As filed with the Securities and Exchange Commission on April 28, 1995
Registration No. 33-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
-----------
MIDLANTIC CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 6711 22-2699903
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation Classification
or Organization) Code Number)
Metro Park Plaza, P.O. Box 600
Edison, New Jersey 08818
908-321-8000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Joseph H. Kott, Executive Vice President, General Counsel
Midlantic Corporation
Metro Park Plaza, P.O. Box 600
Edison, New Jersey 08818
908-321-8127
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
-----------
Please send copies of all communications to:
JOSEPH LUNIN, ESQ. ALAN FELLHEIMER, ESQ.
Pitney, Hardin, Kipp & Szuch Fellheimer, Eichen, Braverman & Kaskey
P.O. Box 1945 One Liberty Place, 1650 Market Street
Morristown, New Jersey 07962-1945 Philadelphia, Pennsylvania 19103
(201) 966-6300 (215) 575-3800
-----------
Approximate date of proposed sale to the public: At the Effective Date of
the Merger, as defined in the Agreement and Plan of Merger, dated as of December
29, 1994 (the "Agreement"), among the Registrant, Midlantic Bank, National
Association, Old York Road Bancorp, Inc. and Bank and Trust Company of Old York
Road, attached as Appendix A to the Proxy Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================
Title of
each class Proposed Proposed
of securities Amount maximum Maximum Amount of
to be to be offering aggregate registration
registered registered price per unit* offering price* fee
- --------------------------------------------------------------------------------
Common Stock, 1,051,299
Par Value $3.00 Shares** $32.92 $34,608,763 $11,934
================================================================================
* Estimated solely for the purpose of calculating the registration fee pursuant
to Rule 457(f) under the Securities Act of 1933, as amended, based on the
average of the high and low prices reported for Old York Road Bancorp, Inc.
Common Stock as of April 27, 1995. For purposes of this calculation, it is
assumed that all shareholders of Old York Road Bancorp, Inc. elect to receive
common stock in exchange for their shares and that there is no anti-dilution
or price adjustment.
** The Registrant also registers hereby such additional shares of its common
stock as may be issuable in the Merger pursuant to the anti-dilution and
price adjustment provisions of the Agreement.
-----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION
8(A), MAY DETERMINE.
================================================================================
---------------
PART I
INFORMATION REQUIRED IN PROSPECTUS
CROSS REFERENCE SHEET
Item 1. Cross Reference Sheet.
Pursuant to Item 501 of Regulation S-K, this cross-reference sheet shows
the location in the Proxy Statement of responses to Items 1 through 19 of Part I
of Form S-4.
Item Location or Heading
No. Caption in Proxy Statement/Prospectus
- ---- ------- -----------------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page
of Prospectus.......................... Forepart of Registration Statement;
Cross Reference Sheet; Cover Page
of Proxy Statement
2. Inside Front and Outside Back Cover
Pages of Prospectus.................... Inside Front Cover
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information ... SUMMARY OF PROXY STATEMENT
(a).................................... SUMMARY OF PROXY STATEMENT--
Principal Businesses
(b) ................................... SUMMARY OF PROXY STATEMENT--
Principal Businesses
(c) ................................... SUMMARY OF PROXY STATEMENT--
The Merger
(d) ................................... SELECTED FINANCIAL INFORMATION;
COMPARATIVE PER SHARE DATA
(e) ................................... Not Applicable
(f) ................................... COMPARATIVE PER SHARE DATA
(g) ................................... MARKET PRICE DATA
(h) ................................... SUMMARY OF PROXY STATEMENT--
The Merger
(i) ................................... SUMMARY OF PROXY STATEMENT--
The Merger
(j) ................................... SUMMARY OF PROXY STATEMENT--
The Merger
(k) ................................... SUMMARY OF PROXY STATEMENT--
The Merger
-i-
Item Location or Heading
No. Caption in Prospectus/Proxy Statement
- ---- ------- -----------------------------
4. Terms of the Transaction
(a) ................................... THE PROPOSED MERGER
(b) ................................... THE PROPOSED MERGER--Fairness
Opinion
(c) ................................... THE PROPOSED MERGER--General
Description
5. Pro Forma Financial Information ....... Not Applicable
6. Material Contacts with the Company
Being Acquired ........................ THE PROPOSED MERGER
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters ............. Not Applicable
8. Interests of Named Experts and
Counsel................................ LEGAL OPINION
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants ........................... INFORMATION DELIVERED AND
INCORPORATED BY REFERENCE
11. Incorporation of Certain Information
by Reference .......................... INFORMATION DELIVERED AND
INCORPORATED BY REFERENCE
12. Information with Respect to S-2 or
S-3 Registrants ....................... Not Applicable
13. Incorporation of Certain Information
by Reference .......................... Not Applicable
14. Information with Respect to Registrants
other than S-3 or S-2 Registrants...... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies ............................. Not Applicable
16. Information with Respect to S-2 or
S-3 Companies ......................... INFORMATION DELIVERED AND
INCORPORATED BY REFERENCE
-ii-
Item Location or Heading
No. Caption in Prospectus/Proxy Statement
- ---- ------- -----------------------------
17. Information with Respect to Companies
Other than S-2 or S-3 Companies........ Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited..... INTRODUCTORY STATEMENT; THE
PROPOSED MERGER--Consideration;
INFORMATION DELIVERED AND
INCORPORATED BY REFERENCE
19. Information if Proxies, Consents or
Authorization Are Not to be Solicited
or in an Exchange Offer................ Not Applicable
-iii-
OLD YORK ROAD BANCORP, INC.
York and Easton Roads
Willow Grove, Pennsylvania 19090-3282
April ___, 1995
To Our Shareholders:
Old York Road Bancorp, Inc. ("Old York") has entered into an Agreement and
Plan of Merger dated as of December 29, 1994 (the "Agreement"), by and among Old
York, Old York's bank subsidiary, Bank and Trust Company of Old York Road (the
"Bank"), Midlantic Corporation ("Midlantic"), and Midlantic's national bank
subsidiary, Midlantic Bank, National Association ("MB"), providing for the
merger of Old York with and into Midlantic. Pursuant to the merger, Old York's
shareholders will be entitled to receive either $10.00 in cash or 0.3721 of a
share of Midlantic's common stock in exchange for each share of Old York's
common stock that they own on the effective date of the merger, subject to
adjustment and to the limitations and election and allocation provisions set
forth in the Agreement, pursuant to which no more than 49% of the number of
shares of Old York common stock outstanding (subject to downward adjustment
pursuant to the Agreement) may be exchanged for cash.
The special meeting of the shareholders of Old York to consider and act
upon the Agreement will be held on __________, 1995. If the merger is not
approved at the special meeting, an annual meeting of shareholders of Old York
will thereafter be scheduled for the election of directors. If the merger is
approved, Old York anticipates dispensing with the annual meeting for 1995.
In the accompanying material, you will find the Notice of Special Meeting
of Shareholders of Old York and a Proxy Statement/Prospectus setting forth
actions to be taken at the meeting, the details of the proposed merger, the
conditions to consummation of the merger and information concerning Midlantic,
MB, Old York and the Bank, together with a proxy form.
The Board of Directors of Old York has carefully considered this
transaction and believes that consummation of the merger in accordance with the
Agreement to be fair to Old York's shareholders and in their best interests. THE
BOARD OF DIRECTORS OF OLD YORK HAS UNANIMOUSLY APPROVED THE AGREEMENT AND
RECOMMENDS A VOTE FOR THE AGREEMENT. The executive officers and directors of Old
York intend to vote all of their shares in favor of the Agreement.
Because of the importance of the merger to the shareholders of Old York, we
urge you to complete and sign the enclosed proxy form and return it as soon as
possible in the enclosed postage-prepaid return envelope so that your shares
will be represented in the meeting. You may nevertheless attend Old York's
meeting and vote in person if you wish to do so.
The enclosed Proxy Statement also constitutes a Prospectus of Midlantic
with respect to the shares of Midlantic's common stock to be issued to the
shareholders of Old York if the merger is consummated.
Sincerely,
James M. Mack
President and Chief Executive
Officer
OLD YORK ROAD BANCORP, INC.
York and Easton Roads
Willow Grove, Pennsylvania 19090-3282
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON __________, 1995
To Our Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of Old York Road Bancorp, Inc. ("Old York") will be held at
______________________________ on _______________________________________, 1995
at 10:00 a.m., for the purpose of considering and voting upon the following
matters:
1. A proposal to approve an Agreement and Plan of Merger, dated as of
December 29, 1994 (the "Agreement"), by and among Old York, Old York's bank
subsidiary, Bank and Trust Company of Old York Road (the "Bank"), Midlantic
Corporation ("Midlantic"), and Midlantic's national bank subsidiary,
Midlantic Bank, National Association ("MB"), providing for the merger (the
"Merger") of Old York with and into Midlantic. Pursuant to the Merger, Old
York shareholders will be entitled to receive either $10.00 in cash or
0.3721 of a share of Midlantic's common stock in exchange for each share of
Old York's common stock that they own on the effective date of the Merger,
subject to adjustment and to the limitations and election and allocation
provisions set forth in the Agreement, pursuant to which no more than 49%
of the outstanding shares of Old York common stock (subject to downward
adjustment pursuant to the Agreement) may be exchanged for cash.
2. The transaction of such other business as may properly come before
the Meeting or any adjournment thereof.
Only those shareholders of record as of the close of business on
[____________], 1995 will be entitled to notice of, and to vote at, the Meeting.
A list of such shareholders will be available at the Meeting.
Consummation of the Merger is subject to certain conditions, including
approval of the Merger by the affirmative vote at the Meeting of holders of at
least a majority of the shares of Old York common stock voting at the Meeting,
whether in person or by proxy. Your vote is important regardless of the number
of shares that you own. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AS SOON AS POSSIBLE IN THE
ENCLOSED STAMPED ENVELOPE. You may revoke the proxy at any time prior to its
exercise.
By Order of the Board of Directors,
James M. Mack
President and Chief Executive Officer
Willow Grove, Pennsylvania
[_______________], 1995
THE MERGER IS OF MAJOR IMPORTANCE TO THE SHAREHOLDERS OF OLD YORK.
ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE
INFORMATION PRESENTED IN THE ATTACHED PROXY STATEMENT.
PROXY STATEMENT
OLD YORK ROAD BANCORP, INC.
for
Special Meeting of Shareholders of Old York Road Bancorp, Inc.
to be held on ____________ , 1995
PROSPECTUS
MIDLANTIC CORPORATION
Common Stock (Par Value $3.00)
------------
This Prospectus of Midlantic Corporation ("Midlantic") and Proxy Statement
of Old York Road Bancorp, Inc. ("Old York") (such Proxy Statement/Prospectus
being hereinafter referred to as the "Proxy Statement") is being furnished in
connection with the solicitation of proxies by the Board of Directors of Old
York to be used at a special meeting of its shareholders (the "Meeting") to be
held on __________, 1995. The purpose of the Meeting is to consider and vote
upon an Agreement and Plan of Merger dated as of December 29, 1994 (the
"Agreement"), by and among Old York, Old York's bank subsidiary, Bank and Trust
Company of Old York Road (the "Bank"), Midlantic and Midlantic's national bank
subsidiary, Midlantic Bank, National Association ("MB"), pursuant to which Old
York will be merged with and into Midlantic. In addition, the Bank will be
merged with and into MB. A copy of the Agreement is attached as Appendix A to
this Proxy Statement.
This Proxy Statement, the accompanying Notice of Special Meeting and form
of proxy are first being mailed to the shareholders of record of Old York on or
about _____________, 1995.
In accordance with the terms of the Agreement, upon approval of the
Agreement by the shareholders of Old York, receipt of all requisite regulatory
approvals and satisfaction or waiver of all conditions, Old York will merge into
Midlantic (the "Merger"), which will be the surviving entity in the Merger. In
connection with the Merger, each share of common stock of Old York, $1.00 par
value per share (the "Old York Common Stock"), issued and outstanding
immediately prior to the Effective Time (as hereinafter defined), will be
exchanged for the right to receive either $10.00 in cash or 0.3721 of a share
(the "Exchange Ratio") of common stock of Midlantic, $3.00 par value (the
"Midlantic Common Stock"), subject to the limitations and election and
allocation provisions set forth in the Agreement, pursuant to which no more than
49% of Old York Common Stock outstanding (subject to downward adjustment
pursuant to the Agreement) may be exchanged for cash, and subject to certain
adjustments as more fully described in this Proxy Statement. See "THE MERGER--
Consideration," "--Election Procedure" and "--Allocation Procedure." In
connection with the Merger, the Bank will also be merged into MB (the "Bank
Merger"), with MB continuing to operate thereafter as a wholly-owned subsidiary
of Midlantic.
Midlantic has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended (the "Act"), covering the shares of Midlantic Common Stock
which will be issued in connection with the Merger. In addition to constituting
the Old York Proxy Statement for the Meeting, this document constitutes a
Prospectus of Midlantic with respect to Midlantic Common Stock to be issued if
the Merger is consummated.
OLD YORK STOCK CERTIFICATES SHOULD NOT BE SENT WITH THE ENCLOSED PROXY FORM
AND SHOULD NOT BE FORWARDED until after receipt of an election form and a letter
of transmittal which will be provided to Old York shareholders on or prior to
the Effective Time (as hereinafter defined) of the Merger.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO SELL, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT
AT ANY TIME, NOR ANY DISTRIBUTION OF SHARES OF MIDLANTIC COMMON STOCK, SHALL
UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
The date of this Proxy Statement is _____________, 1995.
AVAILABLE INFORMATION
Midlantic and Old York are both subject to the information requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
Midlantic has filed with the Commission a Registration Statement on Form
S-4 under the Act (together with all amendments and supplements thereto, the
"Registration Statement"), with respect to the securities being offered by this
Proxy Statement. As permitted by the rules and regulations of the Commission,
this Proxy Statement omits certain information, exhibits and undertakings
contained in the Registration Statement. For further information with respect to
Midlantic and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits thereto.
Statements contained in this Proxy Statement or in any document
incorporated by reference in this Proxy Statement, as to the contents of any
document referred to herein or therein, are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement or such other document, each such document being
qualified in all respects by such reference.
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE
A copy of Old York's Annual Report on Form 10-KSB for the year ended
December 31, 1994 accompanies this Proxy Statement.
The following documents filed by Midlantic with the Commission are
incorporated herein by reference:
1. Midlantic's Annual Report on Form 10-K for the year ended December 31,
1994.
2. The description of Midlantic Common Stock set forth in Midlantic's
Registration Statement on Form 8-A filed by Midlantic pursuant to Section
12 of the Exchange Act, and any amendment or report filed for the purpose
of updating such description.
The following documents filed by Old York with the Commission are
incorporated herein by reference:
1. Old York's Annual Report on Form 10-KSB for the year ended December 31,
1994.
2. Old York's Annual Report to Shareholders for the year ended December 31,
1994, except for lists of Old York's and the Bank's management.
3. Old York's Current Reports on Form 8-K dated December 29, 1994 and
March 7, 1995.
All documents filed by Midlantic pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement and
prior to the Meeting shall be deemed incorporated by reference into this Proxy
Statement and a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
-2-
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS PERTAINING TO MIDLANTIC,
OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST MADE TO CORPORATE SECRETARY, MIDLANTIC CORPORATION,
METRO PARK PLAZA, 499 THORNALL STREET, P.O. BOX 600, NEW JERSEY 08818; TELEPHONE
NUMBER (908) 321-2793. THOSE DOCUMENTS PERTAINING TO OLD YORK, OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR
ORAL REQUEST MADE TO CORPORATE SECRETARY, OLD YORK ROAD BANCORP, INC., YORK AND
EASTON ROADS, P.O. BOX W, WILLOW GROVE, PENNSYLVANIA 19090-3282; TELEPHONE
NUMBER (215) 659-3400. IN ORDER TO INSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY [_______________], 1995.
All information contained or incorporated by reference in this Proxy
Statement with respect to Midlantic and MB was supplied by Midlantic and all
information contained or incorporated by reference in this Proxy Statement with
respect to Old York and the Bank was supplied by Old York. Although neither
Midlantic nor Old York have any knowledge that would indicate that any
statements or information relating to the other party contained or incorporated
herein are inaccurate or incomplete, neither Midlantic nor Old York can warrant
the accuracy or completeness of such information or statements as they relate to
the other entity or its subsidiaries.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS DOCUMENT NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF MIDLANTIC OR OLD YORK SINCE THE DATE HEREOF OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
-3-
TABLE OF CONTENTS Page
----
Available Information...................................................
Information Incorporated by Reference...................................
Summary of Proxy Statement/Prospectus...................................
Principal Businesses....................................................
Certain Information Regarding Midlantic.................................
General ..............................................................
Midlantic Bank, National Association..................................
Certain Information Regarding Old York..................................
General ..............................................................
Recent Developments ..................................................
Comparative Per Share Data..............................................
Market Price Data.......................................................
Selected Financial Information..........................................
Selected Financial Information of Midlantic...........................
Selected Financial Information of Old York............................
Introductory Statement..................................................
Purpose of Meeting....................................................
Vote Required; Shares Entitled to Vote................................
Solicitation, Voting and Revocation of Proxies........................
The Proposed Merger.....................................................
General Description...................................................
Consideration ........................................................
Election Procedure ...................................................
Allocation Procedure .................................................
Payment of Cash and Delivery of Shares................................
Federal Income Tax Consequences.......................................
Rights of Dissenting Old York Shareholders............................
Background of and Reasons for the Merger..............................
Interests of Management in the Merger.................................
Fairness Opinion .....................................................
Resale Considerations with Respect to Midlantic Common Stock..........
Conditions to the Merger..............................................
Regulatory Approvals..................................................
Management and Operations After the Merger............................
Effective Time; Amendments; Termination...............................
Stock Option for Shares of Old York Common Stock......................
Description of Midlantic Capital Stock..................................
General ..............................................................
Common Stock..........................................................
Preferred Stock.......................................................
Shareholder Nomination of Directors...................................
Limitation of Liability of Directors and Officers.....................
Comparison of the Rights of Shareholders under Pennsylvania
and New Jersey Law .................................................
Security Ownership of Certain Beneficial Owners and Management of
Old York ..............................................................
Shareholder Proposals...................................................
Legal Opinion...........................................................
Experts ................................................................
APPENDICES:
Appendix A:
Agreement and Plan of Merger among Midlantic Corporation,
Midlantic Bank, National Association, Old York Road Bancorp,
Inc. and Bank and Trust Company of Old York Road, dated as of
December 29, 1994 .................................................. A-1
Appendix B:
Stock Option Agreement between Midlantic Corporation and Old York
Road Bancorp, Inc. dated as of December 29, 1994 ................... B-1
Appendix C:
Fairness Opinion of Sandler O'Neill & Partners, L.P. ................. C-1
Appendix D:
Subchapter 15D of the Pennsylvania Business Corporation Law .......... D-1
-4-
SUMMARY OF PROXY STATEMENT
The following information is a brief summary of certain information with
respect to the matters to be considered at the Meeting of Old York. This summary
is necessarily incomplete and is qualified in its entirety by the more detailed
information contained elsewhere in this Proxy Statement. Shareholders should
read carefully the details of this Proxy Statement. Certain capitalized terms
used in this Summary are defined elsewhere in this Proxy Statement.
MEETING OF OLD YORK SHAREHOLDERS
Date, Time and Place of
Meeting of Old York................... , 1995, 10:00 a.m. at
Record Date .......................... [ , 1995]
Shares Outstanding on Record
Date and Entitled to Vote............. Shares of Old York Common Stock
Purpose of Meeting.................... (i) To consider and vote upon a
proposal to approve the Agreement and
Plan of Merger dated as of December 29,
1994, by and among Old York, Old York's
bank subsidiary, Bank and Trust Company
of Old York Road, Midlantic and
Midlantic's national bank subsidiary,
Midlantic Bank, National Association,
providing for the merger of Old York
with and into Midlantic and (ii) to
transact any other business that
properly may be brought before the
Meeting.
THE MERGER
Description of the Merger............. Pursuant to the Agreement (a copy of
which is attached as Appendix A to this
Proxy Statement at page A-1), Old York
will be merged into Midlantic with
Midlantic as the surviving corporation.
In addition, the Bank will be merged
into MB, with MB as the surviving
entity and which will continue to
operate as a subsidiary of Midlantic.
See "THE PROPOSED MERGER -- General
Description" and "-- Consideration."
Consideration......................... At the Effective Time (as hereinafter
defined), each outstanding share of Old
York Common Stock (except for shares
owned by shareholders of Old York who
perfect dissenters' rights in
accordance with applicable law) will be
converted into the right to receive
either $10.00 in cash or 0.3721 of a
share of Midlantic Common Stock,
subject to adjustment and to the
limitations and election and allocation
provisions set forth in the Agreement.
Under the terms of the Agreement, no
more than 49% of Old York Common Stock
outstanding (subject to downward
adjustment pursuant to the Agreement)
may be exchanged for cash. Accordingly,
if the holders of more than 49% of Old
York Common Stock elect cash, then the
shareholders so electing will receive a
combination of cash and Midlantic
Common Stock in exchange for their
shares of Old York Common Stock as
determined in accordance with the
allocation procedures set forth in the
Agreement. In addition, under the
Agreement the price which Old York
shareholders are entitled to receive in
exchange for their shares of Old York
Common Stock will be adjusted downward
if Old York does not meet certain
minimum capital (as adjusted in
accordance with the Agreement)
requirements. The Exchange Ratio is
-5-
also subject to adjustment in certain
other circumstances, as more fully
described in this Proxy Statement. No
fractional shares of Midlantic Common
Stock will be issued in the Merger.
Cash payments in exchange for shares of
Old York Common Stock and in lieu of
fractional shares will be received
without interest. See "THE PROPOSED
MERGER -- Consideration," "--Election
Procedure," "-- Allocation Procedure"
and "-- Effective Time; Amendments;
Termination; Price Adjustment."
Election
and Allocation Procedures ............ Each record holder of Common Stock will
receive an election form (the "Election
Form") after the Meeting date and prior
to the Election Date (as defined
below). The Election Form is to be used
by Old York shareholders to submit
their Old York share certificates and,
if they wish, to specify whether they
elect to have their shares converted
into the right to receive cash or into
Midlantic Common Stock. SUCH
SPECIFICATIONS WILL BE EFFECTIVE ONLY
IF SUCH SPECIFICATIONS, ACCOMPANIED BY
THE SHARE CERTIFICATES FOR THE SHARES
TO WHICH THEY RELATE, ARE RECEIVED BY
THE EXCHANGE AGENT, NO LATER THAN 5:00
P.M. ON THE DATE ANNOUNCED BY
MIDLANTIC, IN A NEWS RELEASE DELIVERED
TO THE DOW JONES NEWS SERVICE ("THE
"ELECTION DATE"). The Election Date
must be at least twenty days following
the date of such news release and may
be no more than five business days
prior to the Effective Time and no
later than the date on which the
Effective Time occurs. Except with
respect to shareholders who hold shares
for two or more beneficial owners, a
shareholder may not specify a
preference that part of such
shareholder's shares be converted into
cash and part into Midlantic Common
Stock and must include in his Election
Form all shares of Old York Common
Stock owned by such holder. See "THE
MERGER -- Election Procedures." ANY
SHAREHOLDER WHO DOES NOT SUBMIT A
PROPERLY COMPLETED ELECTION FORM ON OR
PRIOR TO THE ELECTION DATE WILL BE
DEEMED TO HAVE MADE A STOCK ELECTION.
OLD YORK STOCK CERTIFICATES SHOULD NOT
BE SENT WITH THE ENCLOSED PROXY FORM
AND SHOULD NOT BE FORWARDED until after
receipt of an Election Form and a
letter of transmittal which will be
provided to Old York shareholders on or
prior to the effective time of the
Merger. The Agreement contains
provisions governing the allocation of
cash and Midlantic Common Stock, based
upon the tabulation of the Election
Forms submitted to the Exchange Agent.
In general, the allocation procedures
contemplate that the preferences set
forth in the Election Forms will be
honored to the maximum extent
consistent with the cash limitations
provided for in the Agreement. Under
the terms of the Agreement, no more
than 49% of Old York Common Stock
outstanding (subject to downward
adjustment pursuant to the Agreement)
may be exchanged for cash. Accordingly,
if the holders of more than 49% of Old
York Common Stock outstanding elect
cash, then the shareholders so electing
will receive a combination of cash and
Midlantic Common Stock in exchange for
their shares of Old York Common Stock
as determined in accordance with the
allocation procedures set forth in the
Agreement. See "THE MERGER --
Allocation Procedure".
-6-
Certain Federal Income
Tax Consequences...................... The Merger is conditioned upon the
receipt of an opinion of counsel to
Midlantic to the effect that the Merger
will constitute a tax-free
reorganization as defined in Section
368(a)(1) of the Internal Revenue Code
of 1986, as amended, and that,
accordingly, (i) no gain or loss will
be recognized by the shareholders of
Old York upon the exchange of their
shares of Old York Common Stock solely
for shares of Midlantic Common Stock
pursuant to the Merger; (ii) in the
case of Old York shareholders who
receive cash in whole or in part in
exchange for their Old York Common
Stock, gain, if any, realized by the
recipient on the exchange will be
recognized, but in an amount not in
excess of the amount of such cash; and
(iii) in the case of Old York
shareholders who recognize gain on the
exchange of their Old York Common Stock
and in whose hands such stock was a
capital asset, such gain will be
treated as a capital gain (except in
the case of any shareholder as to which
the exchange has the effect of a
dividend by reason of the applicability
of certain attribution rules described
in this Proxy Statement. For a more
detailed discussion regarding federal
income tax matters, including the tax
treatment of cash received in lieu of
fractional shares, see "The Proposed
Merger -- Federal Income Tax
Consequences."
Vote Required for Approval
of Merger............................. The affirmative vote, in person or by
proxy, of the holders of at least a
majority of the shares of Old York
Common Stock voting at the Meeting is
required to approve the Agreement. The
holders of a majority of the
outstanding shares of Old York Common
Stock entitled to vote will constitute
a quorum at the Meeting. See
"Introductory Statement -- Vote
Required; Shares Entitled to Vote."
Rights of Dissenting
Old York Shareholders................. Pursuant to the provisions of Section
1571 of the Pennsylvania Business
Corporation Law (the "PaBCL"),
shareholders of Old York have the right
to dissent from the Merger and obtain
payment of the "fair value" of their
shares by giving notice in writing
prior to the Meeting to the presiding
officer of Old York that they dissent
from the Merger and thereafter not
effecting a change in the beneficial
ownership of their shares and not
voting in favor of the Merger. If the
Merger is consummated, dissenting Old
York shareholders who fully comply with
the requirements of Subchapter 15D of
the PaBCL will be entitled to receive
from Midlantic a cash payment equal to
the fair value of their Old York shares
as of the Effective Time. Old York
shareholders wishing to dissent from
the Merger are urged to carefully read
"The Proposed Merger -- Rights of
Dissenting Old York Shareholders" and
Appendix D to this Proxy Statement and
to consult with their own legal
advisers.
Recommendation of the
Board of Directors of Old York........ The Board of Directors of Old York has
unanimously approved the Merger and
recommends that shareholders vote "FOR"
the Agreement. See "Introductory
Statement -- Purpose of Meeting" and
"The Proposed Merger -- Reasons for the
Merger."
Interests of Management
in the Merger......................... As of January 31, 1995, the directors
and executive officers of Old York
beneficially owned in the aggregate
357,326 shares of Old York Common
Stock, or 12.65% of the then issued and
outstanding shares of Old York Common
Stock.
Fairness Opinion...................... The Board of Directors of Old York has
retained Sandler O'Neill & Partners,
L.P. ("Sandler O'Neill") to evaluate
the terms of the Merger.
-7-
Sandler O'Neill has delivered a written
opinion dated __________, 1995 to the
Board of Directors of Old York to the
effect that the consideration to be
received by the Old York shareholders
pursuant to the Agreement is, as of the
date of such opinion, fair to such
shareholders from a financial point of
view. A copy of Sandler O'Neill's
opinion is attached as Appendix C to
this Proxy Statement at page C-1. For
information concerning the matters
reviewed, assumptions made and factors
considered by Sandler O'Neill, see "THE
PROPOSED MERGER -- Fairness Opinion."
Resale Considerations with Respect
to Midlantic Common Stock............. The shares of the Midlantic Common
Stock to be issued in the Merger will
be registered under the Act and will be
freely transferable, except for shares
received by persons, including
directors and executive officers of Old
York, who may be deemed to be
"affiliates" of Midlantic under Rule
145 promulgated under the Act. See "THE
PROPOSED MERGER -- Resale
Considerations with Respect to the
Midlantic Common Stock."
Conditions to the Merger.............. Consummation of the Merger is
contingent upon a number of conditions,
including receiving all necessary
regulatory approvals; the approval of
the Merger by the holders of at least a
majority of the shares of Old York
Common Stock voting at the Meeting; an
opinion of counsel to Midlantic
relating to the tax aspects of the
Merger; and an opinion of Sandler
O'Neill, advisors to Old York, that the
Merger is fair to the shareholders of
Old York from a financial point of
view. Sandler O'Neill's opinion is
included as Appendix C. In addition, as
a condition to the Merger, Old York
must maintain certain minimum capital
(as adjusted in accordance with the
Agreement) requirements and certain
representations and warranties made by
Old York and the Bank in the Agreement
must be true in all material respects
at the Effective Time of the Merger.
The final outcome of a class action
suit filed against Old York, which was
dismissed without prejudice on
April 25, 1995, may impact
whether certain conditions necessary
for the Merger to occur will be
satisfied. See "THE PROPOSED MERGER --
Fairness Opinion," "-- Conditions to
the Merger" and "--Regulatory
Approvals."
Regulatory Approvals.................. Consummation of the Merger requires the
approval or waiver of the Board of
Governors of the Federal Reserve System
(the "Federal Reserve Board") and the
approval of the Department of Banking
of the Commonwealth of Pennsylvania
(the "Pennsylvania Banking
Department"). Consummation of the Bank
Merger requires the approval of the
Comptroller of the Currency (the
"OCC"). Applications for such approvals
or waivers have been filed by
Midlantic. While Midlantic and Old York
anticipate receiving the approvals or
waivers, there can be no assurance that
they will be granted, or that they will
be granted on a timely basis without
conditions unacceptable to Midlantic or
Old York. See "THE PROPOSED MERGER --
Regulatory Approvals."
Closing............................... The Merger will be consummated (the
"Closing") on the later of (i) the date
on which the Merger is approved by Old
York shareholders and (ii) three days
after all conditions required for
consummation of the Merger have been
satisfied (or waived), or on such other
date as the parties may agree. The
Merger requires that a Certificate of
Merger be filed with the New Jersey
Secretary of State and Articles of
Merger be filed with the Secretary of
the Commonwealth of Pennsylvania. The
effective time of
-8-
the Merger (the "Effective Time") will
be the time at which the foregoing
documents have become effective. The
Merger is expected to close late in the
second quarter or early in the third
quarter of 1995. See "THE PROPOSED
MERGER -- Effective Time; Amendments;
Termination."
Termination Rights and Price
Adjustment............................ The Agreement may be terminated by
either Midlantic or Old York if the
Closing has not occurred by December
31, 1995. The Agreement may be
terminated by Old York if the price of
Midlantic Common Stock over a specified
period of time is less than
approximately $22.84 ($26.87 multiplied
by 0.85) and also less than an index
ratio based upon a selected peer group
of other bank holding companies;
provided, however, that in such event
Midlantic, in its sole discretion, may
elect to increase the Exchange Ratio to
avoid such termination. In addition, if
Old York's capital (as adjusted in
accordance with the terms of the
Agreement) falls below a specified
level, Midlantic is not obligated to
effect the Merger. The Agreement also
provides that if Old York does not meet
certain minimum capital (as adjusted in
accordance with the Agreement)
requirements, the price which Old York
shareholders are entitled to receive in
exchange for their shares of Old York
Common Stock will be adjusted downward.
See "-- Effective Time; Amendments;
Termination; Price Adjustment." For a
more complete description of other
termination rights available to
Midlantic and Old York and the price
adjustment provisions, see "THE
PROPOSED MERGER -- Effective Time;
Amendments; Termination" and "--
Conditions to the Merger."
Stock Option to Midlantic
for Old York Shares................... Midlantic and Old York entered into a
Stock Option Agreement dated December
29, 1994 (the "Stock Option
Agreement"), in connection with the
negotiation by Midlantic and Old York
of the Agreement. Pursuant to the Stock
Option Agreement, Old York has granted
to Midlantic an option (the "Option"),
exercisable only under certain limited
and specifically defined circumstances,
to purchase up to 19.9% of the shares
of Old York Common Stock which would be
outstanding immediately following the
exercise of the Option, for an exercise
price of $7.25 per share. Midlantic
does not have any voting rights with
respect to the shares of Old York
Common Stock subject to the Option
prior to exercise of the Option.
Midlantic has the right to exercise the
Option only upon the occurrence of
certain events including, but not
limited to, the acquisition of
beneficial ownership of at least 20% of
the outstanding shares of Old York
Common Stock by a person or group other
than Midlantic or an affiliate. The
Stock Option Agreement is attached as
Appendix B hereto at page B-1. See "THE
PROPOSED MERGER -- Stock Option for
Shares of Old York Common Stock."
Certain Differences in
Shareholders' Rights.................. On the Effective Date, shareholders of
Old York, except those who receive cash
in the Merger (including those who
perfect dissenters' rights in
accordance with the PaBCL),
automatically will become shareholders
of Midlantic. The rights of
shareholders of Midlantic are
determined by the New Jersey Business
Corporation Act and by Midlantic's
Certificate of Incorporation and
By-laws. The rights of shareholders of
Midlantic differ from the rights of
shareholders of Old York with respect
to certain matters. For a summary of
these differences, see "COMPARISON OF
SHAREHOLDERS RIGHTS UNDER PENNSYLVANIA
AND NEW JERSEY LAW."
-9-
COMPARATIVE PER SHARE DATA (Unaudited)
The following table sets forth the income and dividends per common share
and year-end book value per common share of Midlantic Common Stock and Old York
Common Stock for the year ended December 31, 1994, on an historical and pro
forma basis. The historical per share data have been derived from the financial
statements of Midlantic and Old York which are incorporated by reference herein.
The pro forma combined per share data have been derived after giving effect to
the Merger as if it occurred at the beginning of the period presented. See
"SELECTED FINANCIAL INFORMATION -- Selected Financial Information of Midlantic
Corporation" and "-- Selected Financial Information of Old York Road Bancorp,
Inc."
Year Ended
December 31, 1994
-----------------
Midlantic Common Stock
Income Per Share From Continuing Operations:
Primary
Historical $ 5.18
Pro Forma --Midlantic and Old York 5.10
Fully Diluted
Historical 5.11
Pro Forma -- Midlantic and Old York 5.03
Cash Dividends Declared Per Share (1)
Historical .40
Pro Forma -- Midlantic and Old York .40
Book Value Per Share at Year-end
Historical 25.19
Pro Forma -- Midlantic and Old York 25.11
Old York Common Stock
Income (Loss) Per Share From Continuing Operations:
Historical (Primary and Fully Diluted) $ (1.24)
Pro Forma Equivalent (Primary)--
Midlantic and Old York (2) 1.90
Pro Forma Equivalent (Fully Diluted)--
Midlantic and Old York (2) 1.87
Cash Dividends Declared Per Share
Historical --
Pro Forma Equivalent -- Midlantic and Old York (2) .15
Book Value Per Share at Year-end
Historical 4.44
Pro Forma Equivalent -- Midlantic and Old York (2) 9.34
- -----------
(1) The amount of future dividends payable by Midlantic, if any, is subject to
the discretion of the Board of Directors of Midlantic. Midlantic's Board of
Directors normally considers the cash requirements of Midlantic and its
subsidiaries, general business conditions, the dividend paying capacity of
MB and applicable governmental regulations and policies. Pro forma amounts
assume that Midlantic would have declared cash dividends per share of
Midlantic Common Stock equal to the historical cash dividends declared per
share of Midlantic Common Stock.
(2) Equivalent pro forma income, cash dividends declared and book value per
share of Old York Common Stock represent the income, cash dividends and
book value per share of Midlantic Common Stock on a pro forma basis
multiplied by 0.3721. Such multiplier represents the exchange ratio
(assuming no adjustment) for those shareholders of Old York who elect to
receive Midlantic Common Stock in exchange for Old York Common Stock.
-10-
The following table presents the closing sale price reported by Nasdaq per
share of Midlantic Common Stock and the last sale price reported by Nasdaq per
share of Old York Common Stock on December 29, 1994, the last full trading day
prior to the public announcement that Midlantic and Old York had entered into
the Agreement and April ____, 1995, a date shortly prior to the mailing of this
Proxy Statement. Midlantic Common Stock is traded on The Nasdaq National
Market(R). Old York Common Stock is traded on The Nasdaq SmallCap Market(SM).
See "MARKET PRICE DATA." The table also presents the equivalent value of
Midlantic Common Stock per Old York share which has been calculated by
multiplying the market price of Midlantic Common Stock on the dates indicated by
the Exchange Ratio of 0.3721. Old York shareholders are urged to obtain current
market quotations for Midlantic Common Stock. Because the Exchange Ratio is
fixed (subject to adjustment), Old York shareholders are not assured of
receiving any specific market value of Midlantic Common Stock. See "THE MERGER
- -- Conditions to the Merger" and "-- Effective Time; Amendments; Termination;
Price Adjustment." The price of Midlantic Common Stock at the Effective Time may
be higher or lower than the market price at either the time of entering into the
Agreement, the time of mailing this Proxy Statement or at the time of the
Meeting.
Pro Forma
Equivalent Per
Midlantic Old York Share of Old
Common Common York Common
Stock Stock Stock
-------- -------- -----------
December 29, 1994 $26.75 $7.25 $9.95
April _____, 1995 $ $ $
------ ----- -----
PRINCIPAL BUSINESSES
Midlantic............................. Midlantic is a regional bank holding
company organized under the laws of the
State of New Jersey and registered
under the Bank Holding Company Act of
1956, as amended (the "Bank Holding
Company Act"). Midlantic has one bank
subsidiary, Midlantic Bank, National
Association, which operates 261
branches in New Jersey and 63 branches
in southeastern Pennsylvania. At
December 31, 1994, Midlantic on a
consolidated basis had total assets of
$13.3 billion. Midlantic's principal
executive offices are located at Metro
Park Plaza, 499 Thornall Street, P.O.
Box 600, Edison, New Jersey 08818, and
its telephone number is (908) 321-8000.
See "AVAILABLE INFORMATION,"
"INFORMATION INCORPORATED BY REFERENCE"
and "CERTAIN INFORMATION REGARDING
MIDLANTIC."
Old York.............................. Old York is a bank holding company
organized under the laws of the
Commonwealth of Pennsylvania and
registered under the Bank Holding
Company Act. Old York has one bank
subsidiary, Bank and Trust Company of
Old York Road, which operates 14
banking offices in Montgomery, Bucks
and Philadelphia counties,
Pennsylvania. At December 31, 1994, Old
York had total assets of $231.2
million. Old York's principal executive
offices are located at York & Easton
Roads, P.O. Box W, Willow Grove,
Pennsylvania 19090-3282, and its
telephone number is (215) 659-3400. See
"AVAILABLE INFORMATION," "INFORMATION
INCORPORATED BY REFERENCE" and "CERTAIN
INFORMATION REGARDING OLD YORK."
Recent Developments................... Certain changes in the management of
Old York have occurred in recent
months. In addition, a class action
lawsuit has been filed against Old
York, the outcome of which may impact
whether certain conditions necessary
for the Merger to occur will be
satisfied. See "CERTAIN INFORMATION
REGARDING OLD YORK -- Recent
Developments" for a more detailed
discussion of these matters.
-11-
CERTAIN INFORMATION REGARDING MIDLANTIC
General
Midlantic is a regional bank holding company registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") under the
Bank Holding Company Act. In addition to MB, Midlantic directly or indirectly
through MB, owns additional nonbank subsidiaries. Nonbank subsidiaries owned
directly by Midlantic are engaged in the discount brokerage business and
credit-related reinsurance. MB's direct subsidiaries primarily hold properties
acquired through foreclosure. MB also directly owns a subsidiary engaged in the
leasing of motor vehicles. The corporate headquarters of Midlantic is located in
Edison, New Jersey.
As of December 31, 1994, Midlantic was the fourth largest bank holding
company headquartered in New Jersey based on total assets. At December 31, 1994,
Midlantic reported on a consolidated basis total assets of $13.3 billion, total
loans (net of unearned income) of $8.2 billion, total deposits of $10.8 billion
and shareholders' equity of $1.4 billion.
Midlantic Bank, National Association
MB, headquartered in Newark, New Jersey, is a commercial bank established
under the laws of the United States. As of December 31, 1994, MB operated 261
branches in 20 counties of New Jersey and 63 branches in Bucks, Chester,
Delaware, Montgomery and Philadelphia counties of Pennsylvania. In August 1994,
Continental Bank, which was headquartered in Norristown, Pennsylvania and which
had been a wholly-owned subsidiary of Midlantic, merged with and into MB, with
MB the surviving entity in the merger.
MB provides a full range of commercial and retail bank services, as well as
trust services, which are provided through several offices located within MB's
market area. At December 31, 1994, MB constituted in excess of 95 percent of
Midlantic's consolidated total assets.
Additional information about Midlantic and MB is included in documents
incorporated by reference in this Proxy Statement. See "INFORMATION DELIVERED
AND INCORPORATED BY REFERENCE."
CERTAIN INFORMATION REGARDING OLD YORK
General
Old York is a bank holding company registered with the Federal Reserve
Board under the Bank Holding Company Act and subject to examination by the
Federal Reserve Board. Old York is headquartered in Willow Grove, Pennsylvania
and was incorporated under the laws of the Commonwealth of Pennsylvania for the
purposes of acting as a holding company for the Bank which is Old York's sole
operating subsidiary.
-12-
The Bank, which is a commercial bank incorporated under the laws of the
Commonwealth of Pennsylvania, provides a full range of commercial banking
services and trust and other fiduciary services. The Bank presently operates 14
banking offices located in the Pennsylvania counties of Montgomery, Bucks and
Philadelphia. The Bank owns, in whole or in part, additional nonbank
subsidiaries which primarily hold properties that were acquired in satisfaction
of debts previously contracted.
Recent Developments
(a) On March 2, 1995, the Bank entered into a termination agreement (the
"Termination Agreement") with Erwin K. Wenner pursuant to which Mr. Wenner's
employment as President and Chief Executive Officer of the Bank and Old York was
terminated effective that day. On March 2, 1995, the Bank also entered into an
employment agreement with James M. Mack to serve as President and Chief
Executive Officer of the Bank. Subsequent thereto, Mr. Mack was elected to serve
as President and Chief Executive Officer of Old York and became a director of
Old York in place of Mr. Wenner. See "THE MERGER -- Interests of Management in
the Merger" for a more detailed discussion of these agreements.
(b) In early 1995, Richard Goldberg, an Old York shareholder, filed an
alleged class action suit (the "Goldberg Litigation") against Old York and
various directors and officers of Old York alleging, among other things, that
the price to be received by Old York shareholders in the Merger is unfair and
that Old York shareholders will be damaged if the Merger is consummated, and
further seeking to enjoin the Merger. On April 25, 1995, the Goldberg Litigation
was dismissed without prejudice to the right of the plaintiff to appeal the
dismissal or to reinstitute the matter at a future date. The status of the
Goldberg Litigation immediately prior to the anticipated Closing may directly
impact whether certain conditions necessary for the Merger to occur will be
satisfied. See "THE MERGER -- Conditions to the Merger."
For a more detailed discussion of the Goldberg Litigation and other legal
proceedings involving Old York and the Bank, reference is made to Old York's
Annual Report to Shareholders for the year ended December 31, 1994, which is
being delivered with this Proxy Statement and is incorporated herein by
reference.
-13-
MARKET PRICE DATA
Midlantic Common Stock is traded on The Nasdaq National Market(R) under the
symbol "MIDL". Old York Common Stock is traded on The Nasdaq SmallCap Market(SM)
under the symbol "BOYR". The following table presents information concerning the
market price of Midlantic Common Stock and Old York Common Stock, for the
periods indicated, and the cash dividends declared per share of Midlantic
Common Stock. Old York has not declared any cash dividends since 1990.
Midlantic Old York
Common Stock Common Stock
--------------------------- --------------
Price Dividends Bid/Price
High Low Declared High Low
------- ------- --------- ------ ------
1993
1st Quarter ................ $ 22.38 $ 18.13 $ -- $ 6.00 $ 3.00
2nd Quarter ................ 25.13 17.50 -- 6.50 4.00
3rd Quarter ................ 27.75 21.13 -- 4.50 3.75
4th Quarter ................ 28.63 22.25 -- 4.50 3.75
1994
1st Quarter ................ $ 30.88 $ 24.25 $ -- $ 4.88 $ 4.63
2nd Quarter ................ 31.88 27.50 .10 5.50 4.88
3rd Quarter ................ 30.63 27.63 .13 7.50 7.00
4th Quarter ................ 28.63 24.00 .17 9.13 8.63
1995
1st Quarter ................ $ 34.88 $ 26.25 $.22 $ 9.50 $ 8.25
2nd Quarter (through
April 27, 1995) .......... 38.13 33.88 .32
------- ------- ------- ------ ------
The following table presents the closing sale price reported by Nasdaq per
share of Midlantic Common Stock and the last sale price reported by Nasdaq per
share of Old York Common Stock on December 29, 1994, the last full trading day
prior to the public announcement that Midlantic and Old York had entered into
the Agreement and April ____, 1995, a date shortly prior to the mailing of this
Proxy Statement. The table also presents the equivalent value of Midlantic
Common Stock per Old York share which has been calculated by multiplying the
market price of Midlantic Common Stock on the dates indicated by the Exchange
Ratio of 0.3721. Old York shareholders are urged to obtain current market
quotations for Midlantic Common Stock. Because the Exchange Ratio is fixed
(subject to adjustment), Old York shareholders are not assured of receiving any
specific market value of Midlantic Common Stock. See "THE MERGER -- Conditions
to the Merger" and "-- Effective Time; Amendments; Termination; Price
Adjustment." The price of Midlantic Common Stock at the Effective Time may be
higher or lower than the market price at either the time of entering into the
Agreement, the time of mailing this Proxy Statement or at the time of the
Meeting.
Pro Forma
Equivalent Per
Midlantic Old York Share of Old
Common Common York Common
Stock Stock Stock
--------- -------- --------------
December 29, 1994 ............................... $26.75 $7.25 $9.95
April 27, 1995 .................................. $37.13 $ $
------ ----- -----
-14-
SELECTED FINANCIAL INFORMATION (Unaudited)
The following tables present certain selected consolidated financial
information of Midlantic and Old York. During 1990, 1991 and 1992, Midlantic
sold several bank and nonbank subsidiaries as well as certain assets which, in
the aggregate, reduced total assets by nearly $6 billion. The tables should be
reviewed in conjunction with Midlantic's Annual Report on Form 10-K and Old
York's Annual Report on Form 10-KSB for the year ended December 31, 1994, which
are incorporated herein by reference (See "Information Delivered and
Incorporated by Reference").
SELECTED FINANCIAL INFORMATION OF MIDLANTIC CORPORATION
Years Ended December 31,
------------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(Dollar amounts in thousands, except share and per share data)
Selected Statement of Income Data:
Total interest income .................................. $ 863,484 $ 825,547 $1,062,207 $ 1,742,380 $ 2,208,119
Total interest expense ................................. 278,947 310,857 542,012 1,104,779 1,370,822
----------- ----------- ----------- ----------- -----------
Net interest income .................................... 584,537 514,690 520,195 637,601 837,297
Provision for loan losses .............................. 21,625 81,343 140,580 643,940 701,489
----------- ----------- ----------- ----------- -----------
Net interest income (loss) after provision for loan
losses ............................................... 562,912 433,347 379,615 (6,339) 135,808
Total noninterest income ............................... 214,210 186,453 290,365 244,361 284,591
Total noninterest expenses ............................. 473,117 599,447 660,108 824,801 716,238
Income (loss) before income taxes and
cumulative effect of accounting changes .............. 304,005 20,353 9,872 (586,779) (295,839)
Income tax expense (benefit) ........................... 24,900 (111,043) 2,844 (43,476) (100,834)
----------- ----------- ----------- ----------- -----------
Income (loss) before cumulative effect of
accounting changes ................................... 279,105 131,396 7,028 (543,303) (195,005)
Cumulative effect of accounting changes ................ (7,528) 38,962 -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss) ...................................... $ 271,577 $ 170,358 $ 7,028 $ (543,303) $ (195,005)
=========== =========== ========== =========== ===========
Selected Statement of Condition Data:
Total assets ........................................... $13,293,538 $13,909,178 $14,397,138 $18,132,081 $25,530,149
Investment securities .................................. 2,756,543 2,455,410 2,114,812 2,655,712 2,738,093
Loans* ................................................. 8,237,959 8,409,697 9,050,477 12,586,744 16,894,529
Allowance for loan losses .............................. 349,520 400,311 670,545 847,998 742,172
Other interest-earning assets .......................... 1,113,659 1,778,821 1,995,681 1,108,896 1,237,452
Deposits ............................................... 10,807,334 11,587,801 12,560,029 16,089,823 20,151,931
Short-term borrowings .................................. 584,489 674,497 370,718 588,132 1,307,698
Obligations under capital leases ....................... 8,473 8,861 9,386 9,627 9,814
Long-term debt ......................................... 373,000 386,752 437,112 463,989 448,178
Shareholders' equity ................................... 1,374,186 1,122,564 843,462 727,299 1,272,775
Weighted average common shares (primary) ............... 52,978,041 50,943,324 41,569,086 38,094,934 38,097,294
Weighted average common shares
(fully diluted) ....................................... 54,521,851 52,568,539 41,953,805 38,094,934 38,097,294
Per Common Share Data:
Income (loss)--primary:
Before cumulative effect of
accounting changes ................................... $ 5.18 $ 2.51 $ .08 $(14.36) $ (5.22)
Cumulative effect of accounting changes ................ (.14) .76 -- -- --
Net income ............................................. 5.04 3.27 .08 (14.36) (5.22)
Income (loss)--fully diluted:
Before cumulative effect of
accounting changes ................................... 5.11 2.51 .08 (14.36) (5.22)
Cumulative effect of accounting changes ................ (.14) .74 -- -- --
Net income ............................................. 4.97 3.25 .08 (14.36) (5.22)
Book value ............................................. 25.19 20.56 17.19 17.78 32.10
Dividends .............................................. .40 -- -- -- 1.19
Financial Ratios:
Return on average assets ............................... 2.02% 1.24% .04% (2.49)% (.82)%
Return on average shareholders' equity ................. 21.95 17.50 .92 (52.58) (13.44)
Net interest margin .................................... 4.79 4.12 3.50 3.20 3.84
Liquidity and Capital Ratios:
Average loans to average deposits* ..................... 74.68% 73.06% 77.79% 82.20% 91.00%
Tier 1 risk based ...................................... 13.07 9.28 6.83 4.29 5.93
Total risk based ....................................... 17.22 13.29 10.76 7.69 8.86
Leverage ............................................... 9.43 6.81 5.19 3.43 4.81
Asset Quality Ratios:
Nonaccrual loans to total loans* ....................... 2.00% 3.15% 8.95% 9.96% 6.70%
Nonaccrual assets to total assets ...................... 1.86 2.86 8.76 9.99 6.30
Allowance for loan losses to total loans* .............. 4.24 4.76 7.41 6.74 4.39
Allowance for loan losses to nonaccrual loans .......... 211.83 150.89 82.82 67.68 65.55
Net charge-offs to average loans* ...................... .78 1.96 2.49 3.07 1.92
- -----------------
* Loans are stated net of unearned income.
-15-
SELECTED FINANCIAL INFORMATION OF OLD YORK ROAD BANCORP, INC.
Years Ended December 31,
-----------------------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(Dollar amounts in thousands, except share and per share data)
Selected Statement of Income Data:
Total interest income ............... $ 15,485 $ 15,089 $ 18,285 $ 22,150 $ 24,915
Total interest expense .............. 5,562 5,245 8,026 12,495 14,142
----------- ----------- ----------- ----------- -----------
Net interest income ................. 9,923 9,844 10,259 9,655 10,773
Provision for loan losses ........... 2,474 1,953 4,222 5,273 2,127
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses .......... 7,449 7,891 6,037 4,382 8,646
Total noninterest income ............ 1,766 2,356 2,023 1,946 1,309
Total noninterest expenses .......... 12,714 10,623 11,609 12,284 10,132
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes ... (3,499) (376) (3,549) (5,956) (177)
Income tax expense (benefit) ........ -- 28 724 (991) (179)
----------- ----------- ----------- ----------- -----------
Net income (loss) ................... $ (3,499) $ (404) $ (4,273) $ (4,965) $ 2
=========== =========== =========== =========== ===========
Selected Statement of Condition Data:
Total assets ........................ $ 231,185 $ 223,603 $ 222,697 $ 260,813 $ 269,165
Investment securities ............... 57,948 49,073 33,450 27,258 32,763
Loans* .............................. 148,274 140,112 153,900 200,226 206,688
Allowance for loan losses ........... 5,026 5,502 4,044 5,271 3,963
Other interest-earning assets ....... 4,400 13,200 6,500 3,925 4,650
Deposits ............................ 216,673 206,076 210,397 243,015 245,818
Shareholders' equity ................ 12,537 16,305 10,541 14,722 19,487
Weighted average common shares
(primary and fully diluted) ........ 2,825,312 1,428,525 1,301,545 1,301,545 1,301,861
Per Common Share Data:
Net income (loss)--primary and
fully diluted ..................... $ (1.24) $ (0.28) $ (3.28) $ (3.81) $ --
Book value .......................... 4.44 5.77 8.10 11.31 14.97
Dividends ........................... -- -- -- -- .50
Financial Ratios:
Return on average assets ............ (1.52)% (0.19)% (1.75)% (1.87)% -- %
Return on average shareholders'
equity ............................. (21.93) (3.30) (30.42) (26.29) --
Net interest margin ................. 4.90 5.38 4.84 4.26 4.78
Liquidity and Capital Ratios:
Average loans to average deposits*... 67.58% 71.95% 81.30% 83.55% 84.36%
Tier I risk based ................... 7.90 10.32 6.30 6.30 8.07
Total risk based .................... 9.17 11.60 7.57 7.83 9.58
Leverage ............................ 5.50 7.51 4.70 5.71 7.28
Asset Quality Ratios:
Nonaccrual loans to total loans* .... 4.63% 3.27% 3.39% 5.06% 4.34%
Nonaccrual assets to total assets ... 6.36 7.14 7.78 8.61 6.57
Allowance for loan losses
to total loans* .................... 3.39 3.93 2.63 2.63 1.92
Allowance for loan losses
to nonaccrual loans ................ 73.13 120.00 77.55 52.06 44.21
Net charge-offs to average loans* ... 1.91 .34 2.95 1.95 .83
- --------------------------
*Loans are stated net of unearned income
-16-
INTRODUCTORY STATEMENT
All information contained in or incorporated by reference into this Proxy
Statement with respect to Old York and the Bank was supplied by Old York for
inclusion herein. All information contained herein or incorporated by reference
herein with respect to Midlantic and MB was supplied by Midlantic. The first
date on which this Proxy Statement, the accompanying Notice of Special Meeting
and the enclosed form of proxy are being sent to the shareholders of Old York is
on or about [__________, 1995].
This Proxy Statement does not cover any resales of shares of Midlantic
Common Stock to be received by shareholders of Old York upon consummation of the
transactions described herein. Affiliates of Old York may be subject to
restrictions on their ability to resell the Midlantic Common Stock received by
them in the Merger. See "THE PROPOSED MERGER -- Resale Considerations with
Respect to the Midlantic Common Stock."
Purpose of Meeting
At the Meeting, the Old York shareholders will (i) consider and vote upon a
proposal to approve the Agreement; and (ii) act on such other matters as may be
properly brought before the Meeting. A copy of the Agreement is attached as
Appendix A to this Proxy Statement and is incorporated herein by reference. The
Agreement provides for the right to receive either $10.00 in cash or 0.3721 of a
share of Midlantic Common Stock in exchange for each share of Old York Common
Stock outstanding at the time the Merger becomes effective, subject to the
limitations and election and allocation provisions set forth in the Agreement,
and subject to adjustment in certain circumstances. See "THE PROPOSED MERGER.
THE BOARD OF DIRECTORS OF OLD YORK RECOMMENDS THAT THE SHAREHOLDERS OF OLD YORK
VOTE IN FAVOR OF THE MERGER.
Vote Required; Shares Entitled to Vote
Only holders of record of Old York Common Stock at the close of business on
[______________], 1995 (the "Record Date") are entitled to notice of and to vote
at the Meeting. The holders of a majority of the outstanding shares of Old York
Common Stock entitled to vote will constitute a quorum at the Meeting. The
number of shares of Old York Common Stock issued, outstanding and entitled to
vote at the close of business on the Record Date was [ ]. The Agreement must be
approved by the affirmative vote at the Meeting, either in person or by proxy,
of the holders of at least a majority of the votes cast at the meeting.
Holders of Old York Common Stock of record on the Record Date are entitled
to one vote per share on any matter that may properly come before the Meeting.
Solicitation, Voting and Revocation of Proxies
The enclosed proxy is designed to permit each shareholder of record on the
Record Date to vote on all matters to come before the Meeting. This proxy is
solicited by the Board of Directors of Old York. Any proxy may be revoked at any
time before its exercise by giving written notice of revocation to the Secretary
of Old York, at the main office of Old York at York & Easton Roads, Willow
Grove, Pennsylvania 19090-3282. A subsequently dated and duly executed proxy, if
properly presented, will revoke a prior proxy. Shareholders entitled to vote who
have previously executed a proxy may attend the Meeting and vote in person,
provided they have filed a written notice of revocation of such proxy with the
Secretary of the Meeting prior to the voting of such proxy. Where a shareholder
specifies a choice in the form of proxy with respect to a matter being voted
upon, the shares represented by the proxy will be voted in accordance with such
specification. If no such
-17-
specification is made, the shares represented by proxies will be voted for the
Agreement and in the discretion of the proxyholder as to any matters which may
properly come before the Meeting.
The Board of Directors of Old York knows of no matters, other than the
proposed Merger described in this Proxy Statement, that will be presented for
consideration at the Meeting. However, if other matters properly come before the
Meeting, it is intended that the persons designated as proxies will vote upon
such additional matter(s) in accordance with their best judgment.
The cost of soliciting proxies for the Meeting will be borne by Old York.
In addition to the use of the mails, proxies may be solicited personally, by
telephone or telegram, and by directors, officers and employees of Old York
acting without additional compensation. Arrangements may also be made with
brokers, dealers, nominees and other custodians for the forwarding of
solicitation material to the beneficial owners of stock held of record by such
persons, and such persons may be reimbursed by Old York for reasonable
out-of-pocket expenses.
THE PROPOSED MERGER
General Description
DESCRIPTIONS OF THE MERGER AND THE AGREEMENT (WHICH IS ATTACHED AS APPENDIX
A TO THIS PROXY STATEMENT) ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE
AGREEMENT WHICH IS HEREBY INCORPORATED IN THIS PROXY STATEMENT BY REFERENCE.
SHAREHOLDERS ARE URGED TO CAREFULLY REVIEW THE AGREEMENT.
The Agreement provides that, at the Effective Time, Old York will be merged
with and into Midlantic and Midlantic will be the surviving corporation (the
"Surviving Corporation") and all the property, rights, powers and franchises of
each of Old York and Midlantic will vest in the Surviving Corporation.
Immediately following the Effective Time, the Bank will be merged into MB (the
"Bank Merger") and MB will be the surviving bank (the "Surviving Bank"). The
separate identity and existence of the Bank will cease upon consummation of the
Merger and all property, rights, powers and franchises of each of the Bank and
MB will vest in the Surviving Bank and the Surviving Bank will continue to
operate as a wholly-owned subsidiary of Midlantic. At the Effective Time, each
share of Old York Common Stock outstanding immediately prior to the Effective
Time (except for shares, if any, owned by shareholders of Old York who duly
exercise dissenting rights pursuant to Section 1571 of the Pennsylvania Business
Corporation Law ("PaBCL")) will be converted into the right to receive either
$10.00 in cash or 0.3721 of a share (the "Exchange Ratio") of newly issued
Midlantic Common Stock, subject to the limitations and election and allocation
provisions set forth in the Agreement, and subject to certain adjustments, as
more fully described under "-- Consideration," "-- Election Procedures," "--
Allocation Procedures" and "-- Rights of Dissenting Old York Shareholders."
Consideration
At the Effective Time, each share of Old York Common Stock outstanding
(except for shares, if any, owned by shareholders of Old York who perfect their
rights of dissent from the Merger pursuant to, and who are entitled to the
rights and remedies provided in, Subchapter 15D of the PaBCL) will automatically
be converted into the right to receive (i) 0.3721 of a share of Midlantic Common
Stock, or (ii) if an Old York shareholder specifically elects to receive cash,
$10.00 in cash, subject to the limitations and election and allocation
provisions set forth in the Agreement, and subject to certain adjustments. The
Agreement provides that no more than 49% of Old York Common Stock outstanding
(subject to downward adjustment pursuant to the Agreement) may be exchanged for
cash. Accordingly, if the holders of more than 49% of Old York Common Stock
elect cash, then the shareholders so electing will receive a combination of cash
and Midlantic Common Stock in exchange for their shares of Old York Common Stock
as determined in accordance with the allocation
-18-
procedures set forth in the Agreement. See "--Election Procedure" and "--
Allocation Procedure." Also, see "--Rights of Dissenting Old York Shareholders."
The Agreement provides that if Old York does not meet certain minimum
capital (as adjusted in accordance with the Agreement) requirements, the price
which Old York shareholders are entitled to receive in exchange for their shares
of Old York Common Stock will be adjusted downward. In addition, in the event
Old York's capital (as adjusted in accordance with the terms of the Agreement)
falls below a specified level, Midlantic is not obligated to effect the Merger.
See "-- Conditions to the Merger," and "-- Effective Time; Amendments;
Termination; Price Adjustment."
In addition, the Exchange Ratio is subject to adjustment to take into
account any stock split, stock dividend, stock combination, reclassification or
similar transaction by Midlantic with respect to the Midlantic Common Stock. In
addition, Old York has the right to terminate the Agreement if the price of
Midlantic Common Stock over a specified period of time is less than
approximately $22.84 ($26.87 multiplied by 0.85) and less than an index ratio
based upon a selected peer group of other bank holding companies. See "MARKET
PRICE DATA" for information concerning the market price of Midlantic Common
Stock and Old York Common Stock. Midlantic could avoid such termination by
agreeing to increase the Exchange Ratio in accordance with the terms of the
Agreement, however, Midlantic is under no obligation to adjust the Exchange
Ratio in such circumstances. See "-- Effective Time; Amendments; Termination;
Price Adjustment" for a more complete description of the termination rights
available to Midlantic and Old York.
No holder of Old York Common Stock will be entitled to receive any
fractional shares of Midlantic Common Stock, but instead will be entitled to
receive, without interest, a cash payment in the amount equal to the value of
such fractional share interest, based on the Last Price (as hereinafter defined)
of Midlantic Common Stock. All shares of Midlantic Common Stock that individual
Old York shareholders are entitled to receive in exchange for each share of Old
York Common Stock held will be aggregated to constitute as many whole shares of
Midlantic Common Stock as possible before determining the amount of a cash
payment for fractional shares.
Election Procedure
An election form ("Election Form") will be mailed to each Old York
shareholder after the Meeting and prior to the Election Date (as hereinafter
defined). An Election Form will also be mailed to persons who become
shareholders of record of Old York after the Record Date and before the business
day immediately prior to the Election Date.
The Election Form will enable record holders of Old York Common Stock to
specify that they desire to have all of their shares of Old York Common Stock
converted into the right to receive cash in the Merger (a "Cash Election") or
the right to receive Midlantic Common Stock in the Merger (a "Stock Election").
Any shareholder who (i) validly submits an Election Form and does not make a
Cash Election in such Election Form, (ii) or who does make a Cash Election and
thereafter validly revokes such Cash Election, (iii) or who does not validly
submit an Election Form, shall be deemed to have made a Stock Election.
An election in an Election Form will be effective only if the Form is
properly completed and signed and accompanied by certificates for the shares of
Old York Common Stock to which such Election Form relates, received by MB, the
Exchange Agent, at 499 Thornall Street, Edison, New Jersey 08837 if sent by mail
or overnight delivery, and at 111 Wood Avenue South, Iselin, New Jersey 08830 if
delivered by hand, no later than 5:00 p.m., New Jersey local time, on the
Election Date. Old York share certificates should not be sent with the enclosed
proxy form and should not be forwarded until after receipt of the Election Form
and letter of transmittal.
-19-
The method of delivery of the Election Form and the certificates for the
shares of Old York Common Stock to which it relates is at the election and risk
of the shareholder submitting them. If delivery is by mail, insured registered
mail, return receipt requested, should be considered.
Any Election Form relating to shares of Old York Common Stock with respect
to which the record holder thereof has filed and not withdrawn as of the
Effective Time a written demand for payment of the fair value of Old York Common
Stock pursuant to Subchapter 15D of the PaBCL will be deemed to have been
automatically revoked as of the Election Date.
A combined Election Form containing a single election (a "Combined Election
Form") may be submitted by two or more record holders of Old York Common Stock
if either holder may be deemed constructively to own the holders' shares of Old
York Common Stock by reason of the ownership attribution rules of Section 318 of
the Internal Revenue Code of 1986, as amended. Any Combined Election Form and
any change or revocation in such Combined Election Form must be signed by or on
behalf of all record holders of the Old York Common Stock covered thereby. All
shares of Old York Common Stock covered by a single Combined Election Form held
by record holders of Old York Common Stock submitting such Combined Election
Form will be treated as being held by a single record holder.
Any record holder of Old York Common Stock who holds such stock as nominee
for two or more beneficial owners may submit separate Election Forms for the
shares owned by each beneficial owner, each Election Form to contain a different
specification of preference (or non-preference). For purposes of the allocation
procedures referred to below, each such separate Election Form will be deemed to
be submitted by a separate Old York stockholder.
Any record holder of Old York Common Stock may at any time prior to the
Election Date change such holder's election by written notice received by the
Exchange Agent at or prior to the Election Date accompanied by a properly
completed, revised Election Form. Any record holder of Old York Common Stock may
at any time prior to the Election Date revoke such record holder's election by
(i) written notice received by the Exchange Agent at or prior to the Election
Date or (ii) withdrawal prior to the Election Date of (x) such record holder's
certificates for Old York Common Stock or (y) of the guarantee of delivery of
such certificates, previously deposited with the Exchange Agent.
Allocation Procedure
The allocation among Old York shareholders (other than holders of shares of
Old York Common Stock who have filed and not withdrawn a written demand for
payment of the fair value of their Old York Common Stock pursuant to Subchapter
15D of the PaBCL) of rights to receive cash or Midlantic Common Stock in the
Merger will be effected as follows:
(I) IF THE NUMBER OF SHARES OF OLD YORK COMMON STOCK FOR WHICH CASH
ELECTIONS ARE RECEIVED ("CASH ELECTION SHARES") IS EQUAL TO OR LESS THAN
(A) 49% OF THE NUMBER OF SHARES OF OLD YORK COMMON STOCK OUTSTANDING
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME MINUS (B) THE SUM OF (i) THE SHARES
OF OLD YORK COMMON STOCK PURCHASED BY MIDLANTIC OR ANY SUBSIDIARY OF
MIDLANTIC ON OR AFTER THE DATE OF THE AGREEMENT, (ii) THE SHARES OF OLD
YORK COMMON STOCK REDEEMED BY OLD YORK, IF ANY, FROM THE DATE OF THE
AGREEMENT TO THE EFFECTIVE TIME, (iii) THE SHARES OF OLD YORK COMMON STOCK
WHICH WERE SUBJECT TO AN OPTION AS TO WHICH A CASH AMOUNT IS TO BE PAID TO
ERWIN K. WENNER IN ACCORDANCE WITH THE TERMS OF THE TERMINATION AGREEMENT
BETWEEN THE BANK AND MR. WENNER, AND (iv) THE SHARES OF OLD YORK COMMON
STOCK, IF ANY, AS TO WHICH THE HOLDERS OF SUCH SHARES HAVE FILED AND NOT
WITHDRAWN A WRITTEN DEMAND FOR PAYMENT OF THE FAIR VALUE OF THEIR OLD YORK
COMMON STOCK PURSUANT TO SUBCHAPTER 15D OF THE PABCL AT OR BEFORE THE
MEETING. (THE "MAXIMUM CASH CONVERSION NUMBER"), THEN:
(a) all shares of Old York Common Stock for which Stock Elections
have been made or deemed made ("Stock Election Shares") and all shares
of Old York Common Stock as to which an election is not in effect on
the Election Date ("Non-Electing Common Shares") will be converted
into Midlantic Common Stock (except as otherwise provided for
fractional shares); and
(b) all Cash Election Shares will be converted into the right to
receive cash.
-20-
(II) IF THE NUMBER OF CASH PREFERENCE SHARES IS GREATER THAN THE
MAXIMUM CASH CONVERSION NUMBER, THEN:
(a) all Stock Election Shares and Non-Electing Common Shares will
be converted into Midlantic Common Stock (except as otherwise provided
for fractional shares); and
(b) each Cash Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the product
of (x) $10.00 and (y) a fraction (the "Cash Fraction"), the numerator
of which shall be the Maximum Cash Conversion Number and the
denominator of which shall be the total number of Cash Election
Shares, and (ii) a number of shares of Midlantic Common Stock equal to
the product of (x) the Exchange Ratio and (y) a fraction equal to one
minus the Cash Fraction.
Midlantic will have the right to make rules, not inconsistent with the
terms of the Agreement, governing the manner and extent to which Election Forms
are to be taken into account, the issuance and delivery of certificates for
Midlantic Common Stock into which Old York Common Stock is converted in the
Merger and the payment for shares of Old York Common Stock converted into the
right to receive cash in the Merger. All such rules and determinations
thereunder shall be final and binding on all holders of shares of Old York
Common Stock.
Payment of Cash and Delivery of Shares
As soon as practicable after the Effective Time, the required allocations
will be completed and distributions of cash (by check of the Exchange Agent) and
delivery of certificates for Midlantic Common Stock will be effected; provided,
however, that no cash or new certificates will be delivered to or for the
account of any holder of Old York Common Stock until the Merger is consummated
and the holder has surrendered to the Exchange Agent (to the extent not
previously surrendered with an Election Form) the old certificates for such
holder's Old York Common Stock, accompanied by a duly executed letter of
transmittal in proper form. A reminder notice will be sent by the Exchange Agent
after the Effective Time of the Merger to all Old York shareholders of record
who have not submitted an Election Form.
Holders of outstanding certificates for Old York Common Stock (other than
those who have perfected their dissenters' rights or those receiving cash in
exchange for their shares), upon proper surrender of such certificates to
Midlantic, will receive, promptly after the Effective Time, a certificate
representing the full number of shares of Midlantic Common Stock into which the
shares of Old York Common Stock previously represented by the surrendered
certificates have been converted. At the time of issuance of a new stock
certificate, each shareholder so entitled will receive a check for the amount of
the fractional share interest, if any, to which such shareholder may be
entitled.
Each share of Midlantic Common Stock for which shares of Old York Common
Stock are exchanged will be deemed to have been issued at the Effective Time.
Accordingly, Old York shareholders who receive Midlantic Common Stock in the
Merger will be entitled to receive any dividend or other distribution which may
-21-
be payable to holders of record of Midlantic Common Stock as of dates on or
after the Effective Time. However, no dividend or other distribution will
actually be paid with respect to any shares of Midlantic Common Stock exchanged
for Old York Common Stock until the certificate or certificates formerly
representing shares of Old York Common Stock have been surrendered, at which
time any accrued dividends and other distributions on such shares of Midlantic
Common Stock will be paid without interest. See "-- Consideration."
Holders of Old York Common Stock should not send in their certificates
until they receive instructions from Midlantic.
Federal Income Tax Consequences
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL
INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO CERTAIN CLASSES OF TAXPAYERS,
INCLUDING INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS,
FOREIGN PERSONS AND PERSONS WHO ACQUIRED SHARES OF OLD YORK COMMON STOCK AS
COMPENSATION. OLD YORK SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS
AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
GENERAL. It is intended that the Merger will be treated as a tax-free
reorganization as defined in Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"), and that, accordingly, no gain or loss will be
recognized by Midlantic, Old York, MB or the Bank pursuant to the Merger.
Counsel to Midlantic is required, as a condition of closing, to provide an
opinion to Midlantic and to Old York with respect to the matter covered by the
foregoing sentence and certain other tax matters discussed below. As of the date
of this Proxy Statement, counsel has indicated that, based upon the
circumstances as they presently exist, it expects to be able to render the
required opinion.
CONSEQUENCES TO SHAREHOLDERS RECEIVING STOCK ONLY. No gain or loss will be
recognized by the shareholders of Old York upon the exchange for their shares of
Old York Common Stock solely for shares of Midlantic Common Stock pursuant to
the Merger. The basis of Midlantic Common Stock received by an Old York
shareholder who receives solely Midlantic Common Stock will be the same
immediately after the exchange as the basis of such shareholder's Old York
Common Stock exchanged therefor. See below as to the receipt of cash in lieu
of fractional shares.
CONSEQUENCES TO SHAREHOLDERS RECEIVING CASH ONLY. Shareholders (including
shareholders who perfect dissenters' rights) who receive only cash for their
shares of Old York Common Stock will recognize gain or loss for federal income
tax purposes measured by the difference, if any, between their basis in the
stock and the amount received by them for their stock. The gain or loss will be
characterized for federal income tax purposes as a capital gain or loss or as
ordinary income. The gain or loss will be characterized as a capital gain if (a)
the holder's shares of Old York Common Stock are held as capital assets and (b)
the holder receives cash with respect to all shares of Old York Common Stock
which the holder owns actually and by application of the attribution rules of
Section 318 of the Code discussed below. If a shareholder is not considered as
having disposed of all of his stock by reason of such attribution rules, the
characterization of the gain as ordinary income or as capital gain will depend
upon whether the receipt of the cash has the "effect of the distribution of a
dividend." The application of this standard is discussed below. See
"--Consequences to Shareholders Receiving Cash and Midlantic Common Stock."
Section 318 of the Code provides, in part, that a shareholder will be
considered to be the owner of shares which are owned by corporations,
partnerships, trusts and estates in which the shareholder has a beneficial
ownership interest, shares which such shareholder has an option to acquire, and
shares owned by certain members of such shareholders family (not including
brothers and sisters of the shareholder). Under certain
-22-
circumstances, the attribution rules with respect to shares attributed from a
family member may be waived by the shareholder.
CONSEQUENCES TO SHAREHOLDERS RECEIVING CASH AND MIDLANTIC COMMON STOCK.
Shareholders who receive or are considered to have received not only cash in
exchange for their Old York Common Stock but also Midlantic Common Stock
(through application of the allocation procedures described above, the
attribution rules of Section 318 of the Code or otherwise) must recognize any
gain realized (measured by the excess of (a) the sum of the cash received and
the fair market value of the Midlantic Common Stock received over (b) the
shareholder's basis), but not in excess of the cash received. No loss may be
recognized. The characterization of the gain as either a dividend or as capital
gain will be determined on a shareholder-by-shareholder basis. In general, if
the distribution of the cash is considered as having the "effect of the
distribution of a dividend," then any gain recognized will be taxed as a
dividend. If the cash is considered as not having the "effect of the
distribution of a dividend," then any gain recognized will be taxed as a capital
gain if the Old York Common Stock was held as a capital asset.
The Internal Revenue Service (the "Service") applies two tests to determine
whether a distribution has the "effect of the distribution of a dividend."
Capital gains treatment will apply if the exchange is either "not essentially
equivalent to a dividend" or "substantially disproportionate" with respect to
the shareholder's interest.
Whether a distribution is "not essentially equivalent to a dividend"
depends on the facts and circumstances concerning the individual shareholder. It
is difficult to rely upon this test because it is not subject to objective
measure and because the Service takes the view that only in very special
circumstances (generally, circumstances unrelated to the Merger) will this test
be considered to be met. The "substantially disproportionate" test, according to
the Service, apparently would be satisfied if an Old York shareholder exchanged
a portion of his Old York Common Stock for cash under circumstances in which
there has been a significant reduction in such shareholder's percentage interest
in Old York. The percentage reduction which is required by the Service involves
an analysis in which there has been a hypothetical redemption by Old York. The
analysis is complex but, in general, the Service would assume that the Old York
shareholder received solely Midlantic Common Stock and then immediately redeemed
a portion of the Midlantic Common Stock for cash. The shareholder's percentage
of all of the Midlantic Common Stock after this hypothetical redemption would be
compared to the percentage owned by the shareholder immediately before the
hypothetical redemption. If the first percentage is less than 80% of the second
percentage, no dividend will be present. If the first percentage is equal to or
greater than 80% of the second percentage, the cash, according to the Service,
will be taxed as a dividend. All hypothetical measurements will include shares
constructively owned by application of the attribution rules. Any shareholder
who seeks to rely on this test should exercise extreme caution in light of the
complex analysis involved.
Where an Old York shareholder receives both Midlantic Common Stock and
cash, the basis of the Old York Common Stock received will equal (i) the basis
of the Old York Common Stock exchanged therefor, (ii) decreased by the amount of
cash received and (iii) increased by the amount of gain recognized, if any, on
the exchange.
CONSEQUENCES OF RECEIPT OF CASH IN LIEU OF FRACTIONAL SHARES. In general,
cash paid in lieu of fractional share interests in corporate reorganizations is
treated as having been received in part or full payment in exchange for the
fractional share interest (and therefore subject to capital gains treatment if
the related shares are held as capital assets) if the cash distribution is
undertaken solely for purposes of saving the corporation the expense and
inconvenience of issuing and transferring fractional shares and is not
separately bargained for consideration.
HOLDING PERIOD. The holding period of Midlantic Common Stock received by an
Old York shareholder will include the holding period for the Old York Common
Stock exchanged therefor.
-23-
Rights of Dissenting Old York Shareholders
Pursuant to the provisions of Section 1571 of the PaBCL, dissenting
shareholders of Old York who follow the procedures specified in Subchapter 15D
of the PaBCL ("Subchapter 15D") will be entitled to the rights and remedies of
dissenting shareholders as provided in Subchapter 15D. Pursuant to Subchapter
15D, shareholders of Old York have the right to dissent from the Merger and to
obtain payment of the "fair value" (determined as provided herein) of their
shares of Old York Common Stock if the Merger is consummated.
SHAREHOLDERS OF OLD YORK WHO CONTEMPLATE EXERCISING THEIR RIGHT TO DISSENT
ARE URGED TO READ CAREFULLY THE APPLICABLE PROVISIONS OF SUBCHAPTER 15D, WHICH
ARE ATTACHED AS APPENDIX D TO THIS PROXY STATEMENT. THE FOLLOWING IS A SUMMARY
OF THE STEPS TO BE TAKEN IF THE RIGHT TO DISSENT IS TO BE EXERCISED. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF APPENDIX D TO THIS
PROXY STATEMENT.
Each step must be taken in the indicated order and in strict compliance
with the applicable provisions of Subchapter 15D in order to perfect dissenter's
rights. Any deviations from such steps may result in the forfeiture of
dissenter's rights.
Prior to the Meeting, Old York shareholders who wish to dissent and obtain
payment of the fair value of their shares must (1) file with Old York a written
notice of intention to demand that they be paid the fair value for their shares
if the Merger is consummated (addressed to James M. Mack, President and Chief
Executive Officer, Old York Road Bancorp, Inc., York and Easton Roads, Willow
Grove, Pennsylvania 19090-3282), (2) effect no change in the beneficial
ownership of their shares from the date of such filing continuously through the
Effective Time and (3) refrain from voting their shares in approval of the
Merger. DISSENTERS WHO FAIL TO COMPLY WITH THE FOREGOING IN ANY RESPECT WILL NOT
ACQUIRE ANY RIGHT TO PAYMENT OF THE FAIR VALUE OF THEIR SHARES UNDER SUBCHAPTER
15D. NEITHER A PROXY NOR A VOTE AGAINST THE MERGER WILL CONSTITUTE THE WRITTEN
NOTICE REQUIRED BY SUBCHAPTER 15D.
If the Merger is approved by the affirmative vote at the Meeting, either in
person or by proxy, of the holders of at least a majority of the votes cast at
the meeting, Old York will mail a further notice to all dissenters who gave due
notice of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the Merger. Such notice will (1) state where
and when a demand for payment must be sent and certificates for certificated
shares must be deposited in order to obtain payment, (2) inform holders of
uncertificated shares to what extent transfer of shares will be restricted from
the time that demand for payment is received, (3) supply a form for demanding
payment that includes a request for certification of the date on which the
shareholder, or the person on whose behalf the shareholder dissents, acquired
beneficial ownership of the shares and (4) be accompanied by a copy of
Subchapter 15D.
The time set for receipt of the demand for payment and the deposit of
certificated shares will not be less than 30 days from the mailing of the notice
by Old York. SHAREHOLDERS WHO FAIL TO TIMELY DEMAND PAYMENT, OR FAIL (IN THE
CASE OF CERTIFICATED SHARES) TO TIMELY DEPOSIT CERTIFICATES AS REQUIRED BY THE
NOTICE SENT BY OLD YORK WILL NOT HAVE ANY RIGHT TO RECEIVE PAYMENT OF THE FAIR
VALUE OF THEIR SHARES OF OLD YORK COMMON STOCK UNDER SUBCHAPTER 15D.
Promptly after the consummation of the Merger, or upon timely receipt of
demand for payment if the Merger has already been consummated, Old York will
either (i) remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates the amount that Old York
estimates to be the fair value of the shares, or (ii) give written notice that
no remittance will be made under Section 1577 of the PaBCL. The remittance or
notice will be accompanied by: (1) the closing balance sheet and statement of
income of Old York for the fiscal year ending December 31, 1994 together with
the latest available interim financial statements, (2) a statement of Old York's
estimate of the fair value of the shares, and (3) a notice of the right of the
dissenter to demand payment or supplemental payment, as the case may be,
accompanied by a copy of Subchapter 15D. If dissenters believe that the amount
stated or remitted is less than the fair value of their shares, they may send to
Old York their own respective estimates of the fair value of the shares, which
will be deemed a demand for payment of the amount or the deficiency.
-24-
See Sections 1579 and 1580 of the PaBCL with respect to valuation
proceedings and the manner in which costs and expenses of valuation proceedings
are determined and assessed.
Background of and Reasons for the Merger
In early 1993, the Board of Directors of Old York considered the
prospects for the Bank and whether it would have been, at that time, better to
remain independent or seek a merger partner. At that time, the Board determined
to remain independent and to proceed with a rights offering for the issuance of
its common stock. Pursuant to the rights offering, 1,523,767 shares of common
stock were issued. The rights offering expired on November 18, 1993.
Thereafter, the Board did not again consider a merger until some time in
June, 1994. At that time, one of the directors wrote to the entire Board to
encourage the Board to reconsider the future direction of Old York, and
accordingly, the Board, as a group, discussed the future of Old York. Shortly
thereafter, an unsolicited inquiry arrived with respect to a foreign investor
who was interested in acquiring a financial institution in the United States.
Although a confidentiality agreement was negotiated and signed, the foreign
institution did not pursue due diligence or make any other offer and that matter
was dropped. Although other similar inquiries were received, none of them
materialized into offers.
In August, 1994, the Bank learned that Royal Bank had purchased
approximately 8.2% of the common stock of Old York and, although it indicated
that it was purchasing the shares for investment at that time, it did not
preclude the possibility that it would seek to acquire more shares or Old York
in its entirety. The Board of Directors resolved to pursue a determination of
how to maximize shareholder value on a methodical basis. Accordingly,
considering the then recent unprofitability of the Bank, the long-range
prospects for the Bank, and the desire to realize the value of the business
franchise for the area in which the Bank is located, the Board determined to
interview investment bankers for the purpose of seeking advice on how to
proceed. In early September, after interviewing three investment bankers, a
Mergers and Acquisitions Committee of the Board (including Messrs. Hankin,
Fiorillo, Hunn, Nappen, Poley and Wenner) formed for the purpose, recommended
Sandler O'Neill to the Board of Directors. The Board then permitted Sandler
O'Neill to review materials relating to Old York, interviewed Sandler O'Neill,
received a presentation by Sandler O'Neill concerning the alternatives available
to Old York, and, in late September, determined to retain Sandler O'Neill.
Sandler O'Neill was requested to provide general guidance as to possible courses
of action which could be taken by Old York, including remaining independent or
merging with another financial institution.
Initially, after executing a retainer agreement in early October, Sandler
O'Neill met with the Executive Committee of the Board of Directors and
determined that in order to effectively consider all options, the Committee and
the Board would need to know possible ranges of values that could be obtained in
an acquisition transaction. Sandler O'Neill developed a list of financial
institutions to be approached to inquire as to the institution's interest in
acquiring Old York in a negotiated transaction. The Executive Committee
reviewed the identity of the financial institutions that would be initially
approached, which had been selected on the basis of the Company's market
area, financial ability to complete a transaction, and either a prior history of
making acquisitions or prior indication of possible interest in making an
acquisition. During the months of October and November, 1994, Sandler O'Neill
contacted various financial institutions to ascertain possible interest and
permitted certain of those financial institutions which had executed a
confidentiality agreement to conduct due diligence on the premises of the Bank
and to meet with representatives of the Company either by telephone or in
person. Each of the institutions was asked to submit an indication of interest
indicating a proposed price and a proposed transaction structure. Royal Bank,
although having negotiated a confidentiality agreement, did not sign a
confidentiality agreement and, accordingly, did not conduct any due diligence.
However, it did make an offer along with other offerors.
In late November, as a result of the request for indications of interest,
five institutions (including Midlantic) submitted indications of interest with
various prices and ranges of prices. Other than the proposal from Midlantic, the
proposed transactions were for all cash with a price range of $4.00 to $10.02
per share, each with various terms which could have an impact on the ultimate
price paid. Only the offer by
-25-
Midlantic held open the possibility of a tax-free exchange. Midlantic's
offer of $10.00 per share with the possibility of stock as well as cash, did not
appear to the Board to be subject to any significant conditions which would
cause the $10.00 per share to be significantly reduced. Conversely, the offers
from the other institutions were either at a price significantly less than
$10.00 per share, or subject to conditions which the Board thought might not be
met and, if not met, would have likely resulted in a purchase price
significantly less than $10.00 per share.
Accordingly, the Board determined to pursue the Midlantic offer as being
the best offer and instructed its Merger Negotiation Committee (consisting of
Messrs. Hankin, Fiorillo and Reibman) to enter into final negotiations with
Midlantic for a definitive agreement. Between December 5 and December 29, 1994,
representatives of Old York and Midlantic engaged in arms-length negotiations
regarding the terms and conditions of a definitive agreement, which ultimately
resulted in Midlantic's final offer of $10.00 per share, payable in either cash
or stock with certain adjustments and limitations.
On December 27, 1994, the Board convened a special meeting to consider the
proposed agreement and other details of the proposed transaction. The Board of
Directors reviewed the procedure that had been used to reach the proposed
agreements, the valuation of Old York as an independent entity, and the value
of the indications of interest received by Old York. The Board of Directors
considered the value of the proposal based on current market prices, the
exchange ratio, the anticipated relative initial earnings impact that the
acquiror might experience with an acquisition of Old York, and the effect the
transaction would have on the prospective acquiror's stock price. The Board also
reviewed extensive information presented by Sandler O'Neill on the prospective
acquiror, including its past financial performance, historical common stock
dividends, stock price performance, stock liquidity and other financial
characteristics. The Board took particular note of the fact that Midlantic had
submitted the highest diligence adjusted offer and that it was proposing a
flexible cash/stock mix at the discretion of the shareholders within limits
provided. Finally, Sandler O'Neill presented an extensive analysis of each
proposal and indicated that Midlantic's offer was, in Sandler O'Neill's
judgment, superior to the other proposals from a financial point of view. The
Board also noted that the Bank would effectively become part of a larger entity
that would compete more effectively in the communities served by the Bank by
offering a number of new or expanded services to residents of such communities.
At the meeting, Sandler O'Neill rendered its oral opinion, subsequently
confirmed in writing, that, as of that date, the Merger consideration proposed
to be received by the shareholders pursuant to the Agreement was fair, from a
financial point of view. The oral opinion of Sandler O'Neill was based on
similar facts and analysis considered in rendering its written Fairness Opinion
discussed below.
The Board of Directors concluded that the $10.00 cash/stock offer made by
Midlantic was superior to all other proposals based on the following factors:
(1) the offer as adjusted by contingency charges was higher than all other final
proposals; (2) the offer was a choice of cash or stock subject to certain
limitations; (3) the likelihood of closing the proposed Merger was substantial
because Midlantic has a history of completing other acquisitions; and (4) the
downward price protection provided by the adjustment formula.
THE BOARD OF DIRECTORS OF OLD YORK HAS UNANIMOUSLY APPROVED THE AGREEMENT,
BELIEVES IT TO BE FAIR TO THE SHAREHOLDERS OF OLD YORK AND IN THEIR BEST
INTERESTS, AND RECOMMENDS THAT OLD YORK SHAREHOLDERS VOTE "FOR" THE AGREEMENT.
All the Directors of Old York have indicated their intent to vote all of the
Common Shares held by them for the Merger.
-26-
On December 21, 1994, Midlantic's Board of Directors approved the Merger.
After approval of the Merger by Old York's Board of Directors, Midlantic
announced its participation in the Merger with Old York and, pursuant to a stock
repurchase plan approved by its Board of Directors, announced that it expected
to repurchase from time to time in the open market outstanding shares of
Midlantic Common Stock in a number equal to the approximate number of shares of
Midlantic Common Stock estimated to be issued in the Merger. The stock
repurchase plan was thereafter amended. The stock repurchase plan now permits
the repurchase of up to 5,000,000 shares of Midlantic Common Stock in connection
with acquisitions, for Midlantic's dividend reinvestment plan, for Midlantic's
stock-based benefit plans and for use in satisfying the requirements of certain
corporate securities issued by Midlantic. Accordingly, Midlantic intends to
purchase from time to time shares of Midlantic Common Stock in the open market
in an amount in excess of the number of shares estimated to be issuable to Old
York shareholders in the Merger, subject to restrictions applicable to such
purchases under the Exchange Act and regulations thereunder.
Interests of Management in the Merger
As of January 31, 1995, the directors and executive officers of Old York
beneficially owned in the aggregate 357,326 shares of Old York Common Stock, or
12.65% of the shares of Old York Common Stock outstanding.
The Agreement and Plan of Merger provides for Erwin K. Wenner, former
President and Chief Executive Officer of the Bank and Old York, to receive
certain options to purchase Old York Common Stock and, at the Effective Time,
for such options to be cashed out for an amount equal to the excess, if any, of
$10.00 over the applicable exercise price of the options. However, in lieu
thereof, and with Midlantic's consent, Mr. Wenner entered into the Termination
Agreement with the Bank pursuant to which Mr. Wenner's employment with Old York
and the Bank has been terminated. The Termination Agreement terminated and
cancelled such options, obligates the Bank to pay Mr. Wenner approximately
$29,000 in severance pay and provides that, at the Effective Time, Mr. Wenner
will be paid a lump sum of $75,000, subject to adjustment under certain
circumstances, in lieu of all of the aforementioned Old York options and in
satisfaction of all other obligations that may be owed to Mr. Wenner by Old York
or the Bank. In the event that the Merger is not consummated, Mr. Wenner will
not receive any payment for the cancellation of the options. Upon Mr. Wenner's
termination, pursuant to an employment agreement, effective March 2, 1995, the
Bank hired James M. Mack as its President and Chief Executive Officer at a
salary of $125,000. Mr. Mack is also to serve as President and Chief Executive
Officer of Old York. At the Effective Time, Mr. Mack's employment with the Bank
will automatically be terminated and he will receive a cash payment of $100,000,
subject to adjustment under certain circumstances.
In addition to the foregoing, the Agreement requires Midlantic to provide
the directors and officers of Old York indemnification against all claims,
liabilities, damages and losses arising out of any claim, action, suit or
proceeding pending at any time within a period of six years from the Effective
Time to the full extent permitted by law (but not beyond the indemnification
that would have been available to such directors and officers from Old York as
of the date of the Agreement).
Fairness Opinion
On October 7, 1994, Old York's Board of Directors retained the services of
Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") as Old York's financial
advisor in connection with a possible acquisition transaction and requested that
Sandler O'Neill render its opinion with respect to the fairness, from a
financial point of view, of the consideration to be received by the shareholders
of Old York in any such transaction.
Sandler O'Neill is a nationally recognized investment banking firm whose
principal business specialty is banks and other financial institutions, and in
that connection, is regularly engaged in the valuation of such businesses and
their securities in connection with mergers and acquisitions and other corporate
transactions. As
-27-
the financial advisor to Old York, Sandler O'Neill was involved in every stage
of the discussions with various financial institutions that culminated in the
offer by Midlantic, as well as the negotiations with Midlantic that resulted in
the Agreement. There were no limitations imposed by Old York on Sandler O'Neill
in connection with its rendering of the Fairness Opinion.
Sandler O'Neill has delivered a written opinion, dated as of
______________, 1995, to the Old York Board of Directors that the consideration
to be received by the holders of Old York common stock pursuant to the Agreement
is fair, from a financial point of view, to such shareholders. The full text of
Sandler O'Neill's fairness opinion, which sets forth assumptions made and
matters considered, is attached as Appendix C to this Proxy Statement. Old
York's shareholders are urged to read such opinion in its entirety. Sandler
O'Neill's opinion is directed only to the financial terms of the Merger and does
not constitute a recommendation to any Old York shareholder as to how such
shareholder should vote at the Meeting. The summary information regarding
Sandler O'Neill's opinion and the procedures followed in rendering such opinion
set forth in this Proxy Statement is qualified in its entirety by reference to
the full text of such opinion.
In connection with this opinion, Sandler O'Neill reviewed among other
things: (i) the Agreement, (ii) the Stock Option Agreement dated as of December
29, 1994 by and between Old York and Midlantic, (iii) the audited consolidated
financial statements and management's discussion and analysis of the financial
condition and results of operations of each of Old York and Midlantic for the
three years ended December 31, 1994; (iv) the unaudited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations for the interim period ending March 31, 1995 of each
of Old York and Midlantic; (v) financial analyses and forecasts of Old York
prepared by and/or reviewed with the management of Old York, (vi) the views of
senior management of each of Old York and Midlantic of their respective past and
current business operations, results thereof, financial condition and future
prospects, (vii) the reported price and trading activity for Old York Common
Stock and Midlantic Common Stock, including a comparison of certain financial
and stock market information for Old York and Midlantic with similar information
for certain other companies the securities of which are publicly traded; (viii)
the financial terms of recent business combinations in the banking industry,
(ix) the pro forma impact of the transaction on Midlantic; (x) the current
market environment generally and the banking environment in particular, and (xi)
such other information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered relevant.
In performing its review, Sandler O'Neill assumed and relied upon, without
independent verification, the accuracy and completeness of all of the financial
information, analyses and other information reviewed by and discussed with
Sandler O'Neill, and Sandler O'Neill did not make any independent evaluation or
appraisal of specific assets, the collateral securing assets or the liabilities
of Old York or Midlantic or any of their subsidiaries, or the collectibility of
any such assets (relying, where relevant, on the analyses and estimates of Old
York and Midlantic). With respect to the financial projections reviewed with
management, Sandler O'Neill assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
respective managements of the respective future financial performances of each
of Old York and Midlantic, and that such performances will be achieved. Sandler
O'Neill also assumed that there has been no material change in Old York's or
Midlantic's assets, financial condition, results of operations, business or
prospects since the date of the last financial statements made available to us.
Sandler O'Neill further assumed that Old York will remain as a going concern for
all periods relevant to the analysis, and that the conditions precedent in the
Agreement are not waived.
In connection with rendering its fairness opinion to the Old York Board of
Directors, Sandler O'Neill performed a variety of financial analyses. The
following is a summary of such analyses, but does not purport to be a complete
description of Sandler O'Neill's analysis. The preparation of a fairness opinion
is a complex process involving subjective judgments and is not necessarily
susceptible to partial analyses or summary description. Sandler O'Neill believes
that its analyses must be considered as a whole and that selecting portions of
such analyses and the factors considered therein, without considering all
factors and analyses, could create an incomplete view of the analyses and the
processes underlying Sandler O'Neill's opinion. In performing its analyses,
Sandler O'Neill made numerous assumptions with respect to industry performance,
business and economic conditions and various other matters, many of which cannot
be predicted and are beyond the control of Old York, Midlantic or Sandler
O'Neill. Any estimates contained in Sandler O'Neill's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which
companies or their securities may actually be sold. Because such estimates are
inherently subject to uncertainty, Sandler O'Neill assumes no responsibility for
their accuracy.
-28-
STOCK TRADING HISTORY. Sandler O'Neill examined the history of the trading
prices and volume of Old York Common Stock and the historical performance of Old
York Common Stock relative to the Standard & Poor's 500 Index, The NASDAQ
banking stocks index and the following composite group of twenty-one publicly
traded Maryland, New Jersey and Pennsylvania banking institutions (the "Peer
Institutions").
Since the secondary offering in November 1993, Old York Common Stock has
primarily traded in the $4.25 to $5.75 range. In late August, there was a
significant price appreciation and the stock began trading in the $5.50 to $7.50
range. In the year prior to the acquisition announcement, the largest volume
(28.3%) of trades took place in the $5.375 to $6.125 range, while 23.1% of the
trading volume was in the $6.875 to $7.625 range.
Relative to the comparative indices, Old York Common Stock traded at par
until August of 1994 where it began to consistently outperform all of the
indices.
COMPARABLE GROUP ANALYSIS. Sandler O'Neill also prepared a comparable group
analysis, which analyzed the historical performance of the bank over the last
five years, and compared such performance to two groups of institutions. The
first group was composed of regional commercial banks in Maryland, New Jersey,
and Pennsylvania with asset size similar to that of Old York. The second group
included the most highly valued, nationwide commercial banks as of the date of
the acquisition announcement within the same asset range. The analysis looked at
key operating, balance sheet, capitalization, credit quality, profitability and
valuation ratios. Of particular note was the capitalization of the bank which
was significantly below that of its peers and the highly valued group. It also
compared the asset quality ratios such as non-performing assets ("NPAs") to
total assets and nonperforming loans to total loans; both statistics showed that
Old York was well above the median for both groups. Old York did maintain strong
net interest margins throughout 1993 and 1994, margins that were above its
regional peers and even the highly valued group. Overall, Old York's efficiency
ratio was extremely high and profitability low. Old York, however, had high
expense ratios for the last four years relative to the peer groups.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed 120
transactions (of which 49 were consummated and 71 were pending) announced
January 1, 1994 to December 24, 1994 involving public commercial banks as
targets with transactions value over $15 million ("All Transactions"), eleven
transactions (of which seven were consummated and four were pending) announced
from January 1, 1994 to December 24, 1994, involving public commercial banks in
Maryland, New Jersey and Pennsylvania ("Regional Transactions"), and twelve
transactions (of which seven were consummated and five were pending) announced
from January 1, 1994 to December 24, 1994, involving public commercial banks
with NPAs to total assets greater than 5.00% ("NPAs/Assets > 5.0%
Transactions"). The NPAs/Assets > 5% Transactions were reviewed because of the
fact that key features of this group of transactions, including a high level of
non-performing assets and a high level of expenses associated with
non-performing assets, were the predominant characteristics indicative of Old
York. Sandler O'Neill calculated the ratios of price to earnings (based on net
income), price to book value, price to tangible book value, price to deposits,
price to total assets, and deposit premium paid in each such transaction and
computed high, low, mean and median ratios for each such ratio and for the
respective groups of transactions. Based upon the median multiples for All
Transactions, Sandler O'Neill derived an imputed range of values per share of
Old York Common Stock of $9.01 to $15.51. Based upon the median multiples for
Regional Transactions, Sandler O'Neill derived an imputed range of value per
share of Old York Common Stock of $10.19 to $15.18. Based upon the median
multiples for NPAs/Assets > 5.00% Transactions, Sandler O'Neill derived an
imputed range of values per share of Old York Common Stock of $6.43 to $9.45.
Because the characteristics of this last group were most similar to those of Old
York, within the context of the analysis of Selected Merger Transactions,
Sandler O'Neill placed more weight on this analysis.
DISCOUNTED CASH FLOW ANALYSIS. Sandler O'Neill performed an analysis which
estimated the future cash flows of Old York through 1999 under various
circumstances, assuming Old York performed in accordance with the earnings
forecasts of its management and certain variations thereof (including variations
with respect to the growth rate of assets, net interest spread, non-interest
income, noninterest expenses and dividend payout ratio). To approximate the
terminal value of Old York Common Stock at the end of the five year period,
Sandler O'Neill applied price to earnings multiples ranging from 8.0x to 21.5x
and applied multiples of book value ranging from 80% to 215%. The terminal
values were then discounted to present values using different discount rates
(ranging from 9% to 14%) chosen to reflect different assumptions regarding the
required rates of return of
-29-
holders or prospective buyers of Old York Common Stock. This analysis indicated
a range of value per share of Old York Common Stock of $1.13 to $7.93. In
connection with this analysis, Sandler O'Neill extensively used sensitivity
tables to illustrate the effects that changes in the underlying assumptions
would have on the resulting present value.
Sandler O'Neill's retainer agreement provides that Old York will pay
Sandler O'Neill a transaction fee in connection with the Merger, a substantial
portion of which is contingent upon consummation of the Merger. Under the terms
of the agreement, Old York has agreed to pay Sandler O'Neill a fee equal to 1%
of the aggregate consideration paid to Shareholders and option holders in the
Merger, or approximately $ (based on the number of shares of Old York Common
Stock outstanding on the Record Date and assuming no adjustment to the Merger
consideration). Under the terms of the agreement, Old York has also agreed to
pay Sandler O'Neill an initial quarterly retainer fee of $15,000 and $10,000 per
quarter thereafter for general advisory services, of which $15,000 has been paid
as of the date hereof, and a fee of $50,000 in connection with the rendering of
the fairness opinion, which has also been paid, with all such fees credited
against the 1% Transaction Fee. Sandler O'Neill will receive reimbursement of
its reasonable out-of-pocket expenses, and Old York has agreed to indemnify
Sandler O'Neill against certain liabilities under federal securities laws.
Resale Considerations With Respect to the Midlantic Common Stock
The shares of Midlantic Common Stock that will be issued if the Merger is
consummated have been registered under the Act and will be freely transferable,
except for shares received by persons, including directors and executive
officers of Old York, who may be deemed to be "affiliates" of Old York under
Rule 145 promulgated under the Act. An "affiliate" of an issuer is defined
generally as a person who "controls" the issuer. Directors, executive officers
and 10% shareholders are generally presumed by the Commission to control the
issuer. Affiliates may not sell their shares of Midlantic Common Stock acquired
pursuant to the Merger, except pursuant to an effective registration statement
under the Act covering the Midlantic Common Stock or in compliance with Rule 145
or another applicable exemption from the registration requirements of the Act.
Persons who may be deemed to be "affiliates" of Old York have delivered
letters to Midlantic in which they have agreed to certain restrictions on their
ability to sell, transfer or otherwise dispose of ("transfer") any Old York
Common Stock owned by them and any Midlantic Common Stock acquired by them in
the Merger.
Pursuant to Rule 145, the affiliates have also agreed to refrain from
transferring Midlantic Common Stock acquired by them in the Merger, except in
compliance with certain restrictions imposed by Rule 145. Certificates
representing the shares of Midlantic Common Stock acquired by each such person
pursuant to the Merger will bear a legend reflecting that the shares are
restricted in accordance with the letter signed by such person and may not be
transferred except in compliance with such restrictions. However, the
restrictions of Rule 145 are only applicable for a 2-year period, unless the Old
York affiliate becomes an affiliate of Midlantic. Moreover, as a practical
matter, the limitations of Rule 145 are minimized in that during any three-month
period, so long as Midlantic is current in its reporting obligations under the
Exchange Act, Old York affiliates may effect in any 3-month period, in normal
brokers' transactions, the sale of the greater of (i) 1% of the outstanding
Midlantic Common Stock or (ii) the average weekly trading volume of Midlantic
Common Stock during a specified 4-week period.
Conditions to the Merger
Consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including (i) approval by the affirmative vote of the
holders of a majority of the outstanding shares of Old York Common Stock voting
at the meeting, whether in person or by proxy; (ii) the receipt of all consents,
orders, approvals and authorizations of all necessary government authorities and
expiration of all required waiting periods, necessary for the consummation of
the Merger (see "-- Regulatory Approvals"); and (iii) the effectiveness of the
registration statement covering the shares of Midlantic Common Stock to be
issued to Old York shareholders, which shares shall also have been approved for
designation on The Nasdaq National Market(R). In addition, consummation
-30-
of the Merger is conditioned upon receipt by the parties of an opinion of
counsel to Midlantic to the effect that the exchange of Old York Common Stock
for Midlantic Common Stock is a tax-free reorganization within the meaning of
Section 368 of the Code. See "-- Federal Income Tax Consequences."
Consummation of the Merger is also conditioned on, among other things, (i)
the continued accuracy in all material respects of the representations and
warranties of Old York, the Bank, Midlantic and MB contained in the Agreement;
(ii) the performance by Old York, the Bank, Midlantic and MB, in all material
respects, of all of their respective obligations under the Agreement; (iii) the
absence of any temporary restraining order, preliminary or permanent injunction
or other court order that would prevent the consummation of the Merger; (iv) no
loan or commitment to make a loan by Old York or the Bank to any principal
shareholder of Old York or any director or executive officer of Old York or the
Bank, since September 30, 1994, having been modified to extend or postpone any
maturity date or the prepayment of any portion thereof (except in compliance
with the Bank's underwriting standards, not in violation of any law or
regulation and with notice to MB), increase any principal, release any
collateral or otherwise adversely change its collectibility or the security
thereof and no guarantee with respect to any such loan or commitment, whether
currently effective or to become effective at any time or upon any condition,
having been released or modified in any way to adversely change the guarantee or
the availability of any collateral therefor; and (v) receipt by the Board of
Directors of Old York of a Fairness Opinion of Sandler O'Neill. See "-- Fairness
Opinion." In addition, consummation of the Merger is conditioned upon Old York
satisfying certain minimum capital (as adjusted in accordance with the
Agreement) requirements. If Old York's capital (as adjusted in accordance with
the terms of the Agreement) falls below a specified level, Midlantic is not
obligated to effect the Merger. The Agreement also provides that if Old York
does not meet certain minimum capital (as adjusted in accordance with the
Agreement) requirements, the price which Old York shareholders are entitled to
receive in exchange for their shares of Old York Common Stock will be adjusted
downward. See "-- Effective Time; Amendments; Termination; Price Adjustment."
In addition, Old York may terminate the Agreement in the event that the
price of Midlantic Common Stock over a specified period of time is less than
approximately $22.84 ($26.87 multiplied by 0.85) and less than an index ratio
based upon a selected agreed upon peer group of other bank holding companies.
Midlantic could avoid such termination by agreeing to increase the Exchange
Ratio in accordance with the terms of the Agreement, however, Midlantic is under
no obligation to adjust the Exchange Ratio in such circumstances. Further,
either Midlantic or Old York may terminate the Agreement (i) if the Effective
Time shall not have occurred on or prior to December 31, 1995; (ii) if the
shareholders of Old York fail to approve the Agreement at the Meeting; or (iii)
if any application for any necessary regulatory or governmental approval is
denied or withdrawn at the recommendation of the applicable regulatory agency or
governmental authority. Either Midlantic or Old York may also terminate the
Agreement if (i) there has occurred a material adverse change in the business,
operations, assets or financial condition of any other party; (ii) any other
party materially breaches any of its representations, warranties, covenants,
agreements or obligations under the Agreement; or (iii) any closing condition
cannot reasonably be met by any other party after the other party has had a
reasonable opportunity to cure such condition. The Agreement may also be
terminated with the written consent of all of the parties. See "-- Effective
Time; Amendments; Termination; Price Adjustment."
On April 25, 1995, the Goldberg Litigation was dismissed without prejudice
to the right of the plaintiff to appeal the dismissal or to reinstitute the
matter at a future date. It is possible that the status of the Goldberg
Litigation immediately prior to the anticipated Closing may have a direct impact
upon whether Old York will be able to satisfy all of the conditions precedent to
consummation of the Merger. If a court were to enjoin the Merger, neither Old
York nor Midlantic would be obligated under the Agreement to effect the Merger.
See "CERTAIN INFORMATION REGARDING OLD YORK--Recent Developments" for a
description of the Goldberg Litigation.
No assurance can be given that all of the conditions necessary to
consummate the Merger, as provided for in the Agreement, will be satisfied or
waived.
Old York has agreed that prior to the Effective Time, except as otherwise
approved by Midlantic in writing or as permitted or required by the Agreement,
it will not, among other things, (i) change any provision of its Articles of
Incorporation or By-laws or any similar governing documents; (ii) change the
number of shares of, or issue any more shares of or grant any option or right
with respect to, Old York Common Stock, or split, combine or reclassify any
shares of, or declare, set aside or pay any dividend, or other distribution in
respect of, Old York Common Stock, or redeem or otherwise acquire any shares of
Old York Common Stock; (iii) grant any severance or termination pay (other than
pursuant to policies of Old York in effect on the date of the Agreement or as
agreed to by Midlantic in writing) to, or enter into or amend any employment
agreement with, any of its directors, officers or employees; adopt any new
employee benefit plan or arrangement of any type or amend any such existing
benefit plan or arrangement; or award any increase in compensation or benefits
(except for increases pursuant to commitments existing on the date of the
Agreement) to its directors, officers or employees; (iv) sell or dispose of any
substantial amount of assets or incur any significant liabilities other than in
the ordinary course of business consistent with past practices and policies; (v)
take any action outside of the ordinary course of business or take any action
that would interfere with its ability to perform its obligations under the
Agreement; or (vi) agree to do any of the foregoing.
-31-
Old York has further agreed that it shall not, directly or indirectly,
encourage or solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than Midlantic) concerning
any merger or sale of shares of capital stock or sale of substantial assets or
liabilities not in the ordinary course of business, or similar transactions
involving Old York (an "Acquisition Transaction"), except that Old York may
enter into discussions or negotiations or provide information in connection with
an unsolicited possible Acquisition Transaction if the Board of Directors of Old
York, after consulting with counsel, determines that such discussions or
negotiations should be commenced in the exercise of its fiduciary
responsibilities or such information should be furnished in the exercise of its
fiduciary responsibilities. Old York has agreed to promptly communicate to
Midlantic the terms of any proposal, whether written or oral, which it may
receive in respect of any Acquisition Transaction and the fact that it is having
discussions or negotiations with, or supplying information to, a third party in
connection with a possible Acquisition Transaction.
The Agreement permits Midlantic to pursue business combinations other than
the Merger and to issue securities in connection therewith. Midlantic may
consider and pursue such other acquisition opportunities from time to time and
may consummate one or more acquisition transactions prior to or after the
consummation of the Merger. Such future acquisition opportunities could involve
the issuance by Midlantic of cash, Midlantic Common Stock or other securities of
Midlantic, or any combination thereof.
Regulatory Approvals
Consummation of the Merger is subject, among other things, to prior receipt
of all necessary regulatory approvals. On March 22, 1995, Midlantic submitted a
letter to the Federal Reserve Board seeking a waiver of the requirement for
approval of the Merger under Section 3 of the Bank Holding Company Act as well
as a waiver of the requirements of filing an application thereunder. On March
22, 1995, Midlantic filed an application with the Pennsylvania Banking
Department. On March 22, 1995, MB filed an application with the OCC for approval
of the Bank Merger under the Bank Merger Act. The approval or waiver of the
Federal Reserve Board and the approval of the Pennsylvania Banking Department
and the OCC are required in order for the Merger and the Bank Merger to be
consummated. While both Midlantic and Old York anticipate receiving such
required approvals or waivers, there can be no assurance that the approvals or
waivers will be granted, or that they will be granted on a timely basis and
without conditions that Midlantic or Old York find unacceptable.
Management and Operations After the Merger
At the Effective Time, as a result of the Merger, Old York will be merged
into Midlantic, which will be the surviving entity in the Merger. In addition,
immediately after the Effective Time, the Bank will merge into MB, with MB as
the surviving entity. MB will continue to operate as a subsidiary of Midlantic.
Effective Time; Amendments; Termination; Price Adjustment
Consummation of the Merger (the "Closing") will occur the later of (i) the
day on which the Merger is approved by Old York shareholders and (ii) three days
after all conditions required for consummation of the Merger have been satisfied
(or waived), or on such other date agreed to by Midlantic and Old York. The
Effective Time of the Merger will be the close of business on the day in which
both the New Jersey Certificate of Merger and the Pennsylvania Articles of
Merger have been filed. See "-- Conditions to the Merger." At the Closing,
documents required to satisfy the conditions to the Merger of the respective
parties will be exchanged.
The Agreement may be amended, modified or supplemented with respect to any
of its terms or terminated by the mutual consent of Midlantic, MB, Old York and
the Bank at any time prior to the Effective Time.
The Agreement may be terminated at any time prior to the Effective Time if:
(a) any representation or warranty of either party in the Agreement is not true
and correct in all material respects, (b) either party breaches any covenant or
agreement made by it in the Agreement, or (c) the Closing has not occurred on or
prior to December 31, 1995. In addition, in the event Old York's Adjusted
Capital (as hereinafter defined) falls below $12 million, as determined by
Midlantic, Midlantic is not obligated to effect the Merger. "Adjusted Capital"
of Old York is defined under the Agreement as the sum of shareholders' equity
and the allowance for loan loss calculated by the method utilized in computing
shareholders' equity and the allowance for loan loss for the Old York Financial
Statements at September 30, 1994 (provided that shareholders' equity as so
calculated
-32-
shall not be less than $7.3 million), increased by amounts up to (i)
$300,000 paid to or accrued after the date of the Agreement for services
rendered to Old York by Sandler O'Neill, in connection with the Agreement, (ii)
$150,000 paid to or accrued after the date of the Agreement for legal services
incurred by Old York in connection with the negotiation and consummation of the
Agreement, (iii) $185,000 for the accrual of expenses incurred in connection
with cancellation of Erwin Wenner's options to be cancelled pursuant to the
Agreement, and (iv) $150,000 additional adjustment to the investment portfolio
of the Bank incurred by reason of the application of certain accounting rules
(FASB 115) relating to certain securities held for sale in addition to such
amount as shown in the Old York Financial Statements as of September 30, 1994,
without regard to any adjustments which are made pursuant to Section 5.2.6 of
the Agreement. As of March 31, 1995, the Adjusted Capital of Old York computed
as set forth above (assuming the maximum amounts referred to in clauses (i)-(iv)
above have been accrued as of March 31, 1995) was $__________.
Pursuant to the Agreement, if Old York does not meet certain minimum
capital requirements, the price which Old York shareholders are entitled to
receive in exchange for their shares of Old York Common Stock will be adjusted
downward. Specifically, the Agreement provides that in the event Midlantic
determines that Old York's Adjusted Capital is less than $17.6 million, the
amount of cash and the number of shares of Midlantic Common Stock into which Old
York Common Stock will be converted into the right to receive shall be adjusted
as follows:
(i) after determining the amount of cash and the number of shares of
Midlantic Common Stock to which the holders of Old York Common Stock would
otherwise be entitled to receive without regard to this condition,
(ii) the amount of cash to be received by shareholders of Old York entitled
to receive solely cash will be reduced below the amount of such cash by the
amount of $0.01 per share for each full $100,000 by which such Adjusted Capital
is less than $17.6 million, provided, however, if the Adjusted Capital is less
than $15.5 million, the amount of such cash will be reduced by $0.22 plus $0.02
for each full $100,000 by which such Adjusted Capital is less than $15.5
million, provided further, if the Adjusted Capital is less than $12 million,
Midlantic may elect, in its sole discretion, to determine that the minimum
capital requirements condition of the Agreement has not been met or to decrease
such cash amount by $0.92 plus $0.02 for each full $100,000 by which such
Adjusted Capital is less than $12 million, and
(iii) after determining the amount of cash to be paid to the shareholders
of Old York entitled to receive solely cash, the shares of Midlantic Common
Stock to be received by shareholders of Old York entitled to receive solely
Midlantic Common Stock will be reduced by reducing the Exchange Ratio by
multiplying the Exchange Ratio by a fraction (the "Reduction Fraction"), the
numerator of which shall be the cash amount as so determined pursuant to the
provisions in clause (ii) above and the denominator of which shall be the amount
of cash to which the shareholders of Old York entitled to receive solely cash
shall be entitled to without regard to the provisions in clause (ii) above, and
(iv) after so determining the amount of cash to be paid to the shareholders
of Old York entitled to receive solely cash, and the amount of Midlantic Common
Stock to be received by the shareholders of Old York entitled to receive solely
Midlantic Common Stock, the amount of cash and the amount of Midlantic Common
Stock to be received by the shareholders of Old York entitled to receive both
cash and Midlantic Common Stock shall be reduced by multiplying the amount of
such cash (determined without regard to the provisions in clause (ii)) by the
Reduction Fraction and the Exchange Ratio (determined without regard to the
provisions of clause (iii) above) by the Reduction Fraction.
The following examples illustrate the price adjustment provided for by the
above formulas (for purposes of these examples, it is assumed that the amount of
cash which would be received in exchange for each share of Old York Common Stock
without applying the price adjustment is $10.00 and that the Exchange Ratio
without applying the price adjustment is 0.3721):
(a) If Old York's Adjusted Capital were determined to be $16.6 million,
then for each share of Old York Common Stock exchanged in the Merger, Old York
shareholders entitled to receive solely cash would be entitled
-33-
to receive $9.90 (instead of $10.00) and Old York shareholders entitled to
receive solely Midlantic Common Stock would be entitled to receive approximately
0.3684 (instead of 0.3721) of a share of Midlantic Common Stock. The amount of
cash and Midlantic Common Stock to be received by Old York shareholders entitled
to receive a combination of cash and stock as a result of the election and
allocation procedures would be similarly proportionally reduced.
(b) If Old York's Adjusted Capital were determined to be $15 million, then
for each share of Old York Common Stock exchanged in the Merger, Old York
shareholders entitled to receive solely cash would be entitled to receive $9.68
(instead of $10.00) and Old York shareholders entitled to receive solely
Midlantic Common Stock would be entitled to receive approximately 0.3602
(instead of 0.3721) of a share of Midlantic Common Stock. The amount of cash and
Midlantic Common Stock to be received by Old York shareholders entitled to
receive a combination of cash and stock as a result of the election and
allocation procedures would be similarly proportionally reduced.
(c) If Old York's Adjusted Capital were determined to be at a level less
than $12 million, then Midlantic could determine, in its sole discretion, not to
effect the Merger or to effect the Merger. If Midlantic so determined to effect
the Merger and assuming, for example, Old York's Adjusted Capital had been
determined to be $11.5 million, then, for each share of Old York Common Stock
exchanged in the Merger, Old York shareholders entitled to receive solely cash
would be entitled to receive $8.98 (instead of $10.00) and Old York shareholders
entitled to receive solely Midlantic Common Stock would be entitled to receive
approximately 0.3341 (instead of 0.3721) of a share of Midlantic Common Stock.
The amount of cash and Midlantic Common Stock to be received by Old York
shareholders entitled to receive a combination of cash and stock as a result of
the election and allocation procedures would be similarly proportionally
reduced.
The following chart shows the amount of cash and the number of shares of
Midlantic Common Stock into which Old York Common Stock will be converted into
the right to receive based upon the above examples:
Then each share of Old York Common Stock
If the Adjusted would be converted into either:
Capital Level were: Cash or Shares of Midlantic Common Stock
- ------------------- ---- --------------------------------
$ 17.6 million or more.................. $10.00 0.3721
16.6 million.......................... 9.90 0.3684*
15.0 million.......................... 9.68 0.3602*
11.5 million**........................ 8.98 0.3341*
- ------------------
* Approximate.
** If Adjusted Capital is determined to be less than $12 million, Midlantic
has the option to determine that the minimum capital requirements condition
of the Agreement has not been met.
Neither the above illustrations nor the several assumed Adjusted Capital
levels are intended to reflect what any shareholder of Old York necessarily will
receive or what Old York's Adjusted Capital will be when finally determined in
accordance with the Agreement. Management of Old York is unable as of the date
of this Proxy Statement to determine whether there will be a price adjustment in
accordance with the formulas described above.
In addition, Old York may terminate the Agreement if both of the following
conditions are satisfied: (a) the Acquiror Final Price (as hereinafter defined
below) is less than $26.87 multiplied by 0.85 (which is approximately $22.84)
and (b)(i) the number obtained by subtracting from 1.0 a fraction, in which the
numerator is the Acquiror Final Price and the denominator is 26.87 (the
"Acquiror Starting Price"), is greater than (ii) the
-34-
number obtained by (x) subtracting from 1.0 a fraction (the "Index Ratio"), in
which the numerator is the Index Final Price (as defined below) and the
denominator is 100 (the "Index Starting Price"), and (y) multiplying the result
by 1.15. Midlantic could avoid such termination by electing, in its sole
discretion, to increase the Exchange Ratio to equal the lesser of (i) a number
equal to a quotient, the numerator of which is 0.85 multiplied by the Acquiror
Starting Price multiplied by the Exchange Ratio (as then in effect) and the
denominator of which is the Acquiror Final Price, and (ii) a number equal to a
quotient, the numerator of which is the Exchange Ratio (as then in effect)
multiplied by the Acquiror Starting Price and by the number which results from
(x) 0.15 multiplied by (the Index Ratio subtracted from 1.0) (y) subtracted from
the Index Ratio, and the denominator of which is the Acquiror Final Price. See
"-- Conditions to the Merger."
The "Acquiror Final Price" is defined in the Agreement as the average of
Last Prices of Midlantic Common Stock for the 20 consecutive full trading days
ending at the close of trading on the date on which the last required regulatory
approval or waiver is received. "Last Price" is defined in the Agreement as the
closing price per share of Midlantic Common Stock as quoted on The Nasdaq
National Market(R) and published in the Wall Street Journal for each day trading
in the relevant measuring period.
The "Index Final Price" is defined in the Agreement as the average of the
Index Prices (as defined below) for the 20 consecutive full trading days ending
at the close of trading on the later to occur of the date of receipt of OCC
approval of the Bank Merger or the date of Federal Reserve Board approval of the
Merger. "Index Price" on a given date is defined in the Agreement as the
weighted average (weighted as provided for in the Agreement) of the common stock
closing prices of a selected agreed upon peer group of publicly traded bank
holding companies.
Upon the termination of the Agreement, the transactions contemplated
thereby (other than the confidentiality provisions contained therein) will be
abandoned without further action by any party and each party will bear its own
expenses. In the event of a termination, each party will retain all rights and
remedies it may have at law or equity under the Agreement.
Stock Option for Shares of Old York Common Stock
Midlantic and Old York entered into a Stock Option Agreement dated December
29, 1994 (the "Stock Option Agreement"), in connection with the negotiation of
the Agreement. THE STOCK OPTION AGREEMENT IS SET FORTH AS APPENDIX B HERETO.
DESCRIPTIONS OF THE STOCK OPTION AGREEMENT IN THIS PROXY STATEMENT ARE QUALIFIED
IN THEIR ENTIRETY BY REFERENCE TO THE STOCK OPTION AGREEMENT. Pursuant to the
terms of the Stock Option Agreement, Old York has granted to Midlantic an option
(the "Option") to purchase up to 19.9% of the shares of Old York Common Stock
which would be outstanding immediately following the exercise of the Option, at
a price of $7.25 per share (based upon the number of outstanding shares of Old
York on December 29, 1994, the Option represents the right to purchase up to
701,919 shares). Midlantic does not have any voting rights with respect to
shares of Old York Common Stock subject to the Option prior to exercise of the
Option.
In the event that certain specifically enumerated Triggering Events (as
hereinafter described) occur, including, but not limited to, the acquisition of
beneficial ownership of at least 20% of the outstanding shares of Old York
Common Stock by a person or group other than Midlantic or an affiliate of
Midlantic, Midlantic may exercise the Option in whole or in part. In the event
that a Triggering Event occurs and the Merger is not consummated, Midlantic
would recognize a gain on the sale of the shares of Old York Common Stock
received pursuant to the exercise of the Option if such shares of Old York
Common Stock were sold at prices exceeding $7.25 per share.
The term "Triggering Event" is defined to mean the occurrence of any of the
following events: a person or group, as such terms are defined in the Exchange
Act and the rules and regulations thereunder, other than Midlantic or an
affiliate of Midlantic, (i) acquires beneficial ownership (as such term is
defined in Rule 13d-3
-35-
promulgated under the Exchange Act) of at least 20% of the then outstanding
shares of Old York Common Stock; (ii) enters into a letter of intent or an
agreement with Old York pursuant to which such person or any affiliate of such
person would (a) merge or consolidate, or enter into any similar transaction,
with Old York, (b) acquire all or a significant portion of the assets or
liabilities or Old York, or (c) acquire beneficial ownership of securities
representing, or the right to acquire the beneficial ownership or to vote
securities representing, 20% or more of the then outstanding shares of Old York
Common Stock; (iii) makes a filing with the Commission or bank regulatory
authorities or publicly announces a bona fide proposal (a "Proposal") for (a)
any merger, consolidation or acquisition of all or a significant portion of all
the assets or liabilities of Old York or any other business combination
involving Old York, or (b) a transaction involving the transfer of beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 20% or more of the outstanding
shares of Old York Common Stock, and thereafter, if such Proposal has not been
publicly withdrawn (as defined below) at least 15 days prior to the Meeting and
Old York's shareholders fail to approve the Merger by the vote required by
applicable law at the Meeting; or (iv) makes a bona fide proposal and
thereafter, but before such Proposal has been publicly withdrawn, Old York
willfully takes any action in a manner that would materially interfere with its
ability to consummate the Merger or materially reduce the value of the
transaction to Midlantic. The definition of "Triggering Event" also includes (i)
the taking of any direct or indirect action by Old York or any of its directors,
officers or agents, to invite, encourage or solicit any proposal which has as
its purpose a tender offer for the shares of Old York Common Stock, a merger,
consolidation, plan of exchange, plan of acquisition or reorganization of Old
York, or a sale of a significant number of shares of Old York Common Stock or
any significant portion of its assets or liabilities. Under the Stock Option
Agreement, a significant number means 10% of the outstanding shares of Old York
Common Stock and a significant portion means 25% of the assets or liabilities of
Old York. "Publicly withdrawn" for purposes of the Stock Option Agreement means
an unconditional bona fide withdrawal of a Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or acquiring any
controlling influence over Old York or in soliciting or inducing any other
person (other than Midlantic or any affiliate) to do so.
Midlantic may not sell, assign or otherwise transfer its rights and
obligations under the Stock Option Agreement in whole or in part to any person
or any group of persons other than to an affiliate of Midlantic, except upon the
occurrence of a Triggering Event. The Option may not be exercised (i) in the
absence of any required governmental or regulatory approval or consent necessary
for Old York to issue the Old York Common Stock subject to the Option or
Midlantic to exercise the Option, or prior to the expiration or termination of
any waiting period required by law, or (ii) so long as any injunction or other
order, decree or ruling issued by any federal or state court of competent
jurisdiction is in effect which prohibits the sale or delivery of the Old York
Common Stock subject to the Option.
The Stock Option Agreement further provides that after the occurrence of a
Triggering Event and upon receipt of a written request from Midlantic, Old York
shall prepare and file a registration statement with the Commission covering the
Option and such number of shares of Old York Common Stock subject thereto as
Midlantic shall specify in its request, and shall use its best efforts to cause
such registration statement to become effective; provided, however, that in no
event will Midlantic have the right to have more than one such registration
statement become effective.
The Stock Option Agreement terminates upon either the termination of the
Agreement or the consummation of the transactions contemplated thereby; provided
that if the Agreement terminates after the occurrence of a Triggering Event, the
Stock Option Agreement will not terminate until the later of 18 months following
the date of termination of the Agreement or the consummation of any proposed
transactions which constitute the Triggering Event.
The ability of Midlantic to exercise the Option and to cause up to an
additional 701,919 shares of Old York Common Stock to be issued may be
considered a deterrent to other potential acquisitions of control of Old York
because they are likely to increase the cost of an acquisition of all of the
shares of Old York Common Stock that would be outstanding.
-36-
The exercise of the Option by Midlantic may also make
"pooling-of-interests" accounting treatment unavailable to a subsequent
acquiror.
DESCRIPTION OF MIDLANTIC CAPITAL STOCK
General
The authorized capital stock of Midlantic consists of 150,000,000 shares of
Common Stock and 40,000,000 shares of preferred stock. As of December 31, 1994,
52,564,346 shares of Common Stock were issued and outstanding and 500,000 shares
of preferred stock were issued and outstanding. Midlantic's preferred stock is
divided into two classes, Term Adjustable Rate Cumulative Preferred
Stock--Series A ("Preferred Stock--A"), having no par value, consisting of
500,000 authorized shares, all of which are issued and outstanding, and Series B
Junior Participating Preferred Stock ("Preferred Stock--B"), having no par
value, consisting of 500,000 authorized shares, none of which are outstanding.
From the authorized but unissued capital stock at December 31, 1994, 1,520,833
shares of Common Stock are reserved for issuance upon conversion of Midlantic's
8 1/4% Convertible Subordinated Debentures Due July 1, 2010 and 2,974,357 shares
of Common Stock are reserved for issuance under Midlantic's employee stock
option and stock award plans. See the last paragraph under "Background of and
Reasons for the Merger" for a discussion of Midlantic's stock repurchase plan.
The following description of Midlantic Common Stock sets forth certain
general terms of the Midlantic Common Stock.
Common Stock
DIVIDEND RIGHTS. Holders of Midlantic Common Stock are entitled to
dividends when, as and if declared by Midlantic's Board of Directors out of
funds legally available for the payment of dividends. Any declaration of
dividends will depend on the earnings of Midlantic and its subsidiaries, their
financial condition and need for funds and other relevant factors, including
restrictions imposed on the payment of dividends by (i) applicable law,
governmental policies and regulations, and agreements or other arrangements with
banking regulators, and (ii) the long-term obligations of Midlantic and its
subsidiaries. The only statutory limitation is that such dividends may not be
paid if Midlantic is insolvent. Because funds for the payment of dividends by
Midlantic must come primarily from the earnings of Midlantic's bank subsidiary,
as a practical matter, any restrictions on the ability of MB to pay dividends
will act as restrictions on the amount of funds available for payment of
dividends by Midlantic.
As a national banking association, MB is subject to limitation on the
amount of dividends it may pay to Midlantic, MB's only shareholder. Prior
approval by the OCC is required to the extent the total of all dividends to be
declared by MB in any calendar year exceeds net income for that year combined
with MB's retained net income for the preceding two calendar years. Under this
limitation, MB could declare dividends at December 31, 1994 without prior
approval of the OCC of up to $384.2 million.
Midlantic is also subject to certain Federal Reserve Board policies which
may, in certain circumstances, limit its ability to pay dividends. These
policies require, among other things, that a bank holding company maintain
certain minimum capital ratios. The Federal Reserve Board would most likely seek
to prohibit any dividend payment which would reduce a holding company's capital
below these minimum ratios.
VOTING RIGHTS. At meetings of shareholders, holders of Midlantic Common
Stock are entitled to one vote per share and do not have cumulative voting
rights with respect to the election of directors. The quorum for shareholders'
meeting is a majority of the outstanding shares. Generally, actions and
authorizations to be taken or given by shareholders require the approval of a
majority of the votes cast by holders of Midlantic Common Stock at a meeting at
which a quorum is present.
-37-
LIQUIDATION RIGHTS. In the event of liquidation, dissolution or winding up
of Midlantic, holders of Midlantic Common Stock are entitled to share equally
and ratably in assets available for distribution after payment of debts and
liabilities, subject to the prior rights of holders of shares of any preferred
stock which may be issued and outstanding.
STOCK PURCHASE RIGHTS. On February 23, 1990, Midlantic's Board declared a
distribution of one Stock Purchase Right (a "Right") for each outstanding share
of Midlantic Common Stock to shareholders of record at the close of business on
March 12, 1990 (the "record date"), and authorized the issuance of one Right for
each share of Midlantic Common Stock (including the Midlantic Common Stock
offered by this Proxy Statement) issued between the record date and the
Distribution Date (described herein). The Rights will separate from the
Midlantic Common Stock upon the date (the "Distribution Date") which is the 10th
business day after a person or group acquires beneficial ownership of 15% or
more of the outstanding Midlantic Common Stock or voting securities of
Midlantic, or commences a tender or exchange offer that would result in such
person or group acquiring beneficial ownership of 15% or more of the outstanding
Midlantic Common Stock or voting securities of Midlantic. Each Right initially
will entitle its holder to buy one one-hundredth of a share of Preferred
Stock--B at an exercise price of $125. In the event that a person or group
acquires 15% or more of Midlantic Common Stock or voting securities (except in
transactions approved by the Board) and thereafter (i) Midlantic is acquired in
a merger or other business combination or (ii) more than 50% of Midlantic's
assets, earning power or cash flow is sold, each Right will entitle its holder
to acquire shares of Midlantic or the acquiring person, as the case may be,
having a value of twice the exercise price of the Right. Midlantic may redeem
the Rights at $.01 per Right any time until the tenth business day following
public announcement by Midlantic or an acquiring person or group that such a
person or group has acquired a 15% position in Midlantic. The Rights will expire
on March 12, 2000.
OTHER COMMON STOCK. Midlantic's Board may issue authorized but unissued
Midlantic Common Stock without shareholder approval, except as otherwise
required by applicable law, to such persons and for such consideration as
Midlantic's Board may determine for any corporate purposes, including
acquisitions by Midlantic or its subsidiaries.
Midlantic has outstanding two series of debt securities which, by the terms
of their indenture, are to be exchanged at maturity for Midlantic Common Stock
or perpetual preferred stock of Midlantic having a market value, at the
respective maturity date of each series, equal to the aggregate principal amount
of these debt securities or, upon the satisfaction of certain conditions, may be
repaid in cash. The aggregate principal amount of the debt securities is $200
million, one-half of which is due on December 1, 1999 and the balance of which
is due on August 1, 2001. Inasmuch as the number of shares which may be issued
in connection with any such exchange is not presently determinable, no shares of
Midlantic Common Stock or preferred stock are reserved for issuance with respect
to any such exchange.
PRE-EMPTIVE AND CONVERSION RIGHTS. The holders of Midlantic Common Stock do
not have pre-emptive rights with respect to any securities or any conversion
rights.
ASSESSMENT AND REDEMPTION. All outstanding shares of Midlantic Common Stock
are fully paid and nonassessable. The Midlantic Common Stock is not redeemable
at the option of the issuer or the holders thereof.
OTHER MATTERS. The transfer agent and registrar for Midlantic Common Stock
is currently Midlantic Bank, National Association. Midlantic Common Stock is
traded on The Nasdaq National Market(R) and is registered with the Commission
under Section 12(g) of the Exchange Act.
Preferred Stock
-38-
PREFERRED STOCK--A. The Preferred Stock--A has an annual dividend rate
based on $100 stated value per share. For all dividend periods commencing on or
after April 1, 1992 through the dividend period commencing on January 1, 1997,
the dividend rate is 7.25%. Thereafter the dividend rate will become adjustable
by reference to the rates of certain U.S. Treasury obligations, but in no event
will the annual dividend be less than 6% or more than 12%. The Preferred
Stock--A can be redeemed solely at the option of Midlantic at a redemption price
of $100 per share plus accrued and unpaid dividends to the date of redemption
provided, however, that Midlantic obtains prior approval for redemption from the
Federal Reserve Bank of New York. On liquidation, holders of Preferred Stock--A
are entitled to receive $100 per share plus accrued and unpaid dividends to the
date of final distribution prior to any distribution to holders of Midlantic
Common Stock. No dividends may be paid on the Midlantic Common Stock unless full
cumulative dividends on all outstanding Preferred Stock--A have been paid or
declared and set aside for payment for all dividend periods.
Midlantic executed an agreement dated as of July 21, 1992 with the sole
holder (the "Holder") of the Preferred Stock--A to pay the full cumulative
dividends then in arrears on the Preferred Stock--A by issuing Midlantic Common
Stock in lieu of a cash payment. The agreement also permits Midlantic to pay
future dividends in either cash or Midlantic Common Stock so long as any such
issuance of Midlantic Common Stock would not cause the Holder to be the
beneficial owner of more than 4.99% of the outstanding shares of Midlantic
Common Stock. On July 22, 1992, Midlantic issued shares of Midlantic Common
Stock to the Holder in full satisfaction of dividends accrued to the Preferred
Stock--A through June 30, 1992. For the dividend period from July 1992 through
December 1993, Midlantic issued additional shares of Midlantic Common Stock to
the Holder in full satisfaction of dividends accrued to the Preferred Stock--A
during such dividend periods. Dividends payable on the Preferred Stock--A were
paid by Midlantic in cash for all subsequent dividend periods.
PREFERRED STOCK--B. The Preferred Stock--B is reserved for issuance in
connection with the Rights distributed to holders of record of Midlantic Common
Stock on March 12, 1990. See "-- Common Stock -- Stock Purchase Rights." Holders
of Preferred Stock--B, if and when issued, subject to the dividend rights of any
series of preferred stock ranking prior and superior to the Preferred Stock--B,
are entitled to receive quarterly dividends, and no dividends may be paid on
Midlantic Common Stock unless all dividends on all outstanding shares of
Preferred Stock--B have been paid or declared and set aside for payment for all
dividend periods.
OTHER PREFERRED STOCK. Midlantic's Board is empowered without shareholder
approval to cause Midlantic to issue additional shares of preferred stock, from
time to time, in series and, with respect to each series, the Certificate of
Incorporation of Midlantic (the "Midlantic Certificate of Incorporation")
authorizes Midlantic's Board to determine (i) the number of shares to constitute
such series; (ii) the dividend rate on the shares of each series and whether the
dividend is to be cumulative; (iii) whether the shares of each series will be
redeemable and the terms of such redemption rights; (iv) whether the shares will
be convertible into any other class of stock and the terms of such conversion
rights; (v) the rights of the holders of shares in case of liquidation or
dissolution of Midlantic; (vi) the relative rights and preferences of such
series (vii) the extent of voting powers, if any, of shares of each series; and
(vii) generally any other rights and privileges not in conflict with the
Midlantic Certificate of Incorporation for each series and any qualifications,
limitations or restrictions thereof. See also "-- Common Stock -- Other Common
Stock."
Provisions Relating to Certain Business Transactions
The Midlantic Certificate of Incorporation contains a "Supermajority
Provision", and a "Fair Price Provision." The Supermajority Provision requires
the affirmative vote of not less than 80% of the combined voting power (voting
as one class) of all outstanding voting stock of Midlantic to approve certain
business transactions, unless the transaction is approved by three-fourths of
the "Disinterested Directors" (described below). The Fair Price Provision
requires the same 80% vote of shareholders to approve certain business
transactions involving an "Interested Shareholder" (described below) unless the
transaction is approved by three-
-39-
fourths of the "Continuing Directors" (described below) or meets certain minimum
price and procedural criteria. The Supermajority Provision does not cover
transactions that are subject to the Fair Price Provision.
GENERAL DESCRIPTION OF SUPERMAJORITY PROVISION. The Supermajority Provision
prescribes a higher shareholder vote than would otherwise be required by the New
Jersey Business Corporation Act (the "NJBCA") to authorize certain business
transactions, unless a specified minimum number of Disinterested Directors
approve the transaction. Specifically, in addition to any shareholder vote
required by the NJBCA or otherwise, the affirmative vote of not less than 80% of
the votes entitled to be cast by the holders of all then outstanding shares of
voting stock of Midlantic, voting together as a single class (an "80%
Shareholder Vote"), is required to authorize certain transactions, including a
merger or consolidation of Midlantic, or a sale of all or substantially all
assets. An 80% Shareholder Vote is not required, however, if the transaction is
approved by the greater of (i) three-fourths of the Disinterested Directors or
(ii) three Disinterested Directors. The Midlantic Certificate of Incorporation
requires an 80% Shareholder Vote to amend or repeal, or adopt any provision
inconsistent with, the Supermajority Provision.
For purposes of the Supermajority Provision, a "Disinterested Director" is
any member of the Board, while such person is a member of the Board, who is not
affiliated with the other party to the transaction and who was either named as a
director in the Midlantic Certificate of Incorporation filed in the office of
the Secretary of State of New Jersey on March 20, 1986, or was recommended for
election to the Board, or elected to fill a vacancy on the Board, by a majority
of the Disinterested Directors at the time of such election.
GENERAL DESCRIPTION OF FAIR PRICE PROVISION. Under the Fair Price
Provision, the terms of a "Business Combination" (described below) between
Midlantic or a subsidiary of Midlantic and an Interested Shareholder must (i)
satisfy certain "fair price" criteria and procedural requirements which are
discussed below, (ii) be approved by an 80% Shareholder Vote or (iii) be
approved by the affirmative vote of three-fourths of the Continuing Directors.
Even if a proposed Business Combination satisfies one of these three tests, it
remains subject to the voting requirements otherwise applicable under the NJBCA,
which, for most types of Business Combinations, is the affirmative vote of a
majority of the votes cast at a meeting of the shareholders called to vote on
the matter.
For purposes of the Fair Price Provision, an "Interested Shareholder"
includes any person or group of persons that is the beneficial owner of 10% or
more of Midlantic's voting stock other than Midlantic, its subsidiaries or
employee benefit plans and the trustees of such plans. As of the date of this
Proxy Statement, Midlantic is not aware of any shareholder or group of
shareholders that satisfies this definition. A "Business Combination" subject to
the Fair Price Provision includes any merger or consolidation of Midlantic or
any of its subsidiaries, or other disposition involving any assets or securities
of Midlantic, to, with or by any Interested Shareholder or any "Affiliate" or
"Associate" (as defined in the Midlantic Certificate of Incorporation) of an
Interested Shareholder.
"FAIR PRICE" CRITERIA AND PROCEDURAL REQUIREMENTS. In a Business
Combination, the consideration required to be paid to the shareholders of
Midlantic must be either cash or the same type of consideration used by the
Interested Shareholder to acquire beneficial ownership of the largest portion of
Midlantic's capital stock. In the case of a Business Combination that provides
for the payment of cash or other consideration to holders of Midlantic Common
Stock, such shareholders must receive at least the fair market value of their
Midlantic Common Stock, determined pursuant to a specified formula which was
designed to ensure that such holders receive the economic benefit of the highest
prices paid or agreed to be paid for Midlantic Common Stock during defined time
periods. In addition to meeting the foregoing price criteria, the Interested
Shareholder must satisfy the procedural requirements described below.
If a Business Combination does not involve the receipt of any cash or other
property by any shareholders, such as a sale of assets or an issuance of
Midlantic's securities to an Interested Shareholder, then
-40-
the fair price criteria will not apply and the Business Combination must satisfy
one of the two remaining tests--approval by an 80% Shareholder Vote or by
three-fourths of the Continuing Directors.
The procedural requirements in the Fair Price Provision are intended to
inhibit transactions which might favor an Interested Shareholder. These
requirements ensure that other shareholders continue to receive the benefits of
their stock ownership prior to the consummation of a Business Combination, and
obtain full information, in the form of a proxy or information statement,
regarding the proposed transaction. An Interested Shareholder proposing a
Business Combination must satisfy these requirements, as well as the fair price
criteria described above, unless the Business Combination is approved by
three-fourths of the Continuing Directors or an 80% Shareholder Vote.
CONTINUING DIRECTOR APPROVAL. If a Business Combination is approved by
three-fourths of the Continuing Directors, neither the fair price criteria and
procedural requirements nor the 80% Shareholder Vote requirement will be
applicable. A "Continuing Director" is any member of Midlantic's Board, while
such person is a member of the Board, who is not affiliated with an Interested
Shareholder and who was either named as a director in Midlantic's Certificate of
Incorporation filed in the office of the Secretary of State of New Jersey on
March 20, 1986, or was recommended for election to the Board, or elected to fill
a vacancy on the Board, by a majority of the Continuing Directors at the time of
such election.
80% SHAREHOLDER VOTE. If a Business Combination is approved by an 80%
Shareholder Vote, it will not be subject to the fair price criteria and
procedural requirements or the requirement of approval by three-fourths of the
Continuing Directors.
OTHER LEGAL REQUIREMENTS. Even if a Business Combination satisfies the fair
price criteria and procedural requirements, or is approved by the Continuing
Directors or an 80% Shareholder Vote, it remains subject to voting and other
requirements under the NJBCA. Under current provisions of the NJBCA, certain
mergers, consolidations, reclassifications of capital stock, sales of
substantially all of the assets of a corporation or the adoption of a plan of
dissolution must be approved by the affirmative vote of a majority of the votes
cast by the holders of shares entitled to vote thereon. Certain other
transactions, such as sales of less than substantially all assets, mergers
involving a 90%-owned subsidiary and recapitalizations not involving any
amendment to a certificate of incorporation, do not require shareholder approval
under the NJBCA, although such transactions may constitute Business Combinations
subject to the Fair Price Provision.
AMENDMENT OF FAIR PRICE PROVISION. Any amendment or repeal of the Fair
Price Provision, or the adoption of inconsistent provisions, must be approved by
an 80% Shareholder Vote, unless such amendment, repeal or adoption is
unanimously recommended by Midlantic's Board, all of whom are Continuing
Directors. In that case, only the provisions of the NJBCA will apply, and the
amendment may be approved by the affirmative vote of a majority of the votes
cast by the holders of Midlantic's capital stock entitled to vote thereon.
Shareholder Nomination of Directors
The By-laws of Midlantic (the "Midlantic By-laws") prescribe procedures for
shareholders wishing to nominate persons to serve as directors of Midlantic. The
Midlantic By-laws specify that, subject to any rights of holders of stock having
a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by Midlantic's Board, by a
committee appointed by the Board or by any shareholder entitled to vote in the
election of directors generally. Any shareholder entitled to vote in the
election of directors generally may nominate one or more persons for election as
directors at a shareholders' meeting only if written notice of such
shareholder's intention to make such nomination or nominations was given, either
by personal delivery or by United States mail, postage prepaid, to the Secretary
of Midlantic not later than (i) with respect to any election to be held at an
annual meeting of shareholders, 90 days prior to the anniversary date of the
immediately preceding annual meeting and (ii) with respect to an election to be
held at a special
-41-
meeting of shareholders for the election of directors, the close of business on
the tenth day following the date on which notice of such meeting is first given
to shareholders. Each notice shall set forth: (a) the name and address of the
shareholder who intends to make the nomination and of the person or persons to
be nominated; (b) each nominee's age and principal occupation or employment; (c)
the number of shares of equity securities of Midlantic beneficially owned by
each nominee; (d) a representation that the shareholder is a holder of record of
stock of Midlantic entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice; (e) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; (f) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Commission; and (g) the consent of each
nominee to serve as a director of Midlantic if so elected. A shareholder who
does not comply with this procedure may be precluded from nominating a candidate
for election as a director at a meeting of the shareholders.
Limitation of Liability of Directors and Officers
The Midlantic Certificate of Incorporation contains a provision eliminating
the personal liability of Midlantic's directors and officers to Midlantic or its
shareholders for monetary damages to the full extent from time to time permitted
by law. Under this provision and existing law, a shareholder of Midlantic may
prosecute an action against a director or officer for monetary damages only if
the shareholder can show a breach of the duty of loyalty, a failure to act in
good faith, a knowing violation of law or a breach of duty resulting in receipt
of an improper personal benefit. A shareholder may not prosecute such an action
(including an action relating to an attempted takeover of Midlantic) based on
"negligence" or "gross negligence" of a director or officer in the performance
of such person's duties. However, the Midlantic Certificate of Incorporation
does not limit or eliminate the right of Midlantic or any of its shareholders to
seek an injunction, rescission or other form of nonmonetary relief in the event
of a breach of the duty of care by a director or officer. In addition, the
limited liability provision applies only to claims against directors or officers
arising out of their service in such capacity and, depending upon judicial
interpretation, it may not be effective to relieve a director or officer from
liability under the laws of jurisdictions other than New Jersey. The Midlantic
Certificate of Incorporation does not affect a director's or officer's
liabilities based upon violations of the federal securities laws and has no
effect on tort or other claims by third parties against directors or officers.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
UNDER PENNSYLVANIA AND NEW JERSEY LAW
Midlantic is a New Jersey corporation subject to the provisions of the
NJBCA. Old York is a Pennsylvania corporation subject to the provisions of the
PaBCL. The rights of current shareholders of Old York are governed by Old York's
Articles of Incorporation (the "Old York Articles of Incorporation") and By-laws
(the "Old York By-laws") and the PaBCL. Upon consummation of the Merger,
shareholders of Old York who receive Midlantic Common Stock in exchange for
their shares of Old York Common Stock will become shareholders of Midlantic and,
at the Effective Time, their rights as shareholders will be determined by the
Midlantic Certificate of Incorporation and the Midlantic By-laws and the NJBCA.
The following is a summary of the material differences in the rights of
shareholders of Old York under the Old York Articles of Incorporation, Old York
By-laws and the PaBCL, on the one hand, and the rights of shareholders of
Midlantic under the Midlantic Certificate of Incorporation, the Midlantic
By-laws and the NJBCA, on the other hand. The following discussion does not
purport to be a complete discussion of, and is qualified in its entirety by
reference to, the governing law and the Articles or Certificate of Incorporation
and By-laws of each corporation.
Voting Requirements
-42-
Under the PaBCL, a plan of merger, consolidation, share exchange, division,
conversion, or asset transfer (in respect of a sale, lease, exchange or other
disposition of all, or substantially all, the assets of a corporation other than
in the usual and regular course of business) generally must be proposed by the
board of directors and approved by the affirmative vote of a majority of the
votes cast by all shareholders of any class or series of shares entitled to vote
thereon as a class.
The Midlantic Certificate of Incorporation contains a "Supermajority
Provision," which prescribes a higher shareholder vote than would otherwise be
required by the NJBCA to authorize certain business transactions. See
"DESCRIPTION OF MIDLANTIC CAPITAL STOCK -- Provisions Relating to Certain
Business Transactions."
The PaBCL generally provides that an amendment of the articles of
incorporation must be proposed by the board of directors and may be adopted by
the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon and by a majority of the votes cast by the shareholders
of any class or series of shares entitled to vote thereon. Notwithstanding the
foregoing, if a proposed amendment would alter or change the preferences,
limitations or special rights of the shares of a class or series of shares, so
as to adversely affect them, then the holders of the outstanding shares of the
class or series are entitled to vote as a class in respect to the amendment
regardless of any limitations stated in the articles of incorporation or bylaws
on the voting rights of any class or series.
Under the NJBCA, the holders of a class or series of shares are entitled to
vote as a class upon a proposed amendment to the certificate of incorporation,
whether or not entitled to vote thereon by the provisions of the certificate of
incorporation, if the amendment would exclude or limit their right to vote on
any matter, limit or deny their preemptive rights, cancel or otherwise adversely
affect their dividends which have accrued but have not been declared, create a
new class or series having or convertible into shares having rights or
preferences superior to the class or increase the rights or preference of any
class or series. In addition, notwithstanding any provision of the certificate
of incorporation, the holders of a class or series of shares whose rights or
preferences would be subordinated or otherwise adversely affected by a proposed
amendment are entitled to vote as a class if the amendment would affect their
shares in the following manner: (i) decrease the par value; (ii) effect a
conversion, exchange or reclassification of their shares; (iii) effect a
conversion or exchange of any shares of another class or series into their class
or series; (iv) change the designation, preferences, limitations or relative
rights of their shares; (v) change the shares into a different number of shares,
or into the same number of another class or series; or (vi) divide their shares
into a series or determine the designation, preferences, limitation or relative
rights of any such series, or authorize the board to take any such action.
All shareholder voting rights of Old York are vested in the holders of Old
York Common Stock. All shareholder voting rights of Midlantic are vested in the
holders of the Midlantic Common Stock.
Cumulative Voting
The voting rights of the holders of Old York Common Stock and the holders
of Midlantic Common Stock are similar in that in each instance each holder of a
share of common stock is entitled to one vote for per share held and that there
are no cumulative voting rights in the election of directors.
Classified Board of Directors
The Old York By-laws provide for a classified Board of Directors, with the
total number of the Board of Directors to be classified according to the time
for which they hold office, with each class as nearly equal in number as
possible, with the term of office of at least one class to expire each year. Any
class of directors of Old York are not to be elected for a term shorter than a
period of one year, nor for a term in excess of four years.
-43-
The NJBCA permits a New Jersey corporation to provide for a classified
board of directors in its certificate of incorporation. The Midlantic
Certificate of Incorporation does not provide for a classified Board of
Directors; the entire Board is elected each year.
Rights of Dissenting Shareholders
Under the PaBCL, a shareholder of a Pennsylvania corporation is generally
entitled to receive payment for the fair value of such shareholder's shares if
such shareholder duly exercises its dissenters rights with respect to a plan of
merger or consolidation, share exchange or asset transfer, to which such
corporation is a party, except if the shares are (i) listed on a national
securities exchange or (ii) held by more than 2,000 shareholders. The foregoing
market exceptions do not apply to Old York. See "THE PROPOSED MERGER -- Rights
of Dissenting Old York Shareholders."
Under the NJBCA, shareholders of a New Jersey corporation who dissent from
a merger, consolidation, sale of all or substantially all of the corporation's
assets or certain other corporate transactions are generally entitled to
appraisal rights. No statutory right of appraisal exists, however, where the
stock of the New Jersey corporation is (i) listed on a national securities
exchange, (ii) is held of record by not less than 1,000 holders, or (iii) where
the consideration to be received pursuant to the merger, consolidation or sale
consists of cash or securities or other obligations which, after the
transaction, will be listed on a national securities exchange or held of record
by not less than 1,000 holders. The exception in clause (ii) currently applies
to Midlantic.
Shareholder Consent to Corporate Action
Unless otherwise restricted in the bylaws (and the Old York By-laws are
silent on this issue), the PaBCL permits any action required or permitted to be
taken at a meeting of the corporation's shareholders (or a class of
shareholders) to be taken without a meeting if, prior or subsequent to the
action, a consent or consents thereto by all of the shareholders who would be
entitled to vote at a meeting for such purpose is filed with the secretary of
the corporation.
Except as otherwise provided by the certificate of incorporation (and the
Midlantic Certificate of Incorporation currently is silent on this issue), the
NJBCA permits any action required or permitted to be taken at any meeting of a
corporation's shareholders, other than the annual election of directors, to be
taken without a meeting upon the written consent of shareholders who would have
been entitled to cast the minimum number of votes necessary to authorize such
action at a meeting of shareholders at which all shareholders entitled to vote
were present and voting. The annual election of directors, if not conducted at a
shareholders' meeting, may only be effected by unanimous written consent. Under
the NJBCA, a shareholder vote on a plan of merger or consolidation, if not
conducted at a shareholders' meeting, may only be effected by either: (i)
unanimous written consent of all shareholders entitled to vote on the issue with
advance notice to any other shareholders, or (ii) written consent of
shareholders who would have been entitled to cast the minimum number of votes
necessary to authorize such action at a meeting, together with advance notice to
all other shareholders.
Dividends and Other Distributions to Shareholders
Unless otherwise restricted in the bylaws, the PaBCL provides that a
Pennsylvania corporation may pay dividends or purchase, redeem or otherwise
acquire its own shares unless, after giving effect thereto, (i) the corporation
would be unable to pay its debts as they become due in the usual course of
business or (ii) the corporation's total assets would be less than the sum of
its total liabilities plus the amount that would be needed to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distributions. The authorized capital stock
of Old York consists of only Old York Common Stock. The Old York By-laws
authorize the Board of Directors to declare a dividend out of the profits of Old
York as the Board deems advisable, subject to the limitations prescribed by the
PaBCL.
-44-
Subject to any restrictions contained in the certificate of incorporation,
the NJBCA provides that a New Jersey corporation may pay dividends or purchase,
redeem or otherwise acquire its own shares unless, after giving effect thereto,
(i) the corporation would be unable to pay its debts as they become due in the
usual course of business or (ii) the corporation's total assets would be less
than its total liabilities. The Midlantic Certificate of Incorporation provides
that no dividends may be paid on Midlantic Common Stock unless all accrued and
unpaid dividends on Midlantic's preferred stock have been paid or declared with
funds set apart for the payment thereof. However, Midlantic is permitted to pay
dividends on its Preferred Stock--A in Midlantic Common Stock in lieu of a cash
payment. See "DESCRIPTION OF MIDLANTIC CAPITAL STOCK -- Preferred Stock." Any
declaration of dividends on Midlantic Common Stock will depend on the earnings
of Midlantic and its subsidiaries, their financial condition and need for funds
and other relevant factors. For a description of the regulatory restrictions on
dividend payments by Midlantic, see "DESCRIPTION OF MIDLANTIC CAPITAL STOCK --
Common Stock--Dividend Rights."
By-laws
The Old York By-laws grant the Board of Directors the power to make, amend
and repeal (by a vote of the majority of all the directors) the Old York
By-laws, except those By-laws that fix the Board's qualifications,
classification or term of office and subject to the power of Old York's
shareholders to change or repeal such By-laws. In addition, the PaBCL prohibits
the board of directors of a Pennsylvania corporation from adopting or changing
bylaws on subjects committed expressly to the shareholders by the PaBCL.
Under the NJBCA, the board of directors of a New Jersey corporation has the
power to adopt, amend, or repeal the corporation's bylaws, unless such powers
are reserved in the certificate of incorporation to the shareholders, which the
Midlantic Certificate of Incorporation presently does not do.
Preemptive Rights
Except as otherwise provided in the articles of incorporation (and the Old
York Articles of Incorporation are silent on this issue), the PaBCL permits a
Pennsylvania corporation to provide its shareholders with preemptive rights.
Under the NJBCA, shareholders of New Jersey corporations have only such
preemptive rights as may be provided in the certificate of incorporation. The
Midlantic Certificate of Incorporation does not provide the holders of Midlantic
Common Stock preemptive rights with respect to any securities.
Transactions Involving Officers or Directors
Under the NJBCA, a New Jersey corporation may loan money to, or guarantee
any obligation incurred by, its officers, employees or directors if in the
judgment of the directors such loan or guarantee may reasonably be expected to
benefit the corporation. With respect to any other contract or transaction
between the corporation and one or more of its directors (or any other
corporation or entity in which such director or directors are otherwise
interested), such transactions are neither void nor voidable if either (i) the
director's or officer's interest is made known to the disinterested directors or
the shareholders of the corporation, who thereafter approve the transaction, or
(ii) the contract or transaction is fair to the corporation as of the time it is
approved or ratified by either the board of directors, a committee thereof, or
the shareholders.
Under the PaBCL, a contract or transaction between a Pennsylvania
corporation and one or more of its directors or officers (or any other
corporation or entity in which such director(s) or officer(s) are directors or
officers or have a financial or other interest) is not void or voidable if (i)
the material facts as to the relationship or interest and as to the contract or
transaction are disclosed or are known to the board of directors and a majority
of the disinterested directors authorizes the contract or transaction (even
though the disinterested directors are less than a quorum), (ii) the material
facts as to the relationship or interest of the director(s) or
-45-
officer(s) and as to the contract or transaction are disclosed or are known to
the shareholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by vote of those shareholders, or (iii) the
contract or transaction is fair as to the corporation as of the time it is
authorized, approved or ratified by the board of directors or the shareholders.
Limitations of Liability of Directors and Officers
Under the PaBCL, the shareholders of a Pennsylvania corporation may adopt a
bylaw that would eliminate the personally liability of a director, subject to
the limitations described below. The PaBCL provides that a director cannot be
relieved of liability (i) for a breach or failure to perform the duties of such
person's office under Subchapter 17B of the PaBCL and (ii) where the breach or
failure to perform constitutes self-dealing, willful misconduct or recklessness.
In addition, a director may not be relieved of the (i) responsibility or
liability pursuant to any criminal statute or (ii) liability for the payment of
taxes pursuant to Federal, state or local law. The Old York By-laws contain a
provision that limits a director's liability to the full extent permitted by the
PaBCL.
Under the NJBCA, a New Jersey corporation may include in its certificate of
incorporation a provision that would, subject to the limitations described
below, eliminate or limit directors' or officers' liability to the corporation
or its shareholders for monetary damage for breaches of their fiduciary duty of
care. The NJBCA provides that a director or officer cannot be relieved from
liability or otherwise indemnified for any breach of duty based upon an act or
omission (i) in breach of such person's duty of loyalty to the corporation or
its shareholders, (ii) not in good faith or involving a knowing violation of
law, or (iii) resulting in receipt by such person or an improper personal
benefit. The Midlantic Certificate of Incorporation contains a provision that
limits a director's or officer's liability to the full extent permitted by the
NJBCA.
Shareholder Protection Legislation
Old York is subject to some, but not all, of various provisions of the
PaBCL which are triggered, in general, if any person or group acquires, or
discloses an intent to acquire, 20% or more of the voting power of a covered
corporation, other than pursuant to a registered firm commitment underwriting
or, in certain cases, pursuant to the approving vote of the board of directors.
The relevant provisions are contained in Subchapters 25E through 25H of the
PaBCL.
Subchapter 25E (relating to control transactions) provides that if any
person or group acquires 20% or more of the voting power of a covered
corporation, the remaining shareholders may demand from such person or group the
fair value of their shares, including a proportionate amount of any control
premium.
Subchapter 25F (relating to business combinations) delays for five years
and imposes conditions upon "business combinations" between an "interested
shareholder" and the corporation. The term "business combination" is defined
broadly to include various transactions utilizing a corporation's assets for
purchase price amortization or refinancing purposes. For this purpose, an
"interested shareholder" is defined generally as the beneficial owner of at
least 20% of a corporation's voting shares.
Subchapter 25G (relating to control-share acquisitions) prevents a person
who has acquired 20% or more of the voting power of a covered corporation from
voting such shares unless the "disinterested" shareholders approve such voting
rights. Failure to obtain such approval exposes the owner to the risk of a
forced sale of the shares to the issuer. If shareholder approval is obtained,
the corporation is also subject to Subchapters 25I and 25J. Subchapter 25I
provides for a minimum severance payment to certain employees terminated within
two years of the approval. Subchapter 25J prohibits the abrogation of certain
labor contracts prior to their stated date of expiration.
-46-
Subchapter 25H (relating to disgorgement) applies in the event that (i) any
person or group may acquire control of the corporation or (ii) a person or group
acquires (or publicly discloses an offer or intent to acquire) 20% or more of
the voting power of the corporation and, in either case, sells shares within 18
months thereafter. Any profits from sales of equity securities of the
corporation by the person or group during the 18-month period belong to the
corporation if the securities that were sold were acquired during the 18-month
period or within 24 months prior thereto.
Subchapters 25E through 25H contain a wide variety of transactional and
status exemptions, exclusions and safe harbors. As permitted under the PaBCL,
Old York has opted out of the provisions of Subchapters 25E through 25G but is
subject to the provisions of Subchapters 25H.
In addition, the fiduciary duty standards applicable to Old York's Board of
Directors under the PaBCL (i) explicitly give the Board of Directors the
authority to weigh (in addition to consideration of employees, suppliers,
customers and creditors of the corporation, the communities in which the
corporation is located and other pertinent factors) the short and long-term
interests of the corporation and the possibility that they may be best served by
the independence of the corporation, and the resources, intent and past and
potential conduct of the prospective acquiror, (ii) relieve the board from any
duty to regard the shareholder interest as dominant or controlling, (iii)
explicitly give the board the discretion to refuse to redeem a shareholder
rights plan or to refuse to take certain specified actions with respect to
potential acquisitions of control of the corporation, (iv) declare actions by
directors with respect to a takeover bid to be subject to the same standard of
conduct for directors that is applicable to all other conduct and (v) establish
a presumption that actions with respect to a takeover bid by the "disinterested
directors" (a term defined to include essentially all directors except certain
officers and persons associated with the prospective acquiror) are lawful unless
it is proved under a clear and convincing evidence standard that the director
did not act in good faith after reasonable investigation.
Under a provision of the Pennsylvania Banking Code of 1965 designed to
protect shareholders of Pennsylvania banking institutions, subject to certain
exceptions, no person may offer to acquire, or acquire, control of more than 10%
of the outstanding shares of a Pennsylvania banking institution or 5% of the
outstanding shares of a Pennsylvania banking institution if such institution had
net operating loss carry forwards in excess of 20% of its total shareholders'
equity as reported in its most recent publicly available annual financial
statements, without the prior written approval of the Pennsylvania Department of
Banking.
The New Jersey Shareholders Protection Act (the "NJSPA") prohibits certain
transactions involving an "interested shareholder" and a "resident domestic
corporation." An "interested shareholder" is one that is directly or indirectly
a beneficial owner of 10% or more of the voting power of the outstanding voting
stock of a resident domestic corporation. The NJSPA prohibits certain business
combinations between an interested shareholder and a resident domestic
corporation for a period of five years after the date the interested shareholder
acquired its stock, unless the business combination was approved by the resident
domestic corporation's board of directors prior to the stock acquisition date.
After the five-year period expires, the prohibition on certain business
combinations continues unless the combination is approved by the affirmative
vote of two-thirds of the voting stock not beneficially owned by the interested
shareholder, the combination is approved by the board prior to the interested
shareholder's stock acquisition date or certain fair price provisions are
satisfied.
Both New Jersey and Pennsylvania law include a business combination statute
and a provision that permits, in certain circumstances, directors to consider
factors other than any effects of an action on the shareholders in discharging
their fiduciary duties as a director.
-47-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF OLD YORK
The following table sets forth information, as of January 31, 1995, by each
director and executive officer of Old York and by all directors and executive
officers as a group. Old York knows of no person or group which beneficially
owns 5% or more of Old York Common stock, except as set forth in the table.
Shares Beneficially Owned
------------------------------------
Amount and
Nature of
Name of Beneficial Percent of
Beneficial Owner Ownership (1) Class (2)
---------------- ------------- ----------
Guy M. Cooper ........................... 6,362 --
John J. Fiorillo ........................ 500 --
Robert M. Flood, Jr. .................... 100 --
Carl F. Haeussler, Jr. .................. 200 --
Mark Hankin(3) .......................... 271,356 9.60%
Harry Hilger, Jr.(4) .................... 3,200 --
Henry B. Holtzman ....................... 15,300 --
Stanford S. Hunn ........................ 7,000 --
Allan Nappen ............................ 9,517 --
Arthur Poley ............................ 22,200 --
George S. Rapp(5) ....................... 667 --
Leon Riebman ............................ 20,445 --
James S. Weese .......................... 100 --
Arlene G. Goldbach(6) ................... 379 --
Erwin K. Wenner(5) ...................... -- --
All Directors and Executive
Officers of Old York as a group........ 357,326 12.65%
(12 directors, 3 officers,
15 persons in total)
Shareholder:
Nappen and Associates ................. 145,909 5.2%
Limited Partnership
119 Keystone Drive
Montgomeryville, PA 18936
- -----------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the Commission and may include securities
owned by or for the individual's spouse and minor children and any other
relative who has the same home, as well as securities to which the
individual has or shares voting or investment power or has the right to
acquire beneficial ownership within 60 days after January 31, 1995.
Beneficial ownership may be disclaimed as to certain of the securities.
(2) Less than one percent unless otherwise indicated.
(3) Includes 1,311 shares owned by Mr. Hankin's wife, 6,896 shares held in
trust by Mr. Hankin for his son and 5,544 shares held in trust by Mr.
Hankin for his daughter, with respect to which Mr. Hankin disclaims
beneficial ownership. The total shares presented as beneficially owned by
Mr. Hankin presents an adjustment from previously filed reports.
(4) Includes 1,000 shares owned jointly with Mr. Hilger's wife and 600 shares
owned by Mr. Hilger's wife's IRA.
(5) Messrs. Rapp and Wenner are no longer executive officers of Old York.
(6) Ms. Goldbach is not a director of Old York.
-48-
SHAREHOLDER PROPOSALS
If the Merger is not approved at the Meeting, an annual meeting of
shareholders of Old York will thereafter be scheduled and announced. Old York
will notify Old York shareholders of the date by which any proposal which an Old
York shareholder wishes to have included in the proxy solicitation materials to
be used in connection with the annual meeting must be received by Old York,
which date will be a reasonable time before the solicitation is made.
LEGAL OPINION
Certain legal matters relating to the issuance of the shares of Midlantic
Common Stock offered hereby and certain tax consequences of the Merger will be
passed upon by Pitney, Hardin, Kipp & Szuch, counsel to Midlantic. Members in
the law firm of Pitney, Hardin, Kipp & Szuch beneficially own 7,250 shares of
Midlantic Common Stock as of April 21, 1995.
EXPERTS
The financial statements of Midlantic as of December 31, 1994 and 1993 and
for each of the years in the three-year period ended December 31, 1994 included
in this Proxy Statement (including those incorporated by reference) have been so
included in reliance upon the report of Coopers & Lybrand L.L.P., independent
certified public accountants, and have been included in this Proxy Statement
upon the authority of said firm as experts in accounting and auditing. The
reports of Coopers & Lybrand L.L.P. refer to a change in the methods of
accounting for postemployment benefits and investment securities for the year
ended 1994, and a change in the methods of accounting for postretirement
benefits other than pensions and income taxes for the year ended 1993.
The consolidated financial statements of Old York, as of December 31, 1994
and 1993 and for each of the years in the three-year period ended December 31,
1994, incorporated by reference in this Prospectus, have been so incorporated in
reliance upon the report of Rudolph, Palitz LLP, independent certified public
accountants, given on the authority of said firm as experts in accounting and
auditing. The report of Rudolph, Palitz LLP covering the financial statements
referred to above refers to: uncertainty with respect to the effect of the
proposed merger with Midlantic; uncertainties with respect to the effects of
potential regulatory actions; uncertainties regarding various lawsuits to which
the Bank is subject; uncertainty with respect to the estimates of fair value of
financial instruments; and changes in the methods of accounting for investments
and income taxes.
-49-
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 29, 1994
("Agreement"), is among MIDLANTIC CORPORATION ("the Acquiror"), a New Jersey
corporation and registered bank holding company, MIDLANTIC BANK, NATIONAL
ASSOCIATION, (the "Acquiring Bank"), a national banking association and a
wholly-owned subsidiary of the Acquiror, OLD YORK ROAD BANCORP, INC. (the
"Company"), a Pennsylvania corporation and registered bank holding company, and
BANK AND TRUST COMPANY OF OLD YORK ROAD, a Pennsylvania chartered commercial
bank and a wholly-owned subsidiary of the Company (the "Acquired Bank").
WHEREAS, the respective Boards of Directors of the Acquiror and the Company
have each determined that it is in the best interests of the Acquiror and the
Company, respectively, and their respective stockholders to proceed with the
acquisition contemplated by this Agreement upon the terms and conditions
hereinafter set forth;
WHEREAS, the acquisition will be accomplished by first merging the Company
with and into the Acquiror with the Acquiror surviving and the Company
shareholders receiving the consideration hereinafter set forth, and immediately
thereafter merging the Acquired Bank with and into the Acquiring Bank with the
Acquiring Bank surviving;
WHEREAS, for Federal income tax purposes, it is intended that the
acquisition shall qualify as a reorganization under the provisions of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, to induce the Acquiror to enter into this Agreement,
simultaneously with the execution of this Agreement, the Company has entered
into a stock option agreement with the Acquiror (the "Stock Option Agreement"),
pursuant to which the Company has granted to the Acquiror options to purchase
shares of the authorized and unissued Company Common Stock (as hereinafter
defined), at an option price and subject to the terms and conditions, set forth
in the Stock Option Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, and intending to be
legally bound, the parties hereto hereby agree as follows:
A-1
ARTICLE I--THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereafter defined), the Company shall be merged with and
into the Acquiror (the "Merger") in accordance with the Pennsylvania Business
Corporation Law and the New Jersey Business Corporation Act (the "NJBCA").
1.2. Effective Time. As soon as practicable following fulfillment or waiver
of the conditions specified in Article VI and consummation of the closing
described herein, and provided that this Agreement has not been terminated or
abandoned pursuant to Article VII, the Acquiror and the Company (the
"Constituent Corporations") shall take or shall have taken all steps necessary
to cause the filing and the effectiveness of (a) articles of merger (the
"Pennsylvania Articles of Merger"), in a form reasonably acceptable to the
Acquiror, with the Secretary of the Commonwealth of Pennsylvania, and (b) a
certificate of merger (the "New Jersey Certificate of Merger"), in the form
attached hereto as Exhibit 1.2, with the Secretary of State of the State of New
Jersey. The term "Effective Time" shall mean the close of business on the first
day when both the New Jersey Certificate of Merger and the Pennsylvania Articles
of Merger have been so filed and are effective.
1.3. Effect of the Merger. Pursuant to the Merger, the Acquiror shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall continue to be a New Jersey corporation.
Upon consummation of the Merger, the Surviving Corporation shall thereupon and
thereafter possess all of the rights, privileges, powers, immunities, purposes
and franchises, both public and private, of each of the Constituent
Corporations; and all property, real, personal and mixed, tangible and
intangible, and all debts due on whatever account, and all other choses in
action, and all and every other interest, of or belonging to or due to each of
the Constituent Corporations so merged, shall be deemed to be vested in the
Surviving Corporation without further act or deed; and the title to any real
estate or any interest therein, vested in any of such Constituent Corporations,
shall not revert or be in any way impaired by reason of the Merger. Any
reference to either of the Constituent Corporations in any contract or document,
whether executed or taking effect before or after the Effective Time, shall be
considered a reference to the Surviving Corporation if not inconsistent with the
other provisions of the contract or document; and any pending action or other
judicial proceeding to which either of the Constituent Corporations is a party,
shall not be deemed to have abated or to have discontinued by reason of the
Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Merger had not been made; or the Surviving Corporation may be
substituted as a party to such action or
A-2
proceeding, and any judgment, order or decree may be rendered for or against it
that might have been rendered for or against either of the Constituent
Corporations if the Merger had not occurred.
1.4. Consummation of Merger. The closing of the Merger (the "Closing")
shall take place (a) at the offices of the Acquiror as promptly as practicable
after the later of (i) the day of (and immediately following) the receipt of
approval of the Merger by the Company's shareholders, and also the approval of
the Acquiror's shareholders if required, and (ii) the third business day after
the day on which the last of the conditions set forth in Article VI (other than
the condition set forth in Section 6.1.1) is satisfied or duly waived or (b) at
such other time and place and on such other date as the Acquiror and the Company
may agree. The date on which the Closing is conducted pursuant to this Section
1.4 is sometimes referred to herein as the "Closing Date." At the Closing, all
documents required by the terms of this Agreement to be delivered at or prior to
the consummation of the Merger will be exchanged by the parties.
1.5. Certificate of Incorporation and By-Laws. The certificate of
incorporation and by-laws of the Acquiror in effect at the Effective Time shall
be the certificate of incorporation and by-laws of the Surviving Corporation,
until duly amended in accordance with their terms and the NJBCA.
1.6. Directors and Officers. The directors and officers of the Acquiror
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation, from and after the Effective Time,
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 the Surviving Corporation's Certificate of Incorporation and by-laws and the
NJBCA.
1.7. The Bank Merger. Subject to the terms and conditions of this
Agreement, immediately following the Effective Time, the Acquired Bank shall be
merged with and into the Acquiring Bank (the "Bank Merger") pursuant to a merger
agreement in the form attached hereto as Exhibit 1.7, to be executed by the
Acquired Bank and the Acquiring Bank, and the separate corporate existence of
the Acquired Bank shall thereupon cease in accordance with the applicable
provisions of The Pennsylvania Banking Code of 1965 (the "Pennsylvania Banking
Code") and The National Bank Act (the "National Bank Act").
1.8. Effect of the Bank Merger. Pursuant to the Bank Merger, the Acquired
Bank and the Acquiring Bank (the "Constituent Banks") shall be merged, and the
Acquiring Bank shall be the surviving bank in the Bank Merger (sometimes
hereinafter referred to as the "Surviving Bank") and shall continue to be a
national banking association. Upon consummation of the Bank Merger, the
A-3
Surviving Bank shall thereupon and thereafter possess all of the rights,
privileges, immunities and franchises, both public and private powers, including
appointments, designations and nominations of a trust or fiduciary nature, of
each of the Constituent Banks; and all property, real, personal and mixed,
tangible and intangible, and all debts due on whatever account, and all other
choses in action, and all and every other interest, of or belonging to or due to
each of the Constituent Banks so merged, shall be deemed to be vested in the
Surviving Bank without further act or deed; and the title to any real estate or
any interest therein, vested in any of such Constituent Banks, shall not revert
or be in any way impaired by reason of the Bank Merger. Upon consummation of the
Bank Merger, the Surviving Bank shall thenceforth be responsible and liable for
all the liabilities, obligations and penalties of each of the Constituent Banks.
Any reference to either of the Constituent Banks in any contract or document,
whether executed or taking effect before or after the Bank Merger, shall be
considered a reference to the Surviving Bank if not inconsistent with the other
provisions of the contract or document; and any pending action or other judicial
proceeding to which either of the Constituent Banks is a party, shall not be
deemed to have abated or to have discontinued by reason of the Bank Merger, but
may be prosecuted to final judgment, order or decree in the same manner as if
the Bank Merger had not been made; or the Surviving Bank may be substituted as a
party to such action or proceeding, and any judgment, order or decree may be
rendered for or against it that might have been rendered for or against either
of the Constituent Banks if the Bank Merger had not occurred.
1.9. Articles of Incorporation and By-Laws. The articles of association and
by-laws of the Acquiring Bank in effect at the Effective Time shall be the
articles of association and by-laws of the Surviving Bank, until duly amended in
accordance with their terms and the National Bank Act.
1.10. Bank Directors and Officers. The directors and officers of the
Acquiring Bank immediately prior to the Effective Time shall be the directors
and officers, respectively, of the Surviving Bank, from and after the Effective
Time, 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 the Surviving Bank's Articles of Association and by-laws and the
National Bank Act.
A-4
ARTICLE II--CONVERSION OF SHARES
2.1. Exchange. As of the Effective Time, by virtue of the Merger and
without action on the part of any holder thereof:
2.1.1. Acquiror Stock. Each share of capital stock of the Acquiror that is
issued and outstanding immediately prior to the Effective Time shall remain
outstanding and continue as one share of the Surviving Corporation and each
certificate evidencing ownership of any such shares shall continue to evidence
ownership of the same number of shares of the Surviving Corporation.
2.1.2. Certain Company Shares Cancelled. Each share of common stock of the
Company, par value $1.00 per share (the "Common Stock"), that is either (a)
owned by the Acquiror or any direct or indirect wholly-owned subsidiary of the
Acquiror (except for any shares of Common Stock held in trust accounts, managed
accounts or in any similar manner as trustee or in a fiduciary capacity ("Trust
Account Shares") and shares held as collateral or in lieu of a debt previously
contracted ("Collateral Shares"), (b) held in the treasury of the Company or (c)
owned by any direct or indirect wholly-owned subsidiary of the Company (except
Trust Account Shares and Collateral Shares) shall be cancelled and retired and
no capital stock of the Acquiror, cash or other consideration shall be paid or
delivered in exchange therefor.
2.1.3. Acquired Shares. Subject to Sections 2.6 and 2.8 hereof, each share
of Common Stock that is issued and outstanding immediately prior to the
Effective Time, including without limitation all Trust Account Shares and
Collateral Shares, and that is not retired pursuant to Section 2.1.2, shall be
converted as follows:
2.1.3.1. Each such share of Common Stock which under the terms of Section
2.3 is to be converted into the right to receive cash, shall be converted into
the right to receive $10.00 in cash.
2.1.3.2. Subject to Sections 2.9 and 7.2.3.5, each such share of Common
Stock which under the terms of Section 2.3 is to be converted into the common
stock of the Acquiror, par value $3.00 per share ("Acquiror Common Stock"),
shall be converted into 0.3721 shares (as the same may be adjusted as herein
provided, the "Exchange Ratio") of Acquiror Common Stock. The certificates for
Acquiror Common Stock issued in the Merger will also evidence and entitle the
holder thereof to certain Rights pursuant to the Rights Declaration of the Board
of Directors of the Acquiror, dated as of February 23, 1990.
2.1.3.3. No Dissenting Shares (as hereinafter defined) shall be converted
into or represent a right to receive cash or Acquiror Common Stock under this
Section 2.1.3, but such Dissenting Shares shall be subject to the provisions of
Section 2.8.
A-5
2.1.3.4. Each authorized but unissued share of Common Stock shall cease to
exist.
2.2. Election Procedures. The Acquiror shall authorize the Acquiring Bank
or, in the Acquiror's sole discretion, any other commercial bank having assets
of more than $200,000,000, to act as exchange agent hereunder (the "Exchange
Agent") pursuant to an agreement (the "Exchange Agent Agreement") in form
reasonably acceptable to the Company. The Exchange Agent Agreement shall set
forth procedures for the exchange of Common Stock for consideration in the
Merger, including procedures for holders of Common Stock to request that they
receive all cash or all stock consideration, as set forth below:
2.2.1. Each holder of Common Stock (other than holders of Dissenting Shares
or shares of Common Stock to be cancelled as set forth in Section 2.1.2) shall
have the right to submit an election form to the Exchange Agent (an "Election
Form") specifying whether such holder desires to have such holder's Common Stock
converted into Acquiror Common Stock or the right to receive cash in the Merger
(in either case, an "Election") in accordance with and subject to the following
procedures:
2.2.2. Each holder of Common Stock may specify in the Election Form:
2.2.2.1. that such holder desires to have all of the shares of Common Stock
owned by such holder converted into the right to receive cash in the Merger
("Cash Election"); or
2.2.2.2. that such holder desires to have all of the shares of Common Stock
owned by such holder converted into Acquiror Common Stock in the Merger (a
"Stock Election"). Any shareholder who validly submits an Election Form and does
not make a Cash Election in such Election Form, or who does make a Cash Election
and thereafter validly revokes such Cash Election, or who does not validly
submit an Election Form, shall be deemed to have made a Stock Election.
2.2.3. The Company will use its best efforts to cause the Exchange Agent to
make the Form of Election (accompanied by the Company Proxy Statement described
in Section 5.10) available to all persons who are or who become Company
shareholders of record during the period between the record date for the Company
Meeting (as defined in Section 5.10) and the business day immediately prior to
the Election Date (as defined in this Section 2.2.3). As used herein, the term
"Election Date" means a date announced by the Acquiror, in a news release
delivered to the Dow Jones News Service, as the last day on which Forms of
Election will be accepted; provided, however, that such day (i) shall be a
business day no more than five business days prior to the anticipated Effective
Time and no less than two business days prior to the
A-6
anticipated Effective Time and (ii) shall be at least twenty business days
following the date of such news release; provided further, that the Acquiror
shall have the right to set a later date as the Election Date (and such later
date shall be deemed the "Election Date" for all purposes hereunder) by means of
a similar new release, so long as such later date is no later than the date on
which the Effective Time occurs.
2.2.4. Any Election shall have been properly made only if the Exchange
Agent shall have received, at its office designated in the Form of Election, by
5:00 p.m., local time in the city in which the principal place of business of
such Exchange Agent is located, on or before the Election Date, a Form of
Election properly completed and signed and accompanied by certificates for the
shares of Common Stock to which such Form of Election relates (or by an
appropriate guarantee of delivery of such certificates as set forth in such Form
of Election from a member of any registered national securities exchange or of
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in the United States, provided
such certificates are in fact delivered by the time set forth in such guarantee
of delivery). Any Election relating to shares of Common Stock with respect to
which the holder thereof has filed and not withdrawn as of the Effective Time a
written demand for payment of the fair value of Common Stock in accordance with
the provisions of Section 2.8 hereof shall be deemed to have been automatically
revoked as of the Election Date.
2.2.5. Notwithstanding anything herein to the contrary, a combined Form of
Election containing a single Election (a "Combined Form of Election") may be
submitted by two or more holders of shares of Common Sock either of whom may be
deemed constructively to own the holders' shares of Common Stock by reason of
the ownership attribution rules of Section 318 of the Code. Any Combined Form of
Election and any change or revocation in such Combined Form of Election must be
signed by or on behalf of all holders of the Common Stock covered thereby. For
purposes of this Article II, all shares of Common Stock covered by a single
Combined Form of Election held by holders of Common Stock submitting such
Combined Form of Election will be treated as being held by a single holder.
2.2.6. Any holder of Common Stock may at any time prior to the Election
Date change such holder's Election by written notice received by the Exchange
Agent at or prior to the Election Date accompanied by a properly completed,
revised Form of Election.
2.2.7. Any holder of Common Stock may at any time prior to the Election
Date revoke such holder's Election by written notice received by the Exchange
Agent at or prior to the Election Date or by withdrawal prior to the Election
Date of such holder's
A-7
certificates for Common Stock or of the guarantee of delivery of such
certificates, previously deposited with the Exchange Agent.
2.2.8. The Acquiror shall have the right to make rules not inconsistent
with the terms of this Agreement governing the validity of the Forms of
Election, the manner and extent to which Elections are to be taken into account
in making the determinations prescribed by Section 2.3, the issuance and
delivery of certificates for Acquiror Common Stock into which Common Stock is
converted in the Merger and the payment for shares of Common Stock converted
into the right to receive cash in the Merger. All such rules and determinations
thereunder shall be final and binding on all holders of shares of Common Stock.
2.3. Selection of Common Stock. The manner in which each share of Common
Stock (other than shares of Common Stock to be retired as set forth in Section
2.1.2) shall be converted at the Effective Time into either cash or Acquiror
Common Stock shall be as set forth below in this Section 2.3.
2.3.1. As is more fully set forth below, the number of shares of Common
Stock to be converted into the right to receive cash in the Merger pursuant to
this Agreement (the "Maximum Cash Conversion Number") shall not exceed (i) 49%
of the number of shares of Common Stock outstanding immediately prior to the
Effective Time minus (ii) the sum of (A) the number of shares of Common Stock
purchased by the Acquiror or any subsidiary of the Acquiror on or after the date
hereof, (B) the number of shares of Common Stock redeemed by the Company, if
any, from the date hereof to the Effective Time, (C) the number of shares of
Common Stock as to which a cash amount is to be paid to the Executive, as
defined in and in, accordance with, Section 2.12.1 hereof, and (D) the number of
shares of Common Stock if any, as to which the holders of such shares have filed
and not withdrawn a written demand for payment of the fair value of their Common
Stock pursuant to the provisions of Section 2.8 at or before the Meeting. There
shall be no limitation on the number of shares of Common Stock to be converted
into Acquiror Common Stock in the Merger.
2.3.2. Each share of Common Stock for which Stock Elections have been made
or deemed made ("Stock Election Shares") and each Non-Electing Common Share (as
defined in Section 2.3.5) shall be converted into Acquiror Common Stock in the
Merger.
2.3.3. If Cash Elections are received for a number of shares of Common
Stock which is more than the Maximum Cash Conversion Number, and the shares of
Common Stock for which Cash Elections have been received ("Cash Election
Shares") shall be converted into the right to receive cash and Acquiror Common
Stock in the following manner:
A-8
2.3.3.1. each Cash Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the product of (x)
$10.00 and (y) a fraction (the "Cash Fraction"), the numerator of which shall be
the Maximum Cash Conversion Number and the denominator of which shall be the
total number of Cash Election Shares, and (ii) a number of shares of Acquiror
Common Stock equal to the product of (x) the Exchange Ratio and (y) a fraction
equal to one minus the Cash Fraction.
2.3.4. If Cash Elections are received for a number of shares of Common
Stock which is equal to or less than the Maximum Cash Conversion Number, then
each share of Common Stock covered by a Cash Election shall be converted into
the right to receive cash in the Merger.
2.3.5. For the purposes of this Section 2.3, outstanding shares of Common
Stock (other than shares of Common Stock owned by the Acquiror, the Acquiring
Bank or any other subsidiary of the Acquiror) as to which an Election is not in
effect on the Election Date shall be referred to as "Non-Electing Common
Shares." If the Exchange Agent shall reasonably determine for any reason that
any Election was not properly made with respect to shares of Common Stock such
Election shall be deemed to be not in effect and shares of Common Stock covered
by such Election shall, for purposes hereof, be deemed to be Non-Electing Common
Shares.
2.4. Beneficial Owners. Any record holder of Common Stock may submit two or
more Forms of Election, each containing a different specification of preference
(or non-preference) covering all or any portion of the shares of Common Stock
owned by such record holder, provided that, upon request of the Acquiror, such
record holder shall certify to the satisfaction of the Acquiror that such record
holder holds the shares of Common Stock registered in the name of the record
holder as nominee for two or more persons and that the various Forms of Election
submitted by such record holder represent the individual specifications of
preference (or non-preference) of the respective beneficial owners as to all of
the shares of Common Stock beneficially owned by them, and for purposes of this
Article II each beneficial owner for which such a Form of Election is submitted
will be treated as a separate holder of Common Stock.
2.5. Delay. It is understood by the parties hereto that the election
procedure described in this Article II and the allocation procedure described in
this Article II will involve substantial administrative work to complete the
computation, verification and exchange tasks involved and that the rules of the
Depository Trust Company may require a delay after the Effective Time before the
final allocations may be made. No interest shall be payable by the Acquiror or
the Exchange Agent with respect to any cash to be paid pursuant to this Article
II, even if the
A-9
payment of cash pursuant to the Merger is delayed by reason of the
administrative steps required to effect the steps described herein.
2.6. No Fractional Shares. Acquiror will not issue fractional shares of
Acquiror Common Stock. In lieu of fractional shares of Acquiror Common Stock,
the shareholders of the Company entitled to receive such fractional shares will
receive an amount of cash equal to the value of such fractional share interest
based on the Last Price (as defined in Section 2.7) of the Acquiror Common Stock
on the date on which the Effective Time occurs. Such fractional share interest
shall not include the right to vote or to receive dividends or any interest
thereon.
2.7. Last Price. For purposes of this Agreement, "Last Price" shall mean
the closing price per share of Acquiror Common Stock as quoted on the NASDAQ
National Market System ("NASDAQ") (as published in The Wall Street Journal) for
each trading day as to which such closing price is relevant hereunder or, in the
absence of such quotations for any such trading day, as determined by such other
source upon which the Acquiror and the Company shall mutually agree.
2.8. Dissenting Shares. The shares of Acquiror Common Stock held by those
shareholders of the Company who have timely and properly exercised their
dissenters' rights in accordance with all applicable laws and regulations
relating to the merger of a Pennsylvania corporation into a New Jersey
corporation (the "Appraisal Laws") are herein referred to as "Dissenting
Shares." Each Dissenting Share, the holder of which, as of the Effective Time of
the Merger, has not effectively withdrawn or lost the dissenter's rights in
respect thereto under the Appraisal Laws, shall not be converted into or
represent a right to receive cash or Acquiror Common Stock but the holder
thereof shall be entitled only to such rights as are granted by the Appraisal
Laws. Each holder of Dissenting Shares who becomes entitled to payment for
Common Stock pursuant to the provisions of the Appraisal Laws shall receive
payment therefor from the Acquiror (but only after the amount thereof shall have
been agreed upon or finally determined pursuant to such provisions). If a holder
of shares of Common Stock who dissents under the Appraisal Laws shall
effectively withdraw or lose (through failure to perfect or otherwise) the right
to dissent, then, as of the Effective Time or the occurrence of such event,
whichever last occurs, those shares shall be deemed, upon the surrender of the
Certificate representing those shares, to be Non-Electing Common Shares for
purposes of this Agreement and shall be converted into Acquiror Common Stock in
accordance with the provisions hereof. The Company shall give the Acquiror
notice of dissent of any shares of Common Stock, attempted withdrawals of any
such notices of dissent and any other instruments served pursuant to the
Appraisal Laws received by the Company relating to shareholders' rights, if any,
to dissent. The Company shall not, except with the prior written consent of the
Acquiror, voluntarily
A-10
make any payment with respect to any dissenting shares of the Company, offer to
settle or settle any demands for payment with respect thereto or approve any
withdrawal of any such demands.
2.9. Adjustments. Notwithstanding the foregoing, the Exchange Ratio set
forth in Section 2.1.3.2 shall be subject to appropriate adjustment in the event
that, subsequent to the date of this Agreement but prior to the Effective Time,
the outstanding Acquiror Common Stock shall be increased, decreased, changed
into or exchanged for a different number or kind of securities through a stock
dividend, recapitalization, stock split, reorganization, reclassification or
reverse stock split (or any similar change in capitalization) pursuant to which
the Acquiror shall issue securities to its existing shareholders without
receiving consideration therefor.
2.10. Exchange of Certificates.
2.10.1. Exchange Agent. Except as set forth herein, from and after the
Effective Time, each holder of a certificate (each such certificate, a
"Certificate") representing outstanding shares of Common Stock that have been
converted into the right to receive cash, without interest (the "Cash
Consideration"), or into Acquiror Common Stock and cash, without interest, in
lieu of fractional shares, as applicable (the "Common Stock Consideration")
shall be entitled to receive in exchange therefor, upon surrender of the
Certificate to the Exchange Agent, the applicable Cash Consideration or Common
Stock Consideration for each share of Common Stock so represented by the
Certificate surrendered by such holder thereof. All certificates representing
shares of Acquiror Common Stock issued as part of the Common Stock Consideration
shall be properly issued and countersigned and executed and authenticated, as
appropriate.
2.10.2. Notice of Exchange. Promptly after the Effective Time, the Acquiror
shall cause the Exchange Agent to mail and/or make available to each record
holder of a Certificate who did not submit such Certificate and a Form of
Election prior to the Effective Time a notice and letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) advising such holder of the effectiveness of the Merger and the
procedures to be used in effecting the surrender of the Certificates for
exchange therefor. Upon surrender to the Exchange Agent by any such holder of a
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereon, and such other documents
as may reasonably be requested, the Acquiror shall cause the Exchange Agent to
promptly deliver to such holder the Common Stock Consideration to which such
holder would have been entitled had such holder submitted a valid Stock Election
(with
A-11
respect to the shares represented by such Certificate) prior to the Election
Date, and such Certificate shall forthwith be cancelled.
2.10.3. Transfer. If delivery of all or part of the Common Stock
Consideration is to be made to a person other than the person in whose name a
surrendered Certificate is registered, it shall be a condition to such delivery
or the exchange of such Certificate that such surrendered Certificate be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such delivery or exchange shall have paid any transfer and
other taxes required by reason of such delivery or exchange in a name other than
that of the registered holder of the Certificate surrendered or shall have
established to the reasonable satisfaction of the Acquiror that such tax either
has been paid or is not payable.
2.10.4. Right to Consideration. Until surrendered and exchanged in
accordance with this Section 2.10, each Certificate shall, after the Effective
Time, represent solely the right to receive the appropriate Common Stock
Consideration or Cash Consideration, as the case may be, multiplied by the
number of shares of Common Stock evidenced by such Certificate, together, in the
case of Common Stock Consideration consisting of shares of Acquiror Common Stock
with any dividends or other distributions as provided in Section 2.10.5, and
shall have no other rights. From and after the Effective Time, the Acquiror
shall be entitled to treat any Certificates that have not yet been surrendered
for exchange as evidencing only the ownership of the aggregate Common Stock
Consideration or Cash Consideration, as the case may be, into which the shares
represented by such Certificates have been converted, notwithstanding any
failure to surrender such Certificates. Any portion of the Common Stock
Consideration (or dividends, distributions or interest with respect thereto) or
Cash Consideration which remains unclaimed for two years after the Effective
Time shall be returned by the Exchange Agent to the Acquiror, and any holders of
Common Stock who have not theretofore complied with this Article II shall
thereafter (but only until such time as such property shall escheat to any
applicable governmental authority) look only to the Acquiror for the applicable
Common Stock Consideration or Cash Consideration. Neither the Company, the
Acquired Bank, the Acquiror or the Acquiring Bank shall be liable to any holder
of shares of Common Stock for any Common Stock Consideration (or dividends,
distributions or interest with respect thereto) or Cash Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
2.10.5. Distribution with Respect to Unexchanged Certificates. No dividends
or other distributions with respect to Acquiror Common Stock declared or paid by
the Acquiror after the Effective Time and with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate until
A-12
the holder of such Certificate surrenders such Certificate (and then only if
such holder is entitled to receive Acquiror Common Stock pursuant to the
Merger). Subject to applicable law, following surrender of any such Certificate
to be converted into Acquiror Common Stock there shall be paid to each holder of
certificates representing shares of Acquiror Common Stock issued in exchange
therefor, without interest, (i) the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such shares of Acquiror Common Stock and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such shares of Acquiror Common Stock.
2.10.6. No Interest. All payments of dividends, cash or cash for fractional
shares shall be made without any payment of interest.
2.10.7. Transfer Books. At the Effective Time, the stock transfer books of
the Company shall be closed, and no transfer of Common Stock shall thereafter be
made. If, after the Effective Time, any Certificates are presented to the
Exchange Agent or the Acquiror, they shall be cancelled, retired and exchanged
as provided in this Article II.
2.11. Withholding Rights. The Acquiror shall be entitled to require each
holder of Common Stock to deliver to the Exchange Agent a properly completed
Form W-9 or its equivalent, as a precondition to delivery of the holder's Cash
consideration or Common Stock consideration, as the case may be. The Acquiror
shall be entitled to deduct and withhold, or cause the Exchange Agent to deduct
and withhold, from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Common Stock the minimum amounts (if any)
that the Acquiror is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Acquiror, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Common Stock in respect of which such deduction
and withholding was made by the Acquiror.
2.12. Options. At the Effective Time, all options to purchase Common Stock
which the Company is obligated to grant to Erwin K. Wenner (the "Executive") in
connection with the Merger (the "Executive Options") shall automatically be
cancelled either in accordance with paragraph 2.12.1 below or in accordance with
paragraph 2.12.2 below.
2.12.1. At the Effective Time, each of (a) the Executive Option to purchase
8,333 shares of Common Stock in the event that
A-13
a public announcement is made of a merger or affiliation as the result of the
efforts of the Executive or of the Executive in conjunction with a certain
special committee of the Company's Board of Directors (the "8,333 Executive
Option") and (b) the Executive Option to purchase 25,000 shares of Common Stock
in the event that a public announcement is made of a sale of 80% or more of the
stock of the Company or the Acquired Bank, the merger or consolidation of the
Company or the Acquired Bank or the sale of substantially all of the assets of
the Company or the Acquired Bank, shall be cancelled, and the Executive shall
receive as consideration for such cancellation, for each share of Common Stock
covered by each such option an amount in cash equal to the excess, if any, of
$10.00 over the applicable exercise price of the option.
2.12.2. At the Effective Time, the Executive Option to purchase (i) 8,333
shares of Common Stock, exercisable commencing July 25, 1996, (ii) 8,333 shares
of Common Stock, exercisable commencing July 25, 1997, and (iii) 8,334 shares of
Common Stock, exercisable commencing July 25, 1998, respectively, shall be
cancelled.
2.12.3. The Company has delivered to the Acquiror a consent (in the form of
Exhibit 2.12.3) executed by the Executive agreeing that the covenants of the
Acquiror pursuant to this Section 2.12 are in full satisfaction of all
obligations of the Company and the Acquiror to the Executive with respect to the
Executive Options and with respect to any other options or other right of the
Executive to acquire or receive, at any time, any securities of the Company.
A-14
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY
References herein to "Company Disclosure Schedules" shall mean all of the
disclosure schedules required by this Article III, dated as of the date hereof
and referenced to the specific sections and subsections of Article III of this
Agreement as provided herein, which have been delivered on the date hereof by
the Company to the Acquiror. The Company hereby represents and warrants to the
Acquiror and the Acquiring Bank as follows:
3.1. Corporate Organization.
3.1.1. Company. The Company is a corporation that is duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. The Company is registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHCA"). The Company has full power
and authority, corporate and otherwise, to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except where the failure
to be so licensed, qualified or in good standing would not have a material
adverse effect on the business, results of operations, assets or financial
condition of the Company, the Acquired Bank, and the other "Company
Subsidiaries" (as hereinafter defined), taken as a whole (a "Company Material
Adverse Effect"). A true and complete copy of the Articles of Incorporation and
By-laws, as in effect on the date hereof, of the Company are contained in
Section 3.1.1 of the Company Disclosure Schedules.
3.1.2. Subsidiaries. The Acquired Bank and the corporations and other
entities listed in Section 3.1.2 of the Company Disclosure Schedules are the
only Company Subsidiaries. When used with reference to the Company, the term
"Company Subsidiary" means any corporation, partnership, limited liability
company, joint venture or other legal entity in which the Company, directly or
indirectly, owns at least a 50% stock or other equity interest or for which the
Company, directly or indirectly, acts as a general partner. The Acquired Bank is
a commercial bank duly organized, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania. Each other Company Subsidiary is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization as
set forth in Section 3.1.2. of the Company Disclosure Schedules. Each Company
Subsidiary has full power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business as a foreign
A-15
corporation or entity and is in good standing in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not constitute a Company Material Adverse Effect.
Section 3.1 of the Company Disclosure Schedules sets forth true and complete
copies of the Articles of Incorporation (or Certificate of Incorporation, as the
case may be) and By-laws or other governing instrument, as in effect on the date
hereof, of each Company Subsidiary. Except for the Acquired Bank and the other
Company Subsidiaries identified in Section 3.1.2 of the Company Disclosure
Schedules, the Company does not own or control, directly or indirectly, any
equity interest in any corporation, limited liability company, association,
partnership, joint venture or other entity.
3.2. Capitalization. The authorized capital stock of the Company consists
solely of 14,000,000 shares of Common Stock. As of the date hereof, there are
2,825,312 shares of Common Stock issued and outstanding. As of the date hereof,
there are 33,333 shares of Common Stock issuable upon exercise of the Executive
Options. Section 3.2 of the Company Disclosure Schedules sets forth a true and
complete copy of all agreements relating to the Executive Options. The
authorized capital stock of the Acquired Bank consists solely of 3,000,000
shares of common stock. As of the date hereof, there are 1,307,517 shares of
common stock of the Acquired Bank issued and outstanding. The capitalization and
equity interest ownership in each other Company Subsidiary is as set forth in
Section 3.2 of the Company Disclosure Schedules. Neither the Company nor any
Company Subsidiary has adopted any plan or agreement pursuant to which capital
stock may be issued or stock options may be granted other than the agreements
(all of which are set forth in Section 3.2 of the Company Disclosure Schedules)
which relate to the Executive Options. All issued and outstanding shares of
Common Stock and all issued and outstanding shares of capital stock or other
equity interest of each Company Subsidiary have been duly authorized and validly
issued, have been issued without violating the pre-emptive or other rights of
third parties, are fully paid, and are nonassessable. All of the outstanding
shares of capital stock or other equity interest of each Company Subsidiary are
owned by the Company and are free and clear of all liens, encumbrances, charges,
restrictions or rights of third parties. Except for the Executive Options,
neither the Company nor any Company Subsidiary has granted or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the transfer, purchase, subscription or issuance of
any shares of capital stock or equity interest of the Company or any Company
Subsidiary or has issued any securities representing the right to purchase,
subscribe or otherwise receive any shares of such capital stock or other equity
interest or any securities convertible into any such shares, and there are no
A-16
agreements or understandings to which the Company or any Company Subsidiary is a
party with respect to the voting of any such shares or other equity interest.
There are no outstanding contractual obligations requiring the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any outstanding
securities or other equity interest in the Company or any Company Subsidiary.
Except as set forth in Section 3.2 of the Company Disclosure Schedules, since
December 31, 1993, neither the Company nor any Company Subsidiary has
repurchased, redeemed or otherwise acquired any such securities or interests.
3.3. Authority; No Violation.
3.3.1. Authority. Subject to the approval of this Agreement and the
transactions contemplated hereby (other than the Stock Option Agreement, as to
which no shareholder approval is required) by the shareholders of the Company,
each of the Company and the Acquired Bank has full power and authority,
corporate and otherwise, to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated hereby in
accordance with the terms hereof. The Company has full power and authority to
execute and deliver the Stock Option Agreement, to perform its obligations
thereunder, and to consummate the transactions contemplated thereby in
accordance with the terms thereof. The execution and delivery of this Agreement
and the Stock Option Agreement, and the performance of the Company and the
Acquired Bank's obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of each of the Company and the Acquired Bank
in accordance with its respective Articles of Incorporation and By-laws and all
applicable laws and regulations. Except for approval by the Company's
shareholders of this Agreement, no other corporate proceedings on the part of
the Company or the Acquired Bank are necessary to consummate the transactions so
contemplated. This Agreement and the Stock Option Agreement have been duly and
validly executed by the Company and this Agreement has been duly and validly
executed by the Acquired Bank and constitute valid and binding obligations of
the Company and the Acquired Bank, enforceable against each of them in
accordance with their respective terms.
3.3.2. No Violation. Neither the execution and delivery of this Agreement
by the Company or the Acquired Bank, nor the execution and delivery of the Stock
Option Agreement by the Company, nor the consummation by the Company or the
Acquired Bank of the transactions contemplated hereby or thereby in accordance
with the terms hereof or thereof, or compliance by the Company or the Acquired
Bank with, or performance of, any of the terms or provisions hereof or thereof,
will (i) violate any provision of the Company's or the Acquired Bank's Articles
of Incorporation or By-
A-17
Laws, (ii) assuming that the consents and approvals set forth below are duly
obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to the Company or any Company
Subsidiary or any of their respective properties or assets, or (iii) except as
set forth in Section 3.3 of the Company Disclosure Schedules, violate, conflict
with, result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or other encumbrance upon
any of the respective properties or assets of the Company or any Company
Subsidiary under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, commitment, pledge, permit, deed of trust, license, lease,
contract, agreement or other instrument or obligation or any judgment, order,
decree, law, rule or other restriction of any governmental authority, in each
case to which the Company or the Company Subsidiary is a party, or by which the
Company or the Company Subsidiary may be bound or to which any of the assets or
properties of the Company or the Company Subsidiary are subject, except, with
respect to the matters described in clauses (ii) and (iii) above, such as
individually or in the aggregate will not constitute a Company Material Adverse
Effect, and which will not prevent or delay the consummation of the transactions
contemplated hereby. Except for consents and approvals of or filings or
registrations with or notices to the Federal Deposit Insurance Corporation (the
"FDIC"), the Board of Governors of the Federal Reserve System (the "FRB") and
the Pennsylvania Department of Banking (the "Department") (collectively, the
"Applicable Bank Regulatory Agencies"), applicable environmental protection
agencies (such as, but not limited to the New Jersey Department of Environmental
Protection and Energy ("DEPE")), the Securities and Exchange Commission (the
"SEC") and the shareholders of the Company, no consents or approvals of or
filings or registrations with or notices to any third party or any public body
or authority are necessary on behalf of the Company or the Acquired Bank in
connection with (x) the execution and delivery by the Company or the Acquired
Bank of this Agreement, (y) the execution and delivery by the Company of the
Stock Option Agreement or (z) the performance by the Company or the Acquired
Bank of their respective obligations hereunder (including, without limitation,
consummation of the Merger and the Bank Merger), the performance by the Company
of its obligations under the Stock Option Agreement, or the consummation of the
transactions contemplated hereby and thereby.
3.4. Financial Statements.
3.4.1. Section 3.4 of the Company Disclosure Schedules sets forth copies of
the consolidated statements of condition of the Company as of December 31, 1992
and 1993, and the related consolidated statements of income, changes in
shareholders' equity
A-18
and cash flows for the periods ended December 31, in each of the three years
1991 through 1993, in each case accompanied by the audit report of Rudolph,
Palitz, independent public accountants with respect to the Company, and the
unaudited consolidated statement of condition of the Company as of September 30,
1994 and the related unaudited consolidated statements of income and cash flows
for the nine months ended September 30, 1993 and September 30, 1994
(collectively, the "Company Financial Statements"). Except as set forth in
Section 3.4 of the Company Disclosure Schedules with respect to such unaudited
consolidated financial statements, the Company Financial Statements (including
the related notes) have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods covered
thereby (except as may be indicated therein or in the notes thereto), fairly
present the consolidated financial condition of the Company as of the respective
dates set forth therein and fairly present the consolidated results of
operations, changes in shareholders' equity and cash flows of the Company for
the respective periods set forth therein.
3.4.2. The books and records of the Company and each Company Subsidiary
have been maintained in compliance in all material respects with all applicable
legal, regulatory and accounting requirements.
3.4.3. Except as and to the extent reflected, disclosed or reserved against
in the Company Financial Statements (including the notes thereto), as of
September 30, 1994 (the "Company Statement of Condition Date"), neither the
Company nor any Company Subsidiary had any liabilities, whether absolute,
accrued, contingent or otherwise, material to the business, operations, assets
or financial condition of the Company and the Company Subsidiaries, taken as a
whole, which were required by GAAP (consistently applied) to be disclosed in the
Company's consolidated statement of condition (as of the Company Statement of
Condition Date) or the notes thereto. Since the Company Statement of Condition
Date, neither the Company nor any Company Subsidiary have incurred any
liabilities except in the ordinary course of business and consistent with
prudent banking practice or except as related to the transactions contemplated
by this Agreement.
3.5. Broker's and Other Fees. Except for the retention of Sandler O'Neill &
Partners, L.P., neither the Company nor any Company Subsidiary nor any of their
directors or officers has employed any broker or finder or incurred any
liability for any broker's or finder's fees or commissions in connection with
any of the transactions contemplated by this Agreement. All agreements with
Sandler O'Neill & Partners, L.P. providing for the payment of fees in connection
with the Merger are set forth in Section 3.5 of the Company Disclosure
Schedules. There are no other fees, other than time charges billed at usual and
customary rates, payable by the Company or any Company Subsidiary to any
advisors, including
A-19
lawyers and accountants, in connection with the Merger or the Bank Merger or
which would be triggered by consummation of the Merger or the Bank Merger or the
termination of the services of such advisors by the Company or any Company
Subsidiary.
3.6. Absence of Certain Changes or Events.
3.6.1. Except for the net operating losses incurred by the Company since
September 30, 1994 which have been disclosed to the Acquiror, there has not been
any material adverse change in the business, results of operations, assets or
financial condition of the Company and the Company Subsidiaries, taken as a
whole, since the Company Statement of Condition Date, and to the best of the
Company's knowledge, no facts or conditions exist which are likely to cause such
a material adverse change in the future, except for net operating losses not
arising from any other event which, in and of itself, would be a breach of
another representation or warranty.
3.6.2. Except as set forth in Section 3.6 of the Company Disclosure
Schedules, neither the Company nor any Company Subsidiary has taken or permitted
any of the actions described in Section 5.2 (other than Sections 5.2.6, 5.2.7,
and 5.2.8) hereof (but without reference to the dates specified in Section 5.2)
between December 31, 1993 and the date hereof.
3.6.3. Except as set forth in Section 3.6 of the Company Disclosure
Schedules, since December 31, 1993, neither the Company nor any Company
Subsidiary has taken or permitted any actions, or omitted to take any actions,
that would, or that, with the passage of time or the occurrence of events, would
reasonably be expected to, result in (A) any of the representations and
warranties set forth in this Article III hereafter becoming untrue, (B) a breach
of any of the Company's covenants set forth herein or (C) any of the conditions
to closing set forth in Sections 6.1, 6.2 or 6.3 not being satisfied.
3.7. Legal Proceedings. Except as disclosed in Section 3.7 of the Company
Disclosure Schedules, and except for ordinary routine litigation incidental to
the business of the Company and the Company Subsidiaries, neither the Company
nor any Company Subsidiary is a party to any, and there are no pending or, to
the best of the Company's knowledge, threatened, legal, administrative,
arbitrable or other proceedings, claims, actions or governmental investigations
of any nature against the Company or any Company Subsidiary which, if decided
adversely to the Company or the Company Subsidiary, would constitute a Company
Material Adverse Effect. Except as disclosed in Section 3.7 of the Company
Disclosure Schedules, neither the Company nor any Company Subsidiary is a party
to any order, judgment or decree entered in any lawsuit or proceeding which
order, judgment or proceeding continues to bind, or could in the future bind,
the Company or any Company Subsidiary.
A-20
3.8. Taxes and Tax Returns.
3.8.1. The Company and each Company Subsidiary has duly filed (and until
the Effective Time will so file) all returns, declarations, reports, information
returns and statements ("Returns") required to be filed by them in respect of
any federal, state and local taxes (including without limitation all income
taxes, payroll and employee withholding taxes, backup withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes, excise
taxes, franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workers' compensation
taxes, capital stock taxes, taxes on services, and other obligations of the same
or of a similar nature, whether arising before, on or after the Closing Date and
any interest, penalties or additions to taxes that may become payable in respect
thereof ("Taxes"). Each of the Company and the Acquired Bank has duly paid (and
until the Effective Time will so pay) all such Taxes due and payable, other than
taxes or other charges which are being contested in good faith and are disclosed
in Section 3.8 of the Company Disclosure Schedules. The Company and each Company
Subsidiary have established (and until the Effective Time will establish) on
their books and records reserves that are adequate for the payment of all Taxes
not yet due and payable. Section 3.8 of the Company Disclosure Schedules
identifies the federal income tax returns of the Company and the Company
Subsidiaries which have been examined by the Internal Revenue Service (the
"IRS") within the past six years. No deficiencies were asserted as a result of
such examinations which have not been resolved and paid in full. The federal
Returns of the Company and the Company Subsidiaries have been audited and closed
through December 1992, the state Returns of the Company and the Company
Subsidiaries have been settled through 1989, and there have been no audits or
reviews of any local Returns of the Company and the Company Subsidiaries. Except
as set forth in Section 3.8 of the Company Disclosure Schedules, there is no
action, suit, proceeding, investigation, audit, dispute, protest or claim now
threatened or pending with respect to any Taxes due from the Company or any
Company Subsidiary with respect to any Return, and neither the Company nor any
Company Subsidiary nor their employees (based on personal contact with any
authority) know of any such action, suit, proceeding, investigation, audit,
dispute or claim that has been threatened. Except as set forth in Section 3.8 of
the Company Disclosure Schedules, no claim has ever been made by an authority in
a jurisdiction where the Company or any Company Subsidiary does not file Returns
that the Company or any Company Subsidiary is or may be subject to taxation by
that jurisdiction nor, to the best of the Company's or the Acquired Bank's
knowledge does such a valid claim exist. The Company or the Acquired Bank shall
immediately notify the Acquiror of any governmental audits, actions,
proceedings, investigations or claims with respect to Taxes that occur in the
future and shall provide such information in connection therewith as may be
reasonably requested by the
A-21
Acquiror. Neither the Company nor any Company Subsidiary have given any
currently outstanding waivers or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or Returns. With respect
to information reporting (Forms 1098 and 1099), policies and procedures have
been established by the Company and each Company Subsidiary sufficient to
demonstrate that reasonable care has been exercised under Section 6724 of the
Code and the regulations thereunder to obtain taxpayer identification ("TIN")
numbers including initial and annual solicitation of such TIN's and collection
and submission of back-up withholding where applicable.
3.8.2. Except as set forth in Section 3.8 of the Company Disclosure
Schedules, neither the Company nor any Company Subsidiary (i) has requested any
extension of time within which to file any Return which Return has not since
been filed, (ii) is a party to any agreement providing for the allocation or
sharing of taxes, (iii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or any Company Subsidiary (nor does the Company
have any knowledge that the IRS has proposed any such adjustment or change of
accounting method), or (iv) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply. The Company's
outstanding securities are not "United States real property interests" within
the meaning of Section 897(c) of the Code.
3.8.3. To the date of this Agreement, neither the Company nor any Company
Subsidiary has experienced an equity shift that would limit the use of any tax
attribute carryforward (e.g., net operating losses, credits, etc.) or built in
deductions under Section 382 of the Code and the regulations thereunder.
3.9. Reports.
3.9.1. Section 3.9 of the Company Disclosure Schedules lists, and the
Company has previously delivered to the Acquiror a complete copy of, each (i)
final registration statement, prospectus, annual, quarterly or special report
and definitive proxy statement filed by the Company since September 30, 1990
pursuant to the Securities Act of 1933, as amended ("1933 Act"), or the
Securities and Exchange Act of 1934, as amended ("1934 Act") and (ii)
communication (other than general advertising materials and press releases)
mailed by the Company to its stockholders as a class since September 30, 1990,
and each such final registration statement, prospectus, annual, quarterly or
special report, definitive proxy statement or communication, as of its date,
complied in all material respects with all applicable statutes, rules and
regulations enforced or promulgated by the SEC and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary
A-22
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading; provided that information as of a
later date shall be deemed to modify information as of an earlier date.
3.9.2. The Company and the Acquired Bank have, since January 1, 1991, duly
filed with the FDIC, the FRB, and the Department in form which was correct in
all material respects all financial reports required to be filed under
applicable laws and regulations, and, subject to any required permission from
such regulatory authorities, the Company promptly will deliver or make available
to the Acquiror accurate and complete copies of such reports. Each such report,
as of its date, complied in all material respects with all applicable statutes,
rules and regulations and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided that
information as of a later date shall be deemed to modify information as of an
earlier date. Section 3.9 of the Company Disclosure Schedule lists all
examinations of the Company or the Acquired Bank conducted by either the FRB,
the FDIC or the Department since January 1, 1991 and the dates of any responses
thereto submitted by the Company or the Acquired Bank.
3.10. Company Information. The information relating to the Company and the
Company Subsidiaries to be contained in the Proxy Statement (as defined in
Section 5.10 hereof) to be delivered to shareholders of the Company in
connection with the solicitation of their approval of the Merger, as of the date
the Proxy Statement is mailed to shareholders of the Company, and up to and
including the date of the meeting of shareholders to which such Proxy Statement
relates, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.11. Certain Contracts.
3.11.1. Except for plans referenced in Section 3.17 or as disclosed in
Section 3.11 of the Company Disclosure Schedules, (i) neither the Company nor
any Company Subsidiary is a party to or bound by any written contract or
understanding (whether written or oral) with respect to the employment of any
officers, employees, directors or consultants, and (ii) the consummation of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any additional acts or events with respect to either participation
in such plans or to any employment related matter) result in any payment (either
of severance pay or otherwise) becoming due from the Company or any Company
Subsidiary or any successor of any of the foregoing to any officer, employee,
A-23
director or consultant thereof. Section 3.11 of the Company Disclosure Schedules
sets forth true and correct copies of all severance and employment agreements
with officers, directors, employees, agents or consultants to which the Company
or any Company Subsidiary is a party. Except as disclosed in Section 3.11 of the
Company Disclosure Schedules, neither the Company nor any Company Subsidiary is
a party to or bound by any written contract or understanding (whether written or
oral) that (i) was entered into outside of the ordinary course of business, (ii)
relates to the borrowing of long-term debt by the Company or any Company
Subsidiary or the guarantee by the Company or any Company Subsidiary of any
obligation, (iii) constitutes a collective bargaining agreement or otherwise
involves organized labor, (iv) involves the payment after the date hereof by the
Company or any Company Subsidiary of more than $25,000 in the aggregate; (v)
constitutes an agreement or arrangement to indemnify; or (vi) cannot be
terminated by the Company or the Company Subsidiary at its option within thirty
days or less; copies or descriptions of all such contracts and understandings
referred to in Section 3.11 of the Company Disclosure Schedules have previously
been provided to the Acquiror.
3.11.2. Except as disclosed in Section 3.11 of the Company Disclosure
Schedules and except for loan commitments issued in the ordinary course of
business, (i) as of the date of this Agreement, neither the Company nor any
Company Subsidiary is a party to or bound by any commitment, agreement or other
instrument which is material to the business, operations, assets or financial
condition of the Company and the Company Subsidiaries taken as a whole, but in
no event shall a contract involving the payment or receipt by the Company or any
Company Subsidiary of less than $25,000 in the aggregate be deemed material
under this Section 3.11.2, and (ii) no commitment, agreement or other instrument
to which the Company or any Company Subsidiary is a party or by which any of
them is bound limits the freedom of the Company or any Company Subsidiary to
compete in any line of business or with any person.
3.11.3. Except as disclosed in Section 3.11 of the Company Disclosure
Schedules, neither the Company nor any Company Subsidiary or, to the best
knowledge of each of the Company and the Acquired Bank, any other party thereto,
is in default under any material lease, contract, mortgage, promissory note,
deed of trust, loan or other commitment (except those under which the Acquired
Bank is or will be the creditor) or arrangement, except for defaults which
individually or in the aggregate would not constitute a Company Material Adverse
Effect, and no event has occurred which, with the giving of notice or the lapse
of time or both, would constitute such a default under any such lease, contract,
mortgage, promissory note, deed of trust, loan or other commitment or under any
contract described in Section 3.11 of the Company Disclosure Schedules.
A-24
3.12. Properties and Insurance.
3.12.1. The Company and the Company Subsidiaries have good title, and, as
to owned real property, marketable title, to all assets and properties, whether
real or personal, tangible or intangible, reflected in the Company's
consolidated statement of condition (as set forth in Section 3.4 of the Company
Disclosure Schedules) as of the Company Statement of Condition Date, or owned
and acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value in the ordinary course of
business since the Company Statement of Condition Date or as otherwise set forth
in Section 3.12 of the Company Disclosure Schedules), subject to no
encumbrances, liens, mortgages, security interests, pledges or rights of others,
except (i) those items that secure liabilities that are reflected in such
consolidated statement of condition or the notes thereto, (ii) statutory liens
for amounts not yet delinquent or which are being contested in good faith, (iii)
such encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets and financial condition of the Company and the Company
Subsidiaries taken as a whole and (iv) with respect to owned real property,
title imperfections noted in title reports delivered to the Acquiror prior to
the date hereof. Since December 31, 1993, neither the Company nor any of the
Company Subsidiaries have experienced any uninsured damage or destruction with
respect to any material properties or assets owned or leased by any of them. All
properties and assets used by the Company and/or any of the Company Subsidiaries
are, in all material respects, in good operating condition and repair, suitable
for the purposes for which they are currently utilized, and comply in all
material respects with all laws and other governmental requirements relating
thereto currently in effect. The Company and the Company Subsidiaries, as
lessees, have the right under valid and subsisting leases to occupy, use,
possess and control all real property leased by the Company or the Company
Subsidiaries in all material respects as presently occupied, used, possessed and
controlled by the Company or the Company Subsidiaries. The Company and the
Company Subsidiaries enjoy peaceful and undisturbed possession under all such
leases, all of which are valid and binding obligations of the Company or the
Company Subsidiary, as the case may be. Except as set forth in Section 3.12 of
the Company Disclosure Schedules, neither the Company nor any Company Subsidiary
is in default, nor to the best knowledge of each of them is any other party in
default, in any material respect under any of such leases and there has occurred
no material default or event which, with the lapse of time or the giving of
notice or both, would constitute a material default by the Company, the Company
Subsidiary or any other party under any such lease.
3.12.2. The business operations and all insurable properties and assets of
the Company and the Company Subsidiaries
A-25
are insured for their benefit against all risks which, in the reasonable
judgment of the management of Company, should be insured against, in each case
under policies or bonds issued by insurers of recognized responsibility, in such
amounts with such deductibles and against such risks and losses reasonably
adequate for the business engaged in by the Company and the Company
Subsidiaries. The Company has not received any notice of cancellation or notice
of a material amendment of any such insurance policy or bond, the Company and
the Company Subsidiaries are not in default under any such insurance policy or
bond, no coverage thereunder is being disputed and all material claims
thereunder have been filed in a timely fashion.
3.13. Minute Books. The minute books of the Company and the Company
Subsidiaries contain accurate records of all meetings and other actions held of
their respective shareholders and Boards of Directors or governing bodies
(including committees of their respective Boards of Directors or governing
bodies), except where the failure to so maintain such records would not result
in an omission to disclose a matter which would be material to any party
acquiring a substantial interest in the Company or any Company Subsidiary.
3.14. Reserves. As of the Company Statement of Condition Date, each of the
allowance for loan losses and the allowance for OREO properties in the Company
Financial Statements was adequate. The methodology used to compute such
allowances complies in all material respects with all applicable FDIC and
Department policies.
3.15. No Termination Agreements or Parachute Payments.
3.15.1. Except as disclosed in Section 3.15 of the Company Disclosure
Schedules, no current or former officer, director, employee or agent of the
Company or any Company Subsidiary (each, a "Company Employee") is entitled now,
or will or may be entitled as a consequence of or in connection with (a) this
Agreement or the Merger or the Bank Merger, or (b) termination of such person's
employment with the Company or any Company Subsidiary (by resignation,
involuntary termination or otherwise), in either case ((a) or (b)), alone or in
combination with other facts or events, to any payment or benefit from the
Company, any Company Subsidiary, the Acquiror or any of the Acquiror's
Subsidiaries.
3.15.2. No Company Employee is entitled now, or will or may be entitled as
a consequence of (a) this Agreement or the Merger or the Bank Merger, or (b)
termination of such person's employment with the Company or any Company
Subsidiary (by resignation, involuntary termination or diminution of duties or
otherwise), in either case ((a) or (b)), alone or upon the occurrence of
subsequent events, to any payment or benefit from the Company, any Company
Subsidiary, the Acquiror or any of the
A-26
Acquiror's Subsidiaries which, if paid or provided, would constitute an "excess
parachute payment", as defined in Section 280G of the Code or the regulations
promulgated thereunder.
3.16. Indemnification. Except as set forth in the Articles of Incorporation
and By-laws of the Company or in Section 3.16 of the Company Disclosure
Schedules, (i) neither the Company nor any Company Subsidiary is a party to any
indemnification agreement with any former, current or future Company Employee or
any other person, (ii) no person has served, serves or will serve in any
capacity with any enterprise other than the Company or any Company Subsidiary at
the request of the Company or any Company Subsidiary (a "Covered Person"), and
(iii) to the best knowledge of the Company, there are no claims or potential
claims for which any former or current Company Employee or any other person
would be entitled to indemnification under Section 5.7 hereof if such provisions
were deemed to be in effect.
3.17. Employee Plans. Except as set forth in Section 3.17 of the Company
Disclosure Schedules, all employee benefit, welfare, bonus, deferred
compensation, pension, profit sharing, stock bonus, stock option, employee stock
ownership, consulting, health insurance, life insurance, accident insurance,
disability insurance, disability, severance, cafeteria or fringe benefit plans,
formal or informal, written or oral, and all trust agreements related thereto,
relating to any present or former directors, officers or employees of the
Company or any Company Subsidiary or their relatives or affiliates ("Company
Employee Plans") have been maintained, operated and administered in compliance
with their terms and currently comply, and have at all relevant times complied,
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
to the extent applicable, the Code, to the extent applicable, and any other
applicable laws. Copies of all Company Employee Plans (or description of the
applicable terms where such plans are oral or otherwise informal) currently in
effect, and all financial statements relating thereto, have previously been
delivered to the Acquiror. With respect to each Company Employee Plan which is a
pension plan (as defined in Section 3(2) of ERISA), except as set forth in
Section 3.17 of the Company Disclosure Statements, (a) each pension plan, as
amended (and any trust relating thereto), intended to be a qualified plan under
Section 401(a) of the Code, either has been determined by the IRS to be so
qualified in its current form or is the subject of a pending application for
such determination that was timely filed, (b) there is no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, and no waiver of the minimum funding standards of such
sections has been requested from the IRS, (c) no reportable event described in
Section 4043 of ERISA has occurred, (d) no defined benefit plan has been
terminated, nor has the Pension Benefit Guaranty Corporation (the "PBGC")
instituted proceedings to terminate a defined benefit plan or to
A-27
appoint a trustee or administrator of a defined benefit plan, and no
circumstances exist that constitute grounds under Section 4042 of ERISA
entitling the PBGC to institute any such proceedings, (e) no pension plan is a
"multi-employer plan" within the meaning of Section 3(37) of ERISA and (f) as of
the last day of the most recent plan year which ended prior to the date hereof
and for which an actuarial valuation has been issued by the plan's actuary, with
respect to each defined benefit plan which is a "single-employer plan" (within
the meaning of Section 4001 (a)(15) of ERISA), the actuarially determined
present value of all "benefit liabilities" (within the meaning of Section
4001(a)(16) of ERISA), as determined on the basis of the actuarial assumptions
contained in the plan's most recent actuarial valuation, did not exceed the then
current value of the assets of the plan and there has been no material change in
the financial condition of the plan since the last day of the most recent plan
year. No liability under subtitle C or D of Title IV of ERISA has been incurred
by the Company or any Company Subsidiary with respect to any "single-employer
plan" formerly maintained by them or by any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the
Code. Except as disclosed in Section 3.17 of the Company Disclosure Schedules,
no plan, contract or other arrangement to which the Company or any Company
Subsidiary is a party provides health, medical, disability, death, accident,
survivor or pension benefits to any retiree, former employee or relative,
affiliate or beneficiary thereof. The Company and each Company Subsidiary will
continue to make all required contributions, premium payments or other required
transfers and meet all required funding obligations to keep all Company Employee
Plans current. Except as may be set forth in Section 3.11.1 of the Company
Disclosure Schedules, neither the Company nor any Company Subsidiary provides
continued health care benefits under the Acquired Bank Medical Benefits Plan to
retirees or employees on leave of absence or on long or short term disability
except coverage required by the terms of the Consolidated Omnibus Budget
Reconciliation Act or the federal Family and Medical Leave Act of 1993, nor does
the Company or any Company Subsidiary provide continuing insurance benefits
under the Acquired Bank Life and Accidental Death and Dismemberment Insurance
Plan except for those employees who qualify for continued coverage due to total
disability under the terms of such plan.
3.18. Compliance with Laws and Orders. Except as set forth in Section 3.18
of the Company Disclosure Schedules, all eligible accounts of depositors of the
Acquired Bank are insured by the Bank Insurance Fund of the FDIC to the fullest
extent permitted by law. Except as set forth in Section 3.18 of the Company
Disclosure Schedules, the businesses of the Company and each Company Subsidiary
have not been, and are not being, conducted in violation of any law, ordinance,
regulation, judgment, order, decree, license or permit of any governmental
entity (including, without limitation, in the case of the Company and the
Acquired
A-28
Bank, all statutes, rules and regulations pertaining to the conduct of the
banking business and the exercise of trust powers), except for violations or
possible violations which individually or in the aggregate do not, and, insofar
as reasonably can be foreseen, in the future will not, constitute a Company
Material Adverse Effect. Section 3.18 of the Company Disclosure Schedules
describes with particularity the only areas and matters with respect to which
the condition and operations of the Acquired Bank are not in compliance
therewith. Except as set forth in Section 3.18 of the Company Disclosure
Schedules, no investigation or review by any governmental entity with respect to
the Company or any Company Subsidiary is pending or, to the knowledge of the
Company, threatened, nor has any governmental entity indicated an intention to
conduct any such investigation or review.
3.19. Agreements with Bank Regulators. Except as described in Section 3.19
of the Company Disclosure Schedules, neither the Company nor any Company
Subsidiary is a party to any agreement or memorandum of understanding with, or a
party to any commitment letter, Board resolution submitted to a regulatory
authority 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 which restricts in any manner the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies or its
management, nor has the Company or any Company Subsidiary been advised by any
governmental entity that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, resolution, extraordinary
supervisory letter, commitment letter or similar submission. Except as described
in Section 3.19 of the Company Disclosure Schedules, the Company and each
Company Subsidiary are in compliance in all material respects with each order,
decree, agreement, memorandum of understanding, resolution, letter or submission
referenced in Section 3.19 of the Company Disclosure Schedules. Except as
described in Section 3.19 of the Company Disclosure Schedules, the Company is
not required by Section 32 of the Federal Deposit Insurance Act or otherwise to
give prior notice to any Federal banking agency or to the Department of the
proposed addition of an individual to its board of directors or the employment
of an individual as a senior executive officer. Except as set forth in Section
3.19 of the Company Disclosure Schedules, neither the Company nor the Bank is
subject to any order, limitation, covenant or directive with respect to any
assets purchased from any regulatory agency.
3.20. Company Action. The Board of Directors of the Company (at a meeting
duly called and held) has by the requisite vote of all directors present (a)
determined that the Merger is advisable and in the best interests of the Company
and its shareholders, (b) approved this Agreement and the transactions
contemplated hereby, including the Merger and the Bank Merger,
A-29
(c) directed that the Agreement be submitted for consideration by the Company's
shareholders and (d) resolved to recommend that the Company's shareholders
approve the Merger and this Agreement.
3.21. Vote Required. The affirmative vote of a majority of the outstanding
shares of Common Stock entitled to vote thereon is the only vote of the holders
of any class or series of Company capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
3.22. No Triggering Events. Except as set forth in Section 3.22 of the
Company Disclosure Schedules, neither the execution and delivery by the Company
or the Acquired Bank of this Agreement or the execution and delivery of the
Stock Option Agreement by the Company, nor the consummation of the transactions
or any other event contemplated hereby and thereby, will constitute an event
under any Company Employee Plans that will, or upon the occurrence of subsequent
events would, accelerate the time of payment or vesting or increase the amount
of compensation or benefits due any director, officer, employee or former
employee (or any beneficiary of a former employee) of the Company or any Company
Subsidiary.
3.23. Environmental Matters.
3.23.1. For purposes of this Section 3.23, the following terms shall have
the following meanings:
"Branch Properties" means all real property presently or formerly owned or
operated by the Company or any Company Subsidiary on which branches, operations
centers or headquarters facilities are or were located.
"Environmental Law" means any applicable federal, state or local statute,
law, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction, directive, requirement
or agreement with any governmental entity relating to: (a) the protection,
preservation or restoration of the environment (including, without limitation,
air, water vapor, surface water, ground water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, or (b) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances (as
hereinafter defined). The term Environmental Law includes, without limitation,
(x) the following statutes, each as amended:
(i) the federal Clean Air Act;
(ii) the federal Clean Water Act;
A-30
(iii) the federal Water Pollution Control Act of 1972;
(iv) the federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto)
("RCRA");
(v) the federal Comprehensive Environmental Response Compensation
Liability Act of 1980 (including the Superfund Amendments and
Reauthorization Act of 1986) ("CERCLA");
(vi) the federal Toxic Substances Control Act;
(vii) the federal Occupational Safety and Health Act of 1970; (viii)
the federal Emergency Planning and Community Right to Know Act
of 1986;
(ix) the federal Safe Drinking Water Act;
(x) the federal Solid Waste Disposal Act;
(xi) the federal Insecticide, Fungicide and Rodenticide Act;
(xii) the New Jersey Industrial Site Recovery Act ("ISRA"); and
(y) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Substance.
"Hazardous Substance" means any substance, whether liquid, solid or gas,
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous under any applicable Environmental Law, whether by type or by
quantity. Hazardous Substance includes, without limitation, (i) any "hazardous
substance" as defined in CERCLA, (ii) any "hazardous waste" as defined in RCRA,
and (iii) any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste or petroleum or any derivative or
by-product thereof, radon, radioactive material, asbestos, asbestos containing
material, urea formaldehyde foam insulation, lead and polychlorinated biphenyls.
"Real Property" means the Branch Properties, all real property classified
by the Company or any Company Subsidiary as OREO and all real property
(including property held as trustee or in any other fiduciary capacity) over
which the Company or any Company Subsidiary currently or formerly has exercised
dominion, management or control.
A-31
3.23.2. Except as set forth in Section 3.23 of the Company Disclosure
Schedules or as would not, singly or in the aggregate, constitute a Company
Material Adverse Effect,
3.23.2.1. the Company and each Company Subsidiary and each predecessor of
any of them is and has been at all times during its existence in compliance in
all material respects with all applicable Environmental Laws;
3.23.2.2. the Real Property does not contain any Hazardous Substance in
violation of any applicable Environmental Law;
3.23.2.3. neither the Company nor any Company Subsidiary has received any
written notices, demand letters or written requests for information from any
governmental entity or any third-party indicating that the Company or any
Company Subsidiary may be in violation of, or liable under, any Environmental
Law;
3.23.2.4. there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or, to the best
knowledge of the Company, threatened against the Company or any Company
Subsidiary with respect to the Company or any Company Subsidiary or the Real
Property relating to any violation, or alleged violation, of any Environmental
Law;
3.23.2.5. no reports have been filed, or are required to be filed, by the
Company or any Company Subsidiary concerning the release of any Hazardous
Substance or the threatened or actual violation of any Environmental Law on or
at the Real Property;
3.23.2.6. to the knowledge of the Company, there are no underground storage
tanks on, in or under any of the Branch Properties and no underground storage
tanks have been closed or removed from any Branch Properties while any such
Branch Properties were owned or operated by the Company or any Company
Subsidiary; and
3.23.2.7. to the knowledge of the Company, neither the Company nor any
Company Subsidiary has incurred, and none of the Real Property is currently
subject to, any liabilities (fixed or, to the knowledge of the Company,
contingent) relating to any suit, settlement, court order, administrative order,
judgment or claim asserted or arising under any Environmental Law.
3.23.3. There are no permits or licenses required under any Environmental
Law with respect to the Branch Properties presently operated by the Company or
any Company Subsidiary.
3.23.4. Neither the Company nor any Company Subsidiary has received written
notice that any part of the Real Property has
A-32
been or is listed as a site containing Hazardous Substances pursuant to any
Environmental Law.
3.24. Labor Relations. Except as set forth in Section 3.24 of the Company
Disclosure Schedules, neither the Company nor any Company Subsidiary is a party
to or bound by any collective bargaining agreement respecting its employees, nor
is there pending, or to the best knowledge of the Company threatened, any
strike, walk-out or other work stoppage or labor organizational effort.
3.25. Loans. As of the date hereof:
3.25.1. Except as set forth in Section 3.25 of the Company Disclosure
Schedules, all loans owned by the Company or any Company Subsidiary, or in which
the Company or any Company Subsidiary has an interest ("Company Loans"), comply
in all material respects with all laws, including, but not limited to,
applicable usury statutes, underwriting and record-keeping requirements and the
Truth in Lending Act, the Equal Credit Opportunity Act and the Real Estate
Settlement Procedures Act, and all other applicable consumer protection statutes
and all applicable regulations under such laws.
3.25.2 Except as set forth in Section 3.25 of the Company Disclosure
Schedules, all Company Loans were made or acquired by the Company or the
Acquired Bank in accordance with board of director approved loan policies.
3.25.3. Except as set forth in Section 3.25 of the Company Disclosure
Schedules, all loans originated or purchased by the Company or any Company
Subsidiary and subsequently sold by the Company or a Company Subsidiary have
been sold without recourse to either the Company or to any Company Subsidiary
and without any liability under any yield maintenance or similar obligation.
3.26. Examinations. Section 3.26 of the Company Disclosure Schedules sets
forth the dates on which each of the following occurred: the last examination of
the Acquired Bank by the FDIC prior to the date of this Agreement, the last
examination of the Acquired Bank by the Department prior to the date of this
Agreement, the last examination of the Company by the FRB prior to the date of
this Agreement, and the last examination of the Acquired Bank with respect to
community reinvestment prior to the date of this Agreement. Except as set forth
in Section 3.26 of the Company Disclosure Schedules, all deficiencies noted in
such examinations have been resolved to the satisfaction of the applicable
regulatory agency. Section 3.26 of the Company Disclosure Schedules contains a
copy of the latest public Community Reinvestment Act filing of the Acquired
Bank.
A-33
3.27. Transactions with Certain Persons. Except as set forth in Section
3.27 of the Company Disclosure Schedules, no executive officer, director or
principal shareholder of the Company or any Company Subsidiary, nor any
affiliate of any of the foregoing persons (as such terms are used in
Regulation O of the FRB), has engaged in any transaction with the Company or any
Company Subsidiary at any time and there has been no "extension of credit", as
defined in 12 C.F.R. Section 215.3, to any such person, which transaction was
not concluded, or which extension of credit was not paid in full, prior to
January 1,1988 and was not the subject of any inquiry, investigation, or written
comment by any regulatory agency since such date.
3.28. Disclosure. No representation or warranty contained in Article III of
this Agreement or in the Company Disclosure Schedules contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
A-34
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
References herein to "Acquiror Disclosure Schedules" shall mean all of the
disclosure schedules required by this Article IV, dated as of the date hereof
and referenced to the specific sections and subsections of Article IV of this
Agreement as provided herein, which have been delivered on the date hereof by
the Acquiror to the Company. The Acquiror hereby represents and warrants to the
Company as follows:
4.1. Corporate Organization.
4.1.1. Acquiror. The Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey. The
Acquiror has full power and authority, corporate and otherwise, to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing would
not have a material adverse effect on the business, results of operations,
assets or financial condition of the Acquiror and each Acquiror Subsidiary (as
defined in Section 4.1.2), taken as a whole (an "Acquiror Material Adverse
Effect"). The Acquiror is registered as a bank holding company under the BHCA.
4.1.2. Subsidiaries. The Acquiring Bank is the only "Significant
Subsidiary" (as such term is defined in Rule 405 promulgated by the SEC under
the 1933 Act) of the Acquiror. When used with reference to the Acquiror, the
term "Acquiror Subsidiary" means any corporation, partnership, limited liability
company, joint venture or other legal entity in which the Acquiror, directly or
indirectly, owns at least a 50% stock or other equity interest or for which the
Acquiror, directly or indirectly, acts as a general partner. The Acquiring Bank
is a national banking association that is duly organized, validly existing and
in good standing. Each Acquiror Subsidiary has full power and authority to own
or lease all of its properties and assets and to carry on its business as it is
now being conducted, and is duly licensed or qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not constitute an Acquiror Material Adverse Effect.
For purposes of this Agreement, the term "Acquiror Corporations" shall mean the
Acquiror and the Acquiror Subsidiaries collectively.
A-35
4.2. Capitalization. The authorized capital stock of the Acquiror consists
of 150,000,000 shares of Acquiror Common Stock and 40,000,000 shares of
preferred stock, no par value ("Acquiror Preferred Stock"). As of September 30,
1994, there were 52,491,042 shares of Acquiror Common Stock issued and
outstanding and 500,000 shares of Acquiror Preferred Stock issued and
outstanding. As of September 30, 1994, there were 10,951,927 shares of Acquiror
Common Stock reserved for issuance upon the conversion of debentures and for
employee and dividend reinvestment plans. All issued and outstanding shares of
the capital stock of the Acquiror have been, and all shares of Acquiror Common
Stock to be issued in the Merger will be when issued, duly authorized and
validly issued, issued without violating the pre-emptive or other rights of
third-parties, fully paid, and nonassessable.
4.3. Authority; No Violation.
4.3.1. Authority. The Acquiror and the Acquiring Bank have full power and
authority, corporate and otherwise, to execute and deliver this Agreement and to
consummate the transactions contemplated hereby in accordance with the terms
hereof. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Acquiror in accordance with the Certificate of
Incorporation of the Acquiror, the By-laws of the Acquiror and all applicable
laws and regulations. Prior to the Closing, the Acquiror will cause the Board of
Directors of the Acquiring Bank to duly and validly approve such execution,
delivery and consummation in accordance with the Articles of Association and
By-laws of the Acquiring Bank and all applicable laws and regulations. Except to
the extent that shareholder approval may be required in the event that the
Acquiror enters into other agreements to issue its capital stock prior to the
Closing, no other corporate proceedings on the part of the Acquiror or the
Acquiring Bank (other than such approval of the Acquiring Bank's Board of
Directors) are necessary to consummate the transactions so contemplated. Subject
to receipt of such approval of the Acquiring Bank's Board of Directors and the
receipt of such shareholder approval (if necessary), this Agreement constitutes
a valid and binding obligation of the Acquiror and the Acquiring Bank,
enforceable against the Acquiror and the Acquiring Bank in accordance with its
terms.
4.3.2. No Violation. Neither the execution and delivery of this Agreement
by the Acquiror and the Acquiring Bank, nor the consummation by the Acquiror and
the Acquiring Bank of the transactions contemplated hereby in accordance with
the terms hereof, or compliance by the Acquiror and the Acquiring Bank with any
of the terms or provisions hereof, will (i) violate any provision of the
Acquiror's Certificate of Incorporation, the Acquiring Bank's Articles of
Association or the By-laws of the Acquiror or the Acquiring Bank (ii) assuming
that the consents and
A-36
approvals set forth below are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Acquiror Corporations, or any of their respective properties
or assets, or (iii) violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of the Acquiror Corporations under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, commitment, pledge, permit,
deed of trust, license, lease, contract, agreement or other instrument or
obligation or any judgment, order, decree, law, rule or other restriction of any
governmental authority, in each case to which the Acquiror Corporations is a
party, or by which the Acquiror or any of the Acquiror Corporations may be bound
or to which any of the assets or properties of any of the Acquiror Corporations
are subject, except, with respect to the items described in clauses (ii) and
(iii) above, such as individually or in the aggregate will not constitute an
Acquiror Material Adverse Effect, and which will not prevent or delay the
consummation of the transactions contemplated hereby. Except for consents and
approvals of or filings or registrations with or notices to the Applicable Bank
Regulatory Agencies, applicable environmental agencies, the SEC, the state
securities commissions of the states in which the Company's shareholders reside,
NASDAQ, the Acquiring Bank's Board of Directors and the Acquiror's shareholders
(to the extent contemplated by Section 4.3.1), no consents or approvals of or
filings or registrations with or notices to any third party or any public body
or authority are necessary on behalf of the Acquiror or the Acquiring Bank in
connection with (x) the execution and delivery by the Acquiror and the Acquiring
Bank of this Agreement and the Stock Option Agreement and (y) the consummation
by the Acquiror and the Acquiring Bank of the Merger and the other transactions
contemplated hereby and thereby.
4.4. Reports. Section 4.4 of the Acquiror Disclosure Schedules lists, and
the Acquiror has previously delivered to the Company a complete copy of, each
final prospectus, annual, quarterly or current report and definitive proxy
statement, in each case without exhibits, filed by the Acquiror since January 1,
1992 pursuant to the 1933 Act or the 1934 Act.
4.5. Acquiror Information. The information relating to the Acquiror
Corporations to be contained in the Proxy Statement, as of the date the Proxy
Statement is mailed to shareholders of the Company, and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make
A-37
the statements therein, in light of the circumstances under which they were
made, not misleading.
4.6. Agreements with Bank Regulators. None of the Acquiror Corporations is
a party to any agreement or memorandum of understanding with, or a party to any
commitment letter, Board resolution submitted to a regulatory authority or
similar undertaking to, or is subject to any order or directive by, or is
subject to, any extraordinary supervisory letter from, any governmental entity
which restricts materially the conduct of its business, or in any manner relates
to its capital adequacy, its credit or reserve policies or its management, nor
has the Acquiror or the Acquiring Bank been advised by any governmental entity
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, resolution, extraordinary supervisory letter,
commitment letter or similar submission.
4.7. Broker's and Other Fees. Neither the Acquiror nor the Acquiring Bank
nor any of their directors or officers has employed any broker or finder or
incurred any liability for any broker's or finder's fees or commissions in
connection with any of the transactions contemplated by this Agreement.
A-38
ARTICLE V--COVENANTS
5.1. Acquisition Proposals.
5.1.1. Neither the Company nor any Company Subsidiary shall, and each of
the Company and the Acquired Bank shall instruct and otherwise use its best
efforts to cause the officers, directors, employees, agents, advisors and other
representatives and consultants of the Company and each Company Subsidiary not
to, directly or indirectly, (i) encourage, solicit or initiate any proposals or
offers from any person relating to any acquisition or purchase of all or a
material amount of the assets of, or any securities of, or any merger,
consolidation or business combination with, the Company or the Acquired Bank
(any such transaction is referred to herein as an "Acquisition Transaction") or
(ii) except as the Board of Directors of the Company deems necessary, on the
advice of outside counsel, in the exercise of its fiduciary obligations under
applicable law, participate in any discussions or negotiations regarding, or
furnish to any other person any information with respect to, an Acquisition
Transaction; provided, however, that so long as the Acquiror is given prior
notice and an opportunity to object, nothing contained in this Section 5.1.1
shall restrict or prohibit any disclosure by the Company that is required on the
advice of outside counsel in any document to be filed with the SEC after the
date of this Agreement or any disclosure that, in the opinion of the Board of
Directors of the Company on advice of outside counsel, is otherwise required
under applicable law.
5.1.2. The Company shall promptly notify the Acquiror orally and in writing
of any proposal or offer regarding an Acquisition Transaction or any inquiries
with respect thereto. Such written notification shall include the identity of
the entity making such inquiry or Acquisition Transaction proposal or offer and
such other information with respect thereto as is reasonably necessary to
apprise the Acquiror of the material terms of such Acquisition Transaction
proposal or offer and all other material information relating thereto. The
Company shall give the Acquiror contemporaneous written notice upon engaging in
discussions or negotiations with, or providing any information regarding the
Company to, any such person regarding a possible Acquisition Transaction. The
Company shall promptly provide oral and written notice of all changes in the
information provided to the Acquiror pursuant to this Section 5.1.2 and of the
status of each inquiry, proposal, offer, discussion or negotiation relating to
an Acquisition Transaction.
5.1.3. Neither the Company nor the Acquired Bank shall enter into any
Acquisition Transaction unless, prior thereto, all of the following conditions
(the "Acquisition Transaction Conditions") have been met: (x) the Company's
Board of Directors shall have approved the Acquisition Transaction after
determining,
A-39
upon advice of outside counsel, that such approval was necessary in the exercise
of its fiduciary obligations under applicable law; (y) the Company, prior to
accepting such approved Acquisition Transaction, shall have advised the Acquiror
of the terms of such Acquisition Transaction and shall have offered to the
Acquiror the opportunity to increase the consideration paid by the Acquiror
hereunder to the extent necessary such that the Company shall have a reasonable
basis for determining, upon the advice of outside counsel, that approval of the
Acquisition Transaction is not necessary (in light of such increased
consideration) in the exercise of the fiduciary duties of the Company's Board of
Directors under applicable law and (z) the Acquiror shall fail to increase the
consideration to be paid by the Acquiror to such an extent within seven days
after its receipt of such offer by the Company in writing.
5.2. Interim Operations of the Company. During the period from the date of
this Agreement to the Effective Time, except as expressly provided in this
Agreement, as required by law, or as otherwise approved in writing in advance by
the Acquiror:
5.2.1. Conduct of Business. The Company and the Acquired Bank shall, and
shall cause each Company Subsidiary to, conduct their respective businesses only
in, and not take any action except in, the ordinary course of business. The
Company and the Acquired Bank shall use reasonable efforts to preserve intact
the business organizations of the Company and each Company Subsidiary, to keep
available the services of their respective present key officers and key
employees whom the Company and the Acquired Bank have reasonably determined to
be necessary or appropriate to preserve the goodwill of those having business
relationships with the Company or the Acquired Bank and, except as set forth in
a letter of the Company delivered by the Company to the Acquiror with the
delivery of this Agreement, all other employees.
5.2.2. Governing Instruments. Neither the Company nor the Acquired Bank
shall, nor shall they permit any Company Subsidiary to, make any change or
amendment to their respective articles of incorporation, certificate of
incorporation, by-laws or other governing instruments.
5.2.3. Capital Stock. The Company and the Acquired Bank shall not, and
shall not permit any Company Subsidiary to, issue or sell any shares of capital
stock or any other securities of any of them (other than pursuant to the
exercise of the Executive Options described in Section 2.12 hereof which are
outstanding on the date hereof); or issue any subscriptions, options, warrants,
rights or convertible securities; or enter into any agreements or commitments of
any character relating to the issued or unissued capital stock or other
securities of the Company or any Company Subsidiary obligating the Company or
any Company Subsidiary to issue, deliver
A-40
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock of the Company or any Company Subsidiary or obligating the Company or any
Company Subsidiary to grant, extend or enter into any subscription, option,
warrant, right, convertible security or other similar agreement or commitment;
or purchase any of their own securities; or enter into any arrangement or
contract with respect to the purchase or voting of shares of their capital
stock; or adjust, split, combine or reclassify their capital stock or other
securities; or make any other changes in their capital structures.
5.2.4. Dividends. The Company shall not declare, set aside, pay or make any
dividend or other distribution or payment (whether in cash, stock or property)
with respect to, or purchase or redeem, any shares of the capital stock of the
Company and shall not permit any Company Subsidiary to declare, set aside, pay
or make any dividend or other distribution or payment (whether in cash, stock or
property) with respect to, or purchase or redeem, any shares of its capital
stock other than pursuant to transactions in which funds are paid solely to the
Company (or its pro-rata portion thereof, based on the percentage ownership
thereof, is paid solely to the Company if the Subsidiary is not wholly-owned).
5.2.5. Employees. The Company shall not, and shall not permit any Company
Subsidiary to, enter into, adopt or amend any bonus, profit-sharing,
compensation, severance, termination, consulting, fringe benefit, stock
purchase, stock ownership, stock option, pension, retirement, deferred
compensation, health insurance, medical insurance, life insurance, accident
insurance, retiree, employment or other employee or retiree benefit agreement,
trust, plan or fund, whether formal or informal, written or oral, or other
arrangement for the benefit or welfare of any director, officer, employee or
retiree except as required by Section 5.19. Except for increases pursuant to
commitments of the Company existing as of the date hereof as disclosed in
Section 5.2 of the Company Disclosure Schedules, the Company shall not, and
shall not permit any Company Subsidiary to, increase the compensation or fringe
benefits of any director, officer, employee or retiree or pay any benefit not
required by any existing plan or arrangement (including, without limitation, the
granting of stock options or stock appreciation rights) or take any action or
grant any benefit not required under the terms of any existing agreements,
trusts, plans, funds or other arrangements or enter into any contract,
agreement, commitment or arrangement to do the foregoing.
5.2.6. Conforming Accounting and Reserve Policies; Restructuring Expenses.
5.2.6.1. Notwithstanding that the Company believes that it has established
all reserves and taken all provisions for possible loan losses required by
generally accepted accounting principles and applicable laws, rules and
regulations, the Company
A-41
recognizes that the Acquiror has adopted different loan, accrual and reserve
policies (including loan classifications and levels of reserves for possible
loan losses). From and after the date of this Agreement to the Effective Time,
the Company and the Acquiror shall consult and cooperate with each other with
respect to conforming, as specified in a written notice from the Acquiror to the
Company, based upon such consultation, the Company's loan, accrual and reserve
policies to those policies of the Acquiror to the extent appropriate.
5.2.6.2. In addition, from and after the date of this Agreement to the
Effective Time, the Company and the Acquiror shall consult and cooperate with
each other with respect to determining, as specified in a written notice from
the Acquiror to the Company, based upon such consultation, appropriate accruals,
reserves and charges to establish and take in respect of excess facilities and
equipment capacity, severance costs, litigation matters, write-offs or
write-downs of various assets and other appropriate accounting adjustments,
taking into account the Surviving Bank's business plans following the Merger.
5.2.6.3. The Company and the Acquiror shall consult and cooperate with each
other with respect to determining, as specified in a written notice from the
Acquiror to the Company, based upon such consultation, the amount and the timing
of recognition (for recognizing for financial accounting purposes) of the
expenses of the Merger and any restructuring charges related to or to be
incurred in connection with the Merger.
5.2.6.4. At the request of the Acquiror, the Company shall, prior to the
Closing, use its reasonable efforts to establish and take such accruals and
reserves as the Acquiror shall request in order to conform the Company's loan,
accrual and reserve policies to the Acquiror's policies, to establish and take
such accruals, reserves and charges to implement such policies in respect of
excess facilities and equipment capacity, severance costs, litigation matters,
write-offs or write-downs of various assets and other appropriate accounting
adjustments, and to recognize for financial accounting purposes such expenses of
the Merger and restructuring charges related to or to be incurred in connection
with the Merger; provided, however, that (i) the Company shall not be obligated
to take any such action pursuant to this Section 5.2.6.4 unless and until the
Acquiror specifies its request in a writing delivered by the Acquiror to the
Company, and acknowledges that all conditions to its obligation to consummate
the Merger set forth in Sections 6.1 and 6.3 (other than the Company's
performance under this Section 5.2.6.4) have been waived or satisfied, and (ii)
the Company shall not be required to take any such action to the extent that
such action (A) is inconsistent with GAAP, (B) materially impairs it regulatory
capital, (C) is inconsistent with any formal or informal undertaking by the
Company to any Applicable Bank Regulatory Agency which has been disclosed
A-42
in writing to the Acquiror prior to the date hereof or (D) is inconsistent with
any requirement hereinafter imposed on the Company by any Applicable Bank
Regulatory Agency.
5.2.7. Shareholder Meetings. The Company shall not convene any meeting of
the Company's shareholders (other than the meeting convened to vote upon the
Merger) or determine to submit any matter for shareholder action (other than the
Merger) unless the Acquiror has been given at least 45 days prior written notice
of such meeting or determination.
5.2.8. Representations and Covenants. The Company shall not, and shall not
permit any Company Subsidiary to, take any action, or knowingly omit to take any
action, that would, or that would reasonably be expected to, result in (A) any
of the representations and warranties set forth in Article III becoming untrue,
(B) a breach of any of the Company's covenants set forth herein or (C) any of
the conditions to closing set forth in Sections 6.1, 6.2 or 6.3 not being
satisfied. The Acquired Bank may create subsidiaries after the date hereof,
provided that each such subsidiary is created solely to hold one or more
properties which were, are, or would be property acquired by the Acquired Bank
as a result of the acquisition of property which had been or is pledged,
assigned or mortgaged to the Acquired Bank in a loan transaction and which
Subsidiary is wholly owned by the Acquired Bank and the officers and directors
of which are employees of the Acquired Bank and are removable from their
respective offices and directorships without cause by the Acquired Bank.
5.2.9. Other Actions. The Company shall not, and shall not permit any
Company Subsidiary to, take any action that would (A) materially delay or
adversely affect the ability of the Company or the Acquired Bank to obtain any
approvals of governmental entities required to permit consummation of the Merger
or the Bank Merger or (B) materially adversely affect the Company's or the
Acquired Bank's ability to perform their respective obligations under this
Agreement.
5.2.10. Dominion and Control. Schedule 5.2.10 of the Company Disclosure
Schedules contains a copy of the Company's and each Company Subsidiary's written
policies and procedures and a description of any unwritten policies and
procedures with respect to taking any action that results or would be likely to
result in it being deemed to exercise dominion, management or control over
collateral securing any extension of credit. The actual practices of the Company
and each Company Subsidiary have been consistent with such policies and
procedures. The Company shall not, nor shall it permit any Company Subsidiary
to, change any such policies, procedures or practices. The Company shall not,
and shall not permit any Company Subsidiary to, exercise any dominion,
management or control over collateral securing any outstanding extension of
credit with a contractual amount due of $100,000 or
A-43
more or in connection with which there is reasonably anticipated to be any
environmental exposure, without prior consultation with the Acquiror.
5.3. Acquiror Representations and Covenants; Other Actions. Acquiror shall
not, and shall not permit any of the Acquiror Subsidiaries to, take any action,
or knowingly omit to take any action, that would, or that would reasonably be
expected to, result in (A) any of the representations and warranties of Acquiror
set forth in Article IV becoming untrue, (B) a breach of any covenants of the
Acquiror or the Acquiring Bank set forth herein or (C) any of the conditions to
closing set forth in Sections 6.1, 6.2 or 6.3 not being satisfied. The Acquiror
shall not, and shall not permit any of the Acquiror Subsidiaries to, take any
action that would (A) materially adversely affect the ability of the Acquiror or
the Acquiring Bank to obtain any approvals of governmental entities required to
permit consummation of the Merger or (B) materially adversely affect the
Acquiror's or the Acquiring Bank's ability to perform their respective
obligations under this Agreement.
5.4. Employee Matters. Effective upon consummation of the Bank Merger, the
Acquiror shall assume sponsorship of the (i) "Acquired Bank Employee Retirement
Plan," (ii) "Acquired Bank 401(k) Thrift Plan," (iii) "Acquired Bank Life and
Accidental Death and Dismemberment Insurance Plan," and (iv) "Acquired Bank
Medical Benefits Plan."
5.5. Access and Information.
5.5.1. Upon reasonable notice, each of the Company and the Acquired Bank
shall (and shall cause each Company Subsidiary to) afford to the Acquiror and
its representatives (including, without limitation, directors, officers and
employees of the Acquiror and its affiliates and counsel, accountants and other
professionals retained by the Acquiror) such access as the Acquiror shall
specify during normal business hours throughout the period from the date hereof
through the Effective Time to the books, records (including, without limitation,
tax returns and work papers of the Company's independent auditors), properties,
personnel and such other information as the Acquiror shall reasonably request.
The Acquiror shall provide to the Company, upon its reasonable request, copies
of any publicly disclosed document published by the Acquiror within the past
five years. The Acquiror shall cause one or more of its senior officers to be
available from time to time prior to the Effective Time to respond to reasonable
inquiries made by the Company and its representatives (including, without
limitation, directors, officers and employees of the Company and its affiliates
and counsel, accountants and other professionals retained by the Company).
Notwithstanding the foregoing, neither the Company nor the Acquiror nor their
respective Subsidiaries shall be required to provide access to any such
information if the
A-44
providing of such access (i) would violate a binding contractual obligation,
(ii) would, as advised by outside counsel, be reasonably likely to result in the
loss or impairment of any privilege with respect to such information or (iii)
would be precluded by any law, ordinance, regulation, judgment, order, decree,
license or permit of any governmental entity. Any access granted to the Company
or the Acquiror pursuant to this Section 5.5 shall not in any way limit any
representation or warranty set forth in this Agreement.
5.5.2. The Company and the Acquired Bank shall, and shall cause each other
Company Subsidiary and the officers, directors, employees, affiliates, agents
and representatives of the Company, the Acquired Bank and/or any other Company
Subsidiary (with the Company and the Acquired Bank, collectively, the "Company
Parties") to, keep confidential all confidential information of the Acquiror or
the Acquiring Bank obtained by any of them in connection with the transactions
contemplated hereby. The foregoing restriction shall not apply to any
confidential information which (i) is or becomes generally available to the
public other than as a result of a disclosure by any of the Company Parties, or
(ii) is or becomes available to any of the Company Parties from a source not
known to such party to be bound by a confidentiality obligation with respect
thereto. If any Company Party shall become legally compelled to disclose any
such confidential information, such party to the extent feasible shall inform
the Acquiror of the compelled disclosure and shall exercise reasonable efforts
to obtain assurance that confidential information shall remain confidential. The
Acquiror and the Acquiring Bank shall, and shall cause its officers, directors,
employees, affiliates, agents and representatives (with the Acquiror and the
Acquiring Bank, collectively, the "Acquiror Parties") to, keep confidential all
confidential information of the Company or any Company Subsidiary obtained by
any of them in connection with the transactions contemplated hereby. The
foregoing restriction shall not apply to any confidential information which (i)
is or becomes generally available to the public other than as a result of a
disclosure by any of the Acquiror Parties, or (ii) is or becomes available to
any of the Acquiror Parties from a source not known to such party to be bound by
a confidentiality obligation with respect thereto. If any Acquiror Party shall
become legally compelled to disclose any such confidential information, such
party to the extent feasible shall inform the Company of the compelled
disclosure and shall exercise reasonable efforts to obtain assurance that
confidential information shall remain confidential. The parties hereto
acknowledge that remedies at law may be inadequate to protect against breach of
this Section 5.5.2 and, without prejudice to the rights and remedies otherwise
available, the parties agree each of them shall be entitled to injunctive relief
in their favor in the event of such breach.
A-45
5.6. Certain Filings, Consents and Arrangements. Subject to Section 5.10,
the Acquiror, the Acquiring Bank and the Company shall (a) promptly file all
applications, proxy statements, registration statements and reports required to
be filed with all applicable governmental entities between the date of this
Agreement and the Effective Time with respect to the Merger and the other
transactions contemplated by this Agreement, (b) cooperate with one another (i)
in promptly determining which filings are required to be made and which
consents, approvals, permits or authorizations are required to be obtained under
any applicable federal, state or foreign law or regulation and (ii) in promptly
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such consents, approvals, permits or
authorizations and (c) subject to the qualifications set forth in Section 5.5,
deliver to the other parties to this Agreement copies of all such reports and
filings promptly after they are filed.
5.7. Indemnification.
5.7.1. The Acquiror shall indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, a director or officer (whether elected or
appointed) of the Company or the Acquired Bank (collectively, the "Indemnitees")
against any and all claims, damages, liabilities, losses, costs, charges,
expenses (including, without limitation, reasonable costs of investigation, and
the reasonable fees and disbursements of legal counsel and other advisors and
experts, as incurred), judgments, fines, penalties and amounts paid in
settlement, asserted against, incurred by or imposed upon any Indemnitee, in
connection with, arising out of or relating to any claim, action, suit or
proceeding (whether civil, criminal, administrative or investigative) pending at
any time within a period of six years after the Effective Time, including,
without limitation, any and all claims, actions, suits, proceedings or
investigations by or on behalf of or in the right of or against the Company or
any Company Subsidiary, or by any present or former shareholder of the Company
in such person's capacity as a shareholder (collectively, "Claims"), including,
without limitation, any Claim which is based upon, arises out of or in any way
relates to the Merger, the Proxy Statement, any of the transactions contemplated
by this Agreement, the Indemnitee's service as a member of the Company's or the
Company Subsidiary's Board of Directors or any committee of the Company's or the
Company Subsidiary's Board of Directors, the events leading up to the execution
of this Agreement, any statement, recommendation or solicitation made in
connection therewith or related thereto and any breach of any duty in connection
with any of the foregoing, and in connection with, arising out of or relating to
the enforcement of the obligations of the Acquiror set forth in this Section
5.7, in each such case above to the full extent permitted under applicable law,
but in no event beyond the extent to which such
A-46
indemnification would have been available from the Company had the Claim been
advanced on the date hereof.
5.7.2. This Section 5.7 shall be construed as an agreement, as to which the
Indemnitees are intended to be third-party beneficiaries, between the Acquiror
and the Indemnitees, as unaffiliated third parties.
5.7.3. Any Indemnitee wishing to claim indemnification under this Section
5.7, upon learning of any such claim, action, suit or proceeding, shall promptly
notify the Acquiror thereof, but the failure to so notify shall not relieve the
Acquiror of any liability it may have to such Indemnitee if such failure does
not prejudice the Acquiror. In the event of any such claim, action, suit or
proceeding (whether arising before or after the Effective Time) as to which the
Acquiror agrees that indemnification under this Section 5.7 is applicable, (a)
the Acquiror shall have the right to assume the defense thereof and neither the
Acquiror nor the Surviving Bank shall be liable to such Indemnitees for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnitees in connection with the defense thereof, except that if the
Acquiror elects not to assume such defense or counsel for the Indemnitees
advises that there are issues which raise conflicts of interest between the
Acquiror or the Surviving Bank and the Indemnitees, the Indemnitees may retain
counsel satisfactory to them, and the Acquiror or the Surviving Bank shall pay
the reasonable fees and expenses of counsel for the Indemnitees as statements
therefor are received; provided, however, that the Acquiror and the Surviving
Bank shall be obligated pursuant to this Section 5.7.3 (a) to pay for only one
firm of counsel for all Indemnitees in any jurisdiction with respect to a matter
unless the use of one counsel for such Indemnitees would present such counsel
with a conflict of interest and (b) the Indemnitees will cooperate in the
defense of any such matter. Neither the Acquiror nor the Surviving Bank shall be
liable for settlement of any claim, action or proceeding hereunder unless such
settlement is effected with its prior written consent; and provided further,
however, that neither the Acquiror nor the Surviving Bank shall have any
obligation hereunder to any Indemnitee when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that the indemnification of such Indemnitee in
the manner contemplated hereby is prohibited by applicable law.
5.7.4. If the Acquiror, in its sole discretion, considers obtaining
insurance to cover any or all of its indemnification obligations under this
Section 5.7, then each Indemnitee shall provide the Acquiror with such complete
and correct information as the Acquiror requests to enable it to obtain such
insurance or to determine the cost of such insurance.
A-47
5.8. Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable efforts to
take promptly, or cause to be taken, all actions and to do promptly, or cause to
be done, all things necessary, proper or advisable under all applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its reasonable efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and approvals from all
applicable governmental entities, effecting all necessary registrations and
filings (including, without limitation, making all filings under all applicable
banking and securities laws) and obtaining any required contractual consents.
If, at any time after the Effective Time, the Surviving Corporation considers or
is advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of either of the
Constituent Corporations acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger or otherwise to carry out the
purposes of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of each of the Constituent Corporations or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of the Constituent Corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out the purposes of
this Agreement.
5.9. Publicity. The initial press release announcing this Agreement shall
be a joint press release, and thereafter the Company and the Acquiror shall
consult and reasonably cooperate with each other before (i) issuing any press
releases or otherwise making public statements with respect to the transactions
contemplated hereby, or (ii) making any publicly available filings with any
governmental entity with respect thereto.
5.10. Company Proxy Statement; Registration Statement. The Acquiror and the
Company shall cooperate in preparing a proxy statement (the "Proxy Statement")
which shall be utilized to solicit proxies in connection with the meeting (the
"Company Meeting") at which the Company's shareholders will vote upon the
Merger. Such proxy statement shall also constitute a prospectus for the sale of
the Acquiror's capital stock pursuant to the Merger. Promptly after both the
Acquiror and the Company confirm that the Proxy Statement is satisfactory for
filing in preliminary form, the Acquiror shall file with the SEC a registration
statement on Form S-4 (the "Registration Statement") utilizing such Proxy
Statement as the prospectus. The Company and the Acquiror shall
A-48
each have a reasonable opportunity to respond to any comments received from the
SEC with respect to the Registration Statement and the Proxy Statement. The
Acquiror and the Company shall use reasonable efforts to finalize the Proxy
Statement and Registration Statement and cause the SEC to declare the
Registration Statement effective. The Company will promptly advise the Acquiror
in writing if at any time prior to the Company Meeting it shall obtain knowledge
of any facts that might make it necessary or appropriate to amend or supplement
the Proxy Statement in order to make the statements contained therein not
misleading or to comply with applicable law. The Acquiror shall also take any
reasonable action required to be taken under state blue sky or securities laws
in connection with the issuance of the Acquiror Common Stock pursuant to the
Merger, and the Company shall furnish the Acquiror with all information
concerning the Company and the holders of its capital stock and shall take such
action as the Acquiror may reasonably request in connection with such blue sky
or securities filings.
5.11. Compliance with the 1933 Act.
5.11.1. Prior to the execution and delivery of this Agreement, the Company
has, or within 8 days thereafter, will have, obtained and delivered to the
Acquiror a written agreement (in the form attached hereto as Exhibit 5.11.1),
from each officer and director of the Company and the Acquired Bank, providing
that such person shall not offer, sell, pledge, transfer or otherwise dispose of
any shares of Common Stock held by such person and any shares of Acquiror Common
Stock to be received by such person pursuant to the Merger, except in compliance
with the applicable provisions of the 1933 Act and the rules and regulations
(including Rule 145) thereunder.
5.11.2. Promptly, but in any event within two weeks, after the execution
and delivery of this Agreement, the Company shall identify to the Acquiror all
persons other than officers and directors of the Company or the Acquired Bank
who may reasonably be deemed to be, on the date hereof, "affiliates" of the
Company as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act, and shall obtain and provide to the Acquiror a written agreement
(in form and substance satisfactory to the Acquiror), from each such person
providing that such person shall not offer, sell, pledge, transfer or otherwise
dispose of any shares of Common Stock held by such person and any shares of
Acquiror Common Stock to be received by such person pursuant to the Merger,
except in compliance with the applicable provisions of the 1933 Act and the
rules and regulations (including Rule 145) thereunder. If the Company
subsequently determines that additional persons may be deemed "affiliates" as of
the date of the Company Meeting, the Company promptly shall identify such
persons to the Acquiror and obtain and provide to the Acquiror a written
agreement of the type described in Section 5.11.1 above.
A-49
5.12. Shareholders' Meeting. The Company shall take all action necessary,
in accordance with applicable law and its Articles of Incorporation and By-laws,
to convene the Company Meeting as promptly as practicable for the purpose of
considering and taking action upon this Agreement. The Board of Directors of the
Company shall recommend that the holders of shares of Common Stock vote in favor
of and approve the Merger and adopt this Agreement at the Company Meeting;
provided, however, that such recommendation may be withdrawn, modified or
amended to the extent the Board of Directors of the Company deems it necessary,
upon advice of outside counsel, in the exercise of its fiduciary obligations
under applicable law.
5.13. Reorganization Treatment. Neither the Acquiror nor the Company shall
intentionally take, fail to take or cause to be taken or not taken any action
within its control, which would disqualify the Merger from being treated as a
"reorganization" within the meaning of Section 368(a) of the Code.
5.14. ISRA Approval. The Company, at its sole cost and expense, shall
obtain prior to the Effective Time (i) a determination from the DEPE that the
transactions contemplated by this Agreement are not subject to the requirements
of ISRA, or (ii) an order issued by the DEPE pursuant to ISRA authorizing the
consummation of the transaction contemplated by this Agreement prior to the
issuance of any "Negative Declaration" or approval of any "Clean-Up Plan," as
such terms are defined under ISRA or (iii) a "Negative Declaration" or approval
of a "Clean-up Plan" with respect to each property in New Jersey which the
Company or any Company Subsidiary owns or operates, in each case to the extent
that such property renders the provisions of ISRA applicable to the transactions
contemplated by this Agreement. The Company will post or have posted with the
DEPE a surety bond or other financial security approved by the DEPE in an amount
requested by the DEPE as required in furtherance of the Company's obligations
under this Section 5.14.
5.15. Other Transactions. The parties hereto acknowledge that the Acquiror
may pursue one or more business combinations and may issue securities during the
period between the date hereof and the Effective Time. No provision herein shall
be construed to limit the Acquiror's right to pursue such combinations or issue
such securities.
5.16. Updating. In the event that a party hereto discovers, prior to the
Effective Time, that a representation or warranty made by such party herein
either was inaccurate in any material respect when made or has become inaccurate
in any material respect as a result of acts or omissions occurring subsequent to
the date hereof, such party shall immediately notify the other parties hereto in
writing of such inaccuracy and the facts relating thereto. Such notification
shall not, however, have any effect on
A-50
the rights of the parties under Article VII and shall not be taken into
consideration in determining whether the conditions set forth in Sections 6.2.2
and 6.3.2 have been satisfied.
5.17. Right to Increase Exchange Ratio. If the Company elects to exercise
its termination right pursuant to Section 7.2.3.5, it shall give prompt written
notice to the Acquiror and provide the Acquiror the right, in Acquiror's
discretion, to increase the Exchange Ratio as set forth in Section 7.2.3.5 and,
if the Exchange Ratio is so increased, no termination shall have occurred
pursuant to Section 7.2.3.5. and this Agreement shall remain in effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified).
5.18. Representations by Company Affiliates. The Company shall cause the
Company Affiliates to furnish the representations to be furnished by them in
accordance with Section 6.3.5.
5.19. Benefit Plan Requirements. The Company and the Acquired Bank shall
take, and shall cause each other Company Subsidiary to take, all action which
shall be necessary or appropriate, including the making of filings and
amendments, to comply with the representations and warranties of the Company as
set forth in Section 3.17 without regard to any exception therefrom, by the
elimination of all the exceptions, if any, as are set forth in Section 3.17 of
the Company Disclosure Schedules.
A-51
ARTICLE VI--CONDITIONS
6.1. Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
6.1.1. The Merger shall have been approved and adopted by the requisite
vote of the holders of the Common Stock and, if determined by the Acquiror to be
necessary, by the requisite vote of the Acquiror's shareholders.
6.1.2. All authorizations, consents, orders or approvals of, and all
expirations of waiting periods imposed by, any governmental entity
(collectively, "Governmental Consents") which are necessary for the consummation
of the Merger shall have been obtained or shall have occurred and shall be in
full force and effect at the Effective Time; provided, however, that the entry
by a court, in any suit brought by a private party or governmental entity
challenging the Merger as violative of the antitrust laws, of an order or decree
permitting the Merger, but requiring that any of the businesses, product lines
or assets of the Acquiror or the Company be disposed of or held separate
thereafter, shall not be deemed to satisfy the conditions specified in this
Section 6.1.2 unless waived in writing by the Acquiror.
6.1.3. The Registration Statement shall have become effective in accordance
with the provisions of the 1933 Act. No stop order suspending the effectiveness
of the Registration Statement shall have been issued by the SEC and remain in
effect.
6.1.4. No temporary restraining order, preliminary or permanent injunction
or other order by any federal or state court in the United States which prevents
the consummation of the Merger shall have been issued and remain in effect.
6.1.5. The Company and the Acquiror shall have obtained an opinion of
Pitney, Hardin, Kipp & Szuch, dated the Closing Date, and reasonably
satisfactory in form and substance to the Company and the Acquiror, to the
effect that (i) the Merger qualifies as a "reorganization" qualifying within the
meaning of Section 368(a)(1)(A) of the Code; (ii) no gain or loss shall be
recognized by Company shareholders whose Common Stock is exchanged solely into
Acquiror Common Stock in connection with the Merger; (iii) in the case of
Company shareholders who receive cash in whole or in part in exchange for their
Common Stock gain, if any, realized by the recipient on the exchange shall be
recognized, but in an amount not in excess of the amount of such cash; (iv) in
the case of Company shareholders who recognize gain on the exchange of their
Common Stock and in whose hands such stock was a capital asset on the date of
the exchange, such gain shall be treated as capital gain (long-term or
short-term, depending on the
A-52
shareholders' respective holding periods for their Common Stock), except in the
case of any such shareholder as to which the exchange has the effect of the
distribution of a dividend within the meaning of Section 356(a)(2) of the Code,
determined with the application of the stock attribution rules of Section 318 of
the Code, it being understood that such determination depends on such
shareholder's particular factual circumstances; (v) the basis of any Acquiror
Common Stock received in exchange for Common Stock shall equal the adjusted
basis of the recipient's Common Stock surrendered on the exchange, reduced by
the amount of cash received, if any, on the exchange, and increased by the
amount of the gain recognized, if any, on the exchange (whether characterized as
dividend or capital gain income); (vi) the holding period for any Acquiror
Common Stock received in exchange for Common Stock in connection with the Merger
will include the period during which the Common Stock exchanged in the Merger
was held, provided such stock was held as a capital asset on the date of the
Merger; and (vii) no gain or loss shall be recognized by the Acquiring Bank or
the Acquiror in connection with the Merger or the issuance of securities and
payment of cash in pursuance thereof. In rendering their opinion, Pitney,
Hardin, Kipp & Szuch may require and rely upon representations contained in the
agreements of the Company Affiliates and in certificates of officers of the
Company, the Acquiring Bank, the Acquiror and others.
6.2. Conditions to Obligations of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the additional
following conditions:
6.2.1. The Acquiror and the Acquiring Bank shall have performed in all
material respects their covenants contained in this Agreement required to be
performed at or prior to the Effective Time.
6.2.2. The representations and warranties of the Acquiror contained in this
Agreement shall be true in all material respects when made, and as of the
Effective Time as if made at and as of such time, except as expressly
contemplated or permitted by this Agreement and except for representations and
warranties relating to a time or times other than the Effective Time which were
or shall be true in all material respects at such time or times.
6.2.3. The Acquiror shall have delivered to the Company a Certificate,
dated the date of the Closing, signed by the President or a Vice President of
the Acquiror and the Chief Financial Officer of Acquiror, that, to the best of
their knowledge and belief after due inquiry, the conditions set forth in
Sections 6.2.1 and 6.2.2 have been satisfied.
A-53
6.3. Conditions to Obligation of Acquiror to Effect the Merger. The
obligations of the Acquiror to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the additional
following conditions:
6.3.1. The Company and the Acquired Bank shall have performed in all
material respects its covenants contained in this Agreement and the Stock Option
Agreement required to be performed at or prior to the Effective Time.
6.3.2. The representations and warranties of the Company and the Acquired
Bank contained in this Agreement and the Stock Option Agreement shall not be
untrue in any material adverse respect when made, and as of the Effective Time
as if made at and as of such time, except as expressly contemplated or permitted
by this Agreement or the Stock Option Agreement, as the case may be, and except
for representations and warranties relating to a time or times other than the
Effective Time which were or shall be true in all material respects at such time
or time, provided, however, that the representations and warranties of the
Company and the Acquired Bank contained in this Agreement and the Stock Option
Agreement which shall fail to be true in any material respect when made, shall,
nevertheless, be deemed to be true when made if cured within 10 days after
notice thereof to the Company by the Acquiror and, further provided, the
representation and warranties set forth in Section 3.6.1 shall not fail to be
deemed true in all material respects as of the Effective Time if, at the
Effective Time, (i) the Adjusted Capital as determined in accordance with
Section 6.3.7 is determined to be not less than $12,000,000 and (ii) there shall
have been no other representation and warranty (including those set forth in
Section 3.6.1) of the Company or the Acquired Bank which shall be untrue in any
material adverse respect when made and as of the Effective Time.
6.3.3. The Company shall have delivered to the Acquiror a Certificate,
dated the date of the Closing, signed by the Chief Executive Officer and the
Chief Financial Officer of the Company, certifying the calculation of the
Company's shareholders equity as of the Closing Date and certifying that, to the
best of their knowledge and belief after due inquiry, the conditions set forth
in Sections 6.3.1 and 6.3.2 have been satisfied.
6.3.4. The Acquiror and its directors and officers who sign the
Registration Statement shall have received from Rudolph, Palitz, the Company's
independent certified public accountants, an "agreed upon procedures" letter,
dated the date of the mailing of the Registration Statement to the Company's
shareholders, with respect to certain financial information regarding the
Company in the form customarily issued by independent certified public
accountants at such time in transactions of this type.
A-54
6.3.5. The Acquiror shall have received such factual representations from
the Company Affiliates relating to the Common Stock held or previously held by
them, in form and substance reasonably satisfactory to the Acquiror, that will
support the conclusions set forth in Section 6.1.5.
6.3.6. The Acquiror and the Acquiring Bank shall have received from counsel
to the Company and the Acquired Bank an opinion letter dated the Closing Date
and in form acceptable to the Acquiror, to the following effect:
6.3.6.1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania and has all
requisite corporate power and authority to own or lease all of its properties
and assets and to carry on its business in the manner conducted on the Closing;
6.3.6.2. The Acquired Bank is a commercial bank duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has all requisite corporate power and authority to own or lease all of its
properties and assets and to carry on its business in the manner described in
the Proxy Statement and each Company Subsidiary (other than the Acquired Bank)
is duly organized and in good standing under the laws of their respective
organizations and have all requisite power and authority to own or lease all of
its properties and assets and to carry on the business carried on by it on the
Closing;
6.3.6.3. The Company has all requisite corporate power and authority under
the Pennsylvania Business Corporation Law to execute and deliver this Agreement
and the Stock Option Agreement and to perform its obligations hereunder and
thereunder, and the execution, delivery and performance of this Agreement and
the Stock Option Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby, have been duly authorized by
all requisite corporate actions of the Company;
6.3.6.4. The Acquired Bank has all requisite corporate power and authority
under the Pennsylvania Code to execute and deliver this Agreement and to perform
its obligations thereunder, and the execution, delivery and performance of this
Agreement by the Acquired Bank and the consummation by the Acquired Bank of the
transactions contemplated hereby, have been duly authorized by all requisite
corporate actions of the Acquired Bank;
6.3.6.5. All of the outstanding shares of Company Common Stock and all of
the outstanding shares or equity interests of all the Company Subsidiaries' have
been duly authorized and are validly issued, fully paid and non-assessable;
6.3.6.6. Each of this Agreement and the Stock Option Agreement has been
duly executed and delivered by the Company and
A-55
the Acquired Bank and, assuming due authorization, execution and delivery by the
Acquiror and the Acquiring Bank, constitutes the legal, valid and binding
obligation of each of the Company and the Acquired Bank, enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent conveyance and other similar
laws relating to or affecting the right of creditors generally and the effect of
general principles of equity;
6.3.6.7. The execution, delivery and performance of this Agreement and the
Stock Option Agreement by the Company and the Acquired Bank, and the
consummation by the Company and the Acquired Bank of the transactions
contemplated hereby and thereby, will not conflict with, or result in a breach
of, any of the terms, conditions or provisions of either the Company's or the
Acquired Bank's articles of incorporation or by-laws, or any law, rule, order
(of a bank regulatory agency) or regulation to which the Company or any Company
Subsidiary is subject or, to the best of such firm's knowledge, in any material
respect conflict with, result in a breach or violation of, give rise to a
default under or result in the acceleration of performance or right to
accelerate performance under (whether or not after the giving of notice or lapse
of time or both) any order (other than of a bank regulatory agency) or any
material contract, obligation or commitment relating to the Company or any
Company Subsidiary known to such firm;
6.3.6.8. Such firm is not aware of any facts which would indicate that any
consents or approvals by governmental authorities or other parties which are
required in connection with the consummation by the Company and the Acquired
Bank of the transactions contemplated by this Agreement have not been obtained;
and
6.3.6.9. Such firm is not aware of any facts which would indicate that
either the Company or any Company Subsidiary is involved as plaintiff or
defendant in any legal proceedings other than those described in such letter.
6.3.6.10. All the outstanding stock of the Acquired Bank is owned by the
Company and all the outstanding stock and other equity interests owned by the
Company or the Acquired Bank of each Company Subsidiary (other than the Acquired
Bank) is owned by the Company or the Acquired Bank, in each case, free and clear
of all liens, encumbrances, charges, restrictions and rights of third parties.
6.3.7. The Acquiror shall have reasonably determined that the Adjusted
Capital of the Company is not less than $17,600,000. "Adjusted Capital" shall
mean the sum of shareholders equity and loan loss reserves calculated by the
method utilized in computing shareholders equity and loan loss reserves for the
Company Financial Statements at September 30, 1994 (provided that
A-56
such shareholders equity as so calculated shall not be less than $7,300,000),
increased by amounts up to $300,000 paid to or accrued after the date hereof for
services rendered to the Company by Sandler O'Neill & Partners, L.P., in
connection with this Agreement, up to $150,000 paid to or accrued after the date
hereof for legal services incurred by the Company in connection with the
negotiation and consummation of this Agreement, up to $185,000 for the accrual
of expenses incurred in connection with the cancellation of the Executive
Options to be cancelled pursuant to this Agreement, and up to $150,000
additional adjustment to the investment portfolio of the Acquired Bank incurred
by reason of the application of certain accounting rules (FASB 115) relating to
certain securities held for sale in addition to such amount as shown in the
Company Financial Statements at September 30, 1994, and by disregarding the
effect of adjustments, if any, made pursuant to Section 5.2.6 of this Agreement.
In the event Adjusted Capital as so determined shall be less than $17,600,000,
the amount of cash and the number of shares of Acquiror Common Stock into which
Common Stock shall be converted into the right to receive, shall be adjusted as
follows:
(i) after determining the amount of cash and the number of shares to
which the holders of Common Stock shall be entitled to receive pursuant to the
provisions of this Agreement without regard to this Section,
(ii) the amount of cash to be received by the holders of Common Stock
entitled to receive solely cash shall be reduced below the amount of such cash
by the amount of $0.01 per share for each full $100,000 by which such Adjusted
Capital shall be less than $17,600,000, provided, however, in the event Adjusted
Capital shall be less than $15,500,000, the amount of such cash shall be reduced
by $0.22 plus $0.02 for each full $100,000 by which such Adjusted Capital shall
be less than $15,500,000, provided further, in the event Adjusted Capital shall
be less than $12,000,000, the Acquiror may elect, in its sole discretion, to
either determine that the condition required by this Section 6.3.7. shall not
have been met or to decrease such cash amount by $0.92 plus $0.02 for each full
$100,000 by which Adjusted Capital shall be less than $12,000,000, and
(iii) after so determining the amount of cash to be so paid to the
holders of Common Stock entitled to receive solely cash, the shares of Acquiror
Common Stock to be received by the holders of Common Stock entitled to receive
solely Acquiror Common Stock shall be reduced by reducing the Exchange Ratio by
multiplying the Exchange Ratio by a fraction (the "Reduction Fraction"), the
numerator of which shall be the cash amount as so determined in accordance with
this Section 6.3.7. and the denominator of which shall be the amount of cash to
which the holders of Common Stock entitled to receive solely cash shall be
entitled without regard to this Section 6.3.7 and
A-57
(iv) after so determining the amount of cash to be so paid to the
holders of Common Stock entitled to receive solely cash, and the amount of
Acquiror Common Stock to be received by the holders of Common Stock entitled to
receive solely Acquiror Common Stock, the amount of cash and the amount of
Acquiror Common Stock to be received by the holders of Common Stock entitled to
receive both cash and Acquiror Common Stock shall be reduced by multiplying the
amount of such cash determined without regard to Section 6.3.7. by the Reduction
Fraction and the Exchange Ratio determined without regard to Section 6.3.7. by
the Reduction Fraction.
6.3.8. The Acquiror shall have determined, in its sole discretion, that (a)
the sums paid or accrued by the Company and each Company Subsidiary through the
Effective Time, and (b) the potential obligations of the Surviving Corporation
and the Surviving Bank, in each case ((a) and (b)) with respect to any bulk sale
transaction entered into or consummated by the Company or any Company
Subsidiary, shall not, in the aggregate, be material to the financial condition
or business of the Company or to the earnings that the business of the Company
would be expected to contribute to the Acquiror following the Effective Time.
6.3.9. No loan or other advancement of credit or commitment to make a loan
or to advance credit by the Acquired Bank to any principal shareholder of the
Company or any director or executive officer of the Acquired Bank or the
Company, or to any of their affiliates, within the meaning of Regulation O of
the FRB, since September 30, 1994, has been modified to extend or postpone any
maturity date or the prepayment of any portion thereof (except in compliance
with the underwriting standards of the Acquired Bank, not in violation of any
law or regulation, and with notice to the Acquiring Bank) increase any
principal, delay any enforcement, release any collateral, or otherwise adversely
change its collectibility or the security thereof and no guarantee with respect
to any such loan, credit, or commitment, whether currently effective or to
become effective at any time or upon any condition, has been released or
modified in any way to adversely change the guarantee or the availability of any
collateral therefor.
6.3.10. All qualified pension and profit sharing plans of the Company shall
have been restated or amended in a manner satisfactory to the Acquiror on or
prior to December 31, 1994, unless subject to the extended remedial amendment
period pursuant to I.R.S. Announcement 94-136, and all requests for IRS
determination letters relative to such restatements or amendments shall have
been fully and timely filed.
6.3.11. All authorizations, consents or approvals of, and all expirations
of waiting periods imposed by, any non-governmental third party, which are
necessary for the consummation of the Merger and the transaction by the
Surviving Corporation and the Surviving Bank of all business previously
conducted by the
A-58
Company and each Company Subsidiary, respectively, shall have been obtained or
shall have occurred and shall be in full force and effect at the Effective Time.
6.3.12. The Executive Options to be cancelled in accordance with Sections
2.12.1. and 2.12.2 shall have been so cancelled in accordance therewith and the
Company shall have delivered to the Acquiror the Consent of the Executive
required by Section 2.12.3.
A-59
ARTICLE VII--TERMINATION
This Agreement may be terminated (which termination shall also constitute a
termination of the Bank Merger Agreement) at any time prior to the Effective
Time, whether before or after approval by the Company's shareholders, as
follows:
7.1. Mutual Consent. The Acquiror and the Company may terminate this
Agreement at any time by mutual written agreement.
7.2.1 Other Termination. Either the Acquiror or the Company may terminate
this Agreement by giving written notice (a "Termination Notice") to the other at
any time up to and including the date of Closing, if any one or more of the
following shall have occurred and be continuing:
7.2.1.1. at any time after December 31, 1995, if the Closing shall not have
occurred for any reason other than a Default (as defined in Section 7.4) by the
party giving such notice;
7.2.1.2. this Agreement is not approved by the requisite vote of the
shareholders of the Company at the Company Meeting (including any adjournments
thereof);
7.2.1.3. any application for regulatory approval is denied or withdrawn and
is not modified or supplemented and resubmitted in a manner that the party
giving the notice reasonably believes is responsive to the comments of the
applicable government authority within 120 days after it is so denied or
withdrawn; or
7.2.1.4. a court or other government authority of competent jurisdiction
shall have issued an order, writ, injunction or decree or shall have taken any
other action permanently restraining or otherwise prohibiting the Merger or the
Bank Merger and such order, writ, injunction, decree or other action shall have
become final and nonappealable.
7.2.2. Termination By the Acquiror. In addition to its termination rights
pursuant to Section 7.2.1 hereof, the Acquiror may terminate this Agreement
under any one or more of the following circumstances:
7.2.2.1. at any time if there shall have occurred a Default (as defined in
Section 7.4) by the Company or the Acquired Bank or if Section 5.1 has been
violated or would have been violated but for a fiduciary duty exception set
forth in Section 5.1;
7.2.2.2. on the Closing Date, if any condition set forth in Sections 6.1 or
6.3 shall not have been satisfied;
A-60
7.2.2.3. at any time, if the Board of Directors of the Company withdraws
its recommendation that the shareholders of the Company approve the Merger;
7.2.2.4. at any time if an event constituting a Company Material Adverse
Effect (other than events constituting a Company Material Adverse Effect
relating solely to net operating losses) shall have occurred since September 30,
1994 (excluding any adjustments made by the Company solely to comply with
Section 5.2.6.); or
7.2.2.5. at any time, if the Acquiror determines that the approval of its
shareholders is required in connection with this Agreement, alone or in
combination with other matters, and at the meeting of the Acquiror's
shareholders called to solicit such approval (including any adjournments
thereof), the requisite approving vote of the Acquiror's shareholders is not
obtained.
7.2.3. Termination By the Company. In addition to its termination rights
pursuant to Section 7.2.1 hereof, the Company may also terminate this Agreement
under any one or more of the following circumstances:
7.2.3.1. at any time if there shall have occurred a Default (as defined in
Section 7.4) by the Acquiror or the Acquiring Bank;
7.2.3.2. on the Closing Date, if any condition set forth in Sections 6.1 or
Section 6.2 shall not have been satisfied;
7.2.3.3. at any time if an event constituting an Acquiror Material Adverse
Effect shall have occurred since September 30, 1994;
7.2.3.4. at any time if the Company or the Acquired Bank shall enter into
any Acquisition Transaction after meeting all of the Acquisition Transaction
Conditions specified in Section 5.1.3; or
7.2.3.5. if (either before or after approval of the Merger by the
shareholders of the Company) the Company's Board of Directors so determines by a
vote of a majority of the members of its entire Board, at any time during the
ten day period commencing with the Determination Date (as hereinafter defined),
if both of the following conditions are satisfied:
(1) the Acquiror Final Price (as hereinafter defined) shall be less than
$26.87 (the "Acquiror Starting Price") multiplied by 0.85; and
(2) (i) the number obtained by {subtracting from 1.0 a fraction, the
numerator of which is the Acquiror Final Price and
A-61
the denominator of which is the Acquiror Starting Price} shall be greater than
(ii) the number obtained by (a) {subtracting from 1.0 a fraction (the "Index
Ratio"), in which the numerator is the Index Final Price (as hereinafter
defined) and the denominator is 100 (the "Index Starting Price")}, and (b)
multiplying the result by 1.15; subject, however, to the following:
If the Company elects to exercise its termination right pursuant to
this Section 7.2.3.5, it shall give prompt written notice to the
Acquiror (provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned ten-day period).
During the seven-day period commencing with its receipt of such
notice, the Acquiror shall have the option of increasing the Exchange
Ratio to equal the lesser of:
i) a number equal to a quotient, the numerator of which is 0.85
multiplied by the Acquiror Starting Price multiplied by the
Exchange Ratio (as then in effect) and the denominator of which
is the Acquiror Final Price, and
(ii) a number equal to a quotient, the numerator of which is the
Exchange Ratio (as then in effect) multiplied by the Acquiror
Starting Price and by the number which results from {0.15
multiplied by (the Index Ratio subtracted from 1.0) subtracted
from the Index Ratio} and the denominator of which is the
Acquiror Final Price.
If the Acquiror makes an election contemplated by the preceding
sentence within such seven-day period, it shall give prompt written
notice to the Company of such election and its calculation of the
revised Exchange Ratio, whereupon no termination shall have occurred
pursuant to this Section 7.2.3.5. and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio
shall have been so modified), and any references in this Agreement to
"Exchange Ratio" shall thereafter be deemed to refer to the Exchange
Ratio as adjusted pursuant to this Section 7.2.3.5.
For purposes of this subsection 7.2.3.5, the following terms shall have the
following meanings:
7.2.3.5.1. "Acquiror Final Price" means the average of the Last Prices (as
defined in Section 2.7) for the 20 consecutive full trading days ending at the
close of trading on the Determination Date.
A-62
7.2.3.5.2. "Determination Date" means the later to occur of the date of the
approval of the OCC required for consummation of the Bank Merger or the date of
the approval of the FRB required for consummation of the Merger.
7.2.3.5.3. "Index Group" means the ten bank holding companies identified in
a letter from the Acquiror to the Company dated the date hereof, the common
stock of all of which shall be publicly traded and as to which there shall not
have been a publicly announced proposal since the Starting Date and before the
Determination Date for any such company to be acquired. In the event that the
common stock of any such company ceases to be publicly traded or a proposal to
acquire any such company is announced after the Starting Date and before the
Determination Date, such company will be retroactively removed from the Index
Group, and the weights (which are based on the number of shares of common stock
outstanding as of September 30, 1994 as reflected in the Quarterly Report on
Form 10-Q filed with the SEC by each of the bank holding companies in the Index
Group and their respective market prices) will be redistributed proportionately
for purposes of determining the Index Price.
7.2.3.5.4. "Index Price" on a given date means the weighted average
(weighted in accordance with the basis therefor set forth in Section 7.2.3.5.3.)
of the closing prices of the companies in the Index Group.
7.2.3.5.5. "Index Final Price" means the average of the Index Prices for
the 20 consecutive full trading days ending at the close of trading on the
Determination Date.
7.2.3.5.6. "Starting Date" means the first NASDAQ trading day immediately
following the date of the first public announcement of the parties' entry into
this Agreement.
7.2.3.5.7. If any company belonging to the Index Group or the Acquiror
declares or effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction between the
Starting Date and the Determination Date, the prices for and outstanding amount
of common stock of such company or the Acquiror shall be appropriately adjusted
for the purposes of applying this Section 7.2.3.5.
7.3. Effect of Termination. Termination of this Agreement pursuant to this
Article VII shall not relieve any party of any liability for a Default or other
breach, default or nonperformance under this Agreement.
7.4. Definition of Default. For purposes of this Article VII, a party shall
be in "Default" hereunder if:
A-63
7.4.1. any representation or warranty of such party contained in this
Agreement shall have been incorrect, incomplete or otherwise misleading in any
material respect when made; and/or
7.4.2. such party shall have failed to perform or otherwise breached in any
material respect any of its covenants or obligations contained in this Agreement
and such failure or breach shall have remained uncured for ten days after notice
thereof to such party by any other party hereto.
A-64
ARTICLE VIII--THE CLOSING
8.1. Closing. The Closing shall be conducted at the time and place
described in Section 1.4.
8.2. Delivery of Common Stock Consideration and Cash Consideration.
Contemporaneous with the Closing, the Acquiror shall deliver to the Exchange
Agent one or more stock certificates representing the aggregate number of shares
of Acquiror Common Stock included within the Common Stock Consideration and the
aggregate Cash Consideration for delivery after the Effective Time pursuant to
Article II hereof.
8.3. Deliveries by the Company. At the Closing, the Company shall deliver
or cause to be delivered to the Acquiror the following:
8.3.1. the officers' certificate described in Section 6.3.3;
8.3.2. evidence, in form and substance satisfactory to the Acquiror, of the
Company's compliance with Section 5.14 (ISRA approval);
8.3.3. a certificate of the Secretary of the Company and the Cashier or
Secretary of the Acquired Bank, in form and substance reasonably satisfactory to
the Acquiror, which (i) sets forth copies of all resolutions pursuant to which
the Company's Board of Directors and shareholders approved the Merger and the
Acquired Bank's Board of Directors and shareholders approved the Bank Merger,
(ii) sets forth the Company's and the Acquired Bank's By-laws, (iii) confirms
that there have been no amendments to either the Company's or the Acquired
Bank's Articles of Incorporation other than as previously disclosed in the
Company Disclosure Schedules, (iv) confirms that no stop order or comparable
directive has been received by the Company with respect to the Proxy Statement
or the Registration Statement, (v) certifies the incumbency of officers that
have executed documents relating to the Merger and the Bank Merger and (vi)
covers such other matters as shall be reasonably requested by the Acquiror's
counsel to assure the Company's and the Acquired Bank's compliance with this
Agreement and the Company's and the Acquired Bank's representations hereunder;
and
8.3.4. evidence of the Company's and the Acquired Bank's receipt of all
approvals and consents necessary for the Company to consummate the Merger and
the Acquired Bank to consummate the Bank Merger.
8.4. Deliveries by the Acquiror. At the Closing, the Acquiror shall deliver
or cause to be delivered to the Company the following:
A-65
8.4.1. the officers' certificate described in Section 6.2.3;
8.4.2. a certificate of the Secretary of the Acquiror and the Cashier of
the Acquiring Bank, in form and substance reasonably satisfactory to the
Company, which (i) sets forth copies of all resolutions pursuant to which the
Acquiror's Boards of Director and the Acquiring Bank's Board of Directors
approved the Merger, (ii) sets forth the Acquiror's and the Acquiring Bank's
By-laws, (iii) confirms the last date on which the Acquiror's Certificate of
Incorporation and the Acquiring Bank's Articles of Association were amended,
(iv) confirms that no stop order or comparable directive has been received by
the Acquiror with respect to the Proxy Statement or the Registration Statement,
(v) certifies the incumbency of officers that have executed documents relating
to the Merger and the Bank Merger and (vi) covers such other matters as shall be
reasonably requested by the Company's counsel to assure the Acquiror's and the
Acquiring Bank's compliance with this Agreement and the Acquiror's
representations hereunder; and
8.4.3. evidence of the Acquiror's and the Acquiring Bank's receipt of all
approvals and consents necessary for the Acquiror to consummate the Merger and
the Acquiring Bank to consummate the Bank Merger.
A-66
ARTICLE IX--MISCELLANEOUS
9.1. Non-Survival of Representations, Warranties, and Agreements. The
representations, warranties and covenants in this Agreement shall terminate at
the Effective Time or the earlier termination of this Agreement pursuant to
Article VII, as the case may be; provided, however, that if the Merger is
consummated, Article II and Sections 5.5.2, 5.7, 5.8 and Article IX hereof shall
survive the Effective Time to the extent contemplated by such Sections;
provided, further, however that Section 5.5.2 and all of Article IX hereof shall
in all events survive any termination of this Agreement.
9.2. Interpretation. Unless the context of this Agreement expressly
indicates otherwise, (i) any singular term in this Agreement shall include the
plural and any plural term shall include the singular and (ii) the term Section
or Schedule shall mean a section or schedule of or to this Agreement, the
Company Disclosure Schedules or the Acquiror Disclosure Schedules, as the
context indicates. It is intended by the parties that this Agreement is not to
be construed against the Acquiror or the Acquiring Bank by virtue of the fact
that this Agreement was initially drafted by representatives of the Acquiror and
the Acquiring Bank.
9.3. Parties in Interest. Except for Section 5.7 (which is intended to be
for the benefit of directors and officers and may be enforced by such persons),
this Agreement is not intended to nor shall it confer upon any other person
(other than the parties hereto) any rights or remedies.
9.4. Expenses.
9.4.1. If the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by either the Acquiror or the Surviving Bank.
9.4.2. Notwithstanding any provision herein to the contrary, if this
Agreement is terminated by the Company or the Acquiror pursuant to Sections
7.2.2 or 7.2.3, respectively, because of the willful breach by the other party
of any representation, warranty, covenant, undertaking or restriction contained
in this Agreement and if the terminating party is not in material breach of any
representation, warranty, covenant, undertaking or restriction contained in this
Agreement, then the breaching party shall pay all costs and expenses of the
terminating party; provided, however, that if this Agreement is terminated under
circumstances other than those described in the preceding clauses of this
Section 9.4.2, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and
A-67
expenses. Nothing contained in this Section 9.4.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a party of the
terms of this Agreement or otherwise limit the rights of the non-breaching
party.
9.5. Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
9.6. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
maximum extent possible.
9.7. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be delivered personally, by facsimile,
or by overnight courier, or sent by certified, registered or express air mail,
postage prepaid, and shall be deemed given when so delivered personally, or by
facsimile, or by overnight courier, or if mailed, five days after the date of
mailing, as follows:
A-68
If to the Acquiror or the Acquiring Bank:
if delivered: General Counsel, Midlantic Corporation
499 Thornall Street
Edison, New Jersey 08837
Telephone: (908) 321-8200
Facsimile: (908) 321-8518
if mailed: General Counsel, Midlantic Corporation
P.O. Box 600
Edison, New Jersey 08818-0600
Telephone: (908) 321-8200
Facsimile: (908) 321-8518
With a copy to:
if delivered: Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932-0950
Telephone: (201) 966-6300
Facsimile: (201) 966-1500
Attention: Joseph Lunin, Esq.
if mailed: Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962-1945
Telephone: (201) 966-6300
Facsimile: (201) 966-1500
Attention: Joseph Lunin, Esq.
If to the Company or the Acquired Bank:
Bank and Trust Company of Old York Road
York and Easton Roads
Willow Grove, Pennsylvania 19090-3282
Telephone: (215) 784-1980
Facsimile: (215) 659-3420
Attention: Erwin K. Wenner,
Chief Executive Officer
With a copy to: Fellheimer Eichen Braverman & Kaskey
One Liberty Place
1650 Market Street
Philadelphia, Pennsylvania 19103
Telephone: (215) 575-3800
Facsimile: (215) 575-3801
Attention: Alan Fellheimer, Esq.
9.8. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey without reference
to choice of law principles thereof, except to the extent that the Merger is
governed by the
A-69
Pennsylvania Business Corporation Law and the Bank Merger is governed by the
National Bank Act and the Pennsylvania Code.
9.9. Assignment; Successors and Assigns. This Agreement may not be
assigned, and any attempted assignment shall be null and void, except that this
Agreement may be assigned by the Acquiring Bank to another Acquiror Subsidiary.
This Agreement shall be binding unto and inure to the benefit of the parties
hereto and their respective successors, permitted assigns and legal
representatives.
9.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.
9.11. Titles and Headings. The titles, headings and table of contents in
this Agreement are for reference purposes only, and shall not in any way affect
the meaning or interpretation of this Agreement.
9.12. Amendment and Modification. This Agreement may only be amended or
modified in a writing signed by the party against whom enforcement of such
amendment or modification is sought.
9.13. Waiver. Except as otherwise required by law, any of the terms and
conditions of this Agreement may be waived at any time by the party or parties
entitled to the benefit thereof, but only by a writing signed by the party or
parties waiving such terms or conditions.
9.14. Entire Agreement. This Agreement, including the Company Disclosure
Schedules, the Acquiror Disclosure Schedules, and the Stock Option Agreement,
shall constitute the entire agreement among the parties with respect to the
matters covered hereby and shall supersede all previous written, oral and
implied understandings among them with respect to such matters.
A-70
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and year first above written.
MIDLANTIC CORPORATION
By: /S/ DONALD W. EBBERT, Jr.
------------------------
Name: Donald W. Ebbert, Jr.
Title: Senior Vice President
and Treasurer
MIDLANTIC BANK, NATIONAL ASSOCIATION
By: /S/ DONALD W. EBBERT, Jr.
-------------------------
Name: Donald W. Ebbert, Jr.
Title: Senior Vice President
and Treasurer
OLD YORK ROAD BANCORP, INC.
By: /S/ MARK HANKIN
-------------------------
Name: Mark Hankin
Title: Chairman
BANK AND TRUST COMPANY OF OLD YORK ROAD
By: /S/ MARK HANKIN
-------------------------
Name: Mark Hankin
Title: Chairman
A-71
APPENDIX B
THE TRANSFER OF THE OPTION GRANTED BY THIS AGREEMENT IS SUBJECT TO RESALE
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated December 29, 1994, is by
and between MIDLANTIC CORPORATION, a New Jersey corporation (the "Acquiror") and
registered bank holding company for MIDLANTIC BANK, NATIONAL ASSOCIATION, (the
"Acquiring Bank"), and OLD YORK ROAD BANCORP, INC., a Pennsylvania corporation
(the "Company") and registered bank holding company for BANK AND TRUST COMPANY
OF OLD YORK ROAD, a commercial bank organized under the laws of the Commonwealth
of Pennsylvania (the "Acquired Bank").
BACKGROUND
1. Acquiror, the Company, the Acquired Bank and the Acquiring Bank, as of
the date hereof, have executed a definitive Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which Acquiror will acquire the Company through
a merger of the Company with and into Acquiror (the "Merger") and the Acquired
Bank will be merged with and into the Acquiring Bank.
2. Acquiror has made it a condition of its willingness to enter into the
Merger Agreement that the Company grant to Acquiror an option to purchase
authorized but unissued shares of common stock of the Company in an amount and
on the terms and conditions hereinafter set forth.
3. As an inducement to Acquiror to enter into the Merger Agreement and in
consideration for such entry, the Company desires to grant to Acquiror an option
to purchase authorized but unissued shares of common stock of the Company in an
amount and on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and agreements
set forth herein and in the Merger Agreement, Acquiror and the Company,
intending to be legally bound hereby, agree:
1. Grant of Option. The Company hereby grants to Acquiror the option to
purchase such number of the shares Common Stock of the Company, which, after
issuance thereof would constitute 19.9% of the then issued and outstanding
shares (based on the outstanding shares of the company on the date hereof is an
option to purchase 701,919 shares) of common stock, par value $1.00 per share
(the "Common Stock") of the Company at a price of $7.25 per share (the "Option
Price"), subject to the terms and conditions set forth herein (the "Option").
B-1
2. Exercise of Option. This Option shall not be exercisable until the
occurrence of a Triggering Event (as such term is hereinafter defined). Upon or
after the occurrence of a Triggering Event (as such term is hereinafter
defined), the Acquiror may exercise the Option, in whole or in part, at any time
or from time to time subject to the termination provisions of Section 19 of this
Agreement.
The term "Triggering Event" means the occurrence of any of the following
events:
A person or group (as such terms are defined in the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder) other than the Acquiror or an affiliate of the Acquiror:
a. acquires beneficial ownership (as such term is defined in Rule 13d-3 as
promulgated under the Exchange Act) of at least 20% of the then outstanding
shares of Common Stock; or
b. enters into a letter of intent or an agreement, whether oral or written,
with the Company pursuant to which such person or any affiliate of such person
would (i) merge or consolidate, or enter into any similar transaction with the
Company, (ii) acquire all or a significant portion of the assets or liabilities
of the Company, or (iii) acquire beneficial ownership of securities
representing, or the right to acquire beneficial ownership or to vote securities
representing 20% or more of the then outstanding shares of Common Stock; or
c. makes a filing with the Securities Exchange Commission or bank
regulatory authorities (which filing has been accepted for processing by such
authorities) or publicly announces a bona fide proposal (such filing or
proposal, a "Proposal") with respect to (i) any merger, consolidation or
acquisition of all or a significant portion of all the assets or liabilities of
the Company or any other business combination involving the Company, or (ii) a
transaction involving the transfer of beneficial ownership of securities
representing, or the right to acquire beneficial ownership or to vote securities
representing, 20% or more of the outstanding shares of Common Stock, and
thereafter, such Proposal is not Publicly Withdrawn (as such term is hereinafter
defined) at least 15 days prior to the meeting of stockholders of the Company
called to vote on the Merger and the Company' stockholders fail to approve the
Merger by the vote required by applicable law at the meeting of stockholders
called for such purpose; or
d. makes a bona fide Proposal and thereafter, but before such Proposal has
been Publicly Withdrawn, the Company willfully takes any action in any manner
which would materially interfere
B-2
with its ability to consummate the Merger or materially reduce the value of the
transaction to the Acquiror.
The term "Triggering Event" also means the taking of any material direct or
indirect action by the Company or any of its directors, officers or agents with
the intention of inviting, encouraging or soliciting, or which is likely to
result in, any proposal which has as its purpose a tender offer for the shares
of the Company's Common Stock, a merger, consolidation, plan of exchange, plan
of acquisition or reorganization of the Company, or a sale of a significant
number of shares of the Company's Common Stock or any significant portion of its
assets or liabilities.
The term "significant number" means 10% of the outstanding shares of Common
Stock. The term "significant portion" means 25% of the assets or liabilities of
the Company.
"Publicly Withdrawn", for purposes of clauses (c) and (d) above, shall mean
an unconditional bona fide withdrawal of a Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over the Company or in soliciting or inducing any
other person (other than the Acquiror or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised at any time
(i) in the absence of any required governmental or regulatory approval or
consent necessary for the Company to issue the shares of Common Stock covered by
the Option (the "Option Shares") or the Acquiror to exercise the Option or prior
to the expiration or termination of any waiting period required by law, or (ii)
so long as any injunction or other order, decree or ruling issued by any federal
or state court of competent jurisdiction is in effect which prohibits the sale
or delivery of the Option Shares.
The Company shall notify the Acquiror promptly in writing of the occurrence
of any Triggering Event known to it, it being understood that the giving of such
notice by the Company shall not be a condition to the right of the Acquiror to
exercise the Option. The Company will not take any action which would have the
effect of preventing or disabling the Company from delivering the Option Shares
to the Acquiror upon exercise of the Option or otherwise performing its
obligations under this Agreement. In the event the Acquiror wishes to exercise
the Option, the Acquiror shall send a written notice to the Company (the date of
which is hereinafter referred to as the "Notice Date") specifying the total
number of Option Shares it wishes to purchase and a place and date for the
closing of such a purchase (a "Closing"); provided, however, that a Closing
shall not occur prior to five business days after the later of receipt of any
necessary regulatory approvals and the
B-3
expiration of any legally required notice or waiting period, if any.
3. Payment and Delivery of Certificates. At any Closing hereunder (a) the
Acquiror will make payment to the Company of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by the Company, (b) the Company will deliver to the Acquiror
a stock certificate or certificates representing the number of Option Shares so
purchased, free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever created by or through the Company (other than
restrictions imposed by applicable securities laws), registered in the name of
the Acquiror or its designee, in such denominations as were specified by the
Acquiror in its notice of exercise and bearing a legend as set forth below and
(c) the Acquiror shall pay any transfer or other taxes required by reason of the
issuance of the Option Shares so purchased.
Unless a registration statement is filed and declared effective under
Section 4 hereof, a legend will be placed on each stock certificate evidencing
Option Shares issued pursuant to this Agreement, which legend will read
substantially as follows:
The shares of stock evidenced by this certificate have not been
registered for sale under the Securities Act of 1933 (the "1933 Act").
These shares may not be sold, transferred or otherwise disposed of unless a
registration statement with respect to the sale of such shares has been
filed under the 1933 Act and declared effective or, in the opinion of
counsel to the Company, said transfer would be exempt from registration
under the provisions of the 1933 Act and the regulations promulgated
thereunder.
4. Registration Rights. Upon or after the occurrence of a Triggering Event
that occurs prior to the termination of this Agreement and upon receipt of a
written request from the Acquiror, the Company shall prepare and file a
registration statement with the Securities and Exchange Commission, covering the
Option and such number of Option Shares as the Acquiror shall specify in its
request, and the Company shall use its best efforts to cause such registration
statement to be declared effective in order to permit the sale or other
disposition of the Option and the Option Shares, provided that the Acquiror
shall in no event have the right to have more than one such registration
statement become effective (or only one demand registration if a Registration
Statement which has been filed does not become effective because of the failure
of the Acquiror to furnish information concerning the Acquiror) and provided
further that the Company may postpone such preparation and filing for a period
of time (not to exceed 90 days) if in its reasonable judgment such filing would
require the disclosure of
B-4
material information that the Company has a bona fide business purpose for
preserving as confidential.
In connection with such filing, the Company shall use its best efforts to
cause to be delivered to the Acquiror such certificates, opinions, accountant's
letters and other documents as the Acquiror shall reasonably request and as are
customarily provided in connection with registrations of securities under the
Securities Act of 1933, as amended, and the Acquiror shall provide to the
Company such information regarding the Acquiror as the Company shall reasonably
request for purposes of preparing such registration statement. In the event the
Acquiror shall have exercised the option to acquire in the aggregate 50% or more
of the shares which the Acquiror is entitled to purchase hereunder, all expenses
incurred by the Company in complying with the provisions of this Section 4,
including without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company and blue sky fees
and expenses shall be paid by the Company. Underwriting discounts and
commissions to brokers and dealers relating to the Option Shares, fees and
disbursements of counsel to the Acquiror and any other expenses incurred by the
Acquiror in connection with such registration shall be borne by the Acquiror. In
connection with such filing, the Company shall indemnify and hold harmless the
Acquiror against any losses, claims, damages or liabilities, joint or several,
to which the Acquiror may become subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any preliminary or final prospectus or any amendment or supplement
thereto, or arise out of a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse the Acquiror for any legal or other expense reasonably incurred by the
Acquiror in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such preliminary or final prospectus or
such amendment or supplement thereto in reliance upon and in conformity with
written information furnished by or on behalf of the Acquiror specifically for
use in the preparation thereof. The Acquiror will indemnify and hold harmless
the Company to the same extent as set forth in the immediately preceding
sentence but only with reference to written information specifically furnished
by or on behalf of the Acquiror for use in the preparation of such preliminary
or final prospectus or such amendment or supplement thereto; and the Acquiror
will reimburse the Company for any legal or other expense reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action.
B-5
5. Adjustment Upon Changes in Capitalization. In the event of any change in
the Common Stock by reason of stock dividends, stock splits, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
In the event any capital reorganization or reclassification of the Common
Stock, or any consolidation, merger or similar transaction of the Company with
another entity, or any sale of all or substantially all of the assets of the
Company shall be effected in such a way that the holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
(in form reasonably satisfactory to the holder hereof) shall be made whereby the
holder hereof shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified herein and in lieu of the
Common Stock immediately theretofore purchasable and receivable upon exercise of
the rights represented by this Option, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore purchasable and receivable
upon exercise of the rights represented by this Option had such reorganization,
reclassification, consolidation, merger or sale not taken place; provided,
however, that if such transaction results in the holders of Common Stock
receiving only cash, the holder hereof shall, upon exercise of the Option, be
paid the excess, if any, of such cash consideration over the Option Price
without the need to exercise the Option.
6. Filings and Consents. Each of the Acquiror and the Company will use its
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to compliance with
all applicable laws including, in the event the Acquiror is the holder hereof,
approval of the Board of Governors of the Federal Reserve System, and the
Company agrees to cooperate with and furnish to the holder hereof such
information and documents as may be reasonably required to secure such
approvals.
7. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Acquiror as follows:
a. Due Authorization. The Company has full corporate power and authority to
execute, deliver and perform this Agreement
B-6
and all corporate action necessary for execution, delivery and performance of
this Agreement has been duly taken by the Company.
b. Authorized Shares. The Company has taken and, as long as the Option is
outstanding, will take all necessary corporate action to authorize and reserve
for issuance all shares of Common Stock that may be issued pursuant to any
exercise of the Option.
c. No Conflicts. Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
regulatory approvals) will violate or result in any violation or default of or
be in conflict with or constitute a default under any term of the articles of
association or by-laws of the Company or any agreement, instrument, judgment,
decree, statute, rule or order applicable to the Company.
8. Specific Performance. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement and that the obligations
of the parties hereto shall be specifically enforceable. Notwithstanding the
foregoing, the Acquiror shall have the right to seek money damages against the
Company for a breach of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, among the
parties or any of them with respect to the subject matter hereof.
10. Assignment or Transfer. The Acquiror may not sell, assign or otherwise
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to an affiliate of the Acquiror, except
upon or after the occurrence of a Triggering Event. The Acquiror represents that
it is acquiring the Option for the Acquiror's own account and not with a view to
or for sale in connection with any distribution of the Option or the Option
Shares. The Acquiror is aware that presently neither the Option nor the Option
Shares are being offered by a registration statement filed with, and declared
effective by, the Securities and Exchange Commission, but instead are being
offered in reliance upon the exemption from the registration requirements
pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Acquiror
shall have the right to assign this Agreement to any party it selects after the
occurrence of a Triggering Event, subject to the application of all applicable
securities laws.
11. Amendment of Agreement. In the event that the parties hereto mutually
consent, this Agreement may be amended in writing at any time, for the purpose
of facilitating performance hereunder or to comply with any applicable
regulation of any
B-7
governmental authority or any applicable order of any court or for any other
purpose.
12. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
13. Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally, by express service, cable, telegram
or telex, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
If to the Acquiror:
if delivered:
General Counsel, Midlantic Corporation
499 Thornall Street
Edison, New Jersey 08837
Telephone: (908) 321-8200
Facsimile: (908) 321-8518
if mailed:
General Counsel, Midlantic Corporation
P.O. Box 600
Edison, New Jersey 08818-0600
Telephone: (908) 321-8200
Facsimile: (908) 321-8518
With a copy to:
if delivered:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932-0950
Telephone: (201) 966-6300
Facsimile: (201) 966-1500
Attention: Joseph Lunin, Esq.
if mailed:
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962-1945
Telephone: (201) 966-6300
Facsimile: (201) 966-1500
Attention: Joseph Lunin, Esq.
B-8
If to the Company:
Bank and Trust Company of Old York Road
York and Easton Roads
Willow Grove, Pennsylvania 19090-3282
Telephone: (215) 784-1980
Facsimile: (215) 659-3420
Attention: Erwin K. Wenner,
Chief Executive Officer
With a copy to:
Fellheimer Eichen Braverman & Kaskey
One Liberty Place
1650 Market Street
Philadelphia, Pennsylvania 19103
Telephone: (215) 575-3800
Facsimile: (215) 575-3801
Attention: Alan Fellheimer, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
15. Captions. The captions in the Agreement are inserted for convenience
and reference purposes, and shall not limit or otherwise affect any of the terms
or provisions hereof.
16. Waivers and Extensions. The parties hereto may, by mutual consent,
extend the time for performance of any of the obligations or acts of either
party hereto. Each party may waive (i) compliance with any of the covenants of
the other party contained in this Agreement and/or (ii) the other party's
performance of any of its obligations set forth in this Agreement.
17. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
as provided in Section 10 permitting the Acquiror to assign its rights and
obligations hereunder.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an
B-9
original, but all of which shall constitute one and the same agreement.
19. Termination. This Agreement shall terminate upon either (i) the
termination of the Merger Agreement as provided therein, or (ii) the
consummation of the transactions contemplated by the Merger Agreement; provided,
however, that if termination of the Merger Agreement occurs after the occurrence
of a Triggering Event, this Agreement shall not terminate until the later of 18
months following the date of the termination of the Merger Agreement or the
consummation of any proposed transactions which constitute the Triggering Event,
provided however, that in the event a Triggering Event has occurred but has not
been consummated, and the Company proposes to file a Registration Statement with
the Securities and Exchange Commission in connection with the registration and
issuance of securities solely to raise capital for the Company, and the Company
notifies the Acquiror not less than 30 days prior to the filing of such
Registration Statement, promptly furnishes to the Acquiror copies of all
documents filed by the Company with the Securities and Exchange Commission,
including the Registration Statement and all amendments thereto, and notifies
the Company of the effective term of the Registration Statement not less than 3
days in advance of the effective date of such Registration Statement, then this
Agreement shall terminate at the close of business on the date of the
effectiveness of such Registration Statement.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to resolutions
adopted by its Board of Directors, has caused this Agreement to be executed by
its duly authorized officer, all as of the day and year first above written.
OLD YORK ROAD BANCORP, INC.
By: /s/ MARK HANKIN
---------------------------
Name: Mark Hankin
Title: Chairman
MIDLANTIC CORPORATION
By: /s/ DONALD W. EBBERT, JR.
----------------------------
Name: Donald W. Ebbert, Jr.
Title: Senior Vice President
and Treasurer
B-10
APPENDIX C
- -------------------------------------------------------------------------------
DRAFT
_______________, 1995
Board of Directors
Old York Road Bancorp, Inc.
York and Easton Roads
Willow Grove, PA 19090
Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of outstanding shares of common stock, par value $1.00
per share (the "Shares"), of Old York Bancorp, Inc. ("Company") of the
consideration to be paid to them for the Shares (the "Consideration") pursuant
to the Agreement and Plan of Merger, dated as December 29, 1994, by and between
Midlantic Corporation ("Midlantic"), Midlantic Bank, N.A., Bank and Trust
Company of Old York Road and the Company (the "Agreement").
Under the terms of the Agreement, the Company will be merged with and into
Midlantic (the "Merger") and each Share issued and outstanding immediately prior
to the Merger will be converted into the right to receive, at the holder's
election, either (a) 0.3721 shares of Midlantic's common stock, par value $3.00
per share ("Midlantic Common Stock"), or (b) $10.00 in cash, subject to certain
limitations and adjustments set forth in the Agreement.
Sandler O'Neill Corporate Strategies, a division of Sandler O'Neill &
Partners, L.P., as part of its investment banking business, is regularly engaged
in the valuation of financial institutions and their securities in connection
with mergers and acquisitions and other corporate transactions.
In connection with this opinion, we have reviewed, among other things: (i)
the Agreement; (ii) the Stock Option Agreement dated as of December 29, 1994 by
and between the Company and Midlantic; (iii) the audited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations of each of the Company and Midlantic for the three
years ended December 31, 1993; (iv) the unaudited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations for the interim period ending September 30, 1994 of
each of the company and Midlantic; (v) financial analyses and forecasts for the
Company prepared by and/or reviewed with the management of the Company; (vi) the
views of senior management of each of the Company and Midlantic of their
respective past and current business operations, results thereof, financial
condition and future prospects; (vii) the reported price and trading activity
for the Company's common stock and Midlantic's Common Stock, including a
comparison of certain financial and stock market information for the Company and
Midlantic with similar information for certain other companies the securities
C-1
Board of Directors
Old York Road Bancorp, Inc.
________________, 1995
Page 2 DRAFT
of which are publicly traded; (viii) the financial terms of recent business
combinations in the banking industry; (ix) the pro forma impact of the
transaction on Midlantic; (x) the current market environment generally and the
banking environment in particular; and (xi) such other information, financial
studies, analyses and investigations and financial, economic and market criteria
as we considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all of the financial
information, analyses and other information reviewed by and discussed with us,
and we did not make any independent evaluation or appraisal of specific assets,
the collateral securing assets or the liabilities of the Company or Midlantic or
any of their subsidiaries, or the collectibility of any such assets (relying,
where relevant, on the analyses and estimates of the Company and Midlantic).
With respect to the financial projections reviewed with management, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of the
respective future financial performances of each of the Company and Midlantic,
and that such performances will be achieved. We have also assumed that there has
been no material change in the Company's or Midlantic's assets, financial
condition, results of operations, business or prospects since the date of the
last financial statements made available to us. We have further assumed that the
company will remain as a going concern for all periods relevant to our analysis,
and that the conditions precedent in the Agreement are not waived.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion. We have not undertaken to reaffirm or revise
this opinion or otherwise comment upon any events occurring after the date
hereof.
We have acted as the Company's financial advisor in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. We have also received a fee
for rendering this opinion. We have also provided general financial advisory
services for the Company and have received fees for such services.
In the ordinary course of our business, we may actively trade the equity
securities of both the Company and Midlantic for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
It is understood that this opinion is not to be quoted or referred to, in
whole or in part, in a registration statement, prospectus or proxy statement, or
in any other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without
Sandler O'Neill's prior written consent.
C-2
Board of Directors
Old York Road Bancorp, Inc.
________________, 1995
Page 3 DRAFT
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be paid by Midlantic to the holders of Shares
pursuant to the Agreement is fair, from a financial point of view, to such
holders.
Very truly yours,
DRAFT
Sandler O'Neill & Partners, L.P.
C-3
APPENDIX D
SUBCHAPTER 15D OF THE
PENNSYLVANIA BUSINESS CORPORATION LAW
DISSENTERS RIGHTS
Section
1571. Application and effect of subchapter.
1572. Definitions.
1573. Record and beneficial holders and owners.
1574. Notice of intention to dissent.
1575. Notice to demand payment.
1576. Failure to comply with notice to demand payment, etc.
1577. Release of restrictions or payment for shares.
1578. Estimate by dissenter of fair value of shares.
1579. Valuation proceedings generally.
1580. Costs and expenses of valuation proceedings.
ss. 1571. Application and effect of subchapter
(a) General rule.--Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions).
D-1
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.--
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders; shall not
have the right to obtain payment of the fair value of any such shares
under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted
solely into shares of the acquiring, surviving, new or other
corporation or solely into such shares and money in lieu of fractional
shares.
(ii) Shares of any preferred or special class unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class to vote thereon and require for the adoption
of the plan or the effectuation of the transaction the affirmative
vote of a majority of the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the liabilities
of the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(c) Grant of optional dissenters rights.--The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(d) Notice of dissenters rights.--Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
D-2
(e) Other statutes.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective.--This subchapter may not be
relaxed by any provision of the articles.
(g) Cross references.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
ss. 1572. Definitions
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
ss. 1573. Record and beneficial holders and owners
(a) Record holders of shares.--A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(b) Beneficial owners of shares.--A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
ss. 1574. Notice of intention to dissent
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment
D-3
of the fair value of his shares under this subchapter. Neither a proxy nor a
vote against the proposed corporate action shall constitute the written notice
required by this section.
ss. 1575. Notice to demand payment
(a) General rule.--If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment.--The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
ss. 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act.--A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares.--If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder.--The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
ss. 1577. Release of restrictions or payment for shares
(a) Failure to effectuate corporate action.--Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment.--When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
D-4
(c) Payment of fair value of shares.--Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment.--If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
ss. 1578. Estimate by dissenter of fair value of shares
(a) General rule.--If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of failure to file estimate.--Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.
ss. 1579. Valuation proceedings generally
(a) General rule.--Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
D-5
(b) Mandatory joinder of dissenters.--All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the court.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application.--If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
ss. 1580. Costs and expenses of valuation proceedings
(a) General rule.--The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears.--Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.
(c) Award of fees for benefits to other dissenters.--If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
D-6
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Registrant's Certificate of Incorporation provides that the Registrant
shall indemnify to the full extent from time to time permitted by law any person
(and the legal representative of any person) made or threatened to be made a
party to, or a witness or other participant in, any threatened, pending or
completed legal proceeding by reason of the fact that such person is or was a
director, officer, employee or other agent of the Registrant or any of its
subsidiaries or serves or served any other enterprise at the request of the
Registrant. Any such person shall be indemnified against expenses, judgments,
fines, penalties and amounts paid in settlement (including amounts paid pursuant
to judgments or settlements in derivative actions, i.e., those brought by or in
the right of the corporation).
Statutory authority for indemnification of the Registrant's directors and
officers is contained in the New Jersey Business Corporation Act (the "NJBCA"),
in particular Section 14A:3-5 of the NJBCA, the material provisions of which may
be summarized as follows:
Derivative and Nonderivative Proceedings. Section 14A:3-5 of the NJBCA
provides that in nonderivative proceedings (proceedings other than those brought
by or in the right of the corporation), a corporation may indemnify "corporate
agents" (defined to include directors, officers, employees and persons serving
in other capacities at the corporation's request) against both "expenses"
(defined as reasonable costs, disbursements and counsel fees) and "liabilities"
(defined to include judgments, fines, settlements and penalties) if the
corporate agent acted in good faith and in a manner such corporate agent
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, such corporate agent
had no reasonable cause to believe the conduct was unlawful. The NJBCA also
provides that in derivative proceedings (proceedings brought by or in the right
of the corporation), a corporation may indemnify corporate agents against
expenses if the corporate agent acted in good faith and in a manner such
corporate agent reasonably believed to be in or not opposed to the best
interests of the corporation. In all cases the NJBCA requires the corporation to
indemnify against expenses, including counsel fees, to the extent that a
corporate agent has been successful in a derivative or nonderivative proceeding
on the merits or otherwise, or in defense of any claim, issue or matter therein,
and permits a corporation to advance expenses upon an undertaking for repayment
if it shall ultimately be determined that the corporate agent is not entitled to
indemnification. The NJBCA states that the indemnification it provides "shall
not exclude any other rights, including the right to be indemnified against
liabilities and expenses incurred in proceedings by or in the right of the
corporation," to which a corporate agent may be entitled "under a certificate of
incorporation, by-law, agreement, vote of shareholders or otherwise," unless the
agent has been adjudged guilty of a breach of loyalty, a failure to act in good
faith, a knowing violation of law, or the receipt of an improper personal
benefit.
To the extent that the Registrant's Certificate of Incorporation requires
indemnification against a judgment of settlement in a derivative action, it goes
beyond the indemnification expressly required by the NJBCA but not beyond the
indemnification a corporation is permitted to provide in its certificate of
incorporation. Some courts have questioned the propriety of indemnification
against amounts paid pursuant to judgments or settlements in derivative actions
because of the circularity resulting from such indemnification payments.
However, although there has been no judicial interpretation of relevant
provisions of the NJBCA, the Registrant believes that the NJBCA permits
indemnification in derivative actions if the indemnified person has not been
adjudged guilty of a breach of loyalty, failure to act in good faith, a knowing
violation of law or receipt of an improper personal benefit.
Determinations Regarding Indemnification. Indemnification of a party
(unless ordered by a court) is dependent upon a determination that such
indemnification is proper because the party has met the applicable standards set
forth above. Such a determination must be made (a) by the Board of Directors or
a committee thereof acting by a majority vote of a quorum consisting of
directors who were not parties to or
II-1
otherwise involved in the proceedings, or (b) under certain circumstances, by
independent legal counsel in a written opinion, or (c) by the shareholders.
Other Material Provisions. The indemnification provided by statute is not
exclusive of other rights of indemnification, and inures to the benefit of an
officer's or director's legal representative, provided that a corporation may
not indemnify an officer or director that has been adjudged guilty of a breach
of loyalty, a failure to act in good faith, a knowing violation of law or the
receipt of any improper personal benefit. A corporation may purchase and
maintain insurance against expenses incurred by, and liabilities asserted
against, directors, officers, employees or agents, whether or not the
corporation would be empowered to provide such indemnity, and such insurance may
be purchased from an insurer affiliated with such corporation, whether or not
such insurer does business with any other insured.
------------------------------
The officers and directors of the Registrant are insured against certain
liabilities which they may incur in their respective capacities as officers or
directors pursuant to directors and officers liability insurance policies which
provide coverage up to $50,000,000, subject to a corporate retention of
$5,000,000.
Item 21. Exhibits
Exhibit No. Description
A. 2(a)* Agreement and Plan of Merger, dated as of December 29, 1994, among
Midlantic Corporation, Midlantic Bank National Association, Old York
Road Bancorp, Inc. and Bank and Trust Company of Old York Road,
included as Appendix A to the Proxy Statement/Prospectus.
2(b)* Stock Option Agreement, dated as of December 29, 1994, between
Midlantic Corporation and Old York Road Bancorp, Inc., included as
Appendix B to the Proxy Statement/Prospectus.
5 Opinion of Pitney, Hardin, Kipp & Szuch as to the legality of the
securities to be registered.
8 Opinion of Pitney, Hardin, Kipp & Szuch as to certain tax
consequences of the Merger.
13 Old York's Annual Report on Form 10-KSB for the year ended December
31, 1994.
23(a) Consent of Coopers & Lybrand L.L.P.
23(b) Consent of Rudolph, Palitz LLP.
23(c) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibit 5 and
Exhibit 8 hereto).
23(d) Consent of Sandler O'Neill & Partners, L.P.
24 Powers of Attorney
99(a) Form of Proxy Card to be utilized by the Board of Directors of Old
York.
C. 4(b)* Fairness Opinion of Sandler, O'Neill & Partners, L.P. (included as
Appendix C to the Proxy Statement/Prospectus)
- ----------
* Included elsewhere in this registration statement.
** Incorporated by Reference from other filed documents, as indicated.
II-2
Item 22. Undertakings
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Act"), each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
2. The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
3. The registrant undertakes that every prospectus (i) that is filed pursuant to
paragraph 2 immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a) (3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Act, each such post effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
4. Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
5. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
6. Subject to appropriate interpretation, the undersigned registrant hereby
undertakes to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
becomes effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-4 and has duly caused this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Edison, State of New Jersey, on
the 28th day of April, 1995.
MIDLANTIC CORPORATION
By: GARRY J. SCHEURING
------------------------------------
Garry J. Scheuring,
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
GARRY J. SCHEURING Chairman of the Board April 28, 1995
- ------------------------ and Director (Chief
Garry J. Scheuring Executive Officer)
HOWARD I. ATKINS
- ------------------------ Executive Vice President April 28, 1995
Howard I. Atkins and Chief Financial Officer
JAMES E. KELLY
- ------------------------ Controller April 28, 1995
James E. Kelly
* Director April 28, 1995
- ------------------------
Charles E. Ehinger
* Director April 28, 1995
- ------------------------
David F. Girard-di Carlo
* Director April 28, 1995
- ------------------------
Frederick C. Haab
* Director April 28, 1995
- ------------------------
Kevork S. Hovnanian
* Director April 28, 1995
- ------------------------
Arthur J. Kania
II-4
Signature Title Date
--------- ----- ----
* Director April 28, 1995
- ------------------------
Aubrey C. Lewis
* Director April 28, 1995
- ------------------------
David F. McBride
* Director April 28, 1995
- ------------------------
Desmond P. McDonald
* Director April 28, 1995
- ------------------------
William E. McKenna
* Director April 28, 1995
- ------------------------
Roy T. Peraino
* Director April 28, 1995
- ------------------------
Ernest L. Ransome, III
* Director April 28, 1995
- ------------------------
B.P. Russell
* Director April 28, 1995
- ------------------------
Fred R. Sullivan
* Director April 28, 1995
- ------------------------
Marcy Syms
* Director April 28, 1995
- ------------------------
Harold L. Yoh, Jr.
* Joseph H. Kott, by signing his name hereto, does sign this document on behalf
of each of the persons named above, pursuant to powers of attorney duly
executed by such persons and filed with the Securities and Exchange
Commission.
By JOSEPH H. KOTT
--------------------
Joseph H. Kott,
As Attorney-In-Fact
II-5
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2(a)* Agreement and Plan of Merger, dated as of December 29, 1994,
among Midlantic Corporation, Midlantic Bank National Association,
Old York Road Bancorp, Inc. and Bank and Trust Company of Old
York Road, included as Appendix A to the Proxy
Statement/Prospectus.
2(b)* Stock Option Agreement, dated as of December 29, 1994, between
Midlantic Corporation and Old York Road Bancorp, Inc., included
as Appendix B to the Proxy Statement/Prospectus.
5 Opinion of Pitney, Hardin, Kipp & Szuch as to the legality of the
securities to be registered.
8 Opinion of Pitney, Hardin, Kipp & Szuch as to certain tax
consequences of the Merger.
13 Old York's Annual Report on Form 10-KSB for the year ended
December 31, 1994.
23(a) Consent of Coopers & Lybrand L.L.P.
23(b) Consent of Rudolph, Palitz LLP.
23(c) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibit 5
and Exhibit 8 hereto).
23(d) Consent of Sandler O'Neill & Partners, L.P.
24 Powers of Attorney
99(a) Form of Proxy Card to be utilized by the Board of Directors of
Old York.
4(b)* Fairness Opinion of Sandler, O'Neill & Partners, L.P. (included
as Appendix C to the Proxy Statement).
- -------------
* Included elsewhere in this registration statement.
** Incorporated by Reference from other filed documents, as indicated.
II-6