been filed by First Shenango, and such
returns and reports are (and as to such returns and reports not filed
as of the date hereof,
14
will be) true, correct, and complete in all material respects and
present, fairly and accurately, the information required to be shown
therein. There are no tax deficiencies assessed against First Shenango
that would have a Material Adverse Effect on First Shenango, and there
are no tax deficiencies proposed or threatened, and no audit of First
Shenango by any federal, state or local authority is in progress, and
First Shenango has not received notice regarding any audit.
(b) Payment of Taxes. Except as disclosed in Section 3.11(b)
of the Disclosure Schedule, First Shenango has, within the time and in
the manner prescribed by law, paid in full (and until the Closing Date
will pay within the time and in the manner prescribed by law) payroll
taxes (including, but not limited to, Social Security taxes), franchise
taxes, sales and use taxes, personal property taxes, real estate taxes
and assessments, and local, state and federal income taxes. In
addition, First Shenango will pay or make timely provision for payment
of all such taxes thereafter payable by First Shenango so that no lien
for any such taxes will be placed (or attempted) upon any of the
Assets, on or following the Closing Date.
(c) Tax Reserves. Except as disclosed in Section 3.11(c) of
the Disclosure Schedule, the amounts established as accruals for taxes
on the Financial Statements and on the Books and Records of First
Shenango are reasonably expected to be sufficient for the payment of
all taxes of any kind, whether disputed or not, and whether accrued,
due, absolute, contingent or otherwise, which were or which may be
payable by First Shenango for any periods or fiscal years prior to or
including the Closing Date, including all taxes imposed before or
after the Closing Date which are attributable to any such period or
fiscal year. No differences exist between the amounts of the book
basis and the tax basis of Assets (net of Liabilities) that are not
accounted for by an accrual on the Books and Records for federal
income tax purposes.
(d) Extensions and Waivers. Except as disclosed in Section
3.11(d) of the Disclosure Schedule, First Shenango has not requested
any extension of time within which to file any tax return, which tax
return has not since been filed, nor has First Shenango executed any
outstanding waivers or comparable consents regarding the application of
the statute of limitations with respect to any taxes or tax returns.
3.12 Litigation. Except as disclosed in Section 3.12 of the Disclosure
Schedule:
(a) There is no pending or threatened litigation involving
First Shenango as defendant or plaintiff. There is no suit, action,
arbitration, or legal, administrative, or other proceeding, or
governmental investigation pending or threatened, against or affecting
First Shenango, or its business or Assets. To the best of its
Knowledge, the matters set forth in Section 3.12 of the Disclosure
Schedule, if decided adversely to First Shenango, will not result in a
Material Adverse Impact on First Shenango. First Shenango is not in
default with respect to any Order of any federal, state, local or
foreign court, department, agency, or instrumentality.
15
(b) There are no facts or circumstances known to First
Shenango that could reasonably be expected to give rise to any claim
that would be required to be disclosed pursuant to clause (a) above.
3.13 Compliance with Laws. To the best of its Knowledge, First Shenango
has complied with and is not in violation of, applicable federal, state, or
local statutes, laws and regulations (including, without limitation, any
applicable building, zoning, or other law, ordinance, or regulation) affecting
its properties or the operation of its business, including without limitation
the Real Estate Settlement Procedures Act, Fair Debt Collection Practices Act,
Fair Credit Reporting Act, Equal Credit Opportunity Act, Truth in Lending Act,
Occupational Safety and Health Act of 1970, the Fair Labor Standards Act of
1938, Title VII of the Civil Rights Act of 1964, the Rehabilitation Act of 1973,
Federal Age Discrimination in Employment Act of 1967, Consolidated Omnibus
Budget Reconciliation Act of 1985, the Workers Adjustment and Retraining
Notification Act of 1988, Civil Rights Act of 1991, Americans with Disabilities
Act of 1991, the Family and Medical Leave Act of 1993, as all such have been
amended, except which individually or in the aggregate do not and insofar as
reasonably can be foreseen, in the future will not have a Material Adverse
Effect on First Shenango. Except as disclosed in Section 3.13 of the Disclosure
Schedule, no investigation or review by any governmental entity with respect to
First Shenango outside the ordinary course of business and not generally
applicable to entities engaged in the same business is pending or, to the
Knowledge of First Shenango, threatened, nor has any governmental entity
indicated an intention to conduct the same in each case other than those, the
outcome of which will not have a Material Adverse Effect on First Shenango.
Further, neither First Shenango nor to its Knowledge any employee, officer, or
director has knowingly engaged in any activity or knowingly omitted to take any
action which, in any material way, has resulted or reasonably could be expected
to result in the violation of (i) any local, state or federal law (including
without limitation the Bank Secrecy Act, the Community Reinvestment Act,
applicable consumer protection and disclosure laws and regulations, including
without limitation, Truth in Lending, Truth in Savings and similar disclosure
laws and regulations, and equal employment and employment discrimination laws
and regulations) or (ii) any regulation, order, injunction or decree of any
court or governmental body, the violation of either of which could reasonably be
expected to have a Material Adverse Effect on First Shenango.
3.14 Benefit Plans.
(a) Section 3.14 of the Disclosure Schedule contains a true
and complete list of all employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("Employee Benefit Plans"), whether or not any such
Employee Benefit Plans are otherwise exempt from the provisions of
ERISA, established, maintained or contributed to or obligated to form a
fund by First Shenango (First Shenango shall include, for purposes of
this Section 3.14 only, all employers, whether or not incorporated,
which by reason of common control are treated together with First
Shenango as a single employer within the meaning of Code Section 414(b)
and (c) since September 2, 1974.)
16
(b) First Shenango does not maintain or contribute to any such
employee benefit plan subject to ERISA which is not in substantial
compliance with ERISA, or which has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of ERISA, or which
has applied for or obtained a waiver from the Internal Revenue Service
of any minimum funding requirement under Section 412 of the Code. First
Shenango has not incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC") in connection with any employee benefit plan
covering any employees of First Shenango or ceased operations at any
facility or withdrawn from such plan in a manner which could subject it
to liability under Section 4062(e), 4063 or 4064 of ERISA, and knows of
no facts or circumstances which might give rise to any liability of
First Shenango to the PBGC under Title IV of ERISA. First Shenango has
not incurred any withdrawal liability within the meaning of Sections
4201 and 4204 of ERISA, to any employee benefit plan which is a
multiemployer plan (as defined in Section 4001 of ERISA), and no event
has occurred, and there exists no condition or set of circumstances,
which presents a material risk of the occurrence of any withdrawal from
or the partition, termination, reorganization or insolvency of any
multiemployer plan which could result in any liability to First
Shenango.
(c) Full payment has been made of all amounts which First
Shenango is required for any reason to have paid as contributions to
any Employee Benefit Plan as of the last day of the most recent fiscal
year of such Employee Benefit Plan ended prior to the final Closing
Date. First Shenango has made adequate provision for reserves to meet
contributions that have not been made because they are not yet due
under the terms of any Employee Benefit Plan or related agreements.
Benefits under all Employee Benefit Plans are as represented and have
not been increased subsequent to the date as of which documents have
been provided.
(d) Each Employee Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified by
the Internal Revenue Service and nothing has occurred since the
effective date of the last such determination which resulted in or is
likely to result in the revocation of such determination.
(e) No reportable event (as defined in Section 4043 of ERISA)
has occurred with respect to any Employee Benefit Plan and First
Shenango has not engaged in any transaction with respect to the
Employee Benefit Plans which would subject First Shenango to a tax,
penalty or liability for prohibited transactions under ERISA or the
Code nor have any of First Shenango's directors, officers, or employees
to the extent they or any of them are fiduciaries with respect to such
plans, breached any of their responsibilities or obligations under
Title I of ERISA.
(f) First Shenango has furnished FirstFederal with true and
complete copies of: (i) all Employee Benefit Plans as in effect,
together with all amendments thereto which will become effective at a
later date; (ii) the most recent Internal Revenue Service determination
letter issued with respect to each Employee Benefit Plan; and (iii)
Form
17
5500 for the most recent completed fiscal year for each Employee
Benefit Plan required to file such form.
(g) There are no material actions, suits or claims pending or
threatened, against the Assets of any Employee Benefit Plan.
(h) The plans are qualified under Code Section 401 and the
associated trust funds are exempt from tax under Code Section 501.
(i) Each Employee Benefit Plan which First Shenango maintains
has at all times been administered in material compliance with all
applicable requirements of ERISA, including all reporting requirements,
with respect to the Internal Revenue Service, the Department of Labor
and the Pension Benefit Guaranty Corporation and including all
disclosure requirements with respect to plan participants and
beneficiaries.
(j) Except as disclosed in Disclosure Schedule Section 3.14,
First Shenango does not maintain nor is it under any obligation or duty
to establish any type of post retirement benefit, medical, or life
insurance plan for its employees.
3.15 Real Property. In addition to the representations and warranties
contained in Section 3.16, First Shenango Bancorp, Inc., hereby makes the
following additional representations, warranties and covenants to and with
FirstFederal regarding the Real Property owned or leased by First Shenango as
listed on Section 3.15 of the Disclosure Schedule:
(a) Section 3.15(a) of the Disclosure Schedule contains a true
and correct list of (i) each parcel of Real Property owned by First
Shenango, (ii) each parcel of Real Property leased by First Shenango
(as lessor or lessee), and (iii) all Liens relating to or affecting any
parcel of Real Property owned by First Shenango, and except as listed
in Section 3.15(a) of the Disclosure Schedule, such Real Property owned
by First Shenango is free and clear of all Liens, pledges, equities,
claims of others or restrictions whatsoever, except:
(i) Zoning and building ordinances and regulations
which do not prohibit or restrict the present use of the Real
Property;
(ii) Real estate taxes and assessments, both general
and special, which may be a Lien but are not yet due and
payable as of the Closing Date;
(iii) Easements, covenants, agreements, encumbrances,
conditions, reservations, restrictions of record or other
exceptions affecting the real estate, if any, which are
disclosed to FirstFederal and approved in writing by
FirstFederal prior to the Closing Date.
First Shenango has adequate rights of ingress and egress with respect
to such Real Property, buildings, structures, facilities, fixtures and
other improvements. First
18
Shenango has not received any notice nor has Knowledge that the Real
Property, as currently used by First Shenango, is in violation of any
applicable federal, state or local statute, ordinance, order,
requirement, law, rule or regulation (including without limitation,
building, zoning or Environmental Laws) affecting the Real Property,
or that would have a Material Adverse Effect on the value of the Real
Property or its continued operation and use in the ordinary course of
business.
(b) The zoning of the Real Property permits the presently
existing improvements and the conduct and continuation of the business
presently being conducted on such Real Property.
(c) First Shenango has a valid and subsisting leasehold estate
in and the right to quiet enjoyment of the Real Property leased by it
for the full term of the lease thereof. Each lease is a legal, valid
and binding agreement, enforceable in accordance with its terms, of
First Shenango and of each other person that is a party thereto, and
except as set forth in Section 3.15(c) of the Disclosure Schedule,
there is no, and First Shenango has not received notice of any default
(or any condition or event which, after notice or lapse of time or
both, would constitute a default) thereunder. None of the leases will
terminate or lapse by reason of the transactions contemplated by this
Merger Agreement.
(d) Except as disclosed in Section 3.15(d) of the Disclosure
Schedule, the improvements on the Real Property are structurally sound
and in good operating condition and in a state of good maintenance and
repair, are adequate and suitable for the purposes for which they are
presently being used and, to the Knowledge of First Shenango, there are
no condemnation or appropriation proceedings pending or threatened
against any of such Real Property or the improvements thereon.
3.16 Assets. With respect to the Assets:
(a) Except as listed on Section 3.16(a) of the Disclosure
Schedule, First Shenango has not received any notice nor does it have
any Knowledge of any information that there has been any violation of
any statute, law, ordinance, or regulation of any governmental entity
affecting its Assets with respect to health, safety and environmental
and pollution control, including the disposition of hazardous or toxic
waste materials or emissions into the air, soil or water, or any form
of contamination that would have a Material Adverse Effect on the
value of the Assets or the continued use of the Assets by First
Shenango in the ordinary course of business.
(b) Except as provided in Section 3.16(b) of the Disclosure
Schedule, First Shenango has good and marketable title to the Assets,
free and clear of all Liens, encumbrances, security interests, pledges,
equities, claims of others or restrictions whatsoever.
(c) All equipment owned by First Shenango and used in its
business is now in good working condition and, as of the Closing Date,
will be in good working condition
19
with no material defects other than those items identified to
FirstFederal in Section 3.16(c) of the Disclosure Schedule, and except
as disclosed in Section 3.16(c) of the Disclosure Schedule, no
expenditures in excess of $10,000.00 are planned for the routine,
normal maintenance of such equipment. Except as stated in Section
3.16(c) of the Disclosure Schedule, no personal property used by First
Shenango in connection with its business is held under any lease,
security agreement, conditional sales contract, or other title
retention or security arrangement, or is other than in the possession
and under the control of First Shenango. The tangible personal
property reflected in those Books and Records constitutes all such
tangible personal property necessary for the conduct by First Shenango
of its business as now conducted.
3.17 Intellectual Property. Except as disclosed in Section 3.17 of the
Disclosure Schedule, First Shenango owns the entire right, title and interest in
and to, or has valid Licenses with respect to, all of the Intellectual Property
necessary to conduct the business and operations of First Shenango as presently
conducted. None of such Intellectual Property is subject to any outstanding
order, decree, judgment, stipulation, settlement, lien, charge, encumbrance or
attachment, which order, decree, judgment, stipulation, settlement, lien,
charge, encumbrance or attachment would have a Material Adverse Effect on First
Shenango.
3.18 Contracts.
(a) Section 3.18(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and
complete list of all material Contracts of First Shenango including,
but not limited to, the following:
(i) Contracts and other agreements with any current
or former officer, director, shareholder, affiliate, employee,
consultant, or agent;
(ii) Contracts with any person containing any
provision or covenant prohibiting or limiting the ability of
First Shenango to engage in any business activity or compete
with any person, or prohibiting or limiting the ability of any
person to compete with First Shenango;
(iii) Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or
acquisitions in the ordinary course of business consistent
with past practice;
(iv) Contracts under which First Shenango agrees to
indemnify any person;
(v) Contracts and other agreements relating to the
borrowing of money (other than federally insured deposits),
creation of Liens, issuance of letters of credit, or the
guarantee of the payment of Liabilities or performance of
obligations by First Shenango;
20
(vi) powers of attorney;
(vii) other contracts and other agreements made
outside the ordinary course of business; and
(viii) Material Contracts.
(b) Each Contract required to be disclosed in Section 3.18(a)
of the Disclosure Schedule is in full force and effect and constitutes
a legal, valid and binding agreement, enforceable in accordance with
its terms, of each party thereto; and except as disclosed in Section
3.18(b) of the Disclosure Schedule neither First Shenango, nor, to the
Knowledge of First Shenango, any other party to such Contract, is or
has received notice that it is, in violation or breach of or default
under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Contract). None
of the Contracts disclosed in Section 3.18(a) of the Disclosure
Schedule will terminate or lapse by reason of the transactions
contemplated by this Merger Agreement.
(c) Except as disclosed in Section 3.18(c) of the Disclosure
Schedule, First Shenango is not a party to or bound by any Contract
that has been or could reasonably be expected to have, individually or
in the aggregate with any other such Contracts, a Material Adverse
Effect on First Shenango.
(d) Except as disclosed in Section 3.18(d) of the Disclosure
Schedule attached hereto, there are no Contracts, commitments, leases,
permits or other instruments necessary to hold the Assets by First
Shenango, as and where now held by First Shenango, or to conduct the
business of First Shenango, as and where now operated by First
Shenango, or related to the operation or management of the Assets.
3.19 Pooling of Interests. Other than as disclosed in Section 3.19 of
the Disclosure Schedule, as of the date of this Merger Agreement, First Shenango
knows of no reason relating to it which would reasonably cause it to believe
that the Merger will not qualify as a pooling of interests for financial
accounting purposes.
3.20 Reserved.
3.21 Licenses. Section 3.21 of the Disclosure Schedule contains a true
and complete list of all Licenses used in and material to the business or
operations of First Shenango, setting forth the owner, the function and the
expiration and renewal date of each. Prior to the execution of this Merger
Agreement, First Shenango has delivered to FirstFederal true and complete copies
of all such Licenses. Except as disclosed in Section 3.21 of the Disclosure
Schedule:
(i) First Shenango owns or validly holds all Licenses
that are material to its business or operations;
21
(ii) each License listed in Section 3.21 of the
Disclosure Schedule is valid, binding and in full force and
effect; and
(iii) First Shenango has not received any notice that
it is in default (or with the giving of notice or lapse of
time or both, would be in default) under any such License.
None of the Licenses disclosed in Section 3.21 of the Disclosure Schedule will
terminate or lapse by reason of the transactions contemplated by this Merger
Agreement.
3.22 Insurance. Section 3.22 of the Disclosure Schedule lists all of
the insurance policies held by First Shenango concerning its business and Assets
(including the names and addresses of the insurers, the expiration dates
thereof, the annual premiums and payment terms thereof and a brief description
of the interests insured thereby). All these policies are in the respective
principal amounts set forth in Section 3.22 of the Disclosure Schedule. To First
Shenango's Knowledge, First Shenango has maintained and now maintains (i)
insurance on all its Assets of a type customarily insured, covering property
damage and loss of income by fire or other casualty including, but not limited
to, occurrence-based general liability insurance, and (ii) adequate insurance
protection against all Liabilities, claims and risks against which it is
customary to insure. To First Shenango's Knowledge after due inquiry, except as
disclosed in Section 3.22 of the Disclosure Schedule, there is no breach or
default with respect to any material provision contained in any policy or binder
described in this provision, and there has not been any failure to give any
notice or present any claim under any such policy or binder in due or timely
fashion. There are no outstanding unpaid premiums, and there are no provisions
for retrospective or retroactive premium adjustments except as set forth in
Section 3.22 of the Disclosure Schedule, and First Shenango has not received
notice of any cancellations or nonrenewal or disallowance of any claims under
any such policy or binder. Finally, except as disclosed in Section 3.22 of the
Disclosure Schedule, there has not been any instance since the formation of
First Shenango where there has not been in full force and effect insurance
policies providing the types of insurance as described above. The insurance
coverage provided by the policies described in this section will not terminate
or lapse by reason of the transactions contemplated by this Merger Agreement.
3.23 Brokers and Finders. Neither First Shenango nor any of its
respective officers, directors or employees, has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated herein, except for First Shenango
Bancorp, Inc.'s retention of McDonald & Company Securities, Inc.
("McDonald") to perform certain financial advisory services.
3.24 Employees; Labor Relations.
(a) Section 3.24 of the Disclosure Schedule is a list of all
severance contracts, employee handbooks or manuals, and settlements,
bonus, stock option, medical, dental or legal reimbursement plans, or
hospitalization or insurance plans, or other agreements or arrangements
providing for employee remuneration to which First Shenango is a party
or
22
by which First Shenango is bound; all these contracts and arrangements
are in full force and effect, and neither First Shenango nor any other
party is in default thereunder.
(b) Except as disclosed on Section 3.24 of the Disclosure
Schedule, the employees of First Shenango are not represented by any
labor union, and First Shenango is not and has not been involved in any
representative election, negotiations of a labor agreement, labor
dispute or grievance by any employee nor has it committed any act or
taken any action which is claimed or charged to have constituted an
unfair labor practice. There is no pending or threatened labor dispute,
strike, or work stoppage affecting the business.
(c) Except as disclosed in the Disclosure Schedule, all
employees of First Shenango are employed at will by First Shenango
within the meaning of such term under Pennsylvania law.
3.25 Hazardous Substances. Except as disclosed in Section 3.25 of the
Disclosure Schedule: (i) none of the Real Property or property previously owned
or occupied by First Shenango or in which First Shenango has or had any
interest, legal or equitable, is contaminated with any hazardous substance; (ii)
First Shenango has, in compliance with all applicable laws of federal, state or
local governments, arranged for the disposal of hazardous substances removed
from the Real Property and any real property previously owned or occupied by
First Shenango or in which First Shenango had any interest, legal or equitable
through utilization of qualified licensed waste disposal transporters and
receivers; (iii) First Shenango has not caused and will not cause, and to the
best of its Knowledge, after diligent investigation and inquiry, there never has
occurred, the release of any hazardous substance on the Real Property or any
real property previously owned or occupied by First Shenango or in which First
Shenango had any interest, legal or equitable; (iv) the Real Property or any
real property previously owned or occupied by First Shenango or in which First
Shenango had any interest, legal or equitable, is not subject to any federal,
state or local "superfund" lien, proceedings, claim, liability or action; (v)
First Shenango is under no threat or likelihood thereof for the cleanup,
removal, or remediation of any such hazardous substance from the Real Property
or any real property previously owned or occupied by First Shenango or in which
First Shenango had any interest, legal or equitable; (vi) there is no asbestos
on the Real Property; (vii) there is no underground storage tank on the Real
Property. The terms "hazardous substance," "release," and "removal" as used
herein shall have the same meanings and definitions as set forth in paragraphs
(14), (22), and (23), respectively, of Title 42 U.S.C. Section 9601 provided,
however, that the term "hazardous substance" as used herein also shall include
"hazardous waste" as defined in paragraph (5) of 42 U.S.C. Section 6903 and
"petroleum" as defined in paragraph (8) of 42 U.S.C. Section 6991. The term
"superfund" as used herein means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, being Title 42 U.S.C. Section 9601,
et seq., as amended, and any similar state statute or local ordinance applicable
to the property, including, without limitation, all rules and regulations
promulgated, administered and enforced by any governmental agency or authority
pursuant thereto. The term "underground storage tank" as used herein shall have
the same meaning and definition as set forth in paragraph (1) of 42 U.S.C.
Section 6991.
23
There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or which are in the possession
of, First Shenango in relation to any property or facility now or previously
owned or leased by First Shenango or in which First Shenango had any interest,
legal or equitable, which have not been delivered to FirstFederal prior to the
execution of this Merger Agreement.
3.26 Loans. Each loan reflected as an Asset in the First Shenango
Financial Statements (i) is evidenced by notes, agreements, or other evidences
of indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid Liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, in each case other than loans as to which the failure to satisfy the
foregoing standards would not have a Material Adverse Effect on First Shenango.
3.27 Agreements with Regulators. First Shenango is not a party to any
written agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any extraordinary supervisory letter from,
any governmental entity outside the ordinary course of business and not
generally applicable to entities engaged in the same business, including,
without limitation, cease and desist orders of any regulatory authority, which
restricts the conduct of its business, or in any manner relates to its capital
adequacy, its credit policies or its management, nor has First Shenango been
advised by any governmental entity that it is contemplating issuing, requiring,
or requesting (or is considering the appropriateness of issuing, requiring or
requesting) any such order, directive, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar undertaking.
Except as set forth in Section 3.27 of the Disclosure Schedule, First Shenango
has not been cited in any compliance report to First Shenango, as a result of an
examination by any regulatory authority for (i) material violations, or (ii)
violations with respect to which refunds or restitutions (which are material in
amount to First Shenango, taken as a whole) may be required.
3.28 Vote Required. Provided the Effective Time is after April 5, 1998,
the affirmative vote of the holders of a majority of the issued and outstanding
shares of First Shenango Common Stock entitled to vote thereon is the only vote
of the holders of any class or series of First Shenango capital stock necessary
to approve this Merger Agreement and the transactions contemplated hereby.
3.29 Securities. The investment portfolios of Thrift Subsidiary consist
of securities in marketable form. Except as disclosed in Section 3.29 of the
Disclosure Schedule, since December 31, 1997, to the date hereof, Thrift
Subsidiary has not incurred any unusual or extraordinary losses in its
investment portfolio, and, except for events relating to the business
environment in general, including market fluctuations, the executive officers of
First Shenango are not aware of any events which are reasonably certain to occur
in the future and which reasonably can be
24
expected to result in any material adverse change in the quality or performance
of Thrift Subsidiary's investment portfolio on a consolidated basis.
3.30 Indemnification. To the Knowledge of First Shenango, except as set
forth in Section 3.30 of the Disclosure Schedule, no action or failure to take
action by any director, officer, employee or agent of First Shenango has
occurred which would give rise to a claim or a potential claim by any such
person for indemnification from First Shenango under the corporate
indemnification provisions of the First Shenango Articles or First Shenango
Bylaws applicable to First Shenango Bancorp, Inc., on the date of this Merger
Agreement.
3.31 Disclosure. To First Shenango's Knowledge after due inquiry, all
material facts relating to the business of First Shenango have been disclosed to
FirstFederal in this Merger Agreement. No representation or warranty contained
in this Merger Agreement, and no statement contained in the Disclosure Schedule
or in any certificate, memorandum, list or other writing provided or furnished
to FirstFederal pursuant to any provision of this Merger Agreement (including
without limitation the First Shenango Financial Statements), by First Shenango
on its behalf, contains or will contain any untrue statement of a material fact
or omits any material fact, the omission of which would be misleading.
ARTICLE IV
----------
Representations and Warranties of FirstFederal Financial
--------------------------------------------------------
Representations and Warranties. In order to induce First Shenango
Bancorp, Inc., to enter into this Merger Agreement and to consummate the
transactions contemplated hereunder, FirstFederal Financial makes the following
representations, warranties, covenants and agreements:
4.1 Organization of FirstFederal.
(a) FirstFederal Financial is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Ohio, and has all necessary corporate power and authority to conduct
its business as and to the extent now conducted and to own, use and
lease its Assets. Section 4.1 of the Disclosure Schedule lists all
states in which FirstFederal is engaged in business, or owns, uses, or
leases Assets. FirstFederal is qualified to do business and is in good
standing in those jurisdictions specified in Section 4.1 of the
Disclosure Schedule, which are the only jurisdictions in which such
qualification is legally required, except where the failure to be so
qualified or in good standing (considering all such failures together)
does not and will not have a Material Adverse Effect upon the Business
or Condition of FirstFederal.
(b) The copies of FirstFederal Financial's Articles of
Incorporation as amended to date, certified by the Secretary of State
of Ohio, and the Code of Regulations as amended to date, certified by
FirstFederal Financial's Secretary, all of which have been heretofore
delivered to First Shenango, are and at Closing will be complete and
correct. Further, the minute books and stock record books of
FirstFederal are accurate and complete and at Closing will be accurate
and complete. Such minute books and stock
25
record books will be available for inspection at any reasonable time
by First Shenango's duly authorized representatives, and copies of any
minutes of any meeting held or documents otherwise constituting
corporate action by FirstFederal after the date of such inspection
will be furnished to First Shenango promptly and in no event later
than Closing. FirstFederal Financial anticipates amending its Articles
of Incorporation to change its name.
(c) FirstFederal does not own any First Shenango Common Stock.
4.2 Authority and Approval.
(a) FirstFederal Financial has all requisite corporate power
and authority to enter into and perform all of its obligations under
this Merger Agreement. The execution and delivery of this Merger
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of FirstFederal Financial other than the
shareholder vote as contemplated by Section 5.2.2 hereof.
(b) The consummation of the transactions contemplated hereby
and the compliance by FirstFederal with the terms of this Merger
Agreement do not and will not conflict with, result in, or constitute
any of the following:
(i) A breach of any term or provision of this Merger
Agreement;
(ii) Except for the matters set out on Section 4.2 of
the Disclosure Schedule, a default or an event that, with
notice or lapse of time, or both, would be a default, breach
or violation of the Articles of Incorporation or Code of
Regulations of FirstFederal or any Contract, License,
commitment, or other agreement, instrument, or arrangement to
which FirstFederal is a party or by which FirstFederal or its
Assets are bound;
(iii) Except as to matters set out on Section 4.2 of
the Disclosure Schedule, an event that would permit any party
to terminate any agreement with FirstFederal or to accelerate
the maturity of any obligation of FirstFederal; or
(iv) The creation or imposition of any Lien on any of
its Assets.
4.3 Capital Stock. The authorized capital stock of FirstFederal
Financial consists of:
(a) 20,000,000 shares of FirstFederal Common Stock, of which
7,069,115 shares are issued and outstanding; and 343,580 shares are
held in treasury as of December 31, 1997.
26
(b) 1,500,000 shares serial preferred stock, no par value, of
which (i) 117 shares of 7% Cumulative Convertible Series A are
outstanding and (ii) 429,892 shares of 6.5% Cumulative Convertible
Series B are outstanding as of December 31, 1997.
All issued and outstanding shares of FirstFederal Common Stock are
validly issued and outstanding, fully paid and nonassessable and were not issued
in violation of any preemptive right of any stockholder of FirstFederal. As of
the date hereof, no shares of FirstFederal Common Stock were reserved for
issuance except that 1,149,984 shares were reserved for issuance upon the
exercise of options granted heretofore pursuant to FirstFederal's stock option
plan. Options have been granted with respect to 646,881 shares of FirstFederal
Common Stock, all of which are presently held by the employees, officers, and
directors of FirstFederal. As of the date hereof, there are no other outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating FirstFederal to issue (or to transfer from
treasury) any additional shares of its capital stock of any class.
FirstFederal has taken all action necessary so that the execution of
this Merger Agreement and the consummation of the transactions contemplated
hereby do not and will not result in the grant of any rights to any person under
any agreements or enable rights to any capital stock of FirstFederal to be
exercised, distributed, or triggered, except as otherwise provided in this
Merger Agreement.
4.4 SEC Documents/Regulatory Filings. FirstFederal Financial has filed
all SEC documents required by the security laws and such SEC documents complied
as of their respective dates of filing in all material respects with security
laws. FirstFederal has filed all reports required by statute or regulation to be
filed with any federal or state regulatory agency except where the failure to so
file would not have a Material Adverse Effect on FirstFederal, and such reports
were prepared in accordance with the applicable statutes, regulations, and
instructions in existence as of the date of filing of such reports in all
material respects.
4.5 Subsidiaries.
(a) FirstFederal does not own, directly or indirectly, 5% or
more of the outstanding capital stock or other voting securities of any
corporation, thrift, bank or other organization, except as disclosed on
Section 4.5 of the Disclosure Schedule. The outstanding shares of
capital stock of each Subsidiary are validly issued and outstanding,
fully paid and nonassessable, and all such shares are directly owned by
FirstFederal, free and clear of all liens, claims, and encumbrances. No
Subsidiary has any outstanding securities of any kind, nor any
outstanding options, warrants, or other rights entitling another person
to acquire any securities of a Subsidiary of any kind other than the
shares of capital stock owned by FirstFederal.
(b) Each Subsidiary is a duly organized corporation or
national banking association validly existing and in good standing
under applicable laws. Each Subsidiary (i) has all requisite power and
authority to carry on its business as now conducted; and (ii) is duly
licensed or qualified to do business in the states of the United States
where its
27
ownership or leasing of property or the conduct of its business
requires such licensing or qualification and where failure to be so
licensed or qualified would have a Material Adverse Effect on
FirstFederal. Each Subsidiary has all federal, state, and local
governmental authorizations necessary for it to own or lease its
properties or assets and to carry on its business as is now being
conducted, except where the failure to be so authorized would not have
a Material Adverse Effect on FirstFederal.
4.6 Affiliate Transactions. Except as disclosed in Section 4.6 of the
Disclosure Schedule, as of the date of this Merger Agreement:
(i) There are no Liabilities between FirstFederal, on
the one hand, and the officers and directors of FirstFederal,
on the other hand, that were not incurred on an arm's length
basis;
(ii) No executive officer, director, or Affiliate of
a director or executive officer provides, provided, or caused
or causes to be provided any Assets, services, or facilities
to FirstFederal or otherwise does business with FirstFederal,
other than on an arm's length basis.
4.7 Books and Records. The Books and Records of FirstFederal fairly
reflect in all material respects the transactions to which it is a party and by
which its properties are subject or bound. Such Books and Records have been
properly kept and maintained in compliance in all material respects with GAAP
and all applicable legal requirements.
4.8 Financial Statements. The FirstFederal Financial Statements, all
previously provided to First Shenango, fairly present the consolidated financial
position of FirstFederal Financial and its consolidated Subsidiaries as of the
date indicated, and the consolidated results of operations, changes in
shareholders' equity and cash flows of FirstFederal Financial and its
consolidated Subsidiaries for the period then ended in conformity with GAAP.
There are no material Liabilities of FirstFederal required to be disclosed in
FirstFederal's Financial Statements other than the Liabilities disclosed in such
Financial Statements (including footnotes). All monetary Liabilities and
material non-monetary Liabilities incurred after the date of the Financial
Statements were incurred in the ordinary course of business consistent with past
practices and in the aggregate are not material to FirstFederal's business.
Except for those Subsidiaries listed in Section 4.8 of the Disclosure Schedule,
the statements of financial condition and results of operations of each
Subsidiary are, and for all periods referred to in this Section 4.8 have been,
consolidated with those of FirstFederal Financial.
4.9 Absence of Changes. Since December 31, 1997: (i) there has not been
any material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
Material Adverse Impact of FirstFederal; (ii) neither FirstFederal's chief
executive officer nor its chief financial officer is aware of any events which
have occurred since December 31, 1997, or which are reasonably certain to occur
in the future and which reasonably can be expected to result in any Material
Adverse Impact of
28
FirstFederal; and (iii) there have been no material changes in the methods of
business operation of FirstFederal.
4.10 Consent. Except as set forth in Section 4.10 of the Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any federal or state governmental authority is
required by or with respect to FirstFederal in connection with the execution and
delivery of this Merger Agreement or the consummation of the transactions
contemplated hereby.
4.11 Taxes.
(a) Filing of Tax Returns. Except where properly extended,
within the times and in the manner prescribed by law, FirstFederal has
filed all federal, state, and local tax returns required by law. Except
as disclosed in Section 4.11(a) of the Disclosure Schedule, the federal
income tax returns of FirstFederal have not been audited or
investigated by the Internal Revenue Service for the preceding five
years. Except as reflected on Section 4.11 of the Disclosure Schedule,
there are no present disputes as to taxes payable by FirstFederal. In
addition, all tax returns and reports required by applicable law or
governmental regulations have been filed by FirstFederal, and such
returns and reports are (and as to such returns and reports not filed
as of the date hereof, will be) true, correct, and complete in all
material respects and present, fairly and accurately, the information
required to be shown therein. There are not and will not be any tax
deficiencies assessed against FirstFederal that would have a Material
Adverse Effect on FirstFederal, and there are no tax deficiencies
proposed or threatened, and no audit of FirstFederal by any federal,
state or local authority is in progress, and FirstFederal has not
received notice regarding any audit.
(b) Payment of Taxes. FirstFederal has, within the time and in
the manner prescribed by law, paid in full (and until the Closing Date
will pay within the time and in the manner prescribed by law) payroll
taxes (including, but not limited to, Social Security taxes), franchise
taxes, sales and use taxes, personal property taxes, real estate taxes
and assessments, and local, state and federal income taxes. In
addition, FirstFederal will pay or make timely provision for payment of
all such taxes thereafter payable by FirstFederal so that no Lien for
any such taxes will be placed (or attempted) upon any of the Assets, on
or following the Closing Date.
(c) Tax Reserves. Except as disclosed in Section 4.11(c) of
the Disclosure Schedule, the amounts established as accruals for taxes
on the Financial Statements and on the Books and Records of
FirstFederal are reasonably expected to be sufficient for the payment
of all taxes of any kind, whether disputed or not, and whether accrued,
due, absolute, contingent or otherwise, which were or which may be
payable by FirstFederal for any periods or fiscal years prior to or
including the Closing Date, including all taxes imposed before or after
the Closing Date which are attributable to any such period or fiscal
year. No differences exist between the amounts of the book basis and
the tax basis of
29
Assets (net of Liabilities) that are not accounted for by an accrual
on the Books and Records for federal income tax purposes.
(d) Extensions and Waivers. Except as disclosed in Section
4.11(d) of the Disclosure Schedule, FirstFederal has not requested any
extension of time within which to file any tax return, which tax return
has not since been filed, nor has FirstFederal executed any outstanding
waivers or comparable consents regarding the application of the statute
of limitations with respect to any taxes or tax returns.
4.12 Litigation. Except as disclosed in Section 4.12 of the Disclosure
Schedule:
(a) There is no material pending or threatened litigation
involving FirstFederal as defendant or plaintiff. There is no suit,
action, arbitration, or legal, administrative, or other proceeding, or
governmental investigation pending or threatened, against or affecting
FirstFederal, or its business or Assets that if decided adversely to
FirstFederal, would result in a Material Adverse Effect on
FirstFederal. FirstFederal is not in default with respect to any Order
of any federal, state, local or foreign court, department, agency, or
instrumentality.
(b) There are no facts or circumstances known to FirstFederal
that could reasonably be expected to give rise to any claim that would
be required to be disclosed pursuant to clause (a) above.
4.13 Compliance with Laws. To its Knowledge, FirstFederal has complied
with and is not in violation of, applicable federal, state, or local statutes,
laws and regulations (including, without limitation, any applicable building,
zoning, or other law, ordinance, or regulation) affecting its properties or the
operation of its business, including without limitation the Real Estate
Settlement Procedures Act, Fair Debt Collection Practices Act, Fair Credit
Reporting Act, Equal Credit Opportunity Act, Truth in Lending Act, Occupational
Safety and Health Act of 1970, the Fair Labor Standards Act of 1938, Title VII
of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, Federal Age
Discrimination in Employment Act of 1967, Consolidated Omnibus Budget
Reconciliation Act of 1985, the Workers Adjustment and Retraining Notification
Act of 1988, Civil Rights Act of 1991, Americans with Disabilities Act of 1991,
the Family and Medical Leave Act of 1993, as all such have been amended, except
which individually or in the aggregate do not and insofar as reasonably can be
foreseen, in the future will not have a Material Adverse Effect on FirstFederal.
Except as disclosed in Section 4.13 of the Disclosure Schedule, no investigation
or review by any governmental entity with respect to FirstFederal outside the
ordinary course of business and not generally applicable to entities engaged in
the same business is pending or, to the Knowledge of FirstFederal, threatened,
nor has any governmental entity indicated an intention to conduct the same in
each case other than those, the outcome of which will not have a Material
Adverse Effect on FirstFederal.
Further, neither FirstFederal nor to its Knowledge any employee,
officer, or director has knowingly engaged in any activity or knowingly omitted
to take any action which, in any material way, has resulted or reasonably could
be expected to result in the violation of (i) any local, state
30
or federal law including without limitation the Bank Secrecy Act, the Community
Reinvestment Act, applicable consumer protection and disclosure laws and
regulations, including without limitation, Truth in Lending, Truth in Savings
and similar disclosure laws and regulations, and equal employment and employment
discrimination laws and regulations) or (ii) any regulation, order, injunction
or decree of any court or governmental body, the violation of either of which
could reasonably be expected to have a Material Adverse Effect on FirstFederal.
4.14 Benefit Plans.
(a) Section 4.14 of the Disclosure Schedule contains a true
and complete list of all employee benefit plans within the meaning of
Section 3(3) of ERISA ("Employee Benefit Plans"), whether or not any
such Employee Benefit Plans are otherwise exempt from the provisions of
ERISA, established, maintained or contributed to or obligated to form a
fund by FirstFederal (FirstFederal shall include, for purposes of this
Section 4.14 only, all employers, whether or not incorporated, which by
reason of common control are treated together with FirstFederal as a
single employer within the meaning of Code Section 414(b) and (c) since
September 2, 1974.)
(b) FirstFederal does not maintain or contribute to any such
employee benefit plan subject to ERISA which is not in substantial
compliance with ERISA, or which has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of ERISA, or which
has applied for or obtained a waiver from the Internal Revenue Service
of any minimum funding requirement under Section 412 of the Code.
FirstFederal has not incurred any liability to the Pension Benefit
Guaranty Corporation ("PBGC") in connection with any employee benefit
plan covering any employees of FirstFederal or ceased operations at any
facility or withdrawn from such plan in a manner which could subject it
to liability under Section 4062(e), 4063 or 4064 of ERISA, and knows of
no facts or circumstances which might give rise to any liability of
FirstFederal to the PBGC under Title IV of ERISA. FirstFederal has not
incurred any withdrawal liability within the meaning of Sections 4201
and 4204 of ERISA, to any employee benefit plan which is a
multiemployer plan (as defined in Section 4001 of ERISA), and no event
has occurred, and there exists no condition or set of circumstances,
which presents a material risk of the occurrence of any withdrawal from
or the partition, termination, reorganization or insolvency of any
multiemployer plan which could result in any liability to FirstFederal.
(c) Full payment has been made of all amounts which
FirstFederal is required for any reason to have paid as contributions
to any Employee Benefit Plan as of the last day of the most recent
fiscal year of such Employee Benefit Plan ended prior to the final
Closing Date. FirstFederal has made adequate provision for reserves to
meet contributions that have not been made because they are not yet due
under the terms of any Employee Benefit Plan or related agreements.
Benefits under all Employee Benefit Plans are as represented and have
not been increased subsequent to the date as of which documents have
been provided.
31
(d) Each Employee Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified by
the Internal Revenue Service and nothing has occurred since the
effective date of the last such determination which resulted in or is
likely to result in the revocation of such determination.
(e) No reportable event (as defined in Section 4043 of ERISA)
has occurred with respect to any Employee Benefit Plan and FirstFederal
has not engaged in any transaction with respect to the Employee Benefit
Plans which would subject FirstFederal to a tax, penalty or liability
for prohibited transactions under ERISA or the Code nor have any of
FirstFederal's directors, officers, or employees to the extent they or
any of them are fiduciaries with respect to such plans, breached any of
their responsibilities or obligations under Title I of ERISA.
(f) FirstFederal has furnished First Shenango with true and
complete copies of: (i) all Employee Benefit Plans as in effect,
together with all amendments thereto which will become effective at a
later date; (ii) the most recent Internal Revenue Service determination
letter issued with respect to each Employee Benefit Plan; and (iii)
Form 5500 for the most recent completed fiscal year for each Employee
Benefit Plan required to file such form.
(g) There are no material actions, suits or claims pending or
threatened, against the Assets of any Employee Benefit Plan.
(h) The plans are qualified under Code Section 401 and the
associated trust funds are exempt from tax under Code Section 501.
(i) Each Employee Benefit Plan which FirstFederal maintains
has at all times been administered in material compliance with all
applicable requirements of ERISA, including all reporting requirements,
with respect to the Internal Revenue Service, the Department of Labor
and the Pension Benefit Guaranty Corporation and including all
disclosure requirements with respect to plan participants and
beneficiaries.
(j) FirstFederal does not maintain nor is it under any
obligation or duty to establish any type of post retirement benefit,
medical, or life insurance plan for its employees.
4.15 Real Property. In addition to the representations and warranties
contained in Section 4.16, FirstFederal Financial hereby makes the following
additional representations, warranties and covenants to and with First Shenango
regarding the Real Property owned or leased by FirstFederal as listed on Section
4.15 of the Disclosure Schedule:
(a) Section 4.15(a) of the Disclosure Schedule contains a true
and correct list of (i) each parcel of Real Property owned by
FirstFederal, (ii) each parcel of Real Property leased by FirstFederal
(as lessor or lessee), and (iii) all Liens relating to or affecting any
parcel of Real Property owned by FirstFederal, and except as listed in
32
Section 4.15(a) of the Disclosure Schedule, such Real Property owned by
FirstFederal is free and clear of all Liens, pledges, equities, claims
of others or restrictions whatsoever, except:
(i) Zoning and building ordinances and regulations
which do not prohibit or restrict the present use of the Real
Property;
(ii) Real estate taxes and assessments, both general
and special, which may be a Lien but are not yet due and
payable as of the Closing Date;
(iii) Easements, covenants, agreements, encumbrances,
conditions, reservations, restrictions of record or other
exceptions affecting the real estate, if any, which are
disclosed to First Shenango and approved in writing by First
Shenango prior to the Closing Date.
FirstFederal has adequate rights of ingress and egress with respect to
such Real Property, buildings, structures, facilities, fixtures and
other improvements. FirstFederal has not received any notice or has
Knowledge that the Real Property, as currently used by FirstFederal, is
in violation of any applicable federal, state or local statute,
ordinance, order, requirement, law, rule or regulation (including
without limitation, building, zoning or Environmental Laws) affecting
the Real Property, or that would have a Material Adverse Effect on the
value of the Real Property or its continued operation and use in the
ordinary course of business.
(b) The zoning of the Real Property permits the presently
existing improvements and the conduct and continuation of the business
presently being conducted on such Real Property.
(c) FirstFederal has a valid and subsisting leasehold estate
in and the right to quiet enjoyment of the Real Property leased by it
for the full term of the lease thereof. Each lease is a legal, valid
and binding agreement, enforceable in accordance with its terms, of
FirstFederal and of each other person that is a party thereto, and
except as set forth in Section 4.15(c) of the Disclosure Schedule,
there is no, and FirstFederal has not received notice of any default
(or any condition or event which, after notice or lapse of time or
both, would constitute a default) thereunder. None of the leases will
terminate or lapse by reason of the transactions contemplated by this
Merger Agreement.
(d) Except as disclosed in Section 4.15(d) of the Disclosure
Schedule, the improvements on the Real Property are structurally sound
and in good operating condition and in a state of good maintenance and
repair, are adequate and suitable for the purposes for which they are
presently being used and, to the Knowledge of FirstFederal, there are
no condemnation or appropriation proceedings pending or threatened
against any of such Real Property or the improvements thereon.
4.16 Assets. With respect to the Assets:
33
(a) Except as listed on Section 4.16(a) of the Disclosure
Schedule, FirstFederal has not received any notice nor does it have any
Knowledge of any information that there has been any violation of any
statute, law, ordinance, or regulation of any governmental entity
affecting its Assets with respect to health, safety and environmental
and pollution control, including the disposition of hazardous or toxic
waste materials or emissions into the air, soil or water, or any form
of contamination that would have a Material Adverse Effect on the value
of the Assets or the continued use of the Assets by FirstFederal in the
ordinary course of business.
(b) Except as provided in Section 4.16(b) of the Disclosure
Schedule, FirstFederal has good and marketable title to the Assets,
free and clear of all Liens, encumbrances, security interests, pledges,
equities, claims of others or restrictions whatsoever.
(c) All equipment owned by FirstFederal is now in good working
condition and, as of the Closing Date, will be in good working
condition with no material defects other than those items identified to
First Shenango in Section 4.16(c) of the Disclosure Schedule, and
except as disclosed in Section 4.16(c) of the Disclosure Schedule, no
expenditures in excess of $100,000.00 are planned for the routine,
normal maintenance of such equipment. Except as stated in Section
4.16(c) of the Disclosure Schedule, no personal property used by
FirstFederal in connection with its business is held under any lease,
security agreement, conditional sales contract, or other title
retention or security arrangement, or is other than in the possession
and under the control of FirstFederal. The tangible personal property
reflected in those Books and Records constitutes all such tangible
personal property necessary for the conduct by FirstFederal of its
business as now conducted.
4.17 Intellectual Property. Except as previously disclosed,
FirstFederal or a Subsidiary owns the entire right, title and interest in and
to, or has valid licenses with respect to, all of the Intellectual Property
necessary to conduct the business and operations of FirstFederal and the
FirstFederal Subsidiaries as presently conducted. None of such Intellectual
Property is subject to any outstanding order, decree, judgment, stipulation,
settlement, lien, charge, encumbrance or attachment, which order, decree,
judgment, stipulation, settlement, lien, charge, encumbrance or attachment would
have a Material Adverse Effect on FirstFederal.
4.18 Contracts.
(a) Section 4.18(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and
complete list of all Material Contracts of FirstFederal including, but
not limited to, the following:
(i) Contracts and other agreements with any current
or former officer, director, shareholder, affiliate, employee,
consultant, or agent;
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(ii) Contracts with any person containing any
provision or covenant prohibiting or limiting the ability of
FirstFederal to engage in any business activity or compete
with any person, or prohibiting or limiting the ability of any
person to compete with FirstFederal;
(iii) Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or
acquisitions in the ordinary course of business consistent
with past practice;
(iv) Contracts under which FirstFederal agrees to
indemnify any person;
(v) Contracts and other agreements relating to the
borrowing of money (other than federally insured deposits),
creation of Liens, issuance of letters of credit, or the
guarantee of the payment of Liabilities or performance of
obligations by FirstFederal;
(vi) Contracts and other agreements relating to
provision of services which are not cancelable without penalty
in thirty (30) or fewer days notice;
(vii) powers of attorney;
(viii) other contracts and other agreements made
outside the ordinary course of business; and
(ix) all other contracts that involve the payment or
potential payment, pursuant to the terms of any such contract,
by or to FirstFederal of more than $250,000 and cannot be
terminated within 360 calendar days after giving notice of
termination without resulting in any material cost or penalty
to FirstFederal or any Subsidiary.
(b) Each Contract required to be disclosed in Section 4.18(a)
of the Disclosure Schedule is in full force and effect and constitutes
a legal, valid and binding agreement, enforceable in accordance with
its terms, of each party thereto; and except as disclosed in Section
4.18(b) of the Disclosure Schedule neither FirstFederal, nor, to the
Knowledge of FirstFederal, any other party to such Contract, is or has
received notice that it is, in violation or breach of or default under
any such Contract (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Contract). None of the
Contracts disclosed in Section 4.18(a) of the Disclosure Schedule will
terminate or lapse by reason of the transactions contemplated by this
Merger Agreement.
(c) Except as disclosed in Section 4.18(c) of the Disclosure
Schedule, FirstFederal is not a party to or bound by any Contract that
has been or could reasonably be expected to have, individually or in
the aggregate with any other such Contracts, a Materially Adverse
Effect on FirstFederal.
35
(d) Except as disclosed in Section 4.18(d) of the Disclosure
Schedule and any other Section of the Disclosure Schedule, there are no
Contracts, commitments, leases, permits or other instruments necessary
to hold the Assets by FirstFederal, as and where now held by
FirstFederal, or to conduct the business of FirstFederal, as and where
now operated by FirstFederal, or related to the operation or management
of the Assets.
4.19 Pooling of Interests. Except as set forth in Section 4.19 of the
Disclosure Schedule, as of the date of this Merger Agreement, FirstFederal knows
of no reason relating to it which would reasonably cause it to believe that the
Merger will not qualify as a pooling of interests for financial accounting
purposes.
4.20 Reserved.
4.21 Licenses. Except as disclosed in Section 4.21 of the Disclosure
Schedule:
(i) FirstFederal owns or validly holds all Licenses
that are material to its business or operations;
(ii) each License of FirstFederal is valid, binding
and in full force and effect; and
(iii) FirstFederal has not received any notice that
it is in default (or with the giving of notice or lapse of
time or both, would be in default) under any such License.
None of the Licenses of FirstFederal will terminate or lapse by reason of the
transactions contemplated by this Merger Agreement.
4.22 Insurance. To the best of FirstFederal's Knowledge, FirstFederal
has maintained and now maintains (i) insurance on all its Assets of a type
customarily insured, covering property damage and loss of income by fire or
other casualty including, but not limited to, occurrence-based general liability
insurance, and (ii) adequate insurance protection against all Liabilities,
claims and risks against which it is customary to insure. To FirstFederal's
Knowledge after due inquiry, except as disclosed in Section 4.22 of the
Disclosure Schedule, there is no breach or default with respect to any material
provision contained in any policy or binder described in this provision and
there has not been any failure to give any notice or present any claim under any
such policy or binder in due or timely fashion. There are no outstanding unpaid
premiums, and there are no provisions for retrospective or retroactive premium
adjustments except as set forth in Section 4.22 of the Disclosure Schedule, and
FirstFederal has not received notice of any cancellations or nonrenewal or
disallowance of any claims under any such policy or binder. Finally, except as
disclosed in Section 4.22 of the Disclosure Schedule, there has not been any
instance since the formation of FirstFederal where there has not been in full
force and effect insurance policies providing the types of insurance as
described above. The insurance coverage provided by the policies described in
this section will not terminate or lapse by reason of the transactions
contemplated by this Merger Agreement.
36
4.23 Brokers and Finders. Other than Keefe Bruyette & Woods Inc. for
purposes of a fairness opinion, neither FirstFederal nor any of its respective
officers, directors or employees, has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions in connection with
the transactions contemplated herein.
4.24 Employees; Labor Relations.
(a) Section 4.24 of the Disclosure Schedule is a list of all
severance contracts, employee handbooks or manuals, and settlements,
bonus, stock option, medical, dental or legal reimbursement plans, or
hospitalization or insurance plans, or other agreements or arrangements
providing for employee remuneration to which FirstFederal is a party or
by which FirstFederal is bound; all these contracts and arrangements
are in full force and effect, and neither FirstFederal nor any other
party is in default thereunder.
(b) Except as disclosed on Section 4.24 of the Disclosure
Schedule, the employees of FirstFederal are not represented by any
labor union, and FirstFederal is not and has not been involved in any
representative election, negotiations of a labor agreement, labor
dispute or grievance by any employee nor has it committed any act or
taken any action which is claimed or charged to have constituted an
unfair labor practice. There is no pending or threatened labor
dispute, strike, or work stoppage affecting the business.
(c) Except as disclosed in the Disclosure Schedule, all
employees of FirstFederal and its Subsidiaries are employed at will by
FirstFederal or such Subsidiaries.
4.25 Hazardous Substances. FirstFederal represents that, except as
disclosed in Section 4.25 of the Disclosure Schedule: (i) none of the Real
Property or property previously owned or occupied by FirstFederal or in which
FirstFederal has or had any interest, legal or equitable, is contaminated with
any hazardous substance; (ii) FirstFederal has, in compliance with all
applicable laws of federal, state or local governments, arranged for the
disposal of hazardous substances removed from the Real Property and any real
property previously owned or occupied by FirstFederal or in which FirstFederal
had any interest, legal or equitable through utilization of qualified licensed
waste disposal transporters and receivers; (iii) FirstFederal has not caused and
will not cause, and to its Knowledge, after diligent investigation and inquiry,
there never has occurred, the release of any hazardous substance on the Real
Property or any real property previously owned or occupied by FirstFederal or in
which FirstFederal had any interest, legal or equitable; (iv) the Real Property
or any real property previously owned or occupied by FirstFederal or in which
FirstFederal had any interest, legal or equitable, is not subject to any
federal, state or local "superfund" lien, proceedings, claim, liability or
action; (v) FirstFederal is under no threat or likelihood thereof for the
cleanup, removal, or remediation of any such hazardous substance from the Real
Property or any real property previously owned or occupied by FirstFederal or in
which FirstFederal had any interest, legal or equitable; (vi) there is no
asbestos on the Real Property; (vii) there is no underground storage tank on the
Real Property. The terms "hazardous substance," "release," and "removal" as used
herein shall have the same meaning and definition as set forth in paragraphs
(14), (22), and (23), respectively, of Title 42
37
U.S.C. Section 9601 provided, however, that the term "hazardous substance" as
used herein also shall include "hazardous waste" as defined in paragraph (5) of
42 U.S.C. Section 6903 and "petroleum" as defined in paragraph (8) of 42 U.S.C.
Section 6991. The term "superfund" as used herein means the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, being Title
42 U.S.C. Section 9601, et seq., as amended, and any similar state statute or
local ordinance applicable to the property, including, without limitation, all
rules and regulations promulgated, administered and enforced by any governmental
agency or authority pursuant thereto. The term "underground storage tank" as
used herein shall have the same meaning and definition as set forth in paragraph
(1) of 42 U.S.C. Section 6991.
There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or which are in the possession
of, FirstFederal in relation to any property or facility now or previously owned
or leased by FirstFederal which have not been delivered to First Shenango prior
to the execution of this Merger Agreement.
4.26 Loans. Each loan reflected as an Asset in the FirstFederal
Financial Statements (i) is evidenced by notes, agreements, or other evidences
of indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid Liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, in each case other than loans as to which the failure to satisfy the
foregoing standards would not have a Material Adverse Effect on FirstFederal.
4.27 Agreements with Regulators. FirstFederal is not a party to any
written agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any extraordinary supervisory letter from,
any governmental entity outside the ordinary course of business and not
generally applicable to entities engaged in the same business, including,
without limitation, cease and desist orders of any regulatory authority, which
restricts the conduct of its business, or in any manner relates to its capital
adequacy, its credit policies or its management, nor has FirstFederal been
advised by any governmental entity that it is contemplating issuing, requiring,
or requesting (or is considering the appropriateness of issuing, requiring or
requesting) any such order, directive, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar undertaking.
Except as set forth in Section 4.27 of the Disclosure Schedule, FirstFederal has
not been cited in any compliance report to FirstFederal, as a result of an
examination by any regulatory authority for (i) material violations, or (ii)
violations with respect to which refunds or restitutions (which are material in
amount to FirstFederal, taken as a whole) may be required.
4.28 Reserved.
4.29 Securities. Other than the uncertificated residual interest issued
in the asset backed securitization of manufactured housing pass-through
certificates, the investment portfolios of Bank
38
Subsidiary consist of securities in marketable form. Except as disclosed in
Section 4.29 of the Disclosure Schedule, since December 31, 1997, to the date
hereof, Bank Subsidiary has not incurred any unusual or extraordinary losses in
its investment portfolio, and, except for events relating to the business
environment in general, including market fluctuations, the executive officers of
FirstFederal are not aware of any events which are reasonably certain to occur
in the future and which reasonably can be expected to result in any material
adverse change in the quality or performance of Bank Subsidiary's investment
portfolio on a consolidated basis.
4.30 Disclosure. To FirstFederal's knowledge after due inquiry, all
material facts relating to the business of FirstFederal have been disclosed to
First Shenango in this Merger Agreement. No representation or warranty contained
in this Merger Agreement, and no statement contained in the Disclosure Schedule
or in any certificate, memorandum, list or other writing provided or furnished
to First Shenango pursuant to any provision of this Merger Agreement (including
without limitation the FirstFederal Financial Statements), by FirstFederal on
its behalf, contains or will contain any untrue statement of a material fact or
omits any material fact, the omission of which would be misleading.
ARTICLE V
---------
Covenants
---------
5.1 First Shenango's Covenants. First Shenango Bancorp, Inc., covenants
and agrees with FirstFederal Financial that, at all times from and after the
date of this Merger Agreement until the Effective Time, First Shenango will
comply with all covenants and provisions of this Section 5.1, except to the
extent FirstFederal Financial otherwise consents in writing.
5.1.1 Access to Information. FirstFederal and its counsel, accountants,
and other representatives shall have full access during normal business hours to
all Books and Records of First Shenango. First Shenango shall furnish to
FirstFederal and its representatives all data and information concerning the
business and Assets of First Shenango that may reasonably be requested. Further,
during the period from the date of this Merger Agreement until the Effective
Time each of First Shenango and FirstFederal will promptly notify the other of
(i) any material change in the normal course of its business; (ii) any
governmental complaints, investigations or hearings (or other communications
indicating that the same may be contemplated), or receipt of any memorandum or
understanding or cease and desist order from a regulatory authority; or (iii)
the institution or threat of material litigation involving such parties and will
keep the other party fully informed of such events. During such period,
FirstFederal and First Shenango shall promptly provide the other with monthly
unaudited financial statements as soon as they are available, and each shall
promptly provide the other with copies of all the reports filed by it with any
regulatory authority after the date of this Merger Agreement through the
Effective Time. Each of First Shenango and FirstFederal agrees to keep the
information contained in the monthly unaudited financial statements strictly
confidential.
5.1.2 Conduct of Business. First Shenango shall carry on its business
and activities diligently and in substantially the same manner as they
previously have been carried out, and shall
39
not make or institute any methods of management, accounting, or operation that
are not in the ordinary course of business in accordance with the business
practices or that vary materially from those methods used by First Shenango as
of the date of this Merger Agreement. An increase in borrowings of up to $55
million from the Federal Home Loan Bank from that existing at December 31, 1997,
shall be deemed to be in the ordinary course of business.
5.1.3 Corporate Matters. First Shenango will not (i) amend its Articles
of Incorporation, Bylaws or other charter documents, (ii) issue any shares of
its capital stock, (iii) issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments under which
any additional shares of its capital stock of any class might be directly or
indirectly authorized, issued, or transferred from treasury, or (iv) agree to do
any of the acts listed above.
5.1.4 Distribution and Stock. First Shenango shall not:
(a) Declare, set aside, or pay any dividend, or authorize a
stock split, or make any distribution in respect of its capital stock
other than its regular quarterly dividend of 15 cents per share. The
parties shall coordinate the declaration and payment of First Shenango
Bancorp, Inc.'s dividend in the quarter in which Closing occurs with
the declaration and payment of FirstFederal Financial's dividend in
such quarter so that the shareholders of First Shenango Bancorp, Inc.,
receive only one dividend in the quarter in which Closing occurs;
(b) Directly or indirectly purchase, redeem, or otherwise
acquire any shares of its capital stock;
(c) Enter into any agreement obligating it to do any of the
foregoing prohibited acts.
5.1.5 Insurance. First Shenango will continue to carry its existing
insurance, subject to variations in amounts required by the ordinary operations
of its business. At the request of FirstFederal and at FirstFederal's sole
expense, the amount of insurance against fire and other casualties which First
Shenango carries on any of its properties or in respect of its operations shall
be increased by such amount or amounts as FirstFederal shall specify.
5.1.6 Employees. Except as disclosed in the Disclosure Schedule or
except in the ordinary course of business and consistent with past practice,
First Shenango will not do, or agree to do, any of the following acts: (i) grant
any material increase in salaries or wages payable or to become payable to any
officer, employee, sales agent, or representative, or (ii) increase benefits
payable other than normal accruals to any officer, employee, sales agent, or
representative under any bonus or pension plan or other Contract or commitment.
5.1.7 New Business. First Shenango will not, without FirstFederal's
written consent, do or agree to enter into any Contract, commitment, or
transaction in excess of $50,000, or $250,000 in the aggregate, not in the usual
and ordinary course of business.
40
5.1.8 Agreements. Except as disclosed in the Disclosure Schedule, First
Shenango will not modify, amend, cancel, or terminate any of its existing
Contracts, or agree to do any of those acts nor enter into any agreement to
make, or become obligated to make, any capital expenditures in excess of
$50,000; make, enter into or renew any agreement for services to be provided to
First Shenango Bancorp, Inc., or Thrift Subsidiary or permit the automatic
renewal of any such agreement, except any agreement for services having a term
of not more than three months or requiring the expenditure of not more than
$25,000; apply to the appropriate regulatory authorities to establish a new
branch office or expand any existing branch office; or acquire, become obligated
to acquire, or enter into any agreement to acquire, any banking or non-banking
company or any branch offices of any such companies.
5.1.9 Books and Records. Except to the extent required by applicable
law, First Shenango shall: (i) cause First Shenango's Books and Records to be
maintained under generally accepted accounting principles in accordance with
past practice, and (ii) not permit any material change in any pricing,
investment, hedging, accounting, financial or managerial accounting or
reporting, credit or allowance or in any method of calculating any contingency
or other reserve of First Shenango Bancorp, Inc., or any Subsidiary for
accounting, financial reporting or tax purposes.
5.1.10 Compliance with Laws. First Shenango shall comply, in all
material respects, with all laws, rules, regulations, and Orders applicable to
the business of First Shenango and promptly, following receipt thereof, give
FirstFederal copies of any notice received alleging any violation of any such
law or Order.
5.1.11 Shareholders' Meeting. First Shenango Bancorp, Inc., after
consultation with FirstFederal, will take all action necessary to call and hold
its annual or a special meeting of its shareholders for the purpose of approving
this Merger Agreement, and any other documents or actions necessary to the
consummation of the Merger provided for herein pursuant to law. Subject only to
First Shenango Bancorp, Inc.'s Board of Directors' review of FirstFederal
Financial's Registration Statement to be filed with the SEC described in this
subparagraph and its reasonable satisfaction with the information set forth
therein, and the Board of Directors of First Shenango Bancorp, Inc., intends to
inform the shareholders of First Shenango Bancorp, Inc., in the proxy materials
relating to the annual or special meeting that a majority of directors of First
Shenango Bancorp, Inc., intend to vote all shares of First Shenango Common Stock
which they own of record or have voting control over in favor of approving this
Merger Agreement and any such other necessary documents or actions, and the
requisite number of directors under First Shenango's Articles will recommend
approval of this Merger Agreement to the other shareholders of First Shenango
Bancorp, Inc. First Shenango shall cooperate with FirstFederal in the
preparation of such proxy materials which shall be included and filed with, as a
part of, FirstFederal Financial's Registration Statement filed with the SEC for
the registration of the Shares. Neither First Shenango nor its officers,
directors, and representatives will, without FirstFederal's prior written
consent, send or deliver any written communications to First Shenango Bancorp,
Inc.'s shareholders in their role as shareholders.
41
5.1.12 Solicitations. First Shenango shall not, directly or indirectly,
and shall cause their respective executive officers, directors, employees,
agents and advisors not to, directly or indirectly, solicit or initiate any
proposals or offers from any person, or discuss or negotiate with any such
person, relating to any acquisition or purchase of all or a material amount of
the assets of, or any equity securities of, or any merger, consolidation, or
business combination with, First Shenango Bancorp, Inc., or the Thrift
Subsidiary (such transactions are referred to herein as "Acquisition
Transactions"), provided, however, that nothing contained in this Section shall
prohibit (i) First Shenango Bancorp, Inc., or the Thrift Subsidiary, as the case
may be, from furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited proposal of an
Acquisition Transaction if and to the extent that (a) the Board of Directors of
First Shenango Bancorp, Inc., after consultation with and based upon the written
advice of legal counsel, determines in good faith that such action is required
for the directors of First Shenango Bancorp, Inc., to fulfill their fiduciary
duties and obligations to the First Shenango Bancorp, Inc., stockholders, taking
into consideration the bidding procedures engaged in connection with the
transactions contemplated hereby and (b) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
First Shenango Bancorp, Inc., provides immediate written notice to FirstFederal
to the effect that it is furnishing information to, or entering into discussions
or negotiations with, such person or entity, or (ii) the Board of Directors of
First Shenango Bancorp, Inc., from failing to make, withdrawing or modifying its
recommendation referred to in Section 5.1.11 following receipt of a proposal for
an Acquisition Transaction if the Board of Directors of First Shenango Bancorp,
Inc., after consultation with and based upon the written advice of legal
counsel, determines in good faith that such action is required for the directors
of First Shenango Bancorp, Inc., to fulfill their fiduciary duties and
obligations to the First Shenango Bancorp, Inc., stockholders and other
constituencies under Pennsylvania law, taking into consideration the bidding
procedures engaged in connection with the transactions contemplated hereby.
5.1.13 Break-Up Fee.
(a) First Shenango Bancorp, Inc., shall pay FirstFederal a fee
of $3,000,000 promptly following termination of this Merger Agreement
after the first to occur of any of the following events:
(i) (A) the shareholders of First Shenango Bancorp,
Inc., shall not have approved the Merger on or before
October 31, 1998 if, prior thereto or the termination
date of this Merger Agreement, whichever is earlier,
FirstFederal is not in breach of its material
obligations, and (B) any person (other than
FirstFederal Financial or any affiliate of
FirstFederal Financial or any person or entity acting
in concert with FirstFederal Financial or such
affiliate (a "FirstFederal Entity")) shall have
"commenced" (as such term is defined in Rule 14d-2
under the Securities Exchange Act of 1934 (the
"Exchange Act")) a tender offer or exchange offer to
purchase shares of First Shenango Common Stock such
that, upon consummation of such offer, such person
would have Beneficial Ownership (as defined below) or
the right to acquire Beneficial Ownership of
twenty-five percent (25%) or more of the voting power
of First Shenango and (C) within twelve (12) months
after the earliest of the date of First Shenango
Bancorp, Inc., shareholders' meeting at which
42
the Merger is submitted for approval and voted upon,
the date this Agreement is terminated or October 31,
1998, any person (other than a FirstFederal Entity)
shall have entered into a written understanding in
principle or an agreement to consolidate or merge
with First Shenango, to acquire all or substantially
all of First Shenango's assets or stock, or to engage
in a similar transaction;
(ii) (A) the shareholders of First Shenango Bancorp,
Inc., shall not have approved the Merger on or before
October 31, 1998, if, prior thereto or the
termination date of this Merger Agreement, whichever
is earlier, FirstFederal Financial is not in breach
of its material obligations hereunder, and (B)
subsequent to the date hereof any person (other than
a FirstFederal Entity) shall have publicly announced
a bona fide interest in (x) acquiring First Shenango
by merger, consolidation, purchase of all or
substantially all of its assets or any other similar
transaction or (y) making an offer described in
clause (i) above and in either such case, within
twelve (12) months after the earlier of the date of
First Shenango Bancorp, Inc., shareholders' meeting
at which the Merger is submitted for approval and
voted upon or October 31, 1998, such person (other
than a FirstFederal Entity) shall have entered into a
written understanding in principle or an agreement to
consolidate or merge with First Shenango, to acquire
all or substantially all of First Shenango's assets
or stock, or to engage in a similar transaction;
(iii) (A) the shareholders of First Shenango Bancorp,
Inc., shall not have approved the Merger on or before
October 31, 1998, if,prior thereto or the termination
date of this Merger Agreement, whichever is earlier,
FirstFederal Financial is not in breach of its
material obligations hereunder, and (B) any person,
with respect to First Shenango Common Stock, shall
have publicly solicited proxies or written consents
or become a "participant" in any "solicitation"
(as such terms are defined in Regulation 14A
under the Exchange Act) in opposition to the Merger
and within twelve (12) months after the earlier of
the date of First Shenango Bancorp, Inc.'s
shareholders' meeting at which the Merger is
submitted for approval and voted upon or October 31,
1998, such person (other than a FirstFederal Entity)
shall have entered into a written understanding in
principle or an agreement to consolidate or merge
with First Shenango, to acquire all or substantially
all of First Shenango's assets or stock, or to engage
in a similar transaction;
(iv) unless FirstFederal Financial is in breach of
its material obligations hereunder, the Board of
Directors of First Shenango Bancorp, Inc., other than
as required in the exercise of its fiduciary duties
(as determined in good faith by such directors),
fails to make, withdraws, or modifies in a manner
adverse to FirstFederal Financial, its recommendation
that shareholders of First Shenango Bancorp, Inc.,
vote to approve the Merger before the date of First
Shenango Bancorp, Inc.'s shareholders' meeting at
which the Merger is to be submitted for approval and
voted upon and where First Shenango Bancorp,
43
Inc., has not terminated this Merger Agreement
pursuant to the provisions of Section 5.1.11 hereof;
or
(v) unless FirstFederal Financial is in breach of its
material obligations hereunder, at or prior to First
Shenango Bancorp, Inc.'s shareholders' meeting at
which the Merger is submitted for approval and voted
upon or prior to the termination date of this
Agreement, whichever is earlier, a person (other than
a FirstFederal Entity) enters into a written
understanding in principle or an agreement to
consolidate or merge with First Shenango, to acquire
all or substantially all of First Shenango's assets
or to engage in a similar transaction.
(b) As used in this Section, Beneficial Ownership shall have
the meaning ascribed to it in Rule 13d-3 under the Exchange Act.
5.1.14 Confidentiality. Except as may be required by law, First
Shenango agrees that unless and until the Closing has been consummated, First
Shenango, its officers, directors, and other representatives, will hold in
strict confidence and will not use to the detriment of FirstFederal any data or
information contained in connection with this transaction or Merger Agreement
with respect to FirstFederal's business. If the transactions contemplated by
this Merger Agreement are not consummated, First Shenango will return to
FirstFederal all such data and information that FirstFederal may reasonably
request that was made available to First Shenango in connection with this
transaction. This data and information does not include data and information
that is publicly available other than as a result of disclosure by First
Shenango.
5.1.15 Exercise of Stock Options. Prior to the Closing Date but
subsequent to both Regulatory Approval, and approval of this Merger Agreement by
First Shenango's shareholders; First Shenango Bancorp, Inc., shall take all
action necessary to cause the directors of First Shenango Bancorp, Inc., to
exercise a sufficient number of Stock Options to permit KPMG to issue the
opinion required under Section 6.10 hereof.
5.1.16 ESOP. Effective as of the Closing Date, the First Federal
Savings and Loan Association of New Castle Employee Stock Ownership Plan (the
"ESOP") shall terminate in accordance with its terms as the same existed on
January 1, 1998 (which terms shall include specifically, but without limitation,
the termination upon acquisition provisions specified under Section 8.2(c) of
the ESOP). Any other provision of this section to the contrary notwithstanding,
First Shenango shall neither take, nor omit to take, any action with regard to
the ESOP which would: (i) operate to prevent KPMG from issuing the opinion
required under the provisions of Section 6.10 hereof or (ii) adversely affect
the tax-favored status of the ESOP.
5.1.17 Defined Benefit Plan. First Shenango hereby covenants and agrees
that it shall take all action and shall distribute all notices as may be
required under the terms of applicable law and regulations to provide for the
termination, as of the Closing Date, of a defined benefit plan maintained by the
Thrift Subsidiary (the "Defined Benefit Plan"). First Shenango may amend the
Defined Benefit Plan to amend the benefit accruals or other provisions of the
Defined Benefit Plan provided that no amendments made to the Defined Benefit
Plan shall operate either to adversely affect the tax-favored
44
status of the Defined Benefit Plan or result in any funding deficiencies of the
Defined Benefit Plan as of the date of the plan termination, or require an
additional contribution from First Shenango.
5.1.18 Two Additional Benefit Plans. At or prior to the Closing Date,
Thrift Subsidiary shall take all actions necessary to terminate the Directors'
Deferred Compensation Plan and the Supplemental Executive Retirement Plan for
the benefit of Mr. Bonadio, and all benefits under these plans shall be paid out
in a lump sum to each participant; or alternatively, on or before the Closing
Date, Thrift Subsidiary in its sole discretion may establish an irrevocable
grantor trust or trusts and deposit therein guaranteed investment contracts in
amounts sufficient to provide the monthly benefits specified in accordance with
the Directors Plan and the Supplemental Retirement Plan for such participants
and beneficiaries thereunder that do not receive the lump sum payment as of the
Closing Date. To the extent that any lump sum payments of benefits are not made
as of the Closing Date or that any monthly or other periodic payments of
benefits are not funded through the establishment of one or more irrevocable
grantor trusts as of Closing Date, FirstFederal shall assume liability
thereafter with respect to the payment of any benefits that may be attributable
to the plans described in this section.
5.1.19 Employment Agreements. First Shenango will use its best efforts
to cause the Employment Agreements identified in Section 5.2.6 to be executed
and delivered.
5.2 FirstFederal's Covenants. FirstFederal Financial covenants and
agrees with First Shenango Bancorp, Inc., that, at all times from and after the
date of this Merger Agreement until the Effective Time, FirstFederal will comply
with all covenants and provisions of this Section 5.2, except to the extent
First Shenango Bancorp, Inc., may otherwise consent in writing.
5.2.1 Listing. FirstFederal Financial will file the appropriate form
with the National Association of Securities Dealers, Inc. ("NASD") at the time
prescribed by applicable rules and regulations. In addition, FirstFederal
Financial will use its best efforts to maintain its listing on Nasdaq.
5.2.2 Shareholders' Meeting. FirstFederal, after consultation with
First Shenango, will take all action necessary to call and hold its annual or a
special meeting of its shareholders for the purpose of approving this Merger
Agreement, and any other documents or actions necessary to the consummation of
the Merger provided for herein pursuant to law. Subject only to (i)
FirstFederal's Board of Directors' review of FirstFederal's Registration
Statement to be filed with the SEC described in this subparagraph and its
reasonable satisfaction with the information set forth therein, and (ii) the
exercise of their fiduciary duties, the Board of Directors of FirstFederal
intends to inform the shareholders of FirstFederal in the proxy materials
relating to the annual or special meeting that a majority of directors of
FirstFederal intend to vote all shares of FirstFederal Common Stock which they
own of record or have voting control over in favor of approving this Merger
Agreement and any such other necessary documents or actions, and the Board of
Directors will recommend approval of this Merger Agreement to the other
shareholders of FirstFederal.
45
5.2.3 Employee Benefit Plans. All Thrift Subsidiary's employees
retained by FirstFederal shall receive the standard package of FirstFederal
employee welfare benefits which are in place throughout the FirstFederal holding
company system. These benefits include group health and major medical insurance,
group life insurance, and profit sharing participation, and other customary
benefits. First Shenango's employees shall be entitled to participate
immediately following the Closing Date in all employee benefit plans sponsored
by FirstFederal on the same terms and to the same extent as similarly situated
employees;[ provided that such employees shall not be subject to any enrollment
waiting periods, uninsured waiting periods or pre-existing condition exclusions
to the extent of prior coverage under Thrift Subsidiary benefit plans]. Such
employees shall receive credit for their period of service to First Shenango for
purposes of determining participation, benefit levels, except accrual levels,
under any defined benefit plans, and vesting in all FirstFederal employee
benefit plans. An employee's entitlement to benefits under such FirstFederal
plans shall be subject to the limits set out in Section 415 of the Code. The
president of Thrift Subsidiary shall receive the benefits to which he is
entitled under the supplemental executive retirement plan adopted by the Thrift
Subsidiary for his benefit; this Section 5.2.3 shall be construed as an
agreement as to which the president of Thrift Subsidiary is intended to be a
third party beneficiary and shall be enforceable by him and his heirs and
representatives.
5.2.4 Confidentiality. Except as may be required by law, FirstFederal
agrees that unless and until the Closing has been consummated, FirstFederal, its
officers, directors, and other representatives, will hold in strict confidence
and will not use to the detriment of First Shenango any data or information
obtained in connection with this transaction or Merger Agreement with respect to
First Shenango's business. If the transactions contemplated by this Merger
Agreement are not consummated, FirstFederal will return to First Shenango all
such data and information that First Shenango may reasonably request that was
made available to FirstFederal in connection with this transaction.
5.2.5 Severance Agreements. FirstFederal acknowledges that upon Closing
it will honor the terms of the outstanding severance agreements disclosed on
Section 3.18 of the Disclosure Schedule.
5.2.6 Employment Agreements. FirstFederal will offer to Francis A.
Bonadio and Lonny D. Robinson the Employment Agreements attached hereto as
Exhibit A-1 and Exhibit A-2 to be executed on or before Closing, but to be
effective only upon Closing.
5.3 Mutual Covenants. First Shenango Bancorp, Inc., and FirstFederal
Financial covenant and agree with each other that, at all times from and after
the date of this Merger Agreement until the Effective Time, each will comply
with all covenants and provisions of this Section 5.3, except to the extent the
other party may otherwise consent in writing.
5.3.1 Pooling of Interest.
(a) The merger between First Shenango Bancorp, Inc., and
FirstFederal Financial is intended to be structured to qualify for
treatment under present accounting
46
rules as a pooling of interests, and First Shenango and FirstFederal
agree to take no action which would disqualify this treatment under
GAAP.
(b) FirstFederal and First Shenango shall cooperate and use
their best efforts to identify those persons who may be deemed to be
"affiliates" of FirstFederal or First Shenango within the meaning of
Rule 145 promulgated by the SEC under the Securities Act and for
purposes of qualifying the Merger for "pooling of interests" accounting
treatment. FirstFederal and First Shenango shall use its respective
best efforts to cause each person so identified to deliver to
FirstFederal or First Shenango, as the case may be, no later than 30
days prior to the Effective Time, a written agreement (which agreement
shall be mutually satisfactory to counsel for FirstFederal and First
Shenango). Shares of FirstFederal Common Stock issued to such
FirstFederal and First Shenango affiliates in exchange for First
Shenango Common Stock or previously owned by them shall not be
transferable until such time as financial results covering at least 30
days of combined operations of FirstFederal Financial and First
Shenango Bancorp, Inc., have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such affiliate has provided the
written agreement referred to in this section.
(c) FirstFederal Financial shall use its best efforts to
publish no later than ninety (90) days after the end of the first month
after the Effective Time in which there are at least thirty (30) days
of post-Merger combined operations (which month may be the month in
which the Effective Time occurs), combined sales and net income figures
as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135.
5.3.2 Proxy Statement; Registration Statement. As promptly as
practicable after the date hereof, First Shenango and FirstFederal shall
cooperate in the preparation of the proxy statement to be mailed to the
shareholders of First Shenango Bancorp, Inc., and FirstFederal Financial in
connection with the Merger and the transactions contemplated hereby and to be
filed by FirstFederal Financial as part of the Registration Statement.
FirstFederal will provide copies of all correspondence, comments, amendments and
other material filed with, or received from the SEC, and FirstFederal will
advise First Shenango, promptly after it receives notice thereof, of the time
when the Registration Statement or any post-effective amendment thereto has
become effective or any supplement or amendment has been filed, of the issuance
of any stop order, of the suspension of qualification of the FirstFederal Common
Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information. FirstFederal shall take
all actions necessary to register or qualify the shares of FirstFederal Common
Stock to be issued in the Merger pursuant to all applicable state "blue sky" or
securities laws and shall maintain such registrations or qualifications in
effect for all purposes hereof.
5.3.3 Disclosure. None of the information supplied by First Shenango
for inclusion in the Registration Statement and none of the information supplied
by FirstFederal for inclusion in
47
the proxy statement, will, in the case of the proxy statement or any amendments
thereof, at the time of the First Shenango Bancorp, Inc., shareholders' meetings
or, in the case of the Registration Statement, at the time it becomes effective
and at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
5.3.4 Applications. As promptly as practicable after the date hereof,
First Shenango and FirstFederal shall cooperate in the preparation and
submission of any requisite applications for prior approval of the transactions
contemplated herein, including applications and/or notices from the Office of
Thrift Supervision, Federal Reserve Board, and Department of Justice, as may be
appropriate, and each of the parties hereto shall, and they shall cause their
respective Subsidiaries to, submit any applications, notices or other filings to
any other state or federal government agency, department or body, the approval
of which is required for consummation of the Merger. FirstFederal Financial and
First Shenango Bancorp, Inc., each represents and warrants to the other that all
information concerning it and its directors, officers, shareholders and
Subsidiaries included (or submitted for inclusion) in any such application and
furnished by it shall be true, correct and complete in all material respects.
Further, each party shall provide such information and communication as may be
requested as part of such filings as promptly as possible and shall cooperate
with each other in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Merger Agreement commenced by
any regulatory authority.
5.3.5 Indemnity.
(a) Subject to the limitations set forth in Section 12.3
hereof, FirstFederal Financial and First Shenango Bancorp, Inc., shall
each indemnify and hold the other harmless for any claim, liability or
expense (including reasonable attorneys' fees) arising from a
misstatement or omission in the applications submitted to regulatory
agencies for approval of the transaction contemplated by this Merger
Agreement relating to the indemnifying party which is based or made in
reliance upon any representation, warranty, or covenant of such party
in this Merger Agreement or any certification, document, or other
information furnished or to be furnished by such party pursuant to
this Merger Agreement. From and after the Closing Date, this Section
5.3.5(a) shall be of no further force or effect.
(b) For a period of six (6) years following the Closing Date,
FirstFederal shall indemnify and advance expenses in matters that may
be subject to indemnification to, persons who served as directors and
officers of First Shenango, on or before the Closing Date with respect
to liabilities and claims (and related expenses, including fees and
disbursements of counsel) made against them resulting from their
service as such prior to the Closing Date in accordance with and
subject to the requirements and other provisions of the Articles and
Code of Regulations of FirstFederal and Bank Subsidiary in effect on
the date of this Merger Agreement and applicable provisions of law to
the same extent as FirstFederal is obligated thereunder to indemnify
and advance expenses to its own directors and officers with respect to
liabilities and claims made against them resulting from their service
for FirstFederal and Bank Subsidiary. FirstFederal shall cause the
persons serving as officers and directors of First Shenango immediately
prior to the Closing Date to be covered for a period of 18 months from
the Closing Date by the directors' and officers' liability insurance
policy maintained by First
48
Shenango (provided that FirstFederal may substitute therefor policies
of at least the same coverage and amounts containing terms and
conditions which are not materially less advantageous than such
policy) with respect to acts or omissions occurring prior to the
Closing Date which were committed by such officers and directors in
their capacity as such. This Section 5.3.5(b) shall be construed as an
agreement as to which the directors and officers of First Shenango and
Thrift Subsidiary referred to herein are intended to be third party
beneficiaries and shall be enforceable by such persons and their heirs
and representatives.
5.3.6 Best Efforts.
(a) FirstFederal Financial and First Shenango Bancorp, Inc.,
shall each use its best efforts in good faith, and each of them shall
cause its Subsidiaries to use their best efforts in good faith, to (i)
furnish such information as may be required in connection with the
preparation of the documents referred to in Sections 5.3.2 and 5.3.4
above, and (ii) take or cause to be taken all action necessary or
desirable on its part so as to permit consummation of the Merger at the
earliest possible date, including, without limitation (1) obtaining the
consent or approval of each individual, partnership, corporation,
association or other business or professional entity whose consent or
approval is required for consummation of the transactions contemplated
hereby, provided that First Shenango Bancorp, Inc., shall not agree to
make any payments or modifications to agreements in connection
therewith without the prior written consent of FirstFederal Financial,
which consent shall not be unreasonably withheld and (2) requesting the
delivery of appropriate opinions, consents and letters from its counsel
and independent auditors. No party hereto shall take or fail to take,
or cause or permit its Subsidiaries to take or fail to take, or to the
best of its ability permit to be taken or omitted to be taken by any
third persons, any action that would substantially impair the prospects
of completing the Merger pursuant to this Merger Agreement, that would
materially delay such completion, or that would adversely affect the
qualification of the Merger for pooling of interests accounting
treatment or as a reorganization within the meaning of Section 368(a)
of the Code. In the event that either party has taken any action,
whether before, on or after the date hereof, that would adversely
affect such qualification, each party shall take such action as the
other party may reasonably request to cure such effect to the extent
curable without a Material Adverse Effect on either of the parties
within 30 days of such request.
(b) First Shenango Bancorp, Inc., shall give prompt notice to
FirstFederal Financial, and FirstFederal Financial shall give prompt
notice to First Shenango Bancorp, Inc., of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be
likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any
time from the date hereof to the Closing Date and (ii) any material
failure of FirstFederal or First Shenango, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, and each party shall use
all reasonable efforts to remedy such failure.
(c) Each party shall provide and shall request its auditors to
provide the other party with such historical financial information
regarding it (and related audit reports and
49
consents and certificates) as the other party may reasonably request
for any securities disclosure purposes.
5.3.7 Delivery of Supplements to Disclosure Schedules. Five (5)
business days prior to the Effective Time, each party will deliver to the other
party a supplement or amendment to its Disclosure Schedule with respect to any
matter hereafter arising which, if existing or occurring at or prior to the date
of this Merger Agreement, would have been required to be set forth or described
in such Disclosure Schedule or which is necessary to correct any information in
the Disclosure Schedule.
5.3.8 Internal Procedures. Consistent with GAAP, First Shenango
Bancorp, Inc., agrees that, on or before the Effective Time, based on a review
of Thrift Subsidiary's loan losses, current classified assets and commercial,
multi-family and residential mortgage loans, First Shenango will work with
FirstFederal with a goal of establishing collection procedures, internal
valuation reviews, credit policies and practices and general valuation
allowances which are consistent with guidelines used within the FirstFederal
holding company system to the extent permitted by law and consistent with the
fiduciary duties of the directors and other officers of First Shenango Bancorp,
Inc., and Thrift Subsidiary at such times as reasonably requested by
FirstFederal; provided, however, that neither First Shenango Bancorp, Inc., nor
Thrift Subsidiary shall be obligated to make any such changes or adjustments
until the following conditions have been satisfied: (i) each of the conditions
precedent to Closing specified in Articles VI and VII of this Agreement shall
have been satisfied and (ii) FirstFederal Financial shall certify to First
Shenango Bancorp, Inc., in writing that, as of the date as of which such request
is being made, FirstFederal is aware of no facts or circumstances which would
permit FirstFederal to terminate this Agreement pursuant to Article XII of this
Merger Agreement. FirstFederal shall provide such assistance and direction to
First Shenango as is necessary in conforming to such policies, practices and
procedures.
ARTICLE VI
----------
Conditions Precedent to FirstFederal's Performance
--------------------------------------------------
The obligations of FirstFederal Financial under this Merger Agreement
are subject to the satisfaction, at or before the Closing, of all the conditions
set out below in this Article VI. FirstFederal Financial may waive any or all of
these conditions in whole or in part without prior notice; provided, however,
that no such waiver of a condition shall constitute a waiver by FirstFederal
Financial of any of its other rights or remedies, at law or in equity, if First
Shenango Bancorp, Inc., shall be in default of any of its representations,
warranties, or covenants under this Merger Agreement.
6.1 Representations and Warranties True. The representations and
warranties of First Shenango Bancorp, Inc., contained in this Merger Agreement
were true when made in all material respects, and shall be true in all material
respects as of the Closing Date (after giving effect to any changes contemplated
or provided for in this Merger Agreement) with the same force and effect as if
made at and as at the time of the Closing Date, except for breaches of
50
representations and warranties caused by events taking place after the date
hereof which would not have or would not reasonably be expected to have a
Material Adverse Impact on First Shenango, and First Shenango Bancorp, Inc.,
shall deliver at Closing a written certification thereof.
6.2 Performance of First Shenango. First Shenango Bancorp, Inc., shall
have performed, satisfied, and complied in all material respects with all
covenants, agreements, and conditions required by this Merger Agreement to be
performed or complied with by it on or before the Closing Date.
6.3 No Material Changes. During the period from December 31, 1997, to
the Closing Date, there shall not have been any material adverse change in the
Business or Condition of First Shenango, and First Shenango shall not have
sustained any material loss or damage to its Assets, whether or not insured,
that has a Material Adverse Effect on First Shenango. Any additional expenses
incurred by First Shenango and Thrift Subsidiary in connection with the
repayment of the ESOP loan or other stock benefit plans in connection with the
Merger Agreement will not be considered a material adverse change, provided that
such expenses shall be approved by FirstFederal, which approval shall not be
unreasonably withheld.
6.4 Corporate Approval. The execution and delivery of this Merger
Agreement by First Shenango Bancorp, Inc., and the performance of its covenants
and obligations under it shall have been duly authorized by all necessary
corporate and shareholder action, and FirstFederal Financial shall have received
copies of all resolutions pertaining to that authorization certified by the
Secretary of First Shenango Bancorp, Inc.
6.5 Consents. All necessary agreements and consents of any parties to
the consummation of the transactions contemplated by this Merger Agreement, or
otherwise pertaining to the matters covered by it, shall have been obtained by
First Shenango Bancorp, Inc., and delivered to FirstFederal Financial.
6.6 Reserved.
6.7 Opinion of Counsel. FirstFederal Financial shall have received the
opinion of Malizia, Spidi, Sloane & Fisch, P.C., counsel to First Shenango,
dated the Closing Date, substantially in the form and to the effect of Exhibit D
hereto.
6.8 FirstFederal's Due Diligence. Based upon FirstFederal's due
diligence from the date of the execution of this Merger Agreement to the Closing
Date, FirstFederal has not discovered any material misrepresentation or breach
of warranty or any other matters not adequately disclosed on the Disclosure
Schedule, that would have a Material Adverse Effect on First Shenango.
6.9 Regulatory Approval.
51
(a) FirstFederal shall have received all regulatory approvals required
or deemed necessary in connection with the transactions contemplated by this
Merger Agreement, all notice periods and waiting periods required after the
granting of any such approvals shall have passed and all conditions contained in
any such approval required to have been satisfied prior to consummation of such
transactions shall have been satisfied, provided, however, that no such approval
shall have imposed any condition or requirement which, in the reasonable opinion
of the Board of Directors of FirstFederal Financial so materially and adversely
affects the anticipated economic and business benefits to FirstFederal, of the
transactions contemplated by this Agreement as to render consummation of such
transaction inadvisable;
(b) The Registration Statement (including any post-effective amendment
thereto) shall be effective under the Securities Act, and no proceeding shall be
pending or to the Knowledge of FirstFederal threatened by the SEC to suspend the
effectiveness of such Registration Statement, and FirstFederal shall have
received all state securities or "Blue Sky" permits or other authorizations, or
confirmations as to the availability of an exemption from registration
requirements as may be necessary.
6.10 Pooling of Interest. FirstFederal Financial shall have received a
letter from KPMG Peat Marwick, LLP, FirstFederal Financial's independent public
accountants, to the effect that the Merger will qualify for pooling of interest
accounting treatment.
6.11 Accountant's Letters. FirstFederal Financial shall have received
from Ernst & Young LLP letters dated not more than five days prior to (i) the
effective date of the Registration Statement and (ii) the Closing Date, with
respect to certain financial information regarding First Shenango, each in form
and substance which is customary in transactions of the nature contemplated by
this Agreement.
6.12 Thrift Subsidiary Board of Directors. Thrift Subsidiary's Board of
Directors will appoint to the Thrift Subsidiary's Board of Directors at the
Effective Time two individuals to be recommended by FirstFederal Financial but
subject to the approval of the Thrift Subsidiary's Board of Directors.
6.13 Officer's Certificates. First Shenango Bancorp, Inc., shall
deliver at Closing an officer's certificate to the effect that all conditions
precedent to FirstFederal Financial's performance have been met or waived and
that all action required to be taken by First Shenango to consummate the
transactions contemplated herein has been taken.
6.14 Fairness Opinion. FirstFederal shall have received from Keefe,
Bruyette & Woods, Inc., a written fairness opinion, dated on or about the date
on which the proxy statement is distributed to FirstFederal Financial
shareholders, to the effect that the Exchange Ratio is fair to FirstFederal
Financial shareholders from a financial point of view.
6.15 Department of Labor and Industry Certificate. First Shenango shall
deliver at Closing clearance certificates in accordance with Section 139 of the
PBCL from the Office of
52
Employment Security of the Department of Labor and Industry and Department of
Revenue evidencing the payment by First Shenango of all charges due the
Commonwealth of Pennsylvania.
6.16 Certified Rent Roll. First Shenango shall deliver a certified
rent roll of leased Real Property of which it is the lessor.
ARTICLE VII
-----------
Conditions to Obligations of First Shenango
-------------------------------------------
The obligations of First Shenango Bancorp, Inc., hereunder are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by First
Shenango Bancorp, Inc., in its sole discretion):
7.1 FirstFederal's Warranties. All representations and warranties by
FirstFederal Financial contained in this Merger Agreement or in any written
statement delivered by FirstFederal Financial under this Merger Agreement shall
be true in all material respects on and as of the Closing as though such
representations and warranties were made on and as of that date, except for
breaches of representations and warranties caused by events taking place after
the date hereof which would not or would not reasonably be expected to have a
Material Adverse Effect on FirstFederal.
7.2 FirstFederal's Performance. FirstFederal Financial shall have
performed and complied in all material respects with all covenants and
agreements, satisfied all conditions that it is required by this Merger
Agreement to perform, comply with, or satisfy, before or at the Closing Date.
7.3 Opinion of FirstFederal's Counsel. FirstFederal Financial shall
have furnished First Shenango Bancorp, Inc., with an opinion, dated the Closing
Date, of Critchfield, Critchfield & Johnston, Ltd., counsel for FirstFederal, in
form and substance as set forth in Exhibit E.
7.4 Corporate Approval. The Board of Directors of FirstFederal
Financial shall have duly authorized and approved the execution and delivery of
this Merger Agreement and all corporate action necessary or proper to fulfill
the obligations of FirstFederal Financial to be performed under this Merger
Agreement on or before the Closing Date.
7.5 Fairness Opinion. First Shenango Bancorp, Inc., shall have received
from McDonald a written fairness opinion, dated on or about the date on which
the proxy statement is distributed to First Shenango Bancorp, Inc.'s
stockholders, to the effect that the Exchange Ratio is fair to First Shenango
Bancorp, Inc.'s stockholders from a financial point of view.
7.6 No Material Changes. During the period from December 31, 1997, to
the Closing Date, there shall not have been any material adverse change in the
Business or Condition of FirstFederal, and FirstFederal shall not have sustained
any material loss or damage to its Assets, whether or not insured, that has a
Material Adverse Effect on FirstFederal.
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ARTICLE VIII
------------
The Closing
-----------
8.1 Time and Place. The Closing shall occur at 10:00 a.m. at the
offices of Critchfield, Critchfield & Johnston, as promptly as practicable after
the date on which all of the conditions set forth in Articles VI and VII are
satisfied or duly waived, or at such other time and place and on such other date
as the parties hereto may agree.
8.2 Closing Escrow. All documents to be delivered by First Shenango
Bancorp, Inc., shall be delivered to counsel for FirstFederal in escrow and such
documents shall not be released by counsel for FirstFederal until receiving
written authorization from counsel for First Shenango. All documents to be
delivered by FirstFederal Financial to First Shenango shall be delivered to
counsel for First Shenango in escrow and such documents shall not be released by
counsel for First Shenango until receiving written authority from counsel for
FirstFederal.
ARTICLE IX
----------
Post Closing Obligations
------------------------
9.1 Options. Within ninety (90) days from the Effective Time,
FirstFederal will cause 25,000 Stock Options in the aggregate to be granted to
officers of the Thrift Subsidiary pursuant to the terms and conditions of the
1997 Omnibus Incentive Plan. The allocation of the Stock Options among the
Thrift Subsidiary's officers shall be based upon a recommendation of the Thrift
Subsidiary's Board of Directors, as approved by the FirstFederal Financial's
Board of Directors.
9.2 FirstFederal Board of Directors. FirstFederal Financial's Board of
Directors will appoint Dale R. Perelman to the FirstFederal Financial Board of
Directors for a term expiring at the next annual meeting of FirstFederal
Financial, at which time Dale R. Perelman will stand for nomination to such
board as required by Ohio law. FirstFederal Financial will appoint Joseph Hrach
to Signal Bank, National Association's Board of Directors for a term expiring at
the next annual meeting of Signal Bank, National Association, at which time
Joseph Hrach will stand for nomination to such board as required by federal law.
ARTICLE X
---------
Costs and Publicity
-------------------
10.1 Expenses. Each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiation and preparation of this Merger
Agreement and in closing and carrying out the transactions contemplated by this
Merger Agreement provided that First Shenango shall not incur any such costs and
expenses in excess of $450,000 in the aggregate; excluding therefrom the fee
payable to McDonald as previously disclosed. The parties acknowledge that
FirstFederal Financial will be primarily responsible for the necessary filings
with the SEC relating to this Agreement.
10.2 Publicity. All notices to third parties, employees of First
Shenango and FirstFederal and all other publicity concerning the transactions
contemplated by this Merger
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Agreement, excluding notices and publications required by law or regulation,
shall be jointly planned and coordinated by and between FirstFederal Financial
and First Shenango Bancorp, Inc. None of the parties shall act unilaterally in
this regard without the prior written approval of the others; however, this
approval shall not be unreasonably withheld.
ARTICLE XI
----------
Form of Agreement and Parties
-----------------------------
11.1 Headings. The subject headings of the paragraphs and subparagraphs
of this Merger Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its provisions.
11.2 Modification and Waiver. This Merger Agreement constitutes the
entire agreement between the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, representations, and
understandings of the parties. No supplement, modification, or amendment of this
Merger Agreement shall be binding unless executed in writing by all the parties.
No waiver of any of the provisions of this Merger Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
11.3 Counterparts. This Merger Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11.4 Rights of Parties. Nothing in this Merger Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Merger Agreement on any persons other than the parties to it and
their respective successors and assigns, nor is anything in this Merger
Agreement intended to relieve or discharge the obligation or liability of any
third persons to any party to this Merger Agreement, nor shall any provision
give any third persons any right of subrogation or action over or against any
party to this Merger Agreement.
11.5 Assignment. Neither First Shenango Bancorp, Inc., nor FirstFederal
Financial may assign its rights or obligations under this Merger Agreement.
ARTICLE XII
-----------
Termination
-----------
12.1 Termination. This Merger Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) By the vote of a majority of the Board of Directors of
each of FirstFederal and First Shenango;
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(b) By the vote of a majority of the Board of Directors of
either FirstFederal or First Shenango if the Merger shall not have been
consummated on or before October 31, 1998, unless the failure to
consummate by such date is related to the action or inaction of the
regulatory authorities, and such action or inaction is not directly
related to either FirstFederal's or First Shenango's breach of their
respective obligations under Articles III and IV;
(c) By the vote of a majority of the Board of Directors of
either FirstFederal or First Shenango if any regulatory agency has
denied approval of the Merger and neither First Shenango nor
FirstFederal has timely filed a request for a reconsideration or a
petition seeking review of such order;
(d) At any time before the Closing, by First Shenango, in the
event of the occurrence of a Material Adverse Impact of FirstFederal if
FirstFederal fails to cure such Material Adverse Impact thirty (30)
days following notification thereof by First Shenango;
(e) At any time before the Closing, by FirstFederal, in the
event of the occurrence of a Material Adverse Impact of First Shenango
if First Shenango fails to cure such Material Adverse Impact within
thirty (30) days following notification thereof by FirstFederal;
(f) At any time after December 31, 1998, by First Shenango or
FirstFederal, upon notification of the non-terminating party by the
terminating party if the Closing shall not have occurred on or before
such date and such failure to consummate is not caused by a breach of
this Merger Agreement by the terminating party;
(g) By either party if any bona fide action or proceeding
shall be pending against either party on the Closing Date that could
result in a judgment, decree, or order that would prevent or make
unlawful the carrying out of this Merger Agreement;
(h) By FirstFederal after Regulatory Approval if the
conditions precedent to FirstFederal's obligation to close as contained
in Article VI have not been satisfied or waived;
(i) By First Shenango after Regulatory Approval if the
conditions precedent to First Shenango's obligation to close as
contained in Article VII have not been satisfied or waived;
(j) By First Shenango if all of the following occur: (i) the
FirstFederal Share Price Change is greater than 15%; (ii) the
FirstFederal Share Price Change is greater than the SNL Share Price
Change by more than .1%; and (iii) the FirstFederal Share Price Change
is a positive number.
12.2 Effect of Termination. If this Merger Agreement is validly
terminated pursuant to Section 12.1, this Merger Agreement will forthwith become
null and void, and there will be
56
no liability or obligation on the part of First Shenango or FirstFederal (or any
of their respective officers, directors, employees, agents or other
representatives of Affiliates), except as provided in Sections 5.1.13 and 12.3
and except that the provisions of the Confidentiality Agreements entered into by
FirstFederal on January 13, 1998 will continue to apply following any such
termination.
12.3 Liquidated Damages. In the event this Merger Agreement is
terminated pursuant to 12.1(d), (e), (g), (h) or (i) and the nonterminating
party is in material breach of this Merger Agreement, the terminating party
shall be entitled to receive as liquidated damages the sum of $3 million
("Liquidated Damages") payable within 30 days of the effective date of the
termination. The parties agree that the Liquidated Damages is not a penalty and
is a reasonable estimate of the damages that would be sustained by the
terminating party, as it would be difficult to determine the extent of damages
at the time of the termination. Nothing contained herein shall limit or alter
the rights of FirstFederal to receive a break-up fee under Section 5.1.13,
except that the aggregate amount payable to FirstFederal under Sections 5.1.13
and 12.3 shall not exceed $3 million.
ARTICLE XIII
------------
Disclosure Schedules
--------------------
Notwithstanding any term to the contrary herein, the parties agree that
FirstFederal may terminate this Agreement upon notice to First Shenango within
seven days of the date of this Agreement in the event that the accompanying
documentation relating to Section 3.12 of the Disclosure Schedule contain
information that would have Material Adverse Impact on First Shenango or a
material diminution of the valuation of First Shenango by FirstFederal.
ARTICLE XIV
-----------
Miscellaneous
-------------
14.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to FirstFederal, to: With a Copy to:
FirstFederal Financial Services Corp Critchfield, Critchfield & Johnston, Ltd.
135 E. Liberty St. 225 N. Market Street
Wooster, OH 44691 Wooster, OH 44691
Attn: Gary G. Clark, Attn: Daniel H. Plumly
Chief Executive Officer Facsimile No.: (330) 263-9278
Facsimile No.: (330) 262-1057
57
If to First Shenango, to: With a Copy to:
First Shenango Bancorp, Inc. Malizia, Spidi, Sloane & Fisch, P.C.
First Federal Plaza One Franklin Square
25 N. Mill Street 1301 K Street, N.W., Suite 700 East
New Castle, PA 16103 Washington, D.C. 20005
Attn.: Francis A. Bonadio, President Attn.: Samuel J. Malizia and
Facsimile No.: (412) 658-2971 Gregory Rubis
Facsimile No.: (202) 434-4661
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmissions to the facsimile number
as provided in this Section, be deemed given after receipt of confirmation of
such transmission, and (iii) if delivered by mail in the manner described above
to the address as provided in this Section, be deemed given within three days
following the mailing thereof. Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party hereto.
14.2 Entire Agreement. This Merger Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof, including without limitation that certain letter of
interest from FirstFederal Financial to First Shenango Bancorp, Inc., dated
January 19, 1998, and contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof and thereof.
14.3 Costs. If any legal action or other proceeding is brought for the
enforcement of this Merger Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Merger Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.
14.4 Fair Interpretation. Every covenant, term, and provision of this
Merger Agreement shall be construed simply according to its fair meaning and not
strictly for or against either party.
14.5 Severability. Every provision of this Merger Agreement is intended
to be severable. If any term or provision thereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
or legality of the remainder of this Merger Agreement.
14.6 Effect of Closing. No representations, warranties, covenants, and
agreements of the parties contained in this Merger Agreement shall survive the
Closing, except the covenants and obligations contained in Article IX shall
survive the Closing.
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14.7 Arbitration of Disputes. Other than actions that request equitable
relief, which relief may be sought from a court of competent jurisdiction, it is
agreed that all disputes, claims and controversies between the parties to this
Merger Agreement, whether individual or joint in nature, arising from or in
connection with this Merger Agreement or otherwise, including, without
limitation, contract, tort and other claims, shall be arbitrated pursuant to the
Rules of the American Arbitration Association. Any disputes, claims or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning this Merger Agreement, including any claim to
rescind, reform or otherwise modify any provision of this Merger Agreement,
shall also be arbitrated, provided, however, that no arbitrator shall have the
right or power to enjoin or restrain any act of any party. Judgment upon any
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar
doctrines which would otherwise be applicable in an action brought by a party
shall be applicable.
14.8 No Third Party Beneficiaries. Nothing in this Merger Agreement
shall entitle any person (other than FirstFederal, First Shenango, and their
respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind, except as otherwise expressly provided
herein.
14.9 Governing Law. This Merger Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
[Balance of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Merger Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
FIRSTFEDERAL FINANCIAL SERVICES
CORP
By /s/Gary G. Clark
---------------------------------------
Name: Gary G. Clark
Title: Chief Executive Officer
FIRST SHENANGO BANCORP, INC.
By /s/Francis A. Bonadio
---------------------------------------
Name: Francis A. Bonadio
Title: President
60