AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 2000
REGISTRATION NO. 333-47890
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
BERKSHIRE BANCORP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 6799 94-25663513
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
160 BROADWAY
NEW YORK, NEW YORK 10038
(212) 791-5362
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
STEVEN ROSENBERG
PRESIDENT
BERKSHIRE BANCORP INC.
160 BROADWAY
NEW YORK, NEW YORK 10038
(212) 791-5362 -- FACSIMILE (212) 791-5367
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
-------------------
COPIES TO:
LAWRENCE R. WISEMAN, ESQUIRE JAY L. HACK, ESQUIRE
BLANK ROME COMISKY & MCCAULEY LLP SERCHUK & ZELERMYER, LLP
ONE LOGAN SQUARE 81 MAIN STREET
PHILADELPHIA, PENNSYLVANIA 19103-6998 WHITE PLAINS, NY 10601
(215) 569-5500 (914) 761-2100
FACSIMILE: (215) 569-5555 FACSIMILE: (914) 761-2299
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
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. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box, and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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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 THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.
================================================================================
THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS JOINT PROXY
STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
SUBJECT TO COMPLETION, DECEMBER 1, 2000
Berkshire Bancorp Inc. GSB Financial Corporation
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
This joint proxy statement/prospectus relates to the proposed merger of
Berkshire Bancorp Inc. and GSB Financial Corporation.
In the merger, each share of GSB common stock will be converted into either
0.6027 shares of Berkshire common stock or $20.75 in cash, as each GSB
stockholder elects, subject to limitations described on page 35. The aggregate
value of the merger consideration will be $[ ] if 50.1% of the GSB stock
is converted into Berkshire stock, based on the price of Berkshire stock on
[ ] of $[ ] per share. The actual aggregate merger consideration
may be different depending upon the market value of Berkshire stock on the date
of the merger and how many shares of GSB stock are converted into Berkshire
stock versus cash. GSB STOCKHOLDERS SHOULD COMPLETE AND RETURN THE ENCLOSED
ELECTION FORM IN THE ACCOMPANYING BROWN ENVELOPE SO THAT WE RECEIVE IT PRIOR TO
THE COMMENCEMENT OF THE GSB SPECIAL MEETING. IF A GSB STOCKHOLDER DOES NOT DO
SO, THAT STOCKHOLDER WILL LOSE THE RIGHT TO ELECT WHETHER TO RECEIVE CASH OR
STOCK IN EXCHANGE FOR HIS OR HER GSB STOCK AND WILL RECEIVE CASH AND/OR STOCK AS
SET FORTH ON PAGE 35. Berkshire stockholders will continue to own their existing
shares after the merger.
Berkshire common stock trades on the Nasdaq National Market under the symbol
'ZAPS.'
In general, no gain or loss will be recognized by the GSB stockholders upon
the exchange of GSB stock solely for Berkshire common stock. To the extent that
a GSB stockholder receives both cash and Berkshire stock in the merger, the GSB
stockholder will recognize gain (but not loss) in an amount not in excess of the
cash received. A GSB stockholder who receives solely cash in the exchange and
who does not actually or constructively own any Berkshire stock after the
exchange will generally recognize gain or loss equal to the difference between
the cash received and the stockholder's tax basis in the GSB stock surrendered.
Any gain or loss recognized by a GSB stockholder will generally be long-term
capital gain or loss if the stockholder held the GSB stock for more than one
year prior to the effective date of the merger.
We cannot complete the merger unless the stockholders of both companies
approve the merger agreement. The directors and executive officers of Berkshire,
who collectively hold a majority of the outstanding shares of Berkshire common
stock, have agreed in writing to vote in favor of the merger agreement. PLEASE
COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
WHITE POSTAGE-PAID ENVELOPE.
The date, times and places of the stockholders' meeting are as follows:
FOR BERKSHIRE STOCKHOLDERS: FOR GSB STOCKHOLDERS:
[ ], 2001 at [ ], local time [ ], 2001 at [ ], local time
[ ] [ ]
[ ] [ ]
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE OR INADEQUATE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE SHARES OF BERKSHIRE COMMON STOCK OFFERED BY THIS JOINT PROXY
STATEMENT/PROSPECTUS ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK OR NON-BANK SUBSIDIARY OF ANY OF THE PARTIES. THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY DOES NOT INSURE OR GUARANTEE ANY LOSS TO YOU OF YOUR
INVESTMENT VALUE IN THE BERKSHIRE COMMON STOCK.
FOR A MORE COMPLETE DESCRIPTION OF THE RISK FACTORS ASSOCIATED WITH THE
MERGER, THE MERGER AND THE TERMS AND CONDITIONS OF THE MERGER, SEE 'RISK
FACTORS' BEGINNING ON PAGE 15 AND 'THE MERGER' BEGINNING ON PAGE 24.
JOINT PROXY STATEMENT/PROSPECTUS DATED [ ], 2000 AND
FIRST MAILED TO STOCKHOLDERS OF BERKSHIRE AND GSB ON OR ABOUT
[ ], 2000
GSB FINANCIAL CORPORATION
ONE SOUTH CHURCH STREET
P.O. BOX 469
GOSHEN, NEW YORK 10924
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ ], 2001
---------------------------
PLEASE TAKE NOTICE that a special meeting of stockholders of GSB FINANCIAL
CORPORATION, a Delaware corporation, will be held on [ ], 2001, at
[ ] (eastern standard time), at [ ], for the following
purpose:
To consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization dated August 16, 2000. That merger agreement provides that
GSB will be merged with and into Berkshire Bancorp Inc. Subject to
limitations described in the merger agreement, each outstanding share of GSB
common stock will be converted into either 0.6027 shares of Berkshire common
stock or $20.75 in cash, as each GSB stockholder elects, all as more fully
described in the attached joint proxy statement/prospectus.
A copy of the merger agreement is set forth as Annex A to the accompanying
joint proxy statement/prospectus.
Only holders of record of GSB common stock as of the close of business on
[ ], 2000, are entitled to notice of, and to vote at, the GSB
special meeting and any adjournments or postponements thereof.
If you object to the merger agreement but the merger is completed, you can
demand that you be paid an amount for your shares which the Delaware Court of
Chancery determines is appropriate, but only if you file a written objection
with GSB before the GSB special meeting and comply with other applicable
provisions of Delaware law. Those provisions are set forth in Annex B to the
accompanying joint proxy statement/prospectus.
THE BOARD OF DIRECTORS OF GSB HAS APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE 'FOR' APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors of
GSB FINANCIAL CORPORATION
BARBARA A. CARR
Secretary
[ ], 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE GSB MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
WHITE POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS
EXERCISE IN THE MANNER PROVIDED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS.
BERKSHIRE BANCORP INC.
160 BROADWAY
NEW YORK, NEW YORK 10038
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ ], 2001
---------------------------
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of BERKSHIRE
BANCORP INC., a Delaware corporation, will be held on [ ], 2001, at
[ ] (eastern standard time), at [ ], for the following
purpose:
To consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization dated August 16, 2000. That merger agreement provides that GSB
Financial Corporation will be merged with and into Berkshire. Subject to
limitations described in the merger agreement, each outstanding share of GSB
common stock will be converted into either 0.6027 shares of Berkshire common
stock or $20.75 in cash, as each GSB stockholder elects, all as more fully
described in the attached joint proxy statement/prospectus.
A copy of the merger agreement is set forth as Annex A to the accompanying
joint proxy statement/prospectus.
Only holders of record of Berkshire common stock as of the close of business
on [ ], 2000 are entitled to notice of, and to vote at, the Berkshire special
meeting and any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF BERKSHIRE HAS APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE 'FOR' APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors of
BERKSHIRE BANCORP INC.
EMANUEL J. ADLER
Secretary
[ ], 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE BERKSHIRE MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS
EXERCISE IN THE MANNER PROVIDED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
CONTAINING IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT BERKSHIRE AND GSB
THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS JOINT PROXY STATEMENT/PROSPECTUS.
COPIES OF ANY OF THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO
WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST. WRITTEN REQUESTS FOR BERKSHIRE'S DOCUMENTS SHOULD BE DIRECTED TO STEVEN
ROSENBERG, BERKSHIRE BANCORP INC., 160 BROADWAY, NEW YORK, NEW YORK 10038 AND
TELEPHONE REQUESTS MAY BE DIRECTED TO MR. ROSENBERG AT (212) 791-5362. WRITTEN
REQUESTS FOR GSB'S DOCUMENTS SHOULD BE DIRECTED TO STEPHEN W. DEDERICK, GSB
FINANCIAL CORPORATION, ONE SOUTH CHURCH STREET, P.O. BOX 469, GOSHEN, NEW YORK
10924 AND TELEPHONE REQUESTS MAY BE DIRECTED TO MR. DEDERICK AT (845) 294-6151.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY [ ], 2001.
TABLE OF CONTENTS
PAGE
----
Questions and Answers About the Berkshire/GSB Merger........ 1
Summary..................................................... 3
The Companies........................................... 3
Our Reasons for the Merger.............................. 3
Approval of The Merger.................................. 3
The Merger.............................................. 4
Comparative Per Share Market Price Information.............. 7
Selected Historical Financial Data of Berkshire
Bancorp Inc............................................. 8
Selected Historical Financial Data of GSB Financial
Corporation............................................. 9
Selected Unaudited Pro Forma Combined Financial Data........ 11
Comparative Per Share Data.................................. 12
Dividend Policies........................................... 14
Risk Factors................................................ 15
Where You Can Find More Information......................... 19
Forward-Looking Statements.................................. 20
Special Meetings of Stockholders............................ 21
Berkshire Special Meeting............................... 21
GSB Special Meeting..................................... 22
The Merger.................................................. 24
Background of the Merger................................ 24
GSB's Reasons for the Merger............................ 25
Berkshire's Reasons for the Merger...................... 27
Opinion of Financial Advisors........................... 28
Material Terms of the Merger Agreement.................. 35
Conversion of Shares; No Fractional Amounts......... 35
The Merger Consideration that GSB Stockholders Will
Receive in the Merger May Change................ 37
The Aggregate Value of Merger Consideration May
Fluctuate....................................... 38
Treatment of GSB Stock Options...................... 38
Immediately After the Merger, GSB Stockholders Will
Own From 21.2% to 24.4% of the Outstanding
Berkshire Stock................................. 38
Representations and Warranties...................... 38
Conduct of Business Pending the Merger.............. 38
Non-Solicitation.................................... 39
Indemnification and Insurance....................... 39
Conditions to the Merger............................ 40
Closing Date and Effective Time..................... 41
Termination of the Merger Agreement................. 41
Termination Fees and Expenses....................... 42
Procedures for GSB Stockholders to Receive
Payment......................................... 43
Regulatory Approvals Are Required to Complete
the Merger...................................... 44
i
Board of Directors and Management of Berksire Upon
Consummation of the Merger...................... 44
Subsidiary Merger of Goshen Savings Bank and
Berkshire Bank.................................. 44
Board of Directors and Management of Berkshire Bank
Upon Consummation of the Subsidiary Merger...... 44
Advisory Board Appointees Upon Consummation of the
Subsidiary Merger............................... 44
Employment of GSB/Goshen Savings Bank Employees..... 45
Listing of Berkshire Common Stock on the Nasdaq
National Market................................. 45
GSB's Directors, Officers and Employees Will Receive
Benefits From the Merger............................ 45
Appraisal Rights for Berkshire Stockholders............. 47
Appraisal Rights of GSB Stockholders.................... 47
Material Federal Income Tax Consequences................ 48
Accounting Treatment.................................... 49
Management Of Berkshire..................................... 50
Executive Officers, Directors and Key Employees......... 50
Certain Relationships and Related Transactions.......... 50
Directors Compensation.................................. 50
Executive Compensation.................................. 51
1999 Berkshire Stock Incentive Plan..................... 51
Principal Stockholders Of Berkshire......................... 52
Management of GSB........................................... 53
Board of Directors -- Biographical Information.......... 53
Executive Officers Who Are Not Directors................ 54
Director Compensation................................... 54
Executive Compensation.................................. 54
Description of GSB Stock Option Plan and Incentive Stock
Award Plan......................................... 55
Option Grants During The Year........................... 58
Transactions With Directors And Officers................ 59
Employment and Retention Agreements..................... 59
Pension Plan............................................ 61
Principal Stockholders of GSB............................... 62
Price Range of Common Stock................................. 64
Description of Berkshire Capital Stock...................... 65
Common Stock............................................ 65
Preferred Stock......................................... 65
Registrar and Transfer Agent............................ 66
Anti-Takeover Provisions................................ 66
Comparison of Stockholder's Rights.......................... 67
Capital................................................. 67
Preferred Stock......................................... 67
Stockholder Voting...................................... 67
Cumulative Voting....................................... 68
Meeting of Stockholders; Action by Written Consent...... 68
Preemptive Rights....................................... 68
Amendment of Governing Documents........................ 68
Size and Classification of the Board of Directors....... 68
Removal of Directors.................................... 69
Stockholder Approval of Business Combinations With
Interested Stockholders.............................. 69
Legal Matters............................................... 70
Experts..................................................... 70
Pro Forma Financial Information............................. 71
Annex A -- Agreement and Plan of Reorganization
Annex B -- Section 262 of the Delaware General Corporation
Law -- Appraisal Rights
Annex C -- Opinion of Berwind Financial, L.P.
Annex D -- Opinion of Tucker Anthony Incorporated
ii
QUESTIONS AND ANSWERS ABOUT THE BERKSHIRE/GSB MERGER
Q. WHAT DO I NEED TO DO NOW?
A. Sign your proxy card, mark your vote on it, and mail it to us in the enclosed
white postage-paid envelope.
GSB stockholders should also complete the election form and deliver it to us
in the enclosed brown envelope prior to the GSB special meeting. A GSB
stockholder who does not do so will lose the right to choose the
consideration they will receive and will receive cash and/or Berkshire common
stock, as set forth on page 35 hereof.
Q. SHOULD GSB STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A. Yes. GSB stockholders should send their stock certificates to us along with
their election form in the enclosed brown envelope.
Q. WHAT IF A GSB STOCKHOLDER HAS LOST HIS OR HER STOCK CERTIFICATES?
A. The GSB stockholder will need to indicate in the space provided in his or her
election form that he or she has lost his or her stock certificates. In
addition, the GSB stockholder will have to sign an affidavit which is
included in the election form which provides, among other things, that the
GSB stockholder agrees to indemnify Berkshire for any loss Berkshire may
incur as a result of the GSB stockholder's lost or destroyed stock
certificate. An indemnity bond from an insurance company may also be
required.
Q. WHAT IF I WANT TO CHANGE MY VOTE?
A. Just send in a later-dated, signed proxy card before your special meeting or
attend your special meeting in person and vote.
Q. WHAT IF A GSB STOCKHOLDER WANTS TO CHANGE HIS OR HER ELECTION?
A. Just deliver a later-dated, signed election form prior to the GSB special
meeting.
Q. WILL I HAVE APPRAISAL RIGHTS?
A. Berkshire stockholders will not have appraisal rights.
GSB stockholders will have appraisal rights. GSB stockholders who do not wish
to accept the Berkshire common stock or the cash consideration to be issued
in the merger have the right to have the Delaware Chancery Court determine
the 'fair value' of their shares. Appraisal rights are subject to
restrictions and technical requirements. Generally, in order to exercise
these appraisal rights:
A GSB stockholder must not vote in favor of the merger agreement,
including sending in a signed, unmarked proxy;
A GSB stockholder must not complete and deliver the enclosed election form
to us; and
A GSB stockholder must make a written demand for appraisal before the vote
on the merger agreement.
Merely voting against the merger will not protect a GSB stockholder's right
of appraisal. Annex B contains the text of the Delaware appraisal statute.
See 'The Merger -- Appraisal Rights of GSB Stockholders.'
Q. WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. We expect to complete the merger by the end of February 2001.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. Berkshire stockholders will keep their current stock certificates.
For each share of GSB stock, GSB stockholders will receive either 0.6027
shares of Berkshire common stock or $20.75 in cash, as each GSB stockholder
elects, subject to limitations described on pages 35 through 37.
No fractional shares of Berkshire common stock will be issued. Any GSB
stockholder who would otherwise be entitled to receive a fraction of a share
of GSB common stock will instead receive cash for that fraction of a share.
Each GSB stock option will be converted into an option to purchase 0.6027
shares of Berkshire common stock for each share of GSB common stock covered
by the GSB stock option with an exercise price equal to the exercise price
of the option prior to conversion, divided by 0.6027. The number of shares
and the exercise price may be adjusted for GSB employees to satisfy
requirements of the Internal Revenue Code. Please refer to page 38 for more
1
information regarding the treatment of GSB stock options.
Q. CAN THE AMOUNT THAT GSB STOCKHOLDERS RECEIVE IN THE MERGER CHANGE?
A. Yes. If the average market price of Berkshire common stock for the 20 day
period prior to the eighth business day before the merger is completed is
more than $40.365 or less than $28.635, then the amount of Berkshire common
stock which will be issued in exchange for GSB common stock may be adjusted,
or the agreement may terminate. In addition, if the cost of terminating
Goshen Savings Bank's pension plan is more than $100,000, excluding
professional fees, then the per share amount to be paid to GSB stockholders
may decline. Please refer to pages 41 and 42 for more information on this
issue.
Q. DID THE BERKSHIRE AND GSB BOARDS OBTAIN OPINIONS REGARDING THE FAIRNESS OF
THE MERGER CONSIDERATION TO STOCKHOLDERS?
A. Yes, Berkshire's board of directors received an opinion from its financial
advisor, Berwind Financial, L.P., that the consideration to be paid in the
merger is fair, from a financial point of view, to the stockholders of
Berkshire. This opinion is attached as Annex C. Berkshire has paid Berwind
$50,000 for rendering this opinon.
GSB's board of directors received an opinion from its financial advisor,
Tucker Anthony Incorporated, that the merger consideration is fair, from a
financial point of view, to the stockholders of GSB. This opinion is attached
as Annex D. GSB agreed to pay Tucker Anthony a fee of $372,533 and a retainer
fee of $25,000. GSB paid Tucker Anthony $50,000 upon delivery of Tucker
Anthony's written fairness opinion on August 16, 2000 and $25,000 upon
delivery of the fairness opinion update on the date of this joint proxy
statement/proxy statement.
Q. WHEN WILL GSB STOCKHOLDERS RECEIVE CASH AND/OR SHARES OF BERKSHIRE COMMON
STOCK IN THE MERGER?
A. GSB stockholders who have returned their election forms together with GSB
stock certificates or proof of lost certificate will be sent the cash and/or
Berkshire common stock to which they are entitled within three business days
after the merger is completed. Within five business days after the merger is
completed, GSB stockholders who have not previously sent in their stock
certificates and election forms will be sent a letter of transmittal and
instructions for exchanging their stock certificates. Those GSB stockholders
will be sent their cash and/or stock within five business days after we
receive their letter of transmittal and supporting documents.
Q. WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A. As a general matter, neither Berkshire, Berkshire stockholders, GSB nor GSB
stockholders, to the extent that they receive Berkshire common stock in
exchange for their GSB common stock, will recognize any gain or loss for
federal income tax purposes. GSB stockholders who receive cash will generally
recognize gain or loss for federal income tax purposes as though they had
sold their shares for that cash. See 'The Merger -- Material Federal Income
Tax Consequences.' We have received a legal opinion from Berkshire's counsel
with respect to these matters. This legal opinion is filed as an exhibit to
Berkshire's registration statement on Form S-4 of which this joint proxy
statement/prospectus is a part. See 'Where You Can Find More Information.'
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR
TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER
TO YOU.
Q. IF I RECEIVE BERKSHIRE COMMON STOCK IN THE MERGER, WILL I RECEIVE DIVIDENDS
IN THE FUTURE?
A. Possibly. On March 23, 1999, Berkshire's board of directors adopted a policy
of paying regular cash dividends on Berkshire's common stock in the amount of
$.20 per share per year, payable in equal semi-annual installments of $.10
each. The declaration, payment and amount of dividends in the future is
within the discretion of Berkshire's board of directors and will depend upon
Berkshire's earnings, capital requirements, financial condition and other
relevant factors.
2
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully, and for more complete descriptions of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you. See 'Where You Can Find More Information' on
page 19.
THE COMPANIES
BERKSHIRE BANCORP INC.
160 Broadway
New York, New York 10038
(212) 791-5362
Berkshire, a registered bank holding company incorporated in the state of
Delaware, is the ultimate parent holding company of The Berkshire Bank, a New
York state-chartered commercial bank. At present, Berkshire Bank is Berkshire's
only business operation, other than a minority interest which Berkshire owns in
Madison Merchant Services, Inc., a company which provides credit card processing
services for a variety of retail establishments and other merchants. Berkshire
Bank is a full service commercial bank. Berkshire Bank has its main office at
600 Madison Avenue in New York City and a branch in Brooklyn, New York.
Berkshire Bank has also received approval to open a branch in New York City,
which Berkshire Bank expects to open by the end of 2000. At September 30, 2000,
Berkshire had total assets of $212.0 million on a consolidated basis and
Berkshire Bank had total assets of $184.6 million.
GSB FINANCIAL CORPORATION
One South Church Street
P.O. Box 469
Goshen, New York 10924
(845) 294-6151
GSB, a registered savings and loan holding company incorporated in the state
of Delaware, is the parent holding company of Goshen Savings Bank, a federal
savings bank, chartered under the laws of the United States. GSB's business
consists of directing, planning and coordinating the business activities of
Goshen Saving Bank. Goshen Savings Bank is a full service savings bank. Goshen
Savings Bank has four offices, two in Goshen, one in Harriman and one in
Bloomingburg, New York. At September 30, 2000, GSB had total assets on a
consolidated basis of $191.3 million and Goshen Savings Bank had total assets of
$187.8 million.
OUR REASONS FOR THE MERGER
BERKSHIRE
The Berkshire board of directors recommends the merger because the board
believes, among other reasons, that Goshen Savings Bank will complement and
broaden Berkshire Bank's existing customer base in the New York metropolitan
area. In addition, the Berkshire board of directors believes that the cost of
the merger in financial terms represents a reasonable investment by Berkshire in
furthering its business strategy.
To review Berkshire's reasons for the merger in greater detail, see
page 27.
GSB
The GSB board of directors recommends the merger because the board believes
that the merger provides stockholders with a favorable return on their
investment in GSB common stock while also allowing those stockholders who want
to continue their ownership interest or delay the recognition of tax to do so
through electing to receive Berkshire common stock instead of cash.
To review GSB's reasons for the merger in greater detail, see page 25.
APPROVAL OF THE MERGER
AFFIRMATIVE VOTE OF THE MAJORITY OF BERKSHIRE SHARES OUTSTANDING IS REQUIRED
The affirmative vote of the holders of a majority of the shares outstanding
is required to approve the merger agreement. The directors and executive
officers of Berkshire, who collectively hold a majority of Berkshire
3
common stock, have agreed in writing to vote in favor of the merger agreement.
AFFIRMATIVE VOTE OF THE MAJORITY OF GSB SHARES OUTSTANDING IS REQUIRED
The affirmative vote of the holders of a majority of the shares outstanding
is required to approve the merger agreement. The directors and executive
officers of GSB, who collectively have the power to vote 9.6% of GSB common
stock, have agreed in writing to vote in favor of the merger agreement.
THE MERGER
The merger agreement is attached as Annex A to this joint proxy statement/
prospectus. We encourage you to read the merger agreement because it is the
legal document that governs the merger.
IMMEDIATELY AFTER THE MERGER, GSB STOCKHOLDERS WILL OWN FROM 21.2% TO 24.4% OF
THE OUTSTANDING BERKSHIRE STOCK (see page 38)
We anticipate that Berkshire will issue between 571,921 and 684,935 shares
of Berkshire common stock to GSB stockholders in the merger. We also anticipate
that Berkshire will issue options to purchase up to 78,494 shares of Berkshire
common stock in exchange for outstanding options to purchase GSB common stock.
Based on the number of shares of Berkshire common stock to be issued in the
merger, excluding shares subject to stock options to be assumed by Berkshire,
following the merger existing Berkshire stockholders will own between 78.8% and
75.6% and former GSB stockholders will own between 21.2% and 24.4% of the
outstanding common stock of Berkshire.
CONDITIONS TO THE MERGER (see page 40)
The completion of the merger depends upon the satisfaction or waiver of a
number of conditions.
TERMINATION OF THE MERGER AGREEMENT (see page 41)
We can agree to terminate the merger agreement without completing the
merger, and either of us can terminate the merger agreement under various
circumstances.
For example, GSB may terminate the merger agreement if:
the average market price of Berkshire common stock for the 20 trading days
immediately preceding the eighth business day before the closing date of
the merger is less than $28.635; and
Berkshire does not agree to adjust upward, in accordance with a formula set
forth in the merger agreement, the number of shares of Berkshire common
stock to be received in the merger in exchange for one share of GSB common
stock.
Similarly, Berkshire may terminate the merger agreement if:
the average market price of Berkshire common stock for the 20 trading days
immediately preceding the eighth business day before the closing date of
the merger is more than $40.365; and
GSB does not agree to adjust downward, in accordance with a formula set
forth in the merger agreement, the number of shares of Berkshire common
stock to be received in the merger in exchange for one share of GSB common
stock.
Further, Berkshire may terminate the merger agreement if:
the cost of terminating the Goshen Savings Bank defined benefit pension
plan exceeds $100,000 and GSB does not agree to adjust downward, in
accordance with a formula set forth in the merger agreement, the merger
consideration to be received in exchange for one share of GSB common stock.
Berkshire and/or GSB may decide not to exercise their right to terminate the
merger agreement even if their right to terminate is triggered. We will not
resolicit stockholder approval of the merger agreement, if either Berkshire's or
GSB's right to terminate is exercisable and Berkshire's or GSB's board of
directors decides not to terminate and proceeds with the merger.
4
TERMINATION FEES AND EXPENSES (see page 42)
The merger agreement requires GSB to pay Berkshire a termination fee of
either $1,000,000 or $500,000, depending on the reason, if the merger agreement
is terminated for a number of reasons, including, for example, entering into an
agreement to be acquired by another company, breach of the merger agreement by
GSB or the failure of GSB stockholders to approve the merger agreement. In
addition, the merger agreement requires Berkshire to pay GSB a termination fee
of $500,000 if the merger agreement is terminated because Berkshire stockholders
do not approve the merger agreement or Berkshire materially breached the merger
agreement.
The merger agreement also requires that if the termination is the result of
a willful breach, the breaching party must pay the expenses of the non-breaching
party in connection with the consummation of the transactions contemplated by
the merger agreement.
REGULATORY APPROVALS ARE REQUIRED TO COMPLETE THE MERGER (see page 44)
The merger is subject to the prior approval of the Federal Deposit Insurance
Corporation, referred to as the FDIC, and the New York State Banking Department,
referred to as the NYSBD. We have filed applications to get those approvals with
the FDIC and NYSBD. Approval by bank regulators is not an endorsement of the
merger or a determination that the terms of the merger are fair to the GSB
stockholders. We cannot assure you when or if we will obtain these regulatory
approvals.
BOARD OF DIRECTORS AND MANAGEMENT OF BERKSHIRE FOLLOWING THE MERGER (see
page 44)
When we complete the merger, Berkshire will continue to be managed by its
current directors and officers. In addition, Thomas V. Guarino, who is currently
the Chairman of the board of directors of GSB, will become a director of
Berkshire.
SUBSIDIARY MERGER OF GOSHEN SAVINGS BANK AND BERKSHIRE BANK (see page 44)
Immediately after the completion of the merger, Goshen Savings Bank will be
merged with and into Berkshire Bank. The name of the resulting institution will
be The Berkshire Bank.
BOARD OF DIRECTORS AND MANAGEMENT OF BERKSHIRE BANK UPON CONSUMMATION OF THE
SUBSIDIARY MERGER (see page 44)
When the subsidiary merger is completed, Berkshire Bank will continue to be
managed by its current directors and officers. In addition, Thomas V. Guarino,
who is currently the Chairman of the board of directors of GSB, and Clifford E.
Kelsey, Jr., who is currently a director of GSB, will become directors of
Berkshire Bank.
ADVISORY BOARD APPOINTEES UPON CONSUMMATION OF THE SUBSIDIARY MERGER (see
page 44)
The directors of GSB prior to the completion of the mergers will be given
seats on an advisory board of the Goshen Savings Bank division of Berkshire Bank
for a period of at least three years. The advisory board will meet every other
month and board members will receive board fees of $1,000 per meeting actually
attended.
GSB'S DIRECTORS, OFFICERS AND EMPLOYEES WILL RECEIVE BENEFITS FROM THE MERGER
(see page 45)
In considering the board of directors' recommendations that you vote in
favor of the merger agreement, you should be aware that directors, officers and
other employees of GSB and Goshen Savings Bank will receive benefits from the
merger in addition to any benefits they may receive as stockholders of GSB.
These benefits include the accelerated vesting of awards under the GSB Incentive
Stock Award Plan, the allocation to employees of unallocated shares in the GSB
ESOP which are not needed to repay the loan secured by those shares, and
indemnification and insurance benefits. GSB estimates that the value of the
incentive stock awards for which vesting will accelerate as a result of the
merger will be approximately $797,547 and the
5
value of the unallocated shares held by the GSB ESOP which will be allocated to
employees, net of the loan repayment, will be approximately $1,257,000.
Thomas V. Guarino and Clifford E. Kelsey, Jr., will also have positions on
the board of directors of Berkshire and/or Berkshire Bank after the merger, and
they will be entitled to receive directors' fees in those positions. Eight
officers of GSB and Goshen Savings Bank have employment agreements which provide
for payments if their employment is terminated or adversely affected after a
change in control. However, Berkshire currently anticipates that it will
continue to employ most or all of the officers with those contracts, so the
change in control provisions are not expected to generate any payments to them.
LISTING OF BERKSHIRE COMMON STOCK ON THE NASDAQ NATIONAL MARKET (see page 45)
The shares of Berkshire common stock issued in connection with the merger
will be listed on the Nasdaq National Market under the trading symbol 'ZAPS.'
6
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Since September 20, 2000, Berkshire common stock has been traded on the
Nasdaq National Market under the symbol 'ZAPS.' From February 10, 1995 until
September 19, 2000, Berkshire common stock was traded on the Nasdaq SmallCap
Market under the symbol 'ZAPS.' Shares of GSB common stock trade on the Nasdaq
National Market under the symbol 'GOSB.'
On August 15, 2000, the last full trading day prior to the public
announcement of the merger, and on [ ], the latest practicable date before
the printing of this document, the closing prices of Berkshire common stock and
GSB common stock were as follows:
PRO FORMA PRICE
EQUIVALENT
BERKSHIRE GSB OF GSB
COMMON STOCK COMMON STOCK COMMON STOCK
------------ ------------ ---------------
August 15, 2000........................ $34.75(1) $16.0625 $20.94
[ ]................................
- -------------------
(1) There were no shares of Berkshire common stock traded on August 15, 2000.
Accordingly, this closing price is from August 8, 2000, the last trading day
prior to August 15, 2000 on which shares of Berkshire common stock were
traded.
The pro forma equivalent per share price of each share of GSB common stock,
which is the value of the Berkshire common stock which GSB stockholders would
receive for each share of GSB common stock exchanged for Berkshire common stock
in the merger, was calculated by multiplying the closing sale price per share of
Berkshire common stock reflected in the table by 0.6027, the merger share
exchange ratio.
BERKSHIRE AND GSB STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR BERKSHIRE COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO THE FUTURE
PRICES OF, OR MARKETS FOR, BERKSHIRE COMMON STOCK.
7
SELECTED HISTORICAL FINANCIAL DATA OF BERKSHIRE BANCORP INC.
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following is a summary of consolidated financial information with
respect to Berkshire as of and for the nine months ended September 30, 2000 and
1999, and for the pro forma twelve months ended December 31, 1999 and as of and
for the fiscal years ended October 31, 1999, 1998, 1997, 1996 and 1995. The
results for the nine months ended September 30, 2000 and 1999 are not
necessarily indicative of the results to be expected for the full year. This
information is derived from and should be read in conjunction with Berkshire's
consolidated financial statements and the accompanying notes and 'Management's
Discussion and Analysis of Financial Condition and Results of Operations,' both
of which are incorporated by reference in this joint proxy statement/prospectus
and which accompany this joint proxy statement/prospectus. See 'Where You Can
Find More Information.'
AS OF AND
AS OF AND FOR THE FOR THE
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, AS OF AND FOR THE FISCAL YEARS ENDED OCTOBER 31,
------------------------- ------------ ------------------------------------------------
2000 1999 1999(2) 1999(1) 1998(1) 1997(1) 1996(1) 1995(1)
---- ---- ------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
Balance Sheet Data:
Total assets.......... $212,033 $187,118 $192,130 $180,986 $66,830 $64,521 $34,138 $19,102
Loans, net............ 73,511 50,485 64,668 59,652 -- -- -- --
Investment
securities........... 97,746 90,289 89,497 82,876 -- 38,067 33,572 13,645
Goodwill.............. 11,701 14,068 12,073 12,195 -- -- -- --
Deposits.............. 97,996 102,603 104,087 102,318 -- -- -- --
Stockholders'
equity............... 83,331 73,829 78,070 73,306 65,466 61,729 33,177 16,920
Selected Operating Data:
Interest income....... $ 10,235 $ 7,653 $ 9,852 $ 8,525 $ 3,313 $ 669 $ -- $ --
Interest expense...... 3,607 2,263 3,101 2,548 -- -- 138 193
-------- -------- -------- -------- ------- ------- ------- -------
Net interest income...... 6,628 5,390 6,751 5,977 3,313 669 (138) (193)
Provision for loan
losses............... 15 40 55 45 -- -- -- --
-------- -------- -------- -------- ------- ------- ------- -------
Net interest income after
provision for loan
losses.................. 6,613 5,350 6,696 5,932 3,313 669 (138) (193)
Investment securities
gains................ 13,288 6,863 10,731 7,622 38,909 16,845 772 (376)
Other income.......... 1,189 577 578 633 44 119 22 51
Other expenses........ 3,219 2,662 3,489 2,948 1,066 823 2,905 1,132
Amortization of
goodwill............. 477 547 730 608 -- -- -- --
-------- -------- -------- -------- ------- ------- ------- -------
Income (loss) before
income taxes............ 17,394 9,581 13,786 10,631 41,200 16,810 (2,249) (1,650)
Provision for income
taxes................ 6,229 3,603 5,527 4,091 3,573 100 -- --
-------- -------- -------- -------- ------- ------- ------- -------
Net income (loss)........ $ 11,165 $ 5,978 $ 8,259 $ 6,540 $37,627 $16,710 $(2,249) $(1,650)
-------- -------- -------- -------- ------- ------- ------- -------
-------- -------- -------- -------- ------- ------- ------- -------
Net income (loss) per
share:
Basic................. $ 5.24 $ 2.81 $ 3.88 $ 3.08 $ 17.70 $ 7.78 $ (1.05) $ (0.75)
Diluted............... $ 5.13 $ 2.64 $ 3.65 $ 2.89 $ 16.66 $ 7.45 $ (1.05) $ (0.75)
Cash dividends per
common share......... $ 0.10 $ 0.10 $ 0.32 $ 0.32 $ 0.72 $ -- $ -- $ --
Selected operating
ratios:
Return on average
assets(3)............... 7.3% 4.5% 7.0% 3.9% 55.0% 32.9% (7.7)% (5.1)%
Return on average
equity(3)............... 18.4% 10.9% 14.6% 6.2% 57.2% 33.8% (8.3)% (5.8)%
Net interest margin(3)... 4.8% 4.9% 4.9% 4.4% 4.8% 1.3% -- --
Average equity/average
assets.................. 39.6% 41.6% 47.9% 48.3% 96.2% 97.3% 92.6% 86.8%
Allowance for loan
losses/total loans...... 1.4% 1.7% 1.4% 1.5% -- -- -- --
- -------------------
(1) Prior to the acquisition of Berkshire Bank on January 4, 1999, Berkshire
(formerly Cooper Life Sciences, Inc.) had not been engaged in any operating
activities since October 1994 when it disposed of its majority interest in a
company engaged in mortgage banking. The prior years' amounts have been
reclassified to conform to the current years' presentation.
(2) On December 10, 1999, Berkshire changed its fiscal year end from October 31
to December 31 of each year. This change was effective December 31, 1999.
For presentation purposes, pro forma operating data is shown for the twelve
months ended December 31, 1999.
(3) Selected amounts for the nine months ended September 30, 2000 and 1999 were
annualized.
8
SELECTED HISTORICAL FINANCIAL DATA OF GSB FINANCIAL CORPORATION
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Set forth below are selected consolidated financial and other data of GSB
Financial Corporation. GSB changed from a September 30 to a December 31 fiscal
year in 1999. This financial data is derived in part from, and should be read in
conjunction with, the Financial Statements and Notes to Consolidated Financial
Statements of GSB which are incorporated by reference in this joint proxy
statement/prospectus and which accompany this joint proxy statement/prospectus.
See 'Where You Can Find More Information.' Information for the nine month
periods and for the year ended December 31, 1998 is unaudited. In the opinion of
management of GSB, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of results for or as of the nine
month interim periods have been made.
AS OF AND FOR AS OF AND FOR
NINE MONTHS ENDED THE YEAR ENDED AS OF AND FOR THE FISCAL
SEPTEMBER 30, DECEMBER 31, YEAR ENDED SEPTEMBER 30,
------------------- ---------------------- ----------------------------------------
2000(3) 1999(3) 1999 1998(4) 1998 1997(5) 1996 1995
------- ------- ---- ------- ---- ------- ---- ----
(UNAUDITED) (UNAUDITED)
Balance Sheet Data:
Total assets............... $191,317 $174,634 $176,016 $136,954 $131,935 $117,046 $96,323 $101,041
Loans, net................. 125,671 111,439 115,273 84,752 78,713 65,738 58,727 57,919
Investment securities...... 54,810 53,874 50,346 39,440 41,159 39,281 29,055 32,248
Deposits................... 110,215 103,737 106,256 93,833 88,310 82,983 83,442 88,093
Borrowings................. 48,075 39,325 38,600 10,000 10,000 -- -- 1,000
Stockholders' equity....... 29,930 29,634 29,109 31,367 31,495 32,633 11,747 11,097
Selected Operating Data:
Interest income............ $ 9,589 $ 7,743 $ 10,709 $ 8,487 $ 8,220 $ 7,078 $ 6,235 $ 5,715
Interest expense........... 5,101 3,596 5,099 3,638 3,424 3,226 3,448 3,289
-------- -------- -------- -------- -------- -------- ------- --------
Net interest income........ 4,488 4,147 5,610 4,849 4,796 3,852 2,787 2,426
Provision for loan
losses.................... 75 55 140 110 70 20 24 29
-------- -------- -------- -------- -------- -------- ------- --------
Net interest income after
provision for loan losses.... 4,413 4,092 5,470 4,739 4,726 3,832 2,763 2,397
Investment securities gains... 138 -- 304 361 82 93 234 195
Other income.................. 261 228 318 243 365 250 487 255
Other expenses................ 3,017 2,632 3,251 4,301 4,175 2,979 2,575 2,931
-------- -------- -------- -------- -------- -------- ------- --------
Income (loss) before income
taxes and cumulative effect
of changes in accounting
principles................... 1,795 1,688 2,841 1,042 1,001 1,196 909 (84)
Income tax expense
(benefit).................... 687 669 1,071 417 401 440 351 (16)
-------- -------- -------- -------- -------- -------- ------- --------
Income (loss) before
cumulative effect of changes
in accounting principles..... 1,108 1,019 1,770 625 600 756 558 (68)
Cumulative effect of changes
in accounting
principles(1)................ -- -- -- -- -- -- -- (394)
-------- -------- -------- -------- -------- -------- ------- --------
Net income.................... $ 1,108 $ 1,019 $ 1,770 $ 625 $ 600 $ 756 $ 558 $ 462
-------- -------- -------- -------- -------- -------- ------- --------
-------- -------- -------- -------- -------- -------- ------- --------
Net income per share:
Basic........................ $ 0.62 $ 0.54 $ 0.94 $ 0.31 $ 0.29 $ 0.37 N/A N/A
Diluted...................... $ 0.61 $ 0.54 $ 0.94 $ 0.31 $ 0.29 $ 0.37 N/A N/A
Cash dividends per share..... $ 0.18 $ 0.11 $ 0.16 $ 0.09 $ 0.06 N/A N/A N/A
Selected operating ratios(2):
Return on average assets...... 0.81% 0.88% 1.10% 0.50% 0.49% 0.71% 0.56% (0.46)%
Return on average equity...... 5.06% 4.43% 5.82% 1.94% 1.85% 4.54% 4.88% (4.04)%
Net interest margin........... 3.39% 3.72% 3.65% 4.04% 4.14% 3.89% 3.08% 2.62%
Average equity to average
total assets................. 15.96% 19.78% 19.00% 25.51% 26.75% 15.61% 11.53% 11.40%
Allowance for loan losses to
total loans.................. 0.34% 0.24% 0.30% 0.25% 0.21% 0.21% 0.21% 0.20%
Notes appear on following page.
9
- -------------------
(1) Reflects the recognition, in one lump sum, of the transition obligation for
post-retirement pension benefits recognized in accordance with Statement of
Financial Accounting Standards ('SFAS') 106. See Note 14 of the Notes to
GSB's Consolidated Financial Statements.
(2) Asset quality and capital ratios are at end of period. Other ratios are
based upon daily average balances, except that all ratios for 1997 and
earlier are based on month end average balances.
(3) Selected amounts for the nine months ended September 30, 2000 and 1999 were
annualized.
(4) Information for the year ended December 31, 1998, is presented for
comparison purposes.
(5) On July 9, 1997, GSB completed its initial stock offering in connection with
the conversion of Goshen Savings Bank from a mutual to a stock institution,
generating net proceeds of $21.4 million. Data prior to July 9, 1997 are for
Goshen Savings Bank.
10
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
We have included this unaudited pro forma condensed combined selected
information only for the purposes of illustration. It does not necessarily
indicate what the operating results or financial position of the combined
company would have been if the merger had been completed at the dates indicated.
Moreover, this information does not necessarily indicate what the future
operating results or financial position of the combined company will be. You
should read this unaudited pro forma condensed combined selected financial
information in conjunction with the 'Unaudited Pro Forma Condensed Combined
Financial Information' included elsewhere in this joint proxy statement/
prospectus. This unaudited pro forma condensed combined selected financial
information does not reflect any adjustments to conform to accounting
practices or any cost savings or other synergies which may result from the
merger or any future merger-related expenses. The unaudited pro forma results of
operations data gives effect to the merger as if it occurred at the beginning of
the periods for the periods ended September 30, 2000 and December 31, 1999,
respectively. The unaudited pro forma balance sheet data gives effect to the
merger as if it had occurred on September 30, 2000.
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------
2000 1999
------------- ------------
Results of Operations:
Net interest income..................................... $ 10,381 $11,381
Provision for possible loan losses...................... 90 195
Net interest income after provision for possible loan
losses................................................ 10,291 11,186
Income before income taxes.............................. 18,187 15,291
Net income.............................................. 11,609 9,144
Net income per common share -- diluted.................. $ 4.24 $ 3.23
AT
SEPTEMBER 30,
-------------
2000
-------------
Balance Sheet:
Total assets............................................ $390,863
Total deposits.......................................... 208,211
Total stockholders' equity.............................. 100,774
Book value per common share............................. $ 37.37
11
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table shows comparative per share earnings, cash dividends and
book value data. The equivalent pro forma information assumes an exchange ratio
of 0.6027 shares of Berkshire common stock for each share of GSB common stock
and the conversion of 50.1% of GSB's common stock into Berkshire common stock.
We present the pro forma and the equivalent pro forma data for your
information only. It does not necessarily indicate the results of operations or
the combined financial position that would have resulted had Berkshire and GSB
completed the merger at the times indicated, and it does not necessarily
indicate what the future results of operations or the combined financial
position will be.
You should read the information shown below in conjunction with the
historical consolidated financial statements of Berkshire and GSB and the notes
provided with them, all of which are contained in the Annual Reports and
additional information Berkshire and GSB has filed with the SEC. See 'Where You
Can Find More Information.'
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------ ---------------------------
2000 1999 1999(7) 1998(6) 1997(6)
---- ---- ------- ------- -------
CASH DIVIDENDS PER COMMON SHARE:
Berkshire actual........................... $0.10 $0.10 $0.32 $ 0.72 $--
GSB actual................................. 0.18 0.11 0.16 0.09 --
GSB pro forma equivalent(1)................ 0.07 0.07 0.24 0.55 --
NET INCOME PER COMMON SHARE BASIC:
Berkshire actual........................... $5.24 $2.81 $3.88 $17.70 $7.78
GSB actual................................. 0.62 0.54 0.94 0.29 0.37
Berkshire & GSB pro forma(2)............... 4.35 2.35 3.39 13.92 6.13
GSB pro forma equivalent(3)................ 2.62 1.42 2.04 8.39 3.69
NET INCOME PER COMMON SHARE-DILUTED:
Berkshire actual........................... $5.13 $2.64 $3.65 $16.66 $7.45
GSB actual................................. 0.61 0.54 0.94 0.29 0.37
Berkshire & GSB pro forma(2)............... 4.26 2.23 3.23 13.24 5.93
GSB pro forma equivalent(3)................ 2.57 1.34 1.95 7.98 3.57
AS OF
SEPTEMBER 30,
2000
-------------
BOOK VALUE PER COMMON SHARE:
Berkshire actual........................... $39.22
GSB actual................................. $15.80
Berkshire & GSB pro forma(4)............... $37.37
GSB pro forma equivalent(5)................ $22.52
- -------------------
(1) Represents the dividends declared on Berkshire common stock during the
respective periods multiplied by the exchange ratio (0.6027 for 1) for the
50.1% of the GSB common stock converted.
(2) Represents net income per share of Berkshire common stock on a pro forma
basis. These amounts, for purposes of determining basic net income per share
of Berkshire common stock, have been determined by dividing pro forma net
income by the sum of (a) the weighted average number of shares of Berkshire
common stock outstanding during each period retroactively adjusted for stock
dividends and splits, and (b) shares of Berkshire common stock assumed to be
issued in connection with the merger. These amounts for purposes of
determining diluted net income per common share have been determined by
dividing pro forma net income by the sum of (a) the weighted average number
of shares of Berkshire common stock and stock
12
options outstanding during each period retroactively adjusted for stock
dividends and splits, and (b) shares of Berkshire common stock and the
Berkshire options assumed to be issued in connection with the merger.
(3) Represents the amount computed pursuant to Note 2 above multiplied by the
exchange ratio (0.6027 for 1).
(4) Represents the pro forma combined net book value of Berkshire and GSB,
divided by the sum of (a) the shares of Berkshire common stock outstanding
at September 30, 2000, and (b) the shares of Berkshire common stock assumed
to be issued in connection with the merger.
(5) Represents the amount computed in accordance with Note 4 above multiplied by
the exchange ratio (0.6027 for 1).
(6) For the years ended 1998 and 1997, Berkshire per share information is for
the fiscal years ended October 31, 1998 and 1997 and GSB per share
information is for the fiscal years ended September 30, 1998 and 1997.
(7) Berkshire changed from an October 31 to a December 31 year end during 1999.
Per share information is calculated by adding the two month transition
period of November 1, 1999 through December 31, 1999 to the 10 month period
of January 1, 1999 through October 31, 1999.
13
DIVIDEND POLICIES
On November 16, 1998, Berkshire paid a special dividend of $.72 per share of
common stock to stockholders of record as of the close of business on October
29, 1998. On October 29, 1999, Berkshire paid a special dividend of $.12 per
share of common stock to stockholders of record as of the close of business on
October 25, 1999. The primary purpose for declaring these dividends was the
probable then current status of Berkshire as a 'personal holding company' for
federal income tax purposes; and that, as a result thereof, if said dividends
were not declared and paid to Berkshire's stockholders, Berkshire would incur
substantial additional federal income tax liability.
On March 23, 1999, Berkshire's board of directors adopted a policy of paying
regular cash dividends in respect of Berkshire's common stock in the amount of
$.20 per share per annum, payable in equal semi-annual installments of $.10
each. In accordance with this policy, Berkshire's board of directors declared
and Berkshire paid a cash dividend of $.10 per share on April 30, 1999 and $.10
per share on October 29, 1999 to stockholders of record as of the close of
business on April 15, 1999 and October 15, 1999, respectively. The declaration,
payment and amount of these dividends in the future is within the discretion of
Berkshire's board of directors and will depend upon Berkshire's earnings,
capital requirements, financial condition and other relevant factors.
GSB became a public company on July 9, 1997. Beginning with the quarter
ended June 30, 1998, the board of directors of GSB has followed a practice of
declaring regular dividends each calendar quarter. The board of directors has
gradually increased the level of quarterly dividends from $0.03 per share for
the quarter ended June 30, 1998 to $0.06 per share for the quarter ended
September 30, 2000. The level of GSB's dividends depends upon a number of
factors, primarily the level of net income, capital ratios, financial condition
and the need to retain funds for other uses. The declaration of dividends is
within the discretion of the GSB board of directors and the board of directors
can give no assurance that, if the merger does not occur, dividends will
continue to be paid, or if they are paid, what the level or frequency of
dividends will be.
14
RISK FACTORS
IN CONSIDERING WHETHER TO APPROVE THE MERGER AND, FOR GSB STOCKHOLDERS,
WHETHER TO ELECT TO CONVERT YOUR SHARES OF GSB COMMON STOCK INTO CASH VERSUS
BERKSHIRE COMMON STOCK AND WHETHER OR NOT TO EXERCISE YOUR APPRAISAL RIGHTS
UNDER DELAWARE LAW, YOU SHOULD CONSIDER CAREFULLY THE RISKS WE HAVE DESCRIBED
BELOW.
IF BERKSHIRE IS UNABLE TO SUCCESSFULLY INTEGRATE GOSHEN SAVINGS BANK INTO
BERKSHIRE BANK'S OPERATIONS, BERKSHIRE MAY NOT REALIZE THE BENEFITS IT EXPECTS
FROM THIS ACQUISITION.
If Berkshire is unable to successfully integrate Goshen Savings Bank, the
wholly-owned subsidiary of GSB, into Berkshire Bank's operations, Berkshire may
not be able to realize expected operating efficiencies, eliminate redundant
costs or operate the businesses profitably. The successful integration of
Berkshire and GSB could be adversely affected by one or more of the following
risks:
The cost, in both money and human effort, required to integrate the
operations of the companies may be greater than we expect;
It may be more difficult than we expect to control expenses after the
merger, which would make it more difficult to improve our overall operating
efficiencies and obtain the benefits of economies of scale;
Customers of Goshen Savings Bank may choose not to maintain their deposits,
loans and other banking relationships with Berkshire Bank after the merger;
It may be more difficult than we anticipate to integrate Goshen Savings
Bank's personnel into Berkshire Bank's operations; and
The loss of key senior management of Goshen Savings Bank, which operates in
a market separate from the market currently served by Berkshire Bank, could
make it more difficult for Berkshire to realize the benefits it expects
from the merger with GSB.
A DECLINE IN THE MARKET PRICE OF BERKSHIRE COMMON STOCK REDUCES THE VALUE OF
THE CONSIDERATION PAYABLE TO GSB STOCKHOLDERS.
GSB common stock that is converted into Berkshire common stock will be
converted at a ratio, known as the exchange ratio, equal to 0.6027 shares of
Berkshire common stock for each share of GSB common stock. If the market price
of Berkshire common stock increases above $34.43 during the election period,
which is the amount which would cause the market value of the stock
consideration to exceed $20.75 per share of GSB common stock, then GSB
stockholders may elect to receive stock with the expectation that they will sell
the stock immediately after the merger and receive more than $20.75 per share of
GSB. However, if the market price of Berkshire common stock is less than $34.43
when we complete the merger, then the value of the Berkshire common stock that
is received in exchange for GSB common stock will be less than $20.75 per share.
GSB stockholders are advised to obtain recent market quotations for Berkshire
common stock. We cannot assure you as to the market price of Berkshire common
stock at any time.
GSB STOCKHOLDERS MAY NOT RECEIVE THE CASH AND BERKSHIRE COMMON STOCK THAT
THEY ELECT.
The consideration which Berkshire will pay to the stockholders of GSB when
and if we complete the merger will consist of a combination of cash and
Berkshire common stock. Not more than 49.9% of the GSB common stock will be
converted into cash and not more than 60% will be converted into Berkshire
common stock. Although GSB stockholders may submit election forms in which they
elect cash, stock or a combination of both, if the holders of more than 49.9% of
the GSB stock request cash, or if the holders of more than 60% request stock,
then we will allocate stock and cash pro rata so that the total consideration
does not exceed the 49.9% and 60% limits. Therefore, a GSB stockholder may not
receive exactly what he or she elects and, for example, a stockholder who elects
to receive only cash may receive cash and stock. For more information about how
the consideration is allocated, please read the discussion below on page 35
under the caption 'The Merger -- Material Terms of the Merger Agreement --
Conversion of Shares; No Fractional Amounts.'
15
THE MARKET PRICE OF BERKSHIRE COMMON STOCK MAY CHANGE BETWEEN THE DEADLINE
FOR SUBMITTING ELECTION FORMS AND THE DATE WE COMPLETE THE MERGER.
GSB stockholders must submit their forms to elect cash or stock no later
than the commencement of the GSB special meeting. However, we may not complete
the merger until some time later. Thus, the market price of the Berkshire common
stock which GSB stockholders receive may be different, on the day they receive
it, from the market price on the day they made their original elections. A
decline in the market price of Berkshire common stock would make the stock less
valuable to those who elect stock, while an increase in the market price might
cause those GSB stockholders who elected to receive cash to realize less per
share than those who elected to receive stock.
IF THE AVERAGE MARKET PRICE OF BERKSHIRE COMMON STOCK IS LESS THAN $28.635,
THEN BERKSHIRE MAY HAVE TO INCREASE THE EXCHANGE RATIO IN ORDER TO COMPLETE THE
MERGER.
The merger agreement provides that if the average market price of Berkshire
common stock is less than $28.635, during the twenty trading days prior to eight
business days before the closing of the merger, then GSB has the right to
terminate the merger agreement and not go ahead with the merger unless Berkshire
agrees to increase the amount of Berkshire common stock which will be exchanged
for each share of GSB common stock. Thus, Berkshire could be forced to choose
between abandoning the merger and increasing the share of the merged entity that
will be owned by former GSB stockholders.
IF THE AVERAGE MARKET PRICE OF BERKSHIRE COMMON STOCK IS MORE THAN $40.365,
THEN GSB MAY HAVE TO ACCEPT A REDUCTION IN THE EXCHANGE RATIO IN ORDER TO
COMPLETE THE MERGER.
The merger agreement provides that if the average market price of Berkshire
common stock is more than $40.365, during the twenty trading days prior to eight
business days before the closing of the merger, then Berkshire has the right to
terminate the merger agreement and not go ahead with the merger unless GSB
agrees to reduce the amount of Berkshire common stock which will be exchanged
for each share of GSB common stock. Thus, GSB could be forced to choose between
abandoning the merger and reducing the share of the merged entity that will be
owned by former GSB stockholders.
IF THE COST OF TERMINATING GOSHEN SAVINGS BANK'S PENSION PLAN IS MORE THAN
$100,000, THEN THE AMOUNT PAYABLE TO GSB STOCKHOLDERS UNDER THE MERGER AGREEMENT
MAY DECLINE.
We anticipate that we will terminate the existing Goshen Savings Bank
pension plan in connection with the merger. There will be a cost of terminating
that plan. The determination of the cost of terminating that plan will be made
after the GSB and Berkshire special meetings. The merger agreement provides that
if the cost is more than $100,000, excluding professional fees, then Berkshire
has the right to terminate the merger agreement and not proceed with the merger.
However, GSB has the right to avoid this termination by agreeing to reduce the
amount payable to GSB stockholders (both in cash and in stock) by an amount, in
total, equal to the excess cost of termination over $100,000. Furthermore, if
the price reduction would be less than $0.10 per share for the $20.75 per share
amount in cash, then Berkshire has the unilateral right to reduce the cash
consideration by the amount of the reduction, and correspondingly reduce the
stock consideration.
THE BERKSHIRE COMMON STOCK ISSUED TO GSB STOCKHOLDERS IN CONNECTION WITH THE
MERGER WILL BE REGISTERED WITH THE SEC AND THEREFORE WILL BE IMMEDIATELY
AVAILABLE FOR RESALE IN THE PUBLIC MARKET WITHOUT RESTRICTION. IF GSB
STOCKHOLDERS WHO RECEIVE BERKSHIRE COMMON STOCK IN THE MERGER SELL THAT STOCK
IMMEDIATELY, IT COULD CAUSE A DECLINE IN THE MARKET PRICE OF BERKSHIRE COMMON
STOCK.
As we mentioned above, GSB stockholders may receive Berkshire common stock
even if they elect cash. Those stockholders may elect to sell the stock they
receive immediately after the merger. If this occurs, or if other holders of
Berkshire common stock try to sell material amounts of Berkshire common stock
immediately after we complete the merger, then there could be an excess of
sellers over buyers in the market, which could cause a decline in the market
price of Berkshire common stock.
16
LIMITED TRADING ACTIVITY IN BERKSHIRE COMMON STOCK MAY ADVERSELY AFFECT THE
ABILITY TO OBTAIN FULL VALUE UPON A QUICK SALE OF BERKSHIRE COMMON STOCK.
There is limited trading activity in Berkshire common stock. For example,
during the nine months ended September 30, 2000, there were only four trading
days in which the daily volume of trading exceeded 10,000, while there were more
than 70 days on which no shares traded. Therefore, it may be difficult for GSB
stockholders who receive a substantial amount of Berkshire common stock in the
merger to sell that stock promptly without adversely affecting the market price
of Berkshire common stock.
BERKSHIRE IS REQUIRED TO MAINTAIN AN ALLOWANCE FOR LOAN LOSSES. THESE LOAN
LOSSES ARE SPECULATIVE AND MAY HAVE TO BE ADJUSTED IN THE FUTURE. ANY ADJUSTMENT
TO THE ALLOWANCE FOR LOAN LOSSES, WHETHER DUE TO REGULATORY CHANGES, ECONOMIC
CHANGES OR OTHER FACTORS, MAY AFFECT BERKSHIRE'S FINANCIAL CONDITION AND
EARNINGS.
Berkshire and GSB maintain allowances for loan losses. The allowances are
established through a provision for loan losses based on each bank's
management's evaluation of the risks inherent in its loan portfolio and the
general economy. The allowances for loan losses are based upon a number of
factors, including the size of the loan portfolio, asset classifications,
economic trends, industry experience and trends, industry and geographic
concentrations, estimated collateral values, management's assessment of the
credit risk inherent in the portfolio, historical loan loss experience and loan
underwriting policies. In addition, each bank evaluates all loans identified as
problem loans and augments the allowance based upon the perceived risks
associated with those problem loans.
The management of both banks believe they use a reasonable and prudent
methodology to determine the reasonableness of its allowances for loan losses.
The state and federal regulators, in reviewing Berkshire's loan portfolio as
part of a regulatory examination after the merger, may request Berkshire to
increase its allowance for loan losses, thereby negatively affecting Berkshire's
financial condition and earnings at that time. Moreover, additions to the
allowance may be necessary based on changes in economic and real estate market
conditions, new information regarding existing loans, identification of
additional problem loans and other factors, both within and outside of
Berkshire's management's control.
BERKSHIRE BANK OPERATES IN A HIGHLY COMPETITIVE MARKET AND GEOGRAPHIC AREA.
IF BERKSHIRE BANK IS UNABLE TO OFFER COMPETITIVE PRODUCTS AND SERVICES, ITS
EARNINGS WILL BE NEGATIVELY AFFECTED.
Berkshire Bank's principal competitors for deposits are other commercial
banks, savings banks, savings and loan associations and credit unions in its
market area, as well as money market mutual funds, insurance companies and
securities brokerage firms. Berkshire Bank's competition for loans comes
principally from commercial banks, savings banks, savings and loan associations,
mortgage bankers, finance companies and other institutional lenders. The New
York City metropolitan area and the Orange County market where Goshen Savings
Bank operates include offices of many of the largest financial institutions in
the world. Many of those competing institutions have much greater financial and
marketing resources than the combined resources of Berkshire Bank and Goshen
Savings Bank. Due to their size, many competitors can achieve larger economies
of scale and as a result offer a broader range of products and services than
Berkshire Bank and Goshen Savings Bank. If Berkshire Bank is unable to offer
competitive products and services after the merger, its earnings will be
negatively affected.
BERKSHIRE'S COMMON STOCK IS NOT INSURED BY ANY GOVERNMENTAL AGENCY AND
THEREFORE INVOLVES INVESTMENT RISK.
The shares of common stock offered by this joint proxy statement/prospectus
are not savings accounts or deposits and are not insured or guaranteed by the
FDIC or any other governmental agency, and involve investment risk, including
the possible loss of principal.
17
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE BERKSHIRE AND THIS COULD
DEPRESS BERKSHIRE'S STOCK PRICE.
Under Berkshire's certificate of incorporation, Berkshire has authorized
2,000,000 shares of preferred stock, which the board of directors may issue with
terms, rights, preferences and designations as the board of directors may
determine and without any vote of the stockholders, unless otherwise required by
law. Issuing the preferred stock, depending upon the rights, preferences and
designations set by the board of directors, may delay, deter, or prevent a
change in control of our company. Issuing additional shares of common stock
could result in dilution of the voting power of the current holders of our
common stock. In addition, 'anti-takeover' provisions of Delaware law may
restrict the ability of the stockholders to approve a merger or business
combination or obtain control of Berkshire. This may tend to perpetuate existing
management. See also the risk factor immediately following.
BERKSHIRE IS CONTROLLED BY ONE PRINCIPAL STOCKHOLDER. CONCENTRATED STOCK
OWNERSHIP COULD AFFECT THE MARKET PRICE OF BERKSHIRE STOCK.
As of the date of this prospectus, Moses Marx, a director of Berkshire,
beneficially owns 52.1% of Berkshire's outstanding common stock. After this
offering and assuming no additional issuance of common stock, Mr. Marx will
beneficially own or control, directly or indirectly, 1,106,120 shares of
Berkshire's common stock, which in the aggregate will represent between 40.9%
and 39.3% of the outstanding common stock. Therefore, Mr. Marx is in a position
to exercise control over most matters requiring stockholder approval, including
the election or removal of directors, approval of significant corporate
transactions, and the ability generally to direct our affairs. This
concentration of ownership may have the effect of delaying or preventing a
change in control of Berkshire, including transactions where stockholders might
otherwise receive a premium over current market prices for their shares.
BERKSHIRE BANK'S SUCCESS DEPENDS ON ITS SENIOR MANAGEMENT TEAM AND IF IT IS
NOT ABLE TO RETAIN THEM, IT COULD HAVE A MATERIALLY ADVERSE EFFECT ON BERKSHIRE.
Berkshire Bank is highly dependent upon the continued services and
experience of its senior management team, including Moses Krausz. Berkshire Bank
depends on the services of Moses Krausz to, among other things:
successfully integrate the operations of Berkshire and GSB; and
maintain and develop Berkshire's and GSB's client relationships.
Berkshire is highly dependent upon the services and experiences of Steven
Rosenberg. GSB is highly dependent upon the continued services of locally-based
employees and officers with intimate involvement in and knowledge of the local
community.
18
WHERE YOU CAN FIND MORE INFORMATION
Berkshire and GSB file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements and other information we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. Our SEC filings are also available on the SEC's
Internet site as part of the EDGAR database (http://www.sec.gov).
Berkshire has filed a registration statement on Form S-4 (Registration
No. 333-47890) to register the shares of Berkshire common stock to be issued in
the merger under the Securities Act. This joint proxy statement/prospectus is a
part of the registration statement on Form S-4 and constitutes a prospectus of
Berkshire in addition to being a proxy statement of each of Berkshire and GSB
for their special meetings. As allowed by SEC rules, this joint proxy
statement/prospectus does not contain all the information you can find in the
registration statement on Form S-4 or the exhibits to the registration statement
on Form S-4.
The SEC also allows Berkshire and GSB to 'incorporate by reference' the
information it files with the SEC, which means Berkshire and GSB can disclose
information to you by referring you to another document filed separately with
the SEC. Information incorporated by reference is deemed to be part of this
joint proxy statement/prospectus. Later information filed by Berkshire or GSB
with the SEC updates and supersedes this joint proxy statement/prospectus.
The following documents previously filed by Berkshire with the SEC under the
Exchange Act (File No. 000-13649) are incorporated in this joint proxy
statement/prospectus by this reference:
SEC FILINGS PERIOD
- ---------------------------------------- ---------------------------------------------------
Annual Report on Form 10-K, as amended. Year ended October 31, 1999
Transition Report on Form 10-K For the transition period from November 1, 1999 to
December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000
Current Reports on Form 8-K Filed on April 18, 2000 and August 16, 2000
Berkshire's
Annual Report on Form 10-K, as amended, for the year ended October 31,
1999;
Transition Report on Form 10-K for the transition period from November 1,
1999 to December 31, 1999; and
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000
are being delivered to each Berkshire and GSB stockholder along with this joint
proxy statement/ prospectus.
All documents filed by Berkshire under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this joint proxy statement/prospectus
and prior to the special meetings of Berkshire and GSB will be deemed to be
incorporated by reference in this joint proxy statement/prospectus and to be a
part of this joint proxy statement/prospectus from the date any document is
filed.
19
The following documents previously filed by GSB with the SEC under the
Exchange Act (File No. 000-22559) are incorporated in this joint proxy
statement/prospectus by this reference:
SEC FILINGS PERIOD
- ---------------------------------------- ---------------------------------------------------
Annual Report on Form 10-K, including Year ended December 31, 1999
those portions of GSB's proxy statement
for its 2000 annual meeting of
stockholders incorporated by reference
in the Annual Report on Form 10-K
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000
GSB's
Annual Report on Form 10-K for the year ended December 31, 1999; and
Quarterly Report on Form 10-Q for the year ended September 30, 2000
are being delivered to each Berkshire and GSB stockholder along with this joint
proxy statement/ prospectus.
All documents filed by GSB under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this joint proxy statement/prospectus and
prior to the special meetings of GSB and Berkshire will be deemed to be
incorporated by reference in this joint proxy statement/prospectus and to be a
part of this joint proxy statement/prospectus from the date any document is
filed.
NEITHER GSB NOR BERKSHIRE HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED
[ ], 2000. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THE JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT
DATE, AND NEITHER THE MAILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR THE
ISSUANCE OF BERKSHIRE COMMON STOCK IN THE MERGER WILL CREATE ANY IMPLICATION TO
THE CONTRARY.
FORWARD-LOOKING STATEMENTS
WE HAVE EACH MADE FORWARD-LOOKING STATEMENTS IN THIS DOCUMENT (AND IN
BERKSHIRE AND GSB DOCUMENTS THAT ARE INCORPORATED BY REFERENCE) THAT ARE SUBJECT
TO RISKS AND UNCERTAINTIES. FORWARD-LOOKING STATEMENTS INCLUDE THE INFORMATION
CONCERNING POSSIBLE OR ASSUMED FUTURE RESULTS OF OPERATIONS OF BERKSHIRE OR GSB
INCLUDING THOSE SET FORTH OR REFERENCED IN 'THE MERGER -- BACKGROUND OF THE
MERGER,' ' -- BERKSHIRE'S REASONS FOR THE MERGER,' ' -- GSB'S REASONS FOR THE
MERGER' AND ' -- OPINION OF FINANCIAL ADVISOR.' ALSO, WHEN WE USE WORDS SUCH AS
'BELIEVES,' 'EXPECTS,' 'ANTICIPATES' OR SIMILAR EXPRESSIONS, WE ARE MAKING
FORWARD-LOOKING STATEMENTS. YOU SHOULD NOTE THAT MANY FACTORS, SOME OF WHICH ARE
DISCUSSED IN 'RISK FACTORS' AND ELSEWHERE IN THIS DOCUMENT AND IN THE DOCUMENTS
WHICH WE INCORPORATE BY REFERENCE, COULD AFFECT THE FUTURE FINANCIAL RESULTS OF
BERKSHIRE AND GSB AND COULD CAUSE THOSE RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED OR IMPLIED IN OUR FORWARD-LOOKING STATEMENTS CONTAINED OR INCORPORATED
BY REFERENCE IN THIS DOCUMENT.
20
SPECIAL MEETINGS OF STOCKHOLDERS
We are sending you this joint proxy statement/prospectus in order to provide
you with important information regarding the merger and to solicit your proxy
for use at the special meetings and at any adjournments or postponements of the
special meetings. The special meetings are scheduled to be held at the times and
places described below.
BERKSHIRE SPECIAL MEETING
General. The Berkshire special meeting is scheduled to be held on
[ ], 2001 at [ ] [ ].m., eastern standard time, at the [ ]. At
the Berkshire special meeting, Berkshire stockholders will have the opportunity
to consider and vote upon the merger agreement.
THE BERKSHIRE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT BERKSHIRE STOCKHOLDERS VOTE 'FOR' THE MERGER
AGREEMENT.
Record Date. The Berkshire board of directors has fixed the close of
business on [ ], 2000, as the Berkshire record date for the determination
of holders of shares of Berkshire common stock entitled to notice of and to vote
at the Berkshire special meeting.
Stock Entitled to Vote. As of [ ], 2000, there were [ ]
shares of Berkshire common stock outstanding. Each holder of Berkshire common
stock will have the right to one vote with respect to the matters to be acted
upon at the Berkshire special meeting for each share registered in the holder's
name on the books of Berkshire as of the close of business on [ ], 2000.
Quorum; Required Vote. The presence, in person or by properly executed
proxy, of the holders of a majority of the outstanding shares of Berkshire
common stock entitled to vote at the Berkshire special meeting is necessary to
constitute a quorum. Under Delaware law the affirmative vote of the majority of
the shares outstanding is required for approval of the merger agreement.
Stock Ownership. As of [ ], 2000, the directors and executive
officers of Berkshire, had the right to vote, in the aggregate, 1,123,981 shares
of Berkshire common stock, representing approximately [ ]% of the total votes
entitled to be cast at the Berkshire special meeting. The directors and
executive officers of Berkshire have agreed in writing to vote their shares at
the Berkshire special meeting in favor of the merger agreement.
Voting and Revocation of Proxies. All shares of Berkshire common stock
represented by a proxy properly signed and received at or prior to the Berkshire
special meeting, unless subsequently revoked, will be voted in accordance with
the instructions on the proxy. IF A PROXY IS SIGNED AND RETURNED WITHOUT
INDICATING ANY VOTING INSTRUCTIONS, THE SHARES OF BERKSHIRE COMMON STOCK
REPRESENTED BY THE PROXY WILL BE VOTED 'FOR' THE MERGER AGREEMENT. You may
revoke your proxy by giving written notice of revocation to the President of
Berkshire at any time before it is voted, by submitting to Berkshire a duly
executed, later-dated proxy or by voting the shares subject to the proxy by
written ballot at the Berkshire special meeting. All written notices of
revocation and other communications with respect to revocation of Berkshire
proxies should be addressed to: Berkshire Bancorp Inc., 160 Broadway, New York,
New York 10038, Attention: Steven Rosenberg, President. Attendance at the
Berkshire special meeting will not in and of itself constitute a revocation of a
proxy.
The Berkshire board of directors is not aware of any business to be acted
upon at the Berkshire special meeting other than as described in this joint
proxy statement/prospectus. If, however, other matters are brought before the
Berkshire special meeting, including, among other things, a motion to adjourn or
postpone the Berkshire special meeting to another time or place for the purpose
of soliciting additional proxies or otherwise, the persons appointed as proxies
will have discretion to vote or act on the matters according to their best
judgment. However, no proxy which is voted against the merger agreement will be
voted in favor of any adjournment or postponement. The grant of a proxy will
also confer discretionary authority on the persons named in the proxy to vote on
matters incident to the conduct of the Berkshire special meeting.
Abstentions and 'broker non-votes,' explained below, will be counted as
shares present for purposes of determining whether a quorum is present.
Abstentions and broker non-votes will have
21
the effect of a vote against the merger agreement. Similarly, the failure to
either return your proxy card or attend the Berkshire special meeting in person
and vote in favor of the merger agreement will have the same effect as a vote
against the merger agreement. Broker non-votes are shares held in the name of a
broker or nominee for which an executed proxy is received, but which are not
voted on the proposal because the voting instructions have not been received
from the beneficial owner or persons entitled to vote and the broker or nominee
does not have the discretionary power to vote.
Solicitation of Proxies. Proxies are being solicited on behalf of the
Berkshire board of directors. The solicitation of proxies may be made by
directors, officers and regular employees of Berkshire or its subsidiaries in
person or by mail, telephone, facsimile or telegraph without additional
compensation payable for that solicitation. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to forward proxy
soliciting materials to the beneficial owners of Berkshire common stock held of
record by these persons, and Berkshire will reimburse them for reasonable
expenses incurred by them in so doing. The cost of the solicitation will be
borne by Berkshire.
No Appraisal Rights. Berkshire stockholders will not be entitled to
appraisal rights under Delaware law in connection with the merger. See 'The
Merger -- No Appraisal Rights for Berkshire Stockholders.'
Stockholder Proposals. A stockholder proposal must have been received by
Berkshire on or prior to October 31, 2000 at 160 Broadway, New York, New York
10038 in order to have been eligible for inclusion in Berkshire's proxy
statement for the 2001 Annual Meeting of Stockholders.
GSB SPECIAL MEETING
General. The GSB special meeting is scheduled to be held on [ ], 2001
at [ ].m., eastern standard time, at [ ]. The purpose of the GSB
special meeting is to consider and vote upon the merger agreement.
THE GSB BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT GSB STOCKHOLDERS VOTE 'FOR' THE MERGER AGREEMENT.
Record Date. The GSB board of directors has fixed the close of business on
[ ], 2000 as the GSB record date for the determination of holders of
shares of GSB stock entitled to notice of and to vote at the GSB special
meeting.
Stock Entitled to Vote. At the close of business on [ ], 2000, there
were 1,984,538 shares of GSB common stock outstanding. Holders of GSB common
stock will be entitled to one vote for each share of GSB common stock that they
held of record on [ ], 2000.
Quorum; Required Vote. The presence in person or by properly executed proxy
of the holders of a majority of the outstanding shares of GSB common stock
entitled to vote at the GSB special meeting is necessary to constitute a quorum.
Under Delaware law, the affirmative vote of a majority of the shares outstanding
is required for approval of the merger agreement.
Stock Ownership. As of [ ], 2000 the directors and executive officers
of GSB had the right to vote, in the aggregate, 190,334 shares of GSB common
stock, representing approximately 9.6% of the total votes entitled to be cast at
the GSB special meeting. The GSB Employee Stock Ownership Plan owns an
additional 155,026 shares not allocated to executive officers which may be voted
by officers and other employees of GSB. The directors and executive officers of
GSB have agreed in writing to vote their shares at the GSB special meeting in
favor of the merger agreement.
Voting and Revocation of Proxies. Shares of GSB common stock represented by
a proxy properly signed and received at or prior to the GSB special meeting,
unless subsequently revoked, will be voted in accordance with the instructions
on the proxy. IF YOU SIGN AND RETURN YOUR PROXY WITHOUT INDICATING ANY VOTING
INSTRUCTIONS, THE SHARES OF GSB COMMON STOCK REPRESENTED BY THE PROXY WILL BE
VOTED 'FOR' THE MERGER AGREEMENT. You may revoke your proxy at any time by
giving written notice of revocation to the Secretary of GSB at any time before
it is voted, by submitting to GSB a duly executed, later-dated proxy or by
voting the shares subject to the proxy
22
by written ballot at the GSB special meeting. You should send all written
notices of revocation and other communications with respect to revocation of GSB
proxies to: GSB Financial Corporation, One South Church Street, P.O. Box 469,
Goshen, New York 10924, Attention: Barbara A. Carr, Secretary. Attendance at the
GSB special meeting will not, in and of itself, constitute a revocation of a
proxy.
The GSB board of directors is not aware of any business to be acted upon at
the GSB special meeting other than as described in this joint proxy
statement/prospectus. If, however, additional matters are brought before the GSB
special meeting, including, among other things, a motion to adjourn or postpone
the GSB special meeting to another time or place for the purpose of soliciting
additional proxies or otherwise, the persons appointed as proxies will have
discretion to vote or act on the matters according to their best judgment.
However, no proxy which is voted against the merger agreement will be voted in
favor of any adjournment or postponement. The grant of a proxy will also confer
discretionary authority on the persons named in the proxy to vote on matters
incident to the conduct of the GSB special meeting.
Abstentions and broker non-votes will be counted as shares present for
purposes of determining whether a quorum is present. Abstentions and broker
non-votes will have the effect of a vote against the merger agreement.
Similarly, the failure to either return your proxy card or attend the GSB
special meeting in person and vote in favor of the merger agreement will have
the same effect as a vote against the merger agreement.
Solicitation of Proxies. The proxies are being solicited on behalf of the
GSB board of directors. The solicitation of proxies may be made by directors,
officers and regular employees of GSB in person or by mail, telephone, facsimile
or telegraph without additional compensation payable for that solicitation.
Arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries to forward proxy soliciting materials to the beneficial owners
of GSB common stock held of record by these persons, and GSB will reimburse them
for reasonable expenses incurred by them in so doing. The cost of the
solicitation will be born by GSB. GSB has retained Regan & Associates, Inc., a
firm experienced in the solicitation of proxies on behalf of public companies,
to assist in the proxy solicitation process at a fee of $6,250, which includes
all reasonable out of pocket expenses.
Appraisal Rights of GSB Stockholders. Except as otherwise described in this
joint proxy statement/prospectus, each GSB stockholder who delivers to GSB a
written demand for appraisal of the stockholder's shares before the GSB special
meeting and who otherwise complies with the applicable procedures under Delaware
law will be entitled to have the value of his or her shares appraised by the
Delaware Chancery Court and receive the value so determined in cash if the
merger is completed.
Stockholder Proposals. GSB anticipates that it will not have a 2001 Annual
Meeting of Stockholders because it anticipates that GSB and Berkshire will
complete the merger before that meeting would normally be held. However, if an
annual meeting is held, a stockholder proposal must have been received by GSB on
or prior to November 16, 2000 at One South Church Street, P.O. Box 469, Goshen,
New York 10924 in order to have been eligible for inclusion in GSB's proxy
statement for the 2001 Annual Meeting of Stockholders.
23
THE MERGER
BACKGROUND OF THE MERGER
Since the conversion of Goshen Savings Bank to the stock form of ownership
in 1997, GSB has embarked upon a strategy of expansion of its franchise in order
to add shareholder value. In addition to branching, an increase in loan
offerings, and strengthening the service delivery system, GSB also explored a
number of possible acquisition opportunities of smaller financial institutions.
These explorations were focused principally in the direction of a commercial
bank acquisition, which would have given GSB the opportunity to seek municipal
deposits, which are not available to thrift institutions in New York, and also
to expand its loan and product offerings to the commercial sector of the local
community. However, despite discussions with a number of other institutions, GSB
was unable to reach a satisfactory arrangement to acquire another financial
institution.
In early April of this year, Warwick Community Bancorp, Inc. which reported
on April 19, 2000 that it was the beneficial owner of approximately 8.44% of the
outstanding common stock of GSB, contacted GSB and requested a meeting between
the two companies and their counsel to discuss the upcoming GSB stockholders
meeting which was scheduled for April 27, 2000. On April 18, 2000, Thomas V.
Guarino, the Chairman of GSB, and legal counsel to GSB, met with the Chairman,
the President and legal counsel to Warwick. During that meeting, Warwick
expressed a possible interest in engaging in a business combination with GSB,
but did not discuss timing, price or other deal points. The regulations of the
Office of Thrift Supervision prohibited Warwick from making an offer to acquire
GSB until after July 9, 2000 unless the OTS approved the making of such an offer
in advance. Notwithstanding this prohibition, by letter dated April 19, 2000,
Warwick stated that if the GSB management would be receptive to entering into a
business combination with Warwick prior to that date, Warwick was prepared to
offer $18.00 per share in cash for all issued and outstanding stock of GSB.
Warwick filed the letter as an exhibit to an amendment of its Schedule 13D
filing with the SEC on April 19.
After Warwick made its implied offer public, the GSB board of directors met
and decided that it would be appropriate to explore all strategic alternatives
available to it regarding Warwick's willingness to offer $18.00 per share. To
assist it in the exploration of alternatives, GSB retained the services of
Tucker Anthony Incorporated, an investment banking firm with a national
reputation and with expertise in matters related to financial institutions.
Tucker Anthony then considered and discussed with the GSB board of directors a
number of possible strategies, including remaining as an independent
institution, making an offer to acquire Warwick, seeking a merger transaction
with another bank or savings and loan holding company, or seeking a business
combination with a non-bank financial institution.
At GSB's request, Tucker Anthony analyzed potential merger partners to
identify which institutions, based primarily upon financial resources and
geographic and strategic fit, would be most likely to be interested in and able
to engage in a transaction with GSB. As part of its analysis, Tucker Anthony
first prepared a list of potential partners based upon its knowledge of the
banking industry and then evaluated each of these to estimate the effect that a
transaction with GSB would have on the financial condition or results of
operations of the combined entity.
After the initial screening process, Tucker Anthony and GSB contacted eight
institutions in addition to Warwick to determine whether they would be
interested in a merger with GSB. Two of these institutions, including Berkshire,
expressed an interest in a possible transaction. Tucker Anthony then received
preliminary price indications from both institutions and GSB's board of
directors authorized further discussions with Berkshire because its price
indication was higher. Representatives of GSB's board of directors then met with
representatives of Berkshire and reached an understanding as to the principal
terms of a potential merger. Both GSB and Berkshire conducted the first stage of
their due diligence review, with satisfactory results. A draft definitive
agreement was then prepared and circulated for comment and discussion.
In order to maintain the integrity of the process and to afford the other
interested institutions an opportunity to make a final offer, Tucker Anthony
contacted the other institution which had
24
expressed an interest in a merger with GSB and advised it that it should present
a formal proposal at the best price it was willing to offer. In addition, GSB
contacted Warwick and advised Warwick that if it remained interested in GSB, it
should present its best offer. Warwick reiterated its proposed price of $18.00
per share and stated that after due diligence it might be willing to increase
its price by not more than $0.70 per share, but that due diligence might also
cause it to decrease its price by as much as $0.70 per share. The other
institution presented a formal written offer to merge with GSB at a price higher
than the highest price that Warwick said it would consider but lower than the
price offered by Berkshire. As in the case of Berkshire, the other institution
offered to acquire GSB for a combination of stock and cash, while Warwick
offered only cash.
Based upon the satisfactory progress of negotiations with Berkshire, coupled
with the less desirable economic terms offered by the two other bidders, the GSB
board of directors authorized management to finalize the definitive agreement
with Berkshire. Based on Berkshire's initial due diligence review of GSB, the
Berkshire board of directors authorized its management to also finalize the
definitive agreement with GSB.
Representatives of GSB met with representatives of Berkshire to finalize
negotiations on the proposed merger. On August 10, the GSB board of directors
met to approve the transaction and heard from Tucker Anthony regarding its
analysis of the fairness of the consideration to be paid. Tucker Anthony stated
that it was prepared to deliver its fairness opinion, as discussed below under
the caption 'The Merger -- Opinion of Financial Advisors -- Opinion of Tucker
Anthony Incorporated' and stated that in its opinion the proposed transaction
with Berkshire was fair to the stockholders of GSB from a financial point of
view. Legal counsel informed the GSB board of directors that there were still a
few unresolved issues in the negotiation of the definitive agreement and
discussed those issues with the board of directors. The board of directors then
unanimously approved the agreement with Berkshire, subject to final resolution
of open items in negotiations to be undertaken by the GSB Chairman, legal
counsel and Tucker Anthony and subject to the delivery of the final fairness
opinion of Tucker Anthony as of the date of the agreement. On August 10, 2000,
the Berkshire board of directors met to consider the transaction and hear from
Berwind Financial, L.P. regarding its analysis of the fairness from a financial
point of view, to the Berkshire stockholders of the consideration to be paid in
the merger. On August 14, 2000, the board of directors met again to approve the
merger agreement. Based in part upon the opinion of Berwind Financial, L.P. (see
'The Merger -- Opinion of Financial Advisors -- Opinion of Berwind Financial,
L.P.') that the consideration to be paid to the GSB stockholders was fair from a
financial point of view to Berkshire, the board of directors unanimously
approved the merger agreement with GSB subject to the final resolution of open
items.
All open issues were finally resolved on August 15, 2000. The boards of
directors of GSB and Berkshire each received an update as to the final terms and
reaffirmed their respective approval of the merger agreement. Tucker Anthony
updated its fairness analysis and delivered its final fairness opinion on August
16, 2000. GSB and Berkshire signed the final definitive agreement that day. The
transaction was then publicly announced on the afternoon of August 16.
GSB'S REASONS FOR THE MERGER
The GSB board of directors, in its evaluation of the alternatives available
to GSB, determined that the Berkshire offer was the best available choice and
appeared to present the greatest potential benefits to all of GSB's
constituencies. The fact that Berkshire's price was the highest of the amounts
offered was a primary consideration in approving the transaction with Berkshire.
The GSB board of directors also considered other factors which it found to
support engaging in a business combination with Berkshire. These factors
principally included the following:
The GSB board of directors believes that steps taken by GSB to improve
efficiency, expand its branch network and develop additional products and
services have the potential to bear fruit in the future. A transaction in
which GSB stockholders have the opportunity to elect stock instead of cash
for their shares gives GSB stockholders the opportunity to share in the
25
future if they choose to do so. In addition, the opportunity to elect stock
also allows GSB stockholders to defer the payment of tax on the increase
in the value of GSB stock.
The GSB board of directors believes that a merger with an institution that
does not currently have a presence in the local market is preferable for
members of the local community and the employees of GSB. The GSB board of
directors believes that the transaction with Berkshire will strengthen its
operations in Orange County and allow it to expand products and services,
which will increase, rather than decrease, local competition. For example,
as a commercial bank, Berkshire will be able to offer municipal deposits
and has available other traditional commercial bank services that Goshen
Savings Bank did not previously offer.
The GSB board of directors believes that expansion is important at a time
of increasing consolidation in the banking industry. During the past few
years, GSB sought expansion through acquisitions of other institutions, but
these attempts were not successful. The GSB board of directors also
considered the possibility of making an offer to acquire Warwick after
Warwick implied an offer to acquire GSB, but after consultation with Tucker
Anthony concluded that the financial and economic consequences of an offer
would not be in the best interests of GSB's stockholders. Thus, joining
forces with Berkshire appeared to present the best available route to
franchise expansion.
The fairness opinion by Tucker Anthony to the GSB board of directors,
representing an independent assessment of the finance terms of the
transaction, stated that the transaction with Berkshire is fair to GSB
stockholders from a financial point of view.
The GSB board of directors also reviewed and considered the financial
analysis and comparative data prepared by Tucker Anthony in connection with
the rendering of Tucker Anthony's opinion. This review and analysis
included consideration of the price to book value ratio, the price to
earnings ratio, the price to deposits ratio and the franchise premium to
core deposit ratio of the proposed merger compared to comparable
transactions identified by Tucker Anthony. The GSB board of directors also
reviewed a discounted cash flow analysis prepared by Tucker Anthony
reflecting the estimated present value of the future cash flows that could
be expected by a stockholder of GSB on both an acquisition and non-
acquisition (trading) basis. Detailed information regarding Tucker
Anthony's analysis as provided to the GSB board of directors is set forth
below under the caption 'Opinion of Financial Advisors -- Opinion of Tucker
Anthony Incorporated.'
When evaluating the proposed transaction with Berkshire, the GSB board of
directors also considered the following negative factors:
The possibility that regulatory approval might not be obtained, causing the
recognition of substantial merger-related expenses that would adversely
affect GSB's earnings.
The decreased likelihood that a competing acquiror would seek to offer a
higher price for GSB stock because of the break up fee payable to Berkshire
and the restrictions on GSB's ability to negotiate with other potential
acquirors.
The possibility that there might be some job losses in the local community
as a result of the transaction, and the possibility that resulting adverse
community reaction could affect market share.
The possibility that downward movement in the market price of Berkshire
common stock would make the stock component of the consideration payable in
the transaction less valuable.
The GSB board of directors continues to believe that the positive
considerations mitigating in favor of the transaction with Berkshire outweigh
these negative factors.
THE BOARD OF DIRECTORS OF GSB UNANIMOUSLY RECOMMENDS THAT GSB STOCKHOLDERS
VOTE IN FAVOR OF THE MERGER AGREEMENT.
26
BERKSHIRE'S REASONS FOR THE MERGER
Berkshire's board of directors has unanimously determined that the terms of
the merger agreement and the merger are in the best interests of, Berkshire and
its stockholders. In arriving at its determination, the Berkshire board of
directors consulted with Berkshire's management, as well as its legal counsel,
accountants and financial advisors and gave significant consideration to a
number of factors bearing on its decision. The following were the material
factors that were considered by the Berkshire board of directors:
In January 1999, Berkshire acquired Berkshire Bank, a New York
state-chartered commercial bank, and in February 2000, Berkshire acquired a
minority interest in Madison Merchant Services, Inc., a company which
provides credit card processing services for a variety of retail
establishments and other merchants;
Berkshire seeks to grow both internally and through the acquisition of
complimentary businesses. Goshen Savings Bank, which provides traditional
banking services in areas representing most of Orange County, New York,
will complement and broaden Berkshire Bank's existing customer base in the
New York metropolitan area. In addition, Madison will have an enhanced
ability to offer its credit card processing services in Orange County;
Berkshire Bank's lending activity consists primarily of making commercial
mortgage loans secured by various types of commercial properties and making
commercial loans to businesses, whereas Goshen Savings Bank's lending
activity consists primarily of making conventional first mortgage loans
secured by one-to-four family residences. The merger will result in
substantially greater asset diversification and the opportunity to leverage
management's expertise;
Goshen Savings Bank's business strategy is consistent with Berkshire Bank's
goal to provide clients with high quality personal service. The larger size
of the combined company would place the combined company in a stronger
position to satisfy the financial needs of its expanded customer base;
The belief of the Berkshire board of directors that the cost of the merger
in financial terms represents a reasonable investment by Berkshire in
furthering its business strategy;
The likelihood of the merger being approved by the appropriate regulatory
authorities;
The belief of the Berkshire board of directors that, while no assurances
can be given, it was likely that the merger would be completed and that the
business and financial benefits contemplated in connection with the merger
are likely to be achieved within a reasonable time frame;
The structure of the merger and the terms of the merger agreement,
including the fact that the exchange ratio provides reasonable certainty as
to the amount of cash to be paid and the number of shares of Berkshire
common stock to be issued in the merger; and
The opinion of Berwind Financial, L.P. to the Berkshire board of directors
that, based on and subject to the considerations set forth in the opinion,
the consideration offered in connection with the merger agreement was fair,
from a financial point of view, to the Berkshire stockholders.
Berkshire does not intend this discussion of the information and factors
considered by the Berkshire board of directors to be exhaustive, although this
discussion does include all material factors considered by the Berkshire board
of directors. In reaching its determination to approve and recommend the merger
agreement to the Berkshire stockholders for their approval, the Berkshire board
of directors did not assign any relative or specific weights to the factors
considered, and individual directors of Berkshire might have weighed factors
differently.
27
OPINION OF FINANCIAL ADVISORS
OPINION OF TUCKER ANTHONY INCORPORATED.
General. Pursuant to an engagement letter dated May 12, 2000, the GSB board
of directors retained Tucker Anthony to render financial advisory and investment
banking services, including assistance in evaluating GSB's strategic
alternatives, advice on the range of value of GSB both as an on-going concern
and as a merger partner, assistance in assessment of indications of interest,
negotiations and related strategy and analyses in connection with the possible
merger of GSB and, if appropriate, rendering a fairness opinion should the
process lead to the merger of GSB. Tucker Anthony currently serves as a market
maker in the common stock of GSB.
Tucker Anthony is a nationally recognized investment banking firm and as a
customary part of its investment banking business is engaged in the valuation of
thrift, bank, thrift and bank holding company and other financial services
company securities in connection with mergers, acquisitions, underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for various other purposes. As a specialist in the securities of
financial institutions, Tucker Anthony has experience in, and knowledge of, the
valuation of thrift and banking enterprises. The GSB board of directors selected
Tucker Anthony on the basis of Tucker Anthony's ability to provide the services
described above, as well as its qualifications, its previous experience and its
reputation in the banking and investment communities. Tucker Anthony has acted
exclusively for the GSB board of directors in rendering its fairness opinion and
will receive a fee from GSB for its services. The fairness opinion is directed
to the GSB board of directors only and does not constitute a recommendation to a
GSB stockholder as to how such stockholder should vote at the special meeting.
There is no state or federal law or regulation which requires that a fairness
opinion be issued or obtained in connection with the merger. It is the view of
Tucker Anthony that the determination as to who may rely on the fairness opinion
and to whom Tucker Anthony may be liable in connection with the opinion is
determined by the May 12, 2000 engagement letter to provide the fairness opinion
between Tucker Anthony and the GSB board of directors, which provides that only
GSB may rely on the fairness opinion. However, a court may determine that GSB
stockholders may rely upon the fairness opinion.
Tucker Anthony has rendered a written opinion to the GSB board of directors,
dated as of August 16, 2000 and subsequently reaffirmed as of the date of this
joint proxy statement/prospectus, to the effect that, as of such date, the
merger consideration is fair, from a financial point of view, to the
stockholders of GSB. The full text of the Tucker Anthony opinion is attached as
Annex D to this joint proxy statement/prospectus and is incorporated herein by
reference. We urge GSB's stockholders to read the Tucker Anthony opinion in its
entirety for a description of the procedures followed, assumptions made, matters
considered, and qualifications and limitations of Tucker Anthony's review. We
qualify the following summary of the opinion in its entirety by reference to the
full text of the opinion. Tucker Anthony has reviewed and consented to the
inclusion in this joint proxy statement/prospectus of the following summary of
its opinion. The merger consideration was determined by negotiation between
Berkshire and GSB and was not determined by Tucker Anthony or any of its
affiliates. Neither GSB nor any of its subsidiaries imposed any limitations on
Tucker Anthony regarding the scope of its investigation or procedures in
rendering its fairness opinion. See 'The Merger -- Background of the Merger.'
In rendering its opinion, Tucker Anthony, among other things:
Reviewed the draft Agreement and Plan of Reorganization dated August 16,
2000;
Reviewed historical financial and other information concerning GSB (and
Goshen Savings Bank) since 1996;
Reviewed historical financial and other information concerning Berkshire
(and Berkshire Bank) since 1996;
Held discussions with the senior management of GSB and Berkshire with
respect to their past and current financial performance, financial
condition and future prospects;
28
Reviewed certain internal financial data, projections and other information
of GSB and Berkshire;
Analyzed certain publicly available information of other financial
institutions that Tucker Anthony deemed comparable or otherwise relevant to
its inquiry, and compared GSB and Berkshire from a financial point of view
with certain of these institutions;
Compared the consideration to be paid by Berkshire pursuant to the merger
agreement with the consideration paid in other acquisitions of financial
institutions that Tucker Anthony deemed comparable or otherwise relevant to
its inquiry;
Considered the pro forma impact of the merger on the earnings and book
value per share, consolidated capitalization and certain balance sheet and
profitability ratios of Berkshire;
Reviewed historical trading activity and ownership data of GSB's and
Berkshire's common stock and considered the prospects for dividends and
price movement; and
Considered such other financial studies, analyses and investigations and
reviewed such other information as Tucker Anthony deemed appropriate to
enable it to render its opinion.
Tucker Anthony met with members of senior management and other
representatives of GSB and Berkshire to discuss the foregoing as well as other
matters Tucker Anthony deemed relevant. Tucker Anthony considered financial and
other factors as it deemed appropriate under the circumstances and took into
account its assessment of general economic, market and financial conditions, and
its experience in similar transactions, as well as its experience in securities
valuation and its knowledge of the banking industry generally. Tucker Anthony's
opinions are necessarily based upon conditions as they existed and could be
evaluated on the dates the opinions were given and the information made
available to Tucker Anthony through those dates.
Tucker Anthony relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its opinion. With respect to the financial
forecasts reviewed by Tucker Anthony in rendering its opinion, Tucker Anthony
assumed that the financial forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of GSB and Berkshire as to the future financial performance of GSB
and Berkshire. Tucker Anthony did not make any independent evaluation or
appraisals of the assets or liabilities of GSB or Berkshire nor was it furnished
with any such appraisals. Tucker Anthony also assumed, without independent
verification, that the aggregate allowances for loan losses for GSB and
Berkshire were adequate.
The summary set forth below does not purport to be a complete description of
the analyses performed by Tucker Anthony in connection with the merger. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, the opinion is not
readily susceptible to summary description. Tucker Anthony believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying the opinion. No one of the analyses performed by Tucker Anthony was
assigned a greater significance with respect to industry performance, business
and economic conditions and other matters, many of which are beyond GSB's or
Berkshire's control. The analyses performed by Tucker Anthony are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by the analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.
Taken as a whole, Tucker Anthony believes these analyses support the conclusion
that the consideration to be paid to GSB's stockholders is fair, from a
financial point of view.
Transaction Summary. On August 10, 2000, Tucker Anthony reviewed with the
GSB's board of directors the key financial terms of the proposed merger,
including the expected method of accounting, the exchange ratio, the share price
of Berkshire as of August 10, 2000, the resulting indicated value per share of
GSB capital stock in the merger and the resulting indicated aggregate
consideration to be paid in the merger. The analysis was subsequently updated as
of August 16,
29
2000 when the fairness opinion letter was issued. Tucker Anthony's analysis
included, but was not limited to, the following:
The proposed method of accounting for the merger was purchase accounting;
The aggregate consideration was to be comprised of no less than 50.1% stock
and no more than 60.0% stock. For the stock portion of the aggregate
consideration, the exchange ratio was set at 0.6027 shares of Berkshire's
common stock, subject to a cap and collar. The cash portion of the
aggregate consideration was to be comprised of no less than 40.0% and no
more than 49.9% of the aggregate consideration;
The transaction would be a tax-free exchange for the stock portion of the
aggregate consideration and a taxable event for the cash portion of the
aggregate consideration;
The indicated value was $20.845 per share of GSB's common stock based upon
the closing price of Berkshire's common stock on August 15, 2000 and
assuming the stock portion of the consideration represents 50.1% of the
aggregate consideration;
The indicated aggregate consideration to be paid in the merger was $41.4
million based on 1,985,094 fully diluted shares of GSB's common stock
outstanding; and
The $20.845 per share value represented 138.5% of GSB's fully-diluted book
value per share as of June 30, 2000 and a multiple of 19.7 times GSB's net
income for the twelve months ended June 30, 2000.
Contribution Analysis. Tucker Anthony reviewed the contribution made by each
of GSB and Berkshire to various balance sheet items of the combined company
based on balance sheet data at June 30, 2000. A similar contribution analysis
was prepared for net income and income statement items based on the trailing
twelve months earnings as of June 30, 2000 for GSB and the six months ended June
30, 2000 (annualized) for Berkshire. This analysis showed that:
Assuming the aggregate consideration would be comprised of 50.1% stock and
49.9% cash, GSB stockholders would own approximately 21.7% of the aggregate
shares outstanding of the combined company;
GSB was contributing 47.9% of total assets of the combined company;
GSB was contributing 62.8% of total loans of the combined company;
GSB was contributing 53.4% of total deposits of the combined company; and
GSB was contributing 42.5% of net income of the combined company.
Summary Comparison of Selected Institutions -- GSB. Tucker Anthony compared
selected balance sheet data, asset quality, capitalization and profitability
ratios and market statistics using financial data at or for the twelve months
ended June 30, 2000 and market data as of August 15, 2000 for GSB and a peer
group of Mid-Atlantic and Northeast thrift and thrift holding companies, each of
which had undertaken a standard mutual-to-stock conversion since January 1,
1996, consisting of ten institutions with total deposits between $100 million
and $400 million. The analysis included, but was not limited to, the following
ratios: loans/deposits, equity/assets, non-performing assets/total assets,
allowance for loan losses/non-performing assets, net interest margin, efficiency
ratio, return on average assets, return on average equity, price/earnings,
price/book and dividend yield. Market value measures for GSB were calculated
using an implied value of $11.00 per share, the closing price of GSB shares
prior to the public announcement of Warwick Community Bancorp, Inc.'s interest
in making an offer for GSB. For purposes of this analysis, non-performing assets
include non-accrual loans, restructured loans, other real estate owned and loans
90 days past due but still accruing. The calculation of net interest margin in
this analysis does not include an adjustment for tax-equivalent yield on
tax-free securities. The analysis showed that:
GSB's loans/deposits ratio was 111.0% versus the peer group median of
116.5%;
GSB's equity/asset ratio was 15.7% versus the peer group median of 10.4%;
30
GSB's ratio of non-performing assets to total assets was 0.00% versus the
peer group median of 0.15%;
GSB's allowance for loan losses/non-performing assets ratio was 'Not
meaningful' (due to the fact that GSB had no non-performing assets) versus
the peer group median of 164.2%;
GSB's net interest margin was 3.49% versus the peer group median of 3.28%;
GSB's efficiency ratio was 58.0% versus the peer group median of 69.8%;
GSB's return on average assets and return on average equity were 1.10% and
6.54% versus the peer group medians of 0.63% and 5.38%, respectively;
GSB's price/earnings and price/book ratios were 10.4X and 73.1% versus the
peer group medians of 12.6X and 79.5%, respectively; and
GSB's dividend yield was 2.18% versus the peer group median of 2.35%.
Summary Comparison of Selected Institutions -- Berkshire. Tucker Anthony
compared selected balance sheet data, asset quality, capitalization and
profitability ratios and market statistics using financial data at or for the
twelve months ended June 30, 2000 and market data as of August 15, 2000 for
Berkshire and a peer group of New Jersey, New York and Pennsylvania banks and
bank holding companies consisting of eight institutions with total deposits
between $100 million and $400 million. The analysis included, but was not
limited to, the following ratios: loans/deposits, equity/assets, non-performing
assets/total assets, allowance for loan losses/non-performing assets, net
interest margin, efficiency ratio, return on average assets, return on average
equity, price/earnings, price/book and dividend yield. For purposes of this
analysis, non-performing assets include non-accrual loans, restructured loans,
other real estate owned and loans 90 days past due but still accruing. The
calculation of net interest margin in this analysis does not include an
adjustment for tax-equivalent yield on tax-free securities. The analysis showed
that:
Berkshire's loans/deposits ratio was 76.2% versus the peer group median of
74.1%;
Berkshire's equity/asset ratio was 40.2% versus the peer group median of
7.0%;
Berkshire's ratio of non-performing assets to total assets was 0.00% versus
the peer group median of 0.19%;
Berkshire's allowance for loan losses/non-performing assets ratio was 'Not
meaningful' (due to the fact that Berkshire had no non-performing assets)
versus the peer group median of 227.4%;
Berkshire's net interest margin was 4.84% versus the peer group median of
4.30%;
Berkshire's efficiency ratio was 55.5% versus the peer group median of
57.3%;
Berkshire's return on average assets and return on average equity were
1.30% and 3.28% versus the peer group medians of 1.07% and 15.68%,
respectively;
Berkshire's price/earnings and price/book ratios were 29.2X and 90.7%
versus the peer group medians of 12.8X and 187.0%, respectively; and
Berkshire's dividend yield was 0.92% versus the peer group median of 2.24%.
Summary of Selected Bank Merger and Acquisition Transactions. Tucker Anthony
compared the ratios of price/book, price/trailing 12 months earnings,
price/deposits, and franchise premium/core deposits for the merger to the
average and median ratios for a group of 12 bank and thrift merger transactions
announced since January 1, 1999. The selected transactions involved the
acquisition of profitable thrift and thrift holding companies headquartered in
the Mid-Atlantic region, where the transaction value was between $10 million and
$90 million and the transaction was accounted for using purchase accounting.
This analysis showed that:
The merger consideration represented 138.5% of GSB's book value versus a
median and average of 130.0% and 138.4% for the selected transactions;
The merger consideration represented a price/trailing 12 months earnings
ratio of 19.7X compared to a median and average of 26.6X and 23.5X for the
selected transactions;
31
The merger consideration represented a price/deposits ratio of 38.0%
compared to a median and average of 23.6% and 26.8% for the selected
transactions; and
The merger consideration represented a franchise premium/core deposits
ratio of 12.7% compared to a median and average of 9.1% and 8.6% for the
selected transactions.
Discounted Cash Flow Analysis. Tucker Anthony performed a discounted cash
flow analysis of future income streams of GSB based on management's internal
projections for the period 2000 to 2004. Tucker Anthony performed this analysis
under two scenarios:
assuming GSB was not acquired but remained independent for the time horizon
covered by management's projections, referred to as the Trading Basis; and
assuming GSB was acquired, referred to as the Acquisition Basis.
Based on the assumptions for the Trading Basis and Acquisition Basis
scenarios, Tucker Anthony determined the theoretical value of a share of GSB by
applying terminal earnings multiples and discount rates that Tucker Anthony
viewed as appropriate for GSB's risk characteristics.
On a Trading Basis, Tucker Anthony applied terminal earnings multiples
ranging from 10X to 12X and discount rates from 12% to 15%. The range of
theoretical value of a share of GSB stock on a Trading Basis was $9.62 to
$13.17. On an Acquisition Basis, Tucker Anthony applied terminal earnings
multiples ranging from 18X to 20X and discount rates from 12% to 15%. The range
of theoretical value of a share of GSB stock on an Acquisition Basis was $17.31
to $21.95.
No company or transaction used in the above analysis as a comparison is
identical to GSB, Berkshire or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex consideration and judgments concerning differences in financial
and operating characteristics of the companies and other factors that could
affect the public trading value of the companies to which they are being
compared. The ranges of valuations resulting from any particular analysis
described above should not be taken to be Tucker Anthony's view of the actual
value of GSB or Berkshire. The fact that any specific analysis has been referred
to in the summary above is not meant to indicate that such analysis was given
more weight than any other analyses.
In performing its analyses, Tucker Anthony made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of GSB or Berkshire. The
analyses performed by Tucker Anthony are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by the analyses. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. In addition, as described above, Tucker Anthony's opinion and
presentation to the GSB board of directors is just one of many factors taken
into consideration by the GSB board of directors on making its determination to
approve the merger and the merger agreement.
GSB agreed to pay Tucker Anthony a fee of $372,533 and a retainer fee of
$25,000. GSB paid Tucker Anthony $50,000 upon delivery of Tucker Anthony's
written fairness opinion on August 16, 2000 and $25,000 upon delivery of the
fairness opinion update on the date of this joint proxy statement/prospectus.
Tucker Anthony will be reimbursed for reasonable out-of-pocket expenses incurred
on behalf of GSB. GSB has agreed to indemnify Tucker Anthony against certain
liabilities.
OPINION OF BERWIND FINANCIAL, L.P.
Berkshire retained Berwind to render a fairness opinion in connection with
the merger. Berwind rendered its opinion to the board of directors of Berkshire
that, based upon and subject to the various considerations set forth therein, as
of August 14, 2000, referred to as the August Opinion, and as of [Date],
referred to as the Proxy Opinion, the consideration to be paid in the merger is
fair, from a financial point of view, to the holders of Berkshire common stock.
32
The full text of Berwind's Proxy Opinion, which sets forth the assumptions
made, matters considered and limitations of the review undertaken, is attached
as Annex C to this joint proxy statement/prospectus, is incorporated herein by
reference, and should be read in its entirety in connection with this joint
proxy statement/prospectus. The summary of the opinion of Berwind set forth
herein is qualified in its entirety by reference to the full text of such
opinion attached as Annex C to this joint proxy statement/prospectus. Berwind
has reviewed and consented to the inclusion in this joint proxy
statement/prospectus of the following summary of its opinion.
Berwind was selected by Berkshire in connection with the merger based upon
its qualifications, expertise and experience. Berwind has knowledge of, and
experience with, Mid-Atlantic and surrounding banking markets as well as banking
organizations operating in those markets and was selected by Berkshire because
of its knowledge of, experience with, and reputation in the financial services
industry. Berwind, as part of its investment banking business, is engaged
regularly in the valuation of assets, securities and companies in connection
with various types of asset and securities transactions, including mergers,
acquisitions, private placements, and valuations for various other purposes and
in the determination of adequate consideration in such transactions.
On August 16, 2000, Berkshire's board of directors approved and executed the
merger agreement. Prior to such approval, Berwind rendered its August Opinion to
Berkshire's board of directors stating that, as of such date, the consideration
to be paid in the merger was fair to the stockholders of Berkshire from a
financial point of view. Berwind reached the same opinion as of the date of its
Proxy Opinion. The full text of the Proxy Opinion which sets forth assumptions
made, matters considered and limits on the review undertaken is attached as
Annex C to this joint proxy statement/prospectus. No limitations were imposed by
Berkshire's board of directors upon Berwind with respect to the investigations
made or procedures followed by Berwind in rendering the August Opinion or the
Proxy Opinion. The merger consideration was determined by negotiation between
Berkshire and GSB and was not determined by Berwind or any of its affiliates.
In rendering its Proxy Opinion, Berwind:
reviewed the historical financial performances, current financial positions
and general prospects of Berkshire and GSB;
reviewed the merger agreement;
reviewed and analyzed the stock market performance of Berkshire and GSB;
studied and analyzed the consolidated financial and operating data of
Berkshire and GSB;
considered the terms and conditions of the proposed merger as compared with
the terms and conditions of comparable bank and bank holding company
mergers and acquisitions;
met and/or communicated with certain members of Berkshire's and GSB's
senior management to discuss their respective operations, historical
financial statements, and future prospects;
reviewed this joint proxy statement/prospectus; and
conducted such other financial analyses, studies and investigations as
Berwind deemed appropriate.
In delivering its August Opinion and Proxy Opinion, Berwind assumed that in
the course of obtaining the necessary regulatory and governmental approvals for
the merger, no restriction will be imposed on GSB or Berkshire that would have a
material adverse effect on the contemplated benefits of the merger. Berwind also
assumed that there will not occur any change in applicable law or regulation
that would cause a material adverse change in the prospects or operations of GSB
or Berkshire after the merger.
Berwind relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its opinions. With respect to GSB's and
Berkshire's financial forecasts reviewed by Berwind in rendering its
33
opinions, Berwind assumed that such financial forecasts were reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
management of GSB and Berkshire as to the future financial performances of GSB
and Berkshire. Berwind did not make an independent evaluation or appraisal of
the assets (including loans) or liabilities of Berkshire or GSB nor was it
furnished with any such appraisal. Berwind also did not independently verify and
has relied on and assumed that all allowances for loan and lease losses set
forth in the balance sheets of Berkshire and GSB were adequate and complied
fully with applicable law, regulatory policy and sound banking practice as of
the date of such financial statements.
The following is a summary of selected analyses prepared by Berwind and
presented to Berkshire's board of directors in connection with the August
Opinion and analyzed by Berwind in connection with the August and Proxy
Opinions. In connection with delivering its Proxy Opinion, Berwind updated
certain analyses described above to reflect current market conditions and events
occurring since the date of the August Opinion. Such reviews and updates led
Berwind to conclude that it was not necessary to change the conclusions it had
reached in connection with rendering the August Opinion.
Comparable Companies and Comparable Acquisition Transaction Analyses.
Berwind compared selected financial, operating, and stock market data for
Berkshire with those of a peer group of independent, SEC reporting banks and
bank holding companies with assets between $100 and $300 million headquartered
in New Jersey and New York. Financial data and operating ratios compared in the
analysis of the Berkshire peer group included but were not limited to: return on
average assets, return on average equity, stockholders' equity to assets ratios,
certain asset quality ratios, price to book value, price to tangible book value,
price to earnings (latest twelve months) and dividend yield.
In rendering its opinion, Berwind also compared selected financial,
operating and stock market data for GSB with those of a peer group of
independent, SEC reporting thrifts with assets between $100 million and $600
million headquartered in Pennsylvania, New Jersey, New York, Connecticut, and
Massachusetts that fully converted to public ownership after January 1, 1996.
Financial, operating and stock market data, ratios and multiples compared in the
analysis of the GSB peer group included but were not limited to: return on
average assets, return on average equity, stockholders' equity to asset ratios,
certain asset quality ratios, price to book value, price to tangible book value,
price to earnings (latest twelve months) and dividend yield.
Berwind also compared the multiples of book value, tangible book value and
latest twelve months' earnings inherent to the merger with the multiples paid in
recent acquisitions of banks and bank holding companies that Berwind deemed
comparable. The transactions deemed comparable by Berwind included both
interstate and intrastate acquisitions announced between January 1, 1998 and the
date of its Proxy Opinion, in which the selling thrift's assets were between
$125 million and $300 million on the date the transaction was announced. No
company or transaction, however, used in this analysis is identical to
Berkshire, GSB or the merger. Accordingly, an analysis of the result of the
foregoing is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that would affect the public trading values of
the companies or company to which they are being compared.
Pro Forma Contribution Analysis. Berwind analyzed the changes to Berkshire
in earnings (from a 'GAAP' and 'Cash' perspective), book value and capital
ratios as a result of the merger. In reviewing the pro forma combined earnings,
equity and assets of Berkshire based on the merger with GSB, Berwind analyzed
the contribution that Berkshire would have made to the combined company's
earnings, equity and assets as of and for the period ended June 30, 2000.
Berwind also reviewed the potential percentage ownership that Berkshire
stockholders would hold in the combined company.
In connection with rendering its August Opinion and Proxy Opinion, Berwind
performed a variety of financial analyses. Although the evaluation of the
fairness, from a financial point of view, of the consideration to be paid in the
merger was to some extent a subjective one based on the experience and judgment
of Berwind and not merely the result of mathematical analysis of
34
financial data, Berwind principally relied on the previously discussed financial
valuation methodologies in its determinations. Berwind believes its analyses
must be considered as a whole and that selecting portions of such analyses and
factors considered by Berwind without considering all such analyses and factors
could create an incomplete view of the process underlying Berwind's opinions. In
its analysis, Berwind made numerous assumptions with respect to business,
market, monetary and economic conditions, industry performance and other
matters, many of which are beyond Berkshire's and GSB's control. Any estimates
contained in Berwind's analyses are not necessarily indicative of future results
or values, which may be significantly more or less favorable than such
estimates.
In reaching its opinion as to fairness, none of the analyses performed by
Berwind was assigned a greater or lesser weighting by Berwind than any other
analysis. As a result of its consideration of the aggregate of all factors
present and analyses performed, Berwind reached the conclusion, and opined, that
the consideration to be received in the merger as set forth in the merger
agreement, is fair from a financial point of view to Berkshire and its
stockholders.
Berwind's Proxy Opinion was based solely upon the information available to
it and the economic, market and other circumstances as they existed as of the
date its Proxy Opinion was delivered; events occurring after the date of its
Proxy Opinion could materially affect the assumptions used in preparing its
Proxy Opinion. Berwind has not undertaken to reaffirm and revise its Proxy
Opinion or otherwise comment upon any events occurring after the date thereof.
Pursuant to the terms of the engagement letter dated August 4, 2000,
Berkshire has paid Berwind $50,000 for rendering the August and Proxy Opinions
in connection with the merger. Berkshire will also reimburse Berwind for certain
out-of-pocket expenses. Whether or not the merger is consummated, Berkshire has
also agreed to indemnify Berwind and certain related persons against certain
liabilities relating to or arising out of its engagement.
The full text of the Proxy Opinion of Berwind dated as of the date of this
joint proxy statement/prospectus, which sets forth assumptions made and matters
considered, is attached hereto as Annex C. Berkshire's stockholders are urged to
read the Proxy Opinion in its entirety. Berwind's Proxy Opinion is directed only
to the consideration to be received by Berkshire's stockholders in the merger
and does not constitute a recommendation to any holder of Berkshire common stock
as to how such holder should vote at the Berkshire special meeting.
THE FOREGOING PROVIDES ONLY A SUMMARY OF THE PROXY OPINION OF BERWIND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THAT OPINION, WHICH
IS SET FORTH IN ANNEX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS.
MATERIAL TERMS OF THE MERGER AGREEMENT
The following is a brief summary of the material terms of the merger
agreement. This summary is qualified in its entirety by reference to the merger
agreement which is incorporated by reference and attached to this joint proxy
statement/prospectus as Annex A. You are urged to read the merger agreement
carefully.
CONVERSION OF SHARES; NO FRACTIONAL AMOUNTS
As a result of the merger, GSB will be merged with and into Berkshire. Each
share of GSB common stock, other than shares owned by stockholders who perfect
their appraisal rights under Delaware law, will then be converted into either
0.6027 shares of Berkshire common stock or $20.75 in cash, as each GSB
stockholder elects. However, not less than 50.1% nor more than 60% of the
outstanding shares of GSB common stock will be exchanged for Berkshire common
stock. Therefore, if the holders of more than 60% or less than 50.1% of the GSB
common stock elect to receive Berkshire common stock, the elections that GSB
stockholders make may not be honored and the elections will be adjusted as set
forth below.
If the number of shares of GSB common stock for which stockholders elect to
receive cash, including shares for which stockholders have exercised appraisal
rights, is more than 49.9% of the outstanding shares of GSB common stock, then:
35
All shares of GSB common stock for which no valid election is made, other
than shares governed by appraisal rights, will be converted into shares of
Berkshire common stock; and
Stockholders who elect to receive cash for shares of GSB common stock will
receive cash for some of those shares and will receive stock for the
remaining shares. The allocation will be made on a pro rata basis, so each
stockholder who elects cash will receive the same proportion of cash versus
stock as all other stockholders who elect to receive cash. The reduction in
the number of shares converted into cash will be enough so that only 49.9%
of the total GSB common stock will be converted into cash.
If the number of shares of GSB common stock for which stockholders elect to
receive Berkshire common stock is more than 60% of the outstanding shares of GSB
common stock, then:
All shares of GSB common stock for which no valid election is made, other
than shares governed by appraisal rights, will be converted into cash; and
Stockholders who elect to receive Berkshire common stock for shares of GSB
common stock will receive stock for some of those shares and will receive
cash for the remaining shares. As in the reverse situation described above,
the allocation will be made on a pro rata basis. Each stockholder who
elects Berkshire common stock will receive the same proportion of stock
versus cash that all other stockholders who elect to receive stock will
receive. The reduction in the amount of shares converted into stock will be
enough so that 60.0% of the total GSB common stock will be converted into
stock.
If the number of shares of GSB common stock for which stockholders elect to
receive cash, including shares governed by appraisal rights, is less than 49.9%
of the outstanding shares of GSB common stock and the number of shares for which
GSB stockholders elect to receive Berkshire common stock is less than 60.0% of
the outstanding shares of GSB common stock, then:
All stockholder elections will be honored; and
Stockholders who do not make proper elections will have their shares
allocated proportionally so that at least 50.1% (and up to 60% if so
elected by GSB stockholders) of the total outstanding GSB common stock is
converted into Berkshire common stock and the rest is converted into cash.
No fractional shares of Berkshire common stock will be issued. Any GSB
stockholder who would otherwise be entitled to receive a fraction of a share of
Berkshire common stock will instead receive cash at the rate of $20.75 per GSB
share.
The following examples illustrate the allocation rules. In all examples,
assume that there are 2,000,000 shares of GSB common stock outstanding and
assume that no GSB stockholder exercises appraisal rights. Shares of GSB common
stock owned by GSB's Incentive Stock Award Plan but not allocated to employees,
officers or directors are not counted in the allocation of merger consideration.
EXAMPLE 1: Assume that a GSB stockholder owns 10,000 shares and elects to
receive all cash. If all GSB stockholders together elect to receive cash for
1,500,000 GSB shares, stock for 400,000 GSB shares and for 100,000 shares they
do not submit elections, then the 100,000 shares for which no valid elections
are received will be converted into the right to receive Berkshire common stock.
Since not more than 49.9% of the GSB stock (or 998,000 shares in this example)
may be converted into cash, then our hypothetical stockholder who elected cash
for 10,000 shares will receive cash for 998,000/1,500,000 x 10,000 shares, or
6,653.33 shares, and will receive Berkshire common stock for the remaining
3,346.67 shares. After rounding, this means that the stockholder will receive
2,017 shares of Berkshire common stock and $138,057.91 in cash.
EXAMPLE 2: Assume that the elections are the exact reverse of Example 1. The
GSB stockholder owns 10,000 shares and elects to receive Berkshire common stock.
If all GSB stockholders together elect to receive stock for 1,500,000 GSB
shares, cash for 400,000 GSB shares and for 100,000 shares they do not submit
elections, then the 100,000 shares for which no valid elections are received
will be converted into the right to receive cash. Since not more than 60.0% of
the GSB stock (or 1,200,000 shares in this example) may be converted into stock,
then our
36
hypothetical stockholder who elected stock for 10,000 shares will receive stock
for 1,200,000/1,500,000 x 10,000 shares, or 8,000 shares, and will receive cash
for the remaining 2,000 shares. After rounding, this means that the stockholder
will receive 4,821 shares of Berkshire common stock and $41,520.66 in cash.
EXAMPLE 3: Assume that GSB stockholders who own 900,000 shares elect to
receive Berkshire common stock and GSB stockholders who own 800,000 shares elect
to receive cash, while stockholders who own 300,000 shares do not submit valid
elections. The GSB stockholders who submitted elections will receive what they
requested (except for cash in lieu of fractional shares). The 300,000 shares for
which no valid election was received will be allocated so that 102,000 of them
will be converted into Berkshire common stock (so that a total of 1,002,000 GSB
shares will be converted into Berkshire common stock) and the remaining 198,000
shares will be converted into the right to receive cash. Thus, a stockholder
with 10,000 shares who did not submit an election will receive cash for
198,000/300,000 x 10,000 shares, or 6,600 shares, and will receive stock for the
remaining 3,400 shares. After rounding, this means that the stockholder will
receive 2,049 shares of Berkshire common stock and $136,956.20 in cash.
If these adjustment rules would result in the GSB stockholders receiving
consideration consisting in the aggregate of more than 49.9% cash or less than
50.1% of Berkshire common stock, then the number of shares and the amount of
cash which GSB stockholders will receive will be further adjusted in an
equitable manner to assure compliance with the requirements of Section 368(a) of
the Internal Revenue Code for a tax free reorganization. The following example
illustrates this situation.
EXAMPLE 4: Assume that the value of a share of Berkshire stock equals $30.00
on the date of the merger and GSB stockholders who own 49.9% of the outstanding
shares of GSB stock elect to receive cash in exchange for their GSB stock. The
cash to be paid would be $20,708,500 (998,000 shares $20.75). The value of the
Berkshire stock issued would equal $18,117,162 (1,002,000 shares 0.6027 $30.00).
Therefore, the total value of the consideration issued by Berkshire would equal
$38,825,662 ($20,708,500 + $18,117,162). Because the cash consideration would
exceed 49.9% of the total value of the consideration, at the discretion of
Berkshire a further adjustment may be made. Berkshire would have the right to
adjust the number of shares of GSB stock exchanged for cash so that
approximately 50.1% ($19,451,656) of the total value of the consideration would
constitute Berkshire stock and only 49.9% ($19,374,005) of the total value of
the consideration would constitute cash. If so adjusted, 933,686 GSB shares
would be exchanged for cash ($19,374,005/$20.75). As a result, an additional
64,314 shares of GSB stock must be exchanged for Berkshire stock, bringing the
total number of shares of GSB stock exchanged for Berkshire stock to 1,066,314
(1,002,000 + 64,314). This would be accomplished by allocating, to each GSB
stockholder who requested cash for his or her shares, partly cash and partly
stock on a pro rata basis as in Example 1 above.
GSB STOCKHOLDERS SHOULD COMPLETE AND RETURN THE ENCLOSED ELECTION FORM IN
THE ENCLOSED BROWN ENVELOPE SO THAT IT IS RECEIVED PRIOR TO THE COMMENCEMENT OF
THE GSB SPECIAL MEETING. IF A GSB STOCKHOLDER DOES NOT PROPERLY COMPLETE AND
RETURN AN ELECTION FORM ALONG WITH THE APPLICABLE STOCK CERTIFICATES, A
GUARANTEE OF DELIVERY FOR THE SHARES OF GSB COMMON STOCK COVERED BY THE ELECTION
FORM OR A COMPLETED LOST CERTIFICATE AFFIDAVIT BY THE COMMENCEMENT OF THE GSB
SPECIAL MEETING, THEN THAT STOCKHOLDER WILL RECEIVE CASH AND BERKSHIRE COMMON
STOCK AS SET FORTH ABOVE, DEPENDING UPON THE ELECTIONS SUBMITTED BY OTHER GSB
STOCKHOLDERS.
THE MERGER CONSIDERATION THAT GSB STOCKHOLDERS WILL RECEIVE IN MERGER MAY
CHANGE
The merger agreement provides that if the average market price of Berkshire
common stock for the 20 trading days immediately preceding the eighth business
day before the closing date of the merger is less than $28.635 or more than
$40.365, the merger agreement may be terminated or the amount of Berkshire
common stock received in exchange for a share of GSB common stock may be
adjusted in accordance with a formula set forth in the merger agreement. See
'The Merger -- Material Terms of the Merger Agreement -- Termination of the
Merger Agreement.' You
37
can also review these formulas which are contained in Sections 8.1(h) and
(i) of the merger agreement attached to this joint proxy statement/prospectus as
Annex A.
THE AGGREGATE VALUE OF MERGER CONSIDERATION MAY FLUCTUATE
The aggregate value of the merger consideration will be $[ ] if
50.1% of the GSB stock is converted into Berkshire stock, based on the price of
Berkshire stock on [ ] of $[ ] per share. The actual aggregate
merger consideration may be different depending upon the market value of
Berkshire stock on the date of the merger and how much GSB stock is converted
into Berkshire stock versus cash.
TREATMENT OF GSB STOCK OPTIONS
Under the merger agreement, each outstanding option to purchase GSB common
stock issued in connection with GSB's Stock Option Plan will be converted into
an option to purchase Berkshire common stock. Upon the completion of the merger,
each GSB stock option will be automatically adjusted to provide that:
the number of shares of Berkshire common stock which will be issued upon
the exercise of the GSB option will be that number of shares of GSB common
stock which would have been issued upon exercise of the GSB option
immediately before the completion of the merger, multiplied by 0.6027; and
the exercise price per share of Berkshire common stock under the GSB option
will be that amount equal to the exercise price per share of GSB common
stock under the GSB option immediately before the completion of the merger,
divided by 0.6027.
For employees, including officers, of GSB whose options are incentive stock
options under Section 422 of the Internal Revenue Code, the number of shares
that will be issued may be less, and the per share option exercise price may be
more, in order to satisfy the requirements of the Internal Revenue Code to
continue to be incentive stock options.
IMMEDIATELY AFTER THE MERGER, GSB STOCKHOLDERS WILL OWN FROM 21.2% TO 24.4%
OF THE OUTSTANDING BERKSHIRE STOCK
We anticipate that Berkshire will issue between 571,921 and 684,935 shares
of Berkshire common stock to GSB stockholders. We also anticipate that Berkshire
will issue options to purchase up to 78,494 shares of Berkshire common stock in
exchange for outstanding options to purchase GSB common stock. Based upon the
number of shares of Berkshire common stock issued and outstanding on the
Berkshire record date and the number of shares of Berkshire common stock
anticipated to be issued in the merger, the shares of Berkshire common stock
issued to GSB stockholders in the merger will constitute between 21.2% and 24.4%
of the outstanding common stock of Berkshire after the merger. As previously
noted, holders of GSB options will receive options to purchase up to 78,494
shares of Berkshire common stock. Assuming the exercise of all of these
Berkshire stock options after the merger, GSB stockholders will own between
23.4% and 26.4% of the fully diluted common stock of Berkshire.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains statements and promises made by Berkshire
about itself called representations and warranties. In addition, the merger
agreement contains representations and warranties made by GSB. You can review
the representations and warranties contained in Articles 3 and 4 of the merger
agreement attached to this joint proxy statement/prospectus as Annex A.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement contains covenants and agreements that govern our
actions until the merger is completed or the merger agreement is terminated.
These covenants and agreements
38
require each of us to take actions or to refrain from taking actions with
respect to various matters including that:
GSB will cooperate with Berkshire to obtain the approval of the NYSBD and
the FDIC, and any other governmental or regulatory consents or approvals or
the taking of any other governmental or regulatory action necessary to
consummate the merger;
GSB and Goshen Savings Bank will operate its business only in the usual,
regular, and ordinary course;
Berkshire will file any and all applications with the appropriate
government regulatory authorities in order to obtain the necessary
governmental approval to consummate the merger and the merger of Berkshire
Bank and Goshen Savings Bank;
Neither Berkshire nor any of its subsidiaries will take any action that
would prevent the transactions contemplated by the merger agreement from
qualifying as a tax-free reorganization within the meaning of Section
368(a) of the Code;
Berkshire and Berkshire Bank will take no action which would adversely
affect or delay the ability of the parties to obtain any necessary
approvals, consents or waivers of any governmental authority required for
the transactions contemplated by the merger agreement; and
Berkshire and Berkshire Bank will continue to conduct their businesses in
the ordinary course and consistent with past practices.
To review all of the covenants and agreements contained in the merger agreement,
you should read Articles 5 and 6 of the merger agreement which is attached to
this joint proxy statement/prospectus as Annex A.
NON-SOLICITATION
In the merger agreement, GSB and its subsidiaries agreed that they would not
directly or indirectly initiate, solicit or encourage any inquiries or proposals
from any third party, other than Berkshire, concerning any
sale of beneficial ownership of 15% or more of the outstanding shares of
GSB common stock;
merger, consolidation or similar transaction; or
the sale, lease, exchange or other disposition of 25% or more of the assets
of GSB or Goshen Savings Bank.
GSB and its subsidiaries also agreed that they would not participate in any
discussions or negotiations with any third party or provide any non-public
information to any third party concerning those possible transactions except as
required by law. GSB is permitted to act on unsolicited proposals in the
exercise of the fiduciary duties of its board of directors if the proposal
relates to a transaction which is more favorable to GSB stockholders from a
financial point of view and if procedural requirements described in the merger
agreement are met.
INDEMNIFICATION AND INSURANCE
In the merger agreement, Berkshire agreed to continue to indemnify officers,
directors, and employees of GSB and its subsidiaries to the fullest extent
permitted under the provisions of Delaware Law, the New York Banking Law, and of
Berkshire's and Berkshire Bank's certificate of incorporation, organization
certificate and bylaws from the date the merger is completed. Subject to a
number of limitations, Berkshire also agreed that it will, for a period of not
less than three years after the date the merger is completed, provide to the
persons who served as directors or officers of GSB or any subsidiary of GSB on
or before the date the merger was completed, insurance against liabilities and
claims (and related expenses) made against them resulting from their service as
directors or officers of GSB or any subsidiary of GSB prior to the date the
merger was completed substantially similar in all material respects to the
insurance coverage provided to them prior to the consummation of the merger. To
review all of the limitations related to the
39
provision of insurance coverage, you should read Section 6.6 of the merger
agreement attached to this joint proxy statement/prospectus as Annex A.
CONDITIONS TO THE MERGER
The completion of the merger depends upon the satisfaction or waiver of a
number of conditions, including, among other things, that:
the merger agreement and the transactions contemplated shall have been
approved by the stockholders of GSB and Berkshire;
no claim, action, suit, investigation or other proceeding shall be pending
or threatened before any court or governmental agency which presents a
substantial risk of the restraint or prohibition of the transactions
contemplated by the merger agreement or the obtaining of material damages
or other relief in connection therewith;
the parties shall have received all applicable governmental approvals for
the consummation of the transactions contemplated by the merger agreement;
the parties shall have performed in all material respects the material acts
and undertakings to be performed by them at or prior to the closing date of
the merger in accordance with the merger agreement;
there shall not have been any material adverse change in the business,
property, assets (including loan portfolios), liabilities (whether
absolute, contingent or otherwise), operations, liquidity, income, or
financial condition of Berkshire and Berkshire Bank taken as a whole or GSB
and its subsidiaries taken as a whole since the date of merger agreement;
the representations and warranties of the parties contained in the merger
agreement shall be true and correct, in all material respects, on and as of
the closing date of the merger, with the same effect as though made on and
as of the closing date of the merger;
neither GSB nor Goshen Savings Bank shall have entered into any agreement,
letter of intent, understanding or other arrangement under which GSB or any
of its subsidiaries would merge, consolidate with, effect a business
combination with, sell any substantial part of GSB's or Goshen Savings
Bank's assets to, or acquire a significant part of the shares or assets of,
any other person (financial or otherwise); or adopt any 'poison pill' or
other type of anti-takeover arrangement, any stockholder rights provision,
any 'golden parachute' or similar program which would have the effect of
materially decreasing the value of any GSB or any of its subsidiaries or
the benefits of merging with GSB;
Berkshire shall have received a 'fairness opinion' letter from its
independent financial advisor, Berwind Financial, L.P., to the effect that,
in the opinion of Berwind Financial, L.P., the consideration to be received
by the GSB stockholders is fair to the stockholders of Berkshire from a
financial point of view;
GSB shall have received a 'fairness opinion' letter from its independent
financial advisor, Tucker Anthony Incorporated to the effect that, in the
opinion of Tucker Anthony Incorporated the consideration to be received by
the GSB stockholders is fair to the GSB stockholders from a financial point
of view; and
Berkshire and GSB shall have received an opinion of Berkshire's counsel to
the effect that the merger will constitute a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code and that no gain
or loss will be recognized by GSB stockholders with respect to shares of
Berkshire common stock that they receive in exchange for shares of GSB
common stock.
The tax consequences of the merger are material. Accordingly, waiver of the
receipt of above mentioned opinion of Berkshire's counsel would constitute a
material change to this joint proxy statement/prospectus which would require us
to amend this joint proxy statement/prospectus and resolicit stockholder
approval.
40
To review all of the conditions contained in the agreement and plan of
reorganization, you should read Article 7 of the merger agreement which is
attached to this joint proxy statement/prospectus as Annex A.
CLOSING DATE AND EFFECTIVE TIME
The closing of the merger will take place at 10:00 a.m. on the eighth
business day after the satisfaction or waiver of the conditions to closing
stated in the merger agreement at the office of the attorneys for Berkshire in
New York City unless another date, time or place is agreed to in writing by
Berkshire and GSB. Contemporaneously with the closing of the merger, the parties
will file a certificate of merger with the State of Delaware. The merger will
take effect at the time this filing is made with the State of Delaware.
TERMINATION OF THE MERGER AGREEMENT
At any time before the closing of the merger, whether or not the merger
agreement has been approved by Berkshire's or GSB's stockholders, GSB or
Berkshire may terminate the merger agreement by:
the mutual consent in writing of the parties;
written notice to the other party, if the closing has not occurred by
June 30, 2001, unless the party seeking termination failed to perform its
obligations under the merger agreement in a timely manner;
written notice to the other party upon denial of any governmental approval
necessary for the consummation of the merger or if the governmental
approval includes a condition which would materially affect the benefits
normally expected from the transactions contemplated in the merger
agreement; provided, however, that the term of the merger agreement may be
extended for 90 days to appeal and overturn the denial or imposition of an
unsatisfactory condition provided that written notice by either Berkshire
or GSB has been given to the other of their intent to appeal and the appeal
has been made within 20 business days after receiving notice of the
government disapproval;
written notice to the other party upon the failure to obtain the approval
of the GSB stockholders at the GSB stockholders meeting;
written notice to the other party upon the failure to obtain the approval
of the Berkshire stockholders at the Berkshire stockholders meeting; or
written notice to the other party in the event of a material breach of any
obligation or covenant of the other party or its subsidiaries and the
breach was not remedied within the time periods set forth in the merger
agreement.
In addition, the merger agreement may be terminated by GSB by written notice to
Berkshire:
should either Berkshire or Berkshire Bank enter into a formal agreement,
letter of understanding, memorandum or similar arrangement with any bank
regulatory authority establishing a formal capital plan requiring Berkshire
or Berkshire Bank to raise additional capital or to sell a substantial
portion of its assets; or
subject to compliance with time frames set forth in the merger agreement,
if the mean average market price of Berkshire common stock for the 20
trading days immediately preceding the eighth business day before the
closing date of the merger is less than $28.635 unless Berkshire agrees
that the number of shares of Berkshire common stock to be received in the
merger in exchange for one share of GSB common stock will be equal to that
number of shares of Berkshire common stock that is equal to $28.635
multiplied by 0.6027 and then divided by the mean average market price of
Berkshire common stock for the 20 trading days immediately preceding the
eighth business day before the closing date of the merger.
Further, the merger agreement may be terminated by Berkshire by written notice
to GSB:
should GSB or any GSB subsidiary enter into:
41
a letter of intent or agreement with a view to being acquired by or
effecting a business combination with any other person;
an agreement to merge, consolidate, combine or sell a material portion
of its assets or to be acquired in any manner by any other person; or
an agreement to acquire a material amount of assets or a material equity
position in any other person, whether financial or otherwise;
should either GSB or Goshen Savings Bank enter into a formal agreement,
letter of understanding, memorandum or similar arrangement with any bank
regulatory authority establishing a formal capital plan requiring GSB or
any of its subsidiaries to raise additional capital or to sell a
substantial portion of its assets;
subject to compliance with time frames set forth in the merger agreement,
if the mean average market price of Berkshire common stock for the 20
trading days immediately preceding the eighth business day before the
closing date of the merger is more than $40.365 unless GSB agrees that the
number of shares of Berkshire common stock to be received in the merger in
exchange for one share of GSB common stock will be equal to the number of
shares of Berkshire common stock as is equal to $40.365 multiplied by
0.6027 and then divided by the mean average market price of Berkshire
common stock for the 20 trading days immediately preceding the eighth
business day before the closing date of the merger; or
subject to restriction set forth in the merger agreement, if the cost of
terminating the Goshen Savings Bank defined benefit pension plan exceeds
$100,000 excluding professional fees, unless GSB agrees to adjust the
amount of cash to be received in the merger in exchange for one share of
GSB common stock and the number of shares of Berkshire common stock to be
received in exchange for one share of GSB common stock so that the
aggregate merger consideration is reduced by an amount which approximates
the amount of the excess termination costs, as described in more detail in
the merger agreement. However, if the price reduction would be less than
$0.10 per share for the $20.75 per share amount in cash, then Berkshire has
the unilateral right to reduce the cash consideration by the amount of the
reduction, and correspondingly reduce the stock consideration.
TERMINATION FEES AND EXPENSES
The merger agreement requires GSB to pay a cash termination fee of
$1,000,000 to Berkshire in the event that the merger agreement is terminated for
any of the following reasons:
GSB materially breaches an obligation or covenant of the merger agreement
and fails to remedy the breach within the specified time period;
GSB or one of its subsidiaries enter into:
a letter of intent or agreement with any other person with the view of
being acquired, merged, consolidated or combined or effecting a
business combination;
an agreement with any other person to sell a material portion of its
assets or to be acquired in any other manner by someone other than
Berkshire or Berkshire Bank; or
an agreement to acquire in any manner a material amount of assets or
material equity position in any other person, whether financial or
otherwise.
GSB or Goshen Savings Bank enters into any formal agreement or arrangement
with any bank regulatory authority establishing a formal capital plan
requiring any of the GSB parties to raise additional capital or to sell a
substantial portion of assets; or
the mean average market price of Berkshire common stock for the 20 trading
days immediately preceding the eighth business day before the closing date
of the merger is more than $40.365 and GSB does not agree to adjust the
number of shares of Berkshire common stock to be received in the merger in
exchange for one share of GSB, in accordance with a formula discussed
earlier in this joint proxy statement/prospectus.
42
The merger agreement requires GSB to pay a cash termination fee of $500,000
to Berkshire in the event that the merger documents are terminated for any of
the following reasons:
termination costs of the Goshen Savings Bank defined benefit pension plan
exceeds $100,000 and GSB does not agree to adjust the merger consideration
to be received in the merger in exchange for one share of GSB, in
accordance with a formula set forth in the merger agreement;
GSB fails to obtain approval of the GSB stockholders; however, if within
120 days after the failure of the GSB stockholders to approve the merger
agreement, GSB or Goshen Savings Bank enters into an agreement with anyone
other than Berkshire or Berkshire Bank to engage in an acquisition
transaction, as defined in the merger agreement, then the termination fee
will be $1,000,000; or
the mean average market price of Berkshire common stock for the 20 trading
days immediately preceding the eighth business day before the closing date
of the merger is less than $28.635 and Berkshire does not agree to adjust
the number of shares of Berkshire common stock to be received in the merger
in exchange for one share of GSB, in accordance with a formula discussed
earlier in this joint proxy statement/prospectus.
The merger agreement requires Berkshire to pay a cash termination fee of
$500,000 to GSB in the event that the merger agreement is terminated for any of
the following reasons:
Berkshire fails to obtain approval of the Berkshire stockholders; or
Berkshire materially breaches an obligation or covenant of the merger
agreement and fails to remedy the breach within the specified time period.
In addition, the merger agreement requires that if the termination is the
result of a willful breach, the breaching party will pay all reasonable in
amount and reasonably incurred out-of-pocket expenses incurred by or on behalf
of the non-breaching party in connection with the consummation of the
transactions contemplated by the merger agreement.
PROCEDURES FOR GSB STOCKHOLDERS TO RECEIVE PAYMENT
Berkshire will designate its transfer agent, American Stock Transfer & Trust
Company, to act as the 'exchange agent' under the merger agreement. Within three
business days after the merger is completed, the exchange agent will issue to
GSB stockholders who have returned their election forms together with GSB stock
certificates or proof of lost certificate, the cash and/or Berkshire common
stock to which each stockholder is entitled. Within five business days after the
merger is completed, the exchange agent will send to GSB stockholders who have
not previously sent in their stock certificates and election forms, a letter of
transmittal and instructions for exchanging their stock certificates. Berkshire
shall also make appropriate provisions with the exchange agent to enable GSB
stockholders to obtain the letter of transmittal and instructions for exchanging
their stock certificates from, and to deliver the certificates formerly
representing shares of GSB common stock to, the exchange agent in person,
commencing on or not later than the second business day following the completion
of the merger. Within five business days after receiving a GSB stockholder's
stock certificate(s) together with a completed letter of transmittal the
exchange agent will issue the cash and/or Berkshire common stock to which that
stockholder is entitled.
Until surrendered to the exchange agent, each outstanding GSB stock
certificate will be deemed to evidence the right to receive the cash and/or the
number of shares of Berkshire common stock into which the shares of GSB common
stock have been converted in accordance with the merger agreement. The cash
and/or shares of Berkshire common stock shall not be paid to the record holder
of any GSB common stock until the certificate therefor is sent to the exchange
agent. A GSB stockholder whose certificate(s) have been lost or destroyed may
nevertheless receive cash and/or shares of Berkshire common stock to which that
GSB stockholder is entitled, provided that the GSB stockholder first delivers to
Berkshire or to the exchange agent his or her election form indicating that his
or her stock certificate(s) have been lost, stolen or destroyed. In addition,
the GSB stockholder will have to sign an affidavit which is included in the
election form which provides, among other things, that the GSB stockholder
agrees to indemnify
43
Berkshire for any loss Berkshire may incur as a result of the GSB stockholder's
lost or destroyed stock certificate(s). The GSB stockholder may also be required
to provide an indemnity bond from an insurance company protecting Berkshire and
the exchange agent from any damage which may result if someone presents the lost
certificate for payment.
REGULATORY APPROVALS ARE REQUIRED TO COMPLETE THE MERGER
The merger is subject to the prior approval of the FDIC under the Federal
Deposit Insurance Act, referred to as the FDIA, and the NYSBD under the Banking
Law of the State of New York. In addition, Berkshire must provide notice of the
merger to the Board of Governors of the Federal Reserve System, referred to as
the Federal Reserve Board, and to the Office of Thrift Supervision, referred to
as the OTS. Under the FDIA, the FDIC considers the financial and managerial
resources and future prospects of the companies involved and whether the
proposed transaction can reasonably be expected to produce benefits to the
community to be served, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, or unsound banking
practices. In addition, the FDIC has the authority to deny an application if it
concludes that the combined organization would have an inadequate capital
position or if the acquiring organization does not meet the requirements of the
Community Reinvestment Act of 1977.
Applications have been filed with both the FDIC and NYSBD and notice of the
merger has been provided to the Federal Reserve Board and the OTS.
We cannot assure you that we will obtain these regulatory approvals or as to
the dates of any of these approvals, and we cannot consummate the merger without
these regulatory approvals. Furthermore, we cannot assure you that these
approvals will not contain a condition or requirement which causes these
approvals to fail to satisfy the conditions contained in the merger agreement.
See 'The Merger -- Conditions to the Merger.' Likewise we cannot assure you that
the United States Department of Justice will not challenge the merger, or, if a
challenge is made, as to the result thereof.
BOARD OF DIRECTORS AND MANAGEMENT OF BERKSHIRE UPON CONSUMMATION OF THE
MERGER
When the merger is complete, Berkshire will continue to be managed by its
current directors and officers. In addition, Thomas V. Guarino, who is currently
the Chairman of the board of directors of GSB, will become a director of
Berkshire.
SUBSIDIARY MERGER OF GOSHEN SAVINGS BANK AND BERKSHIRE BANK
Immediately after the completion of the merger, Goshen Savings Bank will be
merged with and into Berkshire Bank. The name of the resulting institution will
be The Berkshire Bank.
BOARD OF DIRECTORS AND MANAGEMENT OF BERKSHIRE BANK UPON CONSUMMATION OF THE
SUBSIDIARY MERGER
When the subsidiary merger is complete, Berkshire Bank will continue to be
managed by its current directors and officers. In addition, Thomas V. Guarino,
who is currently the Chairman of the board of directors of GSB, and Clifford E.
Kelsey, Jr., who is currently a director of GSB, will become directors of
Berkshire Bank.
ADVISORY BOARD APPOINTEES UPON CONSUMMATION OF THE SUBSIDIARY MERGER
The directors of GSB prior to the completion of the merger will be given
seats on an advisory board of the Goshen Savings Bank division of Berkshire Bank
for a period of at least three years. The advisory board will meet every other
month and board members will receive board fees of $1,000 per meeting actually
attended. However, no employee of Berkshire or Berkshire Bank will be entitled
to receive an advisory board fee while an employee.
44
EMPLOYMENT OF GSB/GOSHEN SAVINGS BANK EMPLOYEES
Berkshire Bank, after the completion of the merger, will retain all
employees of GSB and its subsidiaries, subject to the needs of Berkshire Bank's
business. Any employee of GSB or its subsidiaries on the date the merger becomes
effective whose employment with Berkshire Bank is 'terminated,' as defined in
the merger agreement, by Berkshire Bank within one year after the completion of
the merger, other than for 'cause,' as defined in the merger agreement, and who
is not otherwise entitled to a severance payment or contract assurance period,
will be entitled to receive a severance payment equal to one week's salary at
then current rates for each full year of employment.
In addition, after the completion of the mergers, Berkshire and Berkshire
Bank will honor the employment contracts of eight officers of GSB or Goshen
Savings Bank. Each of the employment contracts with three of the officers, who
are the executive officers of GSB and Goshen Savings Bank, provide that the
officer is entitled to continued employment, without any adverse change in his
or her conditions of employment, for three years after a change in control.
Failure to provide this continued employment entitles the officer to payment of
salary and benefits, on an accelerated basis, which the officer would have been
entitled to receive during the remainder of the three year period. The three
officers have agreed to reduce the period to 18 months for the change in control
represented by the merger of Berkshire and GSB. Furthermore, the executive
officers' employment contracts were amended to reduce the circumstances under
which the executive officers could terminate their employment after a change in
control and still receive severance benefits. See 'Management of
GSB -- Employment and Retention Agreements.'
The other five employment contracts provide that the officer is entitled to
two years continued employment after a change in control, and upon termination
of employment the officer is entitled to accelerated salary for the remainder of
the two year period. The conditions under which a payment would be triggered for
these five non-executive officers are more limited than in the contracts with
the three executive officers.
LISTING OF BERKSHIRE COMMON STOCK ON THE NASDAQ NATIONAL MARKET
Berkshire will cause the shares of Berkshire common stock to be issued in
connection with the merger to be listed on the Nasdaq National Market.
GSB DIRECTORS, OFFICERS AND EMPLOYEES WILL RECEIVE BENEFITS FROM THE MERGER
In considering the recommendation of the GSB board of directors with respect
to the merger agreement, GSB stockholders should note that the directors,
officers and employees of GSB or Goshen Savings Bank may have interests in the
merger that are different from or in addition to the interests of GSB
stockholders generally. The boards of directors of Berkshire and GSB were aware
of these interests and took these interests into account in approving the
proposed merger and the transactions contemplated by the merger documents.
GSB Incentive Stock Awards and Stock Options. Directors, executive officers
and other employees of GSB and Goshen Savings Bank have received awards under
the GSB Incentive Stock Award Plan and the GSB Stock Option Plan. Those awards
are not yet fully vested and they are currently scheduled to vest gradually
through 2004. Berkshire has agreed that the approval of the merger agreement by
the stockholders of GSB and the consummation of the merger will cause all
unvested awards under the Incentive Stock Award Plan to fully vest. The
following table shows the estimated value of those unvested awards as of
January 31, 2001 assuming the merger is consummated on that date.
ISAP SHARES VALUE OF ISAP SHARES
WHICH WILL ACCELERATE WHICH WILL ACCELERATE(1)
--------------------- ------------------------
Directors........................................... 25,986 $539,210
Executive Officers.................................. 8,460 $175,545
Other Employees..................................... 3,990 $ 82,792
------ --------
Total........................................... 38,436 $797,547
------ --------
------ --------
- ---------
(1) Calculated based upon a per share value of $20.75.
45
The above table shows only the estimated full value of the unvested awards
assuming that the merger is consummated. The value of the acceleration resulting
from the merger would be less because some, if not all, of the awards shown in
the table would ultimately vest if the merger is not consummated.
The stock options held by directors, officers and employees of GSB or Goshen
Savings Bank will not accelerate as a result of the merger. However, Berkshire
has agreed that service on the advisory board of the Goshen Savings Bank
division of Berkshire Bank will constitute service as a director for the
purposes of vesting. One of the four directors of GSB who will be a member of
the advisory board but who will not be a member of the Berkshire or Berkshire
Bank board did not have sufficient service with GSB to entitle him, under the
terms of the option plan, to immediate vesting of his options upon leaving the
board of GSB. Therefore, the treatment of his service on the advisory board as
continued service under the option plan could have the effect of permitting the
vesting of 6,745 options which might otherwise not vest. These options have an
exercise price of $15.875 per share and were granted in 1998. They are scheduled
to vest in three equal installments in February 2001, 2002 and 2003.
GSB ESOP. Upon the consummation of the merger, the GSB ESOP will terminate.
If the merger occurs during the first quarter of calendar year 2001, there will
then be approximately 116,909 shares of GSB stock owned by the ESOP which have
not yet been allocated to the accounts of employees. Those shares are pledged as
security for a loan which GSB projects will have a principal balance of
$1,169,090 when the merger occurs. The unallocated shares will first be used to
repay the loan and the remainder of those shares, with an estimated value of
$1,256,772 based upon the cash merger consideration of $20.75 per share, will be
allocated to the accounts of the participants in the ESOP. The per employee
allocation will be pro rata based upon the value of each employee's allocated
ESOP account.
Election of Directors and Appointment to Advisory Board. In the merger
agreement, Berkshire agreed to appoint Thomas V. Guarino, Chairman of the board
of directors of GSB, to the board of directors of Berkshire upon completion of
the merger. Mr. Guarino and Clifford E. Kelsey, Jr., a director of GSB, will be
elected directors of Berkshire Bank. They will be entitled to receive directors
fees in those positions to the same extent as other directors of Berkshire and
Berkshire Bank. Currently, each outside director of Berkshire receives monthly
fees of $1,000, and $1,000 for each day during which he participates in a
meeting of the Board and, if on a separate day, $500 for each day during which
he participates in a meeting of a committee of the Board of which he is a
member. Directors of Berkshire Bank are entitled to receive an annual fee of
$9,000, paid quarterly. Mr. Guarino will receive director fees from both
Berkshire and Berkshire Bank. Also, the directors of GSB, prior to the merger,
will be given seats on an advisory board of the Goshen Savings Bank division of
the Berkshire Bank for at least three years. They will be entitled to receive
$1,000 per meeting for actual attendance at meetings of the advisory board,
which will be held once every two months.
Employment Agreements. The employment agreements of eight officers of GSB or
Goshen Savings Bank, as discussed below under the caption 'Management of
GSB -- Employment and Retention Agreements', will be honored by Berkshire or
Berkshire Bank after completion of the merger. However, Berkshire anticipates
that it will continue to employ most or all of those eight officers on terms and
conditions which will not trigger any change-in-control payments under those
agreements.
Indemnification; Insurance. In the merger agreement, Berkshire agreed to
continue to indemnify officers, directors, and employees of GSB and its
subsidiaries to the fullest extent permitted under the provisions of Delaware
Law, the New York Banking Law, and Berkshire's and Berkshire Bank's certificate
of incorporation, organization certificate and bylaws from the date the merger
is completed. Subject to a number of limitations, Berkshire also agreed to
provide, for a period of three years, to the persons who served as directors or
officers of GSB or any subsidiary of GSB on or before the date the merger was
completed, insurance against liabilities and claims (and related expenses) made
against them resulting from their service as directors or officers of GSB or any
subsidiary of GSB prior to the date the merger was completed.
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APPRAISAL RIGHTS FOR BERKSHIRE STOCKHOLDERS
Under Delaware law, holders of Berkshire common stock are not entitled to
dissenters' rights in connection with the merger.
APPRAISAL RIGHTS OF GSB STOCKHOLDERS
Stockholders of GSB have what are commonly known as appraisal rights or
dissenters' rights under Section 262 of the Delaware General Corporation Law. A
copy of Section 262 is attached to this joint proxy statement/prospectus as
Annex B for the information of GSB stockholders. The following discussion is not
a complete statement of the law pertaining to appraisal rights under Section
262. Any GSB stockholder who desires to exercise his or her appraisal rights
should review carefully Section 262 and is urged to consult a legal advisor
before electing or attempting to exercise their rights. All references in
Section 262 to a 'stockholder' and in this summary to a 'GSB stockholder' or a
'holder of GSB stock' are to the record holder of shares as to which appraisal
rights are asserted.
Section 262 provides that a stockholder has the right to receive the value
of his or her stock of GSB, as the Court of Chancery of the State of Delaware
determines, instead of receiving the cash or stock consideration which the
merger agreement provides, if we complete the merger. In order to exercise
appraisal rights, a GSB stockholder must:
1. Not vote in favor of the merger agreement and not consent to the
merger agreement (a stockholder is not required to vote against the merger
agreement in order to preserve appraisal rights, but a stockholder who
returns a signed but unmarked proxy waives his or her appraisal rights);
2. Not complete and deliver an election form to the Exchange Agent;
3. Deliver to GSB, before the vote is taken on the merger agreement,
written demand for an appraisal which sets forth the name of the stockholder
and that the stockholder intends to demand the appraisal of his or her stock
(a proxy or vote against the merger agreement is not sufficient to
constitute a demand for appraisal); and
4. Continue to own the stock of GSB from the date the demand is made
under Item 2 until the merger is consummated. Within 10 days after the
merger is effective, Berkshire must send notice to all stockholders who have
properly exercised appraisal rights that the merger has occurred. Within
120 days after the merger is effective, any stockholder who has satisfied
these requirements, or Berkshire as the survivor of the merger, has the
right to file a petition in the Delaware Court of Chancery demanding a
determination of the value of the stock of all stockholders who have
properly demanded appraisal rights. Berkshire is under no obligation to file
a petition and does not currently intend to do so. A stockholder has the
right to withdraw a demand for appraisal within 60 days after the merger is
effective.
A written demand for appraisal should be sent to GSB Financial Corporation,
One South Church Street, P.O. Box 469, Goshen, New York 10924, Attn: Stephen W.
Dederick. If a GSB stockholder demands appraisal rights and then either
withdraws the demand or fails to perfect those rights, he or she will be
entitled to receive cash or Berkshire common stock upon the completion of the
merger in the same manner as other GSB stockholders. However, a GSB stockholder
who has demanded appraisal rights will forfeit the right to elect cash or
Berkshire common stock unless the demand for appraisal rights is withdrawn
before the deadline for submitting election forms. If the withdrawal or failure
to perfect occurs after the deadline for submitting election forms but before we
complete the merger, then we will treat the stockholder's GSB common stock as
though the stockholder had not submitted a valid election. If the withdrawal or
failure to perfect occurs after we complete the merger, then he or she will be
entitled to receive $20.75 per share in cash for his or her GSB common stock.
Section 262 states that the Chancery Court's appraisal of the stock must
exclude 'any element of value arising from the accomplishment or expectation of
the merger . . . .' Section 262 also provides that the costs of the proceeding
shall be determined by the court and charged to the parties in a manner as the
court deems equitable. The court may require that the expenses of any
47
stockholder in the proceeding, such as attorneys fees and expert fees, be
charged against the value of all shares being appraised.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the legal opinion of Berkshire's counsel,
which is filed as an exhibit to Berkshire's registration statement on Form S-4
of which this joint proxy statement/prospectus is a part, which describes the
material United States federal income tax consequences of the merger to GSB and
the GSB stockholders who receive Berkshire common stock and/or cash in the
merger or perfect dissenters' rights. This summary does not address tax
considerations which may affect the treatment of special status taxpayers such
as financial institutions, broker-dealers, life insurance companies, tax-exempt
organizations, investment companies and foreign taxpayers or of GSB stockholders
who do not hold their GSB stock as a capital asset at the date the merger is
completed. In addition, no information is provided in this summary with respect
to the tax consequences of the merger either under applicable foreign, state or
local laws or to persons who acquired GSB common stock under employee stock
options or otherwise as compensation.
The following discussion is based on the Internal Revenue Code of 1986, as
amended, as in effect on the date of this joint proxy statement/prospectus,
without consideration of the particular facts or circumstances of any particular
holder of GSB stock. GSB and Berkshire have not sought and will not seek any
rulings from the Internal Revenue Service, with respect to any of the matters
discussed in this summary. It is a condition to the closing that Blank Rome
Comisky & McCauley LLP, counsel to Berkshire, render an opinion that the merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, and that therefore:
no gain or loss will be recognized by Berkshire upon the exchange of GSB
stock solely in exchange for Berkshire common stock;
no gain or loss will be recognized by GSB stockholders upon the exchange of
GSB stock solely for Berkshire common stock;
the basis of Berkshire common stock received by GSB stockholders in the
merger will be the same as the basis of their GSB stock surrendered in
exchange therefor; and
for capital gains purposes, the holding period of Berkshire common stock
received by GSB stockholders in the merger will include the period during
which the GSB stock surrendered in exchange therefor was held, provided
that the GSB stock is held as a capital asset at the date the merger is
completed.
To the extent that a GSB stockholder receives both cash and Berkshire stock
in the transaction:
the GSB stockholder will recognize gain (but not loss) in an amount equal to
the lesser of:
the amount of cash received in the exchange; or
the excess of the amount of cash and fair market value of the Berkshire
stock received in the exchange over the GSB stockholder's tax basis in
the GSB stock surrendered in the exchange;
any gain recognized by a GSB stockholder will generally constitute capital
gain unless the cash payment is treated as 'essentially equivalent to a
dividend' -- in which case the cash payment may be treated in whole or part
as dividend income taxable at ordinary income (rather than capital gains)
tax rates;
the tax basis of the Berkshire stock received in the exchange will be equal
to the tax basis of the GSB stock exchanged therefor, as increased by the
amount of gain recognized by the GSB stockholder (including any dividend
income) in the exchange, and as reduced by the amount of cash received in
the exchange; and
48
for holding period purposes, the holding period of the Berkshire stock
received by GSB stockholders in the merger will include the period during
which the GSB stock surrendered in the exchange was held, provided that the
GSB stock was held as a capital asset on the date that the merger is
completed.
A GSB stockholder who receives solely cash in the exchange and who does not
actually or constructively own any Berkshire stock after the exchange will
generally recognize capital gain or loss equal to the difference between the
cash received and the stockholder's tax basis in the GBS stock surrendered in
the exchange.
A GSB stockholder who perfects appraisal rights with respect to his or her
shares of GSB stock, and who does not withdraw his or her rights, should, in
general, treat the difference between the tax basis of the shares of GSB stock
held by the GSB stockholder with respect to which dissenters' rights are
perfected and the amount received in payment therefor as capital gain or loss.
However, depending on the GSB stockholder's particular circumstances, this
amount may be treated for federal income tax purposes as dividend income.
The foregoing is a general discussion of the material federal income tax
consequences of the merger for GSB and GSB stockholders. The foregoing
discussion does not take into account the particular facts and circumstances of
each GSB stockholder's tax status and attributes. Accordingly, each GSB
stockholder should consult his or her own tax advisor regarding the specific tax
consequences of the merger, including the application and effect of federal,
state, local and other tax laws and the possible effects of changes in these tax
laws.
ACCOUNTING TREATMENT
It is expected that the merger will be accounted for under the purchase
method of accounting. Accordingly, under generally accepted accounting
principles, the acquired assets and assumed liabilities of GSB will be recorded
on the books of the combined consolidated Berkshire entity at their fair values
at the date the merger is completed. Any excess of the value of the
consideration paid by Berkshire at the date the merger is completed over the
fair value of the identifiable assets of GSB will be treated as excess of
purchase price over the fair value of net assets acquired (commonly known as
goodwill) and will be amortized over a period of 20 years. As a result, it is
anticipated that an adjustment of approximately $7.1 million will be amortized
over the 20 year period. See 'Selected Pro Forma Combined Financial
Information.'
49
MANAGEMENT OF BERKSHIRE
The following table contains information concerning Berkshire's executive
officers, directors and key employees:
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
NAME AGE POSITION
- ---------------------------------------- --- -----------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS:
William L. Cohen........................ 58 Director
Moses Marx.............................. 65 Director
Steven Rosenberg........................ 52 President, Chief Executive Officer,
Chief Financial Officer, Director
Randolph B. Stockwell................... 54 Director
KEY EMPLOYEES:
Moses Krausz............................ 60 President of Berkshire Bank
Mr. Cohen was elected a director of Berkshire in July 1993. Mr. Cohen is
President, Chief Executive Officer and Chairman of the Board of The Andover
Apparel Group, Inc., an apparel manufacturing company, positions he has held for
more than the past five years.
Mr. Marx was elected a director of Berkshire in May 1995. Mr. Marx has been
a general partner in United Equities Company, a securities brokerage firm, since
1954 and a general partner in United Equities (Commodities) Company, a
commodities brokerage firm, since 1972. He is also President of Momar Corp., an
investment company. Mr. Marx is a director of The Cooper Companies, Inc., a
developer and manufacturer of healthcare products.
Mr. Rosenberg has served as President and Chief Executive Officer of
Berkshire since March 1999 and as Vice President and Chief Financial Officer
since April 1990. He also serves as chief administrative officer of Berkshire.
Mr. Rosenberg was elected a director of Berkshire in May 1995. He also serves as
Secretary to Berkshire Bank. Since July 1998, Mr. Rosenberg has served as
President of Greater American Finance Group Inc., a wholly-owned subsidiary of
Berkshire and the parent company of Berkshire Bank. From September 1987 through
April 1990, he served as President and Director of Scomel Industries, Inc., a
company engaged in international marketing and consulting. Mr. Rosenberg is a
director of The Cooper Companies, Inc.
Mr. Stockwell was elected a director of Berkshire in July 1988. He has been
a private investor for over ten years. Since April 1999, Mr. Stockwell has
served as President of Yachting Systems of America, LLC, a small start-up
company. In addition, he served in various capacities with the Community Bank, a
commercial bank, from September 1972 to January 1987.
Mr. Krausz has held the position of President of Berkshire Bank since March
1992. In November 1993 Berkshire Bank appointed him to the position of Chief
Executive Officer. Prior to joining Berkshire Bank, Mr. Krausz was Managing
Director of SFS Management Co., L.P., a mortgage banker, from 1987 to 1992 and
was President of UMB Bank and Trust Company, a New York State chartered bank,
from 1978 to 1987.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1999, Berkshire made a term loan in the principal amount of
$2,000,000 to Pharmaceutical Holdings Corp., a Delaware corporation, the
principal stockholder of which is Momar Corporation, the principal stockholder
and chief executive officer of which is Moses Marx, a director and principal
stockholder of Berkshire. This loan was renewed in June 2000.
DIRECTORS COMPENSATION
Each director who is not an employee of Berkshire receives monthly fees of
$1,000 for serving as a director of Berkshire and $1,000 for each day during
which he participates in a meeting of the Berkshire board of directors and, if
on a separate day, $500 for each day during which he
50
participates in a meeting of a committee of the Berkshire board of directors of
which he is a member. In addition, see '1999 Berkshire Stock Incentive Plan'
below.
EXECUTIVE COMPENSATION
The following table discloses the compensation awarded by Berkshire, for the
two months ended December 31, 1999 and for the fiscal years ended October 31,
1999, 1998 and 1997, to Mr. Steven Rosenberg, its President, Chief Executive
Officer and Chief Financial Officer. Mr. Rosenberg was the only executive
officer of Berkshire during the two months ended December 31, 1999 and for the
fiscal year ended October 31, 1999.
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION
------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($)
- ------------------------------------------------------------ ---- ----------
1999(2) 131,250
Steven Rosenberg, President, Chief Executive Officer and 1998 90,000
Chief Financial Officer(1)................................ 1997 90,000
- -------------------
(1) Mr. Rosenberg assumed the position of President and Chief Executive Officer
in March 1999.
(2) Includes the two months ended December 31, 1999.
No options were granted in the two months ended December 31, 1999 or in the
fiscal year ended October 31, 1999 to Mr. Rosenberg.
The following table sets forth information concerning the number of options
owned by Mr. Rosenberg and the value of any in-the-money unexercised options as
of December 31, 1999 and as of October 31, 1999. Mr. Rosenberg did not exercise
any options in the two months ended December 31, 1999 or in the fiscal year
ended October 31, 1999.
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED VALUE OF UNEXERCISED
OCTOBER 31, 1999 IN-THE-MONEY OPTIONS AT IN-THE-MONEY OPTIONS AT
AND DECEMBER 31, 1999 OCTOBER 31, 1999(1) DECEMBER 31, 1999(2)
--------------------------- --------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- ------------- ----------- ------------- ----------- -------------
Steven Rosenberg..... 15,000 0 $363,750 0 $378,750 0
- -------------------
(1) Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year end
market value of the common stock. An option is 'in-the-money' if the fiscal
year end fair market value of the common stock exceeds the option exercise
price. The last sale price (the fair market value) of Berkshire's common
stock on October 29, 1999 was $34.00 per share.
(2) The last sale price (the fair market value) of Berkshire common stock on
December 31, 1999 was $35.00 per share.
In April 2000, Mr. Rosenberg exercised all of his 15,000 options.
1999 BERKSHIRE STOCK INCENTIVE PLAN
The 1999 Berkshire Stock Incentive Plan permits the granting of awards in
the form of nonqualified stock options, incentive stock options, restricted
stock, deferred stock, and other stock-based incentives. Up to 200,000 shares of
Berkshire common stock may be issued under the 1999 Stock Incentive Plan
(subject to appropriate adjustment in the event of changes in the corporate
structure of Berkshire). Officers, directors and other key employees of
Berkshire or any subsidiary are eligible to receive awards under the 1999
Berkshire Stock Incentive Plan. The option exercise price of all options which
are granted under the 1999 Berkshire Stock Incentive
51
Plan must be at least equal to 100% of the fair market value of a share of
common stock of Berkshire on the date of grant. At September 21, 2000, options
to acquire 48,875 shares of common stock have been granted under this plan and
options for 151,125 shares are available for future grants.
PRINCIPAL STOCKHOLDERS OF BERKSHIRE
The following table sets forth information as of September 30, 2000 with
respect to the beneficial ownership of Berkshire's common stock by
each person who is known by Berkshire to own beneficially more than 5% of
Berkshire common stock;
each of Berkshire's directors and Steven Rosenberg, Berkshire's only
executive officer; and
all executive officers and directors as a group.
NUMBER OF PERCENT OF
SHARES CLASS
BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
--------------------- ---------------------
William Cohen.......................... 1,500(2) *
Moses Marx ............................ 1,106,120(3) 52.1%
160 Broadway
New York, NY 10038
Steven Rosenberg....................... 10,861 *
Randolph B. Stockwell.................. 7,000(4) *
All executive officers and directors
as a group (4 persons)............... 1,125,481(5) 52.9%
- -------------------
* Less than 1%.
(1) The securities 'beneficially owned' are determined in accordance with the
definitions of 'beneficial ownership' as set forth in the regulations of the
SEC and, accordingly, may include securities owned by or for, among others,
the wife and/or minor childen of the individual and any other relative who
has the same residence as such individual as well as other securities as to
which the individual has or shares voting or investment power or has the
right to acquire under outstanding stock options within 60 days of the date
of this joint proxy statement/prospectus. Shares subject to outstanding
stock options which an individual has the right to acquire within 60 days of
the date of this joint proxy statement/prospectus are deemed to be
outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by such individual or any group including such
individual only.
(2) Includes 500 shares issuable upon the exercise of options which have been
granted to Mr. Cohen under Berkshire's 1991 Stock Option Plan for
Non-Employee Directors.
(3) Includes 500 shares issuable upon the exercise of options which have been
granted to Mr. Marx under Berkshire's 1991 Stock Option Plan for
Non-Employee Directors.
(4) Includes 500 shares issuable upon the exercise of options which have been
granted to Mr. Stockwell under Berkshire's 1991 Stock Option Plan for
Non-Employee Directors.
(5) Includes 1,500 shares of common stock which are issuable upon the exercise
of outstanding options.
52
MANAGEMENT OF GSB
BOARD OF DIRECTORS -- BIOGRAPHICAL INFORMATION
Business experience for the directors listed below comprises experience for
at least the past five years.
CLIFFORD E. KELSEY, JR., age 67, served as the President and Chief Executive
of Goshen Savings Bank from April 1973 until December 31, 1998, and continues to
serve, since 1973, as a director of Goshen Savings Bank. Mr. Kelsey was involved
in the financial institutions industry for more than 30 years. He served as
President and Chief Executive Officer of GSB from its inception through
December 31, 1998 and remains a director of GSB. He also has served as a
director of the Institutional Investors Capital Appreciation Fund, Inc. and the
Arden Hill Senior Health System since 1994.
ROY L. LIPPINCOTT, age 60, has been a director of Goshen Savings Bank since
1978. Mr. Lippincott, now retired, was the President of Lippincott Funeral
Chapel, Inc. in Goshen, New York, and from 1981 until 1996 he was President of
Lippincott Funeral Home Inc. in Chester, New York. From 1971 until 1996, Mr.
Lippincott was President of Ralston Lippincott Hasbrouck Ingrasia Funeral Home,
Inc. located in Middletown, New York. Mr. Lippincott served as the Orange County
Coroner from 1971 until 1985.
HERBERT C. MUELLER, age 73, has been a director of Goshen Savings Bank since
1973. Dr. Mueller is a retired veterinarian, past owner of the Orange County
Veterinary Hospital and past president of the Hudson Valley Veterinary
Association. He also serves as the Comptroller and director of the Black Meadow
Club, a local hunting club. Dr. Mueller served in the 11th Airborne Division
from 1946 to 1947.
GENE J. GENGEL, age 58, has been a director of Goshen Savings Bank since
1995. Mr. Gengel is the Executive Director of the Orange County Cerebral Palsy
Association Rehabilitation Center, a position he has held since 1992. From 1965
to 1992, Mr. Gengel held various management positions in the telephone industry
including General Manager of the Au Sable Valley Telephone Company, a subsidiary
of the Rochester Telephone Corporation. Mr. Gengel is immediate past-President
of the Goshen Rotary Club and a member of the Order of Elks. He has been
recognized as a Professional in Human Resources by the Society for Human
Resources Management and has completed the Cornell certificate program in
Collective Bargaining.
THOMAS V. GUARINO, age 47, has been a director of Goshen Savings Bank since
1996 and Chairman of the Board of Directors of GSB since April 1998. Mr. Guarino
is the President and Senior Portfolio Manager of the Hudson Valley Investment
Advisors, Inc., an investment management and advisory company, a position he has
held since 1995. Prior to that, he had been, since 1988, a Vice President of
Fleet Investment Advisors, Inc. and was Vice President in charge of investments
of Norstar Bank of the Hudson Valley from 1981 to 1988. Mr. Guarino was an
Adjunct Assistant Professor of finance for Orange County Community College from
1983 until 1995. He has served as the past president of the Goshen Rotary Club,
the Mid-Hudson Chapter of the American Institute of Banking and the Hudson
Valley Estate Planning Council. Mr. Guarino also serves as a trustee of the
Goshen Rotary Scholarship Foundation, Inc. Mr. Guarino was elected President of
Goshen Savings Bank, effective January 1, 1999, to satisfy regulatory
requirements that the Bank have a person with that title.
STEPHEN O. HOPKINS, age 62, has been a director of Goshen Savings Bank since
1980. Mr. Hopkins has been the regional representative for the American LaFrance
Corporation since May 1997 and S.V.I. Trucks since 1992, supplying fire and
rescue apparatus to fire stations. From 1981 to 1983, Mr. Hopkins served as the
President of the Cataract Engine & Hose Co. He was the Town Supervisor for the
Town of Goshen from 1996 to 1998. Mr. Hopkins served as the Mayor of the Village
of Goshen from 1983 until 1989 and as the Chief of the Goshen Fire District from
1975 to 1978.
53
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Executive officers are elected for one year terms and serve at the pleasure
of the board of directors. Provided below is biographical information regarding
the executive officers of GSB and Goshen Savings Bank who are not directors.
BARBARA A. CARR, age 44, serves as Goshen Savings Bank's Vice President and
Senior Mortgage Officer. She is also the Secretary of GSB. Ms. Carr joined
Goshen Savings Bank in 1976 and has served in various capacities since that time
including Teller, Auditor, Secretary and Assistant Vice President. She serves as
a President of the Hudson Valley Association of Professional Mortgage Women, a
member of the Mid-Hudson Valley Mortgage Banker's Association, a member of the
Builders Association of the Hudson Valley, and a volunteer counselor with the
Cornell Cooperative Extension's Family Budget Counseling Program.
STEPHEN W. DEDERICK, age 44, joined Goshen Savings Bank in February 1997 as
its Senior Vice President and Chief Financial Officer. He also serves as Chief
Financial Officer and Treasurer of GSB and, as of January 1, 1999, also became
Treasurer of Goshen Savings Bank. Prior to joining Goshen Savings Bank,
Mr. Dederick was the Vice President and Controller of MSB Bank, where he also
served on the Asset/Liability Committee and the Investment Committee.
Mr. Dederick joined MSB Bank in 1985. Mr. Dederick is a member of the Board of
Directors of the Orange County United Way and is a member of its Finance and
Facilities Committees. He is also Treasurer of the Orange County Bankers
Association. Mr. Dederick is active in scouting and is a member and past
treasurer of the Pine Bush Lions Club.
ROLLAND B. PEACOCK, III, age 49, joined Goshen Savings Bank in March 1998 as
its Senior Vice President. He is also Vice President of GSB. Prior to joining
Goshen Savings Bank, he was a Vice President with Albank Commercial and was
previously with Key Bank, serving in a variety of positions over a period of 25
years, including commercial lending, branch administration, business development
and human resources. He is Chairman of the Board of Trustees of the Arden Hill
Foundation and a trustee of Arden Hill Hospital. Mr. Peacock is also a member of
the Executive Board of the Hudson Valley Boy Scout Council, a trustee of McQuade
Family Services, Treasurer of the Goshen Rotary Club and active in the Chamber
of Commerce of Orange County and the Orange County United Way.
DIRECTOR COMPENSATION
Directors who are not employees of GSB or Goshen Savings Bank or any of
their subsidiaries are paid a fee of $500 for each regular Board meeting and
$300 for each committee meeting of GSB or Goshen Savings Bank. Each non-employee
chairman of a committee is paid a fee of $450 for each committee meeting. For
services rendered to GSB outside of scheduled GSB board of directors and
committee meetings, directors are paid a fee of $100 per hour, not to exceed
$300 on any single day. Directors are also eligible for participation in GSB's
Stock Option Plan and Incentive Stock Award Plan, referred to as ISAP. During
fiscal 2000, Thomas V. Guarino was granted an option to purchase 11,241 shares
of GSB common stock at an exercise price of $15.625.
EXECUTIVE COMPENSATION
GSB has not paid any cash compensation to its executive officers since its
formation.
The following table sets forth information concerning the compensation paid
to Ms. Carr and Messrs. Dederick and Peacock, which payments were made by Goshen
Savings Bank. Since the voluntary retirement of Mr. Kelsey as President and
Chief Executive Officer of GSB and Goshen Savings Bank effective December 31,
1998, GSB has functioned without a person holding the title of Chief Executive
Officer. The three executive officers together handle the daily management of
GSB and Goshen Savings Bank, and thus compensation information for all of them
is included in the table below.
54
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- -------------------------------------------
OPTIONS/STOCK
RESTRICTED APPRECIATION
OTHER ANNUAL STOCK RIGHTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($)(2) COMPENSATION($)(3) AWARDS($)(4) ('SARS')(#) COMPENSATION(5)
- --------------------------- ------- --------- ----------- ------------------ ------------ ----------- ---------------
Barbara A. Carr ............ 1999 $60,817 $1,820 None $ 7,280 2,000 $17,035
Vice President and 1998 $53,441 None None $ 6,700 4,000 $10,965
Senior Mortgage Officer 1997 $49,057 None None None None $ 6,462
Stephen W. Dederick, ....... 1999 $89,556 $1,820 None $ 7,280 2,000 $24,223
Senior Vice President and 1998 $78,206 None None $10,050 5,000 $15,016
Chief Financial Officer 1997 $60,991 None None None None 22
Rolland B. Peacock, III(6... 1999 $88,000 $1,820 None $ 7,280 2,000 $24,101
Senior Vice President 1998 $57,416 None None None None $ 0
- -------------------
(1) GSB changed its fiscal year to a calendar year for 1999. All data in the
table is presented on a calendar year basis.
(2) Includes the value, based upon the stock price on the date of grant, of 140
ISAP shares for each executive officer which were granted in 1999 and vested
immediately.
(3) None of the three executive officers received additional benefits or
perquisites which in the aggregate exceeded the lesser of $50,000 or 10% of
his or her respective salary and bonus for the fiscal year.
(4) On December 31, 1999, Ms. Carr had 880 shares of restricted stock with a
value of $10,560, Mr. Dederick had 1,040 shares with a value of $12,480 and
Mr. Peacock had 560 shares with a value of $6,720, based upon a market price
of $12.00 per share on that date. These shares vest gradually in
installments through 2003.
(5) Other compensation includes: (i) Goshen Savings Bank's matching contribution
under its 401(k) Plan for Ms. Carr of $1,824 in 1999, $1,603 in 1998 and
$1,472 in 1997; $1,792 in 1999 and $1,275 in 1998 for Mr. Dederick; and
$2,040 in 1999 for Mr. Peacock; (ii) premium payments for Ms. Carr of $11 in
1999 and $2 in 1998; for Mr. Dederick, $41 in 1999, $51 in 1998 and $22 in
1997; and for Mr. Peacock, $61 in 1999; and (iii) Goshen Savings Bank
contribution to the ESOP to repay the ESOP loan for shares allocated to
Ms. Carr of $15,200 in 1999, $9,360 in 1998 and $4,990 in 1997, to
Mr. Dederick of $22,390 in 1999 and 13,690 in 1998, and to Mr. Peacock of
$22,000 in 1999.
(6) Mr. Peacock joined Goshen Savings Bank in March 1998.
DESCRIPTION OF GSB STOCK OPTION PLAN AND INCENTIVE STOCK AWARD PLAN
On February 25, 1998, GSB stockholders approved two stock compensation
plans: the Stock Option Plan and the Incentive Stock Award Plan, referred to as
the ISAP. The Stock Option Plan provides for awards in the form of stock
options, representing a right to purchase GSB common stock. The ISAP permits the
outright award of shares of GSB common stock. The recipient of an ISAP award is
not required to make any payment to GSB or Goshen Savings Bank in exchange for
the shares and as the award vests, the vested shares will be the same as any
other issued and outstanding shares of GSB common stock. A committee of GSB's
board of directors administers the two plans and has awarded benefits under the
two plans to officers of Goshen Savings Bank. In addition, GSB directors have
also received awards under the two plans.
PROVISIONS OF THE STOCK OPTION PLAN AND ISAP
Eligibility. All directors, officers and other employees of GSB or Goshen
Savings Bank and, with the approval of the board of directors, any corporate
affiliate of GSB or Goshen Savings Bank, are eligible to participate in the
plans.
Shares Covered by the Plans. The Stock Option Plan allows for the award of
options to purchase up to 224,825 shares of GSB common stock and the ISAP allows
for the award of up to 89,930 shares of GSB common stock. GSB funded the ISAP
with 89,930 shares of stock purchased
55
on the open market. Although 40% of the options awarded under the Stock Option
Plan have vested, none of the options has been exercised, so GSB has not needed
to fund any option exercises.
Administration of the Plans. The compensation committee of GSB's board of
directors administers the plans. There are approximately 46 directors, officers
and employees of GSB or its affiliates who are eligible to participate in the
plans. The merger agreement provides that no further grants or awards will be
made under the Stock Option Plan and the ISAP.
Terminations And Forfeitures Under The Plans. The plans provide that awards
to directors and employees automatically terminate and are forfeited if the
awards are not vested and the person is terminated for cause or voluntarily
resigns. Vested options terminate 90 days after any resignation and they
terminate immediately upon termination for cause. If a stock option or ISAP
award terminates or is forfeited before it vests, then the number of shares
covered by the option or ISAP award will again be available for new awards.
Restrictions On Transfers. Generally, the recipient of an option may not
assign or transfer any interest in the option except under limited exceptions
described in the Stock Option Plan. The recipient of an ISAP award may not
transfer the shares represented by the award until the shares vest. As the
shares vest, they become like all other shares of GSB's common stock and may be
sold in the same manner.
Immediate Vesting of Awards. All outstanding awards will automatically
accelerate if there is a hostile change in control. A 'hostile change in
control' is defined as any change in control which results from a transaction
which is not expressly approved by a resolution of, or a favorable approval or
recommendation by, a majority of the disinterested directors of GSB (if the
transaction is with a stockholder of GSB) or a majority of GSB's directors in
the event of a transaction with a person or entity other than a stockholder. A
change in control for which no GSB board of directors' approval or
recommendation is required is a hostile change in control unless the transaction
or event is approved by a two-thirds vote of members of GSB's board of directors
who were directors on the date GSB stockholders approved the amendments to the
plans, or other directors who were elected or nominated by those directors. If a
hostile change in control occurs, a director or employee who received stock
options under the Stock Option Plan could immediately exercise all options which
he or she received and the director or employee would also receive an immediate
distribution of all ISAP awards from the trust which GSB created to hold ISAP
awards as they gradually vest.
If, after ten years of service, a director retires or is not re-elected, his
or her awards immediately vest.
ADDITIONAL TERMS OF THE STOCK OPTION PLAN
The term of stock options under the Stock Option Plan may not exceed ten
years. Recipients can only exercise their options before they expire. No options
may be granted after February 24, 2008. The compensation committee may award
either 'incentive stock options' as defined under Section 422 of the Internal
Revenue Code, or stock options not intended to qualify as incentive stock
options. There are 94,588 shares remaining available for future awards of
options under the plan.
The exercise price for the purchase of shares under an option will not be
less than 100% of the market value of the shares on the date the option is
awarded. The exercise price must be paid in full in cash or, if the compensation
committee permits, the exercise price may be paid in shares of GSB's stock, or a
combination of stock and cash.
The plan provides that after a participant dies, the compensation committee
may permit options of a deceased participant to be settled in cash instead of by
the delivery of shares.
Limits On Incentive Stock Options. Incentive stock options which the
compensation committee awards will be subject to the following additional
requirements of Section 422 of the Internal Revenue Code:
56
Incentive stock options cannot be awarded to a person owning more than 10%
of the voting power of GSB's stock unless the option exercise price equals
110% of the fair market value of the stock at the time of award and the
term of the option may not exceed five years;
If the total fair market value of the stock underlying options first
exercisable in any year exceeds $100,000, then the options which cause the
excess will not be incentive stock options;
The tax benefits of an incentive stock option are not effective for the
participant if he or she sells shares obtained upon exercise of the option
within two years after the option is awarded or within one year after the
option is exercised; and
The tax benefits are also not available to the participant unless the
participant is an employee of GSB or its affiliates continually from the
day the option is awarded until not more than three months before the
option is exercised.
All the options which the compensation committee awarded to officers were
incentive stock options.
Limited Stock Appreciation Rights. Each option under the plan is accompanied
by a Limited Stock Appreciation Right, referred to as LSAR, that the holder of
the option may exercise for six months after a change in control (as defined in
the Stock Option Plan), or more than six months after a change in control if
necessary to avoid liability under Section 16 of the Securities Exchange Act.
When a participant exercises a LSAR, he or she will receive in cash, for each
share covered by the LSAR, the difference between the fair market value of the
common stock at the time of exercise and the exercise price of the related stock
option. The related stock option will then terminate. LSARs will terminate upon
a change of control if the acquiror agrees to make a monetary payment or provide
substitute options or other property equivalent in value to the value of the
option which terminates.
Federal Income Tax Consequences. Under present federal income tax laws,
awards of stock options under the plan will have the following consequences:
The participant has no taxable income and GSB is not entitled to any tax
deduction when an option is awarded.
When a participant exercises an incentive stock option, he or she has no
taxable income at that time. The difference between the exercise price and
the fair market value of the shares on the date of exercise is an item of
tax preference for the participant which may, in certain situations,
trigger the alternative minimum tax. When a participant sells stock which
was obtained upon the exercise of an incentive stock option, the
participant has a taxable capital gain equal to the difference between the
amount received on the sale and the amount paid for the stock. This amount
is treated as ordinary income instead of a capital gain if the participant
sells the stock within one year after exercising the option or within two
years after the option was awarded.
When a participant exercises an option that is not an incentive stock
option, the participant has taxable ordinary income at that time equal to
the difference between the exercise price and the fair market value on the
date of exercise.
When a participant exercises an LSAR, the participant has taxable ordinary
income at that time equal to the cash received as a result of the exercise.
GSB will be allowed a deduction at the time, and in the amount of, any
ordinary income which the participant has, but only if GSB meets its
federal withholding tax obligations.
ADDITIONAL TERMS OF THE INCENTIVE STOCK AWARD PLAN
Administrative Matters. In order to implement the ISAP, GSB established a
trust with HSBC Bank USA as trustee. The trust purchased, on the open market,
89,930 shares of GSB common stock to fund present and future awards under the
ISAP. GSB contributed $1.6 million to the trust to pay for those stock
purchases. The trust may not purchase any more shares of GSB common
57
stock. The costs and expenses of administering the ISAP are borne by GSB, but
dividends paid on shares not awarded to directors and employees may be used to
offset expenses.
ISAP awards are held in trust until they vest. There are 31,956 shares
remaining in the ISAP which have not yet been awarded. As an award vests, the
trustee distributes the vested shares to the participant and the shares are then
like all other issued and outstanding shares, without limits imposed by the
ISAP. An individual with unvested shares may vote and participate in dividends
on those shares. The trustee will vote shares which have not yet been awarded in
the same proportions as unvested shares which have been awarded and voted. Each
participant who has an unvested award under the ISAP may direct the response to
any tender offer, exchange offer or other offer made to shareholders with
respect to those shares. If no direction is given, the trustee will not tender
or exchange the shares. The trustee will generally tender or exchange shares
which have not yet been awarded in the same proportion as the directions
received on awarded but unvested shares.
Federal Income Tax Consequences. Holders of ISAP shares will have taxable
ordinary income when the ISAP shares vest, equal to the fair market value of the
shares on that date. In certain circumstances, a holder may instead elect to
recognize ordinary income when the award is made. Holders of ISAP shares will
also have taxable ordinary income on any dividends (other than stock dividends)
when dividend payments are received. GSB will have a deduction at the time, and
in the amount of, any ordinary income recognized by the participant if GSB meets
its federal withholding tax obligations.
Amendment and Termination of the ISAP. The board of directors of GSB may
amend, suspend or terminate the ISAP at any time, but no amendment or
termination may affect outstanding awards. In addition, federal or state banking
regulations require that stockholders must approve certain amendments to the
ISAP. If the ISAP terminates, the trustee of the ISAP trust must return all
remaining assets of the trust to GSB after making such distributions as the
compensation committee directs. GSB cannot terminate the ISAP if there are any
outstanding unvested awards.
Financial Statement Consequences of the ISAP. GSB did not record a financial
statement expense when the trust purchased the ISAP shares, nor does it record
an expense when awards are made under the ISAP. However, when all or any part of
an award vests, GSB records an expense equal to the trust's original purchase
price of the shares as they vest.
OPTION GRANTS DURING THE YEAR
The following table sets forth information about options granted during
fiscal 1999 to GSB's executive officers under GSB's Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
PERCENT OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
GRANTED TO OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION ----------------------
GRANTED(#)(2) FISCAL YEAR BASE PRICE DATE 5% 10%
------------- ----------- ---------- ---- -- ---
Barbara A. Carr............. 2,000 25% $ 13.00 5/13/09 $16,360 $41,440
Stephen W. Dederick......... 2,000 25% $ 13.00 5/13/09 $16,360 $41,440
Rolland B. Peacock, III..... 2,000 25% $ 13.00 5/13/09 $16,360 $41,440
- -------------------
(1) Based upon the price on the date of grant and an annual appreciation at the
rate stated (compounded annually) of the market price through the expiration
date of the options. The 5% and 10% appreciation rates are set in Securities
and Exchange Commission regulations and therefore are not intended to
forecast possible future appreciation, if any, of GSB's stock price.
(footnotes continued on next page)
58
(footnotes continued from previous page)
(2) Options were granted ten years prior to the expiration dates shown. On each
of the first five anniversaries following the respective dates of grant, 20%
of the options granted will vest and become exercisable.
During fiscal 2000, Ms. Carr and Messrs. Dederick and Peacock were each
granted options to purchase 4,400 shares of GSB common stock at an exercise
price of $10.8125 per share and 2,500 shares of GSB common stock at an exercise
price of $15.625 per share.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
The directors and the executive officers of Goshen Savings Bank maintain
normal deposit account relationships with Goshen Savings Bank on terms and
conditions no more favorable than those available to the general public. In the
ordinary course of business, Goshen Savings Bank may make loans to directors,
officers and employees. All loans to directors, executive officers and related
parties are on substantially the same terms, including interest rate and
collateral, as those prevailing at the time for comparable loans to unrelated
parties and do not involve more than normal risk of collectibility or present
other unfavorable features.
Aside from the normal customer relationships, none of the directors or
executive officers of GSB (or members of their immediate families) maintained,
directly or indirectly, any significant business or personal relationship with
GSB or Goshen Savings Bank during the 1999 fiscal year.
EMPLOYMENT AND RETENTION AGREEMENTS
GSB and Goshen Savings Bank have employment agreements with its three
executive officers. The agreements establish each executive officers' duties and
provide benefits in the event of a change in control. The employment agreements
generally provide for a three year period of employment after a change in
control with extension periods at the discretion of GSB's board of directors.
The three executive officers have agreed to reduce the post change in control
employment period guaranty, referred to as the assurance period, to 18 months
for the transaction with Berkshire only. The executive officers' employment
agreements were further amended to reduce the circumstances under which the
executive officers may terminate their employment during the assurance period
after a change in control and still receive severance benefits. Specifically, an
executive officer may no longer terminate employment, because he or she is not
afforded the same opportunities for salary increases, bonuses, promotions,
increased work responsibilities and similar types of benefits afforded to other
executive officers of the successor to Goshen Savings Bank. Further, an
executive officer may still terminate employment, during the assurance period,
if there is a material reduction in the benefits provided to the executive
officer; however, that right is qualified so as not to include a reduction in
benefits accompanied by a 2% salary increase in order to conform the benefits
under Goshen Savings Bank's current programs with Berkshire Bank's benefits
plan. The agreements do not, however, guarantee that the board of directors will
continue any of the officer's continued employment with Goshen Savings Bank or
GSB prior to a change in control.
If the executive officer's employment terminates after a change in control
under circumstances described in the employment agreement, such as changes in
responsibilities or title following the change in control which are not
commensurate with the executive officer's senior officer status, he or she would
be entitled to receive, in addition to his or her earned but unpaid salary
through the date of termination plus benefits in effect on the date of
termination, a lump sum cash payment equal to
the present value of his or her remaining cash compensation (salary plus
bonus that the executive officer would have earned if he or she had been
employed until the end of the three year employment period, at the highest
annual rate of salary and bonus paid during the two years prior to the
change in control; and
59
the additional contributions or benefits that the executive officer would
have earned under any employee benefit plans had his or her employment not
been terminated prior to the end of the assurance period.
If permitted by applicable laws, provisions will also be made for the cash out
of stock options, appreciation rights or restricted stock as if he or she were
fully vested. The executive officer's life, health and disability insurance or
other benefit plan coverage would also continue for the remainder of the three
year guaranty period.
In general, a 'change in control' will be deemed to occur when a person or
group of persons acting in concert acquires beneficial ownership of 25% or more
of any class of equity security of GSB or Goshen Savings Bank, upon stockholder
approval of a merger or consolidation unless a number of conditions set forth in
the employment agreement are met, or a change of the majority of the board of
directors of GSB or Goshen Savings Bank or upon liquidation or sale of
substantially all the assets of GSB or Goshen Savings Bank.
Payments under Goshen Savings Bank's agreements with the three executive
officers are guaranteed by GSB. If payments under the two agreements are
duplicative, payments due under GSB's agreement would be offset by amounts
actually paid by Goshen Savings Bank. The three executive officers are entitled
to reimbursement of certain costs incurred in interpreting or enforcing the
agreements.
Cash and benefits paid to the three executive officers under the agreements
and under other benefit plans following a 'change in control' may constitute
'excess parachute' payments under Section 280G of the Internal Revenue Code,
resulting in a 20% excise tax payable by the recipient and the denial of the
deduction for these excess amounts to GSB and Goshen Savings Bank. GSB's
agreement includes a provision indemnifying the executive officers on an
after-tax basis for any excise taxes. We estimate that, based on base salary for
2000, cash payments to be made in the event of a change in control of Goshen
Savings Bank or GSB to the three executive officers would aggregate
approximately $760,000 if they were terminated immediately upon a change in
control if the three year employment period guaranty were applicable, and
approximately $380,000 if the 18 month guaranty period applies. These amounts
are calculated without regard to payments for excise tax indemnification,
payments in lieu of employee plan benefits, or for continuation of employee
benefits such as health insurance.
Goshen Savings Bank has also entered into employee retention agreements with
five non-executive officers. The agreements establish the officers' respective
duties and are intended to ensure that Goshen Savings Bank will be able to
continue to benefit from their services. The retention agreements generally
promise two years of employment after a change in control, with extension
periods at the discretion of the board of directors, unless otherwise terminated
by either party. The agreements do not, however, guarantee any of the officer's
continued employment with Goshen Savings Bank prior to a change in control.
If the officer's employment terminates after a change in control under
circumstances comparable to, but somewhat more limited than, those which would
give rise to change in control payments under the employment agreements with the
executive officers, the officer would be entitled to a payment generally equal
to the employee's salary for the remainder of the promised two year employment
period plus continued health insurance coverage for the two years. However, in
no event may the aggregate amount payable under these agreements exceed 299% of
average annual compensation paid to the officer during the five preceding
taxable years. Based on base salary for 2000, cash payments to be made in the
event of a change in control of Goshen Savings Bank or GSB to the five officers,
in the aggregate, under the terms of the retention agreements are estimated to
be up to $476,000, not including the cost of continued health insurance.
The actual amount that may be paid in the event of a change in control under
the employment and retention agreements can only be estimated at this time
because the actual amount will be based on the compensation and benefit costs
and other factors existing at the time of the change in control, and how long
the employee's employment continues after a change in control, which cannot be
determined at this time.
60
PENSION PLAN
Goshen Savings Bank maintains a non-contributory, tax-qualified defined
benefit pension plan for eligible employees. The following table illustrates the
annual benefit payable upon normal retirement at age 65 in the normal form of
benefit under the pension plan at various levels of average annual compensation
and years of service under the pension plan.
PENSION PLAN TABLE
YEARS OF CREDITED SERVICE
-------------------------------------
REMUNERATION 15 20 25 30
- ------------------------ ------- ------- ------- -------
$75,000................. $22,500 $30,000 $37,500 $45,000
100,000................. 30,000 40,000 50,000 60,000
125,000................. 37,500 50,000 62,500 75,000
150,000................. 45,000 60,000 75,000 90,000
175,000................. 45,000 60,000 75,000 96,000
200,000................. 45,000 60,000 75,000 96,000
225,000................. 45,000 60,000 75,000 96,000
All employees and officers with more than 1,000 hours of service per year
who have attained age 21 and completed one year of service are eligible to
participate in the pension plan. The pension plan provides a benefit for each
participant. The annual benefit is equal to 2% of the participant's average
annual compensation multiplied by the participant's number of years of service
not to exceed 30 years of service. For the plan year beginning January 1, 2000,
the maximum permitted average annual compensation for determining pension
benefits under the pension plan is $160,000 and the maximum annual pension
benefit is $96,000.
Average annual compensation is the average annual compensation for the three
years prior to retirement. A participant is fully vested in his or her pension
after five years of service. GSB funds the pension plan on an actuarial basis,
and all assets are held in trust by the pension plan trustee.
At December 31, 1999, Ms. Carr had 16 years of credited service under the
pension plan, Mr. Dederick had two years of credited service and Mr. Peacock had
one year of credited service.
Berkshire intends to terminate Goshen Savings Bank's pension plan in
connection with the merger. See 'The Merger -- Material Terms of the Merger
Agreement -- Termination of the Merger Agreement.'
61
PRINCIPAL STOCKHOLDERS OF GSB
GSB had 1,984,538 shares of common stock outstanding on the record date for
the GSB special meeting. The following table sets forth information regarding
share ownership of
those persons or entities known by management to own beneficially more than
5% of GSB's common stock;
each of GSB's directors;
each of the executive officers of GSB and Goshen Savings Bank; and
all directors and executive officers of GSB and Goshen Savings Bank, as a
group.
Information with respect to persons who own beneficially more than 5% of the
common stock is based upon filings made pursuant to Section 13 of the Securities
Exchange Act and other sources believed by us to be reliable.
SHARES
BENEFICIALLY
OWNED AT PERCENT OF
NOVEMBER 27, 2000(1) CLASS(2)
-------------------- --------
GSB Financial Corporation
Employee Stock Ownership Plan(3)
One South Church Street, Goshen, NY 10924................... 163,789 8.3%
Josiah T. Austin(4)
El Coronado Ranch
Star Route Box 395, Pearce, AZ 85625........................ 161,000 8.1%
Gould Investors L.P.(5)
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021........................................ 198,070 10.0%
Gene J. Gengel, Director.................................... 17,335(6) *
Thomas V. Guarino, Director................................. 37,590(7) 1.9%
Stephen O. Hopkins, Director................................ 11,492(8) *
Clifford E. Kelsey, Jr., Director........................... 27,622(9) 1.4%
Roy L. Lippincott, Director................................. 23,992(10) 1.2%
Herbert C. Mueller, Director................................ 23,352(11) 1.2%
Barbara A. Carr, Vice President and Senior Mortgage
Officer..................................................... 13,415(12) *
Stephen W. Dederick, Senior Vice President and Chief
Financial Officer......................................... 13,688(13) *
Rolland B. Peacock, III, Senior Vice President.............. 10,260(14) *
Directors and Executive Officers of GSB and Goshen Savings
Bank, as a group (9 persons).............................. 178,746 8.8%
Notes appear on following page.
62
NOTES TO STOCK OWNERSHIP TABLE
(1) The amount reported represents shares held directly, as well as shares
allocated to participants in GSB's Employee Stock Ownership Plan (the
'ESOP'), and shares with respect to which a person may be deemed to have
sole voting or investment power. The table also includes, for each
director, 2,698 unvested ISAP shares which vest in equal amounts in 2001,
2002 and 2003 but which the director can vote at the meeting and 4,496
options per director which are exercisable now or within 60 days of the
date of this joint proxy statement/prospectus. The table excludes options
which are not currently vested although they may provide for accelerated
vesting in the event of a change in control. GSB has requested that the IRS
permit an amendment of its ESOP to allow new employees hired during the
last six months of 1998 to become ESOP participants for 1999. If the IRS
approves the amendment, the number of ESOP shares allocated to executive
officers on account of 1999 will be less than the amount included in this
table.
(2) Based upon 1,984,538 shares outstanding on the date of this joint proxy
statement/prospectus, which includes 40,246 shares issued but unvested
under the ISAP, plus stock options for 45,874 shares exercisable on the
date of this joint proxy statement/prospectus or within 60 days thereafter.
An asterisk ('*') means less than 1%.
(3) Includes 28,894 shares representing the approximate number of shares
allocated to ESOP participants. Of these allocated shares, approximately
8,763 shares are allocated to executive officers and also included
elsewhere in this table as appropriate. The trustee of the ESOP is HSBC
Bank USA. Subject to the trustee's fiduciary responsibilities, the trustee
will vote allocated shares as instructed by the applicable participant. The
trustee will vote allocated shares as to which no instructions are received
and any shares that have not been allocated in the same proportion as
allocated shares for which voting instructions are received.
(4) Based upon a Rule 13d filing under the Exchange Act, which reflects that
Josiah T. Austin has the sole voting power over 161,000 shares, including
17,000 shares in his own name and 144,000 shares owned by El Coronado
Holdings, L.L.C. of which Mr. Austin is sole managing member.
(5) Shares are beneficially owned by an investment advisory limited partnership
for investment purposes and are estimated based upon a Rule 13d filing
under to the Exchange Act and other publicly available information.
(6) Includes 8,343 shares owned by Mr. Gengel's Individual Retirement Account
('IRA').
(7) Includes 500 shares owned by Mr. Guarino's spouse and 3,798 shares owned by
him as custodian for his children. Includes an additional 2,248 options
exercisable now or within 60 days after the date of this joint proxy
statement/prospectus.
(8) Includes 2,000 shares owned by Mr. Hopkins' IRA.
(9) Includes 8,630 shares owned by Mr. Kelsey's IRA and 11,798 shares owned by
his wife.
(10) Includes 15,000 shares owned by Mr. Lippincott's IRA.
(11) Includes 5,000 shares owned by Mr. Mueller's IRA and 6,860 shares owned by
his spouse.
(12) Includes 3,300 unvested ISAP shares, 4,660 options exercisable now or
within 60 days after the date of this joint proxy statement/prospectus and
2,955 shares allocated to Ms. Carr in the ESOP.
(13) Includes 600 shares owned by Mr. Dederick's IRA, 3,420 unvested ISAP
shares, 5,060 options exercisable now or within 60 days after the date of
this joint proxy statement/prospectus and 3,608 shares allocated to Mr.
Dederick in the ESOP.
(14) Includes 1,000 shares owned by Mr. Peacock's IRA, 3,060 unvested ISAP
shares, 3,060 options exercisable now or within 60 days after the date of
this joint proxy statement/prospectus and 2,200 shares allocated to Mr.
Peacock in the ESOP.
63
PRICE RANGE OF COMMON STOCK
Since September 20, 2000, Berkshire common stock has been traded on the
Nasdaq National Market under the symbol 'ZAPS.' From February 10, 1995 until
September 20, 2000, Berkshire common stock was traded on the Nasdaq SmallCap
Market under the symbol 'ZAPS.' GSB common stock trades on the Nasdaq National
Market under the symbol 'GOSB.' Following the merger, Berkshire will deregister
the GSB common stock under the Exchange Act, and the common stock of GSB will
cease trading on the Nasdaq National Market.
The following table sets forth for the periods indicated the range of high
and low sales prices of the Berkshire common stock:
BERKSHIRE
---------------
HIGH LOW
------ ------
Fiscal Year Ended October 31, 1998:
First Quarter........................................... $37.88 $25.25
Second Quarter.......................................... 41.00 35.75
Third Quarter........................................... 42.50 36.50
Fourth Quarter.......................................... 41.50 27.13
Fiscal Year Ended October 31, 1999:
First Quarter........................................... 41.00 29.50
Second Quarter.......................................... 43.06 32.00
Third Quarter........................................... 45.00 39.50
Fourth Quarter.......................................... 39.50 34.00
Transition Period Ended December 31, 1999:
November 1, 1999 to December 31, 1999................... 37.00 33.00
Fiscal Year Ended December 31, 2000:
First Quarter........................................... 37.13 29.69
Second Quarter.......................................... 37.31 30.63
Third Quarter........................................... 36.50 30.00
Fourth Quarter (through [ ], 2000).................
The following table sets forth for the periods indicated the range of high
and low sale prices of the GSB common stock:
GSB
---------------
HIGH LOW
------ ------
Fiscal Year Ended September 30, 1998:
First Quarter........................................... $18.94 $14.50
Second Quarter.......................................... 17.50 15.25
Third Quarter........................................... 17.75 16.50
Fourth Quarter.......................................... 17.00 8.31
Transition Quarter Ended December 31, 1998.................. 14.50 10.69
Fiscal Year Ended December 31, 1999:
First Quarter........................................... 14.63 13.75
Second Quarter.......................................... 14.25 12.75
Third Quarter........................................... 14.50 13.00
Fourth Quarter.......................................... 12.75 11.63
Fiscal Year Ended December 31, 2000:
First Quarter........................................... 12.75 10.50
Second Quarter.......................................... 16.50 11.00
Third Quarter........................................... 19.00 15.50
Fourth Quarter (through [ ], 2000).................
On August 8, 2000, the last full trading day prior to the public
announcement of the proposed merger on which shares of Berkshire common stock
were traded, the highest sales price of Berkshire common stock was $34.75 per
share, the lowest sales price of Berkshire common stock
64
was $31.75 per share and the last reported sales price of Berkshire common stock
was $34.75 per share. On [ ], the latest practicable date prior to the
printing of this joint proxy statement/prospectus, the last reported sales price
of Berkshire common stock was $[ ] per share. WE URGE STOCKHOLDERS TO OBTAIN
CURRENT MARKET QUOTATIONS PRIOR TO MAKING ANY DECISIONS WITH RESPECT TO THE
MERGER.
On August 15, 2000, the last full trading day prior to the public
announcement of the proposed merger, the highest sales price of GSB common stock
was $16.625 per share, the lowest sales price of GSB common stock was $16.0625
per share and the last reported sales price of GSB common stock was $16.0625 per
share. On [ ], 2000, the latest practicable date prior to the printing of
this joint proxy statement/prospectus, the last reported sales price of GSB
common stock was $[ ] per share. WE URGE STOCKHOLDERS TO OBTAIN CURRENT MARKET
QUOTATIONS PRIOR TO MAKING ANY DECISIONS WITH RESPECT TO THE MERGER.
On April 17, 2000, the last day on which GSB stock traded prior to Warwick's
public announcement of its interest in the offering to acquire GSB, the last
sale price of GSB common stock was $11.00 per share.
As of September 30, 2000 there were 2,151 holders of record of Berkshire
common stock and 407 holders of record of GSB common stock.
DESCRIPTION OF BERKSHIRE CAPITAL STOCK
Berkshire's current authorized stock consists of ten million (10,000,000)
shares of common stock, $.10 par value per share, and two million (2,000,000)
shares of preferred stock, $.01 par value per share, none of which are
outstanding. As of September 30, 2000, 2,124,449 shares of Berkshire common
stock were outstanding.
COMMON STOCK
Under Delaware law, stockholders generally are not personally liable for a
corporation's acts or debts. Subject to the preferential rights of any other
shares or series of capital stock, holders of shares of Berkshire common stock
are entitled to receive dividends on shares of common stock if, as and when
authorized and declared by the Berkshire board of directors out of funds legally
available for dividends and to share ratably in the assets of Berkshire legally
available for distribution to its stockholders in the event of its liquidation,
dissolution or winding-up after payment of, or adequate provision for, all known
debts and liabilities of Berkshire.
Each outstanding share of Berkshire common stock entitled the holder to one
vote on all matters submitted to a vote of stockholders, including the election
of directors. Unless a larger vote is required by law, the Berkshire certificate
of incorporation or the Berkshire bylaws, when a quorum is present at a meeting
of stockholders, a majority of the votes properly cast upon any question other
than the election of directors shall decide the question. A director is elected
when a plurality of the votes are properly cast for the election of a person to
serve as a director. Except as otherwise required by law or except as provided
with respect to any other class or series of capital stock, the holders of
Berkshire common stock possess the exclusive voting power. There is no
cumulative voting in the election of directors.
Holders of Berkshire common stock have no conversion, sinking fund,
redemption rights, or preemptive rights to subscribe for any of Berkshire's
classes of stock.
All shares of Berkshire common stock have equal rights, including dividend,
distribution and liquidation. In addition, all shares of Berkshire common stock
have no preference, appraisal or exchange rights.
PREFERRED STOCK
The Berkshire board of directors is authorized, without further vote or
action by the Berkshire stockholders, to issue shares of preferred stock in one
or more series, to establish the number of shares in each series and to fix the
designation, powers, preferences and rights of each series and the
qualifications, limitations or restrictions of the series, in each case, if any,
as are
65
permitted by Delaware law. Because the Berkshire board of directors has the
power to establish the preferences and rights of each class or series of
preferred stock, it may afford the stockholders of any series or class of
preferred stock preferences, powers and rights, voting or otherwise, senior to
the rights of holders of shares of Berkshire common stock. The issuance of
shares of preferred stock could have the effect of delaying, deferring or
preventing a change of control of Berkshire.
REGISTRAR AND TRANSFER AGENT
Berkshire's registrar and transfer agent is American Stock Transfer & Trust
Company.
ANTI-TAKEOVER PROVISIONS
Berkshire is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law, referred to as DGCL. Section 203 restricts an
'interested stockholder' from engaging in a business combination with Berkshire
for three years following the date that person became an interested stockholder.
See 'Comparison of Stockholder Rights -- Stockholder Approval of Business
Combinations with Interested Stockholders -- Berkshire.'
In addition, in accordance with Section 161 of the DGCL, the board of
directors of Berkshire can, without stockholder approval, issue shares of
capital stock, which may have the effect of delaying, deferring or preventing a
change of control of Berkshire. Other than pursuant to the merger, Berkshire has
no plan or arrangement for the issuance of any shares of capital stock other
than in the ordinary course or pursuant to the 1999 Berkshire Stock Incentive
Plan.
Provisions of Berkshire's certificate of incorporation and bylaws may be
deemed to have an anti-takeover effect and may delay, deter or prevent a merger,
tender offer, proxy contest or other takeover attempt. The following discussion
is a general summary of these provisions which might be determined to have a
potential 'anti-takeover' effect. Reference should be made in each case to
Berkshire's certificate of incorporation and bylaws. See 'Where You Can Find
More Information' for information regarding how to obtain a copy of these
documents.
Berkshire's certificate of incorporation authorizes the Berkshire board of
directors to issue up to 2,000,000 shares of preferred stock with terms, rights,
preferences and designations as the board of directors may determine and without
any vote of the stockholders, unless otherwise required by law.
Berkshire's bylaws fix the number of directors at between three and eleven
as determined by resolution of the board of directors. The board of directors of
Berkshire is currently comprised of four members. After the merger, the board of
directors of Berkshire will be increased to five members.
Stockholders are not entitled to cumulate their votes in connection with the
election of directors. As a result, a person or group controlling the majority
of shares of Berkshire common stock can elect all of the directors. Following
the merger, the board of directors of Berkshire will own between [ ] and
[ ] shares of Berkshire common stock constituting between [ ]% and
[ ]% of the issued and outstanding Berkshire common stock which may allow it
to control actions taken by stockholders, including the election of directors.
See 'Principal Stockholders of Berkshire' and 'Risk Factors.'
Berkshire's bylaws provide that special meetings of stockholders may only be
called by the chairman of the board of directors, the president or the board of
directors and shall be called by the secretary at the request in writing by
stockholders owning a majority of the capital stock of the corporation issued
and outstanding and entitled to vote.
Berkshire's certificate of incorporation and bylaws contain provisions
permitted under the DGCL relating to the liability of directors. These
provisions eliminate the directors' liability for monetary damages for a breach
of fiduciary duty to the fullest extent permitted by the DGCL. Berkshire's
certificate of incorporation and bylaws also contain provisions which provide
for the indemnification of its directors and officers to the fullest extent
permitted by the DGCL.
66
COMPARISON OF STOCKHOLDER'S RIGHTS
The rights of Berkshire stockholders are governed by Berkshire's certificate
of incorporation, bylaws and the DGCL. The rights of GSB stockholders are
governed by GSB's certificate of incorporation, bylaws and the DGCL. After the
merger is completed, the rights of the GSB stockholders who become Berkshire
stockholders will be governed by Berkshire's certificate of incorporation and
bylaws and the DGCL.
The following is a summary of the material differences between Berkshire's
stockholders' rights and GSB's stockholders' rights. This summary is qualified
in its entirety by references to applicable provisions of the DGCL, Berkshire's
certificate of incorporation and bylaws and GSB's certificate of incorporation
and bylaws.
CAPITAL
BERKSHIRE. Berkshire has the authority to issue twelve million (12,000,000)
shares of capital stock consisting of ten million (10,000,000) shares of common
stock with a par value of $.10 per share and two million (2,000,000) shares of
preferred stock with a par value of $.01 per share.
GSB. GSB has the authority to issue five million (5,000,000) shares of
capital stock consisting of four million five hundred thousand (4,500,000)
shares of common stock with a par value of $.01 per share and five hundred
thousand (500,000) shares of preferred stock with a par value of $.01.
PREFERRED STOCK
BERKSHIRE. Berkshire's certificate of incorporation authorizes the board of
directors to issue from time to time preferred stock in one or more series.
Prior to issuance of a series of preferred stock, Berkshire's board of directors
may fix the designation and powers, preferences, rights, qualifications,
limitations and restrictions relating to the shares of the series.
GSB. GSB's certificate of incorporation authorizes the board of directors
from time to time to provide for the issuance of shares of preferred stock in
one or more series. GSB's board of directors may fix the designation, powers,
preferences, and rights of the shares of each series and any qualifications,
limitations or restrictions. The number of authorized shares of preferred stock
may be increased or decreased by the affirmative vote of the holders of a
majority of the common stock without a vote of the holders of any preferred
stock unless a vote of preferred stockholders is required by the terms of any
preferred stock designation.
STOCKHOLDER VOTING
BERKSHIRE. Authorized common stock is identical in all respects and has
equal rights and privileges. Berkshire's bylaws provide that each stockholder
shall have one vote for each share of capital stock having voting power.
GSB. GSB's certificate of incorporation provides that shares of common stock
beneficially owned by a stockholder in excess of ten percent (10%) of the shares
of common stock outstanding cannot be voted. This voting restriction shall not
apply to:
any offer or sale with a view towards public resale made exclusively by GSB
to any underwriter or underwriters acting on behalf of GSB, or to the
selling group acting on the underwriter's or underwriters' behalf, in
connection with a public offering of common stock; or
any reclassification of securities (including any reverse stock split), or
recapitalization of GSB, or any merger or consolidation of GSB with any of
its subsidiaries or any other transaction or reorganization that does not
have the effect, directly or indirectly, of changing the beneficial
ownership interests of GSB's stockholders, other than in connection with
the exercise of any appraisal rights, except as a result of immaterial
changes due to fractional share adjustments, which changes do not exceed,
in the aggregate, one percent (1%) of the issued and outstanding shares of
the class of equity or convertible securities.
67
CUMULATIVE VOTING
Neither Berkshire nor GSB permits stockholders to cumulate their votes for
the election of directors.
MEETING OF STOCKHOLDERS; ACTION BY WRITTEN CONSENT
BERKSHIRE. Under Berkshire's bylaws, a special meeting may be called for any
purpose by the Chairman of the board of directors, the President or the board of
directors and shall be called by the Secretary at the request in writing by
stockholders owning a majority of the capital stock of the corporation issued
and outstanding and entitled to vote. DGCL Section 228 provides that any action
which is required to be taken or which may be taken at any annual or special
meeting of stockholders may be taken without a meeting, if a consent or consents
in writing, is signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take the
action at a meeting at which all shares entitled to vote thereon were present
and voted.
GSB. GSB's bylaws provide that special meetings of the stockholders may only
be called by the directors in connection with a resolution adopted by a majority
of the directors subject to the rights of the holders of any class or series of
preferred stock. Further, GSB's bylaws provide that an action permitted or
required to be taken by the stockholders must be effected at a duly called
annual or special meeting of stockholders and may not be effected by any consent
in writing by the stockholders in lieu of a meeting.
PREEMPTIVE RIGHTS
Neither Berkshire stockholders nor GSB stockholders have a preemptive right
to acquire or subscribe to any or all additional issues of stock.
AMENDMENT OF GOVERNING DOCUMENTS
BERKSHIRE. In its certificate of incorporation, Berkshire reserves the right
to amend, alter, change or repeal any provision contained in its certificate of
incorporation or bylaws and all rights conferred upon stockholders, directors or
any person by these documents. In addition, Berkshire's certificate of
incorporation provides that the board of directors shall have the power to
adopt, amend and repeal any and all of Berkshire's bylaws.
Under Berkshire's bylaws, both the board of directors and stockholders may
alter, amend, repeal or adopt new bylaws provided that the proposed change or
new bylaw is given in the notice of the meeting.
GSB. GSB reserves the right to amend or repeal any provisions contained in
its certificate of incorporation including rights conferred upon stockholders.
Amendments to GSB's certificate of incorporation must be approved by a majority
vote of its board of directors and also by a majority of the outstanding shares
of its voting stock, provided, however, that an affirmative vote of the holders
of at least eighty percent (80%) of the outstanding voting stock entitled to
vote (after giving effect to the provision limiting voting rights) is required
to amend or repeal a number of provisions of GSB's certificate of incorporation,
including the provision limiting voting rights, the provisions relating to
approval of certain business combinations, calling special meetings, the number
and classification of directors, director and officer indemnification by GSB and
amendment of GSB's bylaws and certificate of incorporation.
GSB's bylaws may be amended by a majority of the whole board of directors,
or by a vote of the holders of at least eighty percent (80%) (after giving
effect to the provision limiting voting rights beyond ten percent (10%)) of the
total votes eligible to be voted at a duly constituted meeting of stockholders.
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
BERKSHIRE. Under Berkshire's bylaws, the board of directors may set the
number of directors comprising the board of directors, but this number shall not
exceed eleven or be less than three.
68
Currently, the board of directors is composed of four directors. Each director
holds office until the next annual meeting of stockholders and until his
successor has been elected and qualified, or until his earlier death,
incapacity, retirement, resignation or removal.
GSB. GSB's bylaws state that in the absence of direction of the board of
directors, the number of directors shall be seven. Currently, the board of
directors consists of six directors.
Directors are to be elected at the annual stockholder meeting. GSB's
certificate of incorporation provides that directors shall be divided into three
classes as nearly equal in number as possible. The directors' terms are
staggered with each term expiring at the third succeeding annual meeting of
stockholders after their election. Approximately one-third of the total number
of directors is elected each year. Each director holds office until the next
annual meeting of stockholders and until his successor has been elected and
qualified, or until his earlier death, incapacity, retirement, resignation or
removal.
REMOVAL OF DIRECTORS
BERKSHIRE. DGCL Section 141 provides that any director or the entire board
of directors may be removed with or without cause by the holders of a majority
of the shares then entitled to vote at an election of directors.
GSB. GSB's certificate of incorporation provides that any director or the
entire board of directors may be removed from office at any time only for cause
and by the affirmative vote of the holders of at least eighty percent (80%) of
the voting power of all of the then outstanding shares of capital stock entitled
to vote generally in the election of directors.
STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
BERKSHIRE. Berkshire is subject to Section 203 of the DGCL, which governs
business combinations with interested stockholders. Subject to exceptions set
forth in Delaware law, Section 203 provides that a corporation shall not engage
in any business combination with any interested stockholder for a three-year
period following the time that a stockholder becomes an 'interested stockholder'
unless:
prior to that time, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
the interested stockholder acquires in the transaction in which it became
an interested stockholder at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding
certain shares); or
at or subsequent to the time, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding voting
stock which is not owned by the interested stockholder.
Except as specified in the law, Section 203 defines an interested
stockholder to mean any person that:
(A) is the owner of 15% or more of the outstanding voting stock of the
corporation; or
(B) is an affiliate or associate of the corporation and was the owner of
15% or more of the outstanding voting stock of the corporation at any time
within three years immediately prior to the relevant date, or any affiliate
or associate of the person referred to in (A) or (B) of this sentence.
GSB. Under GSB's certificate of incorporation, the approval of the holders
of at least eighty percent (80%) of the shares of capital stock entitled to vote
thereon is required for certain business combinations involving an interested
stockholder unless:
the proposed transaction has been approved by a majority of those members
of GSB's board of directors who are unaffiliated with the interested
stockholder and were directors prior to the time when the interested
stockholder became an interested stockholder; or
69
the proposed transaction meets conditions which are designed to afford the
stockholders a fair price in consideration for their shares. Interested
stockholder includes any individual, a group acting in concert,
corporation, partnership, association or other entity who or which is the
beneficial owner, directly or indirectly, of ten percent (10%) or more of
the outstanding shares of voting stock of GSB.
GSB is also subject to Section 203 of the DGCL.
LEGAL MATTERS
The validity of the shares of Berkshire common stock offered hereby will be
passed upon for Berkshire by Blank Rome Comisky & McCauley LLP. Emanuel J.
Adler, a partner in Blank Rome Comisky & McCauley LLP, is the Secretary of
Berkshire. Certain legal matters will be passed upon for GSB by Serchuk &
Zelermyer, LLP.
EXPERTS
The consolidated financial statements of Berkshire Bancorp Inc. as of
December 31, 1999 and October 31, 1999 and 1998 and for the two month period of
November 1, 1999 through December 31, 1999 and for each of the three years in
the period ended October 31, 1999, incorporated by reference in this joint proxy
statement/prospectus, have been audited by Grant Thornton LLP, independent
certified public accountants, whose report thereon appears therein, given upon
the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of GSB Financial Corporation as of
December 31, 1999 and 1998 and September 30, 1998 and the year ended
December 31, 1999 and for the three months ended December 31, 1998 and each of
the years in the two year period ended September 30, 1998 and 1997, incorporated
by reference in this joint proxy statement/prospectus, have been audited by
Nugent & Haeussler, P.C., independent certified public accountants, whose report
thereon appears therein, given upon the authority of said firm as experts in
accounting and auditing.
70
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information
should be read in conjunction with the historical consolidated financial
statements and related notes of Berkshire and GSB, which are incorporated herein
by reference. The unaudited pro forma information is presented for illustration
purposes only in accordance with the assumptions set forth below. This
information is not necessarily indicative of the operating results or of the
financial position that would have occurred if the merger had been consummated
nor is it necessarily indicative of future operating results or financial
position of the combined enterprise. The unaudited pro forma condensed combined
financial information does not reflect any adjustments to conform accounting
practices or to reflect any cost savings or other synergies anticipated as a
result of the merger or any merger-related expenses.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
The following unaudited pro forma condensed combined balance sheet presents
under the purchase method of accounting, the consolidated balance sheets of
Berkshire and GSB combined as of September 30, 2000 as if the merger had
occurred on that date.
CONDENSED COMBINED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
BERKSHIRE GSB ADJUSTED PRO FORMA
--------- --- -------- ---------
(IN THOUSANDS)
ASSETS
Cash and due from banks.................................. $ 502 $ 3,732 $ $ 4,234
Interest bearing deposits................................ 12,510 -- (8,762)(2) 3,748
Federal funds sold....................................... 10,750 100 (10,850)(2) --
-------- -------- -------- --------
Total cash and cash equivalents.......................... 23,762 3,832 (19,612) 7,982
-------- -------- -------- --------
Total investment securities.............................. 97,746 54,810 152,556
Loans, net of unearned income............................ 73,511 125,671 199,182
Accrued interest receivable.............................. 2,050 1,596 3,646
Premises and equipment, net.............................. 308 3,283 3,591
Prepaid expenses and other............................... 2,955 2,125 5,080
Goodwill, net............................................ 11,701 -- 7,125 (6) 18,826
-------- -------- -------- --------
Total assets.......................................... $212,033 $191,317 $(12,487) $390,863
-------- -------- -------- --------
-------- -------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Total deposits........................................... $ 97,996 $110,215 $ -- $208,211
Securities sold under agreements to repurchase........... 20,402 20,402
Federal funds purchased.................................. -- 6,075 6,075
Borrowings............................................... 6,500 42,000 48,500
Escrow................................................... -- 198 198
Accrued interest payable................................. 708 -- 708
Accrued other liabilities................................ 957 2,899 3,856
Income taxes payable..................................... 2,039 -- 2,039
Deferred tax liability................................... 100 -- 100
-------- -------- -------- --------
Total liabilities..................................... 128,702 161,387 290,089
-------- -------- -------- --------
Stockholders' equity
Common stock................................................ 256 22 (22)(1) 269
13 (2)
Additional paid-in capital.................................. 78,741 21,522 (22,223)(1) 93,164
14,424 (2)
1,214 (4)
(514)(5)
Accumulated other comprehensive (loss) income, net.......... (1,190) (1,130) 1,130 (1) (1,190)
Retained earnings........................................... 8,531 15,269 (15,269)(1) 8,531
Unearned ISAP stock......................................... -- (514) 514 (5) --
Unallocated ESOP stock...................................... -- (1,214) 1,214 (4) --
Less: Treasury stock........................................ (3,007) (4,025) (1,214)(4) --
5,239 (1)
3,007 (3)
-------- -------- -------- --------
Total stockholders' equity.................................. 83,331 29,930 (12,487) 100,774
-------- -------- -------- --------
$212,033 $191,317 $(12,487) $390,863
-------- -------- -------- --------
-------- -------- -------- --------
Notes appear on following page.
71
- -------------------
(1) Elimination of equity of GSB.
(2) Purchase price of $20.75 per share for 49.9% of GSB common stock in cash and
50.1% of Berkshire common stock or 571,291 shares of Berkshire common stock
as of September 30, 2000. To restate 50.1% of GSB common stock outstanding
using the exchange ratio; historical and pro forma common stock outstanding
as of September 30, 2000.
BERKSHIRE GSB ADJUSTMENTS PRO FORMA
--------- --------- ----------- ---------
Common Stock -- Berkshire Bancorp Inc......... 2,566,095 2,566,095
Common Stock -- GSB........................... 1,894,073 (1,894,073)
Common Stock outstanding to be converted
(50.1%)................................. 948,931
Common Stock issued (exchange rate
0.6027)................................. 571,921 571,921
Less: Berkshire treasury stock(3)......... (441,646)
---------
Common Stock -- Pro forma Total............... 2,696,370
---------
---------
The following represents the adjustment to additional paid in capital
(in thousands):
Total fair value of stock issued (571,921 x $30.50)(7)...... $17,444
Less: Par value of new shares issued ((571,921 - 441,646) x
$0.10))................................................... 13
Treasury Stock reissued................................ 3,007
-------
Adjustment to additional paid shares in capital............. $14,424
-------
-------
(3) Issuance of treasury stock for purchase price (441,646).
(4) Termination of GSB ESOP of unawarded and awarded but unvested GSB shares
held by the GSB ESOP management recognition plan's trustee. Assumes 58,509
GSB shares will be redeemed to eliminate the remaining balance due on the
ESOP loan.
(5) Termination of ISAP assuming that all remaining shares are cancelled.
(6) Pro forma adjustment to record the goodwill as excess consideration paid.
Purchase price assumes 50.1% or 948,931, of GSB common stock is converted to
Berkshire stock at an exchange rate of 0.6027 with market share price of
$30.50 per share(7), and the remaining 945,142 shares are exchanged for cash
at $20.75 per share. Total purchase price, excluding merger related costs
and the fair market value of the GSB vested options exchanged for Berkshire
options, is $37.1 million.
(7) Market price is as of September 30, 2000.
72
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENTS
The following unaudited pro forma condensed combined income statements
present, under the purchase method of accounting, the consolidated income
statements of Berkshire and GSB for the nine months ended September 30, 2000 and
the year ended December 31, 1999, as if the merger had occurred on January 1,
2000 and 1999, respectively.
CONDENSED COMBINED PRO FORMA INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
BERKSHIRE GSB ADJUSTMENTS PRO FORMA
--------- --- ----------- ---------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
INTEREST INCOME:
Short-term interest-earning assets....................... $ 903 $ -- $ (735)(1) $ 168
Securities and other investments......................... 4,637 2,877 7,514
Loans.................................................... 4,695 6,712 11,407
------- ------ ------- -------
Total interest income................................. 10,235 9,589 (735) 19,089
------- ------ ------- -------
INTEREST EXPENSE:
Deposits................................................. 3,027 3,112 6,139
Borrowings............................................... 580 1,989 2,569
------- ------ ------- -------
Total interest expense................................... 3,607 5,101 8,708
------- ------ ------- -------
Net interest income...................................... 6,628 4,488 (735) 10,381
Provision for loan losses................................ 15 75 90
------- ------ ------- -------
Net interest income after provision for loan losses...... 6,613 4,413 (735) 10,291
OTHER INCOME:
Investment securities gains.............................. 13,288 138 13,426
Other income............................................. 1,189 261 1,450
------- ------ ------- -------
Total other income.................................... 14,477 399 -- 14,876
------- ------ ------- -------
OTHER EXPENSE:
Salaries and employee benefits........................... 1,623 1,350 2,973
Net occupancy expense.................................... 333 180 513
Equipment expense........................................ 74 85 159
FDIC assessment.......................................... 21 16 37
Data processing expense.................................. 15 224 239
Amortization of goodwill................................. 477 -- 267 (2) 744
Other.................................................... 1,153 1,162 -- 2,315
------- ------ ------- -------
Total other expense................................... 3,696 3,017 (267) 6,980
------- ------ ------- -------
Income before provision for taxes........................... 17,394 1,795 (1,002) 18,187
Provision for income taxes.................................. 6,229 687 (338)(1) 6,578
------- ------ ------- -------
Net income.................................................. $11,165 $1,108 $ (664) $11,609
------- ------ ------- -------
------- ------ ------- -------
Net income per share:
Basic.................................................... $ 5.24 $ 0.62 $ 4.35
Diluted.................................................. $ 5.13 $ 0.61 $ 4.26
Weighted average shares outstanding:
Basic.................................................... 2,131 1,788 (1,788) 2,671
540 (3)
Diluted.................................................. 2,176 1,814 (1,814) 2,724
548 (3)
- -------------------
(1) Interest income forgone on the interest bearing deposits and federal funds
sold totaling $19.6 million used to pay for the cash portion of the purchase
price at a blended rate of 5.00%, net of income tax expense.
(2) Amortization of $7.1 million of goodwill over 20 years.
(3) To allocate 50.1% of GSB common stock outstanding using the exchange ratio.
73
CONDENSED COMBINED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
BERKSHIRE(4) GSB ADJUSTMENTS PRO FORMA
------------ --- ----------- ---------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
INTEREST INCOME:
Short-term interest-earning assets....................... $ 1,149 $ -- $ (980)(1) $ 169
Securities and other investments......................... 4,666 3,277 7,943
Loans.................................................... 4,037 7,432 11,469
------- ------- ------ -------
Total interest income................................. 9,852 10,709 (980) 19,581
------- ------- ------ -------
INTEREST EXPENSE:
Deposits................................................. 3,010 3,625 6,635
Borrowings............................................... 91 1,474 1,565
------- ------- ------ -------
Total interest expense................................... 3,101 5,099 8,200
------- ------- ------ -------
Net interest income...................................... 6,751 5,610 (980) 11,381
Provision for loan losses................................ 55 140 195
------- ------- ------ -------
Net interest income after provision for loan losses...... 6,696 5,470 (980) 11,186
OTHER INCOME:
Investment securities gains.............................. 10,731 304 11,035
Other income............................................. 578 318 896
------- ------- ------ -------
Total other income.................................... 11,309 622 11,931
------- ------- ------ -------
OTHER EXPENSE:
Salaries and employee benefits........................... 1,775 1,621 3,396
Net occupancy expense.................................... 427 230 657
Equipment expense........................................ 121 109 230
FDIC assessment.......................................... 11 11 22
Data processing expense.................................. 17 280 297
Amortization of goodwill................................. 730 -- 356(2) 1,086
Recovery of post-retirement FASB 106 expense............. -- (288) (288)
Other.................................................... 1,138 1,288 2,426
------- ------- ------ -------
Total other expense................................... 4,219 3,251 356 7,826
------- ------- ------ -------
Income before provision for taxes........................... 13,786 2,841 (1,336) 15,291
Provision for income taxes.................................. 5,527 1,071 (451)(1) 6,147
------- ------- ------ -------
Net income.................................................. $ 8,259 $ 1,770 $ (885) $ 9,144
------- ------- ------ -------
------- ------- ------ -------
Net income per share:
Basic.................................................... $ 3.88 $ 0.94 $ 3.39
Diluted.................................................. $ 3.65 $ 0.94 $ 3.23
Weighted average shares outstanding:
Basic.................................................... 2,126 1,875 (1,875) 2,692
566(3)
Diluted.................................................. 2,261 1,889 (1,889) 2,831
570(3)
- ---------
(1) Interest income forgone on the interest bearing deposits and federal funds
sold totaling $19.6 million used to pay for the cash portion of the purchase
price at a blended rate of 5.00%, net of income tax expense.
(2) Amortization of $7.1 million of goodwill over 20 years.
(3) To allocate 50.1% of GSB common stock outstanding using the exchange ratio.
(4) Berkshire changed its year end from an October 31 to a December 31 during
1999. Balances calculated by adding the 2 month transition period of
November 1, 1999 through December 31, 1999 to the 10 month period of January
1, 1999 through October 31, 1999.
74
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
BERKSHIRE BANCORP INC.,
GREATER AMERICAN FINANCE GROUP, INC.
AND
THE BERKSHIRE BANK
AND
GSB FINANCIAL CORPORATION
AND
GOSHEN SAVINGS BANK
AGREEMENT AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
PAGE
----
Recitals.................................................... A-1
Definitions................................................. A-1
ARTICLE 1
TERMS OF THE REORGANIZATION
1.1 The Merger.................................................. A-6
(a) Effects of the Merger................................... A-6
(b) Transfer of Assets...................................... A-6
(c) Assumption of Liabilities............................... A-6
1.2 Certificate of Incorporation, Bylaws, Directors, Officers
and Name of the Surviving Corporation..................... A-6
(a) Certificate of Incorporation............................ A-6
(b) Bylaws.................................................. A-6
(c) Directors and Officers.................................. A-6
(d) Advisory Board.......................................... A-7
(e) Fees.................................................... A-7
(f) Name.................................................... A-7
1.3 Availability of Information................................. A-7
1.4 Subsidiary Merger and Berkshire's Right to Revise the
Structure of the Transaction.............................. A-7
1.5 Anti-dilution Provisions.................................... A-7
ARTICLE 2
DESCRIPTION OF TRANSACTION
2.1 Terms of the Merger......................................... A-7
(a) Satisfaction of Conditions to Closing................... A-7
(b) Effective Time.......................................... A-8
2.2 Conversion of Stock......................................... A-8
(a) Consideration........................................... A-8
(b) Cash or Stock Merger Consideration...................... A-8
(c) Fractional Shares....................................... A-8
(d) Dissenting Shares....................................... A-8
(e) Treatment of Options.................................... A-8
(f) Calculation Schedule.................................... A-9
2.3 Election and Allocation Procedures.......................... A-9
(a) Election by GSB Stockholders............................ A-9
(b) Allocation of Cash and Stock............................ A-9
(c) Receipt of Payment...................................... A-10
(d) Satisfaction of Conditions to Closing................... A-10
2.4 Election Procedures......................................... A-10
2.5 Mechanics of Payment of Consideration....................... A-11
(a) Payment of the Merger Consideration..................... A-11
(b) Submission Procedures for Non-Electing Shares........... A-11
(c) Rights Appurtenant to Certificates; Lost Certificates... A-11
(d) Stock Transfer Books.................................... A-12
(e) Reservation, Registration and Listing of Shares of
Berkshire Common Stock.................................... A-12
(f) Right to Receive Dividends on Berkshire Common Stock.... A-12
2.6 Time and Place of Closing................................... A-12
2.7 Voting Agreements........................................... A-12
i
PAGE
----
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE GSB PARTIES
3.1 Organization and Qualification of GSB and Subsidiaries...... A-12
3.2 Authorization, Execution and Delivery; Agreement Not in
Breach.................................................... A-13
3.3 No Legal Bar................................................ A-13
3.4 Government and Other Approvals.............................. A-13
3.5 Licenses, Franchises and Permits............................ A-14
3.6 Charter Documents........................................... A-14
3.7 GSB Financial Statements.................................... A-14
3.8 Absence of Certain Changes.................................. A-14
3.9 Deposits.................................................... A-15
3.10 Properties.................................................. A-15
3.11 Condition of Fixed Assets and Equipment..................... A-15
3.12 Tax Matters................................................. A-15
3.13 Litigation.................................................. A-16
3.14 Environmental Matters....................................... A-16
3.15 Insurance................................................... A-16
3.16 Books and Records........................................... A-16
3.17 Capitalization of GSB....................................... A-17
3.18 Sole Agreement.............................................. A-17
3.19 Disclosure.................................................. A-18
3.20 Absence of Undisclosed Liabilities.......................... A-18
3.21 Allowance for Loan or REO Losses............................ A-18
3.22 Loan Portfolio.............................................. A-19
(a) Enforceability.......................................... A-19
(b) No Modification......................................... A-19
(c) Owner................................................... A-19
(d) Documents............................................... A-19
(e) Litigation.............................................. A-19
(f) Participation........................................... A-19
3.23 Compliance with Laws........................................ A-19
3.24 Employee and Director Benefit Plans......................... A-19
3.25 Material Contracts.......................................... A-21
3.26 Material Contract Defaults.................................. A-21
3.27 1934 Act and NASDAQ Listing................................. A-22
3.28 Certain Regulatory Matters.................................. A-22
3.29 Corporate Approval.......................................... A-22
3.30 Broker's and Finder's Fees.................................. A-22
3.31 Delays...................................................... A-22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BERKSHIRE PARTIES
4.1 Organization and Qualification of Berkshire and
Subsidiaries.............................................. A-22
4.2 Authorization, Execution and Delivery; Agreement Not in
Breach.................................................... A-23
4.3 No Legal Bar................................................ A-23
4.4 Government and Other Approvals.............................. A-23
4.5 Licenses, Franchises and Permits............................ A-24
4.6 Charter Documents........................................... A-24
4.7 Berkshire Financial Statements.............................. A-24
4.8 Absence of Certain Changes.................................. A-24
4.9 Deposits.................................................... A-25
4.10 Tax Matters................................................. A-25
ii
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4.11 Litigation.................................................. A-26
4.12 Environmental Matters....................................... A-26
4.13 Insurance................................................... A-26
4.14 Books and Records........................................... A-26
4.15 Capitalization of Berkshire................................. A-26
4.16 Greater and Berkshire Bank Stock............................ A-27
4.17 Disclosure.................................................. A-27
4.18 Absence of Undisclosed Liabilities.......................... A-28
4.19 Allowance for Loan or REO Losses............................ A-28
4.20 Loan Portfolio.............................................. A-28
(a) Ownership............................................... A-28
(b) Litigation.............................................. A-28
4.21 Compliance with Laws........................................ A-28
4.22 Employee Benefit Plans...................................... A-29
4.23 Material Contracts.......................................... A-29
4.24 Material Contract Defaults.................................. A-29
4.25 1934 Act and NASDAQ Listing................................. A-29
4.26 Certain Regulatory Matters.................................. A-29
4.27 Corporate Approval.......................................... A-30
4.28 Broker's and Finder's Fees.................................. A-30
4.29 Delays...................................................... A-30
ARTICLE 5
COVENANTS OF GSB AND GOSHEN SAVINGS BANK
5.1 Preparation of Registration Statement and Applications For
Required Consents......................................... A-30
5.2 Conduct of Business -- Affirmative Covenants................ A-30
5.3 Conduct of Business -- Negative Covenants................... A-32
5.4 Conduct of Business -- Certain Actions...................... A-34
5.5 Delivery of Information..................................... A-34
5.6 Notification................................................ A-34
ARTICLE 6
COVENANTS OF BERKSHIRE
6.1 Regulatory and Other Approvals.............................. A-35
6.2 Approvals and Registrations................................. A-35
6.3 Employee Benefits; Directors Deferred Compensation Plan..... A-36
6.4 Notification................................................ A-36
6.5 Tax Representations......................................... A-37
6.6 Directors and Officers Indemnification and Insurance
Coverage.................................................. A-37
6.7 Conduct of Berkshire and Berkshire Bank Prior to the
Effective Time............................................ A-37
6.8 NASDAQ Listing.............................................. A-37
6.9 Goshen Savings Bank Division................................ A-37
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of Berkshire.................. A-38
(a) Performance............................................. A-38
(b) No Material Adverse Change.............................. A-38
(c) Representations and Warranties.......................... A-38
(d) Documents............................................... A-38
(e) Inspections Permitted................................... A-38
(f) Opinion of GSB's Counsel................................ A-38
iii
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(g) Other Business Combinations, Etc........................ A-39
(h) Fairness Opinion........................................ A-39
7.2 Conditions to the Obligations of GSB........................ A-39
(a) Performance............................................. A-39
(b) No Material Adverse Change.............................. A-39
(c) Representations and Warranties.......................... A-39
(d) Documents............................................... A-39
(e) Consideration........................................... A-40
(f) Inspections Permitted................................... A-40
(g) Opinion of Berkshire's Counsel.......................... A-40
(h) Fairness Opinion........................................ A-40
7.3 Conditions to Obligations of All Parties.................... A-40
(a) No Pending or Threatened Claims......................... A-40
(b) Governmental Approvals and Acquiescence Obtained........ A-40
(c) Approval of Stockholders................................ A-40
(d) Effectiveness of Registration Statement................. A-41
(e) Tax Opinion............................................. A-41
ARTICLE 8
TERMINATION
8.1 Termination................................................. A-41
8.2 Effect of Termination....................................... A-42
8.3 Fees........................................................ A-43
8.4 Expenses.................................................... A-43
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices..................................................... A-43
9.2 Governing Law............................................... A-44
9.3 Counterparts................................................ A-44
9.4 Publicity................................................... A-44
9.5 Entire Agreement............................................ A-44
9.6 Severability................................................ A-45
9.7 Modifications, Amendments and Waivers....................... A-45
9.8 Interpretation.............................................. A-45
9.9 Payment of Expenses......................................... A-45
9.10 Provisions Which Survive.................................... A-45
9.11 No Waiver................................................... A-45
9.12 Remedies Cumulative......................................... A-45
9.13 Confidentiality............................................. A-45
9.14 Indemnification............................................. A-46
Exhibit A -- Subsidiary Merger Agreement (The Berkshire Bank and
Goshen Savings Bank)..................................... A-1
Exhibit B -- Form of Legal Opinion.................................... B-1
Exhibit C -- Form of Voting Agreement................................. C-1
iv
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this 'Agreement'), dated as of
August 16, 2000 is entered into by and between Berkshire Bancorp Inc.
('Berkshire' or the 'Surviving Corporation' as the context may require), a
corporation incorporated and existing under the laws of the State of Delaware,
which is registered as a bank holding company and whose principal offices are
located at 160 Broadway, New York, NY 10038; Greater American Finance Group,
Inc. ('Greater'), a corporation incorporated and existing under the laws of the
State of Delaware, which is registered as a bank holding company and whose
principal offices are located at 160 Broadway, New York, NY 10038, and which is
a wholly-owned subsidiary of Berkshire; The Berkshire Bank ('Berkshire Bank'), a
commercial bank chartered and existing under the laws of the State of New York,
which has its main office at 600 Madison Avenue, New York, NY 10022, and is a
wholly-owned subsidiary of Greater; GSB Financial Corporation ('GSB'), a
corporation organized and existing under the laws of the State of Delaware,
which is a savings and loan holding company and whose principal offices are
located at 1 South Church Street, Goshen, NY 10924; and Goshen Savings Bank
('Goshen Savings Bank'), a federal savings bank, chartered and existing under
the laws of the United States, which has its main office at 1 South Church
Street, Goshen, NY 10924, and is a wholly-owned subsidiary of GSB.
Berkshire, Greater, Berkshire Bank, GSB and Goshen Savings Bank are
sometimes referred to herein as the 'Parties.'
RECITALS
A. GSB is the beneficial owner and holder of record of 1,000 shares of
Goshen Savings Bank Common Stock, which constitute all of the shares of common
stock of Goshen Savings Bank issued and outstanding.
B. The Boards of Directors of GSB and Goshen Savings Bank deem it desirable
and in the best interests of GSB and Goshen Savings Bank and the stockholders of
GSB that GSB be merged with and into Berkshire (which would survive the merger
as the Surviving Corporation) on the terms and subject to the conditions set
forth in this Agreement.
C. The Board of Directors of The Berkshire Parties, as defined below deems
it desirable and in the best interests of The Berkshire Parties and the
stockholders of Berkshire that GSB be merged with and into Berkshire on the
terms and subject to the conditions set forth in this Agreement and in the
manner provided in this Agreement.
D. The Parties to this Agreement further deem it desirable and in the best
interests of the respective corporations and their stockholders that Goshen
Savings Bank be merged with and into Berkshire Bank immediately after the Merger
pursuant to the Merger Agreement attached hereto as Exhibit A.
E. Pursuant to this Agreement, each share of GSB Common Stock outstanding at
the Effective Time will be converted into either (i) cash in the amount of
$20.75, or (ii) 0.6027 shares of Berkshire Common Stock. Stockholders of GSB
Common Stock will be entitled to elect their preference with respect to each
share of GSB Common Stock held by them, subject to pro-rata allocation, such
that from 40.0% to 49.9% of the aggregate consideration payable by Berkshire for
all outstanding GSB Common Stock shall be paid in cash, and from 50.1% to 60.0%
will be in the form of Berkshire Common Stock, including the effect of the
payment of cash to the stockholders who exercise dissenters' rights.
DEFINITIONS
Except as otherwise provided herein, as used in this Agreement, the
following terms shall have the indicated meanings (which shall be applicable to
both the singular and plural forms of the terms defined).
'Acquisition Proposal' means a proposed, suggested or threatened tender
offer, agreement, understanding or other proposal of any nature pursuant to
which any Person or group, other than
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the Berkshire Parties, would directly or indirectly (i) acquire or participate
in a merger, share exchange, consolidation or any other business combination
involving GSB or Goshen Savings Bank; (ii) acquire the right to vote ten percent
(10%) or more of the outstanding voting stock of GSB or Goshen Savings Bank;
(iii) acquire a significant portion of the assets or earning power of GSB or of
Goshen Savings Bank; or (iv) acquire in excess of ten percent (10%) of any class
of capital stock of GSB or Goshen Savings Bank.
'Acquisition Transaction' means any of the following events:
(i) the acquisition by any Person, other than the Berkshire Parties,
alone or together with such Person's affiliates and associates or any group,
of beneficial ownership of 15% or more of the outstanding shares of GSB
Common Stock (for purposes of this Subsection (b)(i), the terms 'group' and
'beneficial ownership' shall be as defined in Section 13(d) of the Exchange
Act and regulations promulgated thereunder and as interpreted thereunder);
(ii) a merger, consolidation, share exchange, business combination or
any other similar transaction involving GSB or Goshen Savings Bank;
(iii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 25% or more of the assets of the GSB or Goshen Savings Bank,
in a single transaction or series of transactions; or
(iv) the Board of Directors of GSB does not recommend approval of this
Agreement to its stockholders.
'Aggregate Consideration' shall mean the amount which is equal to the sum of
(i) the number of Cash Election Shares (included all Dissenting Shares)
multiplied by the Cash Merger Consideration, plus (ii) the number of Stock
Election Shares multiplied by the dollar amount of the Stock Merger
Consideration, determined based upon the Determination Price. The Aggregate
Consideration shall be determined after all adjustments and pro rations required
to be made under this Agreement except for the adjustment pursuant to
Section 8.1(j).
'Aggregate Shares' shall mean the number of shares of GSB Common Stock
issued and outstanding on the Closing Date, excluding shares for which no
consideration is payable as described in Section 2.2(a).
'Agreement' means this Agreement and Plan of Reorganization, and any
amendment or supplement hereto, which constitutes a 'plan of merger' between GSB
and Berkshire.
'Balance Sheet Date' means June 30, 2000.
'Banking Board' means the New York State Banking Board and, unless the
context otherwise indicates, shall include the Superintendent of Banks of the
State of New York.
'Berkshire' means Berkshire Bancorp Inc. and, except as the context
otherwise requires, includes all Berkshire Subsidiaries.
'Berkshire Common Stock' means the issued and outstanding common stock,
$0.10 par value, of Berkshire.
'Berkshire Financial Statements' means the audited financial statements of
Berkshire for the years ended October 31, 1999, 1998 and 1997, the interim
transition period financial statements of Berkshire for the transition period
ended December 31, 1999, and the unaudited financial statements of Berkshire for
the periods ended March 31, 2000 and June 30, 2000, together with all notes to
such financial statements, as included in Berkshire's annual report on
Form 10-K filed with the SEC for the fiscal year ended October 31, 1999,
Berkshire's transition report on Form 10-K filed with the SEC for the period
ended December 31, 1999, and Berkshire's reports on Form 10-Q filed with the SEC
for the periods ended March 31, 2000 and June 30, 2000.
'Berkshire Parties' means Berkshire, Greater and Berkshire Bank and, except
as the context otherwise requires, includes all other Berkshire Subsidiaries.
'Berkshire Real Property' means the real property, if any, owned by
Berkshire or any Berkshire subsidiary and used in the conduct of its business or
held by Berkshire or such subsidiary as real estate owned or for any other
purpose.
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'Berkshire Schedule' means the Schedule of exceptions and other information
prepared by Berkshire and delivered to GSB as described in the introductory
paragraph of Article 4.
'Cap Price' means $40.365.
'Cash Election' means the election by a stockholder to receive the Cash
Merger Consideration for such stockholder's shares of GSB Common Stock.
'Cash Election Shares' means shares as to which a Cash Election has been
made.
'Cash Merger Consideration' means $20.75.
'Closing' means closing of the Merger and the Subsidiary Merger.
'Closing Date' means the date of the Closing which shall be on the eighth
business day after the last condition precedent pursuant to this Agreement has
been fulfilled or waived (including the expiration of any applicable waiting
period) or such other date upon which the Parties may mutually agree.
'Code' means the Internal Revenue Code of 1986, as amended.
'Collar Price' means $28.635.
'DGCL' means Delaware General Corporation Law.
'Determination Date' means the day which is eight business days before the
Closing Date.
'Determination Price' means the mean average market price of Berkshire
Common Stock for the twenty trading days immediately preceding the Determination
Date. In calculating the average market price of Berkshire Common Stock, the
market price on any trading day for which there are trades reported on the
NASDAQ SmallCap or NASDAQ National Market shall be the last quoted trading price
on that day, and the market price on any trading day for which no trades have
been reported on the NASDAQ SmallCap or NASDAQ National Market shall be the
average of the high bid and low asked prices on that day as reported by NASDAQ.
'Dissenting Shares' mean shares of GSB Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by a
stockholder who has duly exercised the right of appraisal (to the extent such
right is available by law) with respect to such shares of GSB Common Stock
pursuant to Section 262 of the DGCL.
'Effective Time' shall be the close of business on the date on which the
Merger is consummated by the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware.
'Election Form' shall mean the form mutually prepared by Berkshire and GSB
which shall be distributed to the GSB Stockholders and by which the GSB
Stockholders can indicate their election to receive the Cash Merger
Consideration or the Stock Merger Consideration.
'Election Deadline' means the date agreed upon by Berkshire and GSB, and set
forth in the Election Form, by which GSB Stockholders are required to return
their election forms, as such date may be extended pursuant to the terms of this
Agreement.
'Environmental Laws' mean all federal, state and local laws, including
statutes, regulations, ordinances, codes, rules and other governmental
restrictions, standards and requirements relating to the discharge of air
pollutants, water pollutants or process waste water or substances, as now or at
any time hereafter in effect, including, but not limited to, the Federal Solid
Waste Disposal Act, the Federal Hazardous Materials Transportation Act, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental
Responsibility Cleanup and Liability Act of 1980, as amended ('CERCLA'),
regulations of the Environmental Protection Agency, regulations of the Nuclear
Regulatory Agency, regulations of the Occupational Safety and Health
Administration, and any so-called 'Superfund' or 'Superlien' Laws.
'ERISA' means the Employee Retirement Income Security Act of 1974, as
amended.
'ESOP' means the Employee Stock Ownership Plan of GSB.
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'Exchange Act' means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated from time to time thereunder.
'Exchange Agent' means American Stock Transfer & Trust Company or such other
bank, trust company, transfer agent or other entity selected by Berkshire, with
the consent of GSB, not to be unreasonably withheld.
'Expenses' means all reasonable in amount and reasonably incurred
out-of-pocket expenses (including all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to the applicable Party and its
affiliates) incurred by or on behalf of a Party to this Agreement in connection
with the consummation of the transactions contemplated by this Agreement.
'FDIC' means the Federal Deposit Insurance Corporation.
'FRB' means the Board of Governors of the Federal Reserve System.
'GAAP' means generally accepted accounting principles as in effect at the
relevant date.
'Goshen Savings Bank Common Stock' means the common stock of Goshen Savings
Bank, par value $0.01 per share.
'Government Approvals' means the approval, or non-objection after notice, of
the Merger, the Subsidiary Merger, or the transactions related thereto by the
Banking Board, the FDIC, the FRB and the OTS.
'GSB' means GSB Financial Corporation and, except as the context otherwise
requires, includes all GSB Subsidiaries.
'GSB Common Stock' means the common stock of GSB, $0.01 par value.
'GSB Financial Statements' means the audited financial statements of GSB for
the years ended December 31, 1999, 1998 and 1997, and the unaudited financial
statements of GSB for the periods ended March 31, 2000 and June 30, 2000,
together with all notes to all such financial statements, as included in GSB's
annual report on Form 10-K filed with the SEC for the fiscal year ended
December 31, 1999, and GSB's reports on Form 10-Q filed with the SEC for the
periods ended March 31, 2000 and June 30, 2000.
'GSB Real Property' means the real property, if any, owned by GSB or any GSB
Subsidiary and used in the conduct of its business or held by GSB or such
subsidiary as real estate owned or for any other purpose.
'GSB Parties' means GSB and Goshen Savings Bank and, except as the context
otherwise requires, includes all other GSB Subsidiaries.
'GSB Schedule' means the Schedule of exceptions and other information
prepared by GSB and delivered to Berkshire as described in the introductory
paragraph of Article 3.
'GSB Stock Options' mean options to purchase shares of GSB Common Stock
granted pursuant to the GSB Stock Option Plan as approved by stockholders of GSB
on February 25, 1998 and amended by stockholders on April 27, 2000.
'GSB Stockholder' means a record holder of one or more shares of GSB Common
Stock.
'Merger' means the merger of GSB with and into Berkshire, with Berkshire
surviving the merger.
'Non-Election' means the failure of a GSB Stockholder to indicate a
preference as to consideration to be received for its GSB Common Stock.
'Non-Electing Shares' means outstanding shares of GSB Common Stock as to
which there is a Non-Election.
'OTS' means the Office of Thrift Supervision of the United States Department
of the Treasury.
'Person' means an individual, partnership (general or limited), corporation,
joint venture, business trust, limited liability company, cooperative
association or other form of business
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organization (whether or not regarded as a business entity under applicable
law), trust, estate or any other entity.
'Per Share Merger Consideration' means either the Cash Merger Consideration
or Stock Merger Consideration.
'Prospectus/Proxy' means the combined prospectus and proxy statement
constituting the prospectus for the issuance of the Berkshire Common Stock as
the Stock Merger Consideration pursuant to this Agreement and also constituting
the proxy statement sent to the stockholders of Berkshire and GSB to solicit
their votes on the approval of this Agreement, as the same is included in the
Registration Statement as declared effective by the SEC, together with any
supplement or amendment thereto included as part of any post-effective
amendment.
'Registration Statement' means the Securities Act registration statement on
Form S-4 as filed with the SEC in order to register the offering of the
Berkshire Common Stock constituting the offering of the Stock Merger
Consideration, together with all filed amendments to such registration
statement.
'Regulatory Authorities' shall mean the OTS, the FRB, the FDIC and the
Banking Board.
'SEC' means the Securities and Exchange Commission.
'Securities Act' means the Securities Act of 1933, as amended, and the rules
and regulations promulgated from time to time thereunder.
'Securities Laws' means the Securities Act and the Exchange Act.
'Stock Election' means the election by a stockholder to receive the Stock
Merger Consideration for such stockholder's shares of GSB Common Stock.
'Stock Election Shares' means shares as to which a Stock Election has been
made.
'Stockholder Materials' means a letter of transmittal, an instruction sheet
and a return mailing envelope sent or made available to GSB Stockholders who
have not duly submitted the certificates for shares of GSB Common Stock by the
Election Deadline.
'Stock Merger Consideration' means 0.6027 shares of Berkshire Common Stock.
'Subsidiary' means a corporation, partnership, limited liability company or
other business entity in which any party, or group of parties, to this Agreement
owns, directly or indirectly, 50% or more of any class of equity securities or a
comparable percentage equity ownership interest.
'Subsidiary Merger' means the merger of Goshen Savings Bank with and into
Berkshire Bank.
'Superior Proposal' means a bona fide proposal to enter into an Acquisition
Transaction that the board of directors of GSB determines in its good faith
business judgment (after consultation with its financial advisors and legal
counsel) (i) would result in a transaction that is more favorable to its
stockholders, from a financial point of view, than the transactions contemplated
by this Agreement, and (ii) is reasonably capable of being completed; provided,
however, that, for the purposes of this definition, the term 'Acquisition
Transaction' shall have the meaning ascribed to it herein except that the
reference therein to 15% shall be deemed to be a reference to 50%.
'Tax' means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
'Tax Return' means any returns, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements herein contained and for
other good and valuable
A-5
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:
AGREEMENT
ARTICLE 1
TERMS OF THE REORGANIZATION
1.1 The Merger. Subject to the satisfaction (or lawful waiver) of each of
the conditions to the obligations of each of the Parties to this Agreement, at
the Effective Time, GSB shall be merged with and into Berkshire, which latter
corporation shall survive the Merger and is referred to herein in such capacity
as the 'Surviving Corporation.' The Merger shall have the effects set forth in
the DGCL, with respect to mergers of corporate entities.
(a) Effects of the Merger. At the Effective Time, the separate existence of
GSB shall cease, and Berkshire, as the Surviving Corporation, shall thereupon
and thereafter possess all of the assets, rights, privileges, appointments,
powers, licenses, permits and franchises of the two merged corporations, whether
of a public or a private nature, and shall be subject to all of the liabilities,
restrictions, disabilities and duties of GSB. The Merger is intended to be
treated by the parties as a reorganization within the meaning of Section 368(a)
of the Code.
(b) Transfer of Assets. At the Effective Time, all rights, assets, licenses,
permits, franchises and interests of GSB in and to every type of property,
whether real, personal, or mixed, whether tangible or intangible, and choses in
action shall be deemed to be vested in Berkshire as the Surviving Corporation by
virtue of the Merger becoming effective and without any deed or other instrument
or act of transfer whatsoever.
(c) Assumption of Liabilities. At the Effective Time, the Surviving
Corporation shall become and be liable for all debts, liabilities, obligations
and contracts of GSB whether the same shall be matured or unmatured; whether
accrued, absolute, contingent or otherwise; and whether or not reflected or
reserved against in the balance sheets, other financial statements, books of
account or records of GSB.
1.2 Certificate of Incorporation, Bylaws, Directors, Officers and Name of
the Surviving Corporation.
(a) Certificate of Incorporation. At and after the Effective Time, the
Certificate of Incorporation of Berkshire, as in effect immediately prior to the
Effective Time, shall continue to be the Certificate of Incorporation of
Berkshire as the Surviving Corporation, unless and until amended thereafter as
provided by law and the terms of such Certificate of Incorporation.
(b) Bylaws. At and after the Effective Time, the Bylaws of Berkshire, as in
effect immediately prior to the Effective Time, shall continue to be the Bylaws
of Berkshire as the Surviving Corporation, unless and until amended or repealed
as provided by law, the Certificate of Incorporation of Berkshire and such
Bylaws.
(c) Directors and Officers. The directors and officers of Berkshire in
office immediately prior to the Effective Time shall continue to be the
directors and officers of the Surviving Corporation, to hold office as provided
in the Certificate of Incorporation and Bylaws of the Surviving Corporation,
unless and until their successors shall have been elected or appointed and shall
have qualified or until they shall have been removed in the manner provided in
said Certificate of Incorporation and Bylaws, provided, however, that the Board
of Directors of Berkshire shall elect Thomas Guarino as a director of Berkshire.
Mr. Guarino shall be elected for a term expiring at the next annual meeting of
stockholders of Berkshire and shall be nominated for election as a director for
a one year term at such annual meeting. Berkshire shall recommend Mr. Guarino
for election by the stockholders and shall include him in management's proxy
solicitation for such meeting. Greater, as the sole stockholder of Berkshire
Bank, shall also elect Thomas Guarino and Clifford Kelsey as directors of
Berkshire Bank. Messrs. Guarino and Kelsey shall be elected for terms expiring
at the next annual meeting of stockholders of Berkshire Bank and at such
meeting, Greater shall vote all its shares of Berkshire Bank stock to elect them
as directors for one year
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terms. If either Mr. Guarino or Mr. Kelsey is unable or unwilling to serve, he
shall be replaced by another person selected by Berkshire who was a director of
GSB immediately prior to the Closing Date.
(d) Advisory Board. Berkshire Bank shall offer the current directors of GSB
seats on a to-be-formed Advisory Board of the Goshen Savings Bank division of
Berkshire Bank for a period of at least three years. Such Advisory Board shall
meet every other month and board members will receive board fees of $1,000 per
meeting actually attended. Berkshire and Berkshire Bank shall have the right to
send one or more representatives to attend Advisory Board meetings and the
Advisory Board shall give Berkshire at least 15 days notice of the date, time
and place of such meetings.
(e) Fees. All directors described in Sections 1.2 (c) shall be entitled to
the same fees and benefits as other directors, but no employee of Berkshire or
Berkshire Bank shall be entitled to receive any directors fees or Advisory Board
fees while an employee.
(f) Name. The name of the Surviving Corporation following the Merger shall
be 'Berkshire Bancorp Inc.'
1.3 Availability of Information. Promptly after the execution by the Parties
of this Agreement, each Party shall provide to the other Parties, its officers,
employees, agents, and representatives, access, on reasonable notice and during
customary business hours, to the books, records, properties and facilities of
the Party and shall use its best efforts to cause its officers, employees,
agents and representatives to cooperate with any of the reviewing Party's
reasonable requests for information.
1.4 Subsidiary Merger and Berkshire's Right to Revise the Structure of the
Transaction. The Parties to this Agreement shall take all such action as shall
be necessary or appropriate to effect the Subsidiary Merger pursuant to the
terms, subject to the conditions and with the effects set forth in the
Subsidiary Merger Agreement, immediately after the Merger. Berkshire shall have
the right to revise the structure of the corporate reorganization contemplated
by this Agreement (including, without limitation, the manner in which the Merger
or the Subsidiary Merger are to be effectuated) in order to achieve tax benefits
or for regulatory reasons which Berkshire may deem advisable. Berkshire may
exercise this right of revision by giving written notice to GSB and Goshen
Savings Bank in the manner provided in this Agreement which notice shall be in
the form of an amendment to this Agreement or in the form of an Amended and
Restated Agreement and Plan of Reorganization provided, however, that such
restructuring may not have a material adverse effect on the benefits of the
Merger to GSB's stockholders, directors, officers and employees.
1.5 Anti-dilution Provisions. In the event Berkshire changes the number of
shares of Berkshire Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, recapitalization or any other
distribution to stockholders of Berkshire except for dividends satisfying the
requirements of Section 6.7., the Per Share Stock Consideration shall be
proportionately adjusted.
ARTICLE 2
DESCRIPTION OF TRANSACTION
2.1 Terms of the Merger.
(a) Satisfaction of Conditions to Closing. After the transactions
contemplated herein have been approved by the stockholders of Berkshire and GSB
and each other condition to the obligations of the Parties hereto, other than
those conditions which are to be satisfied by delivery of documents by any Party
to any other Party, has been satisfied or, if lawfully permitted, waived by the
Party or Parties entitled to the benefits thereof, the Closing will be held on
the date and at the time of day and place referred to in this Agreement. At the
Closing, the Parties shall use their best efforts to deliver the certificates,
letters and opinions which constitute conditions to effecting the Merger and the
Subsidiary Merger and each Party will provide the other Parties with such proof
or indication of satisfaction of the conditions to the obligations of such other
Parties to consummate the Merger as such other Parties may reasonably require.
If all conditions to the obligations of
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each of the Parties shall have been satisfied or lawfully waived by the Party
entitled to the benefits thereof, the Parties shall, at the Closing, duly
execute a Certificate of Merger and such documents prepared by Berkshire as are
required to be filed with the Secretary of State of the State of Delaware to
effect the Merger and promptly thereafter GSB and Berkshire shall take all steps
necessary or desirable to consummate the Merger in accordance with all
applicable laws, rules and regulations. The Parties shall thereupon take such
other and further actions as Berkshire shall reasonably direct or as may be
required by law or this Agreement to consummate the transactions contemplated
herein.
(b) Effective Time. Upon the satisfaction of all conditions to Closing, the
Merger shall become effective on the date and at the time of filing of the
Certificate of Merger with the Secretary of State of the State of Delaware or at
such later date and/or time as may be agreed upon by the Parties and set forth
in the Certificate of Merger so filed.
2.2 Conversion of Stock.
(a) Consideration. At the Effective Time, each share of GSB Common Stock
then issued and outstanding (other than shares held directly or indirectly by
Berkshire, excluding shares held in a fiduciary capacity or in satisfaction of a
debt previously contracted) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive from Berkshire the cash and/or shares of stock of Berkshire
constituting the Per Share Merger Consideration, provided, however, that any
shares of GSB Common Stock which are owned by the trust created under the GSB
Incentive Stock Award Plan and which have not been awarded to employees or
directors at the Effective Time shall be canceled and no payment therefor shall
be made. Berkshire covenants and agrees to pay the Cash Merger Consideration and
the Stock Merger Consideration, as applicable, to GSB Stockholders, subject to
the satisfaction of the conditions set forth in this Agreement. As of the
Effective Time, each share of the GSB Common Stock held directly or indirectly
by Berkshire, excluding shares held in a fiduciary capacity or in satisfaction
of a debt previously contracted, shall be canceled, retired and cease to exist,
and no exchange or payment shall be made with respect thereto.
(b) Cash or Stock Merger Consideration. Each stockholder of record of GSB
Common Stock shall have the right to elect to receive the Cash Merger
Consideration or the Stock Merger Consideration as to each share of GSB Common
Stock owned by such stockholder, subject however to the allocation, adjustment
and proration procedures set forth below.
(c) Fractional Shares. Fractional shares of Berkshire Common Stock shall not
be issued and each holder of GSB Common Stock who would otherwise be entitled to
receive any such fractional shares (taking into account all share amounts to
which such holder is otherwise entitled hereunder) shall receive cash (without
interest) in lieu thereof in an amount equal to the fraction of the share of
Berkshire Common Stock to which such holder would otherwise be entitled
multiplied by the Determination Price. No Person entitled to receive a
fractional share of Berkshire Common Stock will be entitled to dividends, voting
rights or any other rights of a stockholder of Berkshire with respect to such
fractional share.
(d) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Dissenting Shares shall not be converted into or be exchangeable for
the right to receive the consideration provided in this Section 2.2 unless and
until such holder fails to perfect his or her right to an appraisal or
effectively withdraws or loses such right under the DGCL, as the case may be. If
such holder fails to perfect his right to dissent or effectively withdraws or
loses such right, each of his or her shares of GSB Common Stock shall thereupon
be deemed to be Cash Election Shares.
(e) Treatment of Options. At the Effective Time, each unexercised GSB Stock
Option shall be automatically converted into an option to purchase 0.6027 shares
of Berkshire Common Stock for each share of GSB Common Stock covered by such
option, with an exercise price equal to the exercise price of such option prior
to conversion, divided by 0.6027; provided, however, that as to any option which
is an incentive stock option under Section 422 of the Code, the exercise price
of the new option shall be not less than the amount which bears the same
relationship to the fair market value of outstanding shares of Berkshire Common
Stock immediately after the Merger as
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the exercise price of the GSB Stock Option bears to the fair market value of
outstanding shares of GSB Common Stock immediately prior to the Merger; and
provided further that, after any adjustment which may be required by the
preceding proviso, the exercise price of the new option shall be further
increased, if necessary, so that the amount determined by subtracting the
exercise price of the new option from the fair market value of outstanding
shares of Berkshire Common Stock immediately after the Merger and multiplying
said difference by the number of shares covered by such option shall not be more
than the amount determined by subtracting the exercise price of the GSB Stock
Option from the fair market value of outstanding shares of GSB Common Stock
immediately prior to the merger and multiplying said difference by the number of
shares covered by the GSB Stock Option.
(f) Calculation Schedule. The calculations of the respective amounts of cash
and Berkshire Common Stock payable and issuable pursuant to the terms of this
Agreement shall be calculated by the Exchange Agent and approved by Berkshire
and GSB as soon as practicable and no later than the Effective Time.
2.3 Election and Allocation Procedures.
(a) Election by GSB Stockholders. Subject to and in accordance with the
allocation and election procedures set forth herein, each GSB Stockholder shall,
prior to the Election Deadline, specify (i) the number of whole shares of GSB
Common Stock held by such Stockholder as to which such Stockholder shall desire
to receive the Cash Merger Consideration, and (ii) the number of whole shares of
GSB Common Stock held by such Stockholder as to which such Stockholder shall
desire to receive the Stock Merger Consideration.
(b) Allocation of Cash and Stock. Notwithstanding anything herein to the
contrary, and after taking into consideration Dissenting Shares and cash paid in
lieu of fractional shares, and after excluding shares for which no consideration
is payable as described in Section 2.2(a), not less than 50.1% nor more than 60%
of the outstanding GSB Common Stock shall be exchanged for Berkshire Common
Stock and all remaining GSB Common Stock shall be converted into the right to
receive the Cash Merger Consideration. Such result shall be accomplished through
the following adjustments to the elections made by GSB Stockholders, and by
giving due consideration to cash payments for fractional shares:
(1) If the number of Cash Election Shares is in excess of 49.9% of the
Aggregate Shares, then (i) Non-Electing Shares shall be deemed to be Stock
Election Shares, (ii) Dissenting Shares shall be treated as Cash Election
Shares without adjustment, and (iii)(A) Cash Election Shares of each GSB
Stockholder who made the Cash Election shall be reduced pro rata by
multiplying the number of Cash Election Shares of such GSB Stockholder by a
fraction, the numerator of which is the number of shares of GSB Common Stock
equal to 49.9% of the Aggregate Shares, minus Dissenting Shares, and the
denominator of which is the aggregate number of Cash Election Shares of all
GSB Stockholders, excluding Dissenting Shares, and (B) the shares of such
stockholder representing the difference between such GSB Stockholder's
initial Cash Election and such stockholder's reduced Cash Election pursuant
to clause (A) shall be converted into and be deemed to be Stock Election
Shares.
(2) If the number of Stock Election Shares is in excess of 60% of the
Aggregate Shares, then (i) Non-Electing Shares shall be deemed to be Cash
Election Shares and (ii) (A) Stock Election Shares of each GSB Stockholder
shall be reduced pro rata by multiplying the number of Stock Election Shares
of such GSB Stockholder by a fraction, the numerator of which is the number
of shares of GSB Common Stock equal to 60% of the Aggregate Shares and the
denominator of which is the aggregate number of Stock Election Shares of all
GSB Stockholders, and (B) the shares of such Holder representing the
difference between such GSB Stockholder's initial Stock Election and such
GSB Stockholder's reduced Stock Election pursuant to clause (A) shall be
converted into to and be deemed to be Cash Election Shares.
(3) If the number of Cash Election Shares is less than 49.9% of the
Aggregate Shares and the number of Stock Election Shares is less than 50.1%
of the Aggregate Shares, then (i) there shall be no adjustment to the
elections made by electing GSB Stockholders, (ii) there
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shall be no adjustment to the GSB Stockholder's Dissenting Shares, if any,
and (iii) Non-Electing Shares of each GSB Stockholder shall be treated as
Stock Elections Shares and/or as Cash Election Shares in proportion to the
respective amounts by which the Cash Election Shares and the Stock Election
Shares are less than the 49.9% and 50.1% limits, respectively.
(4) If the number of Cash Election Shares is less than 49.9% of the
Aggregate Shares and the number of Stock Election Shares is 50.1% or more
but not more than 60% of the Aggregate Shares, then (i) there shall be no
adjustment to the elections made by electing GSB Stockholders, (ii) there
shall be no adjustment to the Dissenting Shares, if any, and
(iii) Non-Electing Shares shall be deemed to be Cash Election Shares.
(c) Receipt of Payment. After taking into account the foregoing adjustment
provisions, each Cash Election Share (including those deemed to be Cash Election
Shares) shall receive in the Merger the Cash Merger Consideration pursuant to
Section 2.2(b) and each Stock Election Share (including those deemed to be Stock
Election Shares) shall receive in the Merger the Stock Merger Consideration (and
cash in lieu of fractional shares) pursuant to Section 2.2(b).
(d) Satisfaction of Conditions to Closing. Notwithstanding any other
provision of this Agreement, if the application of the provisions of this
Section would result in GSB Stockholders receiving a number of shares of
Berkshire Common Stock that would prevent the Per Share Merger Consideration,
calculated in such manner as is necessary to determine compliance with the
requirements of Section 368(a) of the Internal Revenue Code for a tax-free
reorganization (as determined by counsel to Berkshire, in its reasonable
discretion), from consisting in the aggregate of not more than 49.9% Cash Merger
Consideration and not less than 50.1% Stock Merger Consideration or otherwise
prevent the satisfaction of any of the conditions set forth in Article 7 hereof,
the number of shares otherwise allocable to GSB Stockholders pursuant to this
section shall be adjusted in an equitable manner as shall be necessary to enable
the satisfaction of all conditions.
2.4 Election Procedures.
(a) The Election Form shall be distributed to each GSB Stockholder at such
time as GSB and Berkshire shall determine and shall specify the date by which
all such elections must be made, which date shall be the date of the meeting of
GSB Stockholders to approve the Merger or such other date determined by GSB and
Berkshire.
(b) Elections shall be made by GSB Stockholders by mailing to the Exchange
Agent a completed Election Form. To be effective, an Election Form must be
properly completed, signed and submitted to the Exchange Agent accompanied by
certificates representing the shares of GSB Common Stock as to which the
election is being made (or by an appropriate guaranty of delivery by a
commercial bank or trust company in the United States or a member of a
registered national security exchange or the National Association of Securities
Dealers, Inc.), or by evidence that such certificates have been lost, stolen or
destroyed accompanied by such security or indemnity as shall be reasonably
requested by Berkshire. An Election Form and accompanying share certificates
must be received by the Exchange Agent by the close of business on the Election
Deadline. An election may be changed or revoked but only by written notice
received by the Exchange Agent prior to the Election Deadline including, in the
case of a change, a properly completed revised Election Form.
(c) Berkshire, or the Exchange Agent if so designated by Berkshire, shall
determine in the reasonable exercise of discretion, whether the Election Forms
have been properly completed, signed and submitted or changed or revoked and may
disregard immaterial defects in Election Forms. Berkshire or the Exchange Agent,
as applicable, will notify the applicable stockholder of any defect in an
Election Form by regular mail or such other method of notice which can
reasonably be expected to be at least as prompt.
(d) For the purposes hereof, a GSB Stockholder who does not submit an
effective Election Form to the Exchange Agent prior to the Election Deadline
shall be deemed to have made a Non-Election.
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(e) In the event that this Agreement is terminated pursuant to the
provisions hereof and any certificates for shares have been transmitted to the
Exchange Agent pursuant to the provisions hereof, Berkshire and GSB shall cause
the Exchange Agent to promptly return such certificates to the Person submitting
the same.
2.5 Mechanics of Payment of Consideration.
(a) Payment of the Merger Consideration. Berkshire shall deposit with the
Exchange Agent sufficient certificates representing Berkshire Common Stock and
sufficient cash to enable the Exchange Agent to distribute the Merger
Consideration as determined pursuant to this Agreement. Within three business
days after the Effective Time, the Exchange Agent shall distribute, to all GSB
Stockholders who have properly submitted Election Forms together with their
share certificates or proper proofs with respect to lost certificates, the Cash
Merger Consideration and the Stock Merger Consideration to which each such
stockholder is entitled. Within five business days after receiving properly
completed Stockholder Materials, as set forth in Section 2.5(b), from any GSB
Stockholder who made a Non-Election, the Exchange Agent shall likewise
distribute to such GSB Stockholder the Cash Merger Consideration or Stock Merger
Consideration, or a combination of both, which such stockholder is entitled to
receive.
(b) Submission Procedures for Non-Electing Shares. Within five business days
after the Effective Time, the Exchange Agent shall send the Stockholder
Materials to each GSB Stockholder who has made a Non-Election. All Stockholder
Materials shall be sent by first class United States mail to such GSB
Stockholders at the addresses set forth on the official stockholder records of
GSB. Berkshire shall also make appropriate provisions with the Exchange Agent to
enable GSB Stockholders to obtain the Stockholder Materials from, and to deliver
the certificates formerly representing shares of GSB Common Stock to, the
Exchange Agent in person, commencing on or not later than the second business
day following the Closing Date. Upon receipt of the appropriate Stockholder
Materials, together with the certificates formerly evidencing and representing
all of the shares of GSB Common Stock which were validly held of record by such
holder, the Exchange Agent shall take prompt action to process such certificates
formerly evidencing and representing shares of GSB Common Stock received by it
(including the prompt return of any defective submissions with instructions as
to those actions which may be necessary to remedy any defects) and to mail to
the former GSB Stockholders in exchange for the certificate(s) surrendered by
them, the Consideration to be issued or paid for each such GSB Stockholder's
shares pursuant to the terms hereof.
(c) Rights Appurtenant to Certificates; Lost Certificates. After the
Effective Time and until properly surrendered to the Exchange Agent, each
outstanding certificate or certificates which formerly evidenced and represented
GSB Common Stock shall be deemed for all purposes to represent and evidence only
the right to receive the Cash or Stock Merger Consideration into which such GSB
Common Stock was converted. The Cash or Stock Merger Consideration shall not be
paid to the record holder of any GSB Common Stock until the certificate therefor
is surrendered in the manner required. Each GSB Stockholder will be responsible
for all federal, state and local taxes which may be incurred by him on account
of his receipt of the Consideration to be paid in the Merger. A GSB Stockholder
whose certificate(s) have been lost or destroyed may nevertheless, subject to
the provisions of this Article, receive Cash or Stock Merger Consideration to
which such GSB Stockholder is entitled, provided that such GSB Stockholder must
first deliver to Berkshire or to the Exchange Agent: (i) a sworn statement
certifying such loss or destruction and specifying the circumstances thereof and
(ii) a lost instrument bond in form satisfactory to Berkshire and the Exchange
Agent which has been duly executed by a corporate surety satisfactory to
Berkshire and the Exchange Agent, indemnifying the Surviving Corporation,
Berkshire, the Exchange Agent (and their respective successors) to their
satisfaction against any loss or expense which any of them may incur as a result
of such lost or destroyed certificates being thereafter presented. Any costs or
expenses which may arise from such replacement procedure, including the premium
on the lost instrument bond, shall be paid by the GSB Stockholder.
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(d) Stock Transfer Books. At the Effective Time, the stock transfer books of
GSB shall be closed and no transfer of shares of GSB Common Stock shall be made
thereafter.
(e) Reservation, Registration and Listing of Shares of Berkshire Common
Stock. Berkshire shall reserve for issuance, register under the Securities Laws
and apply for listing for trading on the NASDAQ National Market or Small Cap
Market a sufficient number of shares of Berkshire Common Stock for the purpose
of issuing shares of Berkshire Common Stock to the GSB Stockholders in
accordance with the terms and conditions of this Article.
(f) Right to Receive Dividends on Berkshire Common Stock. Each GSB
Stockholder who is entitled to receive the Stock Merger Consideration shall be
entitled, to the same extent as other holders of Berkshire Common Stock, to
payments of dividends, if any, on Berkshire Common Stock if the record date for
such dividend is on or after the Closing Date, provided, however, that such
dividends shall be paid, without interest, only after the GSB Stockholder
submits his or her certificate for GSB Common Stock pursuant to Sections 2.4(b)
or 2.5(b) or complies with the requirements of Section 2.5(c) with respect to
lost stock certificates. All dividends not paid on the dividend payment date
pursuant to this Section shall be paid by Berkshire to the Exchange Agent, which
shall remit them to the applicable stockholder upon satisfaction of the
conditions set forth in this Section 2.5(f).
2.6 Time and Place of Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.1 and subject to the satisfaction or waiver of the
conditions set forth in Article 7, the Closing will take place at 10:00 a.m. on
the Closing Date, at the offices of the attorneys for Berkshire in New York
City, unless another date, time or place is agreed to in writing by the parties
hereto.
2.7 Voting Agreements. Simultaneously herewith, each director and executive
officer of the GSB Parties and the Berkshire Parties shall enter into an
agreement, substantially in the form annexed hereto as Exhibit C, in which he or
she agrees to vote all his or her shares of GSB Common Stock and Berkshire
Common Stock which such person may vote, or whose vote may be directed by such
person, in favor of the transactions contemplated by this Agreement at the
meeting of stockholders at which this Agreement is considered.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE GSB PARTIES
EXCEPT AS OTHERWISE DISCLOSED IN ONE OR MORE SCHEDULES DATED AS OF THE DATE
HEREOF, numbered to correspond to the following Sections, and delivered
concurrently with this Agreement, both as of the date hereof and as of the
Effective Time, the GSB Parties represent and warrant to the Berkshire Parties
as follows:
3.1 Organization and Qualification of GSB and Subsidiaries. GSB is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and (i) has all requisite corporate power and authority
to own, operate and lease its material properties and to carry on its business
as it is currently being conducted; (ii) is in good standing and is duly
qualified to do business in each jurisdiction where the character of its
properties owned or held under lease or the nature of its business is such that
a failure to be so qualified would have a material adverse effect on the GSB
Parties taken as a whole; and (iii) is a savings and loan holding company under
the regulations of the OTS. Goshen Savings Bank is a federal stock savings bank,
duly organized, validly existing and in good standing under the laws of the
United States and engages only in activities (and holds properties only of the
types) permitted by the law of the United States and the rules and regulations
promulgated by the OTS thereunder and the FDIC for insured depository
institutions. Goshen Savings Bank's deposit accounts are insured by the Bank
Insurance Fund as administered by the FDIC to the fullest extent permitted under
applicable law. GSB has only one other Subsidiary, GSB Investment Services,
Inc., which subsidiary has not conducted any business for at least twelve months
and will not conduct any business from the date hereof until the Effective Time.
GSB Financial Services, Inc. has no
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material assets other than cash and cash equivalents and has no liabilities.
Goshen Savings Bank has no Subsidiaries.
3.2 Authorization, Execution and Delivery; Agreement Not in Breach.
(a) The GSB Parties have all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the proposed transactions have been duly authorized by the
unanimous vote of the entire Boards of Directors of the GSB Parties and no other
corporate proceedings on the part of the GSB Parties are necessary to authorize
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except for the approval of their respective
stockholders. This Agreement and all other agreements and instruments herein
contemplated to be executed by the GSB Parties have been (or upon execution will
have been) duly executed and delivered by the GSB Parties and constitute (or
upon execution will constitute) legal, valid and enforceable obligations of the
GSB Parties, subject, as to enforceability, to applicable bankruptcy,
insolvency, receivership, conservatorship, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and to the
application of equitable principles and judicial discretion.
(b) The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms hereof will
not result in a material violation or breach of any of the terms or provisions
of, or constitute a material default under (or an event which, with the passage
of time or the giving of notice, or both, would constitute such a default
under), or conflict with, or permit the acceleration of, any material obligation
under, any material mortgage, lease, covenant, agreement, indenture or other
instrument to which any of the GSB Parties is a party or by which any of them is
bound, the Certificate of Incorporation and Bylaws of GSB or the Charter and
bylaws of Goshen Savings Bank; or any material judgment, decree, order,
regulatory letter of understanding or award of any court, governmental body,
authority or arbitrator by which any of the GSB Parties is bound, or any
material permit, concession, grant, franchise, license, law, statute, ordinance,
rule or regulation applicable to any of the GSB Parties or the properties of any
of them; or result in the creation of any material lien, claim, security
interest, encumbrance, charge, restriction or right of any third party of any
kind whatsoever upon the properties or assets of any of the GSB Parties; except
that the Government Approvals must be obtained in order for the GSB Parties to
consummate the Merger and Subsidiary Merger.
3.3 No Legal Bar. None of the GSB Parties is a party to, or subject to or
bound by, any material agreement, judgment, order, letter of understanding,
writ, prohibition, injunction or decree of any court or other governmental
authority or body of competent jurisdiction, or any law which would prevent the
execution of this Agreement by any of the GSB Parties, the delivery hereof to
the Berkshire Parties or the consummation of the transactions contemplated
hereby (except for such laws as require that the Government Approvals be
obtained), and no action or proceeding is pending against any of the GSB Parties
in which the validity of this Agreement, any of the transactions contemplated
hereby or any action which has been taken by any of the Parties in connection
herewith, or, in connection with any of the transactions contemplated hereby, is
at issue.
3.4 Government and Other Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by the
GSB Parties in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated by this Agreement except for
the approval of the Banking Board, the FDIC, the FRB, the OTS and the SEC (as to
the issuance of the Stock Merger Consideration) nor is any consent or approval
required from any landlord, licensor or other non-governmental party which has
granted rights to any of the GSB Parties in order to avoid forfeiture or
impairment of such rights which are material to the business of the GSB Parties
taken as a whole. None of the GSB Parties is aware of any facts, circumstances
or reasons why such Government Approvals should not be forthcoming or which
would prevent or hinder such approvals from being obtained.
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3.5 Licenses, Franchises and Permits. The GSB Parties hold all licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
respective businesses. The benefits of all of such licenses, franchises, permits
and authorizations are in full force and effect and may continue to be enjoyed
by a successor to the GSB Parties subsequent to the Closing of the transactions
contemplated herein without any consent or approval, other than the Government
Approvals, subject to the legal right and authority of such successor to engage
in the activities licensed, franchised, permitted or authorized thereby. None of
the GSB Parties has received notice of any proceeding for the suspension or
revocation of any such license, franchise, permit, or authorization and no such
proceeding is pending or, to the best knowledge of the GSB Parties, has been
threatened by any governmental authority.
3.6 Charter Documents. GSB has provided to Berkshire true and correct copies
of the Certificate of Incorporation or Charter and Bylaws of GSB, Goshen Savings
Bank, and all GSB Subsidiaries.
3.7 GSB Financial Statements. The consolidated statements of financial
condition contained in the GSB Financial Statements fairly present the
consolidated financial condition of GSB as of the respective dates set forth
therein, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows in the GSB Financial Statements fairly
present the results of the consolidated operations, changes in stockholders'
equity and cash flows of GSB for the respective periods or as of the respective
dates set forth therein, in each case in conformity with GAAP consistently
applied, it being understood that GSB's interim financial statements are not
audited, not prepared with related notes and are subject to normal year-end
adjustments.
3.8 Absence of Certain Changes. Except as provided for or contemplated in
this Agreement, since the Balance Sheet Date there has not been:
(a) any material transaction by the GSB Parties not in the ordinary
course of business and in conformity with past practice;
(b) any material adverse change in the business, property, assets
(including loan portfolios), liabilities (whether absolute, accrued,
contingent or otherwise), operations, liquidity, income, condition or net
worth of the GSB Parties taken as a whole;
(c) any damage, destruction or loss, whether or not covered by
insurance, which has had or may have a material adverse effect on any of the
properties or business prospects of the GSB Parties taken as a whole or
their future use and operation by the GSB Parties taken as a whole;
(d) any acquisition or disposition by the GSB Parties of any property or
asset of the GSB Parties, whether real or personal, having a fair market
value, singularly or in the aggregate, in an amount greater than fifteen
thousand dollars ($15,000) other than acquisitions or dispositions made in
the ordinary course of business;
(e) any mortgage, pledge or subjection to lien, charge or encumbrance of
any kind on any of the respective properties or assets of the GSB Parties,
except to secure extensions of credit in the ordinary course of business and
in conformity with past practice (pledges of and liens on assets to secure
Federal Home Loan Bank or Federal Reserve Bank of New York advances being
deemed both in the ordinary course of business and consistent with past
practice);
(f) any amendment, modification or termination of any contract or
agreement (other than contracts or agreements related to loans made by
Goshen Savings Bank) in excess of $10,000, relating to any of the GSB
Parties, to which any of the GSB Parties is a party which would have a
material adverse effect upon the financial condition or operations of the
GSB Parties taken as a whole;
(g) any increase in, or commitment to increase, the compensation payable
or to become payable to any officer, director, employee or agent of any of
the GSB Parties, or any bonus payment, similar arrangement, stock option
award or restrictive stock award made to or with any of such officers,
directors, employees or agents;
A-14
(h) any incurring of, assumption of, or taking of, by any of the GSB
Parties, any property subject to, any liability in excess of $15,000, except
for liabilities incurred or assumed or property taken subsequent to the
Balance Sheet Date in the ordinary course of business and in conformity with
past practice; or
(i) any material alteration in the manner of keeping the books, accounts
or records of any of the GSB Parties, or in the accounting policies or
practices therein reflected, except as required by GAAP and requirements of
Regulatory Authorities.
3.9 Deposits. None of the Goshen Savings Bank deposits (consisting of
certificates of deposit, savings accounts, NOW accounts, money market accounts
and checking accounts), is a brokered deposit.
3.10 Properties. Section 3.10 of the GSB Schedule contains a true and
complete list of all real property owned or leased by GSB, Goshen Savings Bank
or any GSB Subsidiary. Except as adequately reserved against in the GSB
Financial Statements or disposed of since the Balance Sheet Date in the ordinary
course of business, GSB and each GSB Subsidiary has good and, as to real
property, marketable title free and clear of all material liens, encumbrances,
charges, defaults, or equities of whatever character to all of the material
properties and assets, reflected in the GSB Financial Statements as being owned
by GSB or any GSB Subsidiary as of the dates thereof. All buildings, and all
fixtures, equipment, and other property and assets that are material to the
business of GSB and the GSB Subsidiaries on a consolidated basis, held under
leases or subleases by GSB or any GSB Subsidiary, are held under valid
instruments enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting the enforcement of
creditors' rights generally, or by equitable principles).
3.11 Condition of Fixed Assets and Equipment. Section 3.11 of the GSB
Schedule is a list of all fixed assets and equipment used in the conduct of the
business of GSB as of the balance sheet date. Each such item of GSB's fixed
assets and equipment having a net book value in excess of Ten Thousand Dollars
($10,000) is in good operating condition and repair, normal wear and tear
excepted.
3.12 Tax Matters.
(a) All federal, state and local Tax Returns required to be filed by or on
behalf of the GSB Parties have been timely filed. All Tax Returns filed are, and
the information contained therein is, complete and accurate in all material
respects. All Tax obligations reflected in such returns have been timely paid.
None of the GSB Parties is currently the beneficiary of any extension of time
within which to file any Tax Return. As of the date of this Agreement, there is
no audit examination, deficiency, or refund litigation or matter in controversy
with respect to any Taxes that might reasonably be expected to result in a
determination materially adverse to the GSB Parties taken as a whole except as
fully reserved for in the GSB Financial Statements. All Taxes, interest,
additions, and penalties due with respect to completed and settled examinations
or concluded litigation have been paid;
(b) None of the GSB Parties has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due that is
currently in effect;
(c) Adequate provision for any federal, state or local Taxes due or to
become due for the GSB Parties for all periods through and including June 30,
2000, has been made and is reflected on the June 30, 2000 financial statements
included in GSB's Report on Form 10-Q for such period, and have been and will
continue to be made with respect to periods ending after June 30, 2000 on a
basis consistent with its historic Tax accounting practices and GAAP;
(d) Deferred taxes of the GSB Parties have been and will be provided for in
accordance with GAAP; and
(e) Neither the Internal Revenue Service nor any state, local or other
taxing authority is now asserting or threatening to assert against any of the
GSB Parties any deficiency or claim for additional Taxes, or interest thereon or
penalties in connection therewith. All income, payroll,
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withholding, property, excise, sales, use, franchise and transfer taxes, and all
other Taxes, charges, fees, levies or other assessments, imposed upon the GSB
Parties by the United States or by any state, municipality, subdivision or
instrumentality of the United States or by any other taxing authority, including
all interest, penalties or additions attributable thereto, which are due and
payable by any of the GSB Parties, either have been paid in full or have been
properly accrued and reflected in the GSB Financial Statements.
(f) None of the GSB Parties has made any material payments, is obligated to
make any material payments, or is a party to any agreement that under certain
circumstances could obligate it to make any material payments that will not be
deductible under Section 280G of the Code.
(g) None of the GSB Parties (i) is a party to any Tax allocation or sharing
agreement, (ii) has been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
GSB), or (iii) has any Tax liability for any party (other than the GSB Parties)
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise.
3.13 Litigation. There is no action, suit or proceeding pending against any
of the GSB Parties, or to the best knowledge of any of the GSB Parties,
threatened against or affecting GSB, Goshen Savings Bank or any of their assets,
before any court or arbitrator or any governmental body, agency or official that
may, if decided against any of the GSB Parties, have a material adverse effect
on the business, properties, assets, liabilities, or condition (financial or
other) of the GSB Parties taken as a whole and that are not reflected in the GSB
Financial Statements.
3.14 Environmental Matters. To the knowledge of the GSB Parties, the GSB
Real Property is in material compliance with all Environmental Laws, and there
are no conditions existing currently which would subject any of the GSB Parties
to damages, penalties, injunctive relief or cleanup costs under any
Environmental Laws or assertions thereof, or which require cleanup, removal,
remedial action or other response pursuant to Environmental Laws by any of the
GSB Parties. None of the GSB Parties is a party to any litigation or
administrative proceeding, nor have either of them (either in their own capacity
or as trustee or fiduciary), materially violated Environmental Laws nor, to
their knowledge are the GSB Parties (either in their own capacity or as trustee
or fiduciary) required to clean up, remove or take remedial or other responsive
action due to the disposal, depositing, discharge, leaking or other release of
any hazardous substances or materials. To the knowledge of the GSB Parties, none
of the GSB Real Property is, nor are the GSB Parties, subject to any judgment,
decree, order or citation related to or arising out of any Environmental Laws.
To the knowledge of the GSB Parties, no material permits, licenses or approvals
are required under Environmental Laws relative to the GSB Real Property; and
none of the GSB Parties has stored, deposited, treated, recycled, used or
disposed of any materials (including, without limitation, asbestos) on, under or
at the GSB Real Property (or tanks or other facilities thereon containing such
materials), which materials if known to be present on the GSB Real Property or
present in soils or ground water, would require cleanup, removal or some other
remedial action under the Environmental Laws.
3.15 Insurance. Section 3.15 of the GSB Schedule includes a complete list of
all insurance policies (other than title insurance policies or insurance
policies of which Goshen Savings Bank is a beneficiary incident to the making of
individual loans) held by GSB or Goshen Savings Bank. There are no outstanding
unresolved claims for losses under any such insurance policies. The GSB Parties
have paid all amounts due and payable under any insurance policies and
guaranties applicable to them and their assets and operations; all such
insurance policies and guaranties are in full force and effect; and the GSB
Parties and all of the GSB Real Estate and other material properties are insured
against fire, casualty, theft, loss, and such other events against which it is
customary to insure, all such insurance policies being in amounts that are
adequate and are consistent with past practices and experience.
3.16 Books and Records. The minute books of the GSB Parties contain, in all
material respects, accurate records of and fairly reflect all actions taken at
all meetings and accurately reflect all other corporate action of the
stockholders and the boards of directors and each committee thereof. The books
and records of the GSB Parties fairly and accurately reflect the
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transactions to which the GSB Parties are or have been parties or by which their
properties are subject or bound, and such books and records have been properly
kept and maintained.
3.17 Capitalization of GSB. The authorized capital stock of GSB consists of
4,500,000 shares of common stock having a par value of $0.01 per share, 500,000
shares of preferred stock, $0.01 par value per share, and no other class of
equity security. As of the date of this Agreement, 2,248,250 shares of GSB
Common Stock were issued, of which 1,984,538 were outstanding and 263,712 were
held in treasury, and no shares of GSB's preferred stock were issued or
outstanding. Of the outstanding shares, 31,956 shares represent unawarded shares
held in trust pursuant to the GSB Incentive Stock Award Plan and 40,246 shares
represent awarded but unvested shares held by such trust. All of the outstanding
GSB Common Stock is validly issued, fully-paid and nonassessable and has not
been issued in violation of any preemptive rights of any GSB Stockholder. There
are 130,237 validly issued, outstanding GSB Stock Options, all of which are
either currently exercisable or which will become exercisable upon or prior to
the Merger, and there are no other options, rights, warrants, scrip or similar
rights to purchase shares of GSB Common Stock from GSB outstanding.
Section 3.17 of the GSB Schedule contains a true and complete list of all
outstanding stock options and awards under the GSB Incentive Stock Award Plan.
There are no other outstanding securities or other obligations which are
convertible into GSB Common Stock or into any other equity or debt security of
GSB, and no outstanding options, warrants, rights, scrip, rights to subscribe
to, calls or other commitments of any nature which would entitle the holder,
upon exercise thereof, to be issued GSB Common Stock or any other equity or debt
security of GSB. Accordingly, immediately prior to the Effective Time, there
will be not more than 2,114,775 shares of GSB Common Stock issued and
outstanding on a fully diluted basis (consisting of 1,984,538 shares currently
outstanding plus 130,237 unexercised options which may be exercised). GSB owns
and is the beneficial record holder of, and has good and freely transferable
title to, 1,000 shares of Goshen Savings Bank Common Stock, which are all of the
issued and outstanding shares of Goshen Savings Bank capital stock and which are
owned by GSB free and clear of all liens, charges or encumbrances. Such Goshen
Savings Bank Common Stock is not subject to any voting trusts, agreements or
similar arrangements or other claims which could affect the ability of GSB to
freely vote such stock in support of the transactions contemplated herein.
3.18 Sole Agreement. With the exception of this Agreement, neither GSB, nor
Goshen Savings Bank, nor any Subsidiary of either, has been or is a party to:
any letter of intent or agreement to merge, to consolidate, to sell or purchase
assets (other than in the normal course of its business) or any other agreement
which contemplates the involvement of GSB or Goshen Savings Bank or any
Subsidiary of either (or any of their assets) in any business combination of any
kind; or any agreement obligating GSB or Goshen Savings Bank to issue or sell or
authorize the sale or transfer of any shares of capital stock of GSB or Goshen
Savings Bank, except for options and awards under the GSB Stock Option Plan or
Incentive Stock Award Plan disclosed in the GSB Schedule. There are no (nor will
there be at the Effective Time any) shares of capital stock or other equity
securities of GSB or Goshen Savings Bank outstanding, except for shares of GSB
Common Stock and Goshen Savings Bank Common Stock presently issued and
outstanding (or issuable upon the exercise of outstanding stock options), and
there are no (nor will there be at the Effective Time any) outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of any of the GSB Parties, or contracts,
commitments, understandings, or arrangements by which any of the GSB Parties is
or may be bound to issue additional shares of their capital stock or options,
warrants, or rights to purchase or acquire any additional shares of their
capital stock. There are no (nor will there be at the Effective Time any)
contracts, commitments, understandings, or arrangements by which any of the GSB
Parties is or may be bound to transfer or issue to any third party any shares of
the capital stock of Goshen Savings Bank, and there are no (nor will there be at
the Effective Time any) contracts, agreements, understandings or commitments
relating to the right of GSB to vote or to dispose of any such shares.
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3.19 Disclosure.
(a) The information concerning, and representations and warranties made by,
the GSB Parties set forth in this Agreement, or in the GSB Schedule, or in any
document, statement, certificate or other writing furnished or to be furnished
by the GSB Parties to the Berkshire Parties pursuant hereto, do not and will not
contain any untrue statement of a material fact or omit and will not omit to
state a material fact required to be stated herein or therein which is necessary
to make the statements and facts contained herein or therein, in light of the
circumstances in which they were or are made, not false or misleading.
(b) None of the information prepared by, or on behalf of, GSB or any GSB
Subsidiary regarding GSB, Goshen Savings Bank or any other GSB Subsidiary
included or to be included in the Prospectus/Proxy and any other documents to be
filed with the SEC, or any other Regulatory Authority in connection with the
transactions contemplated herein, will, at the respective times such documents
are filed, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. All documents
which GSB or any GSB Subsidiary is responsible for filing with the SEC or any
other Regulatory Authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable law, including applicable provisions of the Securities Laws and the
rules and regulations promulgated thereunder. Without limiting the foregoing, at
the time the Prospectus/Proxy is mailed to GSB Stockholders and Berkshire
Stockholders and at all times subsequent to such mailing, up to and including
the date of the stockholders meetings at which the Merger and this Agreement
will be presented for approval, the Registration Statement, with respect to all
information relating to the GSB Parties, (i) will comply in all material
respects with the applicable provisions of the Securities Laws and (ii) will not
contain any statement which, at the time and in light of the circumstances under
which it is made, is false or misleading with respect to any material fact or
omit to state any material fact necessary in order to make the statements made
therein not false or misleading, or required to be stated therein or necessary
to correct any statement made in an earlier communication with respect to such
matters which have become false or misleading.
(c) Copies of all documents heretofore or hereafter delivered or made
available to the Berkshire Parties by GSB or Goshen Savings Bank pursuant hereto
were or will be complete and accurate copies of such documents.
3.20 Absence of Undisclosed Liabilities. None of the GSB Parties has any
obligation or liability that is material to the financial condition or
operations of any of them, or that, when combined with all similar obligations
or liabilities, would be material to their financial condition or operations
(i) except as disclosed in the GSB Financial Statements delivered to Berkshire
prior to the date of this Agreement, (ii) except obligations or liabilities
incurred in the ordinary course of its business consistent with past practices
or (iii) except as contemplated under this Agreement. Since June 30, 2000, none
of the GSB Parties has incurred or paid any obligation or liability which would
be material to the financial condition or operations of any of them, except for
obligations paid in connection with transactions made by them in the ordinary
course of their business consistent with past practices, laws and regulations
applicable to them.
3.21 Allowance for Loan or REO Losses. The allowance for loan losses shown
on the GSB Financial Statements is in the opinion of management of GSB adequate
in all material respects to provide for anticipated losses inherent in loans
outstanding. As of the date thereof, none of the GSB Parties has any loan which
has been criticized, designated or classified by management of GSB, or by
regulatory examiners representing any Regulatory Authority or by GSB's
independent auditors as 'Special Mention,' 'Substandard,' 'Doubtful', 'Loss' or
as a 'Potential Problem Loan.'
The allowance for losses in real estate owned, if any, shown on the GSB
Financial Statements in the opinion of management is or will be adequate in all
respects to provide for anticipated losses inherent in REO owned or held by the
GSB Parties and the net book value of real estate
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owned on the Balance Sheet of the GSB Financial Statements is the fair value of
the real estate owned in accordance with Statement of Position 92-3.
3.22 Loan Portfolio. With respect to each loan owned by GSB or Goshen
Savings Bank in whole or in part (each, a 'Loan'):
(a) Enforceability. The note and any related mortgage, security
agreement, pledge, assignment or other grant of collateral, and all
guaranties thereof, are each legal, valid and binding obligations of the
maker or obligor thereof, enforceable against such maker or obligor in
accordance with their material terms.
(b) No Modification. Neither GSB nor Goshen Savings Bank nor any prior
holder of a Loan has modified the related documents in any material respect
or satisfied, canceled or subordinated any collateral for such Loan except
as otherwise disclosed by documents in the applicable Loan file.
(c) Owner. GSB or Goshen Savings Bank is the sole holder of legal and
beneficial title to each Loan (or, if the Loan is a participation loan as
shown in the loan file, Goshen Savings Bank's applicable participation
interest), as applicable, and there has not been any assignment or pledge of
any Loan (other than as security for Federal Home Loan Bank or Federal
Reserve Bank of New York advances).
(d) Documents. The note, mortgage, security agreement, guaranty and any
other collateral documents, copies of which are included in the Loan files,
are, in all material respects, true and correct copies of the documents they
purport to be and have not been superseded, amended, modified, canceled or
otherwise changed except as otherwise disclosed by documents in the
applicable Loan file.
(e) Litigation. There is no litigation or proceeding pending or
threatened, relating to the Loan or any collateral for the Loan which would
have a material adverse effect upon the Loan.
(f) Participation. With respect to each Loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable and the interest in such Loan of GSB or Goshen Savings Bank
created by such participation would not be a part of the insolvency estate
of the Loan originator or other third party upon the insolvency thereof.
3.23 Compliance with Laws.
(a) To the best knowledge of the GSB Parties, they are in compliance with
all laws, rules, regulations, reporting and licensing requirements, and orders
applicable to its business or employees conducting its business (including, but
not limited to, those relating to consumer disclosure and currency transaction
reporting) the breach or violation of which would or could reasonably be
expected to have a material adverse effect on the financial condition or
operations of the GSB Parties taken as a whole, or which would or could
reasonably be expected to subject any of the GSB Parties or any of their
directors or officers to civil money penalties; and
(b) None of the GSB Parties has received notification or communication from
any agency or department of federal, state, or local government or any of the
Regulatory Authorities, or the staff thereof (i) asserting that any of the GSB
Parties is not in compliance with any of the statutes, rules, regulations, or
ordinances which such governmental authority or Regulatory Authority enforces,
and which, as a result of such noncompliance, would or could reasonably be
expected to have a material adverse effect on the GSB Parties taken as a whole,
(ii) threatening to revoke any license, franchise, permit, or governmental
authorization which is material to the financial condition or operations of the
GSB Parties taken as a whole, or (iii) requiring any of the GSB Parties to enter
into a cease and desist order, consent, agreement or memorandum of
understanding.
3.24 Employee and Director Benefit Plans.
(a) Section 3.24 of the GSB Schedule lists (i) each pension, profit sharing,
stock bonus, thrift, savings, employee stock ownership or other plan, program or
arrangement, which constitutes an 'employee pension benefit plan' within the
meaning of Section 3(2) of ERISA, which is maintained by any of the GSB Parties
or to which any of the GSB Parties contribute, or are
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obligated to contribute, for the benefit of any current or former employee,
officer, director, consultant or agent; (ii) each plan, program or arrangement
for the provision of medical, surgical, or hospital care or benefits, benefits
in the event of sickness, accident, disability, death, unemployment, severance,
vacation, apprenticeship, day care, scholarship, prepaid legal services or other
benefits which constitute an 'employee welfare benefit plan' within the meaning
of Section 3(1) of ERISA, which is maintained by any of the GSB Parties or to
which any of the GSB Parties contribute, or are obligated to contribute, for the
benefit of any current or former employee, officer, director, consultant or
agent; and (iii) every other retirement or deferred compensation plan, bonus or
incentive compensation plan or arrangement, stock option plan, stock purchase
plan, severance or vacation pay arrangement, or other fringe benefit plan,
program or arrangement through which any of the GSB Parties provide benefits for
or on behalf of any current or former employee, officer, director, consultant or
agent. All benefits under the employee welfare benefit plans described in this
Section 3.24, with the exception of the Cafeteria Plan, are fully insured and
the liability of Berkshire Bancorp will be limited to the cost of premiums for
the insurance.
(b) All of the plans, programs and arrangements described in Section 3.24 of
the GSB Schedule (hereinafter referred to as the 'GSB Benefit Plans') are in
material compliance with their provisions and with all applicable requirements
of ERISA and all other applicable federal and state laws, including the
reporting and disclosure requirements of Part I of Title I of ERISA. Each of the
GSB Benefit Plans that is intended to be a pension, profit sharing, stock bonus,
thrift, savings or employee stock ownership plan that is qualified under
Section 401(a) of the Code satisfies the applicable requirements of such
provision in all material respects and there exist no circumstances that would
adversely affect the qualified status of any such plan under that section,
except with respect to any required retroactive amendment for which the remedial
amendment period has not yet expired. GSB or Goshen Savings Bank has submitted
each such plan to the IRS for approval within the time prescribed therefor under
applicable regulations and favorable letters of determination of such
tax-qualified status from the IRS have been received and provided to Berkshire.
Except as set forth in Schedule 3.24 of the GSB Schedule, there is no pending
or, to the best knowledge of GSB, threatened litigation, governmental
proceeding, audit or investigation against or relating to any GSB Benefit Plan
and there is no reasonable basis for any material proceedings, claims, actions,
litigation, investigation or audits against any GSB Benefit Plan or its
fiduciaries related to such plans. To the best of GSB's knowledge, no GSB
Benefit Plan (or GSB Benefit Plan fiduciary, in his capacity as such) has
engaged in a non-exempt prohibited transaction (as defined in Section 406 of
ERISA or Section 4975(c) of the Code) since the date on which said sections
became applicable to such Plan. There have been no acts or omissions by GSB that
have given rise to any fines, penalties, taxes or related charges under ERISA or
the Code, or that may give rise to any material fines, penalties, taxes or
related damages under such laws for which GSB may be liable. All group health
plans of GSB, including any plans of current and former affiliates of GSB that
must be taken into account under Section 4980B of the Code or Section 601 of
ERISA or the requirements of any similar state law regarding insurance
continuation, have been operated in material compliance with the group health
plan continuation coverage requirements of Section 4980B of the Code,
Sections 601 through 609 of ERISA and any similar state law to the extent such
requirements are applicable. All payments due from any GSB Benefit Plan (or from
GSB with respect to any GSB Benefit Plan) have been made, and all amounts
properly accrued to date as liabilities of GSB that have not yet been paid have
been properly recorded on the books of GSB.
(c) Section 3.24(c) of the GSB Schedule contains true and complete
information, as of the Balance Sheet Date, as to the total number of shares of
GSB Common Stock owned by the ESOP, the number of those shares which have not
yet been released for allocation from the lien of the loan made to the ESOP by
GSB, and the principal balance of such loan. The ESOP shall be terminated, in
accordance with its terms, as of the closing of the Merger contemplated by this
Agreement; and Goshen Savings Bank shall continue to repay the ESOP note on a
pro rated basis for the period from January 1, 2000 through the Closing in
accordance with past contribution rates
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by Goshen Savings Bank, and further that the Closing shall be treated as the end
of the plan year for purposes of permitting an allocation of benefits based on
such repayments.
(d) Section 3.24(d) of the GSB Schedule contains a list of all plans which
provide for compensation or benefits to directors of GSB (other than the GSB
Stock Option Plan and the GSB Incentive Stock Award Plan for which information
is provided in Section 3.17 of the GSB Schedule) and a list of the liabilities
owed to directors under the Directors' deferred compensation plans as of the
Balance Sheet Date. All deferred amounts listed on such schedule have been fully
accrued on the GSB Financial Statements.
(e) True and correct copies and descriptions of all GSB Benefit Plans, all
employees affected or covered by GSB Benefit Plans and all liabilities and
obligations thereunder have been provided to Berkshire, which information shall
be updated on the Closing Date. The GSB Parties have furnished Berkshire with a
true and correct copy of the most current Form 5500, if required, and any other
form or filing required to be submitted to any governmental agency with regard
to any of the GSB Benefit Plans and the most current actuarial report with
regard to any of the GSB Benefit Plans. With respect to the GSB Benefit Plans,
GSB Parties will have made, on or prior to the Closing Date, all payments
required to be made (including those payments contemplated herein) on or prior
to the Closing Date and will have accrued (in accordance with generally accepted
accounting principles consistently applied) as of the Closing Date all payments
due but not yet payable as of the Closing Date. There would be no liability of
GSB Parties under Title IV of ERISA if any of the GSB Benefit Plans were
terminated as of the Closing Date. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due from GSB
Parties under any of the GSB Benefit Plans, (ii) increase any benefits otherwise
payable under any of the GSB Benefit Plans, or (iii) result in the acceleration
of the time of payment or vesting of any such benefits to any extent. Except as
disclosed in Section 3.24 of the GSB Schedule, no event has occurred or will
occur which will result in liability to GSB Parties or by any other entity
which, together with any of the GSB Parties constitute elements of either (i) a
controlled group of corporations (within the meaning of Section 414(b) of the
Code, (ii) a group of trades or business under common control (within the
meaning of Section 414(c) of the Code or 4001 of ERISA, (iii) an affiliated
service group (within the meaning of Sections 414(m) of the Code, or
(iv) another arrangement covered by Section 414(o) of the Code.
3.25 Material Contracts.
(a) Section 3.25(a) of the GSB Schedule contains a true and complete list of
all employment, severance or other written or oral contracts between any of the
GSB Parties and individual employees or officers.
(b) None of the Berkshire Parties, nor any of their respective assets,
businesses, or operations, is as of the date of this Agreement a party to, or
bound or affected by, or receives benefits under, any other contract or
agreement or amendment thereto that requires annual payments of over $50,000 per
year, other than as set forth in Section 3.25 of the GSB Schedule, and other
than loans or commitments to lend in the ordinary course of business pursuant to
which Goshen Savings Bank or GSB is a lender.
(c) None of the GSB Parties is a party to any collective bargaining
agreement and there is no labor union representing the employees of any of the
GSB Parties, nor are any of the GSB Parties aware of any union organizing effort
involving any employees of any of the GSB Parties.
3.26 Material Contract Defaults. None of the GSB Parties is in default under
any material contract, agreement, commitment, arrangement, lease, insurance
policy, or other instrument to which it is a party or by which its respective
assets, business, or operations may be bound or affected or under which it or
its respective assets, business, or operations receives benefits, and which
default would reasonably be expected to have either individually or in the
aggregate a material adverse effect on the GSB Parties taken as a whole, and
there has not occurred any event that, with the lapse of time or the giving of
notice or both, would constitute such a default.
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3.27 1934 Act and NASDAQ Listing.
(a) The GSB Common Stock is registered with the SEC pursuant to the 1934 Act
and GSB has filed with the SEC all material forms and reports required by law to
be filed by GSB with the SEC, which forms and reports, taken as a whole, are
true and correct in all material respects, and do not misstate a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading.
(b) The outstanding shares of GSB Common Stock are quoted for trading on the
NASDAQ Stock Market (under the symbol 'GOSB') and GSB has filed with the NASDAQ
Stock Market all material forms and reports required to be filed by GSB.
3.28 Certain Regulatory Matters.
(a) Goshen Savings Bank is a qualified thrift lender under Section 10(m) of
the Home Owners' Loan Act and is a member of the Federal Home Loan Bank of New
York.
(b) Goshen Savings Bank has not paid any dividends to GSB or any affiliate
thereof that (i) caused the regulatory capital of Goshen Savings Bank to be less
than the amount then required by applicable law or (ii) exceeded any other
limitation on the payment of dividends imposed by law, agreement or regulatory
policy.
(c) Goshen Savings Bank has adopted policies and procedures designed to
promote overall compliance with the Bank Secrecy Act (31 U.S.C. Section 5301),
the Truth-in-Lending Act (15 U.S.C. Section 1601 et seq.), the Expedited Funds
Availability Act (12 U.S.C. Section 4001) and the regulations adopted under each
such act and have materially complied with the reporting requirements under the
Bank Secrecy Act and the regulations thereunder.
3.29 Corporate Approval. The affirmative vote of a majority of the
outstanding stock of GSB entitled to vote is required to adopt this Agreement
and approve the Merger and the other transactions contemplated hereby. No other
vote of the stockholders of GSB is required by law, the Certificate of
Incorporation or Bylaws of GSB or otherwise to adopt this Agreement and approve
the Merger and the other transactions contemplated hereby.
3.30 Broker's and Finder's Fees. Except for payments to Tucker Anthony
Incorporated as described in Section 3.30 of the GSB Schedule, neither GSB nor
any of its subsidiaries has any liability to any broker, finder, or similar
agent, nor have any of them agreed to pay any broker's fee, finder's fee or
commission, with respect hereto or to the transactions contemplated hereby.
3.31 Delays. None of the GSB Parties is aware of any matter that could cause
a delay in receiving any approval required by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BERKSHIRE PARTIES
EXCEPT AS OTHERWISE DISCLOSED IN ONE OR MORE SCHEDULES DATED AS OF THE DATE
HEREOF, numbered to correspond to the following Sections, and delivered
concurrently with this Agreement, both as of the date hereof and as of the
Effective Time, each of the Berkshire Parties represents and warrants to the GSB
Parties as follows:
4.1 Organization and Qualification of Berkshire and Subsidiaries. Berkshire
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and (i) has all requisite corporate power and
authority to own, operate and lease its material properties and to carry on its
business as it is currently being conducted; (ii) is in good standing and is
duly qualified to do business in each jurisdiction where the character of its
properties owned or held under lease or the nature of its business is such that
a failure to be so qualified would have a material adverse effect on the
Berkshire Parties taken as a whole; and (iii) is a registered bank holding
company under the regulations of the FRB. Berkshire Bank is a state chartered
commercial bank, duly organized, validly existing and in good standing under the
laws of the State of New York and engages only in activities (and holds
properties only of the types)
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permitted by the law of the United States, the New York State Banking Law and
the regulations of the New York State Banking Department thereunder, and the
regulations of the FDIC for insured depository institutions. Berkshire Bank's
deposit accounts are insured by the BIF as administered by the FDIC to the
fullest extent permitted under applicable law. Berkshire has two Subsidiaries,
Greater and Berkshire Bank, which is itself a wholly owned subsidiary of
Greater. Greater has no other Subsidiaries and Berkshire Bank has no
Subsidiaries.
4.2 Authorization, Execution and Delivery; Agreement Not in Breach.
(a) The Berkshire Parties have all requisite corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the proposed transactions have been duly authorized by the
unanimous vote of the entire Boards of Directors of the Berkshire Parties and no
other corporate proceedings on the part of the Berkshire Parties are necessary
to authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, except for the approval of their
respective stockholders. This Agreement and all other agreements and instruments
herein contemplated to be executed by the Berkshire Parties have been (or upon
execution will have been) duly executed and delivered by the Berkshire Parties
and constitute (or upon execution will constitute) legal, valid and enforceable
obligations of the Berkshire Parties, subject, as to enforceability, to
applicable bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and to the application of equitable principles and
judicial discretion.
(b) The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms hereof will
not result in a material violation or breach of any of the terms or provisions
of, or constitute a material default under (or an event which, with the passage
of time or the giving of notice, or both, would constitute such a default
under), or conflict with, or permit the acceleration of, any material obligation
under, any material mortgage, lease, covenant, agreement, indenture or other
instrument to which any of the Berkshire Parties is a party or by which any of
the Berkshire Parties is bound, the Certificate of Incorporation and Bylaws of
Berkshire or Greater or the Organization Certificate and bylaws of Berkshire
Bank; or any material judgment, decree, order, regulatory letter of
understanding or award of any court, governmental body, authority or arbitrator
by which any of the Berkshire Parties is bound, or any material permit,
concession, grant, franchise, license, law, statute, ordinance, rule or
regulation applicable to any of the Berkshire Parties or the properties of any
of them; or result in the creation of any material lien, claim, security
interest, encumbrance, charge, restriction or right of any third party of any
kind whatsoever upon the properties or assets of any of the Berkshire Parties,
except that the Government Approvals must be obtained for the Berkshire Parties
to consummate the Merger and Subsidiary Merger.
4.3 No Legal Bar. None of the Berkshire Parties is a party to, or subject to
or bound by, any material agreement, judgment, order, letter of understanding,
writ, prohibition, injunction or decree of any court or other governmental
authority or body of competent jurisdiction, or any law which would prevent the
execution of this Agreement by any of the Berkshire Parties, the delivery hereof
to the GSB Parties or the consummation of the transactions contemplated hereby
(except for such laws as require that the Government Approvals be obtained), and
no action or proceeding is pending against any of the Berkshire Parties in which
the validity of this Agreement, any of the transactions contemplated hereby or
any action which has been taken by any of the Parties in connection herewith,
or, in connection with any of the transactions contemplated hereby, is at issue.
4.4 Government and Other Approvals. Except for the Government Approvals and
the registration of the issuance of the Stock Merger Consideration with the SEC
pursuant to the Securities Act, no consent, approval, order or authorization of,
or registration, declaration or filing with, any federal, state or local
governmental authority is required to be made or obtained by the Berkshire
Parties in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement nor is any
consent or approval required from any landlord, licensor or other
non-governmental party which has granted rights to
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any of the Berkshire Parties in order to avoid forfeiture or impairment of such
rights which are material to the business of the Berkshire Parties taken as a
whole. None of the Berkshire Parties is aware of any facts, circumstances or
reasons why such Government Approvals should not be forthcoming or which would
prevent or hinder such approvals from being obtained.
4.5 Licenses, Franchises and Permits. The Berkshire Parties hold all
licenses, franchises, permits and authorizations necessary for the lawful
conduct of their respective businesses. The benefits of all of such licenses,
franchises, permits and authorizations are in full force and effect and may
continue to be enjoyed by a successor to the Berkshire Parties subsequent to the
Closing of the transactions contemplated herein without any consent or approval,
other than the Government Approvals, subject to the legal right and authority of
such successor to engage in the activities licensed, franchised, permitted or
authorized thereby. None of the Berkshire Parties has received notice of any
proceeding for the suspension or revocation of any such license, franchise,
permit, or authorization and no such proceeding is pending or, to the best
knowledge of the Berkshire Parties, has been threatened by any governmental
authority.
4.6 Charter Documents. Berkshire has provided to GSB true and correct copies
of the Certificate of Incorporation or Charter and Bylaws of the Berkshire
Parties.
4.7 Berkshire Financial Statements. The consolidated statements of financial
condition contained in the Berkshire Financial Statements fairly present the
consolidated financial condition of Berkshire as of the respective dates set
forth therein, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows in the Berkshire Financial Statements fairly
present the results of the consolidated operations, changes in stockholders'
equity and cash flows of Berkshire for the respective periods or as of the
respective dates set forth therein, in each case in conformity with GAAP
consistently applied, it being understood that Berkshire's interim financial
statements are not audited, not prepared with related notes and are subject to
normal year-end adjustments.
4.8 Absence of Certain Changes. Except as provided for or contemplated in
this Agreement, since the Balance Sheet Date there has not been:
(a) any material transaction by the Berkshire Parties not in the
ordinary course of business and in conformity with past practice;
(b) any material adverse change in the business, property, assets
(including loan portfolios), liabilities (whether absolute, accrued,
contingent or otherwise), operations, liquidity, income, condition or net
worth of the Berkshire Parties taken as a whole;
(c) any damage, destruction or loss, whether or not covered by
insurance, which has had or may have a material adverse effect on any of the
properties or business prospects of the Berkshire Parties taken as a whole
or their future use and operation by the Berkshire Parties taken as a whole;
(d) any acquisition or disposition by the Berkshire Parties of any
property or asset of the Berkshire Parties, whether real or personal, having
a fair market value, singularly or in the aggregate, in an amount greater
than fifty thousand dollars ($50,000) other than acquisitions or
dispositions made in the ordinary course of business;
(e) any mortgage, pledge or subjection to lien, charge or encumbrance of
any kind on any of the respective properties or assets of the Berkshire
Parties, except to secure extensions of credit in the ordinary course of
business and in conformity with past practice (pledges of and liens on
assets to secure Federal Home Loan Bank or Federal Reserve Bank of New York
advances being deemed both in the ordinary course of business and consistent
with past practice);
(f) any amendment, modification or termination of any contract or
agreement (other than contracts or agreements related to loans made by
Berkshire Bank) in excess of $10,000, relating to any of the Berkshire
Parties to which any of the Berkshire Parties is a party which would have a
material adverse effect upon the financial condition or operations of the
Berkshire Parties taken as a whole;
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(g) any increase in, or commitment to increase, the compensation payable
or to become payable to any officer, director, employee or agent of any of
the Berkshire Parties, or any bonus payment or similar arrangement made to
or with any of such officers, directors, employees or agents, other than
routine increases made in the ordinary course of business and consistent
with past practice not exceeding the lesser of five percent (5%) per annum
or $5,000 for any of them individually;
(h) any incurring of, assumption of, or taking of, by any of the
Berkshire Parties, any property subject to, any liability in excess of
$50,000, except for liabilities incurred or assumed or property taken
subsequent to the Balance Sheet Date in the ordinary course of business and
in conformity with past practice; or
(i) any material alteration in the manner of keeping the books, accounts
or records of any of the Berkshire Parties, or in the accounting policies or
practices therein reflected, except as required by GAAP and requirements of
Regulatory Authorities.
4.9 Deposits. None of the Berkshire Bank deposits (consisting of certificate
of deposit, savings accounts, NOW accounts and checking account), is a brokered
deposit.
4.10 Tax Matters.
(a) All federal, state and local Tax Returns required to be filed by or on
behalf of the Berkshire Parties have been timely filed. All Tax Returns filed
are, and the information contained therein is, complete and accurate in all
material respects. All Tax obligations reflected in such returns have been
timely paid. None of the Berkshire Parties is currently the beneficiary of any
extension of time within which to file any Tax Return. As of the date of this
Agreement, there is no audit examination, deficiency, or refund litigation or
matter in controversy with respect to any Taxes that might reasonably be
expected to result in a determination materially adverse to the Berkshire
Parties taken as a whole except as fully reserved for in the Berkshire Financial
Statements. All Taxes, interest, additions, and penalties due with respect to
completed and settled examinations or concluded litigation have been paid;
(b) None of the Berkshire Parties has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due that is
currently in effect;
(c) Adequate provision for any federal, state or local Taxes due or to
become due for the Berkshire Parties for all periods through and including
June 30, 2000, has been made and is reflected on the June 30, 2000 financial
statements included in Berkshire's Report on Form 10-Q for such period, and have
been and will continue to be made with respect to periods ending after June 30,
2000 on a basis consistent with its historic Tax accounting practices and GAAP;
(d) Deferred taxes of the Berkshire Parties have been and will be provided
for in accordance with GAAP; and
(e) Neither the Internal Revenue Service nor any state, local or other
taxing authority is now asserting or threatening to assert against any of the
Berkshire Parties any deficiency or claim for additional Taxes, or interest
thereon or penalties in connection therewith. All income, payroll, withholding,
property, excise, sales, use, franchise and transfer taxes, and all other Taxes,
charges, fees, levies or other assessments, imposed upon the Berkshire Parties
by the United States or by any state, municipality, subdivision or
instrumentality of the United States or by any other taxing authority, including
all interest, penalties or additions attributable thereto, which are due and
payable by any of the Berkshire Parties, either have been paid in full or have
been properly accrued and reflected in the Berkshire Financial Statements.
(f) None of the Berkshire Parties (i) is a party to any Tax allocation or
sharing agreement, (ii) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was Berkshire), or (iii) has any Tax liability for any party (other than
the Berkshire Parties) under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise.
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4.11 Litigation. There is no action, suit or proceeding pending against any
of the Berkshire Parties, or to the best knowledge of any of the Berkshire
Parties, threatened against or affecting any of the Berkshire Parties or any of
their assets, before any court or arbitrator or any governmental body, agency or
official that may, if decided against the Berkshire Parties, have a material
adverse effect on the business, properties, assets, liabilities, or condition
(financial or other) of the Berkshire Parties taken as a whole and that are not
reflected in the Berkshire Financial Statements.
4.12 Environmental Matters. To the knowledge of the Berkshire Parties, the
Berkshire Real Property is in material compliance with all Environmental Laws,
and there are no conditions existing currently which would subject any of the
Berkshire Parties, or any of them, to damages, penalties, injunctive relief or
cleanup costs under any Environmental Laws or assertions thereof, or which
require cleanup, removal, remedial action or other response pursuant to
Environmental Laws by any of the Berkshire Parties. None of the Berkshire
Parties is a party to any litigation or administrative proceeding, nor have the
Berkshire Parties (either in their own capacity or as trustee or fiduciary),
materially violated Environmental Laws nor, to their knowledge are the Berkshire
Parties(either in their own capacity or as trustee or fiduciary) required to
clean up, remove or take remedial or other responsive action due to the
disposal, depositing, discharge, leaking or other release of any hazardous
substances or materials. To the knowledge of the Berkshire Parties, none of the
Berkshire Real Property is, nor are the Berkshire Parties, subject to any
judgment, decree, order or citation related to or arising out of any
Environmental Laws. To the knowledge of the Berkshire Parties, no material
permits, licenses or approvals are required under Environmental Laws relative to
the Berkshire Real Property; and, none of the Berkshire Parties has stored,
deposited, treated, recycled, used or disposed of any materials (including,
without limitation, asbestos) on, under or at the Berkshire Real Property (or
tanks or other facilities thereon containing such materials), which materials if
known to be present on the Berkshire Real Property or present in soils or ground
water, would require cleanup, removal or some other remedial action under the
Environmental Laws.
4.13 Insurance. The Berkshire Parties have paid all amounts due and payable
under any insurance policies and guaranties applicable to them and their assets
and operations; all such insurance policies and guaranties are in full force and
effect; and the Berkshire Parties and all of the Berkshire Real Estate and other
material properties are insured against fire, casualty, theft, loss, and such
other events against which it is customary to insure, all such insurance
policies being in amounts that are adequate and are consistent with past
practices and experience.
4.14 Books and Records. The minute books of the Berkshire Parties contain,
in all material respects, accurate records of and fairly reflect all actions
taken at all meetings and accurately reflect all other corporate action of the
stockholders and the boards of directors and each committee thereof. The books
and records of the Berkshire Parties fairly and accurately reflect the
transactions to which the Berkshire Parties are or have been parties or by which
their properties are subject or bound, and such books and records have been
properly kept and maintained.
4.15 Capitalization of Berkshire. The authorized capital stock of Berkshire
consists of 10,000,000 shares of Common Stock having a par value of $0.10 per
share, 2,000,000 shares of preferred stock, $0.10 par value per share and no
other class of equity security. As of the date of this Agreement, 2,566,095
shares of Berkshire Common Stock were issued, of which 2,134,044 were
outstanding and 432,051 were held in treasury, and no shares of Berkshire's
preferred stock were issued and outstanding. All of the outstanding Berkshire
Common Stock is validly issued, fully-paid and nonassessable and has not been
issued in violation of any preemptive rights of any Berkshire Stockholder. As of
the date hereof, there are no outstanding securities or other obligations which
are convertible into Berkshire Common Stock or into any other equity or debt
security of Berkshire, and there are no outstanding options, warrants, rights,
scrip, rights to subscribe to, calls or other commitments of any nature which
would entitle the holder, upon exercise thereof, to be issued Berkshire Common
Stock or any other equity or debt security of Berkshire, except that there are
outstanding options under Berkshire stock option plans to purchase 50,375 shares
of Berkshire Common Stock at an average exercise price of $36.67 as of the
Balance Sheet Date.
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Berkshire owns and is the beneficial record holder of, and has good and freely
transferable title to, all of the issued and outstanding shares of capital stock
of Greater, all of which are recorded on the books and records of Greater as
being held in its name free and clear of all liens, charges or encumbrances, and
such stock is not subject to any voting trusts, agreements or similar
arrangements or other claims which could affect the ability of Berkshire to
freely vote such stock in support of the transactions contemplated herein, and
Greater owns all of the issued and outstanding shares of capital stock of
Berkshire Bank, all of which are recorded on the books and records of Berkshire
Bank as being held in its name, free and clear of all liens, charges or
encumbrances, and such stock is not subject to any voting trusts, agreements or
similar arrangements or other claims which could affect the ability of Greater
to freely vote such stock in support of the transactions contemplated herein.
4.16 Greater and Berkshire Bank Stock. There are no shares of capital stock
or other equity securities of Greater or Berkshire Bank outstanding, except for
shares of Berkshire Bank Common Stock presently issued and outstanding and the
common stock of Greater owned by Berkshire, and there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of Greater or Berkshire Bank, or
contracts, commitments, understandings, or arrangements by which Greater or
Berkshire Bank is or may be bound to issue additional shares of their capital
stock or options, warrants, or rights to purchase or acquire any additional
shares of their capital stock. There are no contracts, commitments,
understandings, or arrangements by which any of the Berkshire Parties is or may
be bound to transfer or issue to any third party any shares of the capital stock
of Greater or Berkshire Bank.
4.17 Disclosure.
(a) The information concerning, and representations and warranties made by,
the Berkshire Parties set forth in this Agreement, or in the Berkshire Schedule,
or in any document, statement, certificate or other writing furnished or to be
furnished by the Berkshire Parties to the GSB Parties pursuant hereto, do not
and will not contain any untrue statement of a material fact or omit and will
not omit to state a material fact required to be stated herein or therein which
is necessary to make the statements and facts contained herein or therein, in
light of the circumstances in which they were or are made, not false or
misleading.
(b) None of the information prepared by, or on behalf of, the Berkshire
Parties regarding them included or to be included in the Prospectus/Proxy and
any other documents to be filed with the SEC, or any other Regulatory Authority
in connection with the transactions contemplated herein, will, at the respective
times such documents are filed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents which the Berkshire Parties are responsible for
filing with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable law, including applicable provisions of the
Securities Laws and the rules and regulations promulgated thereunder. Without
limiting the foregoing, at the time the Prospectus/Proxy is mailed to Berkshire
Stockholders and GSB Stockholders and at all times subsequent to such mailing,
up to and including the date of the stockholders meetings at which the Merger
and this Agreement will be presented for approval, the Registration Statement,
with respect to all information relating to the Berkshire Parties, (i) will
comply in all material respects with the applicable provisions of the Securities
Laws and (ii) will not contain any statement which, at the time and in light of
the circumstances under which it is made, is false or misleading with respect to
any material fact or omit to state any material fact necessary in order to make
the statements made therein not false or misleading, or required to be stated
therein or necessary to correct any statement made in an earlier communication
with respect to such matters which have become false or misleading.
(c) Copies of all documents heretofore or hereafter delivered or made
available to GSB by the Berkshire Parties pursuant hereto were or will be
complete and accurate copies of such documents.
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4.18 Absence of Undisclosed Liabilities. To their knowledge none of the
Berkshire parties has any obligation or liability that is material to the
financial condition or operations of any of them, or that, when combined with
all similar obligations or liabilities, would be material to their financial
condition or operations (i) except as disclosed in the Berkshire Financial
Statements prior to the date of this Agreement, (ii) except obligations or
liabilities incurred in the ordinary course of its business consistent with past
practices or (iii) except as contemplated under this Agreement. Since June 30,
2000, none of the Berkshire Parties has incurred or paid any obligation or
liability which would be material to the financial condition or operations of
any of them, except for obligations paid in connection with transactions made by
them in the ordinary course of their business consistent with past practices,
laws and regulations applicable to them.
4.19 Allowance for Loan or REO Losses. The allowance for loan losses shown
on the Berkshire Financial Statements is in the opinion of management of
Berkshire adequate in all material respects to provide for anticipated losses
inherent in loans outstanding. As of the date thereof, none of the Berkshire
Parties has any loan which has been criticized, designated or classified by
management of Berkshire, or by regulatory examiners representing any Regulatory
Authority or by Berkshire's independent auditors as 'Special Mention,'
'Substandard,' 'Doubtful', 'Loss' or as a 'Potential Problem Loan.'
The allowance for losses in real estate owned, if any, shown on the
Berkshire Financial Statements in the opinion of management is or will be
adequate in all respects to provide for anticipated losses inherent in REO owned
or held by the Berkshire Parties and the net book value of real estate owned on
the Balance Sheet of the Berkshire Financial Statements is the fair value of the
real estate owned in accordance with Statement of Position 92-3.
4.20 Loan Portfolio.
(a) Ownership. With respect to each loan reflected as an asset on the
Berkshire Financial Statements, Berkshire, Greater or Berkshire Bank is the sole
holder of legal and beneficial title to each such loan (or, if the loan is a
participation loan, their applicable participation interest), and there has not
been any assignment or pledge of any loan (other than as security for Federal
Home Loan Bank or Federal Reserve Bank of New York advances).
(b) Litigation. There is no litigation or proceeding pending or threatened,
relating to any such loan or any collateral for the loan which would have a
material adverse effect upon the loan.
4.21 Compliance with Laws.
(a) To the best knowledge of the Berkshire Parties, they are in compliance
with all laws, rules, regulations, reporting and licensing requirements, and
orders applicable to its business or employees conducting its business
(including, but not limited to, those relating to consumer disclosure and
currency transaction reporting) the breach or violation of which would or could
reasonably be expected to have a material adverse effect on the financial
condition or operations of the Berkshire Parties taken as a whole, or which
would or could reasonably be expected to subject any of the Berkshire Parties or
any of their directors or officers to civil money penalties; and
(b) None of the Berkshire Parties has received notification or communication
from any agency or department of federal, state, or local government or any of
the Regulatory Authorities, or the staff thereof (i) asserting that any of the
Berkshire Parties is not in compliance with any of the statutes, rules,
regulations, or ordinances which such governmental authority or Regulatory
Authority enforces, and which, as a result of such noncompliance, would or could
reasonably be expected to have a material adverse effect on the Berkshire
Parties taken as a whole, (ii) threatening to revoke any license, franchise,
permit, or governmental authorization which is material to the financial
condition or operations of the Berkshire Parties taken as a whole, or
(iii) requiring any of the Berkshire Parties to enter into a cease and desist
order, consent, agreement or memorandum of understanding.
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4.22 Employee Benefit Plans.
(a) Section 4.22 of the Berkshire Schedule lists (i) each pension, profit
sharing, stock bonus, thrift, savings, employee stock ownership or other plan,
program or arrangement, which constitutes an 'employee pension benefit plan'
within the meaning of Section 3(2) of ERISA, which is maintained by any of the
Berkshire Parties or to which any of them contribute for the benefit of any
current or former employee, officer, director, consultant or agent; (ii) each
plan, program or arrangement for the provision of medical, surgical, or hospital
care or benefits, benefits in the event of sickness, accident, disability,
death, unemployment, severance, vacation, apprenticeship, day care, scholarship,
prepaid legal services or other benefits which constitute an 'employee welfare
benefit plan' within the meaning of Section 3(1) of ERISA, which is maintained
by any of the Berkshire Parties or to which any of them contribute for the
benefit of any current or former employee, officer, director, consultant or
agent; and (iii) every other retirement or deferred compensation plan, bonus or
incentive compensation plan or arrangement, stock option plan, stock purchase
plan, severance or vacation pay arrangement, or other fringe benefit plan,
program or arrangement through which any of the Berkshire Parties provide
benefits for or on behalf of any current or former employee, officer, director,
consultant or agent.
4.23 Material Contracts. None of the Berkshire Parties, nor any of their
respective assets, businesses, or operations, is as of the date of this
Agreement a party to, or bound or affected by, or receives benefits under, any
contract or agreement or amendment thereto that require annual payments of over
$50,000 per year, other than loans or commitments to lend in the ordinary course
of business pursuant to which Berkshire Bank is a lender, employment agreements
disclosed in the most recent definitive proxy statement of Berkshire as filed
with the SEC, other contracts or agreements disclosed in the most recent Report
on Form 10-K filed by Berkshire with the SEC, and obligations to repay deposits
and borrowings as shown on the Berkshire Financial Statements.
4.24 Material Contract Defaults. None of the Berkshire Parties is in default
under any material contract, agreement, commitment, arrangement, lease,
insurance policy, or other instrument to which it is a party or by which its
respective assets, business, or operations may be bound or affected or under
which it or its respective assets, business, or operations receives benefits,
and which default would reasonably be expected to have either individually or in
the aggregate a material adverse effect on the Berkshire Parties taken as a
whole, and there has not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a default.
4.25 1934 Act and NASDAQ Listing.
(a) The Berkshire Common Stock is registered with the SEC pursuant to the
1934 Act and Berkshire has filed with the SEC all material forms and reports
required by law to be filed by Berkshire with the SEC, which forms and reports,
taken as a whole, are true and correct in all material respects, and do not
misstate a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(b) The outstanding shares of Berkshire Common Stock are quoted for trading
on the NASDAQ SmallCap Market (under the symbol 'ZAPS') and Berkshire has filed
with the NASDAQ SmallCap Market all material forms and reports required to be
filed by Berkshire. Berkshire has made application to have Berkshire Common
Stock listed for trading on the NASDAQ National Market System.
4.26 Certain Regulatory Matters.
(a) Berkshire Bank is a member of the Federal Home Loan Bank of New York.
(b) Berkshire Bank has not paid any dividends to Berkshire or any affiliate
thereof that (i) caused the regulatory capital of Berkshire Bank to be less than
the amount then required by applicable law or (ii) exceeded any other limitation
on the payment of dividends imposed by law, agreement or regulatory policy.
(c) Berkshire Bank has adopted policies and procedures designed to promote
overall compliance with the Bank Secrecy Act (31 U.S.C. Section 5301), the
Truth-in-Lending Act (15
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U.S.C. Section 1601 et seq.), the Expedited Funds Availability Act (12 U.S.C.
Section 4001) and the regulations adopted under each such act and have
materially complied with the reporting requirements under the Bank Secrecy Act
and the regulations thereunder.
4.27 Corporate Approval. The affirmative vote of a majority of the votes
cast by stockholders of Berkshire entitled to vote at a meeting is required to
adopt this Agreement and approve the Merger and the other transactions
contemplated hereby. No other vote of the stockholders of Berkshire is required
by law, the Certificate of Incorporation or Bylaws of Berkshire or otherwise to
adopt this Agreement and approve the Merger and the other transactions
contemplated hereby.
4.28 Broker's and Finder's Fees. None of the Berkshire Parties has any
liability to any broker, finder, or similar agent, nor have any of them agreed
to pay any broker's fee, finder's fee or commission, with respect hereto or to
the transactions contemplated hereby except for a fee payable to Berwind
Financial, L.P.
4.29 Delays. None of the Berkshire Parties is aware of any matter that could
cause a delay in receiving any approval required by this Agreement.
ARTICLE 5
COVENANTS OF GSB AND GOSHEN SAVINGS BANK
5.1 Preparation of Registration Statement and Applications for Required
Consents.
(a) GSB will cooperate with Berkshire in the preparation of the Registration
Statement and the Prospectus/Proxy. In connection therewith, GSB will furnish
all financial or other information, including using best efforts to obtain
customary consents, certificates, opinions of counsel and other items concerning
GSB reasonably deemed necessary by counsel to Berkshire for the filing or
preparation for filing under the Securities Act and the Exchange Act of the
Registration Statement and the Prospectus/Proxy. GSB will cooperate with
Berkshire and provide such information as may be advisable in obtaining an order
of effectiveness for the Registration Statement, appropriate permits or
approvals under state securities and 'blue sky' law, the required approval of
the Banking Board, the FDIC, the FRB and the OTS, the listing of the Shares on
the NASDAQ Stock Market (subject to official notice of issuance, if necessary)
and any other governmental or regulatory consents or approvals or the taking of
any other governmental or regulatory action necessary to consummate the Merger
without a material adverse effect on the business, results of operations, assets
or financial condition of the Surviving Corporation and its subsidiaries, taken
as a whole. The GSB Parties covenant and agree that all information furnished by
any of the GSB Parties for inclusion in the Registration Statement, the
Prospectus/Proxy, all applications to appropriate regulatory agencies for
approval of the Merger, and all information furnished by the GSB Parties to
Berkshire pursuant to this Agreement or in connection with obtaining Government
Approvals, will comply in all material respects with the provisions of
applicable law, including the Securities Act and the rules and regulations of
the SEC thereunder, and will not contain any untrue statement of a material fact
and will not omit to state any material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(b) As promptly as practicable after the Registration Statement becomes
effective under the Securities Act, the GSB Parties and the Berkshire Parties
will hold meetings of their stockholders for the purpose of approving this
Agreement and authorizing the Merger or the Subsidiary Merger, as applicable.
GSB and Berkshire will, in accordance with and in compliance with the Exchange
Act, and to the extent permitted with the respective Board's fiduciary duty,
solicit proxies from their stockholders in favor of such approval and
authorization. Without the prior written consent of Berkshire, GSB will not
distribute to its stockholders any materials in connection with such proxy
solicitation other than materials contained in the Registration Statement as
effective.
5.2 Conduct of Business -- Affirmative Covenants. Unless the prior written
consent of Berkshire shall have been obtained:
(a) Each of GSB and Goshen Savings Bank shall:
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(i) Operate its business only in the usual, regular, and ordinary
course;
(ii) Preserve intact its business organizations and assets and
maintain its rights and franchises;
(iii) Take no action, unless otherwise required by law, rules or
regulation, that would reasonably be considered to (A) adversely affect
the ability of any of them or Berkshire to obtain any necessary approvals
of Regulatory Authorities required to consummate the transactions
contemplated by this Agreement, or (B) adversely affect the ability of
such Party to perform its covenants and agreements under this Agreement;
(iv) Except as they may terminate in accordance with their terms or
as may be terminated by GSB or Goshen Savings Bank as a result of a
material default by a party other than GSB or Goshen Savings Bank, keep
in full force and effect, and not default in any of their obligations
under, all material contracts;
(v) Keep in full force and effect insurance coverage with responsible
insurance carriers which is reasonably adequate in coverage and amount
for companies the size of GSB or such GSB Subsidiary and for the
businesses and properties owned by each and in which each is engaged, to
the extent that such insurance is reasonably available;
(vi) Use its best efforts to retain Goshen Savings Bank's present
customer base and to facilitate the retention of such customers by Goshen
Savings Bank and its branches after the Effective Time; and
(vii) Maintain, renew, keep in full force and effect, and preserve
its business organization and material rights and franchises, permits and
licenses, and use its best efforts to maintain positive relations with
its present employees so that such employees will continue to perform
effectively and will be available to GSB, Goshen Savings Bank or
Berkshire and Berkshire's Subsidiaries at and after the Effective Time,
and use its best efforts to maintain its existing, or substantially
equivalent, credit arrangements with banks and other financial
institutions and to assure the continuance of Goshen Savings Bank's
customer relationships.
(b) The GSB Parties agree to use their best efforts to assist the
Berkshire Parties in obtaining the Government Approvals necessary to
complete the transactions contemplated hereby and do not know of any reason
that such Government Approvals can not be obtained, and the GSB Parties
shall provide to Berkshire or to the appropriate governmental authorities
all information reasonably required to be submitted in connection with
obtaining such approvals.
(c) The GSB Parties, at their own cost and expense, shall use their best
efforts to secure all necessary consents and all consents and releases, if
any, required of GSB, Goshen Savings Bank or third parties and shall comply
with all applicable laws, regulations and rulings in connection with this
Agreement and the consummation of the transactions contemplated hereby.
(d) Intentionally omitted.
(e) Subject to the terms and conditions of this Agreement, the GSB
Parties shall use their best efforts to do, or to cause to be done, all
things necessary, proper, or advisable under applicable laws and regulations
to consummate and make effective, with reasonable promptness after the date
of this Agreement, the transactions contemplated by this Agreement,
including, without limitation, using reasonable efforts to lift or rescind
any injunction or restraining or other order adversely affecting the ability
of the Parties to consummate the transaction contemplated by this Agreement.
GSB shall use, and shall cause each of its Subsidiaries to use, its best
efforts to obtain consents of all third parties and Regulatory Authorities
necessary or desirable for the consummation of each of the transactions
contemplated by this Agreement.
(f) Intentionally omitted.
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(g) On the business day immediately prior to the Effective Time or on
such other day after the satisfaction of all conditions precedent to the
Merger as Berkshire may require, GSB shall, at the request of Berkshire,
take all legally permissible action necessary to convert to the accounting
policies and practices of Berkshire, such actions to include, without
limitation, at Berkshire's option, adjustments to loan loss reserves,
reserves for federal income taxes, accounting for post-retirement medical
benefits, and accruals for severance and related costs and accrued vacation
and disability leave. GSB's and Goshen Savings Bank's representations,
warranties and covenants contained in this Agreement shall not be deemed to
be untrue or breached in any respect for any purpose as a consequence of any
modifications or changes undertaken at the request of Berkshire under this
Section 5.2(g) or otherwise.
5.3 Conduct of Business -- Negative Covenants. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, except as may be separately agreed by GSB and Berkshire, the GSB
Parties covenant and agree that they will neither do, nor agree or commit to do,
nor permit any GSB Subsidiary to do or commit or agree to do, any of the
following without requesting Berkshire's approval and receiving the prior
written consent of the president of Berkshire, which consent shall be deemed
given unless Berkshire disapproves the same within five (5) business days of
having received GSB's written request for such approval:
(a) Except as expressly contemplated by this Agreement, amend its
Certificate of Incorporation or Bylaws; or
(b) Impose on any share of capital stock held by it or by any of its
Subsidiaries any lien, charge, or encumbrance, or permit any such lien,
charge, or encumbrance to exist; or
(c) (i) Repurchase, redeem, or otherwise acquire or exchange, directly
or indirectly, any shares of its capital stock or other equity securities or
any securities or instruments convertible into any shares of its capital
stock, or any rights or options to acquire any shares of its capital stock
or other equity securities except as expressly permitted by this Agreement,
or (ii) split or otherwise subdivide its capital stock; or
(iii) recapitalize in any way; or (iv) declare a stock dividend on the GSB
Common Stock; or (v) pay or declare a cash dividend or make or declare any
other type of distribution on the GSB Common Stock except for any cash
dividend already declared prior to this Agreement or regular quarterly cash
dividends payable in the same amount and on the same schedule as past
quarterly dividends; or
(d) Except as expressly permitted by this Agreement, acquire direct or
indirect control over any corporation, association, firm, organization or
other entity, other than in connection with (i) mergers, acquisitions, or
other transactions approved in writing by Berkshire, (ii) internal
reorganizations or consolidations involving existing Subsidiaries,
(iii) acquisitions of control in its fiduciary capacity, or (iv) the
creation of new subsidiaries organized to conduct or continue activities
otherwise permitted by this Agreement;
(e) Except as expressly permitted by this Agreement, to (i) issue, sell,
agree to sell, or otherwise dispose of or otherwise permit to become
outstanding any additional shares of GSB Common Stock (not including shares
issuable upon the exercise of GSB Stock Options outstanding as of the date
of this Agreement), or any other capital stock of GSB or of any GSB
Subsidiary, or any stock appreciation rights, or any option, warrant,
conversion, call, scrip, or other right to acquire any such stock, or any
security convertible into any such stock, unless any such shares of such
stock are directly sold or otherwise directly transferred to GSB or any GSB
Subsidiary, (ii) sell, agree to sell, or otherwise dispose of any
substantial part of the assets or earning power of GSB or of any GSB
Subsidiary; (iii) sell, agree to sell, or otherwise dispose of any asset of
GSB or any GSB Subsidiary other than in the ordinary course of business for
reasonable and adequate consideration or (iv) buy, agree to buy or otherwise
acquire a substantial part of the assets or earning power of any other
Person except in the ordinary course of business to realize upon a debt owed
to it;
(f) Incur, or permit any GSB Subsidiary to incur, any additional debt
obligation or other obligation for borrowed money other than (i) in
replacement of existing short-term debt with other short-term debt of an
equal or lesser amount, (ii) financing of banking related activities,
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or (iii) indebtedness of GSB or any GSB Subsidiary to Goshen Savings Bank or
another GSB Subsidiary not in excess of an aggregate of $10,000 (for GSB and
its Subsidiaries on a consolidated basis), except in the ordinary course of
the business of GSB or such GSB Subsidiary (and such ordinary course of
business shall include, but shall not be limited to, creation of deposit
liabilities, entry into repurchase agreements or reverse repurchase
agreements, purchases or sales of federal funds, Federal Home Loan Bank
advances, and sales of certificates of deposit);
(g) Grant any increase in compensation or benefits (including, without
limitation, any grants or awards under the GSB stock option plan and
Incentive Stock Award Plan) to any of its employees or officers, except as
required by law, and except for the scheduled increases in salary listed in
Section 5.3(g) of the GSB Schedule; enter into any severance agreements with
any of its officers or employees; grant any material increase in fees or
other increases in new compensation or other benefits to any director of GSB
or of any GSB Subsidiary; effect any change in retirement benefits for any
class of its employees or officers, unless such change is required by
applicable law; or pay any bonuses to any persons in excess of $150,000 for
all bonuses paid in the aggregate;
(h) Amend any existing employment or other contract between it and any
director, officer or employee to increase the compensation or benefits
payable thereunder; or enter into any new employment or other contract with
any director, officer or employee that GSB or Goshen Savings Bank, as
applicable, does not have the unconditional right to terminate without
liability (other than liability for services already rendered), at any time
on or after the Effective Time;
(i) Adopt any new employee benefit plan or terminate or make any
material change in or to any existing employee benefit plan other than any
change that is required by law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax-qualified status of any such
plan;
(j) Enter into any new service contracts, purchase or sale agreements or
lease agreements providing for annual payments in excess of $10,000 that are
material to GSB or any GSB Subsidiary except for the sale of collateral for
loans in default;
(k) Make any capital expenditure exceeding $25,000 except for budgeted
expenses in connection with the previously announced opening of a new
branch;
(l) Knowingly take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or in any
of the conditions to the Merger set forth in Article 7 not being satisfied,
or in violation of any provision of this Agreement, except, in every case,
as may be required by applicable law;
(m) Change its methods of accounting in effect at June 30, 2000, except
as required by changes in generally accepted accounting principles as
concurred in, in writing, by GSB's independent auditors (a copy of which
shall be provided to Berkshire) or regulatory accounting principles;
(n) Except as required by applicable law, knowingly take or cause to be
taken any action that could reasonably be expected to jeopardize or delay
the receipt of any of the required regulatory approvals or which would
reasonably be expected to result in any such required regulatory approval
containing a condition that is determined by Berkshire to be unduly
burdensome;
(o) Fail to use its best efforts to keep in full force and effect its
insurance and bonds in such amounts as are reasonable to cover such risks
customary in relation to the character and location of its properties and
the nature of its business and in any event at least equal in scope and
amount of coverage of insurance and bonds now carried;
(p) Fail to notify Berkshire promptly of its receipt of any letter,
notice or other communication, whether written or oral, from any
governmental entity advising GSB of any
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governmental investigation (other than normal bank regulatory examinations)
or that such governmental entity is contemplating issuing, requiring, or
requesting any agreement, memorandum of understanding, or similar
undertaking, order or directive;
(q) Fail promptly to notify Berkshire of (i) the commencement or threat
of any audit, action, or proceeding involving any material amount of taxes
against either GSB or any GSB Subsidiary or (ii) the receipt by GSB or any
GSB Subsidiary of any deficiency or audit notices or reports in respect of
any material deficiencies asserted by any federal, state, local or other tax
authorities;
(r) Fail to maintain and keep its properties in good repair and
condition, except for depreciation due to ordinary wear and tear;
(s) Engage in any off-balance sheet hedge transactions.
5.4 Conduct of Business -- Certain Actions. During the period from the date
of this Agreement until the earlier of the Effective Time or the termination of
this Agreement, the GSB Parties shall not, and shall cause their directors,
officers, employees, agents and representatives (including investment bankers,
attorneys and accountants) not to, directly or indirectly, (i) initiate,
solicit, encourage or otherwise facilitate any Acquisition Transaction or any
inquiries that may reasonably be expected to lead to an Acquisition Transaction,
or (ii) engage in any discussions with or provide any confidential information
or data to any Person that may reasonably be expected to lead to an Acquisition
Transaction, or (iii) engage in any negotiations concerning, or otherwise
facilitate any effort or attempt to make or implement, an Acquisition
Transaction. Notwithstanding the foregoing, the Board of Directors of GSB shall
be permitted (A) to the extent applicable to comply, with regard to an
Acquisition Proposal, with Rule 14e-2(a) promulgated under the Exchange Act,
(B) in response to an unsolicited bona fide written Acquisition Proposal from
any Person, to recommend such Acquisition Transaction to its shareholders or
withdraw or modify in any adverse manner its approval or recommendation of this
Agreement, and (C) to engage in any discussions or negotiations with, or provide
any information to, any Person in response to an unsolicited bona fide written
Acquisition Proposal by any such Person, if and only to the extent that, in any
such case described in the preceding clause (B) or (C), (i) the GSB Stockholders
shall not have approved this Agreement and the Merger, (ii) the Board of
Directors of GSB shall have concluded in good faith that such Acquisition
Proposal (x) in the case described in clause (B) above would, if consummated,
constitute a Superior Proposal, or (y), in the case described in clause (C)
above, could reasonably be expected to constitute a Superior Proposal,
(iii) the Board of Directors of GSB shall have determined in good faith on the
basis of written advice of outside legal counsel that such action is necessary
for such Board of Directors to be deemed to have acted in a manner consistent
with its fiduciary duties under the DGCL or other applicable law, and
(iv) prior to providing any information or data to any Person in connection with
an Acquisition Transaction by any such Person, the Board of Directors shall have
received from such Person an executed confidentiality agreement containing terms
and provisions no less favorable to GSB than those contained in the
confidentiality agreement between GSB and Berkshire. GSB shall, within one (1)
business day, notify Berkshire in writing of any and all such inquiries,
proposals or offers received by, or any such discussions or negotiations sought
to be initiated or continued with, any of its representatives, which notice
shall set forth the name(s) of such Person and the material terms and conditions
of any Acquisition Proposal. GSB shall immediately cease and cause to be
terminated any pending activities, discussions or negotiations with any Persons
with respect to any Acquisition Transaction. Nothing in this Section 5.4 shall
permit GSB to terminate this Agreement.
5.5 Delivery of Information. The GSB Parties will provide to Berkshire a
copy of the materials, including monthly financial statements, distributed to
directors of GSB or Goshen Savings Bank in connection with board meetings.
5.6 Notification. GSB shall notify Berkshire promptly after becoming aware
of the occurrence of, or the impending or threatened occurrence of, any event
that would constitute a material breach on its part of any obligation under this
Agreement or the occurrence of any event that would cause any representation or
warranty made by it herein to be false or misleading in any material respect, or
if it becomes a party or is threatened with becoming a party to any legal or
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equitable proceeding or governmental investigation or upon the occurrence of any
event that would result in a material change in the circumstances described in
the representations and warranties contained herein, provided, however, that
such notification does not obviate any responsibilities of any of the GSB
Parties under this Agreement. At all times up to and including, and as of, the
Closing, the GSB Parties shall inform Berkshire in writing of any and all facts
necessary to amend or supplement the representations and warranties made herein
and in the GSB Schedule as necessary so that the information contained herein
and therein will accurately reflect the current status of the GSB Parties;
provided, however, that any such updates to the GSB Schedule shall be required
prior to the Closing only with respect to matters which represent material
changes to the GSB Schedule and the information contained therein.
ARTICLE 6
COVENANTS OF BERKSHIRE
6.1 Regulatory and Other Approvals. As promptly as practicable after
execution of this Agreement, Berkshire shall file any and all applications with
the appropriate government Regulatory Authorities in order to obtain the
Government Approvals and shall take such other actions as may be reasonably
required to consummate the transactions contemplated in this Agreement with
reasonable promptness. Berkshire shall pay all fees and expenses arising in
connection with such applications for regulatory approval. Berkshire agrees to
use its best efforts to provide the appropriate Regulatory Authorities with the
information required by such authorities in connection with Berkshire's
applications for regulatory approval and to use its best efforts to obtain such
regulatory approvals, and any other approvals and consents as may be required
for the Closing, as promptly as practicable; provided, however, that nothing in
this Section shall be construed to obligate Berkshire to take any action to meet
any condition required to obtain prior regulatory approval if such condition
would have a material adverse effect on the ability of Berkshire to carry on its
business, branching or acquisition programs. Berkshire shall provide GSB the
opportunity to review and comment on all required applications within a
reasonable period prior to the filing thereof and provide GSB with copies of all
written communications with Regulatory Authorities regarding the transactions
provided for herein and related applications and proceedings. Subject to the
terms and conditions of this Agreement, Berkshire and Berkshire Bank shall use
their best efforts to do, or to cause to be done, all things necessary, proper,
or advisable under applicable laws and regulations to consummate and make
effective, with reasonable promptness after the date of this Agreement, the
transactions contemplated by this Agreement, including, without limitation,
using reasonable efforts to lift or rescind any injunction or restraining or
other order adversely affecting the ability of the Parties to consummate the
transaction contemplated by this Agreement. Subject to the provisions of this
Section, Berkshire shall use, and shall cause each of its Subsidiaries to use,
its best efforts to obtain consents of all third parties and Regulatory
Authorities necessary or desirable for the consummation of each of the
transactions contemplated by this Agreement.
6.2 Approvals and Registrations. Berkshire will use its best efforts to
prepare and file (a) the Registration Statement with the SEC, (b) with the
Regulatory Authorities, applications for approval of the Merger or the
Subsidiary Merger, if required, and (c) with the NASDAQ Stock Market, if
necessary, an application for the listing of the Shares of Berkshire Common
Stock issuable upon the Merger, subject to official notice of issuance, except
that Berkshire shall have no obligations to file a new registration statement or
a post-effective amendment to the Registration Statement covering any reoffering
of Berkshire Common Stock by GSB affiliates. Berkshire, reasonably in advance of
making such filings, will provide GSB a reasonable opportunity to comment on
such filings and regulatory applications and will give due consideration to any
comments of GSB before making any such filing or application; and Berkshire will
provide GSB with copies of all such filings and applications at the time filed
if such filings and applications are made at any time before the Effective Time.
Berkshire covenants and agrees that all information furnished by Berkshire for
inclusion in the Registration Statement, the Prospectus/Proxy, and all
applications and submissions for the Government Approvals will comply in all
material respects
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with the provisions of applicable law, including the Securities Act and the
Exchange Act and the rules and regulations of the SEC, the FDIC, the OTS, and
FRB, and will not contain any untrue statement of a material fact and will not
omit to state any material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading.
6.3 Employee Benefits; Directors Deferred Compensation Plan.
(a) As soon as practical after the consummation of the transactions
contemplated herein, Berkshire Bank shall have the right to terminate the
defined benefit pension plan of Goshen Savings Bank.
(b) All employees of any of the GSB Parties immediately prior to the
Effective Time who continue as employees of Berkshire Bank will be afforded the
opportunity to participate in any employee benefit plans maintained by Berkshire
Bank, including but not limited to any 'employee benefit plan,' as that term is
defined in ERISA, on an equal basis with similarly situated employees of
Berkshire Bank with comparable positions, compensation, and tenure, subject to
the provisions of this Section, provided, however, that the length of the
vacation to which a former employee of one of the GSB Parties was entitled
immediately prior to the Merger shall not be reduced. Service with GSB or with
any GSB Subsidiary prior to the Effective Time by such former GSB employees will
be deemed service with Berkshire Bank for all purposes.
(c) In order to recognize the effect of certain differences between the
employee benefit plans of the GSB Parties when compared to the employee benefit
plans of Berkshire Bank, all employees and officers of the GSB Parties will
receive a 2% increase in base salary effective upon the consummation of the
Merger.
(d) Berkshire Bank, after the Effective Time, shall retain all employees of
the GSB Parties, subject to the needs of Berkshire Bank's business. Any employee
of any of the GSB Parties at the Effective Time whose employment with Berkshire
Bank is terminated by Berkshire Bank within one year after the Effective Time,
other than for cause, and who is not otherwise entitled to a severance payment
or contract assurance period pursuant to any agreement with any of the GSB
Parties, shall be entitled to receive a severance payment equal to one week's
salary at then current rates for each full year of employment with Goshen
Savings Bank and Berkshire Bank as its successor. For the purposes of this
Agreement, termination by Berkshire Bank shall include actual termination,
material reduction in salary, or relocation of the principal workplace of the
employee beyond 10 miles outside the borders of Orange County; and 'cause' shall
include the following: (i) personal dishonesty, (ii) incompetence or intentional
failure to perform regular duties, (iii) willful misconduct or willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or final cease and desist order, or (iv) breach of fiduciary duty. GSB
shall make all filings as may be required with the IRS so that the ESOP may be
terminated at or as soon as legally permissible after the Effective Time, and
the ESOP shall be so terminated and distributions made thereunder in accordance
with the provisions of the ESOP and the Code as soon as practicable after the
Effective Time. Following the transfer of the former GSB or Goshen Savings Bank
employees to Berkshire's or any Berkshire Subsidiary's health plan, there shall
be no exclusion from coverage for any pre-existing medical condition of any such
employee to the extent such condition was covered under a health plan of GSB or
Goshen Savings Bank.
(e) Berkshire and Berkshire Bank, after the Merger and the Subsidiary
Merger, shall honor all employment contracts of the GSB Parties, respectively as
listed in Section 3.25 of the GSB Schedule.
(f) From and after the Closing Date, Berkshire and Berkshire Bank shall,
without any further action being required, assume all obligations under, and pay
as and when due, all amounts owed to directors of the GSB Parties pursuant to,
existing plans for the deferred payment of directors fees.
6.4 Notification. Berkshire shall notify GSB promptly after becoming aware
of the occurrence of, or the impending or threatened occurrence of, any event
that would constitute a material breach on its part of any obligation under this
Agreement or the occurrence of any event that
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would cause any representation or warranty made by it herein to be false or
misleading in any material respect, or if it becomes a party or is threatened
with becoming a party to any legal or equitable proceeding or governmental
investigation or upon the occurrence of any event that would result in a
material change in the circumstances described in the representations and
warranties contained herein, provided, however, that such notification does not
obviate any responsibilities of any of the Berkshire Parties under this
Agreement. At all times up to and including, and as of, the Closing, Berkshire
and Berkshire Bank shall inform GSB in writing of any and all facts necessary to
amend or supplement the representations and warranties made herein and in the
Berkshire Schedule as necessary so that the information contained herein and
therein will accurately reflect the current status of Berkshire and Berkshire
Bank; provided, however, that any such updates to the Berkshire Schedule shall
be required prior to the Closing only with respect to matters which represent
material changes to the Berkshire Schedule and the information contained
therein.
6.5 Tax Representations. Neither Berkshire nor any of its Subsidiaries has
taken, agreed to take, or will take any action or has any knowledge of any fact
or circumstance that would prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
6.6 Directors and Officers Indemnification and Insurance Coverage.
(a) Berkshire will continue to indemnify officers, directors, and employees
of the GSB Parties to the fullest extent permitted under the provisions of
Delaware Law, the New York Banking Law, and of Berkshire's and Berkshire Bank's
Certificate of Incorporation, Organization Certificate and Bylaws from the
Effective Time.
(b) For a period of not less than three years after the Effective Time,
Berkshire will provide to the persons who served as directors or officers of GSB
or any subsidiary of GSB on or before the Effective Time insurance against
liabilities and claims (and related expenses) made against them resulting from
their service as such prior to the Effective Time substantially similar in all
material respects to the insurance coverage provided to them in such capacities
at the date hereof; provided, however, that Berkshire may satisfy such
obligation by authorizing and causing GSB to purchase a discovery 'tail' period
on the existing liability insurance of the GSB Parties, which otherwise expires
in April 2002, to extend the period for the reporting of claims under such
policy through three years after the Effective Time, further provided, however,
that in no event shall Berkshire be required to spend in excess of $5,000 over
and above the premiums already paid by the GSB Parties for their existing
directors and officers liability insurance policy, to satisfy its obligations
under this Section 6.6(b).
(c) The GSB Parties represent and warrant to Berkshire that they are not
aware of any basis for any claim under GSB's existing directors and officers
liability insurance policy.
6.7 Conduct of Berkshire and Berkshire Bank Prior to the Effective Time.
Except as expressly provided in this Agreement, as agreed to by GSB or as
required by applicable law, rules or regulations, during the period from the
date of this Agreement to the Effective Time, Berkshire and Berkshire Bank
shall, and shall cause its subsidiaries to, (i) take no action which would
adversely affect or delay the ability of the parties to obtain any necessary
approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or to perform their covenants and agreements in
this Agreement on a timely basis, (ii) take no action that could reasonably be
expected to have a material adverse effect on the financial condition, results
of operations or business prospects of Berkshire or Berkshire Bank; (iii)
continue to conduct their businesses in the ordinary course and consistent with
past practices; and (iv) pay no dividend other than normal periodic dividends in
accordance with existing practice.
6.8 NASDAQ Listing. Berkshire shall use its best efforts to cause the
listing of its common stock to be moved from the NASDAQ Small Cap Market to the
NASDAQ National Market effective upon the consummation of the Merger.
6.9 Goshen Savings Bank Division. For a period of at least three years after
the Subsidiary Merger, the offices of Goshen Savings Bank on the Closing Date,
and the business operations
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conducted from such offices, shall be referred to as the Goshen Savings Bank
Division of Berkshire Bank.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of Berkshire. Unless waived in writing by
Berkshire, the obligation of Berkshire to consummate the transactions
contemplated by this Agreement is subject to the satisfaction at or prior to the
Closing Date of all of the following conditions:
(a) Performance. Each of the material acts and undertakings of the GSB
Parties to be performed at or before the Closing Date pursuant to this
Agreement shall have been duly performed.
(b) No Material Adverse Change. No material adverse change in the
business, property, assets (including loan portfolios), liabilities (whether
absolute, contingent or otherwise), operations, liquidity, income, or
financial condition of the GSB Parties taken as a whole shall have occurred
since the date of this Agreement.
(c) Representations and Warranties. The representations and warranties
of the GSB Parties contained in this Agreement shall be true and correct, in
all material respects, on and as of the Closing Date with the same effect as
though made on and as of the Closing Date.
(d) Documents. In addition to the documents described elsewhere in this
Agreement, Berkshire shall have received the following documents and
instruments:
(i) a certificate signed by the Secretary or an assistant secretary
of the GSB Parties dated as of the Closing Date certifying that:
(A) GSB's and Goshen Savings Bank's respective Boards of
Directors and stockholders have duly adopted resolutions (copies of
which shall be attached to such certificate) approving the
substantive terms of this Agreement and authorizing the consummation
of the transactions contemplated by this Agreement and certifying
that such resolutions have not been amended or modified and remain in
full force and effect;
(B) each person executing this Agreement on behalf of the GSB
Parties is an officer of GSB or Goshen Savings Bank, as the case may
be, holding the office or offices specified therein, with full power
and authority to execute this Agreement and any and all other
documents in connection with the Merger, and that the signature of
each person set forth on such certificate is his or her genuine
signature;
(C) the charter documents of the GSB Parties attached to such
certificate remain in full force and effect; and
(ii) a certificate signed by the Chairman of the Board, President and
Chief Financial Officer of each of GSB and Goshen Savings Bank stating
that to the best of their knowledge and belief the conditions set forth
in Sections 7.1(a), 7.1(b) and 7.1(c) of this Agreement have been
satisfied.
(e) Inspections Permitted. Between the date of this Agreement and the
Closing Date, the GSB Parties shall have afforded Berkshire and its
authorized agents and representatives reasonable access during normal
business hours to the properties, operations, books, records, contracts,
documents, loan files and other information of or relating to the GSB
Parties. Berkshire will provide the GSB Parties at least 48 hours notice of
any inspection and conduct any inspection in a reasonable manner that will
not interfere with business operations. The GSB Parties shall have caused
all GSB or Goshen Savings Bank personnel to provide reasonable assistance to
Berkshire in its investigation of matters relating to the GSB Parties.
(f) Opinion of GSB's Counsel. Berkshire shall have been furnished with
an opinion of legal counsel to the GSB Parties, dated the Closing Date,
addressed to Berkshire, substantially to the effect set forth in Exhibit B.
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Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of GSB or Goshen Savings Bank or
appropriate government officials; and (ii) in the case of matters of law
governed by the laws of the states in which they are not licensed, reasonably
rely upon the opinions of legal counsel duly licensed in such states and may
be limited, in any event, to Federal Law, and the laws of the State of New
York and Delaware.
(g) Other Business Combinations, Etc. Neither GSB nor Goshen Savings
Bank shall have entered into any agreement, letter of intent, understanding
or other arrangement pursuant to which any of the GSB Parties would merge,
consolidate with, effect a business combination with, sell any substantial
part of GSB's or Goshen Savings Bank's assets to, or acquire a significant
part of the shares or assets of, any other Person (financial or otherwise);
or adopt any 'poison pill' or other type of anti-takeover arrangement, any
stockholder rights provision, any 'golden parachute' or similar program
which would have the effect of materially decreasing the value of any of the
GSB Parties or the benefits of merging with GSB.
(h) Fairness Opinion. Berkshire shall have received a 'fairness opinion'
letter from its independent financial adviser, Berwind Financial, L.P.,
dated the date hereof and to the effect that, in the opinion of such
adviser, the consideration to be received by the GSB Stockholders is fair to
the stockholders of Berkshire from a financial point of view, and Berkshire
shall have received an updated 'fairness opinion' letter from such advisers
at the time of the mailing of the Prospectus/Proxy confirming the opinions
provided in the initial 'fairness opinion' letter.
7.2 Conditions to the Obligations of GSB. Unless waived in writing by GSB,
the obligation of GSB to consummate the transaction contemplated by this
Agreement is subject to the satisfaction at or prior to the Closing Date of all
of the following conditions:
(a) Performance. Each of the material acts and undertakings of Berkshire
to be performed at or prior to the Closing Date pursuant to this Agreement
shall have been duly performed in all material respects.
(b) No Material Adverse Change. No material adverse change in the
business, property, assets (including loan portfolios), liabilities (whether
absolute, contingent or otherwise), operations, liquidity, income, or
financial condition of Berkshire and Berkshire Bank taken as a whole shall
have occurred since the date of this Agreement.
(c) Representations and Warranties. The representations and warranties
of Berkshire and Berkshire Bank contained in this Agreement shall be true
and correct, in all material respects, on and as of the Closing Date with
the same effect as though made on and as of the Closing Date.
(d) Documents. In addition to the other deliveries of Berkshire
described elsewhere in this Agreement, GSB shall have received the following
documents and instruments:
(i) a certificate signed by the Secretary or an assistant secretary
of Berkshire and Berkshire Bank dated as of the Closing Date certifying
that:
(A) Berkshire's and Berkshire Bank's respective Boards of
Directors and stockholders have duly adopted resolutions (copies of
which shall be attached to such certificate) approving the
substantive terms of this Agreement and authorizing the consummation
of the transactions contemplated by this Agreement and certifying
that such resolutions have not been amended or modified and remain in
full force and effect;
(B) each person executing this Agreement on behalf of Berkshire
and Berkshire Bank is an officer of Berkshire or Berkshire Bank, as
the case may be, holding the office or offices specified therein,
with full power and authority to execute this Agreement and any and
all other documents in connection with the Merger, and that the
signature of such person set forth on such certificate is his or her
genuine signature;
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(C) the charter documents of Berkshire and Berkshire Bank
attached to such certificate remain in full force and effect; and
(ii) a certificate signed by the Chairman of the Board, President and
Chief Financial Officer of each of Berkshire and Berkshire Bank stating
that to the best of their knowledge and belief the conditions set forth
in Sections 7.2(a), 7.2(b) and 7.2(c) of this Agreement have been
satisfied.
(e) Consideration. GSB shall have received a certificate executed by an
authorized officer of the Exchange Agent to the effect that the Exchange
Agent has received and holds in its possession proper authorization to issue
certificates evidencing shares of Berkshire Common Stock and cash or other
good funds sufficient to meet the obligations of Berkshire to the GSB
Stockholders to deliver the Consideration under this Agreement.
(f) Inspections Permitted. Between the date of this Agreement and the
Closing Date, Berkshire and Berkshire Bank shall have afforded GSB and its
authorized agents and representatives reasonable access during normal
business hours to the properties, operations, books, records, contracts,
documents, loan files and other information of or relating to Berkshire and
Berkshire Bank. GSB will provide Berkshire and Berkshire Bank at least 48
hours notice of any inspection and conduct any inspection in a reasonable
manner that will not interfere with business operations. Berkshire and
Berkshire Bank shall have caused all Berkshire or Berkshire Bank personnel
to provide reasonable assistance to GSB in its investigation of matters
relating to Berkshire and Berkshire Bank.
(g) Opinion of Berkshire's Counsel. GSB shall have been furnished with
an opinion of counsel to Berkshire, dated as of the Closing Date, addressed
to GSB, substantially to the effect set forth on Exhibit B.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Berkshire or appropriate government
officials; and (ii) in the case of matters of law governed by the laws of the
states in which they are not licensed, reasonably rely upon the opinions of
legal counsel duly licensed in such states and may be limited, in any event,
to Federal Law and the laws of the States of New York and Delaware.
(h) Fairness Opinion. GSB shall have received a 'fairness opinion'
letter from its independent financial adviser, Tucker Anthony Incorporated,
or such other qualified third party, dated the date hereof and to the effect
that, in the opinion of such adviser the Consideration to be received by the
GSB Stockholders is fair to the GSB Stockholders from a financial point of
view, and GSB shall have received an updated 'fairness opinion' letter from
such advisers at the time of the mailing of the Prospectus/Proxy confirming
the opinions provided in the initial 'fairness opinion' letter.
7.3 Conditions to Obligations of All Parties. The obligations of each Party
to effect the transactions contemplated hereby shall be subject to the
fulfillment, at or prior to the Closing, of the following conditions:
(a) No Pending or Threatened Claims. No claim, action, suit,
investigation or other proceeding shall be pending or threatened before any
court or governmental agency which presents a substantial risk of the
restraint or prohibition of the transactions contemplated by this Agreement
or the obtaining of material damages or other relief in connection
therewith;
(b) Governmental Approvals and Acquiescence Obtained. The Parties hereto
shall have received all applicable Governmental Approvals for the
consummation of the transactions contemplated herein without the imposition
of any conditions which would materially affect the benefits normally
expected to result from the transactions contemplated by this Agreement and
all waiting periods incidental to such approvals or notices given shall have
expired; and
(c) Approval of Stockholders. Approval of this Agreement and the
transactions contemplated hereby by the stockholders of GSB and Berkshire,
as required by applicable law, the rules of the NASDAQ Stock Market or
applicable provisions of GSB's or Berkshire's Certificate of Incorporation
and Bylaws.
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(d) Effectiveness of Registration Statement. The Registration Statement
has become effective under the Securities Act, and no stop order suspending
the effectiveness of the Registration Statement or preventing the use of the
Prospectus/Proxy has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated by the SEC or any state
securities or other regulatory authority.
(e) Tax Opinion. Berkshire and GSB shall receive an opinion of
Berkshire's counsel to the effect that the transaction will constitute a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and that no gain or loss will be recognized by GSB stockholders
with respect to shares of Berkshire Common Stock that they receive in
exchange for shares of GSB Common Stock.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing, as follows:
(a) By mutual consent in writing of the Parties;
(b) By Berkshire or GSB in the event the Closing shall not have occurred
by June 30, 2001, unless the failure of the Closing to occur shall be due to
the failure of the Party seeking to terminate this Agreement to perform its
obligations hereunder in a timely manner;
(c) By either Berkshire or GSB upon written notice to the other Party,
(i) upon denial of any Governmental Approval necessary for the consummation
of the Merger (or should such approval include a condition which would
materially affect the benefits normally expected from the transactions
contemplated hereby); provided, however, that either Berkshire or GSB may,
upon written notice to the other, extend the term of this Agreement for
ninety (90) days to prosecute diligently and overturn such denial or
imposition of an unsatisfactory condition, provided that such denial or
imposition has been appealed within twenty (20) business days of the receipt
thereof or (ii) upon the failure to obtain the approval of the GSB
Stockholders at the GSB stockholders meeting or (iii) upon the failure to
obtain the approval of the Berkshire Stockholders at the Berkshire
stockholders meeting;
(d) By Berkshire or GSB in the event that there shall have been a
material breach of any obligation or covenant of the other Party or its
Subsidiaries hereunder and such breach shall not have been remedied within
five days after receipt by the breaching Party of written notice from the
other Party specifying the nature of such breach and requesting that it be
remedied, or such longer period not to exceed 30 days as may be necessary to
remedy such breach if the same cannot be remedied within five days;
(e) By Berkshire should GSB or any GSB Subsidiary enter into any letter
of intent or agreement with a view to being acquired by or effecting a
business combination with any other Person; or any agreement to merge, to
consolidate, to combine or to sell a material portion of its assets or to be
acquired in any other manner by any other Person or to acquire a material
amount of assets or a material equity position in any other Person, whether
financial or otherwise;
(f) By Berkshire should either GSB or Goshen Savings Bank enter into any
formal agreement, letter of understanding, memorandum or other similar
arrangement with any bank regulatory authority establishing a formal capital
plan requiring any of the GSB Parties to raise additional capital or to sell
a substantial portion of its assets.
(g) By GSB should either Berkshire or Berkshire Bank enter into any
formal agreement, letter of understanding, memorandum or other similar
arrangement with any bank regulatory authority establishing a formal capital
plan requiring Berkshire or Berkshire Bank to raise additional capital or to
sell a substantial portion of its assets.
(h) By GSB if the Determination Price is less than the Collar Price,
provided, however, that in order to exercise such right to terminate, GSB
must give written notice to Berkshire
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within three business days after the Determination Date, and during the
three business days after receipt of such notice Berkshire shall have the
option to agree that the Stock Merger Consideration shall be equal to such
number of shares of Berkshire Common Stock as is equal to the Collar Price
multiplied by 0.6027 and then divided by the Determination Price. If
Berkshire so agrees during such three business day period, it shall give
notice thereof to GSB by the end of such three business day period,
whereupon no termination shall have occurred pursuant to this subsection (h)
and this Agreement shall remain in effect according to its terms except that
the Stock Merger Consideration shall be the number of shares of Berkshire
Common Stock as is equal to the Collar Price multiplied by 0.6027 and then
divided by the Determination Price.
(i) By Berkshire if the Determination Price is more than the Cap Price,
provided, however, that in order to exercise such right to terminate,
Berkshire must give written notice to GSB within three business days after
the Determination Date, and during the three business days after receipt of
such notice, GSB shall have the option to agree that the Stock Merger
Consideration shall be equal to such number of shares of Berkshire Common
Stock as is equal to the Cap Price multiplied by 0.6027 and then divided by
the Determination Price. If GSB so agrees during such three business day
period, it shall give notice thereof to Berkshire by the end of such three
business day period, whereupon no termination shall have occurred pursuant
to this subsection (i) and this Agreement shall remain in effect according
to its terms except that the Stock Merger Consideration shall be the number
of shares of Berkshire Common Stock as is equal to the Cap Price multiplied
by 0.6027 and then divided by the Determination Price.
(j) By Berkshire if the cost of terminating the Goshen Savings Bank
defined benefit pension plan after applying all then existing plan assets,
as reasonably determined by Berkshire in good faith, excluding the cost of
any professional fees related to such termination, exceeds $100,000,
provided, however, that in order to exercise such right to terminate,
Berkshire must give written notice to GSB no later than within three
business days after the Determination Date, and during the three business
days after receipt of such notice, GSB shall have the option to agree to
adjust the Cash Merger Consideration and the Stock Merger Consideration so
that both shall be equal to the amounts determined without regard to this
Section 8.1(j) multiplied by a fraction, the numerator of which shall be the
Aggregate Consideration minus the amount by which such cost of termination
as reasonably determined by Berkshire in good faith, excluding the cost of
any professional fees related to such termination, exceeds $100,0000, and
the denominator of which shall be the Aggregate Consideration.
Notwithstanding the provisions of the preceding sentence regarding the right
to terminate this Agreement, if the adjustment in the Cash Merger
Consideration calculated pursuant to the preceding sentence would be less
than or equal to ten cents per share, then Berkshire shall have the right,
in lieu of terminating this Agreement, to require that the Agreement remain
in full force and effect and that the Cash and Stock Merger Consideration be
adjusted as set forth in the preceding sentence. Any adjustment pursuant to
this Section 8.1(j) shall be made after calculating any adjustment required
pursuant to Section 8.1(h) or 8.1(i).
If a Party should elect to terminate this Agreement pursuant to subsections (b),
(c), (d), (e), (f) or (g) of this Section, it shall give notice to the other
Party, in writing, of its election in the manner prescribed in Section 9.1 of
this Agreement.
8.2 Effect of Termination. If this Agreement is terminated pursuant to this
Section, all further obligations of the Parties under this Agreement shall
terminate without further liability of any Party to another; provided, however,
that a termination under this Section shall not relieve any Party of any
liability for breach of this Agreement or for any misstatement or
misrepresentation made hereunder prior to such termination, or be deemed to
constitute a waiver of any available remedy for any such breach, misstatement or
misrepresentation.
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8.3 Fees.
(a) Notwithstanding anything to the contrary herein, GSB hereby agrees to
pay Berkshire and Berkshire shall be entitled to receipt of a fee of $1,000,000
if this Agreement is terminated, unless the termination is pursuant to Section
8.1(a), (b), (c)(i), (c)(ii), (d) (in the event terminated by GSB due to a
material breach by Berkshire), (h) or (j). If the termination is pursuant to
Section 8.1(c)(ii), then the fee shall be $500,000 instead of $1,000,000 unless,
within 120 days after the failure of the GSB Stockholders to approve this
Agreement, GSB or Goshen Savings Bank enters into an agreement with anyone other
than Berkshire or Berkshire Bank to engage in an Acquisition Transaction. If the
termination is pursuant to Section 8.1(h) or (j), the fee shall be $500,000.
(b) GSB shall notify Berkshire promptly in writing of its knowledge of the
occurrence of any Acquisition Transaction provided, however, that the giving of
such notice by GSB shall not be a condition to the right of Berkshire to the
fee.
(c) Notwithstanding anything to the contrary herein, Berkshire hereby agrees
to pay GSB and GSB shall be entitled to receipt of a fee of $500,000 if this
Agreement is terminated pursuant to Section 8.1(c)(iii) or (d) (in the event
terminated by GSB due to a material breach by Berkshire).
8.4 Expenses.
(a) GSB hereby agrees that if this Agreement or the transactions
contemplated hereby are terminated pursuant to Sections 8.1(d) as a result of a
willful breach by GSB, GSB shall promptly (and in any event within ten (10)
business days after such termination) pay all Expenses of Berkshire.
(b) Berkshire hereby agrees that if this Agreement or the transactions
contemplated hereby are terminated pursuant to Sections 8.1(d) as a result of a
willful breach by Berkshire, Berkshire shall promptly (and in any event within
ten (10) business days after such termination) pay all Expenses of GSB.
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. Any notice, request, demand and other communication which
either Party hereto may desire or may be required hereunder to give shall be in
writing and shall be deemed to be duly given if delivered personally or mailed
by certified or registered mail (postage prepaid, return receipt requested), air
courier or facsimile transmission, addressed or transmitted to such other Party
as follows:
If to Berkshire, Greater
or Berkshire Bank: Berkshire Bancorp Inc.
160 Broadway
New York, NY 10038
Attn: Steven Rosenberg
Fax: (212) 791-5367
President and Chief Executive Officer
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With a copies to: Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Fax: (215) 832-5549
Attn: Lawrence R. Wiseman, Esq.
and
Blank Rome Tenzer Greenblatt LLP
405 Lexington Avenue
New York, NY 10174
Fax: (212) 885-5001
Attn: Emanuel J. Adler, Esq.
If to GSB
or Goshen Savings Bank: GSB Financial Corporation
One South Church Street
Goshen, New York 10924
Fax: (845) 294-5629
Attn: Thomas Guarino,
Chairman
With a copy to: Serchuk & Zelermyer, LLP
81 Main Street
White Plains, NY 10601
Fax: (914) 761-2299
Attn: Jay L. Hack, Esq.
or to such other address as any Party hereto may hereafter designate to the
other Parties in writing. Notice shall be deemed to have been given on the date
reflected in the proof or evidence of delivery, or if none, on the date actually
received.
9.2 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws, and not the laws pertaining to
choice or conflicts of laws, of the State of New York, unless and to the extent
that federal law controls, provided, however, that the corporate proceedings of
Berkshire and GSB shall continue to be governed by the laws of the State of
Delaware. Any dispute arising between the Parties in connection with the
transactions which are the subject of this Agreement shall be heard in a court
of competent jurisdiction located in New York City or in the Southern District
of New York.
9.3 Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute but one and the same instrument.
9.4 Publicity. The Parties hereto will consult with each other with regard
to the terms and substance of any press releases, announcements, communications
with customers, employees or stockholders, or other public statements with
respect to the transactions contemplated hereby. To the extent practicable, each
Party shall provide the proposed text of any such press release, announcement,
communication with customers, employees or stockholders or public statement to
the other Party prior to its publication, shall permit such other Party a
reasonable period to provide comments thereon, and shall not issue the same over
the other Party's reasonable objection.
9.5 Entire Agreement. This Agreement, together with the recitals and
defintions appearing at the beginning hereof, and the Schedules, Annexes and
Exhibits required to be delivered hereunder and any amendments or addenda
hereafter executed and delivered in accordance with this Section constitute the
entire agreement of the Parties hereto pertaining to the transactions
contemplated hereby and supersede all prior written and oral (and all
contemporaneous oral) agreements and understandings of the Parties hereto
concerning the subject matter hereof. The Schedules, Annexes and Exhibits
attached hereto or furnished pursuant to this Agreement are hereby incorporated
as integral parts of this Agreement. Except to the extent otherwise provided
herein, by specific language and not by mere implication, this Agreement is not
intended to confer upon any other Person not a Party to this Agreement any
rights or remedies hereunder.
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9.6 Severability. If any portion or provision of this Agreement should be
determined by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any jurisdiction, such portion or provision shall be
ineffective as to that jurisdiction to the extent of such invalidity, illegality
or unenforceability, without affecting in any way the validity or enforceability
of the remaining portions or provisions hereof in such jurisdiction or rendering
that or any other portions or provisions of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
9.7 Modifications, Amendments and Waivers. At any time prior to the Closing
or termination of this Agreement, the Parties may, solely by written agreement
executed by their duly authorized officers:
(a) extend the time for the performance of any of the obligations or
other acts of the other Party hereto;
(b) waive any inaccuracies in the representations and warranties made by
the other Party contained in this Agreement or in the Schedules or Exhibits
hereto or any other document delivered pursuant to this Agreement;
(c) waive compliance with any of the covenants or agreements of the
other Party contained in this Agreement to the extent permitted by
applicable law; and
(d) amend or add to any provision of this Agreement; provided, however,
that no provision of this Agreement may be amended or added to except by an
agreement in writing signed by the Parties hereto or their respective
successors in interest and expressly stating that it is an amendment to this
Agreement.
9.8 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9 Payment of Expenses. Except as set forth herein, Berkshire and GSB shall
each pay its own fees and expenses (including, without limitation, legal fees
and expenses) incurred by it in connection with the transactions contemplated
hereunder.
9.10 Provisions Which Survive. Except for the agreements of the parties in
Sections 1.2(d), 2.2(a), 2.5, 6.3, 6.6, 8.3, 8.4, 9.13 and 9.14, which shall
survive the Closing, none of the representations, warranties and conditions of
the Parties contained in this Agreement or in any instrument of transfer or
other document delivered in connection with the transactions contemplated by
this Agreement shall survive the Closing or other termination of this Agreement.
The agreements of the parties in Sections 1.2(d), 2.2(a), 2.5, 6.3 and 6.6 shall
be enforceable directly by each Person benefitted or intended to be benefitted
by such sections.
9.11 No Waiver. No failure, delay or omission of or by any Party in
exercising any right, power or remedy upon any breach or default of any other
Party shall impair any such rights, powers or remedies of the Party not in
breach or default, nor shall it be construed to be a waiver of any such right,
power or remedy, or an acquiescence in any similar breach or default; nor shall
any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Party of any
provisions of this Agreement must be in writing and must be executed by the
Parties to this Agreement and shall be effective only to the extent specifically
set forth in such writing.
9.12 Remedies Cumulative. All remedies provided in this Agreement, by law or
equity, shall be cumulative and not alternative.
9.13 Confidentiality. Any non-public or confidential information disclosed
by either GSB (including any GSB Subsidiary) or Berkshire (including any
Berkshire Subsidiary) to the other Parties pursuant to this Agreement or as a
result of the discussions and negotiations leading to this Agreement, or
otherwise disclosed, or to which any other Party has acquired or may acquire
access, shall be kept strictly confidential and shall not be used in any manner
by the recipient except in connection with the transactions contemplated by this
Agreement. To that end, the Parties hereto will each, to the maximum extent
practicable, restrict knowledge of and access to non-public or confidential
information of the other Party to its officers, directors, employees and
professional advisors who are directly involved in the transactions contemplated
hereby and reasonably need to know such information. Further to that end, all
non-public or confidential
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documents (including all copies thereof) obtained hereunder by any Party shall
be returned as soon as practicable after any termination of this Agreement.
9.14 Indemnification. The GSB Parties, on the one hand, and Berkshire and
Berkshire Bank, on the other hand, each agree to fully indemnify and hold
harmless the others, their directors, officers and representatives, from and
against any and all losses, claims, liabilities, damages and expenses (including
reasonable attorneys fees and costs of litigation) that arise out of or are
based upon a breach of the representations and warranties contained in Sections
3.19(b) and 4.17(b), respectively, of this Agreement.
Signatures appear on following page
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IN WITNESS WHEREOF, each of the Parties hereto has duly executed and
delivered this Agreement or has caused this Agreement to be executed and
delivered in its name and on its behalf by its representative thereunto duly
authorized, all as of the date first written above.
GSB FINANCIAL CORPORATION
By: /s/ THOMAS GUARINO
..................................
THOMAS GUARINO
CHAIRMAN OF THE BOARD
GOSHEN SAVINGS BANK
By: /s/ THOMAS GUARINO
..................................
THOMAS GUARINO
PRESIDENT
BERKSHIRE BANCORP INC.
By: /s/ STEVEN ROSENBERG
..................................
STEVEN ROSENBERG
PRESIDENT
THE BERKSHIRE BANK
By: /s/ MOSES KRAUSZ
..................................
MOSES KRAUSZ
PRESIDENT
GREATER AMERICAN FINANCE GROUP, INC.
By: /s/ STEVEN ROSENBERG
..................................
STEVEN ROSENBERG
PRESIDENT
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ANNEX B
SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW -- APPRAISAL RIGHTS
SECTION 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to 'SS'228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
'stockholder' means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words 'stock' and 'share' mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
'depository receipt' mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to 'SS'251 (other than a merger effected pursuant to
'SS'251(g) of this title), 'SS'252, 'SS'254, 'SS'257, 'SS'258, 'SS'263 or
'SS'264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of 'SS'251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to 'SS'SS'
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under 'SS'253 of this title is not owned by a
parent corporation immediately prior to
the merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation, or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to 'SS'228 or
'SS'253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of the mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that
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such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10 days prior
to the date the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
shareholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such shareholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereof of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the
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final determination of the stockholder entitled to an appraisal. Any stockholder
whose name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter within
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
B-4
ANNEX C
OPINION OF BERWIND FINANCIAL, L.P.
[LOGO FOR BERWIND FINANCIAL, L.P.]
[Date]
Board of Directors
Berkshire Bancorp, Inc.
160 Broadway
New York, NY 10038
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of the common stock (the
'Shares') of Berkshire Bancorp, Inc. ('Berkshire') of the consideration of
$20.75 in cash or .6027 shares of Berkshire common stock, with the stock
consideration to be no less than 50.1% and no more than 60% of total
consideration, for each outstanding share of GSB Financial Corporation ('GSB')
common stock in the proposed merger (the 'Proposed Merger') by and between
Berkshire and GSB as set forth in the Agreement and Plan of Reorganization dated
August 16, 2000 (the 'Merger Agreement').
Berwind Financial, L.P., as part of its investment banking business,
regularly is engaged in the valuation of assets, securities and companies in
connection with various types of asset and security transactions, including
mergers, acquisitions, private placements and valuations for various other
purposes, and in the determination of adequate consideration in such
transactions.
In arriving at our opinion, we have, among other things: (i) reviewed the
historical financial performances, current financial positions and general
prospects of Berkshire and GSB and reviewed certain internal financial analyses
and forecasts prepared by the management of Berkshire and GSB, (ii) reviewed the
Merger Agreement, (iii) reviewed and analyzed the stock market performance of
Berkshire and GSB, (iv) studied and analyzed the consolidated financial and
operating data of Berkshire and GSB, (v) considered the terms and conditions of
the Proposed Merger between Berkshire and GSB as compared with the terms and
conditions of comparable bank and bank holding company mergers and acquisitions,
(vi) met and/or communicated with certain members of Berkshire's and GSB's
senior management to discuss their respective operations, historical financial
statements and future prospects, (vii) reviewed this joint Proxy
Statement/Prospectus and (viii) conducted such other financial analyses, studies
and investigations as we deemed appropriate.
3000 CENTRE SQUARE WEST, 1500 MARKET STREET, PHILADELPHIA,
PENNSYLVANIA 19102, PHONE (215) 575-2400 FAX (215) 563-4878
Member National Association of Securities Dealers
Board of Directors
[Date]
Page 2
Our opinion is given in reliance on information and representations made or
given by Berkshire and GSB, and their respective officers, directors, auditors,
counsel and other agents, and on filings, releases and other information issued
by Berkshire and GSB including financial statements, financial projections, and
stock price data as well as certain information from recognized independent
sources. We have not independently verified the information concerning Berkshire
and GSB nor other data which we have considered in our review and, for purposes
of the opinion set forth below, we have assumed and relied upon the accuracy and
completeness of all such information and data. We have not conducted any
valuation or appraisal of any assets or liabilities of Berkshire or GSB, nor
have any such valuations or appraisals been provided to us. Additionally, we
assume that the Proposed Merger is, in all respects, lawful under applicable
law.
With regard to financial and other information relating to the general
prospects of Berkshire and GSB, we have assumed that such information has been
reasonably prepared and reflects the best currently available estimates and
judgment of the management of Berkshire and GSB as to their most likely future
performance and the cost savings and other potential synergies (including the
amount, timing and achievability thereof) anticipated to result from the
Proposed Merger. For Berkshire and GSB, we have assumed the allowance for loan
losses indicated on the balance sheets of each entity is adequate to cover such
losses; we have not reviewed credit files of either Berkshire or GSB. Also, in
rendering our opinion, we have assumed that in the course of obtaining the
necessary regulatory approvals for the Proposed Merger no conditions will be
imposed that will have a material adverse effect on the contemplated benefits of
the Proposed Merger to Berkshire or GSB.
Our opinion is based upon information provided to us by the management of
Berkshire and GSB, as well as market, economic, financial and other conditions
as they exist and can be evaluated only as of the date hereof and speaks to no
other period. Our opinion pertains only to the consideration offered, is for the
information of the Board of Directors of Berkshire in connection with its
evaluation of the Proposed Merger and does not constitute a recommendation to
the Board of Berkshire and does not constitute a recommendation to Berkshire
shareholders as to how such shareholders should vote on the Proposed Merger.
Based on the foregoing, it is our opinion that, as of the date hereof that
the consideration offered pursuant to the Merger Agreement is fair, from a
financial point of view, to the holders of the Shares.
Sincerely,
BERWIND FINANCIAL, L.P.
C-2
ANNEX D
OPINION OF TUCKER ANTHONY INCORPORATED
November xx, 2000
Board of Directors
GSB Financial Corp.
1 South Church Street
Goshen, NY 10924
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of GSB Financial Corp. (the 'Company') common stock of the
consideration to be paid by Berkshire Bancorp, Inc. ('Berkshire' or the 'Buyer')
to the holders of the Company's common stock (the 'Seller Common Stock')
pursuant to the Agreement and Plan of Merger (the 'Agreement') by and between
the Company and the Buyer. Pursuant to the Agreement, the Company will be merged
into the Buyer (collectively, the transaction is the 'Merger') and as a result
of the Merger, as defined in the Agreement, each share of the Company's Common
Stock held shall cease to be outstanding and shall be converted to the right to
receive either $20.75 in cash or 0.6027 shares of the Buyer's Common Stock (the
'Consideration') so that between 50.1% - 60% of the aggregate consideration will
be paid in stock and that between 40% - 49.9% of the aggregate consideration
will be paid in cash, depending on shareholder elections. The stock portion of
the Consideration is subject to a cap and a collar as defined in the Agreement.
Tucker Anthony Capital Markets, a division of Tucker Anthony Incorporated
('Tucker Anthony') as part of its investment banking business is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, private placements and
valuations for corporate and other purposes. In the ordinary course of business
Tucker Anthony may actively trade the securities of the Company or the Seller
for its own account and for the accounts of customers and accordingly, may at
any time hold a long or short position in such securities. Tucker Anthony
currently serves as a market maker in the common stock of the Company.
In arriving at our opinion, we have among other things:
(i) Reviewed the draft Agreement and Plan of Merger dated August 16, 2000;
(ii) Reviewed certain historical financial and other information concerning
the Company (and Goshen Savings Bank) since 1996;
(iii) Reviewed certain historical financial and other information
concerning Berkshire (and The Berkshire Bank) since 1996;
(iv) Held discussions with the senior management of the Company and the
Buyer with respect to their past and current financial performance,
financial condition and future prospects;
(v) Reviewed certain internal financial data, projections and other
information of the Company and the Buyer;
(vi) Analyzed certain publicly available information of other financial
institutions that we deemed comparable or otherwise relevant to our
inquiry, and compared the Company and the Buyer from a financial point
of view with certain of these institutions;
(vii) Compared the Consideration to be paid by the Buyer pursuant to the
Agreement with the consideration paid in other acquisitions of
financial institutions that we deemed comparable or otherwise
relevant to our inquiry;
(viii) Reviewed historical trading activity and ownership data of the
Company's and Buyer's common stock and considered the prospects for
dividends and price movement; and
(ix) Considered such other financial studies, analyses and investigations
and reviewed such other information as we deemed appropriate to enable
us to render our opinion. In our review, we have also taken into
account an assessment of general economic, market and financial
conditions and certain industry trends and related matters; and
(x) Considered such other factors, as we deemed appropriate.
In our review and analysis and in arriving at our opinion we have assumed
and relied upon the accuracy and completeness of all the financial information
publicly available or provided to us by the Company and the Buyer and have not
attempted to verify such information. Tucker Anthony has assumed that (i) the
financial projections of the Company and the Buyer provided to us with respect
to the results of operations likely to be achieved by each company have been
prepared on a basis reflecting the best currently available estimates and
judgements of the Company's and the Buyer's management and advisors as to future
financial performance and results and (ii) that such forecasts and estimates
will be realized in the amounts and in the time periods currently estimated. We
have also assumed, without independent verification, that the current and
projected aggregate reserves for loan losses for the Company and the Buyer are
adequate to cover such losses. We did not make or obtain and independent
evaluations or appraisals of any assets or liabilities of the Company, the Buyer
or any of their respective subsidiaries nor did we verify any of the Company's
or the Buyer's books or records or review any individual loan or credit files.
Our opinion is limited to the fairness, from a financial point of view, to the
shareholders of the Company of the Consideration.
In rendering our opinion we have assumed that in the course of obtaining the
necessary regulatory approvals for the Merger, no conditions will be imposed
that will have a material adverse effect on the contemplated benefits of the
Merger to either the Company or, on a pro forma basis, the resulting company
following the merger. Our opinion necessarily is based upon market, economic,
and other conditions as they exist on, and can be evaluated as of, the date of
this letter.
This opinion is being furnished for the use and benefit of the Board of
Directors of the Company and is not a recommendation to shareholders. There is
no state or federal law or regulation which requires that a fairness opinion be
issued or obtained in connection with the merger. It is the view of Tucker
Anthony that the determination as to who may rely on the fairness opinion and to
whom Tucker Anthony may be liable in connection with the opinion is determined
by the May 12, 2000 engagement letter to provide the fairness opinion between
Tucker Anthony and the GSB board of directors, which provides that only GSB may
rely on the fairness opinion. However, a court may determine that GSB
stockholders may rely upon the fairness opinion.
On August 16, 2000, we rendered our opinion to the Board that the
Consideration paid by the Buyer pursuant to the Agreement was fair to the
Company's shareholders from a financial point of view. Based upon and subject to
the foregoing, it is our opinion that as of the date hereof the Consideration to
be paid by the Buyer pursuant to the Agreement is fair to the Company's
shareholders from a financial point of view.
Very truly yours,
TUCKER ANTHONY INCORPORATED
D-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTOR AND OFFICERS
The Delaware General Corporation Law (the 'DGCL') provides, in substance,
that Delaware corporations shall have the power, under specified circumstances,
to indemnify their directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by third parties and in
connection with actions or suits by or in the right of the corporation, by
reason of the fact that they were or are such directors, officers, employees and
agents, against expenses (including attorney's fees) and, in the case of
actions, suits or proceedings brought by third parties, against judgments, fines
and amounts paid in settlement actually and reasonably incurred in any such
action, suit or proceeding.
Berkshire's amended and restated certificate of incorporation and amended
and restated bylaws provide for indemnification to the fullest extent permitted
by the DGCL to Berkshire's directors and officers. Reference is made to
Berkshire's amended and restated certificate of incorporation filed as
Exhibit 3.1 hereto and Berkshire's amended and restated bylaws filed as
Exhibit 3.2 hereto.
In addition, Berkshire's amended and restated certificate of incorporation
eliminates, to the fullest extent permitted by the DGCL, a Berkshire director's
personal liability to Berkshire or its stockholders for monetary damages for
breach of fiduciary duty as a director.
Berkshire has obtained directors and officers' liability insurance that
covers certain liabilities, including liabilities to Berkshire and its
stockholders in the amount of $5,000,000.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
2.1 Agreement and Plan of Reorganization, dated August 16, 2000, among Berkshire, Greater
American Finance Group, Inc., and The Berkshire Bank and GSB and Goshen Savings
Bank (included in the joint proxy statement/prospectus as Annex A).
3.1(1) Amended and Restated Certificate of Incorporation of Berkshire.
3.2(1) Amended and Restated Bylaws of Berkshire.
5.1 Opinion of Blank Rome Comisky & McCauley LLP as to the validity of the issuance of the
shares of Berkshire common stock to be issued in the merger.
8.1 Opinion of Blank Rome Comisky & McCauley LLP concerning tax matters.
10.1(2) Employment Contract by and between Goshen Savings Bank and Stephen W. Dederick dated
as of July 1, 1999.
10.2(2) Supplemental Employment Contract by and between GSB and Stephen W. Dederick dated as
of July 1, 1999.
10.3(2) Schedule of Additional Employment Contracts by and between GSB and/or Goshen Savings
Bank and Barbara A. Carr and Rolland B. Peacock III.
10.4(3) GSB Stock Option Plan for Outside Directors, Officers and Employees.
21.1(4) Subsidiaries of Berkshire.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Nugent & Haeussler, P.C.
23.3 Consent of Blank Rome Comisky & McCauley LLP (included in Exhibit 5.1).
23.4 Consent of Berwind Financial, L.P.
23.5 Consent of Tucker Anthony Incorporated.
24.1(5) Power of attorney (included on signature page).
99.1 Berkshire's Proxy Card.
99.2 GSB's Proxy Card.
99.3 Election Form.
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(1) Incorporated by reference to Berkshire's Current Report on Form 8-K filed
with the SEC on March 30, 1999.
II-1
(2) Incorporated by reference to GSB's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 as filed with the SEC on November 15, 1999.
(3) Incorporated by reference to GSB's Definitive Proxy Statement on
Schedule 14A filed with the SEC on March 17, 2000.
(4) Incorporated by reference to Berkshire's Transition Report on Form 10-K for
the transition period from November 1, 1999 to December 31, 1999 filed with
the SEC on March 29, 2000.
(5) Previously filed.
-------------------
(B) FINANCIAL STATEMENT SCHEDULES
None.
(C) REPORT, OPINION OR APPRAISAL EXHIBITS
1. Opinion of Berwind Financial, L.P. (included in the joint proxy
statement/prospectus as Annex C).
2. Opinion of Tucker Anthony Incorporated (included in the joint proxy
statement/prospectus as Annex D).
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being
made, a post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the 'Calculation of
Registration Fee' table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any other material change to such information in the registration
statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934, as amended, that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934, as amended, that is
incorporated by reference in the registration statement shall be deemed to be a
new
II-2
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.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934, as amended; and where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
(d)(1) 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.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (d)(1) immediately preceding or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933, as amended,
and is used in connection with an offering of securities subject to Rule 415,
will be filed as 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 Securities Act of 1933, as amended, 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.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, 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 Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by 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
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
(f) 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 (1) 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.
(g) 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 became effective.
II-3
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in New York, New York, on
the date indicated.
BERKSHIRE BANCORP INC.
Date: November 29, 2000 By: /S/ STEVEN ROSENBERG
........................................................
STEVEN ROSENBERG,
PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL
OFFICER AND DIRECTOR
Pursuant to the requirement of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons as of
November 29, 2000 in the capacities indicated:
SIGNATURES TITLE
---------- -----
/S/ STEVEN ROSENBERG President, Chief Executive Officer, Chief Financial
.......................................... Officer and Director (principal executive officer,
STEVEN ROSENBERG principal financial officer and principal accounting
officer)
* Director
..........................................
MOSES MARX
* Director
..........................................
WILLIAM L. COHEN
* Director
..........................................
RANDOLPH B. STOCKWELL
* By: /S/ STEVEN ROSENBERG
..........................................
STEVEN ROSENBERG, ATTORNEY-IN-FACT
II-4
EXHIBIT INDEX
NUMBER DESCRIPTION
- ------ -----------
2.1 Agreement and Plan of Reorganization, dated August 16, 2000,
among Berkshire, Greater American Finance Group, Inc., and
The Berkshire Bank and GSB and Goshen Savings Bank (included
in the joint proxy statement/prospectus as Annex A).
3.1(1) Amended and Restated Certificate of Incorporation of
Berkshire.
3.2(1) Amended and Restated Bylaws of Berkshire.
5.1 Opinion of Blank Rome Comisky & McCauley LLP as to the
validity of the issuance of the shares of Berkshire common
stock to be issued in the merger.
8.1 Opinion of Blank Rome Comisky & McCauley LLP concerning tax
matters.
10.1(2) Employment Contract by and between Goshen Savings Bank and
Stephen W. Dederick dated as of July 1, 1999.
10.2(2) Supplemental Employment Contract by and between GSB and
Stephen W. Dederick dated as of July 1, 1999.
10.3(2) Schedule of Additional Employment Contracts by and between
GSB and Goshen Savings Bank and Barbara A. Carr and Rolland
B. Peacock III.
10.4(3) GSB Stock Option Plan for Outside Directors, Officers and
Employees.
21.1(4) Subsidiaries of Berkshire.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Nugent & Haeussler, P.C.
23.3 Consent of Blank Rome Comisky & McCauley LLP (included in
Exhibit 5.1).
23.4 Consent of Berwind Financial, L.P.
23.5 Consent of Tucker Anthony Incorporated.
24.1(5) Power of attorney (included on signature page).
99.1 Berkshire's Proxy Card.
99.2 GSB's Proxy Card.
99.3 Election Form.
- -------------------
(1) Incorporated by reference to Berkshire's Current Report on Form 8-K filed
with the SEC on March 30, 1999.
(2) Incorporated by reference to GSB's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 as filed with the SEC on November 15, 1999.
(3) Incorporated by reference to GSB's Definitive Proxy Statement on Schedule
14A filed with the SEC on March 17, 2000.
(4) Incorporated by reference to Berkshire's Transition Report on Form 10-K for
the transition period from November 1, 1999 to December 31, 1999 filed with
the SEC on March 29, 2000.
(5) Previously filed.
II-5
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as ............................... 'SS'