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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
OHIO STATE FINANCIAL SERVICES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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OHIO STATE FINANCIAL SERVICES, INC.
435 MAIN STREET
BRIDGEPORT, OHIO 43912
(740) 635-0764
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting of Shareholders of Ohio
State Financial Services, Inc. will be held at the offices of Bridgeport Savings
and Loan Association, 435 Main Street, Bridgeport, Ohio, on August 27, 2001 at
1:00 p.m., local time for the following purposes, all of which are more
completely set forth in the accompanying Proxy Statement:
1. To consider and vote upon the adoption of the Agreement and Plan
of Merger between Ohio State Financial Services, Inc. and Advance
Financial Bancorp, dated April 18, 2001, which provides for the
acquisition of OSFS by Advance Financial, and the related Plan of
Merger, dated May 14, 2001 between OSFS and AFB Acquisition
Subsidiary, Inc.; and
2. To transact such other business incident to the conduct of the
Special Meeting as may properly come before the Special Meeting
and any adjournment or postponement of the Special Meeting,
including adjournment of the Special Meeting to allow for
additional solicitation of shareholder votes in order to obtain
the required vote to approve and adopt the Agreement and Plan of
Merger and the Plan of Merger.
Only OSFS shareholders of record at the close of business on July 16,
2001, will be entitled to receive notice of and to vote at the Special Meeting
and at any adjournments thereof. Whether or not you expect to attend the Special
Meeting, we urge you to consider the accompanying Proxy Statement carefully and
to SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF A QUORUM MAY BE ASSURED
AT THE SPECIAL MEETING. Giving a proxy does not affect your right to vote in
person in the event that you attend the Special Meeting.
July 18, 2001 By Order of the Board of Directors
Jon W. Letzkus, President
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OHIO STATE FINANCIAL SERVICES, INC.
435 MAIN STREET
BRIDGEPORT, OHIO 43912
(740) 635-0764
PROXY STATEMENT
GENERAL INFORMATION
On April 18, 2001, Ohio State Financial Services, Inc. ("OSFS")
executed an Agreement and Plan of Merger that provides for the acquisition of
OSFS and Bridgeport Savings and Loan Association ("Bridgeport") by Advance
Financial Bancorp ("Advance Financial") and Advance Financial Savings Bank
("Advance Savings"). For tax reasons, the merger will involve AFB Acquisition
Subsidiary, Inc. (the "Acquisition Subsidiary"), a merger subsidiary created by
Advance Financial, pursuant to the Plan of Merger dated May 14, 2001.
We cannot complete the merger unless the holders of at least 247,700
OSFS shares, which is a majority of the issued and outstanding OSFS shares,
adopt the merger agreement and the plan of merger. The board of directors of
OSFS has scheduled a special meeting of shareholders to vote on the merger
agreement and the plan of merger. The date, time and place of the special
meeting are as follows:
August 27, 2001
1:00 p.m.
Bridgeport Savings and Loan Association
435 Main Street
Bridgeport, Ohio 43912
If we complete the merger, each OSFS shareholder will receive $16.00 in
cash in exchange for each OSFS share owned as of the effective time of the
merger.
This document provides detailed information about the merger. We
encourage you to read this entire document carefully.
This document is being mailed to shareholders of OSFS on or about July
25, 2001.
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TABLE OF CONTENTS
Summary...................................................................1
The parties............................................................1
The merger.............................................................1
Background and reasons for the merger..................................2
Opinion of Keefe, Bruyette & Woods, Inc................................2
Recommendation to shareholders.........................................2
Interests of directors and executive officers..........................2
Termination and amendment of the merger agreement......................3
Special meeting of shareholders.......................................3
Dissenters' rights.....................................................3
Federal tax consequences of the merger.................................3
Per share market price information.....................................3
Per share market price information........................................4
Purpose of this document..................................................4
The special meeting of OSFS shareholders..................................4
Time, date and place...................................................4
Purpose of the meeting.................................................4
Shares outstanding and entitled to vote; record date...................4
Votes required.........................................................5
Share ownership of certain beneficial owners and management...............5
Voting and solicitation and revocation of proxies......................7
Dissenters' rights.....................................................7
The parties...............................................................9
Advance Financial and Advance Savings..................................9
OSFS and Bridgeport....................................................9
The merger................................................................9
Background and reasons for the merger.................................10
Keefe, Bruyette & Woods, Inc..........................................10
Recommendation of the Board of Directors of OSFS......................12
Exchange of OSFS shares...............................................13
Exchange of certificates evidencing OSFS shares.......................13
Representations and warranties........................................13
Covenants.............................................................14
Conditions............................................................16
Effective time........................................................17
Termination and amendment.............................................17
Interests of directors and executive officers.........................18
Federal income tax consequences.......................................19
Regulatory approvals..................................................19
Proposals for the 2002 annual shareholders' meeting......................19
Where you can find more information......................................20
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Appendix A Agreement and Plan of Merger, dated April 18, 2001 between Advance
- ---------- Financial Bancorp and OSFS
Appendix B Plan of Merger dated May 14, 2001, between OSFS and AFB
- ---------- Acquisition Subsidiary, Inc.
Appendix C Rights of Dissenting Shareholders, Ohio General Corporation Law
- ---------- Section 1701.85
Appendix D Opinion of Keefe, Bruyette & Woods, Inc., dated July 18, 2001
- ----------
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SUMMARY
This summary highlights selected information from this document. It
does not contain all of the information that is important to you. You should
read carefully this entire document to fully understand the merger. To obtain
more information, see "Where you can find more information" on page 20. Page
references are included in this summary to direct you to a more complete
description of topics discussed in this document.
THE PARTIES (PAGE 9)
Advance Financial and Advance Savings
1015 Commerce Street
Wellsburg, West Virginia 26070
Advance Financial is a savings and loan holding company organized under
Delaware law in September 1996. Advance Financial acquired all of the capital
stock issued by Advance Savings upon its conversion from mutual to stock form.
Advance Financial conducts no significant business or operations of its own
other than holding all of the outstanding stock of Advance Savings.
Advance Savings is a federally chartered stock savings bank
headquartered in Wellsburg, West Virginia, with branches in Follansbee, West
Virginia and Wintersville, Ohio. Advance Savings operates a traditional savings
bank business, attracting deposit accounts from the general public and using
those deposits, together with other funds, primarily to originate and invest in
loans secured by one- to four-family residential real estate, non-residential
real estate, and commercial loans. To a lesser extent, Advance Savings also
originates multi-family real estate loans and consumer loans.
OSFS and Bridgeport
435 Main Street
Bridgeport, Ohio 43912
OSFS is a savings and loan holding company organized under Ohio law in
March 1997. OSFS acquired all of the common shares issued by Bridgeport, a
savings and loan association organized under Ohio law, upon the conversion of
Bridgeport from mutual to stock form in September 1997. The primary business of
OSFS is holding all of the issued and outstanding shares of Bridgeport.
Bridgeport conducts business from its main office located in Bridgeport,
Ohio, and one full-service branch located in Shadyside, Ohio. The principal
business of Bridgeport is the origination of permanent mortgage loans on one- to
four-family residential real estate located in Bridgeport's primary market area,
which consists of Belmont County, Ohio, and Ohio and Marshall Counties, West
Virginia. Bridgeport also originates a limited number of loans for the
construction of one- to four-family residences and permanent mortgage loans
secured by nonresidential real estate in its market area. In addition to real
estate lending, Bridgeport originates secured and unsecured consumer loans.
THE MERGER (PAGES 9 THROUGH 19)
If the merger is completed, OSFS shareholders shall have the right to
receive $16.00 in cash for each OSFS share owned as of the effective time of
merger. Advance Financial shall designate an exchange agent through which OSFS
shareholders may exchange their stock certificates for the merger consideration.
For tax purposes, the merger agreement and the plan of merger provide
for the merger of AFB Acquisition Subsidiary, a newly organized subsidiary of
Advance Financial, into OSFS, the immediate subsequent liquidation of all OSFS
shares and the merger of Bridgeport into Advance Savings. The merger cannot be
completed unless the holders of at least 247,700 OSFS shares approve the merger.
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We have attached the merger agreement and the plan of merger to this
document as Appendices A and B and incorporated them by reference into this
document. Please read the merger agreement and the plan of merger. They are the
legal documents that govern the merger.
BACKGROUND AND REASONS FOR THE MERGER (PAGES 9 AND 10)
OSFS and Advance Financial have proposed the merger to best serve the
interests of OSFS shareholders and maximize shareholder value, while continuing
to serve the needs of Bridgeport's customers.
OPINION OF KEEFE, BRUYETTE & WOODS, INC. (PAGE 10)
In deciding to approve the merger, the OSFS board of directors
considered the opinion of its financial advisor, Keefe, Bruyette & Woods, Inc.
("KBW"), dated April 18, 2001, that the merger consideration was fair to OSFS
shareholders as of such date from a financial point of view. The opinion,
updated as of July 18, 2001, is attached as Appendix D to this document. We
encourage you to read the opinion.
RECOMMENDATION TO SHAREHOLDERS (PAGE 12)
The board of directors of OSFS believes that the merger is in the best
interests of OSFS and its shareholders and unanimously recommends that you vote
FOR the proposal to adopt the merger agreement and the plan of merger.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS (PAGE 18)
Some of the directors and officers of OSFS and Bridgeport have
interests in the merger that are different from, or in addition to, their
interests as shareholders of OSFS. These interests include the following:
- At the effective time of the merger, each outstanding OSFS
stock option shall be converted into the right to receive a
cash payment equal to the difference between $16.00 and the
exercise price per share of each outstanding option. The
directors and executive officers of OSFS as a group have
options to acquire a total of 41,219 shares of OSFS.
- Each holder of an unvested share of OSFS restricted stock that
was granted under the Bridgeport Savings and Loan Association
Recognition and Retention Plan and Trust merger agreement (the
"RRP"), shall be entitled to receive a cash payment equal to
$16.00 per share. The directors and executive officers of OSFS
as a group have a total of 5,571 shares of unvested restricted
stock.
- The OSFS employee stock ownership plan ("ESOP") will be
terminated as of the effective time of the merger and all OSFS
shares held by the ESOP trustee will be exchanged for $16.00
per share. The ESOP trustee will use this money to retire the
loan from OSFS to the ESOP. Any money that remains in the ESOP
after retirement of the loan will be distributed to the ESOP
participants.
- For six years after completion of the merger, Advance
Financial will indemnify the past and present officers and
directors of OSFS and Bridgeport. Advance Financial will also
provide them with directors and officers' liability insurance
coverage for three years after the effective time of the
merger.
- The merger agreement provides for Advance Financial to make a
lump sum payment to the president of OSFS and Bridgeport under
the terms of his current employment agreement. This payment
will be equal to two times his annual salary.
- Advance Financial will appoint the four current non-employee
directors of Bridgeport to an advisory board for a period of
at least one year after completion of the merger. The
directors will receive compensation for service on the
advisory board.
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TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT (PAGES 17 AND 18)
The parties to the merger agreement may agree to terminate the merger
at any time before it is effective, even if the shareholders have voted to
approve the merger. The merger agreement may be terminated if:
- the parties mutually consent to its termination in writing;
- the parties do not complete the merger by December 31, 2001;
or
- the parties have not satisfied or agreed to waive the
conditions listed in the merger agreement.
If the merger is not completed because OSFS enters into an acquisition
agreement with a party other than Advance Financial, OSFS will be required to
pay a fee of $400,000 to Advance Financial. If either OSFS or Advance Financial
willfully breaches the merger agreement, the breaching party will be required to
pay all reasonable expenses of the other party, not to exceed $200,000.
The merger agreement may be amended with the consent of the board of
directors of each party at any time before or after receiving shareholder
approval of the merger agreement. However, if the shareholders have approved the
merger, the merger agreement may not be amended without their approval if the
amendment would reduce the amount of the per share merger consideration or
materially and adversely affect their rights as shareholders.
SPECIAL MEETING OF SHAREHOLDERS (PAGES 4 AND 5)
The OSFS special meeting of shareholders will take place at the offices
of Bridgeport Savings and Loan Association, 435 Main Street, Bridgeport, Ohio,
on August 27, 2001, at 1:00 p.m.. If you owned OSFS common shares on July 16,
2001, you are entitled to vote at the special meeting. To approve the merger,
the holders of 247,700 OSFS shares, which is a majority of the issued and
outstanding shares, must vote in favor of the merger agreement and the plan of
merger.
The directors of OSFS have agreed to vote all of their OSFS shares for
the adoption of the merger agreement and the plan of merger. As of July 16,
2001, the directors, in the aggregate, owned or had the power to vote 81,034
OSFS shares, or 16.3% of the issued and outstanding shares.
DISSENTERS' RIGHTS (PAGES 7 THROUGH 9)
Ohio law provides that OSFS shareholders may receive the fair cash
value for their shares if, among other requirements, they do not vote in favor
of the merger and they file a written demand for the fair cash value with OSFS.
FEDERAL TAX CONSEQUENCES OF THE MERGER (PAGE 19)
Each OSFS shareholder that receives cash will recognize a gain or loss
for federal income tax purposes, depending upon the shareholder's adjusted basis
in the OSFS shares. If your shares qualify as a capital asset, your gain or loss
will be treated as capital gain or loss and will be either short-term or
long-term depending upon how long you have owned your shares. You should consult
a tax advisor for a complete understanding of the tax consequences of the merger
to you.
PER SHARE MARKET PRICE INFORMATION (PAGE 4)
OSFS shares are traded on the OTC Bulletin Board under the symbol
"OSFS." As of April 17, 2001, the last trading day before the public
announcement of the proposed merger, the closing bid price of an OSFS share was
$9.75 per share, and the closing asked price was $10.25. On June 20, 2001, the
last day for which a trade was reported, OSFS shares had a closing sale price of
$15.10 per share.
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PER SHARE MARKET PRICE INFORMATION
OSFS shares are quoted on the OTC Bulletin Board. As of July 16, 2001,
there were 495,398 outstanding OSFS shares held by approximately 310 holders of
record. The following table shows the high and low bid prices of OSFS shares as
quoted on the OTC Bulletin Board and the cash dividends per share declared
during each of these periods.
OSFS
-----------------------------------------------
Bid price
--------------------- Cash dividends
Quarter ended High Low declared per share
- ------------- ---- --- ------------------
June 30, 2001 $15.26 $9.375 $.00
March 31, 2001 9.75 8.00 .07
December 31, 2000 11.00 9.13 .12
September 30, 2000 9.50 8.25 .06
June 30, 2000 9.38 8.38 .05
March 31, 2000 9.25 8.50 .05
December 31, 1999 10.00 9.00 .05
September 30, 1999 10.75 9.50 .05
June 30, 1999 12.25 9.63 .05
PURPOSE OF THIS DOCUMENT
This document serves as a proxy statement of OSFS for its special
meeting of shareholders. This document is being mailed to OSFS shareholders on
or about July 25, 2001.
Advance Financial and Advance Savings provided all the information in
this document about them, and OSFS and Bridgeport provided all the information
in this document about them. Each party is responsible for the accuracy of its
information.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR
TO WHICH WE HAVE REFERRED IN THIS DOCUMENT. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH ANY ADDITIONAL OR DIFFERENT INFORMATION.
THE SPECIAL MEETING OF OSFS SHAREHOLDERS
TIME, DATE AND PLACE
The OSFS special meeting of shareholders will be held at the offices of
Bridgeport Savings and Loan Association, 435 Main Street, Bridgeport, Ohio, at
1:00 p.m., local time, on August 27, 2001.
PURPOSE OF THE MEETING
At the special meeting of shareholders, you will be asked to consider
and vote upon a proposal to adopt the merger agreement and the plan of merger.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
Only shareholders of record on July 16, 2001, will be entitled to
notice of and to vote at the special meeting of shareholders. At the close of
business on July 16, 2001, there were 495,398 OSFS shares issued and outstanding
and entitled to vote. The OSFS shares were held of record by approximately 310
shareholders. Each
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OSFS share entitles the holder to one vote on all matters properly presented at
the special meeting of shareholders.
VOTES REQUIRED
The holders of 247,700 OSFS shares, which is a majority of the issued
and outstanding shares, must vote in favor of the merger agreement and the plan
of merger. The directors of OSFS have agreed to vote all of their OSFS shares
for the adoption of the merger agreement and the plan of merger. As of July 16,
2001, the directors of OSFS owned or had the power to vote, in the aggregate,
81,034 OSFS shares, or 16.3% of the issued and outstanding OSFS common shares.
A quorum, consisting of the holders of a majority of the issued and
outstanding OSFS shares, voting in person or by proxy, must be present at the
special meeting before any action can be taken.
Under Ohio law, shares that are held by a nominee for a beneficial
owner and which are represented in person or by proxy at the special meeting
will be counted as being present for purposes of establishing a quorum.
Abstentions and shares as to which the authority to vote is withheld and shares
held by a nominee for a beneficial owner which are present in person or by proxy
but are not voted ("non-votes"), will be counted as a vote against the approval
and adoption of the merger agreement and the plan of merger. If your proxy is
signed, dated and submitted but no vote is specified, it will be voted "FOR" the
approval and adoption of the merger agreement and the plan of merger.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the only persons
known by OSFS to be the beneficial owners of more than five percent of the
shares of OSFS, as of July 16, 2001:
Amount and nature of Percent of
Name and address beneficial ownership shares outstanding
- ---------------- -------------------- ------------------
Ohio State Financial Services, Inc. 58,353 (1) 11.8%
Employee Stock Ownership Plan
First Bankers Trust Company,
N.A.,
Trustee
435 Main Street
Bridgeport, Ohio 43912
Jeffrey L. Gendell 39,300 (2) 7.9
200 Park Avenue
Suite 3900
New York, New York 10166
Jon W. Letzkus 60,770 (3) 11.8
435 Main Street
Bridgeport, Ohio 43912
William E. Reline 24,977 (4) 5.0
435 Main Street
Bridgeport, Ohio 43912
- ---------------------------
(footnotes on following page)
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(1) The trustee has sole voting power over 43,687 unallocated shares and
limited shared investment power over all of the 58,353 ESOP shares.
(2) Based on a Schedule 13G filed with the SEC on April 7, 2000, by Jeffrey
L. Gendell ("Gendell"), Tontine Financial Partners, L.P., a Delaware
limited partnership ("Tontine"), and Tontine Management L.L.C., a
Delaware limited liability company ("TM"). Gendell, TM and Tontine
report shared voting and dispositive power over the reported shares.
(3) Mr. Letzkus has sole voting power over 37,735 shares, which includes
18,737 shares that may be acquired upon the exercise of an option
awarded under the Stock Option Plan. Mr. Letzkus has sole voting and
shared investment power over 7,567 shares allocated to his ESOP account
and shared voting and investment power over 15,468 shares as a trustee
of the RRP.
(4) Mr. Reline has sole voting power over 9,509 shares, which includes
3,747 shares that may be acquired upon the exercise of an option
awarded under the Stock Option Plan. Mr. Reline has shared voting and
investment power over 15,468 shares as a trustee of the RRP.
The following table sets forth certain information regarding the number
of shares of OSFS beneficially owned by each director individually and by all
directors and executive officers of OSFS as a group, as of July 16, 2001:
Amount and nature of beneficial ownership
--------------------------------------------
Sole voting and Shared voting and Percent of
Name and address (1) investment power investment power shares outstanding
- -------------------- ---------------- ---------------- ------------------
John O. Costine 6,509 (2) 15,468 (3) 4.4%
Anton M. Godez 11,709 (2) 7,000 3.7
Jon W. Letzkus 37,735 (4) 23,035 (3)(5) 11.8
William E. Reline 9,509 (2) 15,468 (3) 5.0
Manuel C. Thomas 16,262 (2) 3,000 3.9
All directors and executive officers
of OSFS as a group (8 people) 97,911 (6) 38,251 (7) 25.4
- -------------------------
(1) Each of the persons listed in this table may be contacted at the
address of OSFS.
(2) Includes 3,747 shares that may be acquired upon the exercise of options
awarded under the Stock Option Plan.
(3) Includes 15,468 shares held by the RRP as to which Messrs. Costine,
Reline and Letzkus have shared voting power as trustees of the RRP.
(4) Includes 18,737 shares that may be acquired upon the exercise of an
option awarded under the Stock Option Plan.
(5) Includes 7,567 shares allocated to the ESOP account of Mr. Letzkus.
(6) Includes 41,219 shares that may be acquired upon the exercise of
options awarded under the Stock Option Plan.
(7) Includes the 12,710 shares allocated to the ESOP accounts of the
executive officers of OSFS and 15,468 shares held by the RRP as to
which Messrs. Costine, Reline and Letzkus act as trustees. Although the
RRP shares appear in each of the trustees entries, they have only been
included once in the total.
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VOTING AND SOLICITATION AND REVOCATION OF PROXIES
We have included with this document a form of proxy for the special
meeting. This proxy is solicited by the OSFS board of directors. Whether or not
you attend the special meeting, the board of directors urges you to use the
enclosed proxy. If you have executed a proxy, you may revoke it at any time
before the vote by:
- filing a written notice of revocation with the Secretary of
OSFS at 435 Main Street, Bridgeport, Ohio 43912;
- executing and returning a later-dated proxy that is received
by OSFS prior to a vote being taken at the special meeting; or
- attending the special meeting and giving notice of revocation
in person. Attending the special meeting will not, by itself,
revoke a proxy you have submitted.
We do not expect any matter other than the merger to be brought before
the OSFS special meeting of shareholders. The executed proxy will be deemed to
confer authority on the persons named in the proxy card, or their substitutes,
and the persons named as proxies will act at the direction of the OSFS board of
directors in voting on any other matters that properly come before the special
meeting. No proxy, however, that is voted against the proposal to approve the
merger agreement will be voted in favor of any adjournment or postponement.
OSFS will pay its expenses incurred in connection with preparing and
mailing this document, the accompanying proxy and all other related materials
and costs incurred in connection with the solicitation of proxies on behalf of
the board of directors. Proxies will be solicited by mail and may also be
solicited, for no additional compensation, by officers, directors or employees
of OSFS. OSFS will also pay the standard charges and expenses of brokerage
houses, voting trustees, banks, associations and other custodians, nominees and
fiduciaries who are the record holders of OSFS shares beneficially owned by
others, for forwarding the proxy materials to, and obtaining proxies from, the
beneficial owners of OSFS shares entitled to vote at the special meeting.
DISSENTERS' RIGHTS
The following is a summary of the steps that you must take if you wish
to exercise dissenters' rights with respect to the merger. This description is
not complete. For a more complete discussion of the procedures, you should read
Section 1701.85 of the Ohio General Corporation Law, which is attached as
Appendix C to this document. IF YOU FAIL TO TAKE ANY ONE OF THE REQUIRED STEPS,
YOUR DISSENTERS' RIGHTS MAY BE TERMINATED UNDER OHIO LAW. If you are considering
dissenting, you should consult your own legal advisor.
To exercise dissenters' rights, you must satisfy five conditions:
- you must be a shareholder of record on July 16, 2001;
- you must not vote your shares in favor of the merger;
- you must deliver a written demand for the fair cash value of
the dissenting shares within 10 days after the date on which
the merger agreement and plan of merger are approved by the
OSFS Shareholders;
- if OSFS requests, you must send your stock certificates to
OSFS within 15 days of the request so that a legend may be
added stating that a demand for fair cash value has been made;
and
- if you have not reached an agreement as to the fair cash value
of your shares with OSFS, you must file a complaint in court
for determination of the fair cash value within three months
from the date of your demand to OSFS for fair cash value.
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All demands should be sent to OSFS, 435 Main Street, Bridgeport, Ohio
43912, Attention: Secretary.
"Fair cash value" is the amount that a willing seller, under no
compulsion to sell, would be willing to accept, and that a willing buyer, under
no compulsion to purchase, would be willing to pay. In no event will the fair
cash value exceed the amounts specified in the dissenting shareholder's demand.
Fair cash value is determined as of the day before the special meeting,
excluding any appreciation or depreciation in market value of your shares
resulting from the merger. The fair cash value of your shares may be higher, the
same, or lower than the market value of OSFS shares on the date of the merger.
The following is a more detailed description of the conditions you must
satisfy to perfect your dissenters' rights:
- You must be the record holder of the dissenting shares as of
July 16, 2001. If you have a beneficial interest in OSFS
shares held of record in the name of another person, you must
cause the shareholder of record to follow the required
procedures.
- You must not vote in favor of the merger. This requirement is
satisfied if:
- you submit a properly executed proxy with
instructions to vote "against" the adoption of the
merger agreement and the plan of merger or to
"abstain" from the vote; or
- you do not return a proxy or you revoke a proxy and
you do not cast a vote at the special meeting in
favor of the adoption of the merger agreement and the
plan of merger.
IF YOU VOTE IN FAVOR OF THE MERGER AGREEMENT AND THE PLAN OF
MERGER, YOU WILL LOSE YOUR DISSENTERS' RIGHTS. IF YOU SIGN A
PROXY AND RETURN IT BUT DO NOT INDICATE A VOTING PREFERENCE ON
THE PROXY, THE PROXY WILL BE VOTED IN FAVOR OF THE ADOPTION OF
THE MERGER AGREEMENT AND PLAN OF MERGER AND WILL CONSTITUTE A
WAIVER OF DISSENTERS' RIGHTS.
- You must file a written demand with OSFS on or before the 10th
day after the date on which the merger agreement and plan of
merger are approved by the OSFS shareholders. OSFS will not
inform you of the expiration of the 10-day period. The written
demand must include your name and address, the number of
dissenting shares and the amount you claim as the fair cash
value of those shares. Voting against the merger does not
constitute a written demand as required under Ohio law.
- If OSFS requests, you must submit your certificates for
dissenting shares to OSFS within 15 days after it sends its
request that a legend be placed on the certificates,
indicating that demand for cash value was made. The
certificates will be returned to you by OSFS. OSFS intends to
make this request to dissenting shareholders.
- You must file a petition with the court if you do not reach an
agreement with OSFS as to the fair cash value of your shares.
You must file the petition with the Court of Common Pleas of
Belmont County, Ohio, for a determination of the fair cash
value of the dissenting shares within three months after
service of your demand to OSFS for fair cash value. The court
will determine the fair cash value per share. The costs of the
proceeding, including reasonable compensation to appraisers,
will be assessed by the court as it considers equitable.
Your right to receive the fair cash value of your dissenting shares
will terminate if:
- the merger does not become effective;
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- you fail to make a timely written demand on OSFS;
- you do not, upon request of OSFS, surrender your OSFS
certificates in a timely manner;
- you withdraw your demand, with the consent of OSFS; or
- you and OSFS have not come to an agreement as to the fair cash
value of the dissenting shares and you have not timely filed a
complaint.
THE PARTIES
ADVANCE FINANCIAL AND ADVANCE SAVINGS
Advance Financial is a savings and loan holding company organized under
Delaware law in September 1996. Advance Financial acquired all of the capital
stock issued by Advance Savings upon its conversion from mutual to stock form.
Advance Financial conducts no significant business or operations of its own
other than holding all of the outstanding stock of Advance Savings.
Advance Savings is a federally chartered stock savings bank
headquartered in Wellsburg, West Virginia, with branches in Follansbee, West
Virginia and Wintersville, Ohio. Advance Savings operates a traditional savings
bank business, attracting deposit accounts from the general public and using
those deposits, together with other funds, primarily to originate and invest in
loans secured by one- to four-family residential real estate, non-residential
real estate, and commercial loans. To a lesser extent, Advance Savings also
originates multi-family real estate loans and consumer loans.
OSFS AND BRIDGEPORT
OSFS is a savings and loan holding company organized under Ohio law in
March 1997. OSFS acquired all of the common shares issued by Bridgeport, a
savings and loan association organized under Ohio law, upon Bridgeport's
conversion from mutual to stock form in September 1997. The primary business of
OSFS is holding all of the outstanding shares of Bridgeport.
Bridgeport conducts business from its main office located in Bridgeport,
Ohio, and one full-service branch located in Shadyside, Ohio. Bridgeport's
principal business is the origination of permanent mortgage loans on one- to
four-family residential real estate located in Bridgeport's primary market area,
which consists of Belmont County, Ohio, and Ohio and Marshall Counties, West
Virginia. Bridgeport also originates a limited number of loans for the
construction of one- to four-family residences and permanent mortgage loans
secured by nonresidential real estate in its market area. In addition to real
estate lending, Bridgeport originates secured and unsecured consumer loans.
Bridgeport invests in interest-bearing deposits in other financial institutions,
U.S. Government and agency obligations, and mortgage-backed securities. Funds
for lending and other investment activities are obtained primarily from savings
deposits, which are insured up to applicable limits by the FDIC, principal
repayments of loans, and maturities of investment securities.
THE MERGER
THE FULL TEXT OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS
DOCUMENT AND THE PLAN OF MERGER IS ATTACHED AS APPENDIX B. THE SUMMARY OF THE
MERGER AGREEMENT AND THE PLAN OF MERGER AND THEIR TERMS AND CONDITIONS SET FORTH
IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT AND PLAN OF MERGER.
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BACKGROUND AND REASONS FOR THE MERGER
Originally chartered in 1893, Bridgeport converted to the stock form of
organization and formed OSFS as its holding company in 1997. The period since
the conversion has been one of significant change in the banking industry,
characterized by heightened regulatory scrutiny, consolidation, and intensifying
competition. Over the past eighteen months, the board of directors has analyzed
its business plan and considered various means of better positioning Bridgeport
to compete more effectively and produce greater revenue. During this period of
time board members consulted various advisors and attended conferences. In
January 1998, the board met with KBW to discuss the economic environment, the
performance of OSFS and other comparable companies, methods to enhance
shareholder value and the state of the mergers and acquisitions environment. In
May 1999, the board again met with KBW to discuss alternative strategic
directions, including remaining independent and selling or merging OSFS with
another institution. Discussions included: (1) an analysis of competition at the
retail franchise level and the ability to grow OSFS; (2) the limited liquidity
of OSFS stock; and (3) the status of the current merger market, the relative
pricing and the opportunities that might be available for OSFS. These issues
were analyzed in conjunction with the goal to continue to increase stockholder
value.
On February 16, 2001, the board received from Advance Financial an
unsolicited indication of interest to acquire OSFS. The letter suggested a price
range of $15.25 to $16.00 and was subject to the satisfactory completion of due
diligence and the execution of a definitive agreement. On February 25, 2001, the
OSFS board met with its legal and investment advisors and agreed to allow
Advance Financial to perform due diligence in order to refine the terms of its
proposal. Due diligence was performed by Advance Financial in March 2001. A
revised letter was then sent by Advance Financial to OSFS on March 20, 2001,
which stated the due diligence was satisfactorily completed and set the price at
$16.00 per share in an all cash transaction.
The OSFS board met again with its legal and investment advisors to
discuss the revised indication of interest. The board instructed its investment
advisor, KBW, to test the market to determine if there were any other parties
that may be interested in conducting a merger or acquisition transaction with
OSFS. KBW contacted four other financial institutions, which resulted in no
additional interest in a transaction with OSFS. A third board meeting was held
on April 5, 2001, to discuss the results of the market check performed by KBW
and to discuss the relative advantages and disadvantages of merging with Advance
Financial and remaining independent. The board then voted to authorize the
President and OSFS' legal counsel and KBW to engage in negotiations with Advance
Financial to reach a definitive agreement to merge. Negotiations were then held
over a two week period. At a meeting held on April 18, 2001, the terms of the
agreement were reviewed by counsel with the board and KBW presented its analysis
and opinion that the transaction was fair to the shareholders from a financial
point of view. At the conclusion of the meeting, the board voted unanimously in
favor of the agreement.
OPINION OF KEEFE, BRUYETTE & WOODS, INC.
In April 2001, OSFS retained KBW to evaluate a potential strategic
combination between OSFS and Advance Financial. KBW, as part of its investment
banking business, is regularly engaged in the evaluation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, and distributions of listed and unlisted securities. KBW is
familiar with the market for common stocks of publicly traded banks, thrifts and
bank and thrift holding companies. The OSFS board selected KBW on the basis of
the firm's reputation and its experience and expertise in transactions similar
to the Merger and its prior work for and relationship with OSFS.
Pursuant to its engagement, KBW was asked to render an opinion as to
the fairness, from a financial point of view, of the merger consideration to
shareholders of OSFS. KBW delivered its opinion to the OSFS board that, as of
April 18, 2001, the merger consideration is fair, from a financial point of
view, to the shareholders of OSFS. No limitations were imposed by the OSFS board
upon KBW with respect to the investigations made or procedures followed by it in
rendering its opinion. KBW has consented to the inclusion herein of the summary
of its opinion to the OSFS board and to the reference to the entire opinion
attached hereto as Appendix D.
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THE FULL TEXT OF THE OPINION OF KBW, WHICH IS ATTACHED AS APPENDIX D TO
THIS PROXY STATEMENT, SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY KBW, AND SHOULD BE READ IN ITS
ENTIRETY. THE SUMMARY OF THE OPINION OF KBW SET FORTH IN THIS DOCUMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION.
In rendering its opinion, KBW (i) reviewed the merger agreement, (ii)
reviewed OSFS' Annual Reports, Proxy Statements and Forms 10-KSB since
completing its initial public offering in September 1997 and Advance Financial's
Annual Reports, Proxy Statements and Forms 10-KSB for each of the years ended
June 30, 1998, 1999 and 2000 and the unaudited quarterly financial information
for the quarters ending September 30, and December 31, 2000 and certain other
information considered relevant, (iii) discussed with senior management and the
boards of directors of OSFS and Bridgeport the current position and prospective
outlook for OSFS to enhance future shareholder value, (iv) discussed with senior
management of Advance Financial their operations, financial performance and
future plans and prospects, (v) considered historical quotations, levels of
activity and prices of recorded transactions in OSFS' and Advance Financial's
common stock, (vi) reviewed financial and stock market data of other thrifts in
a comparable asset range to OSFS and Advance Financial, (vii) reviewed certain
recent business combinations of strategic alliance transactions which KBW deemed
comparable in whole or in part, and (viii) performed other analyses which KBW
considered appropriate.
In rendering its opinion, KBW assumed and relied upon the accuracy and
completeness of the financial information provided to it by OSFS and Advance
Financial. In its review, with the consent of the OSFS board, KBW did not
undertake any independent verification of the information provided to it, nor
did it make any independent appraisal or evaluation of the assets or
liabilities, and potential or contingent liabilities of OSFS or Advance
Financial.
KBW presented the following analyses:
Regional Group Analysis. KBW reviewed the financial performance of OSFS
and Advance Financial based on various financial measures of asset size,
earnings performance, tangible equity/assets, market pricing ratios, and
dividend-related ratios to all publicly-traded thrift institutions in Ohio and
West Virginia (33 in the group). This analysis showed among other things, that
as of March 31, 2001, OSFS and Advance Financial compared as follows:
Tangible Price to
Equity to Price to Price to Tangible Dividend
Assets Assets ROAE EPS Book Book Yield
------ ------ ---- --- ----- ---- -----
OSFS $ 33.1 million 24.6% 2.94% 19.61x 60.9% 60.9% 2.80%
Advance Financial $161.8 million 9.8% 6.11% 10.30x 63.8% 63.8% 3.70%
Median $141.4 million 10.1% 6.13% 12.67% 87.2% 87.2% 3.43%
Analysis of Selected Mergers and Strategic Alliance Transactions. In
rendering its opinion, KBW analyzed the consideration offered by Advance
Financial in relation to certain comparable merger and acquisition transactions
of pending thrift deals, comparing merger consideration relative to tangible
book value, last 12 months earnings, total assets, total deposits and premium to
core deposits. Pending and completed thrift deals consist of thrift acquisitions
with deal values less than $15 million, target equity to assets ratios between
20% and 30% and target return on average equity between 2% and 5%.
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The information in the following table summarizes the comparable group
results analyzed by KBW with respect to the merger. The summary does not purport
to be a complete description of the analysis performed by KBW and should not be
construed independently of the other information considered by KBW in rendering
its opinion. Selecting portions of KBW's analysis or isolating certain aspects
of the comparable transactions without considering all analysis and factors
could create an incomplete or potentially misleading view of the evaluation
process.
Price to
------------------------------------------------------------- Core Deposit
Tangible Book (1) EPS (2) Deposits Assets Premium
(%) (X) (%) (%) (%)
Consideration to OSFS $16.00: 97.4% 33.3x 32.7% 24.2% --
Median of pending deals: 110.4% 28.3x 31.6% 20.0% 5.2%
Median of completed deals: 126.7% 32.7x 26.7% 18.6% 6.1%
- ---------------------------
(1) Based on OSFS tangible book value of $16.43.
(2) Earnings per share for March 2001 quarter annualized of $0.48.
Based on the above information, KBW concluded that the above analysis
of the transaction with a deal price of $16.00 per share is fair from a
financial point of view to the shareholders of OSFS.
No company or transaction used in any of the above analyses as a
comparison is identical to OSFS, Advance Financial or the contemplated
transaction. Accordingly, an analysis of the results of the foregoing is not
formulaic; rather, it involves complex considerations and judgments concerning
differences in financial, market 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.
Based on the above information, KBW concluded that the merger
consideration was fair from a financial point of view. Further, the fairness
analysis considered (i) the relative market performance of thrift stocks in
general, especially small cap stocks, over the past year; (ii) the relative
historical returns on equity of OSFS and Advance Financial; and (iii) the
expected performance of each company given additional considerations such as the
business plan, asset mix, net interest margin, net interest spread and asset
quality. The summary does not purport to be a complete description of the
analysis performed by KBW and should not be construed independently of the other
information considered by KBW in rendering its opinion. Selecting portions of
KBW's analysis or isolating certain aspects of the comparable transactions
without considering all analysis and factors, could create an incomplete or
potentially misleading view of the evaluation process.
In preparing its analysis, KBW made numerous assumptions with respect
to industry performance, business and economic conditions and other matters,
many of which are beyond the control of KBW and OSFS. The analyses performed by
KBW are not necessarily indicative of actual values or future results, which may
be significantly more or less favorable than suggested by such analyses and do
not purport to be appraisals or reflect the prices at which a business may be
sold.
KBW will receive a fee of $100,000 for services rendered in connection
with advising and issuing a fairness opinion regarding the merger. As of the
date of this document, KBW has received $35,000 of such fee and the remainder of
the fee is to be paid one day after the effective time of the merger.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF OSFS
The board of directors of OSFS unanimously recommends that the OSFS
shareholders vote FOR the adoption of the merger agreement and the plan of
merger. The board of directors believes that the terms of the merger are fair
to, and in the best interests of, the shareholders of OSFS.
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EXCHANGE OF OSFS SHARES
If the holders of at least a majority of OSFS shares approve the
merger, if all necessary regulatory approvals are received and if all conditions
to the completion of the merger are satisfied or waived, OSFS and Bridgeport
will be acquired by Advance Financial and Advance Savings. For tax purposes, the
acquisition of OSFS and Bridgeport will be accomplished through a three step
process. First, OSFS will merge with AFB Acquisition Subsidiary, Inc., a wholly
owned subsidiary of Advance Financial created for the purposes of the merger. As
a result of this merger, OSFS will be the surviving corporation and Advance
Financial will be its sole shareholder. At the time the merger subsidiary is
merged into OSFS, each OSFS share will be converted into the right to receive
$16.00 in cash, and all OSFS shares will be cancelled and extinguished. Second,
OSFS will merge into Advance Financial. Finally, Bridgeport will be merged into
Advance Savings, with Advance Savings being the surviving savings association
and wholly owned subsidiary of Advance Financial. Steps two and three of this
process will occur immediately after the merger of the merger subsidiary into
OSFS. The details of this merger are more thoroughly described in the merger
agreement and the plan of merger that are attached as Appendices A and B.
Assuming that immediately before the completion of the merger there
will be 495,398 OSFS shares outstanding and 59,942 outstanding options to
purchase OSFS shares, the total amount of cash to be paid to OSFS shareholders
and option holders would be approximately $8.0 million.
EXCHANGE OF CERTIFICATES EVIDENCING OSFS SHARES
No later than five business days after the effective date of the
merger, an exchange agent of Advance Financial will mail to you a form letter of
transmittal containing instructions for surrendering your OSFS share
certificates. When you surrender your certificates for cancellation, together
with a properly executed letter of transmittal, you will be entitled to receive
cash in an amount equal to $16.00 per share. Until you surrender your
certificates, Advance Financial will not pay you the per share merger
consideration.
If you have lost or misplaced your OSFS share certificate, you should
immediately call OSFS' transfer agent, Fifth Third Bank, Corporate Trust
Services, at (513) 579-5320 or (800) 837-2755. The transfer agent will mail to
you instructions for replacing the lost certificate.
REPRESENTATIONS AND WARRANTIES
Each of Advance Financial and OSFS has made representations and
warranties in the merger agreement regarding:
- corporate organization, good standing and authority to engage
in its business and in the merger;
- ownership of subsidiaries;
- subsidiary organization, good standing and authority to engage
in its business and in the merger;
- authorization and execution of the agreement;
- securities documents and regulatory reports and records;
- financial statements;
- material adverse changes;
- legal proceedings;
- brokers and finders' fees and commissions; and
- truth and completeness of information.
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In addition, OSFS has made representations and warranties regarding:
- capital structure;
- environmental compliance and claims;
- taxes;
- compliance with laws, past conduct of business, and permits,
licenses and approvals to conduct business;
- employee benefit plans and ERISA compliance;
- contracts;
- insurance;
- properties;
- labor relations;
- allowance for loan losses;
- officer and director interests;
- the fairness opinion;
- the absence of undisclosed liabilities;
- loan and investment portfolios;
- interest rate risk management; and
- dividends and distributions.
In addition, Advance Financial has represented and warranted that it
has the financial resources to perform its obligations under the merger
agreement and that it has complied with applicable state anti-takeover statutes.
COVENANTS
During the period between April 18, 2001 and the completion of the
merger, each of OSFS, Bridgeport, Advance Financial, and Advance Savings has
agreed to conduct its business in the ordinary and usual course, and to use its
reasonable best efforts to enable completion of the merger as soon as reasonably
possible. Additionally, OSFS and Advance Financial have agreed to:
- promptly prepare and file all documents required for all
necessary regulatory approvals;
- share information needed to accomplish anything contemplated
in the merger agreement;
- not issue any press release related to the merger agreement or
merger without consulting the other party;
- not take any action that would amount to a breach of any
representation or warranty, or that would delay completion of
the merger, without the written consent of the other party;
- take all necessary action to cause the two subsequent mergers
to occur;
- develop a bonus plan to reward employees of Bridgeport who
remain employees for at least one month after the merger;
- maintain the confidentiality of information and return all
shared documents and information if the merger is not
completed;
- supplement and amend any materials previously disclosed as
needed; and
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- notify the other party if it believes a condition to the
merger agreement will not be satisfied prior to its
termination.
OSFS has also agreed to:
- call and hold a shareholders' meeting to vote on the
agreement;
- allow Advance Financial reasonable access to its properties,
personnel, and records;
- confer monthly or more frequently with Advance Financial
regarding business, financial condition and operations, and
merger related matters;
- provide Advance Financial an estimate of, and pay for, its
merger-related expenses;
- conform Bridgeport's lending, accounting, and data processing
policies to that of Advance Financial; and
- provide Advance Financial with and existing environmental
reports related to any property owned or being used by it.
OSFS and Bridgeport have also agreed, absent prior written consent of
Advance Financial, not to:
- declare a dividend from OSFS, except for one regular quarterly
cash dividend in the second quarter of 2001 in an amount NOT
to exceed $0.07 per share;
- effect a stock split, recapitalization or reclassification;
- issue or purchase shares of their stock other than upon the
exercise of stock options;
- amend their articles of incorporation, code of regulations,
constitution or bylaws; except as necessary to complete the
merger;
- increase the compensation of any of their officers, directors,
or employees;
- enter into, modify, or contribute to any employee benefit
plan, other than as required by law or plan documents, or
consistent with past practices;
- originate or purchase a loan in excess of $250,000 relating to
loans secured by one- to four-family properties and in excess
of $300,000 relating to loans secured by commercial
properties;
- enter into any transaction or agreement relating to the
borrowing of money by OSFS or Bridgeport or hire a new
employee or consultant whose contract may not be terminated at
will;
- change its method of accounting that was in effect on
December 31, 2000 except as required by applicable law;
- make any capital expenditure greater than $5,000 individually
or $10,000 in the aggregate, unless (i) in the ordinary course
of business; (ii) in connection with the transactions
contemplated by the merger agreement; (iii) pursuant to
binding commitments that were previously disclosed and in
existence on the date of the merger agreement; and (iv)
expenditures necessary to maintain existing assets in good
repair. OSFS and Bridgeport also agree to not enter into any
new lease or lease renewal of real or personal property for
annual payments in excess of $5,000;
- apply or contract to obtain a new branch or site location;
- acquire an equity interest in another entity;
- grant any preferential rights to buy any of its assets;
- materially change their lending and investment policies;
- enter into a contract or agreement for the purpose of hedging
their interest-earning exposure; or
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- materially increase or decrease any rate of interest, except
in a manner consistent with past practices.
Neither OSFS nor Bridgeport may solicit or initiate any proposals or
offers from any person, or discuss or negotiate with any person or entity, for
any acquisition or purchase of all or a substantial portion of the assets of,
any equity security of, or any merger, consolidation or business combination
with, OSFS or Bridgeport. OSFS or Bridgeport may enter into discussions
regarding any of these transactions if any person or entity makes an unsolicited
proposal and the OSFS board of directors determines it must commence discussions
as required by the good faith exercise of its fiduciary duties to the OSFS
shareholders. OSFS must provide Advance Financial with oral and written notice
of such discussions. If OSFS enters into an agreement with any person or entity
for the acquisition or purchase of all or a material amount of OSFS' assets or
equity securities, or for any merger, consolidation or business combination,
OSFS shall pay Advance Financial $400,000.
For six years after completion of the merger, Advance Financial will
indemnify the past and present officers and directors of OSFS and Bridgeport to
the fullest extent permitted by their respective articles of incorporation and
codes of regulations. Advance Financial will also provide them with directors
and officers' liability insurance coverage for three years after the merger.
Employees of OSFS or Bridgeport who remain employed by Advance
Financial or Advance Savings will be eligible to participate in Advance
Financial's ESOP on January 1, 2003. These employees shall be eligible to
participate in other benefit plans as soon as permitted by those plans. OSFS
will terminate its ESOP. The per share merger consideration will be paid into
the ESOP for each of its shares. The money received for unallocated ESOP shares
will be used to repay in full the ESOP loan from OSFS and the remaining cash
will be allocated to the accounts of plan participants.
Advance Financial has agreed to appoint all current non-employee
directors of Bridgeport to an advisory board for a period of at least one year.
The directors of OSFS have agreed to enter into a voting agreement to
vote all their shares in favor of the merger.
CONDITIONS
Advance Financial, Advance Savings, OSFS and Bridgeport may complete
the merger only if:
- the merger agreement is approved by the holders of at least a
majority of the outstanding OSFS shares and all other
necessary corporate action is taken;
- the parties receive all required governmental and regulatory
approvals and consents;
- no law or regulation exists that would make completion of the
merger illegal; and
- no proceeding initiated by any governmental entity seeking to
restrain or prohibit the merger is pending.
OSFS will not be required to complete the merger unless the following
conditions are satisfied:
- Advance Financial's representations and warranties in the
merger agreement are true in all material respects;
- Advance Financial has satisfied, in all material respects, its
obligations and covenants in the merger agreement;
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- Advance Financial certifies in writing that it has fulfilled
all the conditions to which it is subject; and
- counsel for Advance Financial provides an opinion on the
organization and authority of Advance Financial to enter into
the agreement.
In addition, Advance Financial will not be required to complete the
merger unless the following conditions are satisfied:
- OSFS' representations and warranties in the merger agreement
are true in all material respects;
- OSFS has satisfied, in all material respects, its obligations
and covenants in the merger agreement;
- OSFS certifies in writing that it has fulfilled all the
conditions to which it is subject;
- the holders of not more than 15% of the outstanding OSFS
shares have dissented;
- counsel for OSFS provides an opinion on the organization and
authority of OSFS to enter into the agreement; and
- OSFS has accounted for all its merger related expenses.
Advance Financial and OSFS may extend the time for performance or waive
any of the conditions in the merger agreement unless the waiver is prohibited by
law. Such waiver or extension must be in writing and may be granted at any time
before or after shareholder approval.
Advance Financial and Advance Savings have submitted applications to
the Office of Thrift Supervision and the Ohio Division of Financial Institutions
seeking approval of the merger. It is anticipated that the Office of Thrift
Supervision and the Ohio Division of Financial Institutions will approve the
merger. Advance Financial and OSFS are not aware of any basis for disapproving
the merger. There can be no assurance, though, that all regulatory approvals
will be obtained, that such approvals will be received on a timely basis or that
such approvals will not impose conditions or requirements that would so reduce
the benefits of the transactions contemplated by the merger that, had such
condition or requirement been known, neither Advance Financial nor OSFS would
have entered into the merger agreement.
EFFECTIVE TIME
Following the satisfaction or waiver of all conditions in the merger
agreement, Advance Financial and OSFS will file as soon as practicable a
Certificate of Merger with the Secretary of State of the State of Ohio to
complete the merger. It is anticipated that the merger will be completed during
the third or fourth quarter of 2001.
TERMINATION AND AMENDMENT
Either Advance Financial or OSFS may terminate the merger agreement or
the merger under the circumstances described below, whether or not the
shareholders already have voted to approve the merger agreement. Termination may
occur by the mutual consent in writing of Advance Financial and OSFS. Either
Advance Financial or OSFS may terminate the agreement if:
- the other party has breached any covenant, representation or
warranty contained in the agreement, unless cured within 30
days of notice;
- any application for approval of a government entity, that is
necessary to consummate the merger agreement, has been denied
or withdrawn at the request of the governmental entity that
must grant such approval;
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- the shareholders of OSFS do not approve the merger agreement;
- the merger is not consummated by December 31, 2001; or
- certain environmental compliance costs exceed $150,000.
The merger agreement may be amended at any time before or after the
special meeting of OSFS shareholders. An amendment to the merger agreement which
takes place after the special meeting of shareholders and that reduces the per
share merger consideration or otherwise materially and adversely affects the
rights of OSFS shareholders, however, will not be made without further
shareholder approval. If necessary, OSFS will seek approval at a subsequent
meeting of shareholders.
If the merger is not completed because OSFS enters into an agreement
with a party other than Advance Financial, OSFS will be required to pay a fee of
$400,000 to Advance Financial. If either of the parties to the merger agreement
willfully breach the merger agreement, the breaching party will be required to
pay all reasonable expenses of the other party, not to exceed $200,000.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS
Certain members of OSFS management have interests in the merger in
addition to their interests solely as OSFS shareholders.
EMPLOYMENT AGREEMENT. The merger agreement and plan of merger provides
for Advance Financial to make a lump sum payment to the president of OSFS and
Bridgeport under the terms of his current employment agreement. The amount of
this payment will equal two times his current salary.
OFFICERS AND DIRECTORS. Advance Financial will appoint the four current
non-employee directors of Bridgeport to an advisory board for a period of at
least one year after the effective time of the merger. Advance Financial may, in
its discretion, continue to employ these directors in an advisory capacity after
the one year period. The directors will receive $6,000 ($500 per month) for
their service on the advisory board.
TERMINATION OF EMPLOYEE STOCK OWNERSHIP PLAN. Before the merger is
effective, OSFS will terminate its ESOP. Upon consummation of the merger, all
OSFS shares held by the ESOP trustee will be exchanged for the cash
consideration to be paid in accordance with the merger agreement. The trustee
will use the cash paid on unallocated ESOP shares to retire the loan from OSFS
to the ESOP. As of July 18, 2001, the outstanding balance on the loan was
$326,592. If there is any cash remaining after the loan is retired, it will be
allocated and distributed to ESOP participants.
STOCK OPTIONS. Directors and officers who hold outstanding options to
purchase 41,219 OSFS shares shall, at the effective time of the merger, have the
right to receive a cash payment from Advance Financial equal to the difference
between $16.00 and the exercise price per share of the options. The exercise
prices range from $11.25 to $14.70, depending on when the option was granted.
MANAGEMENT RECOGNITION PLAN SHARES. At the effective time of the
merger, each unvested share of OSFS restricted stock that was granted under the
RRP shall be entitled to receive $16.00 per share. As of the date of the
agreement, there were 8,768 unvested restricted shares, of which the directors
and officers hold 5,571 unvested shares. In addition, any cash held by the RRP
after the merger that has been expensed or accrued and that is not attributable
to a grantee shall be distributed to all current grantees in proportion to their
awards.
INDEMNIFICATION AND INSURANCE. For a period of six years after the
merger is completed, Advance Financial will indemnify the past and present
directors and officers of OSFS and Bridgeport to the fullest extent permitted by
their respective Articles of Incorporation and Codes of Regulations. Advance
Financial has also agreed to purchase directors' and officers' liability
insurance coverage for the directors and officers of OSFS and Bridgeport for
three years after the completion of the merger.
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FEDERAL INCOME TAX CONSEQUENCES
Each OSFS shareholder will recognize a gain or loss for federal income
tax purposes, depending upon the shareholders adjusted basis in the OSFS shares.
If your shares qualify as a capital asset, your gain or loss will be treated as
capital gain or loss and will be either short-term or long-term depending upon
how long you have owned your shares.
Determining the actual tax consequences of the merger to you as an
individual taxpayer can be complicated. The tax results will depend on your
specific situation and other variables that are not within the control or
knowledge of Advance Financial or OSFS.
BECAUSE OF THE COMPLEXITIES OF THE FEDERAL, STATE AND LOCAL TAX LAWS,
WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR.
REGULATORY APPROVALS
Advance Financial and OSFS have agreed to use their reasonable best
efforts to obtain all regulatory approvals required to complete the merger,
which include applications to the Office of Thrift Supervision and the Ohio
Department of Financial Institutions. Advance Financial and OSFS have completed
the filing of these applications. The merger cannot proceed in the absence of
these regulatory approvals. There can be no assurance that these regulatory
approvals will be obtained, and, if obtained, there can be no assurance of the
date of any such approvals or the absence of any litigation challenging these
approvals. Advance Financial and OSFS are not aware of any other regulatory
approvals or actions that are required prior to the parties' consummation of the
merger other than those described below.
OFFICE OF THRIFT SUPERVISION. The merger is subject to the approval of
the Office of Thrift Supervision under the Home Owners' Loan Act, as amended.
Advance Financial has filed an application with the Office of Thrift Supervision
for approval of the acquisition of OSFS by Advance Financial through the merger
of a subsidiary of Advance Savings with and into OSFS. The Office of Thrift
Supervision is prohibited from approving the merger if the merger would result
in a monopoly, or would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any part of
the United States, or may have the effect on any section of the United States of
substantially reducing competition, or tending to create a monopoly, or
resulting in a restraint of trade, unless the Office of Thrift Supervision finds
the anti-competitive effects of the transaction are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. Assuming Office of Thrift
Supervision approval is received, the merger may not be consummated until
fifteen days after the approval, during which time the United States Department
of Justice may challenge the merger on antitrust grounds. With the approval of
the Office of Thrift Supervision and the Department of Justice, the waiting
period may be reduced to no less than fifteen days.
In evaluating the application for approval of the merger, the Office of
Thrift Supervision will consider the financial and managerial resources and
future prospects of the companies involved in the merger. The Office of Thrift
Supervision will also consider the convenience and needs of the community to be
served.
OHIO DIVISION OF FINANCIAL INSTITUTIONS. The approval of the Ohio
Division of Financial Institutions is required for the consummation of the
merger of Bridgeport into Advance Savings. The Ohio Division of Financial
Institutions will consider factors similar to those considered by the Office of
Thrift Supervision when evaluating whether it will approve the application.
PROPOSALS FOR THE 2002 ANNUAL SHAREHOLDERS' MEETING
OSFS will only hold an annual meeting in 2002 if the merger is not
completed. Any shareholder proposals submitted for inclusion in the proxy
statement for the 2002 annual meeting, if the meeting is held, must be received
at the principal executive offices of OSFS no later than November 13, 2001, to
be included in the
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proxy statement. If a shareholder presents a proposal at the 2002 annual meeting
without including the proposal in the proxy statement related to that meeting,
and if the proposal is not received by January 28, 2002, then the proxies
designated by the board of directors of OSFS for the 2002 annual meeting may
vote in their discretion on that proposal any shares for which they have been
appointed proxies without mention of the matter in the proxy statement or on the
proxy card for that meeting.
WHERE YOU CAN FIND MORE INFORMATION
OSFS files reports, proxy statements and other information with the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
You can inspect and copy the reports, proxy statements and other information
filed with the Securities and Exchange Commission by OSFS, at the following
location:
Securities and Exchange Commission's Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
Please call the Securities and Exchange Commission for more information
on the operation of the Public Reference Room at 1-800-SEC-0330. OSFS IS AN
ELECTRONIC FILER, AND THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB
SITE THAT CONTAINS REPORTS, PROXY AND INFORMATION STATEMENTS AND OTHER
INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE SECURITIES
AND EXCHANGE COMMISSION AT THE FOLLOWING WEB ADDRESS: http://www.sec.gov.
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Appendix A
AGREEMENT AND PLAN OF MERGER
BETWEEN
OHIO STATE FINANCIAL SERVICES, INC.
AND
ADVANCE FINANCIAL BANCORP
DATED AS OF APRIL 18, 2001
27
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AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I.........................................................................................................1
DEFINITIONS..............................................................................................1
ARTICLE II........................................................................................................6
THE MERGER...............................................................................................6
2.1 The Corporate Merger and Subsequent Events......................................................6
2.2 Effective Time; Closing.........................................................................6
2.3 Treatment of Capital Stock......................................................................6
2.4 Shareholder Rights; Stock Transfers.............................................................7
2.5 Options and Restricted Stock....................................................................7
2.6 Exchange Procedure..............................................................................7
2.7 Dissenting Shares...............................................................................9
2.8 Additional Actions..............................................................................9
ARTICLE III......................................................................................................10
REPRESENTATIONS AND WARRANTIES OF SELLER................................................................10
3.1 Capital Structure..............................................................................10
3.2 Organization, Standing and Authority of Seller.................................................10
3.3 Ownership of Seller Subsidiaries...............................................................10
3.4 Organization, Standing and Authority of Seller Subsidiaries....................................11
3.5 Authorized and Effective Agreement.............................................................11
3.6 Securities Documents and Regulatory Reports....................................................12
3.7 Financial Statements...........................................................................13
3.8 Material Adverse Change........................................................................14
3.9 Environmental Matters..........................................................................14
3.10 Tax Matters....................................................................................14
3.11 Legal Proceedings..............................................................................15
3.12 Compliance with Laws...........................................................................15
3.13 Certain Information............................................................................16
3.14 Employee Benefit Plans.........................................................................16
3.15 Certain Contracts..............................................................................18
3.16 Brokers and Finders............................................................................18
3.17 Insurance......................................................................................19
3.18 Properties.....................................................................................19
3.19 Labor..........................................................................................19
3.20 Allowance for Loan Losse.......................................................................19
3.21 Material Interests of Certain Persons..........................................................20
3.22 Fairness Opinion...............................................................................20
3.23 Disclosures....................................................................................20
3.24 No Undisclosed Liabilities.....................................................................20
3.25 Loan Portfolio.................................................................................20
3.26 Investment Portfolio...........................................................................21
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3.27 Interest Rate Risk Management Instruments......................................................21
3.28 Interim Events.................................................................................21
ARTICLE IV.......................................................................................................22
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................22
4.1 Organization, Standing and Authority of Buy....................................................22
4.2 Ownership of Buyer Subsidiaries................................................................22
4.3 Organization, Standing and Authority of Buyer Subsidiaries.....................................22
4.4 Authorized and Effective Agreement.............................................................22
4.5 Securities Documents and Regulatory Reports....................................................24
4.6 Financial Statements...........................................................................24
4.7 Material Adverse Change........................................................................24
4.8 Legal Proceeding...............................................................................25
4.9 Certain Information............................................................................25
4.10 Brokers and Finders............................................................................25
4.11 Disclosures....................................................................................25
4.12 Financial Resources............................................................................25
4.13 State Takeover Statutes........................................................................26
ARTICLE V........................................................................................................26
COVENANTS 26
5.1 Reasonable Best Efforts........................................................................26
5.2 Shareholder Meeting............................................................................26
5.3 Regulatory Matters.............................................................................26
5.4 Investigation and Confidentiality..............................................................27
5.5 Press Releases.................................................................................28
5.6 Business of the Parties........................................................................28
5.7 Certain Actions................................................................................31
5.8 Current Information............................................................................32
5.9 Indemnification; Insurance.....................................................................32
5.10 Employees and Employee Benefit Plans...........................................................33
5.11 Company Merger.................................................................................35
5.12 Bank Merger....................................................................................35
5.13 Organization of Merger Sub.....................................................................35
5.14 Conforming Entries.............................................................................35
5.15 Integration of Policies........................................................................36
5.16 Disclosure Supplements.........................................................................36
5.17 Failure to Fulfill Conditions..................................................................37
5.18 Environmental Reports..........................................................................37
5.19 Transaction Expenses of Seller.................................................................37
5.20 Success Bonus Plan.............................................................................38
5.21 Advisory Directors After the Company Merger....................................................38
5.22 Voting Agreements..............................................................................38
ARTICLE VI.......................................................................................................38
CONDITIONS PRECEDENT....................................................................................38
6.1 Conditions Precedent - Buyer and Seller........................................................38
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29
6.2 Conditions Precedent - Seller..................................................................39
6.3 Conditions Precedent - Buyer...................................................................40
ARTICLE VII......................................................................................................41
TERMINATION, WAIVER AND AMENDMENT.......................................................................41
7.1 Termination....................................................................................41
7.2 Effect of Termination..........................................................................42
7.3 Survival of Representations, Warranties and Covenants..........................................43
7.4 Waiver.........................................................................................44
7.5 Amendment or Supplement........................................................................44
ARTICLE VIII.....................................................................................................44
MISCELLANEOUS...........................................................................................44
8.1 Entire Agreement...............................................................................44
8.2 No Assignment..................................................................................44
8.3 Notices........................................................................................45
8.4 Alternative Structure..........................................................................45
8.5 Interpretation.................................................................................45
8.6 Counterparts...................................................................................46
8.7 Governing Law..................................................................................46
8.8 Severability...................................................................................46
8.9 Standard of Materiality........................................................................46
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AGREEMENT AND PLAN OF MERGER
WHEREAS, the Boards of Directors of Buyer and Seller (all terms as
defined in Article I hereof) have determined to consummate certain business
combination transactions subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of such inducements and of the mutual
covenants and agreements contained herein, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Agreement" shall mean this Agreement and Plan of Merger dated as of
April 2001 between Buyer and Seller.
"Bank Merger" shall mean the contemplated merger of Seller Bank into
Buyer Bank, with Buyer Bank surviving.
"Buyer" shall mean Advance Financial Bancorp, a Delaware corporation.
"Buyer Bank" shall mean Advance Financial Savings Bank, a
Federal-chartered stock savings bank and wholly owned subsidiary of Buyer.
"Buyer Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Buyer as of June 30,
2000 and 1999 and the consolidated income statements and statements of changes
in equity and cash flows (including related notes and schedules, if any) of
Buyer for each of the three years ended June 30, 2000, 1999 and 1998, as filed
by Buyer in its Securities Documents, and (ii) the consolidated balance sheets
(including related notes and schedules, if any) of Buyer and the consolidated
income statements and statements of changes in equity and cash flows (including
related notes and schedules, if any) of Buyer included in Securities Documents
filed by Buyer with respect to the periods ended subsequent to June 30, 2000.
"Cause" shall mean termination because of the employee's personal
dishonesty in the conduct of his duties, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist order.
"Certificate" shall mean any certificate which prior to the Effective
Time represented shares of Seller Common Stock.
31
"Certificate of Merger" shall mean the certificate of merger to be
filed with the Ohio Secretary of State with respect to the Corporate Merger and
the Company Merger and with the Delaware Secretary of State with respect to the
Company Merger.
"Closing" shall mean the closing of the Corporate Merger at a time and
place reasonably selected by Buyer following the satisfaction or waiver of all
conditions to the Corporate Merger.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Merger" shall mean the contemplated Merger of the Surviving
Corporation into Buyer, with Buyer surviving.
"Corporate Merger" shall mean the merger of Merger Sub into Seller,
with Seller surviving.
"CRA" shall mean the Community Reinvestment Act.
"Department" shall mean the Ohio Department of Commerce, Division of
Financial Institutions.
"Dissenting Shares" shall mean any shares of Seller Common Stock whose
holder becomes entitled to the payment of the fair value of such shares under
the OGCL.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the time of the filing of the Certificate
of Merger for the Corporate Merger , or such later time as may be specified in
the Certificate of Merger.
"Environmental Claim" shall mean any written notice from any
Governmental Entity or third party alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Governmental Entity relating to (i) the protection, preservation or restoration
of the environment (including air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal life or
any other natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Materials of Environment Concern. The term Environmental Law
includes (i) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, ET SEQ; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, ET SEQ; the
Clean Air Act, as
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amended, 42 U.S.C. Section 7401, ET SEQ; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251, ET SEQ; the Toxic Substances Control
Act, as amended, 15 U.S.C. Section 9601, ET SEQ; the Emergency Planning and
Community Right to Know Act, 42 U.S.C. Section 1101, ET SEQ; the Safe Drinking
Water Act, 42 U.S.C. Section 300f, ET SEQ; and all comparable state and local
laws, and (ii) any common law (including common law that may impose strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of or exposure to any Materials
of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean an exchange agent designated by Buyer, who
shall be reasonably acceptable to Seller.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"FHLB" shall mean the Federal Home Loan Bank of Pittsburgh for the
Buyer Bank and the Federal Home Loan Bank of Cincinnati for the Seller Bank.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"include" shall mean "include without limitation."
"Insider Loans" shall mean loans from Seller or any Seller Subsidiary
to any executive officer or director of Seller, any Seller Subsidiary or any
associate or related interest of any such person.
"IRS" shall mean the Internal Revenue Service or any successor thereto.
"Material Adverse Effect" shall mean, with respect to any Party, any
effect that is material and adverse to the financial condition, results of
operations or business of that Party and its Subsidiaries taken as whole, or
that materially impairs the ability of any Party to consummate the Merger,
provided, however, that Material Adverse Effect shall not be deemed to include
the impact of (a) changes in laws and regulations or interpretations thereof
that are generally applicable to the banking or savings industries, (b) changes
in GAAP that are generally applicable to the banking or savings industries, (c)
expenses incurred in connection with the
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transactions contemplated hereby, (d) actions or omissions of a party (or any of
its Subsidiaries) taken with the prior informed written consent of the other
party or parties in contemplation of the transactions contemplated hereby, or
(e) changes attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest rates.
"Materials of Environmental Concern" shall mean pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other materials regulated under Environmental Laws.
"Merger" shall mean the Corporate Merger, the other transactions
contemplated by this Agreement, the Company Merger and the Bank Merger.
"Merger Consideration" shall mean $16.00 in cash without interest for
each share of Seller Common Stock.
"Merger Sub" shall mean an Ohio corporation to be organized as a
subsidiary of Buyer.
"Merger Sub Common Stock" shall mean the common stock of Merger Sub.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OGCL" shall mean the Ohio General Corporation Law, as amended.
"Parties" shall mean Buyer and Seller.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed in a disclosure schedule
delivered on or prior to the date hereof by the disclosing Party to the other
Party specifically referring to the appropriate section of this Agreement and
describing in reasonable detail the matters contained therein.
"Proxy Statement" shall mean the proxy statement to be delivered to
shareholders of Seller in connection with the solicitation of their approval of
this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered
by the FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Seller" shall mean Ohio State Financial Services, Inc., an Ohio
corporation.
"Seller Bank" shall mean Bridgeport Savings and Loan Association, an
Ohio-chartered savings and loan association and wholly owned subsidiary of
Seller.
"Seller Common Stock" shall mean the common stock, no par value per
share, of Seller.
"Seller Defined Benefit Plan" shall mean any Seller Employee Plan
constituting an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA.
"Seller Employee Plans" shall mean all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of Seller, or any
Seller Subsidiary, whether written or oral.
"Seller ESOP" shall mean the employee stock ownership plan of Seller,
as in effect as of the date hereof.
"Seller Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of Seller as of December 31, 2000 and 1999 and the consolidated statements
of income, shareholders' equity and cash flows (including related notes and
schedules, if any) of Seller for each of the three years ended December 31,
2000, 1999 and 1998 as filed by Seller in its Securities Documents, and (ii) the
consolidated statements of financial condition of Seller (including related
notes and schedules, if any) and the consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) of Seller included in the Securities Documents filed by Seller with respect
to the periods ended subsequent to December 31, 2000.
"Seller Options" shall mean options to purchase shares of Seller Common
Stock issued pursuant to Seller's Stock Option Plan.
"Seller Restricted Stock" shall mean Seller Common Stock subject to
restrictions pursuant to Seller's Recognition and Retention Plan.
"SLHCA" shall mean the Savings and Loan Holding Company Act.
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"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" shall mean Seller after the Corporate Merger.
"Surviving Corporation Common Stock" shall mean the shares of common
stock of the Surviving Corporation.
ARTICLE II
THE MERGER
2.1 THE CORPORATE MERGER AND SUBSEQUENT EVENTS
(a) Subject to the terms and conditions of this Agreement, at the
effective Time, Merger Sub shall be merged into Seller in accordance with the
provisions of Section 1701.78 of the OGCL and the separate corporate existence
of Merger Sub shall cease. Seller shall be the Surviving Corporation of the
Corporate Merger, and shall continue its corporate existence under the laws of
the State of Ohio. The name of the Surviving Corporation shall be as stated in
the Articles of Incorporation of Seller immediately prior to the Effective Time.
Immediately following the Corporate Merger, (i) the Surviving Corporation shall
merge into Buyer, with Buyer surviving and (ii) the Seller Bank shall merge with
Buyer Bank, with Buyer Bank surviving.
(b) The Articles of Incorporation and Code of Regulations of Seller as
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation and Code of Regulations of the Surviving Corporation.
(c) The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation.
2.2 EFFECTIVE TIME; CLOSING
The Corporate Merger shall become effective at the Effective Time. The
Certificate of Merger shall be filed as soon after the Closing as is
practicable.
2.3 TREATMENT OF CAPITAL STOCK
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Corporate Merger and without any action on the
part of any shareholder:
(a) each outstanding share of Merger Sub Common Stock shall
automatically convert into a share of Surviving Corporation Common Stock;
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(b) each share of Buyer's common stock shall continue unchanged as the
same share of Buyer's common stock; and
(c) each share of Seller Common Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares) shall, by
virtue of the Corporate Merger and without any action of any kind by any person
or entity, be converted into the right to receive the Merger Consideration;
provided, however, that each share of Seller Common Stock which is owned
beneficially or of record by Seller (including treasury shares) or Buyer or any
of their respective Subsidiaries (other than shares held in a fiduciary capacity
for the benefit of third parties or as a result of debts previously contracted)
shall be canceled and retired without consideration or conversion.
2.4 SHAREHOLDER RIGHTS; STOCK TRANSFERS
At the Effective Time, holders of Seller Common Stock shall cease to be
and shall have no rights as shareholders of Seller, other than to receive the
Merger Consideration for each share of Seller Common Stock held. After the
Effective Time, there shall be no transfers on the stock transfer books of
Seller or the Surviving Corporation of shares of Seller Common Stock and if
Certificates are presented for transfer after the Effective Time, they shall be
delivered to Buyer or the Exchange Agent for cancellation against delivery of
the Merger Consideration. No interest shall be paid on the Merger Consideration.
2.5 OPTIONS AND RESTRICTED STOCK
At the Effective Time, each outstanding Seller Option granted to an
eligible individual (an "Optionee") under the Seller's Stock Option Plan shall
be converted into a right to receive the Merger Consideration less the
applicable option exercise price per share, less applicable federal and state
tax withholding obligations of the Optionee.
At the Effective Time, each holder of an unvested share of Seller
Restricted Stock under the Seller's Recognition and Retention Plan shall be
entitled to receive an amount of compensation equal to the Merger Consideration
for each such share of Seller Restricted Stock subject to applicable federal and
state tax withholding obligations of the Seller together with accumulated but
undistributed dividends on such Seller Restricted Stock. In addition, any cash
held by the Seller's Recognition and Retention Plan after the Effective Time
that has been expensed or accrued not attributable to a grantee shall be
distributed to all current grantees in proportion to their awards as determined
by the Seller's committee subject to applicable federal and state withholding
obligations of Seller.
2.6 EXCHANGE PROCEDURES
(a) No later than five (5) business days following the Effective Time,
Buyer shall cause the Exchange Agent to mail or make available to each holder of
record of any Certificate a notice and letter of transmittal disclosing the
effectiveness of the Corporate Merger and the procedure for exchanging
Certificates for the Merger Consideration. Such letter of transmittal
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37
shall specify that delivery shall be effected and risk of loss and title shall
pass only upon proper delivery of Certificates to the Exchange Agent.
(b) At the Effective Time, Buyer shall deliver to the Exchange Agent an
amount of cash equal to the aggregate Merger Consideration.
(c) Each holder of any outstanding Certificate (other than holders of
Dissenting Shares) who surrenders such Certificate to the Exchange Agent will,
upon acceptance thereof by the Exchange Agent, be entitled to the Merger
Consideration for each share represented by such Certificate. The Exchange Agent
shall accept Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange in
accordance with normal exchange practices. Each outstanding Certificate which is
not surrendered to the Exchange Agent shall, except as otherwise herein
provided, evidence ownership of only the right to receive the Merger
Consideration for each share represented by such Certificate.
(d) The Exchange Agent shall not be obligated to deliver the Merger
Consideration until the holder surrenders a Certificate as provided in this
Section 2.6, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Exchange Agent. If any check is to be issued in a name other than that in which
the Certificate is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed or accompanied by
an executed form of assignment separate from the Certificate and otherwise in
proper form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
check in any name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(e) Any portion of the cash delivered to the Exchange Agent by Buyer
pursuant to Section 2.6(b) that remains unclaimed by the shareholders of Seller
for six months after the Closing Date shall be delivered by the Exchange Agent
to Buyer. Any shareholders of Seller who have not theretofore complied with
Section 2.6(c) shall thereafter look only to Buyer for the Merger Consideration.
If outstanding Certificates are not surrendered or the payment for them is not
claimed prior to the date on which such payment would otherwise escheat to or
become the property of any Governmental Entity, the unclaimed items shall, to
the extent permitted by abandoned property and any other applicable law, become
the property of Buyer (and to the extent not in its possession shall be
delivered to it), free and clear of all claims or interest of any person
previously entitled to such property. Neither the Exchange Agent nor any party
to this Agreement shall be liable to any holder of Seller Common Stock
represented by any Certificate for any consideration paid to a public official
pursuant to applicable abandoned property, escheat or similar laws. Buyer and
the Exchange Agent shall be entitled to rely upon the stock transfer books of
Seller to establish the identity of those persons entitled to receive the Merger
Consideration, which books shall be conclusive with respect thereto. In the
event of a dispute with respect to ownership of Seller Common Stock represented
by any Certificate, Buyer and the Exchange Agent shall be entitled to deposit
any Merger Consideration represented thereby in
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38
escrow with an independent third party and thereafter be relieved with respect
to any claims thereto.
(f) Buyer shall be entitled to deduct and withhold from consideration
otherwise payable pursuant to this Agreement to any holder of Certificates, such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Buyer, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Certificates in respect of which such deduction and withholding
was made.
2.7 DISSENTING SHARES
(a) Any holders of Dissenting Shares shall be entitled to payment for
such shares only to the extent permitted by and in accordance with the
provisions of the OGCL; provided, however, that if, in accordance with the OGCL,
any holder of Dissenting Shares shall forfeit such right to payment of the fair
value of such shares, such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration. Dissenting Shares shall not,
after the Effective Time, be entitled to vote for any purpose or receive any
dividends or other distributions and shall be entitled only to such rights as
are afforded in respect of Dissenting Shares pursuant to the OGCL.
(b) Seller shall give Buyer (i) prompt notice of any written objections
to the Corporate Merger and any written demands for the payment of the fair
value of any shares, withdrawals of such demands, and any other instruments
served pursuant to the OGCL received by Seller and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such demands
under the OGCL. Seller shall not voluntarily make any payment with respect to
any demands for payment of fair value and shall not, except with the prior
written consent of Buyer, settle or offer to settle any such demands.
2.8 ADDITIONAL ACTIONS
If, at any time after the Effective Time, Buyer shall consider that any
further assignments or assurances in law or any other acts are necessary or
desirable to (i) vest, perfect or confirm, of record or otherwise, in Buyer its
right, title or interest in, to or under any of the rights, properties or assets
of Seller acquired or to be acquired by Buyer as a result of, or in connection
with, the Merger, or (ii) otherwise carry out the purposes of this Agreement,
Seller and its proper officers and directors shall be deemed to have granted to
Buyer an irrevocable power of attorney to execute and deliver all such proper
deeds, assignments and assurances in law and to do all acts necessary or proper
to vest, perfect or confirm title to and possession of such rights, properties
or assets in Buyer and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of Buyer are fully authorized in the name
of Seller or otherwise to take any and all such action.
The authorized capital stock of Seller consists of 3,000,000 shares of
Seller Common Stock. As of the date hereof, 495,398 shares of Seller Common
Stock are outstanding (including 15,578 shares of Seller Restricted Stock held
by Seller's Recognition and Retention Plan), and
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138,770 shares of Seller Common Stock are held in treasury. All outstanding
shares of Seller Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable, and none of the outstanding shares of Seller
Common Stock has been issued in violation of the preemptive rights of any
person, firm or entity. Except for (i) Seller Options to acquire not more than
60,555 shares of Seller Common Stock as of the date hereof, a schedule of which
has been Previously Disclosed, and (ii) 8,768 unvested shares of Seller
Restricted Stock as of the date hereof, a schedule of which has been Previously
Disclosed, there are no Rights authorized, issued or outstanding with respect to
the capital stock of Seller as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, except as
Previously Disclosed:
3.1 CAPITAL STRUCTURE
The authorized capital stock of Seller consists of 3,000,000 shares of
Seller Common Stock. As of the date hereof, 495,398 shares of Seller Common
Stock are outstanding (including 15,578 shares of Seller Restricted Stock held
by Seller's Recognition and Retention Plan), and 138,770 shares of Seller Common
Stock are held in treasury. All outstanding shares of Seller Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Seller Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except for (i)
Seller Options to acquire not more than 60,555 shares of Seller Common Stock as
of the date hereof, a schedule of which has been Previously Disclosed, and (ii)
8,768 unvested shares of Seller Restricted Stock as of the date hereof, a
schedule of which has been Previously Disclosed, there are no Rights authorized,
issued or outstanding with respect to the capital stock of Seller as of the date
hereof.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF SELLER
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification. Seller is a savings and loan holding company under the SLHCA and
subject to the regulation and supervision by the OTS and the Department. Seller
has heretofore delivered to Buyer true and complete copies of the Articles of
Incorporation and Code of Regulations of Seller as in effect as of the date
hereof.
3.3 OWNERSHIP OF SELLER SUBSIDIARIES
Seller has Previously Disclosed the name, jurisdiction of incorporation
and percentage ownership of each direct or indirect Seller Subsidiary and
identified Seller Bank as its only Significant Subsidiary. Except for (x)
capital stock of Seller Subsidiaries, (y) securities and
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other interests held in a fiduciary capacity and beneficially owned by third
parties or taken in consideration of debts previously contracted and (z)
securities and other interests which are Previously Disclosed, Seller does not
own or have the right to acquire, directly or indirectly, any outstanding
capital stock or other voting securities or ownership interests of any
corporation, bank, savings association, partnership, joint venture or other
organization, other than investment securities representing not more than 5% of
any entity. The outstanding shares of capital stock or other ownership interests
of each Seller Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable, and are directly owned by Seller free and clear of
all liens, claims, encumbrances, charges, pledges, restrictions or rights of
third parties of any kind whatsoever. No rights are authorized, issued or
outstanding with respect to the capital stock or other ownership interests of
Seller Subsidiaries and there are no agreements, understandings or commitments
relating to the right of Seller to vote or to dispose of such capital stock or
other ownership interests.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF SELLER SUBSIDIARIES
The Seller Subsidiary is a savings association, corporation or
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized with full power and authority to
own or lease all of its properties and assets and to carry on its business as
now conducted, and the Seller Subsidiary is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification. The deposit accounts of Seller Bank are insured by the SAIF to
the maximum extent permitted by the FDIA and Seller Bank has paid all deposit
insurance premiums and assessments required by the FDIA and the regulations
thereunder. Seller has heretofore delivered to Buyer true and complete copies of
the Articles of Incorporation, as amended and restated, and Constitution of
Seller Bank as in effect as of the date hereof.
3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Seller has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals and
the approval of Seller's shareholders of this Agreement and subject to the
amendment of the Amended Articles of Incorporation of Seller Bank with respect
to acquisitions of more than 10% of the outstanding shares of Seller Bank) to
perform all of its respective obligations hereunder. The execution and delivery
of this Agreement and the completion of the transactions contemplated hereby
have been deemed advisable by the Board and duly authorized and approved by all
necessary corporate action in respect thereof on the part of Seller, except for
the approval of this Agreement by Seller's shareholders. This Agreement has been
duly and validly executed and delivered by Seller and, assuming due
authorization, execution and delivery by Buyer, constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles and except to the extent such enforceability may be
limited by laws relating to safety and soundness of insured depository
institutions as set forth in 12 USC 1818(6) or by the appointment of a
conservator by the FDIC.
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(b) Neither the execution and delivery of this Agreement nor completion
of the transactions contemplated hereby, nor compliance by Seller with any of
the provisions hereof and subject to the amendment of the Amended Articles of
Incorporation of Seller Bank with respect to acquisitions of more than 10% of
the outstanding shares of Seller Bank (i) does or will conflict with or result
in a breach of any provisions of the Articles of Incorporation or Code of
Regulations of Seller or the equivalent documents of any Seller Subsidiary, (ii)
violate, conflict with or result in a breach of any term, condition or provision
of, or constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of Seller
or any Seller Subsidiary pursuant to, any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Seller or any Seller Subsidiary is a party, or by which any
of their respective properties or assets may be bound or affected, or (iii)
subject to receipt of all required governmental and shareholder approvals,
violates any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller or any Seller Subsidiary.
(c) To the best knowledge of Seller and subject to the amendment of the
Amended Articles of Incorporation of Seller Bank with respect to acquisitions of
more than 10% of the outstanding shares of Seller Bank, except for (i) the
filing of applications and notices with and the approvals of the OTS and the
FDIC, (ii) the filing of applications with the Department and the approvals of
the Department, (iii) the filing and clearance of the Proxy Statement relating
to the meeting of shareholders of Seller to be held pursuant to Section 5.2
hereof with the SEC, (iv) the approval of this Agreement and the transactions
contemplated hereby by the requisite vote of the shareholders of Seller, (v) the
filing of the Certificate of Merger with the Secretary of State of the State of
Ohio in connection with the Corporate Merger and the Company Merger, (vi) the
filing of Articles of Combination with the OTS and Certificate of Merger with
the Secretary of State of Ohio in connection with the Bank Merger (vii) the
filing of Certificate of Merger with the Secretary of the State of Delaware in
connection with the Company Merger, and (viii) review of the Merger by the DOJ
under federal antitrust laws, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of Seller or Seller Bank in connection with (x) the execution and
delivery by Seller of this Agreement and the completion of the transactions
contemplated hereby, or (y) the Merger.
(d) Except as Previously Disclosed, as of the date hereof, neither
Seller nor Seller Bank is aware of any reasons relating to Seller or Seller Bank
(including CRA compliance) why all consents and approvals shall not be procured
from all Governmental Entities having jurisdiction over the Merger as shall be
necessary for the completion of the Merger and the continuation by Buyer after
the Effective Time of the business of each of Seller and Seller Bank,
respectively, as such business is carried on immediately prior to the Effective
Time, free of any conditions or requirements which could materially impair the
value of Seller or Seller Bank to Buyer.
3.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
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(a) Since September 26, 1997, Seller has timely filed with the SEC and
the NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities Laws
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Since September 26, 1997, each of Seller and Seller Bank has duly
filed with the OTS and the Department and any other applicable federal or state
banking authority, as the case may be, the reports required to be filed under
applicable laws and regulations and such reports were in all material respects
complete and accurate and in compliance with the requirements of applicable laws
and regulations. In connection with the most recent examinations of Seller and
Seller Bank by the OTS, FDIC, and the Department, neither Seller nor Seller Bank
was required to correct or change any action, procedure or proceeding which
Seller or Seller Bank believes has not been corrected or changed as required.
3.7 FINANCIAL STATEMENTS
(a) Seller has previously delivered or made available to Buyer accurate
and complete copies of the Seller Financial Statements, which are accompanied by
the audit reports of S.R. Snodgrass, A.C., independent certified public
accountants with respect to Seller. The Seller Financial Statements, as well as
the Seller Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present or will fairly present, as the case may be, the consolidated
financial condition of Seller as of the respective dates set forth therein, and
the consolidated income, changes in shareholders' equity and cash flows of
Seller for the respective periods or as of the respective dates set forth
therein.
(b) Each of the Seller Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of Seller have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of Seller and the
Seller Subsidiaries are being maintained in compliance with applicable
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legal and accounting requirements, and such books and records accurately reflect
all dealings and transactions in respect of the business, assets, liabilities
and affairs of Seller and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the Seller Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transactions contemplated by this Agreement, neither Seller
nor any Seller Subsidiary has any liabilities, whether absolute, accrued,
contingent or otherwise.
3.8 MATERIAL ADVERSE CHANGE
Since December 31, 2000 or as Previously Disclosed, (i) Seller and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses in connection with this
Agreement and the transactions contemplated hereby) and (ii) no event has
occurred or circumstance arisen that, in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect on Seller.
3.9 ENVIRONMENTAL MATTERS
(a) Seller and its Subsidiaries are in compliance with all
Environmental Laws. Neither Seller nor any Seller Subsidiary has received any
communication alleging that Seller or any Seller Subsidiary is not in such
compliance and, to the best knowledge of Seller, there are no present
circumstances that would prevent or interfere with the continuation of such
compliance.
(b) None of the properties owned, leased or operated by Seller or a
Seller Subsidiary has been or is in violation of or liable under any
Environmental Law.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Law against Seller or a Seller Subsidiary or against any person or entity whose
liability for any Environmental Claim Seller or a Seller Subsidiary has or may
have retained or assumed either contractually or by operation of law.
(d) Except in the ordinary course of its loan underwriting activities,
and except as Previously Disclosed, Seller has not conducted any environmental
studies during the past five years with respect to any properties owned by it or
a Seller Subsidiary as of the date hereof.
3.10 TAX MATTERS
(a) Seller and its Subsidiaries have timely filed all federal, state
and local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law to
be filed by them (including estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such
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returns and, as of the Effective Time, will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual for
the payment of, all material taxes for any subsequent periods ending on or prior
to the Effective Time. Neither Seller nor any Seller Subsidiary will have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by Seller and its Subsidiaries are complete and accurate in all material
respects. Neither Seller nor any Seller Subsidiary is delinquent in the payment
of any tax, assessment or governmental charge or has requested any extension of
time within which to file any tax returns in respect of any fiscal year or
portion thereof. The federal, state and local income tax returns of Seller and
its Subsidiaries have been audited by the applicable tax authorities for all
periods ended through 1997 (or are closed to examination due to the expiration
of the applicable statute of limitations) and no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against Seller or any Subsidiary as a result of such
audits or otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to Seller or any Subsidiary to extend the
period of limitations for the assessment or collection of any tax. Except as
previously disclosed in Schedule 3.10(b), as of the date hereof, no audit,
examination or deficiency or refund litigation with respect to any such return
is pending or, to the best of Seller's knowledge, threatened.
(c) Neither Seller nor any Seller Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes other than the
agreement between Seller and Seller Bank Previously Disclosed, (ii) is required
to include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by Seller or any
Subsidiary (nor does Seller have any knowledge that the IRS has proposed any
such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.11 LEGAL PROCEEDINGS
Except as Previously Disclosed in Schedule 3.11, there are no actions,
suits, claims, governmental investigations or proceedings instituted, pending
or, to the best knowledge of Seller, that are unasserted or threatened against
Seller or any of its Subsidiaries or against any asset, interest or right of
Seller or any of its Subsidiaries, or against any officer, director or employee
of any of them. Neither Seller nor any Seller Subsidiary is a party to any
order, judgment or decree that would have a Material Adverse Effect.
3.12 COMPLIANCE WITH LAWS
(a) Each of Seller and the Seller Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities that are
required in order to permit it to carry on its business as it is presently being
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and will not be adversely affected by
virtue of the
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completion of the Merger; and to the best knowledge of Seller, no suspension or
cancellation of any of the same is threatened.
(b) Except as Previously Disclosed, neither Seller nor any Seller
Subsidiary is in violation of its respective Articles of Incorporation,
Constitution or Code of Regulations, or of any applicable federal, state or
local law or ordinance or any order, rule or regulation of any Governmental
Entity (including all banking (including all regulatory capital requirements),
truth-in-lending, usury, fair credit reporting, consumer protection, securities,
municipal securities, safety, health, zoning, anti-discrimination, antitrust,
and wage and hour laws, ordinances, orders, rules and regulations), or in
default with respect to any order, writ, injunction or decree of any court, or
in default under any order, license, regulation or demand of any Governmental
Entity; and neither Seller nor any Seller Subsidiary has received any notice or
communication from any Governmental Entity asserting that Seller or any Seller
Subsidiary is in violation of any of the foregoing. Neither Seller nor any
Seller Subsidiary is subject to any regulatory or supervisory cease and desist
order, agreement, written directive, memorandum of understanding or written
commitment (other than those of general applicability to savings banks or
holding companies thereof issued by Governmental Entities), and neither of them
has received any written communication requesting that it enter into any of the
foregoing.
3.13 CERTAIN INFORMATION
None of the information relating to Seller and its Subsidiaries
supplied or to be supplied by them for inclusion in the Proxy Statement, as of
the date such Proxy Statement is mailed to shareholders of Seller and up to and
including the date of the meeting of shareholders to which such Proxy Statement
relates, will contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
3.14 EMPLOYEE BENEFIT PLANS
(a) Seller has Previously Disclosed all Seller Employee Plans and has
heretofore delivered to Buyer accurate and complete copies of each (including
amendments and agreements relating thereto) together with, in the case of
tax-qualified plans, (i) the most recent actuarial and financial reports
prepared with respect thereto, (ii) the most recent annual reports filed with
any Governmental Entity with respect thereto, and (iii) all rulings and
determination letters and any open requests for rulings or letters that pertain
thereto.
(b) None of Seller, any Seller Subsidiary, any Seller Defined Benefit
Plan or, to the best of Seller's knowledge, any fiduciary of a Seller Defined
Benefit Plan, has incurred any material liability to the PBGC or the IRS with
respect to any Seller Defined Benefit Plan. To the best of Seller's knowledge,
no reportable event under Section 4043(b) of ERISA has occurred with respect to
any Seller Defined Benefit Plan.
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(c) Neither Seller nor any Seller Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the IRS with
respect to each Seller Defined Benefit Plan or Seller Employee Plans, including
Seller ESOP, which is intended to qualify under Section 401 of the Code to the
effect that such Seller Defined Benefit Plan and Seller Employee Plans,
including Seller ESOP, is qualified under Section 401 of the Code, and the trust
associated with such Seller Defined Benefit Plan and Seller Employee Plans,
including Seller ESOP, is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of Seller's knowledge, is threatened to
be revoked, and Seller does not know of any ground on which such revocation may
be based. Neither Seller nor any Seller Subsidiary has any liability under any
such Seller Defined Benefit Plan and Seller Employee Plans, including Seller
ESOP, that is not reflected in the Seller Financial Statements, other than
liabilities incurred in the ordinary course of business in connection therewith
subsequent to the date thereof.
(e) No transaction prohibited by Section 406 of ERISA (and not exempt
under Section 408 of ERISA or Section 4975 of the Code or pursuant to a class or
administrative exemption granted under those sections) has occurred with respect
to any Seller Employee Plan which would result in the imposition, directly or
indirectly, of an excise tax under Section 4975 of the Code or otherwise have a
Material Adverse Effect on Seller.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Seller Employee
Plan or ERISA; except as disclosed in the Seller Financial Statements, no
accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Seller
Defined Benefit Plan, and there is no "unfunded current liability" (as defined
in Section 412 of the Code) with respect to any Seller Defined Benefit Plan.
(g) The Seller Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations. All contributions required
to be made to Seller Employee Plans at the date hereof have been made, and all
contributions required to be made to Seller Employee Plans as of the Effective
Time will have been made as of such date.
(h) There are no pending or, to the best knowledge of Seller,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of Seller Employee Plans or any trust related thereto or any
fiduciary thereof.
(i) Neither Seller nor any Seller Subsidiary has made any payments, or
is or has been a party to any agreement or any Seller Employee Plan, that under
any circumstances could obligate it or its successor to make payments or deemed
payments, that (i) are not or will not be
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deductible because of Sections 162(m) or 280G of the Code or (ii) require Buyer
or any Buyer Subsidiary to record any charge or expense therefor (or any tax
gross-up payments) for financial reporting purposes on a post-acquisition basis.
3.15 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither Seller nor any Subsidiary
is a party to, is bound or affected by, receives, or is obligated to pay,
benefits under (i) any agreement, arrangement or commitment, including any
agreement, indenture or other instrument, relating to the borrowing of money by
Seller or a Subsidiary (other than in the case of Seller Bank deposits, FHLB
advances, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or the guarantee by Seller or a
Subsidiary of any obligation, other than by Seller Bank in the ordinary course
of its banking business, (ii) any agreement, arrangement or commitment relating
to the employment of a consultant or the employment, election or retention in
office of any present or former director, officer or employee of Seller or a
Subsidiary, (iii) any agreement, arrangement or understanding (other than as set
forth in this Agreement) pursuant to which any payment (whether of severance pay
or otherwise) became or may become due to any director, officer or employee of
Seller or a Subsidiary upon execution of this Agreement or upon or following
completion of the transactions contemplated by this Agreement (either alone or
in connection with the occurrence of any additional acts or events); (iv) any
agreement, arrangement or understanding pursuant to which Seller or a Subsidiary
is obligated to indemnify any director, officer, employee or agent of Seller or
a Subsidiary, other than as set forth in Seller Employee Plans and in the
Articles of Incorporation, Code of Regulations or other governing documents of
Seller and its Subsidiaries; (v) any agreement, arrangement or understanding to
which Seller or a Subsidiary is a party or by which any of the same is bound
which limits the freedom of Seller or a Subsidiary to compete in any line of
business or with any person; (vi) any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by the OTS, the FDIC, the
Department, or any other regulatory agency; or (vii) any agreement, arrangement
or understanding which would be required to be filed as an exhibit to Seller's
Annual Report on Form 10-KSB under the Exchange Act and which has not been so
filed.
(b) Neither Seller nor any Seller Subsidiary is in default or in
non-compliance under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party or by which its
assets, business or operations may be bound or affected, whether entered into in
the ordinary course of business or otherwise and whether written or oral, 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 or non-compliance.
3.16 BROKERS AND FINDERS
Except for a Previously Disclosed agreement with Keefe, Bruyette &
Woods, Inc. ("KBW") neither Seller nor any Seller Subsidiary nor any of their
respective directors, officers or employees, has employed any broker or finder
or incurred any liability for any broker or finder fees or commissions in
connection with the transactions contemplated hereby.
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3.17 INSURANCE
Each of Seller and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. The Seller has Previously Disclosed copies of
Seller's insurance policies to the Buyer.
3.18 PROPERTIES
All real and personal property owned by Seller or its Subsidiaries or
presently used by any of them in its respective business is in good condition
(ordinary wear and tear excepted) and is sufficient to carry on the business of
Seller and its Subsidiaries in the ordinary course of business consistent with
their past practices. Seller has good and marketable title free and clear of all
liens, encumbrances, charges, defaults or equities (other than equities of
redemption under applicable foreclosure laws) to all of its properties and
assets, real and personal, except (i) liens for current taxes not yet due or
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are de minimis in character, amount or
extent and (iv) as reflected in the Seller Financial Statements. All real and
personal property which is material to Seller's business on a consolidated basis
and leased or licensed by Seller or a Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
All improved real property owned by Seller or its Subsidiaries is in compliance
with all applicable zoning laws.
3.19 LABOR
No work stoppage involving Seller or a Subsidiary is pending or, to the
best knowledge of Seller, threatened. Neither Seller nor a Subsidiary is
involved in or, to the best knowledge of Seller, threatened with or affected by,
any labor dispute, arbitration, lawsuit or administrative proceeding involving
the employees of Seller or a Subsidiary. Employees of Seller and Seller
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and to
the best of Seller's knowledge, there have been no efforts to unionize or
organize any employees of Seller or any Seller Subsidiaries during the past five
years.
3.20 ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on Seller's consolidated
statement of financial condition included in the Seller Financial Statements is,
and will be in the case of subsequently delivered Seller Financial Statements,
in the opinion of Seller's management, adequate in all material respects as of
their respective dates under the requirements of GAAP to provide for reasonably
anticipated losses on outstanding loans, net of recoveries. The real estate
owned reflected in the Seller Financial Statements is, and will be in the case
of subsequently delivered
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Seller Financial Statements, carried at the lower of cost or fair value, less
estimated costs to sell, as required by GAAP.
3.21 MATERIAL INTERESTS OF CERTAIN PERSONS
(a) No officer or director of Seller, any Seller Subsidiary or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) or
related interest of any such person has any material interest in any material
contract or property (real or personal, tangible or intangible), used in, or
pertaining to, the business of Seller or any Subsidiary of Seller.
(b) There are no Insider Loans as of the date hereof, except for those
disclosed in Schedule 3.21(b).
3.22 FAIRNESS OPINION
Seller has received an opinion from KBW to the effect that, as of the
date hereof, the Merger Consideration to be received by shareholders of Seller
pursuant to this Agreement is fair, from a financial point of view, to such
shareholders.
3.23 DISCLOSURES
None of the representations and warranties of Seller or any of the
written information or documents furnished or to be furnished by Seller to Buyer
in connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
3.24 NO UNDISCLOSED LIABILITIES
Except as Previously Disclosed, Seller and its Subsidiaries do not have
any liability, whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
taxes (and there is no past or present fact, situation, circumstance, condition
or other basis for any present or future action, suit or proceeding, hearing,
charge, complaint, claim or demand against Seller or its Subsidiaries giving
rise to any such liability) required in accordance with generally accepted
accounting principles to be reflected in an audited consolidated balance sheet
of Seller, except and to the extent (i) reflected, disclosed or provided for in
the Seller Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transactions contemplated by this Agreement.
3.25 LOAN PORTFOLIO
(i) All loans and discounts shown on the Seller Financial
Statements or which were entered into after the date of the most recent balance
sheet included in the Seller Financial
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Statements were and shall be made for good, valuable and adequate consideration
in the ordinary course of the business of Seller and its Subsidiaries, in
accordance with sound banking practices, and are not subject to any known
defenses, set-offs or counter-claims, including any such as are afforded by
usury or truth in lending laws, except as may be provided by bankruptcy,
solvency or similar laws or by general principles of equity, (ii) the notes or
other evidence of indebtedness evidencing such loans in all forms of pledges,
mortgages and other collateral documents and security agreements are and shall
be in force, valid, true and genuine and what they purport to be, and (iii)
except as Previously Disclosed, Seller and its Subsidiaries have complied and
shall prior to the Effective Time comply with all laws and regulations relating
to such loans.
3.26 INVESTMENT PORTFOLIO
All investment securities held by Seller or its Subsidiaries, as
reflected in the consolidated balance sheets of Seller included in the Seller
Financial Statements, are carried in accordance with GAAP, specifically
including but not limited to, FAS 115.
3.27 INTEREST RATE RISK MANAGEMENT INSTRUMENTS
Seller has Previously Disclosed all interest rate swaps, caps, floors,
option agreements or other interest rate risk management arrangements or
agreements, whether entered into for the account of Seller or its Subsidiaries
or for the account of a customer of Seller or one of its Subsidiaries. All such
arrangements and agreements were entered into in the ordinary course of business
and in accordance with prudent banking practice and applicable rules,
regulations and policies and with counter parties believed to be financially
responsible at the time and are legal, valid and binding obligations of Seller
or one of its Subsidiaries in force in accordance with their terms (subject to
the provisions of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws effecting the enforceability of creditors rights
generally from time to time and effect, and equitable principles relating to the
granting of specific performance and other equitable remedies as a matter of
judicial discretion), and are in full force and effect. Seller and its
Subsidiaries have duly performed all of their obligations thereunder to the
extent that such obligations to perform have accrued; and, to Seller's
knowledge, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
3.28 INTERIM EVENTS
Since December 31, 2000, except as Previously Disclosed, neither Seller
nor its Subsidiaries have paid or declared any dividend or made any other
distribution to shareholders or taken any action which if taken after the date
hereof would require the prior written consent of Buyer pursuant to Section 5.6
hereof.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows, except as
Previously Disclosed:
4.1 ORGANIZATION, STANDING AND AUTHORITY OF BUYER
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and Buyer is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification. Buyer is a savings and loan holding company under the SLHCA and
subject to the regulations of the OTS. Buyer has heretofore delivered to Seller
true and complete copies of the Articles of Incorporation and Bylaws of Buyer as
in effect as of the date hereof.
4.2 OWNERSHIP OF BUYER SUBSIDIARIES
Buyer has Previously Disclosed the name, jurisdiction of incorporation
and percentage ownership of each direct or indirect Buyer Subsidiary and
identified Buyer Bank as its only Significant Subsidiary. The outstanding shares
of capital stock or other ownership interests of each Buyer Subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable, and are
directly owned by Buyer free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind
whatsoever. No Rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of Buyer Subsidiaries and there are
no agreements, understandings or commitments relating to the right of Buyer to
vote or to dispose of such capital stock or other ownership interests.
4.3 ORGANIZATION, STANDING AND AUTHORITY OF BUYER SUBSIDIARIES
The Buyer Subsidiary is a savings bank, corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized, with full power and authority to own or
lease all of its properties and assets and to carry on its business as now
conducted, and the Buyer Subsidiary is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification. The deposit accounts of Buyer Bank are insured by the FDIC to the
maximum extent permitted by the FDIA and Buyer Bank has paid all deposit
insurance premiums and assessments required by the FDIA and the regulations
thereunder. Buyer has heretofore delivered to Seller true and complete copies of
the Charter and Bylaws of Buyer Bank as in effect as of the date hereof.
4.4 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Buyer has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals) to
perform all of its respective obligations hereunder. The execution and delivery
of this Agreement and the completion of the
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transactions contemplated hereby have been deemed advisable by the Boards of
Directors of Buyer and Buyer Bank and duly authorized and approved by all
necessary corporate action in respect thereof on the part of Buyer and Buyer
Bank.. This Agreement has been duly and validly executed and delivered by Buyer
and, assuming due authorization, execution and delivery by Seller, constitutes a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement nor completion
of the transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof (i) does or will conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of Buyer or the equivalent
documents of any Buyer Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of Buyer or any Buyer Subsidiary pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Buyer or any Buyer
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental approvals, violates any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer or any Buyer Subsidiary.
(c) To the best knowledge of Buyer, except for (i) the filing of
applications and notices with and the approvals of the OTS and the FDIC, (ii)
the filing of applications with the Department and the approvals of the
Department, (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Ohio in connection with the Corporate Merger and the
Company Merger, (iv) the filing of a Certificate of Merger with the Secretary of
State of the State of Delaware in connection with the Company Merger, (v) the
filing of Articles of Combination with the OTS and Certificate of Merger with
the Secretary of State of Ohio in connection with the Bank Merger, and (vi)
review of the Merger by the DOJ under federal antitrust laws, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of Buyer, Merger Sub or Buyer Bank in
connection with (x) the execution and delivery by Buyer of this Agreement, and
the completion of the transactions contemplated hereby, or (y) the Merger. Buyer
as sole shareholder of Buyer Bank has taken all necessary shareholder action to
approve the Bank Merger.
(d) As of the date hereof, neither Buyer nor Buyer Bank is aware of any
reasons relating to Buyer or Buyer Bank (including CRA compliance) why all
consents and approvals shall not be procured from all Governmental Entities
having jurisdiction over the Merger as shall be necessary for completion of the
Merger and continuation by Buyer after the Effective Time of the business of
each of Seller and Seller Bank, respectively, as such business is carried on
immediately prior to the Effective Time, free of any conditions or requirements
which could impair the value of Seller or Seller Bank to Buyer.
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4.5 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1998, Buyer has timely filed with the SEC and the
NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities Laws
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Each of Buyer and Buyer Bank has since January 1, 1998, duly filed
with the OTS, FDIC and any other applicable federal banking authority, as the
case may be, the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and accurate
and in compliance with the requirements of applicable laws and regulations. In
connection with the most recent examinations of Buyer and Buyer Bank by the OTS
and FDIC, neither Buyer nor Buyer Bank was required to correct or change any
action, procedure or proceeding which Buyer or Buyer Bank believes has not been
corrected or changed as required.
4.6 FINANCIAL STATEMENTS
(a) Buyer has previously delivered or made available to Seller accurate
and complete copies of the Buyer Financial Statements, which are accompanied by
the audit reports of S.R. Snodgrass, A.C., independent certified public
accountants with respect to Buyer. The Buyer Financial Statements fairly present
and will fairly present, as the case may be, the consolidated financial
condition of Buyer as of the respective dates set forth therein, and the
consolidated income, changes in equity and cash flows of Buyer for the
respective periods or as of the respective dates set forth therein.
(b) Each of the Buyer Financial Statements referred to in Section
4.6(a) has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of Buyer have been conducted in accordance with generally accepted
auditing standards. The books and records of Buyer and the Buyer Subsidiaries
are being maintained in compliance with applicable legal and accounting
requirements, and all such books and records accurately reflect all dealings and
transactions in respect of the business, assets, liabilities and affairs of
Buyer and its Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for in
the Buyer Financial Statements, (ii) of liabilities since incurred in the
ordinary course of business and (iii) of liabilities incurred in connection with
completion of the transaction contemplated by this Agreement, neither Buyer nor
any Buyer Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise.
4.7 MATERIAL ADVERSE CHANGE
Since December 31, 2000, (i) Buyer and its Subsidiary have conducted
their respective businesses in the ordinary and usual course (excluding the
incurrence of expenses in connection
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with this Agreement and the transactions contemplated hereby) and (ii) no event
has occurred or circumstance arisen that, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on Buyer.
4.8 LEGAL PROCEEDING
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Buyer, that are
unasserted or threatened against Buyer or of its Subsidiary or against any
asset, interest or right of Buyer or of its Subsidiary, or against any officer,
director or employee of any of them. Neither Buyer nor any Buyer Subsidiary is a
party to any order, judgment or decree.
4.9 CERTAIN INFORMATION
None of the information relating to Buyer and its Subsidiary supplied
or to be supplied by them for inclusion in the Proxy Statement, as of the date
such Proxy Statement is mailed to shareholders of Seller and up to and including
the date of the meeting of shareholders to which such Proxy Statement relates,
will contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided that information as of a
later date shall be deemed to modify information as of an earlier date.
4.10 BROKERS AND FINDERS
Neither Buyer nor any Buyer Subsidiary, nor any of their respective
directors, officers or employees, has employed any broker or finder or incurred
any liability for any broker or finder fees or commissions in connection with
the transactions contemplated hereby.
4.11 DISCLOSURES
None of the representations and warranties of Buyer or any of the
written information or documents furnished or to be furnished by Buyer to Seller
in connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
4.12 FINANCIAL RESOURCES
Buyer has the financial wherewithal and has, or will have prior to the
Effective Time, sufficient internal funds to perform its obligations under this
Agreement. Buyer and Buyer Bank are, and will be immediately following the
Merger, in material compliance with all applicable capital, debt and financial
and non-financial regulations of state and federal banking agencies having
jurisdiction over them.
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4.13 STATE TAKEOVER STATUTES
Neither Buyer nor any Buyer Subsidiary beneficially own any Seller
common stock. Neither Buyer nor any Buyer Subsidiary is now, and has not been
during the three years prior to the date of this Agreement, an "interested
shareholder" of Seller within the meaning of OGCL Section 1704.01(c)(8).
ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of Seller
and Buyer (i) shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or advisable under applicable laws and regulations so as to permit and
otherwise enable completion of the Merger as promptly as reasonably practicable,
and (ii) shall cooperate fully with each other to that end. If necessary to
complete Bank Merger, Seller shall cause Seller Bank to amend its Articles of
Incorporation and/or Constitution to facilitate the completion of the Bank
Merger.
5.2 SHAREHOLDER MEETING
Seller shall take all action necessary to file the Proxy Statement
within 45 days of the date of this Agreement and to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby.
The Board of Directors of Seller will recommend that the shareholders of Seller
approve this Agreement and the transactions contemplated hereby, provided that
the Board of Directors of Seller may fail to make such recommendation, or
withdraw, modify or change any such recommendation, if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the making of such recommendation, or the failure to withdraw,
modify or change such recommendation, would constitute a breach of the fiduciary
duties of such directors under applicable law.
5.3 REGULATORY MATTERS
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Proxy Statement relating to the meeting of
shareholders of Seller to be held pursuant to Section 5.2 of this Agreement.
Each of Buyer and Seller shall use its reasonable best efforts to have the Proxy
Statement approved for mailing in definitive form as promptly as practicable and
thereafter Seller shall promptly mail to its shareholders the Proxy Statement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file within 45 days after the
date hereof or as soon thereafter as is reasonably practicable, all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
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authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement. Buyer and Seller shall have the right to review in advance, and to
the extent practicable each will consult with the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein. The parties hereto agree that they will use their
reasonable best efforts to cause the Closing Date to occur by September 30,
2001.
(c) Buyer and Seller shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors and
officers, the shareholders of Seller and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of Buyer, Buyer Bank, Merger Sub, Seller or
Seller Bank to any Governmental Entity in connection with the transactions
contemplated hereby.
(d) Buyer and Seller shall promptly furnish each other with copies of
written communications received by Buyer or Seller, as the case may be, or any
of their respective Subsidiaries from, or delivered by any of the foregoing to,
any Governmental Entity in respect of the transactions contemplated hereby.
5.4 INVESTIGATION AND CONFIDENTIALITY
(a) The Seller shall permit the Buyer and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to the Buyer, upon the Buyer's reasonable request, all books, papers
and records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of Seller and Seller Subsidiaries, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of meetings of boards of directors (and any committees
thereof) and shareholders, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the Buyer may have a reasonable interest,
provided that such access and any such reasonable request shall be reasonably
related to the transactions contemplated hereby and, in the reasonable opinion
of the Seller providing such access, not unduly interfere with normal
operations. The Seller and its Subsidiaries shall make their respective
directors, officers, employees and agents and authorized representatives
(including counsel and independent public accountants) available to confer with
the Buyer and its representatives, provided that such access shall be reasonably
related to the transactions contemplated hereby and shall not unduly interfere
with normal operations. Representatives of Buyer or Buyer Bank shall be given
notice of and shall be entitled to attend meetings of the Boards of Directors of
Seller and Seller Bank after the date hereof, provided, that the Chairman
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of such meetings shall be entitled to exclude such representatives of Buyer or
Buyer Bank from discussions at such meetings, if the Board of Directors
determines, consistent with the exercise of its fiduciary duties, that it is in
the best interests of Seller and its shareholders to exclude such
representatives.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until completion of
the transactions contemplated hereby and, if such transactions shall not occur,
the party receiving the information shall either destroy or return to the party
which furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The obligation to
keep such information confidential shall continue for five years from the date
the proposed transactions are abandoned but shall not apply to (i) any
information which (x) the party receiving the information can establish was
already in its possession prior to the disclosure thereof by the party
furnishing the information; (y) was then generally known to the public; or (z)
became known to the public through no fault of the party receiving the
information; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction, provided that the
party which is the subject of any such legal requirement or order shall use its
best efforts to give the other party at least ten business days prior notice
thereof.
5.5 PRESS RELEASES
Buyer and Seller agree they will not issue any press release related to
this Agreement or the transactions contemplated hereby, without first consulting
with the other party as to the form and substance of public disclosures which
may relate to the transactions contemplated by this Agreement, provided,
however, that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which is required by
law or regulation.
5.6 BUSINESS OF THE PARTIES
(a) During the period from the date of this Agreement and continuing
until the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of Buyer, Seller and its Subsidiary
shall carry on their respective businesses in the ordinary course consistent
with past practice. During such period, Seller also will use all reasonable
efforts to (x) preserve its business organization and that of Seller Bank
intact, (y) keep available to itself and Buyer the present services of the
employees of Seller and Seller Bank and (z) preserve for itself and Buyer the
goodwill of the customers of Seller and Seller Bank and others with whom
business relationships exist. Without limiting the generality of the foregoing,
except with the prior written consent of Buyer, which consent shall not be
unreasonably withheld, or as expressly contemplated hereby, between the date
hereof and the Effective Time, Seller shall not, and shall cause each Seller
Subsidiary not to:
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(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of Seller Common Stock except for one regular quarterly cash dividend at
a rate per share of Seller Common Stock not in excess of $0.07 per share to be
paid on or about May 15, 2001; provided, however, that nothing contained herein
shall be deemed to affect the ability of a Subsidiary to pay dividends on its
capital stock to Seller;
(ii) issue any shares of its capital stock other than upon
exercise of Seller Options referred to in Section 3.1 hereof; issue, grant,
modify or authorize any Rights; purchase any shares of Seller Common Stock; or
effect any recapitalization, reclassification, stock dividend, stock split or
like change in capitalization;
(iii) amend its Articles of Incorporation, Code of
Regulations, Constitution or similar organizational documents, unless such
amendment shall be necessary to complete the Corporate Merger, Company Merger,
or Bank Merger; impose, or suffer the imposition, on any share of stock or other
ownership interest held by Seller in a Subsidiary of any lien, charge or
encumbrance or permit any such lien, charge or encumbrance to exist; or waive or
release any material right or cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or severance
to, or provide any other new employee benefit or incentive to, any of its
directors, officers or employees, except as may be required by law;
(v) enter into or, except as may be required by law and for
amendments contemplated by Section 5.10 hereof, modify any Seller Employee Plan
or other employee benefit, incentive or welfare contract, plan or arrangement,
or any trust agreement related thereto, in respect of any of its directors,
officers or employees; or make any contributions to any Seller Defined Benefit
Plan, Seller 401(k) Plan or the Seller ESOP (other than as required by law or
regulation or in a manner and amount consistent with past practices or as
required by the Plan documents);
(vi) originate or purchase any loan in excess of $250,000 with
respect to loans secured by one- to four-family properties and in excess of
$300,000 with respect to loans secured by commercial properties;
(vii) enter into (w) any transaction, agreement, arrangement
or commitment not made in the ordinary course of business, (x) any agreement,
indenture or other instrument relating to the borrowing of money by Seller or a
Subsidiary or guarantee by Seller or any Seller Subsidiary of any such
obligation, except in the case of Seller Bank for deposits, FHLB advances,
federal funds purchased and securities sold under agreements to repurchase in
the ordinary course of business consistent with past practice, (y) any
agreement, arrangement or commitment relating to the employment of an employee
or consultant, or amend any such existing agreement, arrangement or commitment,
provided that Seller and Seller Bank may employ an employee in the
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ordinary course of business if the employment of such employee is terminable by
Seller or Seller Bank at will without liability, other than as required by law;
or (z) any contract, agreement or understanding with a labor union;
(viii) change its method of accounting in effect for the year
ended December 31, 2000, except as required by changes in laws or regulations or
GAAP, or change any of its methods of reporting income and deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax return for such year, except as required by changes in laws
or regulations;
(ix) except as Previously Disclosed, make any expenditures in
excess of $5,000 individually or $10,000 in the aggregate, other than (a) in the
ordinary course of business, (b) in connection with the transactions
contemplated by this Agreement, (c) pursuant to binding commitments that have
been Previously Disclosed and are existing on the date hereof, and (d)
expenditures necessary to maintain existing assets in good repair; or enter into
any new lease or lease renewal of real property or any new lease or lease
renewal of personal property providing for annual payments exceeding $5,000;
(x) file any applications or make any contract with respect to
branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) control over or any equity interest in any
business or entity;
(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its assets or
rights or requiring the consent of any party to the transfer and assignment of
any such assets or rights;
(xiii) except as necessitated in the reasonable opinion of
Seller due to changes in interest rates, and in accordance with safe and sound
banking practices, change or modify in any material respect any of its lending
or investment policies, except to the extent required by law or an applicable
regulatory authority;
(xiv) except as necessitated in the reasonable opinion of
Seller due to changes in interest rates, and in accordance with safe and sound
banking practices, enter into any futures contract, option contract, interest
rate caps, interest rate floors, interest rate exchange agreement or other
agreement for purposes of hedging the exposure of its interest-earning assets
and interest-bearing liabilities to changes in market rates of interest;
(xv) take any action that would result in any of the
representations and warranties of Seller contained in this Agreement not to be
true and correct in any material respect at the Effective Time or that would
cause any of the conditions of Sections 6.1 or 6.3 hereof not to be satisfied;
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(xvi) take any action that would materially impede or delay
the completion of the transactions contemplated by this Agreement or the ability
of Buyer or Seller to perform its covenants and agreements under this Agreement;
or
(xvii) materially increase or decrease the rate of interest
paid on time deposits, or on certificates of deposit, except in a manner and
pursuant to policies consistent with past practices or to reflect changes in
market interest rates; or
(xviii) agree to do any of the foregoing.
(b) Seller shall promptly notify Buyer in writing of the occurrence of
any matter or event known to and directly involving Seller, which would not
include any changes in conditions that affect the banking industry generally,
that would have, either individually or in the aggregate, a Material Adverse
Effect on Seller.
(c) Except with the prior written consent of Seller or as expressly
contemplated hereby, between the date hereof and the Effective Time, Buyer shall
not, and shall cause each Buyer Subsidiary not to:
(i) take any action that would result in any of the
representations and warranties of Buyer contained in this Agreement not to be
true and correct in any material respect at the Effective Time or that would
cause any of the conditions of Sections 6.1 or 6.2 hereof not to be satisfied;
(ii) take any action that would materially impede or delay the
completion of the transactions contemplated by this Agreement or the ability of
Buyer or Seller to perform its covenants and agreements under this Agreement; or
(iii) agree to do any of the foregoing.
5.7 CERTAIN ACTIONS
Seller shall not, and shall cause each Seller Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, purchase of all or a substantial portion of the
assets of, or any equity interest in, Seller or a Subsidiary (other than with
Buyer or an affiliate thereof), provided, however, that the Board of Directors
of Seller may furnish such information or participate in such negotiations or
discussions if such Board of Directors, after having consulted with and
considered the written opinion of outside counsel, has determined that the
failure to do the same is likely to constitute a breach of fiduciary duties of
such directors under applicable law. Seller will promptly inform Buyer orally
and in writing of any such request for information or of any such negotiations
or discussions, as well as instruct its and its Subsidiaries' directors,
officers, representatives and agents to refrain from taking any action
prohibited by this Section.
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5.8 CURRENT INFORMATION
During the period from the date hereof to the Effective Time, Seller
shall, upon the request of Buyer, cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of Buyer regarding Seller's financial condition, operations and
business and matters relating to the completion of the transactions contemplated
hereby. As soon as reasonably available, but in no event more than two business
days after filing, Seller will deliver to Buyer all reports filed by it under
the Exchange Act subsequent to the date hereof. Seller also will deliver to
Buyer each thrift financial report or similar report filed by it with the OTS or
the Department concurrently with the filing of such call report. Within fifteen
(15) days after the end of each month, Seller will deliver to Buyer an unaudited
consolidated balance sheet and an unaudited consolidated statement of income,
without related notes, for such month prepared in accordance with GAAP.
5.9 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time, Buyer agrees for a period of six
years, to indemnify and hold harmless the past and present directors and
officers of Seller and its Subsidiaries (the "Indemnified Parties") for all acts
or omissions occurring at or prior to the Effective Time to the same extent such
persons are indemnified and held harmless under the respective Articles of
Incorporation, Code of Regulations or Constitution of Seller and its Subsidiary
in the form in effect at the date of this Agreement, and such duties and
obligations shall continue in full force and effect for so long as they would
(but for the Merger) otherwise survive and continue in full force and effect.
Without limiting the foregoing, all limitations of liability existing in favor
of the Indemnified Parties in the Articles of Incorporation, Code of Regulations
or Constitution of Seller or any Seller Subsidiary as of the date hereof, to the
extent permissible under applicable law as of the date hereof, arising out of
matters existing or occurring at or prior to the Effective Time, shall survive
the Merger and shall continue in full force and effect. Buyer will provide, or
cause to be provided, for a period of not less than three years from the
Effective Time, an insurance and indemnification policy that provides the
officers and directors of Seller and its Subsidiaries immediately prior to the
Effective Time coverage no less favorable than as currently provided by Seller
to such officers and directors, to the extent such insurance may be purchased or
kept in full force without any material increase in the cost of the premium
currently paid by Buyer for its directors' and officers' liability insurance
(provided that if such insurance is not available without such a material
increase, Buyer will substitute or cause Seller to substitute therefor to the
extent available at a cost not in excess of 150% of the current annual premium
cost of Seller's existing directors and officers' insurance, single premium tail
coverage with policy limits equal to Seller's existing annual coverage limits).
At the request of Buyer, Seller shall use reasonable efforts to procure the
insurance coverage referred to in the preceding sentence prior to the Effective
Time.
(b) In the event that Buyer or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section, which obligations
are expressly
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intended to be for the irrevocable benefit of, and shall be enforceable by, each
director and officer covered hereby.
5.10 EMPLOYEES AND EMPLOYEE BENEFIT PLANS
(a) Former full-time employees of Seller or Seller Bank who remain
employed by Buyer or Buyer Bank after the Effective Date will be eligible to
participate in the Buyer's employee stock ownership plan on January 1, 2003 or
such earlier date required by Section 410(b)(6)(C) of the Code and applicable
regulations ("Entry Date"), with credit for years of service with Seller or any
of its Subsidiaries for the purpose of eligibility and vesting on and after the
Entry Date (but not for the purposes of accrual of benefits or allocation of
employer contributions). Former full-time employees of Seller or Seller Bank who
remain employed by Buyer or Buyer Bank will be eligible to participate in the
Buyer's benefit plans, other than the Buyer's employee stock ownership plan, on
the earliest date permitted by such plan, with credit for years of service with
Seller or any of its Subsidiaries for the purpose of eligibility and vesting
(but not for the purpose of accrual of benefits or allocation of employer
contributions). Buyer shall use its best efforts to cause any and all
pre-existing condition limitations (to the extent such limitations did not apply
to a pre-existing condition under Seller Employee Plan) and eligibility waiting
periods under group health plans to be waived with respect to such participants
and their eligible dependents.
(b) To the extent that Buyer or a Buyer Subsidiary terminates the
employment of any Seller or Seller Bank employee other than for Cause within one
year following the Effective Time, Buyer shall, or shall cause a Buyer
Subsidiary to, provide severance benefits in a cash amount equal to such
employee's regular salary for a one-week period (as in effect immediately prior
to the Effective Time) multiplied by the total number of whole years of such
employee's employment (up to a maximum of 10 years) at Seller, Buyer and any
Subsidiary of either; provided, however, that in no event shall Buyer or a Buyer
Subsidiary have any obligation to provide severance benefits to any Seller or
Seller Bank employee whose termination of employment occurs due to resignation
or to discharge for Cause or who is entitled to severance benefits or the
equivalent thereof under the terms of any other compensation plan or individual
contract with Seller or Seller Bank.
(c) It is acknowledged that Seller Bank currently has outstanding an
employment agreement with Jon Letzkus ("Employment Agreement"). In accordance
with the terms of the Employment Agreement, on the Effective Date, Seller Bank
will pay Jon Letzkus a lump sum payment provided for under such Employment
Agreement, but in no event in excess of the amount equal to the maximum amount
permissible tax deductible under Section 280G of the Code.
(d) In the sole discretion of Buyer or a Buyer Subsidiary, as
applicable, payments made by it in full and complete satisfaction of obligations
of Seller or Seller Bank under any Seller Employee Plan (other than any Seller
Employee Plan that is subject to ERISA) or under Section 5.10(c) shall be
subject to the recipient's delivery to Buyer or a Buyer Subsidiary, as
applicable, of (i) a written acknowledgment signed by such recipient that the
payment or payments and benefits to be made to him or her is in full and
complete satisfaction of all
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liabilities and obligations thereunder of Seller, Seller Bank, Buyer or any
Buyer Subsidiary, and each of their respective affiliates, directors, officers,
employees and agents, and (ii) a release by such recipient of all such parties
from further liability in connection with the particular Seller Employee Plan or
this Agreement, as applicable.
(e) Subject to the Code and relevant regulations, as of the Effective
Time or as soon as practicable thereafter, the loan to the Seller ESOP shall be
repaid in full with the cash consideration received from Buyer for the
unallocated shares of Seller Common Stock held in the Seller ESOP in the amount
equal to the Merger Consideration multiplied by the number of unallocated shares
of Seller Common Stock held by the Seller ESOP, and any unallocated portion of
the consideration remaining after such repayment shall be allocated to the
Seller ESOP accounts of the employees of Seller and its Subsidiaries in
accordance with the terms of the Seller ESOP as amended. As of the Effective
Time, the Seller ESOP shall be terminated. The current administrator of the
Seller ESOP, or another administrator selected by Buyer (subject to consultation
with Seller ESOP's then current trustee), shall continue to administer the
Seller ESOP subsequent to the Effective Time, and the current Trustee of the
Seller ESOP, or such other trustee(s) selected by Buyer (subject to consultation
with Seller ESOP's then current trustee) or the administrators, shall continue
to be the Trustee subsequent to the Effective Time. Buyer agrees not to amend
the Seller ESOP subsequent to the Effective Time in any manner that would change
or expand the class of persons entitled to receive benefits under the Seller
ESOP. The Parties agree that the Seller ESOP shall be amended to the extent
necessary to receive a favorable determination letter from the IRS as to the tax
qualified status of the Seller ESOP upon its termination under Section 401(a)
and 4975(e)(7) of the Code (the "Final Determination Letter"). Following the
receipt of the Final Determination Letter, distributions of the account balances
under the Seller ESOP shall be made to the ESOP Participants. From and after the
date hereof, in anticipation of such termination and distribution, Buyer and
Seller prior to the Effective Time, and Buyer after the Effective Time, shall
use their best efforts to apply for and obtain a favorable Final Determination
Letter from the IRS. In the event that Buyer and Seller, prior to the Effective
Time, and Buyer after the Effective Time, reasonably determine that the Seller
ESOP cannot obtain a favorable Final Determination Letter, or that the amounts
held therein cannot be so applied, allocated or distributed without causing the
Seller ESOP to lose its tax qualified status, Seller prior to the Effective Time
and Buyer after the Effective Time shall take such action as they may reasonably
determine is necessary to obtain a favorable Final Determination Letter from the
IRS and for the distribution of account balances to the ESOP Participants,
provided that the assets of the Seller ESOP shall be held or paid solely for the
benefit of the ESOP Participants and provided further that in no event shall any
portion of the amounts held in the Seller ESOP revert, directly or indirectly,
to Seller or any affiliate thereof, or to Buyer or any affiliate thereof unless
required by the IRS as a condition to the issuance of a favorable Final
Determination Letter. All ESOP Participants shall fully vest and have a
nonforfeitable interest in their accounts under the Seller ESOP determined as of
the termination date.
(f) Seller shall take all necessary steps to cause the Seller Defined
Benefit Plan to be terminated no later than the end of the plan year in which
the Merger occurs and will take all steps to terminate the employer's
participation in the Seller Defined Benefit Plan and liquidate the Seller
Defined Benefit Plan as expeditiously as possible and in a manner that will not
result
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in the imposition of any underfunding liability or responsibility upon Buyer or
any of its Subsidiaries; provided, that Seller shall not terminate the Seller
Defined Benefit Plan without approval from the Buyer if the Seller Defined
Benefit Plan has an outstanding underfunded liability. The Parties agree that
the Seller Defined Benefit Plan shall be amended to the extent necessary to
receive a favorable determination letter from the IRS as to the tax qualified
status of the Seller Defined Benefit Plan upon its termination under Section
401(a) of the Code.
(g) On or before the Effective Time, Seller shall take all steps
necessary to cause the 401(k) plan maintained by Seller to be terminated,
subject to applicable limitations under the Code.
5.11 COMPANY MERGER
Buyer and Seller shall take, and shall cause their Subsidiaries to
take, all necessary and appropriate actions to make it possible for the Company
Merger to be authorized, agreed to, and accomplished immediately after the
Corporate Merger, or at such other time as may be determined by Buyer in its
sole discretion.
5.12 BANK MERGER
Buyer and Seller shall take, and shall cause their Subsidiaries to
take, all necessary and appropriate actions to make it possible for the Bank
Merger to be authorized, agreed to, and accomplished immediately after the
Corporate Merger, or at such other time thereafter as may be determined by Buyer
in its sole discretion.
5.13 ORGANIZATION OF MERGER SUB
Buyer shall cause Merger Sub to be organized under the OGCL as soon as
practicable hereafter. Following the organization, the Board of Directors of
Merger Sub shall approve this Agreement and the transactions contemplated
hereby, whereupon Merger Sub shall become a party to, and be bound by, this
Agreement, and Buyer shall approve this Agreement in its capacity as the sole
stockholder of Merger Sub.
5.14 CONFORMING ENTRIES
(a) Seller recognizes that Buyer may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). Subject to applicable laws, from and after
the date of this Agreement to the Effective Time, Seller and Buyer shall consult
and cooperate with each other with respect to conforming the loan, accrual and
reserve policies of Seller and the Seller Subsidiaries to those policies of
Buyer, as specified in each case in writing to Seller, based upon such
consultation and subject to the conditions in Section 5.14(c) below.
(b) Subject to applicable laws and regulations, Seller and Buyer shall
consult and cooperate with each other with respect to determining, as specified
in a written notice from Buyer to Seller, based upon such consultation and
subject to the conditions in Section 5.14(c)
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below, the amount and the timing for recognizing for financial accounting
purposes Seller's expenses of the Merger and the restructuring charges relating
to or to be incurred in connection with the Merger.
(c) Subject to applicable laws and regulations, Seller shall (i)
establish and take such reserves and accruals at such time as Buyer shall
reasonably request to conform Seller's loan, accrual and reserve policies to
Buyer's policies, and (ii) establish and take such accruals, reserves and
charges in order to implement such policies and to recognize for financial
accounting purposes such expenses of the Merger and restructuring charges
related to or to be incurred in connection with the Merger, in each case at such
times as are reasonably requested by Buyer; provided, however, that on the date
such reserves, accruals and charges are to be taken, Buyer shall certify to
Seller that all conditions to Buyer's obligation to consummate the Merger set
forth in Sections 6.1 and 6.3 hereof (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing or
otherwise to be dated at the Effective Time, the delivery of which shall
continue to be conditions to Buyer's obligation to consummate the Merger) have
been satisfied or waived; and provided, further, that Seller shall not be
required to take any such action that is not consistent with GAAP and regulatory
accounting principles.
(d) No reserves, accruals or charges taken in accordance with this
Section 5.14 may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Seller herein.
5.15 INTEGRATION OF POLICIES
During the period from the date hereof to the Effective Time, Seller
and Seller Bank shall, and shall cause their directors, officers and employees
to, and shall make all reasonable efforts to cause their respective data
processing service providers to, cooperate and assist Buyer in connection with
an electronic and systematic conversion of all applicable data regarding Seller
to Buyer's system of electronic data processing, provided, however, that no such
conversion shall occur until the Effective Time. In furtherance of the
foregoing, Seller shall make reasonable arrangements during normal business
hours to permit representatives of Buyer to train Seller and Seller Bank
employees in Buyer's system of electronic data processing.
5.16 DISCLOSURE SUPPLEMENTS
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered to
the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in materials Previously Disclosed to
the other party or which is necessary to correct any information in such
materials which has been rendered materially inaccurate thereby; no such
supplement or amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
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5.17 FAILURE TO FULFILL CONDITIONS
In the event that either of the Parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party. Each Party will promptly
inform the other Party of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger by any Governmental Entity or
third party or which would otherwise prevent or materially delay completion of
such transactions.
5.18 ENVIRONMENTAL REPORTS
Seller shall have furnished to Buyer before the date of this Agreement
any environmental reports related to any property owned or being used by Seller.
Buyer, at its sole discretion, may obtain, as soon as reasonably practical, but
not later than 30 days after the date hereof (or within ten days after the
acquisition of lease of any real property acquired or leased after the date
hereof), a report of a phase one environmental investigation on real property
owned or leased by Seller or its Subsidiaries (but excluding space in office or
retail and similar establishments leased by Seller or its subsidiaries for
automatic teller machines or bank branch facilities or other office uses where
the space leased comprises less than 20% of the total space leased to all
tenants of such property). If required by the phase one investigation in Buyer's
reasonable opinion, Seller shall provide to Buyer, within 40 days of the receipt
by Seller of the request of Buyer therefor, a report of a phase two
investigation on properties requiring such additional study. Buyer shall have 5
business days to request Seller to obtain a phase two investigation report.
Buyer shall have 5 business days from the receipt of any such phase two
investigation report to notify Seller of any dissatisfaction with the contents
of such report. Should the cost of taking all remedial or other corrective
actions and measures (i) required by applicable law or reasonably likely to be
required by applicable law, or (ii) recommended or suggested by such report or
reports or prudent in light of serious life, health or safety concerns, in the
aggregate, exceed the sum of $150,000 as reasonably estimated by an
environmental expert retained for such purpose by Buyer and reasonably
acceptable to Seller, or if the cost of such actions and measures cannot be so
reasonably estimated by such expert to be such amount or less with any
reasonable degree of certainty, then Buyer shall have the right pursuant to
Section 7.1 hereof, for a period of ten business days following receipt of such
estimate or indication that the cost of such actions and measures can not be so
reasonably estimated, to terminate this Agreement, which shall be Buyer's sole
remedy in such event. The costs of the phase one and phase two investigations,
if any, shall be paid by Buyer.
5.19 TRANSACTION EXPENSES OF SELLER
(a) For planning purposes, the Seller (as Previously Disclosed) has
provided Buyer with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by the Seller in connection with the
Agreement based on facts and circumstances then currently known, including the
fees and expenses of counsel, accountants, investment bankers and other
professionals. The Seller shall use its best efforts to maintain expenses with
the budget.
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(b) Promptly after the execution of this Agreement, the Seller shall
ask all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements within 30 days. The Seller
shall accrue and/or pay all of such amounts as soon as possible.
(c) The Seller shall cause its professionals to render monthly invoices
within 30 days after the end of each month. The Seller shall advise the Buyer
monthly of all out-of-pocket expenses which the Seller has incurred in
connection with the Agreement.
(d) The Seller, in reasonable consultation with the Buyer, shall make
all arrangements with respect to the printing and mailing of the Proxy
Statement.
5.20 SUCCESS BONUS PLAN
Buyer and Seller will jointly develop a "Success Bonus Plan" which will
provide for payment of a bonus to certain employees of Seller Bank who are not
party to an employment contract for remaining as employees of Seller Bank from
the date hereof to one month after Effective Time.
5.21 ADVISORY DIRECTORS AFTER THE COMPANY MERGER
Buyer agrees to take all action necessary to appoint all of the
individual non-employee directors of Seller Bank (that is, the President will
not be a member), effective as of the Effective Time, to an advisory board for a
period of at least one year. Buyer shall pay the members of the advisory board a
fee of $500 per month, which is the current board fee of Seller Bank. Subject to
the fiduciary duty of the Board of Directors of Buyer, Buyer will consider the
appointment of individuals to an advisory board for additional periods at a fee
to be determined.
5.22 VOTING AGREEMENTS
At least a majority of the Seller's directors, including the President,
will enter into a voting agreement, a form of which is attached as Exhibit 5.22,
hereto at the time the Seller and Buyer enter into this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT - BUYER AND SELLER
The respective obligations of Buyer and Seller to effect the
transactions contemplated hereby shall be subject to satisfaction of the
following conditions at or prior to the Closing Date.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and completion of the Corporate Merger shall have
been duly and validly taken by
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Buyer, Merger Sub and Seller, including adoption of this Agreement by the
requisite vote of the shareholders of Seller.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the completion of the Corporate
Merger shall have been received and all statutory waiting periods in respect
thereof shall have expired; and Buyer, Buyer Bank, Seller and Seller Bank shall
have procured all other approvals, consents and waivers of each person (other
than the Governmental Entities referred to above) whose approval, consent or
waiver is necessary to the completion of the Corporate Merger and the failure of
which to obtain would have the effects set forth in the following proviso
clause; provided, however, that no approval or consent referred to in this
Section 6.1(b) shall be deemed to have been received if it shall include any
nonstandard condition or requirement that, in the aggregate, would so materially
reduce the economic or business benefits of the transactions contemplated by
this Agreement to Buyer that had such condition or requirement been known,
Buyer, in its reasonable judgment, would not have entered into this Agreement.
(c) None of Buyer, Buyer Bank, Merger Sub, Seller or Seller Bank shall
be subject to any statute, rule, regulation, injunction or other order or decree
which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
completion of the Corporate Merger.
(d) No proceeding initiated by any Governmental Entity seeking an
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the completion
of the Corporate Merger shall be pending.
6.2 CONDITIONS PRECEDENT - SELLER
The obligations of Seller to effect the transactions contemplated
hereby shall be subject to satisfaction of the following conditions at or prior
to the Closing Date unless waived by Seller pursuant to Section 7.4 hereof.
(a) The representations and warranties of Buyer set forth in Article IV
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, or on the date when made in the case of a representation and warranty
which specifically relates to an earlier date.
(b) Buyer shall have performed in all material respects all obligations
and complied with all covenants required to be performed and complied with by it
pursuant to this Agreement on or prior to the Closing Date.
(c) Buyer shall have delivered to Seller a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.2(a) and 6.2(b) have been satisfied.
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(d) Buyer shall have furnished Seller with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.2 as such conditions relate to Buyer
as Seller may reasonably request.
(e) Seller shall have received an opinion of counsel of Buyer, dated
the Closing Date, in form and substance reasonably satisfactory to Seller,
substantially to the effect set forth in Exhibit 6.2(e) hereto.
(f) Seller shall have received a written fairness opinion of KBW dated
the date of this Agreement and as of a date reasonably proximate to the date of
the Proxy Statement, to the effect that the Merger Consideration is fair to the
shareholders of Seller from a financial point of view.
6.3 CONDITIONS PRECEDENT - BUYER
The obligations of Buyer to effect the transactions contemplated hereby
shall be subject to satisfaction of the following conditions at or prior to the
Effective Time unless waived by Buyer pursuant to Section 7.4 hereof.
(a) The representations and warranties of Seller set forth in Article
III hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, or on the date when made in the case of a representation and
warranty which specifically relates to an earlier date.
(b) Seller shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Closing Date.
(c) Seller shall have delivered to Buyer a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
(d) Seller shall have furnished Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to Seller
as Buyer may reasonably request.
(e) No more than 15% the outstanding shares of Seller Common Stock
shall be Dissenting Shares.
(f) Buyer shall have received an opinion of counsel to Seller, dated
the Closing Date, in form and substance reasonably satisfactory to Buyer,
substantially to the effect set forth in Exhibit 6.3(f) hereto.
(g) Seller shall have provided Buyer with an accounting of all merger
related expenses incurred by it through the Closing Date, including a good faith
estimate of such expenses incurred but as to which invoices have not been
submitted as of the Closing Date. The merger related expenses of Seller other
than printing expenses (which are within the control of
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Buyer), shall be reasonable, taking into account normal and customary billing
rates, fees and expenses for similar transactions.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENTT
7.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Closing Date, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Closing Date, by Buyer in writing if
Seller has, or by Seller in writing if Buyer has, breached any covenant or
undertaking contained herein or any representation or warranty contained herein,
unless such breach has been cured within 30 days after written notice of such
breach;
(c) at any time, by either Buyer or Seller in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary to
consummate the Corporate Merger is denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such approval, unless
within the 30-day period following such denial or withdrawal a petition for
rehearing or an amended application has been filed with the applicable
Governmental Entity, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 7(c)(i) if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein, or (ii) if any Governmental
Entity of competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the completion of the Corporate Merger;
(d) at any time, by either Buyer or Seller in writing, if the
shareholders of Seller do not approve this Agreement after a vote taken thereon
at a meeting duly called for such purpose (or at any adjournment thereof) unless
the failure of such occurrence shall be due to the failure of the party seeking
to terminate to perform or observe in any material respect its agreements set
forth herein to be performed or observed by such party at or before the Closing
Date; and
(e) by either Buyer or Seller in writing if the Effective Time has not
occurred by the close of business on December 31, 2001, provided that this right
to terminate shall not be available to any party whose failure to perform an
obligation in breach of such party's obligations under this Agreement has been
the cause of, or resulted in, the failure of the Corporate Merger to be
consummated by such date.
(f) by Buyer to the extent provided by Section 5.18, by giving timely
written notice thereof to Seller.
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For purposes of this Section 7.1, termination by Buyer also shall be
deemed to be termination on behalf of the Merger Sub.
7.2 EFFECT OF TERMINATION
(a) Each of the Parties shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel, provided that notwithstanding
anything to the contrary contained in this Agreement, neither Buyer nor Seller
shall be released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.
(b) As a means of compensating the parties for the substantial direct
and indirect monetary and other costs incurred and to be incurred in connection
with this Agreement and the transactions contemplated hereby, the Seller agrees
that if this Agreement is terminated by the Buyer in accordance with Section
7.1(b) the Seller will upon demand pay to Buyer or Buyer Bank in immediately
available funds all reasonable expenses of Buyer and Buyer Bank in an amount not
to exceed $200,000. Buyer agrees that if this Agreement is terminated by Seller
in accordance with Section 7.1(b), the Buyer will upon demand pay to Seller in
immediately available funds all reasonable expenses of Seller and Seller Bank in
an amount not to exceed $200,000. For purposes of this Section 7.2(b), the
expenses of a party shall include all reasonable out-of-pocket expenses of that
party (including all fees and expenses of counsel, accountants, financial
advisors and consultants to that party) incurred by it or on its behalf in
connection with the consummation of the transactions contemplated by this
Agreement.
If this Agreement is terminated by the Buyer or Seller in accordance
with Section 7.1(d) or (e) and prior to such termination a Termination Event, as
defined in paragraph (c) of this Section 7.2, shall have occurred, the Seller
will upon demand pay to Buyer or Buyer Bank in immediately available funds
$400,000, inclusive of any other amounts that may otherwise be due and payable
in accordance with Section 7.2 hereunder; provided however, no such payment
shall be due or payable hereunder prior to the Seller and/or the Seller Bank
either (1) receiving a publicly announced bona fide offer from a third party
prior to the Seller's shareholder meeting and subsequently failing to receive
shareholder approval of the Agreement and entering into a definitive written
agreement with such third party within 18 months after the Seller's shareholder
meeting, (2) the Seller and/or Seller Bank entering into a written definitive
agreement with a third party with respect to a Takeover Proposal either prior to
the meeting of the shareholders of Seller to approve the Agreement or within 18
months after termination of the Agreement or (3) within such 18-month period any
third-party acquires 25% or more of the Seller Common Stock. "Takeover Proposal"
shall mean any proposal, other than as contemplated by this Agreement, for a
merger or other business combination involving the Seller or any Seller
Subsidiary or for the acquisition of a ten percent (10%) or greater equity
interest in Seller or any Seller Subsidiary, or for the purchase, lease or other
acquisition of a substantial portion of the assets of Seller or any Seller
Subsidiary (other than loans or securities sold in the ordinary course of
business).
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(c) For purposes of this Agreement, a Termination Event shall mean
either of the following:
(i) The Seller or any Seller Subsidiary, without having
received Buyer's prior written consent, shall have entered into a written
agreement to engage in a Takeover Proposal with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Exchange Act, and the rules and regulations
thereunder) other than Buyer or any affiliate of Buyer (the term "affiliate" for
purposes of this Agreement having the meaning assigned thereto in Rule 405 under
the Securities Act) or the Board of Directors of the Seller shall have
recommended that the shareholders of the Seller approve or accept any Takeover
Proposal with any person other than Buyer or any affiliate of Buyer; or
(ii) After a bona fide written proposal is made by any person
other than Buyer or any affiliate of Buyer to the Seller or its shareholders to
engage in a Takeover Proposal and is publicly disclosed, either (A) the Seller
shall have breached any covenant or obligation contained in this Agreement and
such breach would entitle Buyer to terminate this Agreement, or (B) the holders
of Seller Common Stock shall not have approved this Agreement at the Seller's
shareholder meeting described in Section 5.2 of this Agreement, a proxy
statement has not been mailed to the holders of Seller Common Stock as a result
of the Board of Directors' exercise of its fiduciary duties as set forth in
Section 5.2 of this Agreement, such shareholder meeting shall not have been held
in a timely manner or shall have been postponed, delayed or enjoined prior to
termination of this Agreement except as a result of a judicial or administrative
proceeding or the Seller's Board of Directors shall have (i) withdrawn or
modified in a manner materially adverse to Buyer the recommendation of the
Seller's Board of Directors with respect to this Agreement, or announced or
disclosed to any third party its intention to do so or (ii) failed to recommend,
in the case of a tender offer or exchange offer for the Seller Common Stock,
against acceptance of such tender offer or exchange offer to its shareholders or
takes no position with respect to acceptance of such tender offer or exchange
offer by its stockholders.
(d) In the event that this Agreement is terminated pursuant to Section
7.1 hereof, this Agreement shall become void and have no effect, except that (i)
the provisions relating to confidentiality set forth in Section 5.4(b) and this
Section 7.2, shall survive any such termination and (ii) a termination pursuant
to Section 7.1(b), (c), (d), or (e) shall not relieve the breaching party from
any liability or damages arising out of its willful breach of any provision of
this Agreement giving rise to such termination.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including the
covenants set forth in Sections 2.6, 2.8, 5.9, and 5.10 hereof), provided that
no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive Buyer or Seller (or any director,
officer or controlling person of
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either thereof) of any defense at law or in equity which otherwise would be
available against the claims of any person, including any shareholder or former
shareholder of either Buyer or Seller.
7.4 WAIVER
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of Seller) extend the time for the performance of
any of the obligations or other acts of the other party hereto and may waive (i)
any inaccuracies of the other party in the representations or warranties
contained in this Agreement or any document delivered pursuant hereto, (ii)
compliance with any of the covenants, undertakings or agreements of the other
party, (iii) to the extent permitted by law, satisfaction of any of the
conditions precedent to its obligations contained herein or (iv) the performance
by the other party of any of its obligations set forth herein, provided that any
such waiver granted, or any amendment or supplement pursuant to Section 7.5
hereof executed after shareholders of Seller have approved this Agreement, shall
not modify either the amount or form of the consideration to be provided hereby
to the holders of Seller Common Stock upon completion of the Corporate Merger or
otherwise materially adversely affect such shareholders without the approval of
the shareholders who would be so affected.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement may be amended or supplemented at any time by mutual
agreement of the Parties hereto, subject to the proviso to Section 7.4 hereof.
Any such amendment or supplement must be in writing and authorized by or under
the direction of the Board of Directors of each of the Parties hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 ENTIRE AGREEMENT
This Agreement contains the entire agreement among the Parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the Parties hereto
and their respective successors. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the Parties hereto,
and their respective successors, any rights, remedies, obligations or
liabilities other than as set forth in Sections 5.9, 5.10, 5.20 and 5.21 hereof.
8.2 NO ASSIGNMENT
None of the Parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
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8.3 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to Buyer:
Advance Financial Bancorp
1015 Commerce Street
Wellsburg, WV 26070
Attn: Stephen M. Gagliardi, President
Fax: 304-737-3154
With a required copy to:
Malizia, Spidi & Fisch, PC
1100 New York Avenue, NW, Suite 340 West
Washington, DC 20005
Attn: Samuel J. Malizia, Esq.
Richard Fisch, Esq.
Fax: 202-434-4661
E-Mail: mail@malizialaw.com
If to Seller:
Ohio State Financial Services, Inc.
435 Main Street
Bridgeport, OH 43912
Attn: Jon Letzkus, President
Fax: 740-635-0768
With a required copy to:
Vorys, Sater, Seymour and Pease LLP
221 East Fourth Street, Suite 2100
Cincinnati, OH 45201
Attn: Roger A. Yurchuck, Esq.
Terri Reyering Abare, Esq.
Fax: 513-723-4056
8.4 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, Buyer
may, with the written consent of Seller, which shall not be unreasonably
withheld, at any time modify the structure of the acquisition of Seller set
forth herein, provided that (i) the consideration to be paid to the holders of
Seller Common Stock is not thereby changed in kind or reduced in amount as a
result of such modification and (ii) such modification will not materially delay
or jeopardize receipt of any required approvals of Governmental Entities or any
other condition to the obligations of Buyer set forth in Sections 6.1 and 6.3
hereof.
8.5 INTERPRETATION
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
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8.6 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of West Virginia applicable to agreements made and
entirely to be performed within such jurisdiction.
8.8 SEVERABILITY
Any term, provision, covenant or restriction contained in this
Agreement held to be invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable.
8.9 STANDARD OF MATERIALITY
No representation or warranty shall be deemed untrue or incorrect, and
no Party shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, event or circumstance, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
has had or is reasonably likely to have a Material Adverse Effect on the Party
making such representation or warranty.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
OHIO STATE FINANCIAL SERVICES, INC.
Attest:
By: /s/ Sherri Yarbrough By: /s/ Jon Letzkus
------------------------------ -----------------------------------
Secretary Jon Letzkus, President
ADVANCE FINANCIAL BANCORP
Attest:
/s/ Florence K. McAlpine By: /s/ Stephen M. Gagliardi
- --------------------------------- -----------------------------------
Secretary Stephen M. Gagliardi, President
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Appendix B
PLAN OF MERGER
OHIO STATE FINANCIAL SERVICES, INC.
and
AFB ACQUISITION SUBSIDIARY, INC.
THIS PLAN OF MERGER ("Plan of Merger") is entered into as of the 14th
day of May, 2001, by and between Ohio State Financial Services, Inc., an Ohio
business corporation ("Seller"), and AFB Acquisition Subsidiary, Inc., an Ohio
business corporation ("Merger Sub"), and is joined in by Advance Financial
Bancorp ("Advance"), a Delaware business corporation that is the sole
shareholder of Merger Sub.
R E C I T A L S :
WHEREAS, Seller and Advance have entered into an Agreement and Plan of
Merger, dated April 18, 2001 (the "Agreement"), providing among other things for
the merger of Merger Sub with and into Seller, with Seller surviving such merger
and becoming the wholly owned subsidiary of Advance;
NOW, THEREFORE, in consideration of the mutual premises and mutual
agreements contained herein and in the Agreement, the parties hereto have agreed
as follows:
ARTICLE I
THE MERGER
At the Effective Time (as defined in Section 2 below), Merger Sub shall
merge with and into Seller (the "Merger") pursuant to Section 1701.78 of the
Ohio General Corporation Law ("OGCL"). Upon consummation of the Merger, the
separate existence of Merger Sub shall cease and Seller shall continue as the
surviving corporation (the "Surviving Corporation").
ARTICLE II
EFFECTIVE TIME
The Merger shall become effective immediately following and contingent
upon the occurrence of the Closing (as defined in Article I of the Agreement) at
the date and time specified in the Certificate of Merger with respect to the
Merger (the "Effective Time") as filed with the Ohio Secretary of State.
78
ARTICLE III
NAME OF SURVIVING CORPORATION
The name of the Surviving Corporation shall be Ohio State Financial
Services, Inc.
ARTICLE IV
ARTICLES OF INCORPORATION AND CODE OF REGULATIONS
The Articles of Incorporation and Code of Regulations of Seller as in
effect immediately before the Effective Time shall be the Articles of
Incorporation and Code of Regulations of the Surviving Corporation at and after
the Effective Time.
ARTICLE V
DIRECTORS AND OFFICERS
At the Effective Time, the directors and officers of the Surviving
Corporation shall be those persons who are serving as directors and officers,
respectively, of Merger Sub immediately before the Effective Time.
ARTICLE VI
PURCHASE AND CONVERSION OF SHARES
AND EXCHANGE OF STOCK CERTIFICATES
6.1 Treatment of Capital Stock.
Subject to the provisions of the Agreement and this Plan of Merger, at
the Effective Time, automatically by virtue of the Merger and without any action
on the part of any shareholder:
(a) each outstanding share of common stock of Merger Sub, no
par value per share ("Merger Sub Common Stock"), shall automatically convert
into one share of common stock of the Surviving Corporation, no par value per
share ("Surviving Corporation Common Stock"); and
(b) each share of common stock of Seller, no par value
("Seller Common Stock"), issued and outstanding immediately prior to the
Effective Time (other than shares of Seller Common Stock whose holders seek
relief as dissenting shareholders under Section 1701.78 of the OGCL ("Dissenting
Shares")) shall, by virtue of the Merger and without any action of any kind by
any person or entity, be converted into the right to receive $16.00 in cash
without interest (the "Merger Consideration"); provided, however, that each
share of Seller Common Stock which is owned beneficially or of record by Seller
(including treasury shares) or Advance or any of their respective Subsidiaries
(other than shares held in a fiduciary capacity for the benefit of third parties
or as a result of debts previously contracted) shall be canceled and retired
without consideration or conversion.
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6.2 Shareholder Rights; Stock Transfers.
At the Effective Time, holders of Seller Common Stock shall cease to be
and shall have no rights as shareholders of Seller, other than to receive the
Merger Consideration for each share of Seller Common Stock held. After the
Effective Time, there shall be no transfers on the stock transfer books of
Seller or the Surviving Corporation of shares of Seller Common Stock and if
Certificates are presented for transfer after the Effective Time, they shall be
delivered to Advance or the Exchange Agent for cancellation against delivery of
the Merger Consideration. No interest shall be paid on the Merger Consideration.
6.3 Options and Restricted Stock
At the Effective Time, each outstanding option to purchase shares of
Seller Common Stock ("Seller Option") and then exercisable under Seller's Stock
Option Plan shall be converted into the right to receive a cash payment from
Seller equal to the difference between the Merger Consideration and the exercise
price per share of such Seller Option, subject to applicable federal and state
tax withholding obligations of Seller.
At the Effective Time, each holder of an unvested share of Seller
Restricted Stock under Seller's Recognition and Retention Plan shall be entitled
to receive an amount of compensation equal to the Merger Consideration for each
such share of Seller Restricted Stock together with accumulated but
undistributed dividends on such Seller Restricted Stock, subject to applicable
federal and state tax withholding obligations of Seller.
6.4 Exchange Procedures
(a) No later than five business days following the Effective
Time, Advance shall cause the Exchange Agent to mail or make available to each
holder of record of any certificate for shares of Seller Common Stock
("Certificate") a notice and letter of transmittal disclosing the effectiveness
of the Merger and the procedure for exchanging Certificates for the Merger
Consideration. Such letter of transmittal shall specify that delivery shall be
effected and risk of loss and title shall pass only upon proper delivery of
Certificates to the Exchange Agent.
(b) At or prior to the Effective Time, Advance shall make
available to the Exchange Agent an amount of cash equal to the aggregate Merger
Consideration.
(c) Each holder of any outstanding Certificate (other than
holders of Dissenting Shares) who surrenders such Certificate to the Exchange
Agent will, upon acceptance thereof by the Exchange Agent, be entitled to the
Merger Consideration for each share represented by such Certificate. The
Exchange Agent shall accept Certificates upon compliance with such reasonable
terms and conditions as the Exchange Agent may impose to effect an orderly
exchange in accordance with normal exchange practices. Each outstanding
Certificate that is not surrendered to the Exchange Agent shall, except as
otherwise herein provided, evidence ownership of only the right to receive the
Merger Consideration for each share represented by such Certificate.
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(d) The Exchange Agent shall not be obligated to deliver the
Merger Consideration until the holder surrenders a Certificate as provided in
this Section 6.4, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Exchange Agent. If any check is to be issued in a name other than that in which
the Certificate is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed or accompanied by
an executed form of assignment separate from the Certificate and otherwise in
proper form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
check in any name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(e) Any portion of the cash delivered to the Exchange Agent by
Advance pursuant to Section 6.4(b) that remains unclaimed by the shareholders of
Seller for one year after the Closing Date shall be delivered by the Exchange
Agent to Advance. Any shareholders of Seller who have not theretofore complied
with Section 6.4(c) shall thereafter look only to Advance for the Merger
Consideration. If outstanding Certificates are not surrendered or the payment
for them is not claimed prior to the date on which such payment would otherwise
escheat to or become the property of any Governmental Entity, the unclaimed
items shall, to the extent permitted by abandoned property and any other
applicable law, become the property of Advance (and to the extent not in its
possession shall be delivered to it), free and clear of all claims or interest
of any person previously entitled to such property. Neither the Exchange Agent
nor any party to the Agreement shall be liable to any holder of Seller Common
Stock represented by any Certificate for any consideration paid to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Advance and the Exchange Agent shall be entitled to rely upon the stock transfer
books of Seller to establish the identity of those persons entitled to receive
the Merger Consideration, which books shall be conclusive with respect thereto.
In the event of a dispute with respect to ownership of Seller Common Stock
represented by any Certificate, Advance and the Exchange Agent shall be entitled
to deposit any Merger Consideration represented thereby in escrow with an
independent third party and thereafter be relieved with respect to any claims
thereto.
(f) Advance shall be entitled to deduct and withhold from
consideration otherwise payable pursuant to the Agreement and this Plan of
Merger to any holder of Certificates, such amounts as it is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Advance, such withheld amounts shall be treated for all purposes of
the Agreement and this Plan of Merger as having been paid to the holder of the
Certificates in respect of which such deduction and withholding was made.
6.5 Dissenting Shares
(a) Any holders of Dissenting Shares shall be entitled to
payment for such shares only to the extent permitted by and in accordance with
the provisions of the OGCL; provided, however, that if, in accordance with the
OGCL, any holder of Dissenting Shares shall forfeit such right to payment of the
fair value of such shares, such shares shall thereupon be
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deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Merger Consideration. Dissenting
Shares shall not, after the Effective Time, be entitled to vote for any purpose
or receive any dividends or other distributions and shall be entitled only to
such rights as are afforded in respect of Dissenting Shares pursuant to the
OGCL.
(b) Seller shall give Advance (i) prompt notice of any written
objections to the Merger and any written demands for the payment of the fair
value of any shares, withdrawals of such demands, and any other instruments
served pursuant to the OGCL received by Seller and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such demands
under the OGCL. Seller shall not voluntarily make any payment with respect to
any demands for payment of fair value and shall not, except with the prior
written consent of Advance, settle or offer to settle any such demands.
6.6 Additional Actions
If, at any time after the Effective Time, Advance shall consider that
any further assignments or assurances in law or any other acts are necessary or
desirable to (i) vest, perfect or confirm, of record or otherwise, in Advance
its right, title or interest in, to or under any of the rights, properties or
assets of Seller acquired or to be acquired by Advance as a result of, or in
connection with, the Merger, or (ii) otherwise carry out the purposes of the
Agreement and this Plan of Merger, Seller and its proper officers and directors
shall be deemed to have granted to Advance an irrevocable power of attorney to
execute and deliver all such proper deeds, assignments and assurances in law and
to do all acts necessary or proper to vest, perfect or confirm title to and
possession of such rights, properties or assets in Advance and otherwise to
carry out the purposes of the Agreement and this Plan of Merger; and the proper
officers and directors of Advance are fully authorized in the name of Seller or
otherwise to take any and all such action.
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ARTICLE VII
EFFECT OF MERGER
At the Effective Time, Merger Sub shall be merged with and into Seller,
with Seller as the Surviving Corporation, and the separate existence of Merger
Sub shall cease. All assets, rights, interests, privileges, powers, franchises
and property (real, personal and mixed) of Merger Sub and Seller shall be
automatically transferred to and vested in the Surviving Corporation by virtue
of the Merger without any deed or other document of transfer. The Surviving
Corporation, without any order or action on the part of any court or otherwise
and without any documents of assumption or assignment, shall hold and enjoy all
of the assets, rights, privileges, powers, properties, franchises and interests,
including, without limitation, appointments, powers, designations, nominations
and all other rights, interests and powers as agent or fiduciary, in the same
manner and to the same extent as such rights, interests and powers were held or
enjoyed by Merger Sub and Seller, respectively. The Surviving Corporation shall
be responsible for all of the liabilities, restrictions and duties of every kind
and description of both Merger Sub and Seller, immediately prior to the Merger,
including, without limitation, liabilities for all debts, obligations and
contracts of Merger Sub and Seller, respectively, matured or unmatured, whether
accrued, absolute, contingent and otherwise and whether or not reflected or
reserved against on balance sheets, books of accounts or records of either
Merger Sub or Seller. All rights of creditors and other obligees and all liens
on property of either Merger Sub or Seller shall be preserved, shall be assumed
by the Surviving Corporation and shall not be released or impaired.
ARTICLE VIII
OTHER DEFINED TERMS
All terms used in this Plan of Merger shall, unless defined herein,
have the meanings set forth in the Agreement. The Agreement is incorporated
herein by this reference and made a part hereof to the extent necessary or
appropriate to effect and consummate the terms of this Plan of Merger and the
Agreement.
ARTICLE IX
TERMINATION
This Plan of Merger shall terminate and become null and void, and the
transactions contemplated herein shall thereupon be abandoned, upon any
occurrence of a permitted termination of the Agreement pursuant to Section 7.1
thereof.
ARTICLE X
EXECUTION
This Plan of Merger may be executed in any number of counterparts, each
of which shall be deemed an original and all of such counterparts shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Plan of Merger to be
executed as of the date first above written.
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ATTEST: OHIO STATE FINANCIAL SERVICES, INC.
By: /s/ Jon Letzkus
-------------------------------
Secretary Jon Letzkus
President
ATTEST: AFB ACQUISITION SUBSIDIARY, INC.
By: /s/ Stephen M. Gagliardi
-------------------------------
Secretary Stephen M. Gagliardi
President
ATTEST: ADVANCE FINANCIAL BANCORP
By: /s/ Stephen M. Gagliardi
-------------------------------
Secretary Stephen M. Gagliardi
President
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Appendix C
SECTION 1701.85 DISSENTING SHAREHOLDER'S DEMAND FOR FAIR CASH VALUE OF SHARES.
(A) (1) A shareholder of a domestic corporation is entitled to relief
as a dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division
(C) of section 1701.84 of the Revised Code in the case of a merger pursuant to
section 1701.80 of the Revised Code and a dissenting shareholder entitled to
relief under division (E) of section 1701.84 of the Revised Code in the case of
a merger pursuant to section 1701.801 [1701.80.1] of the Revised Code shall be a
record holder of the shares of the corporation as to which he seeks relief as of
the date on which the agreement of merger was adopted by the directors of that
corporation. Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 [1701.80.1] of the Revised Code, the dissenting
shareholder shall deliver to the corporation a written demand for payment with
the same information as that provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on
the constituent corporation involved constitutes service on the surviving or the
new entity, whether the demand is served before, on, or after the effective date
of the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates representing the
shares as to which he seeks relief, the dissenting shareholder, within fifteen
days from the date of the sending of such request, shall deliver to the
corporation the certificates requested so that the corporation may forthwith
endorse on them a legend to the effect that demand for the fair cash value of
such shares has been made. The corporation promptly shall return such endorsed
certificates to the dissenting shareholder. A dissenting shareholder's failure
to deliver such certificates terminates his rights as a dissenting shareholder,
at the option of the corporation, exercised by written notice sent to the
dissenting shareholder within twenty days after the lapse of the fifteen-day
period, unless a court for good cause shown otherwise directs. If shares
represented by a certificate on which such a legend has been endorsed are
transferred, each new certificate issued for them shall bear a similar legend,
together with the name of the original dissenting holder of such shares. Upon
receiving a demand for payment from a dissenting shareholder who is the record
holder of uncertificated securities, the corporation shall make an appropriate
notation of the demand for payment in its shareholder records. If uncertificated
shares for which payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend required for
certificated securities as provided in this paragraph. A transferee of the
shares so endorsed, or of uncertificated securities where such notation has been
made, acquires only such rights in the corporation as the original dissenting
holder of such shares had immediately after the service of a demand for payment
of the fair cash value of the
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shares. A request under this paragraph by the corporation is not an admission by
the corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come
to an agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of
the corporation, fair cash value as to those shareholders shall be determined as
of the day prior to the day on which the vote by the shareholders was taken and,
in the case of a merger pursuant to section 1701.80 or 1701.801 [1701.80.1] of
the Revised Code, fair cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell would be willing to
accept
86
and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting from
the proposal submitted to the directors or to the shareholders shall be
excluded.
(D) (1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this
section, unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind their
adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not
come to an agreement as to the fair cash value per share, and neither the
shareholder nor the corporation has filed or joined in a complaint under
division (B) of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger
or consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
87
Appendix D
July 18, 2001
Board of Directors
Ohio State Financial Services
435 Main Street
Bridgeport, Ohio 43912
Dear Members of the Board:
You have requested our opinion as an independent investment banking firm
regarding the fairness, from a financial point of view, to the stockholders of
Ohio State Financial Services ("OSFS"), of the consideration to be paid by
Advance Financial Bancorp ("AFBC") in the merger (the "Merger") between OSFS and
AFBC. We have not been requested to opine as to, and our opinion does not in any
manner address, OSFS' underlying business decision to proceed with or effect the
Merger.
Pursuant to the Agreement and Plan of Merger, dated April 18, 2001, by and among
OSFS and AFBC (the "Agreement"), at the effective time of the Merger, AFBC will
acquire all of OSFS' issued and outstanding shares of common stock. AFBC will
issue to the holders of OSFS' common stock $16.00 in cash for each share of OSFS
common stock outstanding. The options of OSFS that remain outstanding at the
Effective Time will cashed out at the difference between $16.00 per share and
the exercise price. The complete terms of the proposed transaction are described
in the Agreement, and this summary is qualified in its entirety by reference
thereto.
Keefe, Bruyette & Woods, Inc., as part of its investment banking business, is
regularly engaged in the evaluation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, and distributions of
listed and unlisted securities. We are familiar with the market for common
stocks of publicly traded banks, savings institutions and bank and savings
institution holding companies.
In connection with this opinion we reviewed certain financial and other business
data supplied to us by OSFS including (i) the Agreement and Plan of Merger by
and among OSFS and AFBC, (ii) Annual Report, Proxy Statement and Form 10-K for
the years ended December 31, 1998, 1999 and 2000, and (iii) other information we
deemed relevant. We discussed with management and the boards of directors of
OSFS and its wholly owned subsidiary, Bridgeport Savings & Loan Association, the
current position and prospective outlook for OSFS. We considered historical
quotations and the prices of recorded
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Board of Directors
Ohio State Financial Services
July 18, 2001
Page 2
transactions in OSFS' common stock since its initial public offering. We
reviewed financial and stock market data of other savings institutions,
particularly in the Midwestern region of the United States, and the financial
and structural terms of several other recent transactions involving mergers and
acquisitions of savings institutions or proposed changes of control of
comparably situated companies.
For AFBC, we reviewed the audited financial statements, 10-K's, and Proxy
Statements for the years ended June 30, 1998, 1999, and 2000, the 10-Q's for the
quarters ended September 30, 2000 and December 31, 2000 and certain other
information deemed relevant.
For purposes of this opinion we have relied, without independent verification,
on the accuracy and completeness of the material furnished to us by OSFS and
AFBC and the material otherwise made available to us, including information from
published sources, and we have not made any independent effort to verify such
data. With respect to the financial information, including forecasts and asset
valuations we received from OSFS, we assumed (with your consent) that they had
been reasonably prepared reflecting the best currently available estimates and
judgment of OSFS' management. In addition, we have not made or obtained any
independent appraisals or evaluations of the assets or liabilities, and
potential and/or contingent liabilities of OSFS or AFBC. We have further relied
on the assurances of management of OSFS and AFBC that they are not aware of any
facts that would make such information inaccurate or misleading. We express no
opinion on matters of a legal, regulatory, tax or accounting nature or the
ability of the Merger, as set forth in the Agreement, to be consummated.
In rendering our opinion, we have assumed that in the course of obtaining the
necessary approvals for the Merger, no restrictions or conditions will be
imposed that would have a material adverse effect on the contemplated benefits
of the Merger to OSFS or the ability to consummate the Merger. Our opinion is
based on the market, economic and other relevant considerations as they exist
and can be evaluated on the date hereof.
Consistent with the engagement letter with you, we have acted as financial
advisor to OSFS in connection with the Merger and will receive a fee for such
services. In addition, OSFS has agreed to indemnify us for certain liabilities
arising out of our engagement by OSFS in connection with the Merger.
Based upon and subject to the foregoing, as outlined in the foregoing paragraphs
and based on such other matters as we considered relevant, it is our opinion
that as of the date hereof, the consideration to be paid by AFBC in the Merger
is fair, from a financial point of view, to the stockholders of OSFS.
This opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent, although this opinion
may be included in its
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Board of Directors
Ohio State Financial Services
July 18, 2001
Page 3
entirety in the proxy statement of OSFS used to solicit stockholder approval of
the Merger. It is understood that this letter is directed to the Board of
Directors of OSFS in its consideration of the Agreement, and is not intended to
be and does not constitute a recommendation to any stockholder as to how such
stockholder should vote with respect to the Merger.
Very truly yours,
Keefe, Bruyette, & Woods, Inc.
90
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
OHIO STATE FINANCIAL SERVICES, INC.
OHIO STATE FINANCIAL SERVICES, INC. SPECIAL MEETING OF SHAREHOLDERS
August 27, 2001
The undersigned shareholder of Ohio State Financial Services, Inc.
("OSFS") hereby constitutes and appoints Marianne Doyle and Sherri Yarbrough, or
either one of them, as the Proxy or Proxies of the undersigned with full power
of substitution and resubstitution, to vote at the Special Meeting of
Shareholders of OSFS to be held at the office of Bridgeport Savings and Loan
Association, 435 Main Street, Bridgeport, Ohio, on August 27, 2001, at 1:00 p.m.
p.m. local time (the "Special Meeting"), all of the shares of OSFS which the
undersigned is entitled to vote at the Special Meeting, or at any adjournment
thereof, on each of the following proposals, all of which are described in the
accompanying Proxy Statement:
1. The adoption of the Agreement and Plan of Merger between Ohio State
Financial Services, Inc. and Advance Financial Bancorp, dated April 18, 2001,
which provides for the acquisition of OSFS by Advance Financial, and the related
Plan of Merger between OSFS and AFB Acquisition Subsidiary, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, upon such other business incident to the
conduct of the Special Meeting as may properly come before the Special Meeting
or any adjournment or postponement thereof, including adjournment to allow for
additional solicitation of shareholder votes in order to obtain the required
vote to approve and adopt the Agreement and Plan of Merger and to approve the
transactions contemplated by the Agreement and Plan of Merger.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF OSFS.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO CHOICE IS MADE, THIS PROXY
WILL BE VOTED FOR THE ADOPTION OF THE AGREEMENT AND PLAN OF MERGER BETWEEN OSFS
AND ADVANCE FINANCIAL.
All Proxies previously given by the undersigned are hereby revoked.
Receipt of the Notice of the Special Meeting of Shareholders of OSFS and of the
accompanying Proxy Statement is hereby acknowledged.
91
Please sign exactly as your name appears on your Stock Certificate(s).
Executors, Administrators, Trustees, Guardians, Attorneys and Agents should give
their full titles.
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Signature Signature
- ---------------------------- ------------------------------
Print or Type Name Print or Type Name
Dated: Dated:
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PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE U.S.A.
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