AGREEMENT
---------
THIS AGREEMENT, dated as of December 17, 2003 ("Agreement"), is made by
and among NATIONAL PENN BANCSHARES, INC., a Pennsylvania corporation ("NPB"),
and PEOPLES FIRST INC., a Pennsylvania corporation ("PFI").
BACKGROUND
----------
1. NPB owns directly all of the outstanding capital stock of National
Penn Bank, a national banking association ("NPBank").
2. PFI owns directly all of the outstanding capital stock of The
Peoples Bank of Oxford, a Pennsylvania bank ("Peoples Bank").
3. NPB and PFI desire for PFI to merge with and into NPB, with NPB
surviving such merger, in accordance with the applicable laws of the
Commonwealth of Pennsylvania and this Agreement. Promptly thereafter, NPB
desires to merger Peoples Bank with and into NPBank, with NPBank surviving such
merger as a wholly-owned subsidiary of NPB, in accordance with the applicable
laws of the United States, the Commonwealth of Pennsylvania and this Agreement.
4. As a condition and inducement to NPB to enter into this Agreement,
the directors, certain officers and other substantial shareholders with
ownership interests in excess of five percent (5%) of PFI are each concurrently
executing a Letter Agreement in the form attached hereto as Exhibit 1 (the
"Letter Agreement").
5. As a condition and inducement to each of NPB and PFI to enter into
this Agreement, NPB has caused NPBank to enter into agreements (the "Key
Management Agreements") with George C. Mason, Hugh J. Garchinsky and Gary R.
Davis (the "Key Peoples Management") regarding the terms of their engagement and
employment, respectively, following consummation of the transactions
contemplated hereby.
6. Each of the parties, by signing this Agreement, adopts it as a plan
of reorganization as defined in IRC Section 368(a), and intends the Merger to be
a reorganization as defined in IRC Section 368(a).
7. NPB and PFI desire to provide the terms and conditions governing the
transactions contemplated herein.
1
AGREEMENT
---------
NOW THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the
parties, intending to be legally bound hereby, agree as follows:
ARTICLE I
---------
GENERAL
-------
1.01 Definitions. As used in this Agreement, the following terms shall
have the indicated meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
Adjusted PFI Option has the meaning given to that term in Section 2.07
of this Agreement.
Affiliate means, with respect to any corporation, any person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such corporation and, without
limiting the generality of the foregoing, includes any executive officer,
director or 10% equity owner of such corporation.
Aggregate Cash Consideration has the meaning given to that term in
Section 2.02(b).
Aggregate Common Stock Consideration has the meaning given to that term
in Section 2.02(b).
Agreement means this Agreement, including any amendment or supplement
hereto.
Application means an application for regulatory approval which is
required by the Contemplated Transactions.
Articles of Merger mean the articles of merger to be executed by NPB
and PFI and to be filed in the PDS, in accordance with the applicable laws of
the Commonwealth of Pennsylvania.
Bank Merger means the merger of Peoples Bank with and into NPBank, with
NPBank surviving such merger, contemplated by Section 1.03 of this Agreement.
Bank Plan of Merger has the meaning given to that term in Section 1.03
of this Agreement.
2
Banking Code means the Pennsylvania Banking Code of 1965, as amended.
BCL means the Pennsylvania Business Corporation Law of 1988, as
amended.
BHC Act means the Bank Holding Company Act of 1956, as amended.
Business Day means any day other than (i) a Saturday or Sunday or (ii)
a day on which NPBank is authorized or obligated by law or executive order to
close.
Cash Consideration has the meaning given to such term in Section
2.02(a)(ii) of this Agreement.
Cash Election Shares has the meaning given to such term in Section
2.02(b)(ii).
Closing Date means the date on which the last condition precedent
provided in this Agreement (other than those conditions which are to be
fulfilled at the Closing) has been fulfilled or waived, or as soon as
practicable thereafter.
Common Stock Consideration has the meaning given to such term in
Section 2.02(a)(i) of this Agreement.
Common Stock Election Shares has the meaning given to such term in
Section 2.02(b)(i).
Confidentiality Agreement means the confidentiality agreement dated
November 10, 2003 between NPB and Sandler O'Neill & Partners, L.P., as agent for
PFI.
Contemplated Transactions means all of the transactions contemplated by
this Agreement, including: (a) the merger of PFI with and into NPB, with NPB
surviving such merger; (b) the merger of Peoples Bank with and into NPBank, with
NPBank surviving such merger as a wholly-owned subsidiary of NPB; (c) the
performance by NPB and PFI of their respective covenants and obligations under
this Agreement; and (d) the performance by NPBank and Peoples Bank of their
respective covenants and obligations under the Bank Plan of Merger.
CRA means the Community Reinvestment Act of 1977, as amended, and the
rules and regulations promulgated from time to time thereunder.
Determination Date means the Business Day which is two (2) Business
Days immediately prior to the Closing Date.
Determination Period has the meaning given to such term in Section 2.05
of this Agreement.
3
Dissenting PFI Shares has the meaning given to that term in Section
2.06 of this Agreement.
Effective Date means the date upon which the Articles of Merger shall
be filed in the PDS and shall be the same as the Closing Date or as soon
thereafter as is practicable.
Election means either a Common Stock Election, a Cash Election or a
Mixed Election.
Election Deadline means 5:00 p.m., prevailing Eastern Time, on the day
that is two (2) Business Days prior to the Closing Date.
Election Form means a form, in such form as NPB and PFI shall mutually
agree, on which holders of PFI Common Stock shall make an Election.
Environmental Law means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Regulatory
Authority relating to (i) the protection, preservation or restoration of the
environment, including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource, and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated for the protection of human health, safety or the
environment, whether by type or by quantity, including any material containing
any such substance as a component.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
Exchange Act means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated from time to time thereunder.
Exchange Agent means the agent designated by NPB (as soon as
practicable following execution of this Agreement) to act as the exchange agent
for purposes of conducting the election procedures described in Section 2.02(b)
and the exchange procedure described in Section 2.08.
Exchange Ratio means the exchange ratio set forth in Section
2.02(a)(i), as it may be adjusted pursuant to Section 2.09.
FDIC means the Federal Deposit Insurance Corporation.
4
FRB means the Federal Reserve Board.
GAAP means accounting principles generally accepted in the United
States.
IRC means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
IRS means the Internal Revenue Service.
Key Management Agreements has the meaning given to such term in the
Background Section of this Agreement.
Key Peoples Management has the meaning given to such term in the
Background Section of this Agreement.
Knowledge of NPB means the knowledge of NPB's executive officers and
directors.
Knowledge of PFI means the knowledge of PFI's executive officers and
directors.
Letter Agreement has the meaning given to such term in the Background
Section of this Agreement.
Material Adverse Effect means a material adverse effect on (a) the
business, financial condition or results of operations of PFI on a consolidated
basis (when such term is used in Article III hereof) or NPB on a consolidated
basis (when such term is used in Article IV hereof) other than, in each case,
any change, circumstance or effect relating to (i) any change in the value of
the respective investment portfolios of NPB or PFI resulting from a change in
interest rates generally, (ii) any change occurring after the date hereof in any
federal or state law, rule or regulation or in GAAP, which change affects
banking institutions generally, including any change affecting the Bank
Insurance Fund, (iii) changes in general economic (except in the context of
determining a Material Adverse Effect for purposes of asset quality), legal,
regulatory or political conditions affecting banking institutions generally,
(iv) reasonable expenses (plus reasonable legal fees, costs and expenses
relating to any litigation arising as a result of the Merger) incurred in
connection with this Agreement and the transactions contemplated hereby, (v)
actions or omissions of a party (or any of its Subsidiaries) taken pursuant to
the terms of this Agreement with the prior written consent of the other party in
contemplation of the transactions contemplated hereby (including without
limitation any actions taken by PFI pursuant to Section 5.07 of this Agreement),
and (vi) any effect with respect to a party hereto caused, in whole or in
substantial part, by the other party, or (b) the ability of such party to
consummate the Contemplated Transactions.
5
Merger means the merger of PFI with and into NPB, contemplated by this
Agreement.
Merger Consideration has the meaning given to such term in Section
2.02(a)(ii) of this Agreement.
Mixed Election has the meaning given that term in Section 2.02(c) of
this Agreement.
NASD means the National Association of Securities Dealers, Inc.
Nasdaq means the National Market tier of The Nasdaq Stock Market
operated by the NASD.
No-Election Shares has the meaning given to such term in Section
2.02(b).
NPB means National Penn Bancshares, Inc., a Pennsylvania corporation.
NPBank means National Penn Bank, a national banking association, all
the outstanding capital stock of which is owned by NPB.
NPB/NPBank Bylaws Restrictions means the provisions of the NPB and NP
Bank bylaws that require the retirement of a director as of the annual meeting
next following that director's reaching age 72.
NPB Certificate has the meaning given to such term in Section 2.08(b)
of this Agreement.
NPB Common Stock means the shares of common stock, without par value,
of NPB.
NPB Disclosure Schedule means, collectively, the disclosure schedules
delivered by NPB to PFI at or prior to the execution and delivery of this
Agreement.
NPB ERISA Affiliate has the meaning given to such term in Section
4.13(a) of this Agreement.
NPB Financials means (a) the audited consolidated financial statements
of NPB as of December 31, 2002 and 2001 and for each of the three years in the
period ended December 31, 2002, and (b) the unaudited interim consolidated
financial statements of NPB for each calendar quarter after December 31, 2002.
6
NPB Market Value has the meaning given to such term in Section 2.05 of
this Agreement.
OCC means the Office of the Comptroller of the Currency.
PDB means the Department of Banking of the Commonwealth of
Pennsylvania.
PDS means the Department of State of the Commonwealth of Pennsylvania.
Peoples Bank means The Peoples Bank of Oxford, a Pennsylvania bank, all
the outstanding capital stock of which is owned by PFI.
Peoples Bank Board has the meaning given to that term in Section
5.07(c)(iv)(D) of this Agreement.
Peoples Bank Board Member means a director of PFI immediately prior to
the Closing Date who becomes, and on the date of determination is, a member of
the Peoples Bank Board.
Peoples Bank Division has the meaning given to that term in Section
5.07(c)(iv)(A) of this Agreement.
PFI means Peoples First, Inc., a Pennsylvania corporation.
PFI NPBank Nominee has the meaning given to that term in Section
5.07(c)(iii) of this Agreement.
PFI Benefit Plan has the meaning given to that term in Section 3.12 of
this Agreement.
PFI Certificate has the meaning given to that term in Section 2.08(a)
of this Agreement.
PFI Common Stock has the meaning given to that term in Section 3.02(a)
of this Agreement.
PFI Disclosure Schedule means, collectively, the disclosure schedules
delivered by PFI to NPB at or prior to the execution and delivery of this
Agreement.
PFI ERISA Affiliate has the meaning given to such term in Section
3.12(a) of this Agreement.
PFI Financials means (a) the audited consolidated financial statements
of PFI as of December 31, 2002 and 2001 and for each of the three years in the
7
period ended December 31, 2002, and (b) the unaudited interim consolidated
financial statements of PFI for each calendar quarter after December 31, 2002.
PFI Nominee has the meaning given to that term in Section 1.02(d)(i) of
this Agreement.
PFI Option has the meaning given to that term in Section 2.07 of this
Agreement.
PFI Option Plan means the stock option plan maintained by PFI
immediately prior to the Effective Date.
PFI Shareholders Meeting means the meeting of the holders of PFI Common
Stock concerning the Merger pursuant to the Prospectus/Proxy Statement.
Prospectus/Proxy Statement means the prospectus/proxy statement,
together with any supplements thereto, to be sent to holders of PFI Common Stock
in connection with the Contemplated Transactions.
Reallocated Cash Shares has the meaning given to that term in Section
2.02(d)(i)(C).
Reallocated Common Stock Shares has the meaning given to that term in
Section 2.02(d)(ii)(B).
Registration Statement means the registration statement on Form S-4,
including any pre-effective or post-effective amendments or supplements thereto,
as filed with the SEC under the Securities Act with respect to the NPB Common
Stock to be issued in connection with the Contemplated Transactions.
Regulatory Agreement has the meaning given to that term in Sections
3.11 and 4.12 of this Agreement.
Regulatory Authority means any agency or department of any federal,
state or local government or of any self-regulatory organization, including
without limitation the SEC, the PDB, the OCC, the FDIC, the NASD, and the
respective staffs thereof.
Rights means warrants, options, rights, convertible securities and
other capital stock equivalents which obligate an entity to issue its
securities.
Rights Agreement means the rights agreement dated August 23, 1989, as
amended August 21, 1999, between NPB and NPBank, as Rights Agent.
SEC means the Securities and Exchange Commission.
8
Securities Act means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time thereunder.
Securities Documents means all registration statements, schedules,
statements, forms, reports, proxy material, and other documents required to be
filed under the Securities Laws.
Securities Laws means the Securities Act and the Exchange Act and the
rules and regulations promulgated from time to time thereunder.
Subsidiary means any corporation, 50% or more of the capital stock of
which is owned, either directly or indirectly, by another entity, except any
corporation the stock of which is held in the ordinary course of the lending
activities of a bank.
1.02 The Merger.
(a) Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place on the Closing Date at a time and
place to be agreed upon by the parties hereto; provided, in any case, that all
conditions to closing set forth in Article VI of this Agreement (other than the
delivery of certificates, opinions, and other instruments and documents to be
delivered at the Closing) have been satisfied or waived at or prior to the
Closing Date.
(b) The Merger. Subject to the terms and conditions of this Agreement
and in accordance with the BCL, on the Effective Date:
(i) PFI shall merge with and into NPB;
(ii) the separate existence of PFI shall cease;
(iii) NPB shall be the surviving corporation in the Merger; and
(iv) all of the property (real, personal and mixed), rights,
powers, duties, obligations and liabilities of PFI shall be taken and deemed to
be transferred to and vested in NPB, as the surviving corporation in the Merger,
without further act or deed;
all in accordance with the applicable laws of the Commonwealth of Pennsylvania.
(c) NPB's Articles of Incorporation and Bylaws. On and after the
Effective Date, the articles of incorporation and bylaws of NPB, as in effect
immediately prior to the Effective Date, shall automatically be and remain the
articles of incorporation and bylaws of NPB, as the surviving corporation in the
Merger, until thereafter altered, amended or repealed.
9
(d) NPB's Board of Directors and Officers.
(i) On and after the Effective Date, (A) the directors of NPB
duly elected and holding office immediately prior to the Effective Date, and (B)
one person (the "PFI Nominee") selected by PFI's Board of Directors and approved
by NPB (which approval is hereby granted as to George C. Mason and will not
otherwise be unreasonably withheld) shall be the directors of NPB, as the
surviving corporation in the Merger, each to hold office until his successor is
elected and qualified or otherwise in accordance with applicable law, the
articles of incorporation and bylaws of NPB. NPB shall designate the PFI Nominee
as a Class I director with a term of office through April 2006 and NPB agrees to
re-nominate the PFI Nominee for at least one full three-year term thereafter.
(ii) If the PFI Nominee, or any successor, resigns, dies or is
otherwise removed from NPB's Board of Directors prior to the end of the Class I
term ending April 2009, the former PFI directors who are then serving on the
Peoples Bank Board, by a plurality vote, shall have the right to select the
successor to such PFI Nominee, or any successor, subject to (A) compliance with
the NPB/NPBank Bylaws Restrictions, (B) such person being "independent" as
defined by the SEC and Nasdaq, and (C) approval of such person by NPB (which
approval will not be unreasonably withheld). NPB shall take all reasonable steps
to elect such successor to the NPB Board of Directors.
(iii) On and after the Effective Date, the officers of NPB
duly elected and holding office immediately prior to the Effective Date shall be
the officers of NPB, as the surviving corporation in the Merger, each to hold
office until his or her successor is elected and qualified or otherwise in
accordance with applicable law, the articles of incorporation and bylaws of NPB.
1.03 Bank Merger. NPB and PFI shall each use their best efforts to
cause Peoples Bank to merge with and into NPBank, with NPBank surviving such
merger (the "Bank Merger") as soon as practicable after the Effective Date.
Concurrently with the execution of this Agreement, NPB shall cause NPBank to
execute, and PFI shall cause Peoples Bank to execute, the Bank Plan of Merger
attached hereto as Exhibit 2 (the "Bank Plan of Merger"). The Bank Merger shall
not be effected prior to the Effective Date.
ARTICLE II
----------
CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES
-----------------------------------------------
2.01 NPB Common Stock.
(a) Outstanding Shares. Each share of NPB Common Stock issued and
10
outstanding immediately prior to the Effective Date shall, on and after the
Effective Date, continue to be issued and outstanding as an identical share of
NPB Common Stock.
(b) Treasury Stock. Each share of NPB Common Stock issued and held in
the treasury of NPB immediately prior to the Effective Date, if any, shall, on
and after the Effective Date, continue to be issued and held in the treasury of
NPB.
2.02 PFI Common Stock.
(a) Conversion Alternatives. Subject to Sections 2.03, 2.04 and 2.06
below with respect to treasury stock, fractional shares and dissenting shares of
PFI Common Stock, each share of PFI Common Stock issued and outstanding
immediately prior to the Effective Date, shall, on the Effective Date, by reason
of the Merger and without any action on the part of the holder thereof, cease to
be outstanding and be converted into the right to receive, at the election of
the holder thereof:
(i) 1.505 shares of NPB Common Stock (the "Exchange Ratio"),
including the associated rights to purchase securities pursuant to the Rights
Agreement, subject to adjustment as provided in Section 2.09 below (the "Common
Stock Consideration"); or
(ii) $49.54 in cash (the "Cash Consideration," and
collectively with the Common Stock Consideration, the "Merger Consideration").
Notwithstanding the foregoing, (i) the number of shares of PFI Common Stock to
be converted into the right to receive the Common Stock Consideration on the
Effective Date (the "Aggregate Common Stock Consideration") shall be equal to
seventy percent (70%) of the total number of shares of PFI Common Stock issued
and outstanding on the Effective Date and (ii) the number of shares of PFI
Common Stock to be converted into the right to receive the Cash Consideration on
the Effective Date shall be equal to thirty percent (30%) of the total number of
shares of PFI Common Stock issued and outstanding on the Effective Date, minus
(x) the number of shares of PFI Common Stock, if any, with respect to which
dissenters' rights have been duly exercised and (y) the aggregate number of
shares with respect to which cash is paid in lieu of fractional shares pursuant
to Section 2.04 (the "Aggregate Cash Consideration").
(b) Election Procedures. NPB and PFI shall cause the Exchange Agent to
mail an Election Form to holders of PFI Common Stocknot more than sixty (60)
Business Days and not less than twenty (20) Business Days prior to the Election
Deadline. Each Election Form shall permit the holder (or in the case of nominee
record holders, the beneficial owner through proper instructions and
documentation):
(i) to elect to receive the Common Stock Consideration with
11
respect to all or a portion of their shares of PFI Common Stock (the "Common
Stock Election Shares"); or
(ii) to elect to receive the Cash Consideration with respect
to all or a portion of their shares of PFI Common Stock (the "Cash Election
Shares").
The Exchange Agent shall use reasonable efforts to make the Election Form
available to all persons who become holders of PFI Common Stock during the
period between the record date for the mailing of the Election Form and the
Election Deadline. Any holder's election shall have been properly made only if
the Exchange Agent shall have received at its designated office, by the Election
Deadline, a properly completed and signed Election Form accompanied by
certificates that immediately prior to the Effective Date represented issued and
outstanding shares of PFI Common Stock (the "PFI Certificates") to which such
Election Form relates, in form acceptable for transfer (or by an appropriate
guarantee of delivery of such PFI Certificates as set forth in such Election
Form from a firm which is an "eligible guarantor institution" (as defined in
Rule 17Ad-15 under the Exchange Act) provided that such PFI Certificates are in
fact delivered to the Exchange Agent by the time set forth in such guarantee of
delivery). If a holder of PFI Common Stock either: (i) does not submit a
properly completed Election Form before the Election Deadline; (ii) revokes an
Election Form prior to the Election Deadline and does not resubmit a properly
completed Election Form prior to the Election Deadline; or (iii) fails to
perfect his, her or its dissenters' rights pursuant to subsection 2.06 of this
Agreement, the shares of PFI Common Stock held by such holder shall be
designated "No-Election Shares." Nominee record holders who hold PFI Common
Stock on behalf of multiple beneficial owners shall be required to indicate how
many of the shares held by them are Common Stock Election Shares, Cash Election
Shares and No-Election Shares.
For purposes of this Section 2.02, any Dissenting PFI Shares shall be deemed to
be Cash Election Shares and, with respect to such shares, the holders thereof
shall in no event be classified as holders of Reallocated Common Stock Shares.
(c) Mixed Election. Subject to the immediately following sentence, each
record holder of shares of PFI Common Stock immediately prior to the Effective
Date shall be entitled to elect to receive shares of NPB Common Stock for a
portion of such holder's shares of PFI Common Stock and cash for the remaining
portion of such holder's shares of PFI Common Stock (the "Mixed Election"). With
respect to each holder of PFI Common Stock who makes a Mixed Election, the
shares of PFI Common Stock that such holder elects to be converted into the
right to receive the Common Stock Consideration shall be treated as Common Stock
Election Shares and the shares such holder elects to be converted into the right
to receive the Cash Consideration shall be treated as Cash Election Shares.
(d) Effective Election. Any Election shall be properly made only if the
12
Exchange Agent shall have actually received a properly completed Election Form
by the Election Deadline. Any Election Form may be revoked or changed by the
person submitting such Election Form to the Exchange Agent by written notice to
the Exchange Agent only if such written notice is actually received by the
Exchange Agent at or prior to the Election Deadline. The Exchange Agent shall
have reasonable discretion to (i) determine whether any election, modification
or revocation is received, (ii) determine whether any election, modification or
revocation has been properly made, and (iii) disregard immaterial defects in any
Election Form. Good faith determinations made by the Exchange Agent regarding
such matters shall be binding and conclusive. Neither NPB, PFI nor the Exchange
Agent shall be under any obligation to notify any person of any defect in an
Election Form.
(e) Allocation. The Exchange Agent shall effect the allocation among
the holders of PFI Common Stock of rights to receive NPB Common Stock or cash in
accordance with the Election Forms as follows:
(i) Aggregate Cash Consideration Undersubscribed. If the
amount of cash represented by the aggregate Cash Election Shares is less than
the Aggregate Cash Consideration, then:
(A) all Cash Election Shares (subject to Section 2.06
with respect to Dissenting PFI Shares) shall be converted into the right to
receive cash;
(B) No-Election Shares shall be deemed to be Cash
Election Shares to the extent necessary to have the amount of cash represented
by the aggregate Cash Election Shares equal the Aggregate Cash Consideration. If
less than all of the No-Election Shares need to be treated as Cash Election
Shares, then the Exchange Agent shall select which No-Election Shares shall be
treated as Cash Election Shares in such manner as the Exchange Agent, in its
sole discretion, shall determine. All remaining No-Election Shares shall
thereafter be treated as Common Stock Election Shares;
(C) If all of the No-Election Shares are treated as
Cash Election Shares under the preceding subsection and the amount of cash
represented by the aggregate Cash Election Shares remains less than the
Aggregate Cash Consideration, then the Exchange Agent shall convert, on a pro
rata basis described in subsection 2.02(d)(iv) below, a sufficient number of
Common Stock Election Shares into Cash Election Shares ("Reallocated Cash
Shares") such that the amount of cash represented by the aggregate Cash Election
Shares, including the Reallocated Cash Shares, equals the Aggregate Cash
Consideration, and thereafter all Reallocated Cash Shares will be converted into
the right to receive cash; and
(D) the Common Stock Election Shares which are not
Reallocated Cash Shares shall be converted into the right to receive NPB Common
Stock.
13
(ii) Aggregate Cash Consideration Oversubscribed. If the
amount of cash represented by the aggregate Cash Election Shares is more than
the Aggregate Cash Consideration, then:
(A) all Common Stock Election Shares and No-Election
Shares shall be converted into the right to receive NPB Common Stock;
(B) the Exchange Agent shall convert, on a pro rata
basis described in subsection 2.02(d)(iv) below, a sufficient number of Cash
Election Shares (excluding Dissenting PFI Shares) into Common Stock Election
Shares ("Reallocated Common Stock Shares") such that the amount of cash
represented by the remaining aggregate Cash Election Shares equals the Aggregate
Cash Consideration, and thereafter all Reallocated Common Stock Shares will be
converted into the right to receive NPB Common Stock; and
(C) the Cash Election Shares (subject to Section 2.06
with respect to Dissenting PFI Shares) which are not Reallocated Common Stock
Shares shall be converted into the right to receive cash.
(iii) Aggregate Cash Consideration and Aggregate Common Stock
Consideration Satisfied. If the amount of cash represented by the aggregate Cash
Election Shares is equal to the Aggregate Cash Consideration, then subsections
(d)(i) and (ii) shall not apply, and all Cash Election shares (subject to
Section 2.06 with respect to Dissenting PFI Shares) shall be converted into the
right to receive cash and all Common Stock Election Shares and all No-Election
Shares shall be converted into the right to receive NPB Common Stock.
(iv) Pro Rata Reallocations. If the Exchange Agent is required
pursuant to subsection 2.02(d)(i)(C) to convert some Common Stock Election
Shares into Reallocated Cash Shares, each holder of Common Stock Election Shares
shall be allocated a pro rata portion of the total Reallocated Cash Shares. If
the Exchange Agent is required pursuant to subsection 2.02(d)(ii)(B) to convert
some Cash Election Shares into Reallocated Common Stock Shares, each holder of
Cash Election Shares shall be allocated a pro rata portion of the total
Reallocated Common Stock Shares.
2.03 Treasury Stock. Each share of PFI Common Stock issued and held in
the treasury of PFI as of the Effective Date, if any, shall be cancelled, and no
cash, stock or other property shall be delivered in exchange therefor.
2.04 Fractional Shares. No fractional shares of NPB Common Stock and no
scrip or certificates therefor shall be issued in connection with the Merger.
Any former holder of PFI Common Stock who would otherwise be entitled to receive
a fraction of a share of NPB Common Stock shall receive, in lieu thereof, cash
in an amount equal to such fraction of a share multiplied by the closing price
14
of NPB Common Stock on the Closing Date.
2.05 Market Value of NPB Common Stock. For purposes of this Agreement,
the market value of a share of NPB Common Stock ("NPB Market Value") shall be
deemed to be the average of the closing sale price of a share of NPB Common
Stock, as reported on Nasdaq, as published in the Wall Street Journal, for the
ten(10) trading days (the "Determination Period") ending on the Determination
Date.
2.06 Dissenting PFI Shareholders.
(a) The outstanding shares of PFI Common Stock, the holders of which
have timely filed written notices of an intention to demand appraisal for their
shares ("Dissenting PFI Shares") pursuant to Subchapter D of the BCL and have
not effectively withdrawn or lost their dissenters' rights under the BCL, shall
not be converted into or represent a right to receive the Merger Consideration
under this Agreement, and the holders thereof shall be entitled only to such
rights as are granted by Subchapter D of the BCL.
(b) If any such holder of PFI Common Stock shall have failed to perfect
or effectively shall have withdrawn or lost such right, and if such holder shall
have delivered a properly completed Election Form to the Exchange Agent by the
Election Deadline, the Dissenting PFI Shares held by such holder shall be
converted into a right to receive the Common Stock Consideration or the Cash
Consideration in accordance with the applicable provisions of this Agreement. If
any such holder of PFI Common Stock shall have failed to perfect or effectively
shall have withdrawn or lost such right, and if such holder shall not have
delivered a properly completed Election Form to the Exchange Agent by the
Election Deadline, the Dissenting PFI Shares held by such holder shall be
designate No-Election Shares and shall be converted on a share by share basis
into either the right to receive the Common Stock Consideration or the Cash
Consideration in accordance with the applicable provisions of this Agreement.
(c) All payments in respect of Dissenting PFI Shares, if any, will be
made by NPB.
2.07 Stock Options.
(a) On and after the Effective Date, each non-qualified stock option
(each, a "PFI Option") to purchase shares of PFI Common Stock issued by PFI and
outstanding on the Effective Date shall remain outstanding, subject to the
following adjustments:
(i) each PFI Option will constitute a right to purchase a
number of shares of NPB Common Stock determined in accordance with Section
2.07(a)(ii), below, at a price equal to the amount determined in accordance with
Section 2.07(a)(iii), below;
15
(ii) the number of shares of NPB Common Stock subject to each
PFI Option immediately following the Effective Date will be equal to the
quotient of (1) the product of the number of shares of PFI Common Stock
originally subject to that option times the original exercise price of that
option; divided by (2) the adjusted exercise price of that option immediately
following the Effective Date, as determined in accordance with Section
2.07(a)(iii), below; and
(iii) the exercise price of each PFI Option immediately after
the Effective Date will be equal to the quotient of: (x) the product of the
closing price of NPB Common Stock on the Effect Date times the original exercise
price of that option, divided by (y) $49.54 (the Cash Consideration).
(b) Except as otherwise provided in this section, the terms and
conditions of all PFI Options will not be changed and such options will remain
outstanding and will be exercisable in accordance with the terms of the
applicable PFI Option Plan and stock option agreement. As adjusted pursuant to
this section, each PFI Option will be referred to herein as an "Adjusted PFI
Option".
(c) As soon as practicable after the Effective Date, but in no event
later than ten (10) Business Days after the Effective Date, NPB shall deliver to
the holders of Adjusted PFI Options appropriate notices setting forth the effect
of the adjustments described in Section 2.07(a), above. NPB shall comply with
the terms of the PFI Option Plan.
(d) NPB shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of NPB Common Stock for delivery upon
exercise of Adjusted PFI Options in accordance with this Agreement. Within ten
(10) Business Days after the Effective Date, NPB shall file a registration
statement on Form S-8 (or any successor other appropriate forms), with respect
to the shares of NPB Common Stock issuable upon exercise of the Adjusted PFI
Options and shall use its reasonable best efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained thereon) for so long
as such options remain outstanding.
(e) With respect to those individuals who, subsequent to the Merger,
will be subject to the reporting requirements under Section 16(a) of the
Exchange Act, where applicable, NPB shall administer the PFI Option Plan in a
manner consistent with the exemptions provided by Rule 16b-3 promulgated under
the Exchange Act.
2.08 Surrender and Exchange of PFI Stock Certificates.
(a) Exchange Fund. On or prior to the Effective Date, NPB
shall deposit with the Exchange Agent, in trust for the benefit of holders of
16
shares of PFI Common Stock, sufficient cash and certificates representing shares
of NPB Common Stock to make all payments and deliveries to shareholders of PFI
pursuant to this Article II. Any cash and certificates for NPB Common Stock
deposited with the Exchange Agent shall hereinafter be referred to as the
"Exchange Fund."
(b) Exchange Procedures for Effective Election Forms Submitted by
Election Deadline. As soon as reasonably practicable after the Effective Date
(and in any case no later than ten (10) Business Days thereafter), NPB shall
cause the Exchange Agent to mail the Merger Consideration to shareholders of PFI
who have submitted effective Election Forms prior to the Election Deadline.
(c) Exchange Procedures in Absence of Effective Election Forms
Submitted by Effective Deadline. As soon as reasonably practicable after the
Effective Date (and in any case no later than ten (10) Business Days
thereafter), NPB shall cause the Exchange Agent to mail to each record holder of
PFI Common Stock immediately prior to the Effective Date who has not surrendered
PFI Certificates representing all of the shares of PFI Common Stock owned by
such holder pursuant to Section 2.02(b), a letter of transmittal which shall
specify that delivery of the PFI Certificates shall be effected, and risk of
loss and title to the PFI Certificates shall pass, only upon delivery of the PFI
Certificates to the Exchange Agent, and which letter shall be in customary form
and have such other provisions as NPB may reasonably specify and instructions
for effecting the surrender of such PFI Certificates in exchange for the Cash
Consideration and/or the Common Stock Consideration, as the case may be. Upon
surrender of a PFI Certificate to the Exchange Agent together with such letter
of transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such PFI Certificate shall be entitled to receive within
ten (10) Business Days thereafter and in exchange therefor (i) a certificate
representing, in the aggregate, the whole number of shares of NPB Common Stock
that such holder has the right to receive pursuant to this Article II and/or
(ii) a check in the amount equal to the cash that such holder has the right to
receive pursuant to this Article II. No interest will be paid or will accrue on
any cash payment pursuant to this Section 2.08.
(d) Each certificate for shares of NPB Common Stock (each, a "NPB
Certificate") issued in exchange for PFI Certificates pursuant to this Section
2.08 shall be dated the Effective Date and be entitled to dividends,
distributions and all other rights and privileges pertaining to such shares of
NPB Common Stock from the Effective Date. Until surrendered, each PFI
Certificate shall, from and after the Effective Date, evidence solely the right
to receive the Merger Consideration.
(e) If a PFI Certificate is exchanged on a date following one or more
record dates after the Effective Date for the payment of dividends or any other
distribution on shares of NPB Common Stock, NPB shall pay to the holder of such
PFI Certificate cash in an amount equal to dividends payable on the shares of
NPB Common Stock issued in exchange therefore and pay or deliver any other
17
distribution to which such shareholder is entitled. No interest shall accrue or
be payable in respect of dividends or any other distribution otherwise payable
under this Section 2.02(e) upon surrender of PFI Certificates. Notwithstanding
the foregoing, no party hereto shall be liable to any holder of PFI Common Stock
for any amount paid in good faith to a public official or agency pursuant to any
applicable abandoned property, escheat or similar law. Until such time as PFI
Certificates are surrendered to NPB for exchange, NPB shall have the right to
withhold dividends or any other distributions on the shares of NPB Common Stock
issuable to such shareholder.
(f) Upon the Effective Date, the stock transfer books for PFI Common
Stock will be closed and no further transfers of PFI Common Stock will
thereafter be made or recognized. All PFI Certificates surrendered pursuant to
this Section 2.08 will be cancelled.
(g) If there is a transfer of ownership of PFI Common Stock which is
not registered in the transfer records of PFI, one or more NPB Certificates
evidencing, in the aggregate, the proper number of shares of NPB Common Stock, a
check in the proper amount of cash in lieu of any fractional shares, the per
share Cash Consideration, and any dividends or other distributions to which such
holder is entitled pursuant to Section 2.08(e), as applicable and appropriate,
may be issued with respect to such PFI Common Stock to such a transferee if the
PFI Certificate representing such shares of PFI Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid.
(h) If any PFI Certificate shall have been lost, stolen or destroyed,
the Exchange Agent shall deliver in exchange for such lost, stolen or destroyed
PFI Certificate, upon the making of a sworn affidavit of that fact by the holder
thereof in form satisfactory to the Exchange Agent, the Merger Consideration,
and any dividends or other distributions to which such holder is entitled
pursuant to this Section 2.08 as may be required pursuant to this Agreement;
provided, however, that the Exchange Agent may, in its sole discretion and as a
condition precedent to the delivery of the Merger Consideration to which the
holder of such PFI Certificate is entitled as a result of the Merger, require
the owner of such lost, stolen or destroyed PFI Certificate to deliver a bond in
such amount as it may direct as indemnity against any claim that may be made
against PFI, NPB or the Exchange Agent or any other party with respect to the
PFI Certificate alleged to have been lost, stolen or destroyed.
2.09 Anti-Dilution Provisions. If NPB shall, at any time before the
Effective Date:
(i) declare a dividend in shares of NPB Common Stock with a
record date on or prior to the Closing Date;
18
(ii) combine the outstanding shares of NPB Common Stock into a
smaller number of shares;
(iii) resolve to effect a split or subdivide the outstanding
shares of NPB Common Stock with a record date on or prior to the Closing Date;
or
(iv) reclassify the shares of NPB Common Stock;
then, in any such event, the number of shares of NPB Common Stock to be
delivered to PFI shareholders who are entitled to receive shares of NPB Common
Stock in exchange for shares of PFI Common Stock shall be adjusted so that each
PFI shareholder shall be entitled to receive such number of shares of NPB Common
Stock as such shareholder would have been entitled to receive if the Effective
Date had occurred prior to the happening of such event. (By way of illustration,
if NPB shall declare a stock dividend of 3% payable with respect to a record
date on or prior to the Effective Date, the Exchange Ratio shall be adjusted
upward by 3%.) In addition, in the event that, prior to the Effective Date, NPB
enters into an agreement pursuant to which shares of NPB Common Stock would be
converted into shares or other securities or obligations of another corporation,
proper provision shall be made in such agreement so that each PFI shareholder
entitled to receive shares of NPB Common Stock in the Merger shall be entitled
to receive such number of shares or other securities or amount or obligations of
such other corporation as such shareholder would be entitled to receive if the
Effective Date had occurred immediately prior to the happening of such event.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF PFI
-------------------------------------
PFI hereby represents and warrants to NPB as follows:
3.01 Organization.
(a) PFI is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. PFI is a bank
holding company duly registered under the BHC Act. PFI has the corporate power
and authority to carry on its businesses and operations as now being conducted
and to own and operate the properties and assets now owned and being operated by
it. PFI is duly licensed, registered or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing, registration or qualification necessary, except where the
failure to be so licensed, registered or qualified would not have a Material
19
Adverse Effect, and all such licenses, registrations and qualifications are in
full force and effect in all material respects.
(b) Peoples Bank is a bank duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. Peoples Bank has
the corporate power and authority to carry on its business and operations as now
being conducted and to own and operate the properties and assets now owned and
being operated by it. Peoples Bank is duly licensed, registered or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing, registration or qualification necessary, except
where the failure to be so licensed, registered or qualified would not have a
Material Adverse Effect, and all such licenses, registrations and qualifications
are in full force and effect in all material respects.
(c) The deposits of Peoples Bank are insured by the Bank Insurance Fund
of the FDIC to the extent provided in the Federal Deposit Insurance Act.
(d) PFI has no Subsidiaries other than Peoples Bank and those
identified in PFI Disclosure Schedule 3.01(d).
(e) The respective minute books of PFI and each PFI Subsidiary
accurately record, in all material respects, all material corporate actions of
their respective shareholders and boards of directors, including committees, in
each case in accordance with normal business practice of PFI and the PFI
Subsidiary.
(f) PFI has delivered to NPB true and correct copies of the articles of
incorporation and bylaws of PFI and Peoples Bank, and the articles of
incorporation and bylaws of each other PFI Subsidiary, each as in effect on the
date hereof.
3.02 Capitalization.
(a) The authorized capital stock of PFI consists of 10,000,000 shares
of common stock, par value $1.00 per share ("PFI Common Stock"), of which at the
date hereof 2,956,288 shares are validly issued and outstanding, fully paid and
nonassessable, and free of preemptive rights, and 96,920 are held as treasury
shares. PFI has not issued nor is PFI bound by any subscription, option,
warrant, call, commitment, agreement or other Right of any character relating to
the purchase, sale, or issuance of, or right to receive dividends or other
distributions on, any shares of PFI Common Stock or any other security of PFI or
any securities representing the right to vote, purchase or otherwise receive any
shares of PFI Common Stock or any other security of PFI, except (i) for PFI
Options for 85,950 shares of PFI Common Stock issued and outstanding under the
PFI Stock Option Plan, (ii) pursuant to PFI's Dividend Reinvestment Plan, and
(iii) this Agreement.
20
(b) Except as set forth in PFI Disclosure Schedule 3.02(b), PFI owns,
directly or indirectly, all of the capital stock of Peoples Bank and the other
PFI Subsidiaries, free and clear of any liens, security interests, pledges,
charges, encumbrances, agreements and restrictions of any kind or nature. Except
for the Bank Plan of Merger, there are no subscriptions, options, warrants,
calls, commitments, agreements or other Rights outstanding with respect to the
capital stock of Peoples Bank or any other PFI Subsidiary. Except for the PFI
Subsidiaries, PFI does not possess, directly or indirectly, any material equity
interest in any corporation, except for (i) equity interests in Peoples Bank's
investment portfolio, (ii) equity interests held in connection with Peoples
Bank's commercial loan activities and (iii) as set forth on PFI Disclosure
Schedule 3.02(b).
(c) To the Knowledge of PFI, except as set forth on PFI Disclosure
Schedule 3.02(c) or as disclosed in PFI's proxy materials used in connection
with its 2003 annual meeting of shareholders, no person or group is the
beneficial owner of 5% or more of the outstanding shares of PFI Common Stock
(the terms "person", "group" and "beneficial owner" are as defined in Section
13(d) of the Exchange Act, and the rules and regulations thereunder).
3.03 Authority; No Violation.
(a) PFI has full corporate power and authority to execute and deliver
this Agreement and to consummate the Contemplated Transactions. The execution
and delivery of this Agreement by PFI and the consummation by PFI of the
Contemplated Transactions have been duly and validly approved by the Board of
Directors of PFI and, except for approval by the shareholders of PFI as required
by the BCL, no other corporate proceedings on the part of PFI are necessary to
consummate the Merger. This Agreement has been duly and validly executed and
delivered by PFI and, subject to approval by the shareholders of PFI and subject
to receipt of the required approvals of Regulatory Authorities described in
Section 4.04 hereof, constitutes the valid and binding obligation of PFI,
enforceable against PFI in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of equity.
(b) (i) The execution and delivery of this Agreement by PFI, (ii)
subject to receipt of approvals from the PFI shareholders and the Regulatory
Authorities referred to in Section 4.04 hereof and PFI's and NPB's compliance
with any conditions contained therein, the consummation of the Merger, and (iii)
compliance by PFI or any PFI Subsidiary with any of the terms or provisions
hereof, do not and will not:
(A) conflict with or result in a breach of any
provision of the respective articles
of incorporation or bylaws of PFI or any PFI Subsidiary;
(B) violate any statute, rule, regulation, judgment,
order, writ, decree or injunction applicable to PFI or any PFI Subsidiary or any
of their respective properties or assets; or
21
(C) except as described in PFI Disclosure Schedule
3.03, violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, or acceleration
of, the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of PFI or any PFI Subsidiary
under any of the terms or conditions of any note, bond, mortgage, indenture,
license, lease, agreement, commitment or other instrument or obligation to which
PFI or any PFI Subsidiary is a party, or by which they or any of their
respective properties or assets may be bound or affected,
excluding from clauses (B) and (C) hereof, any items which, in the aggregate,
would not have a Material Adverse Effect.
3.04 Consents. No consents or approvals of, or filings or registrations
with, any public body or authority are necessary, and except as described in PFI
Disclosure Schedule 3.04, no consents or approvals of any third parties are
necessary, in connection with the execution and delivery of this Agreement by
PFI or the Bank Plan of Merger by Peoples Bank or, subject to the consents,
approvals, filings and registrations from or with the Regulatory Authorities
referred to in Section 4.04 hereof and compliance with any conditions contained
therein and subject to the approval of this Agreement by the shareholders of PFI
as required under the BCL, the consummation by PFI or Peoples Bank of the
Contemplated Transactions.
3.05 Financial Statements.
(a) PFI has delivered to NPB the PFI Financials, except those
pertaining to quarterly periods commencing after September 30, 2003, which it
will deliver to NPB within 45 days after the end of the respective quarter. The
delivered PFI Financials fairly present, in all material respects, the
consolidated financial position, results of operations and cash flows of PFI as
of and for the periods ended on the dates thereof, in accordance with GAAP
consistently applied, and, in the case of interim period financial statements,
which are subject to normal year-end adjustments and footnotes thereto.
(b) To the Knowledge of PFI and except as set forth in PFI Disclosure
Schedule 3.05(b), PFI did not, as of the date of the balance sheets referred to
below,have any liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise, which are not fully reflected or reserved
against in the balance sheets included in the PFI Financials at the date of such
balance sheets which would have been required to be reflected therein in
accordance with GAAP consistently applied or disclosed in a footnote thereto,
except for liabilities and obligations which were incurred in the ordinary
course of business consistent with past practice, and except for liabilities and
22
obligations which are within the subject matter of a specific representation and
warranty herein or which otherwise have not had a Material Adverse Effect.
3.06 No Material Adverse Change. Neither PFI nor any PFI Subsidiary has
suffered any adverse change in their respective assets, business, financial
condition or results of operations since September 30, 2003 which change has had
a Material Adverse Effect.
3.07 Taxes.
(a) PFI and the PFI Subsidiaries are members of the same affiliated
group within the meaning of IRC Section 1504(a) of which PFI is a common parent.
PFI has filed, and will file, all material federal, state and local tax returns
required to be filed by, or with respect to, PFI and the PFI Subsidiaries on or
prior to the Closing Date, except to the extent that any failure to file or any
inaccuracies would not, individually or in the aggregate, have a Material
Adverse Effect, and has paid or will pay, or made or will make, provisions for
the payment of all federal, state and local taxes which are shown on such
returns to be due for the periods covered thereby from PFI or any PFI Subsidiary
to any applicable taxing authority, on or prior to the Closing Date, other than
taxes which (i) are not delinquent or are being contested in good faith, (ii)
have not been finally determined, or (iii) the failure to pay would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) No consent pursuant to IRC Section 341(f) has been filed, or will
be filed prior to the Closing Date, by or with respect to PFI or any PFI
Subsidiary.
(c) To the Knowledge of PFI, there are no material disputes pending, or
claims asserted in writing, for taxes or assessments upon PFI or any PFI
Subsidiary, nor has PFI or any PFI Subsidiary been requested in writing to give
any currently effective waivers extending the statutory period of limitation
applicable to any federal, state, county or local income tax return for any
period.
(d) Proper and accurate amounts have been withheld by PFI and each PFI
Subsidiary from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable federal,
state and local laws, except where failure to do so is not reasonably likely to
have a Material Adverse Effect.
3.08 Contracts.
(a) Except as described in PFI Disclosure Schedule 3.08(a) or 3.12,
neither PFI nor any PFI Subsidiary is a party to or subject to:
(i) any employment, consulting, severance, "change-in-control"
23
or termination contract or arrangement with any officer, director, employee,
independent contractor, agent or other person, except for "at will"
arrangements;
(ii) any plan, arrangement or contract providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit sharing or
similar arrangements for or with any officer, director, employee, independent
contractor, agent or other person;
(iii) any collective bargaining agreement with any labor union
relating to employees;
(iv) any agreement which by its terms limits the payment of
dividends by PFI or any PFI Subsidiary;
(v) except in the ordinary course of business, any material
instrument evidencing or related to indebtedness for borrowed money, whether
directly or indirectly, by way of purchase money obligation, conditional sale,
lease purchase, guaranty or otherwise, in respect of which PFI or any PFI
Subsidiary is an obligor to any person, other than deposits, repurchase
agreements, bankers acceptances and "treasury tax and loan" accounts established
in the ordinary course of business, instruments relating to transactions entered
into in the customary course of the banking business of Peoples Bank, and
transactions in "federal funds", or which contains financial covenants or other
restrictions, other than those relating to the payment of principal and interest
when due, which would be applicable on or after the Closing Date;
(vi) any contract, other than this Agreement, which restricts
or prohibits it from engaging in any type of business permissible under
applicable law;
(vii) any contract, plan or arrangement which provides for
payments or benefits in certain circumstances which, together with other
payments or benefits payable to any participant therein or party thereto, might
render any portion of any such payments or benefits subject to disallowance of
deduction therefor as a result of the application of Section 280G of the IRC;
(viii) except in the ordinary course of business, any lease
for real property;
(ix) any contract or arrangement with any broker-dealer or
investment adviser;
(x) any investment advisory contract with any investment
company registered under the Investment Company Act of 1940; or
(xi) any contract or arrangement with, or membership in, any
local clearing house or self-regulatory organization.
24
(b) (i) All the contracts, plans, arrangements and instruments listed
in PFI Disclosure Schedule 3.08(a) or 3.12 are in full force and effect on the
date hereof, and neither PFI, any PFI Subsidiary nor, to the Knowledge of PFI,
any other party to any such contract, plan, arrangement or instrument, has
breached any provision of, or is in default under any term of, any such
contract, plan, arrangement or instrument the breach of which or default under
which will have a Material Adverse Effect, and no party to any such contract,
plan, arrangement or instrument will have the right to terminate any or all of
the provisions thereof as a result of the transactions contemplated by this
Agreement, the termination of which will have a Material Adverse Effect.
(ii) Except as otherwise described in PFI Disclosure Schedule
3.08(a) or 3.12, no plan, employment agreement, termination agreement or similar
agreement or arrangement to which PFI or any PFI Subsidiary is a party or by
which PFI or any PFI Subsidiary may be bound:
(A) contains provisions which permit an employee or
an independent contractor to terminate it without cause and continue to accrue
future benefits thereunder;
(B) provides for acceleration in the vesting of
benefits thereunder upon the occurrence of a change in ownership or control or
merger or other acquisition of PFI or any PFI Subsidiary; or
(C) requires PFI or any PFI Subsidiary to provide a
benefit in the form of PFI Common Stock or determined by reference to the value
of PFI Common Stock.
3.09 Ownership of Property; Insurance Coverage.
(a) PFI and each PFI Subsidiary has, and will have as to property
acquired after the date hereof, good, and as to real property, marketable, title
to all material assets and properties owned by PFI or such PFI Subsidiary,
whether real or personal, tangible or intangible, including securities, assets
and properties reflected in the balance sheets contained in the PFI Financials
or acquired subsequent thereto (except to the extent that such securities are
held in any fiduciary or agency capacity and except to the extent that such
assets and properties have been disposed of for fair value, in the ordinary
course of business, or have been disposed of as obsolete since the date of such
balance sheets), subject to no encumbrances, liens, mortgages, security
interests or pledges, except:
(i) those items that secure liabilities for borrowed money and
that are described in PFI Disclosure Schedule 3.09(a) or permitted under Article
V hereof;
(ii) statutory liens for amounts not yet delinquent or which
are being contested in good faith;
25
(iii) liens for current taxes not yet due and payable;
(iv) pledges to secure deposits and other liens incurred in
the ordinary course of banking business;
(v) such imperfections of title, easements and encumbrances,
if any, as are not material in character, amount or extent; and
(vi) dispositions and encumbrances for adequate consideration
in the ordinary course of business.
PFI and each PFI Subsidiary have the right under leases of material properties
used by PFI or such PFI Subsidiary in the conduct of their respective businesses
to occupy and use all such properties in all material respects as presently
occupied and used by them.
(b) With respect to all agreements pursuant to which PFI or any PFI
Subsidiary has purchased securities subject to an agreement to resell, if any,
PFI or such PFI Subsidiary has a valid, perfected first lien or security
interest in the securities or other collateral securing the repurchase
agreement, and the value of such collateral equals or exceeds the amount of the
debt secured thereby, except to the extent that any failure to obtain such a
lien or maintain such collateral would not, individually or in the aggregate,
have a Material Adverse Effect.
(c) PFI and each PFI Subsidiary maintain insurance in amounts
considered by PFI to be reasonable for their respective operations, and such
insurance is similar in scope and coverage in all material respects to that
maintained by other businesses similarly situated. Neither PFI nor any PFI
Subsidiary has received notice from any insurance carrier that:
(i) such insurance will be cancelled or that coverage
thereunder will be reduced or eliminated; or
(ii) premium costs with respect to such insurance will be
substantially increased;
except to the extent such cancellation, reduction, elimination or increase would
not have a Material Adverse Effect.
(d) PFI and each PFI Subsidiary maintain such fidelity bonds and errors
and omissions insurance as may be customary or required under applicable laws or
regulations.
26
3.10 Legal Proceedings. Except as set forth in PFI Disclosure Schedule
3.10, neither PFI nor any PFI Subsidiary is a party to any, and there are no
pending or, to the Knowledge of PFI, threatened, legal, administrative,
arbitration or other proceedings, claims, actions, customer complaints, or
governmental investigations or inquiries of any nature:
(a) against PFI or any PFI Subsidiary;
(b) to which the assets of PFI or any PFI Subsidiary are subject;
(c) challenging the validity or propriety of any of the Contemplated
Transactions; or
(d) which could materially adversely affect the ability of PFI, Peoples
Bank or any other PFI Subsidiary to perform their respective obligations under
this Agreement and the Bank Plan of Merger;
except for any proceedings, claims, actions, investigations, or inquiries
referred to in clauses (a) or (b) which, individually or in the aggregate, would
not have a Material Adverse Effect.
3.11 Compliance with Applicable Law.
(a) PFI and each PFI Subsidiary hold all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under, and have complied in all material respects with, applicable
laws, statutes, orders, rules or regulations of any Regulatory Authority
relating to them, other than where such failure to hold or such noncompliance
will neither result in a limitation in any material respect on the conduct of
its businesses nor otherwise have a Material Adverse Effect.
(b) PFI and each PFI Subsidiary have filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that they were required to file with any Regulatory Authority, and have
filed all other reports and statements required to be filed by them, including
without limitation any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, any state or any Regulatory
Authority, and have paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report, registration or
statement or to pay such fees and assessments, either individually or in the
aggregate, would not have a Material Adverse Effect.
(c) No Regulatory Authority has initiated any proceeding or, to the
Knowledge of PFI, investigation into the business or operations of PFI or any
PFI Subsidiary, except where any such proceedings or investigations will not,
individually or in the aggregate, have a Material Adverse Effect, or such
proceedings or investigations have been terminated or otherwise resolved.
27
(d) Neither PFI nor any PFI Subsidiary has received any notification or
communication from any Regulatory Authority:
(i) asserting that PFI or any PFI Subsidiary is not in
substantial compliance with any of the statutes, regulations or ordinances which
such Regulatory Authority enforces, unless such assertion has been waived,
withdrawn or otherwise resolved;
(ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to PFI or any PFI Subsidiary;
(iii) requiring or threatening to require PFI or any PFI
Subsidiary, or indicating that PFI or any PFI Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement restricting or limiting, or purporting to restrict or limit,
in any manner the operations of PFI or any PFI Subsidiary, including without
limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any manner the operations of PFI or any PFI
Subsidiary (any such notice, communication, memorandum, agreement or order
described in this sentence herein referred to as a "Regulatory Agreement");
in each case except as heretofore disclosed to NPB.
(e) Neither PFI nor any PFI Subsidiary has received, consented to, or
entered into any Regulatory Agreement, except as heretofore disclosed to NPB.
(f) To the Knowledge of PFI, except as heretofore disclosed to NPB,
there is no unresolved violation, criticism, or exception by any Regulatory
Authority with respect to any Regulatory Agreement which if resolved in a manner
adverse to PFI or any PFI Subsidiary would have a Material Adverse Effect.
(g) There is no injunction, order, judgment or decree imposed upon PFI
or any PFI Subsidiary or the assets of PFI or any PFI Subsidiary which has had,
or, to the Knowledge of PFI, would have, a Material Adverse Effect.
3.12 ERISA.
(a) PFI has delivered to NPB true and complete copies of any employee
pension benefit plans within the meaning of ERISA Section 3(2), profit sharing
plans, stock purchase plans, deferred compensation and supplemental income
plans, supplemental executive retirement plans, annual incentive plans, group
28
insurance plans, and all other employee welfare benefit plans within the meaning
of ERISA Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans) and all other material
employee benefit plans, policies, agreements and arrangements, all of which are
set forth in PFI Disclosure Schedule 3.12, currently maintained or contributed
to for the benefit of the employees or former employees (including retired
employees) and any beneficiaries thereof or directors or former directors of PFI
or any other entity (a "PFI ERISA Affiliate") that, together with PFI, is
treated as a single employer under IRC Sections 414(b),(c),(m) or (o)
(collectively, the "PFI Benefit Plans"), together with:
(i) the most recent actuarial reports (if any) and financial
reports relating to those PFI Benefit Plans which constitute "qualified plans"
under IRC Section 401(a);
(ii) the most recent Form 5500 (if any) relating to such PFI
Benefit Plans filed with the IRS; and
(iii) the most recent IRS determination letters which pertain
to any such PFI Benefit Plans.
(b) Neither PFI nor any PFI ERISA Affiliate, and no pension plan
(within the meaning of ERISA Section 3(2)) maintained or contributed to by PFI
or any PFI ERISA Affiliate, has incurred any liability to the Pension Benefit
Guaranty Corporation or to the IRS with respect to any pension plan qualified
under IRC Section 401(a), except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has any reportable event under ERISA Section 4043(b) (with respect to which
the 30 day notice requirement has not been waived) occurred with respect to any
such pension plan.
(c) Neither PFI nor any PFI ERISA Affiliate has ever contributed to or
otherwise incurred any liability with respect to a multi-employer plan (within
the meaning of ERISA Section 3(37)).
(d) Each PFI Benefit Plan has been maintained, operated and
administered in compliance in all respects with its terms and related documents
or agreements and the applicable provisions of all laws, including ERISA and the
IRC, except where any such non-compliance would not have a Material Adverse
Effect.
(e) There is no existing, or, to the Knowledge of PFI, contemplated,
audit of any PFI Benefit Plan by the IRS, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation or any other governmental authority. In
addition, there are no pending or threatened claims by, on behalf of or with
respect to any PFI Benefit Plan, or by or on behalf of any individual
participant or beneficiary of any PFI Benefit Plan, alleging any violation of
ERISA or any other applicable laws, or claiming benefits (other than claims for
benefits not in dispute and expected to be granted promptly in the ordinary
course of business), nor to the Knowledge of PFI, is there any basis for such
claim.
29
(f) With respect to any services which PFI or any PFI Subsidiary may
provide as a record-keeper, administrator, custodian, fiduciary, trustee or
otherwise for any plan, program, or arrangement subject to ERISA (other than any
PFI Benefit Plan), PFI and each PFI Subsidiary:
(i) have correctly computed all contributions, payments or
other amounts for which it is responsible;
(ii) have not engaged in any prohibited transactions (as
defined in ERISA Section 406 for which an exemption does not exist);
(iii) have not breached any duty imposed by ERISA: and
(iv) have not otherwise incurred any liability to the IRS, the
Department of Labor, the Pension Benefit Guaranty Corporation, or to any
beneficiary, fiduciary or sponsor of any ERISA plan in the performance (or
non-performance) of services;
except where any such action or inaction would not have a Material Adverse
Effect.
3.13 Brokers and Finders. Neither PFI, any PFI Subsidiary, nor any of
their respective officers, directors, employees, independent contractors or
agents, has employed any broker, finder, investment banker or financial advisor,
or incurred any liability for any fees or commissions to any such person, in
connection with the transactions contemplated by this Agreement, except for
Sandler O'Neill & Partners, L.P. ("Sandler"), whose engagement letter with PFI
is included in PFI Disclosure Schedule 3.13.
3.14 Environmental Matters.
(a) Except as set forth on PFI Disclosure Schedule 3.14, to the
Knowledge of PFI, neither PFI nor any PFI Subsidiary, nor any property owned or
operated by PFI or any PFI Subsidiary, has been or is in violation of or liable
under any Environmental Law, except for such violations or liabilities that,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as set forth on PFI Disclosure Schedule 3.14, there are no actions, suits
or proceedings, or demands, claims or notices, including without limitation
notices, demand letters or requests for information from any Regulatory
Authority, instituted or pending, or to the Knowledge of PFI, threatened, or any
investigation pending, relating to the liability of PFI or any PFI Subsidiary
with respect to any property owned or operated by PFI or any PFI Subsidiary
under any Environmental Law, except as to any such actions or other matters
which would not result in a Material Adverse Effect.
30
(b) Except as set forth on PFI Disclosure Schedule 3.14, to the
Knowledge of PFI, no property, now or formerly owned or operated by PFI or any
PFI Subsidiary or on which PFI or any PFI Subsidiary holds or held a mortgage or
other security interest or has foreclosed or taken a deed in lieu of
foreclosure, has been listed or proposed for listing on the National Priority
List under the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended ("CERCLA"), on the Comprehensive Environmental Response
Compensation and Liabilities Information System, or any similar state list, or
which is the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against PFI or any PFI Subsidiary for
response costs, remedial work, investigation, damage to natural resources or for
personal injury or property damage claim, including, but not limited to, claims
under CERCLA, which would have a Material Adverse Effect.
3.15 Business of PFI. Since September 30, 2003, neither PFI nor any PFI
Subsidiary has, in any material respect:
(a) increased the wages, salaries, compensation, pension or other
employee benefits payable to any executive officer, employee or director, except
as is permitted in Section 5.01(d);
(b) eliminated employee benefits;
(c) deferred routine maintenance of real property or leased premises;
(d) eliminated a reserve where the liability related to such reserve
has remained;
(e) failed to depreciate capital assets in accordance with past
practice or to eliminate capital assets which are no longer used in its
business; or
(f) had extraordinary reduction or deferral of ordinary or necessary
expenses.
3.16 CRA Compliance. PFI and Peoples Bank are in material compliance
with the applicable provisions of the CRA, and, as of the date hereof, Peoples
Bank has received a CRA rating of "satisfactory" or better from the FDIC. To the
Knowledge of PFI, there is no fact or circumstance or set of facts or
circumstances which would cause PFI or Peoples Bank to fail to comply with such
provisions in a manner which would have a Material Adverse Effect.
3.17 Bank Merger.
(a) Peoples Bank has full corporate power and authority to execute and
deliver the Bank Plan of Merger and to consummate the Bank Merger. The execution
and delivery of the Bank Plan of Merger by Peoples Bank and the consummation by
31
Peoples Bank of the Bank Merger have been duly and validly approved by the Board
of Directors of Peoples Bank and by PFI as sole shareholder of Peoples Bank, and
no other corporate proceedings on the part of Peoples Bank are necessary to
consummate the Bank Merger. Subject to receipt of required approvals of
Regulatory Authorities, the Bank Plan of Merger, upon its execution and delivery
by Peoples Bank concurrently with the execution and delivery of this Agreement,
will constitute the valid and binding obligation of Peoples Bank, enforceable
against Peoples Bank in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of equity.
(b) The execution and delivery of the Bank Plan of Merger and the
consummation of the Bank Merger will not:
(i) conflict with or result in a breach of any provision of
the respective articles of incorporation or bylaws of PFI or Peoples Bank;
(ii) subject to receipt of required Regulatory Approvals,
violate any statute, rule, regulation, judgment, order, writ, decree or
injunction applicable to PFI or Peoples Bank or any of their respective
properties or assets; or
(iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
or acceleration of the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the respective properties or assets of
PFI or Peoples Bank under, any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other instrument
or obligation to which PFI or Peoples Bank is a party, or by which they or any
of their respective properties or assets may be bound or affected;
excluding from clauses (ii) and (iii) any such items which, in the aggregate,
would not have a Material Adverse Effect.
3.18 Information to be Supplied.
(a) The information supplied by PFI for inclusion in the Registration
Statement (including the Prospectus/Proxy Statement) will not, at the time the
Registration Statement is declared effective pursuant to the Securities Act, and
as of the date the Prospectus/Proxy Statement is mailed to shareholders of PFI,
and up to and including the date of the PFI Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
in which they were made, not misleading.
32
(b) The information supplied by PFI for inclusion in the Applications
will, at the time each such document is filed with any Regulatory Authority and
up to and including the dates of any required regulatory approvals or consents,
as such Applications may be amended by subsequent filings, be accurate in all
material respects.
3.19 Related Party Transactions.
(a) Except as set forth on PFI Disclosure Schedule 3.19, or as is
disclosed in the footnotes to the PFI Financials, as of the date hereof, neither
PFI nor any PFI Subsidiary is a party to any transaction (including any loan or
other credit accommodation but excluding deposits in the ordinary course of
business) with any Affiliate of PFI or any PFI Subsidiary, and all such
transactions were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other "persons" (as defined in Section 13(d) of the Exchange Act, and the rules
and regulations thereunder), except with respect to variations in such terms as
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Except as set forth in PFI Disclosure Schedule 3.19, as of the date
hereof, no loan or credit accommodation to any PFI Affiliate is presently in
default or, during the three-year period prior to the date of this Agreement,
has been in material default or has been restructured, modified or extended in
any manner which would have a Material Adverse Effect. To the Knowledge of PFI,
as of the date hereof, principal and interest with respect to any such loan or
other credit accommodation will be paid when due and the loan grade
classification accorded such loan or credit accommodation is appropriate.
3.20 Loans. All loans reflected as assets in the PFI Financials are
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and correct, and to the extent secured, are secured by valid liens
and security interests which have been perfected, excluding loans as to which
the failure to satisfy the foregoing standards would not have a Material Adverse
Effect.
3.21 Allowance for Loan Losses. The allowance for loan losses shown,
and to be shown, on the balance sheets contained in the PFI Financials have
been, and will be, established in accordance with GAAP and all applicable
regulatory criteria.
3.22 Reorganization. As of the date hereof, PFI does not have any
reason to believe that the Merger will fail to qualify as a reorganization under
Section 368(a) of the IRC.
3.23 Fairness Opinion. PFI has received an oral opinion from Sandler to
the effect that, as of the date hereof, the consideration to be received by
shareholders of PFI pursuant to this Agreement is fair, from a financial point
of view, to such shareholders.
3.24 Securities Documents. PFI has delivered to NPB copies of:
33
(a) PFI's annual reports on SEC Form 10-K for the years ended December
31, 2002 and 2001;
(b) PFI's quarterly report on SEC Form 10-Q for the quarters ended
March 31, 2003, June 30, 2003 and September 30, 2003.
(c) all other reports, registration statements and filings of PFI filed
with the SEC since January 1, 2003; and
(d) PFI's proxy materials used in connection with its meetings of
shareholders held in 2003 and 2002.
Such reports and proxy materials complied, in all material respects, and all
future SEC reports, filings, and proxy materials will comply, in all material
respects, with the rules and regulations of the SEC to the extent applicable
thereto, and all such SEC reports, filings and proxy materials did not and will
not, at the time of their filing, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances in which they
were made, not misleading.
3.25 Quality of Representations. To the Knowledge of PFI, no
representation made by PFI in this Agreement contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF NPB
-------------------------------------
NPB hereby represents and warrants to PFI as follows:
4.01 Organization.
(a) NPB is a corporation duly incorporated, organized and subsisting
under the laws of the Commonwealth of Pennsylvania. NPB is a bank holding
company duly registered under the BHC Act of 1956, as amended. NPB has the
corporate power to carry on its businesses and operations as now being conducted
and to own and operate the properties and assets now owned and being operated by
it. NPB is duly licensed, registered or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing, registration or qualification necessary, except where the
34
failure to be so licensed, registered or qualified will not have a Material
Adverse Effect, and all such licenses, registrations and qualifications are in
full force and effect in all material respects.
(b) NPBank is a national banking association duly organized and validly
existing under the laws of the United States. NPBank has the corporate power to
carry on its business and operations as now being conducted and to own and
operate the properties and assets now owned and being operated by it. NPBank is
duly licensed, registered or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing,
registration or qualification necessary, except where the failure to be so
licensed, registered or qualified will not have a Material Adverse Effect, and
all such licenses, registrations and qualifications are in full force and effect
in all material respects.
(c) The deposits of NPBank are insured by the Bank Insurance Fund of
the FDIC to the extent provided in the Federal Deposit Insurance Act.
(d) NPB has no Subsidiaries other than those identified in NPB
Disclosure Schedule 4.01(d).
(e) The respective minute books of NPB and each NPB Subsidiary
accurately record, in all material respects, all material corporate actions of
their respective shareholders and boards of directors, including committees, in
each case in accordance with the normal business practice of NPB and the NPB
Subsidiary.
(f) NPB has delivered to PFI true and correct copies of the respective
articles of incorporation, articles of association and bylaws of NPB and NPBank,
as in effect on the date hereof.
4.02 Capitalization.
(a) The authorized capital stock of NPB consists of (a) 62,500,000
shares of common stock, without par value ("NPB Common Stock"), of which, as of
December 15, 2003, 45,806 shares are validly issued and held by NPB as treasury
stock and 24,213,107 shares are validly issued and outstanding, fully paid and
nonassessable and free of preemptive rights, and (b) 1,000,000 shares of
preferred stock, without par value, of which none are issued. NPB has not issued
nor is NPB bound by any subscription, option, warrant, call, commitment,
agreement or other Right of any character relating to the purchase, sale, or
issuance of, or right to receive dividends or other distributions on, any shares
of NPB Common Stock or any other security of NPB or any securities representing
the right to vote, purchase or otherwise receive any shares of NPB Common Stock
or any other security of NPB, except (i) for options to acquire shares of NPB
Common Stock issued under NPB's various stock option plans, (ii) pursuant to
NPB's employee stock purchase plan, dividend reinvestment plan and directors'
fee plan, (iii) pursuant to the Rights Agreement, and (iv) this Agreement.
35
(b) NPB owns, directly or indirectly, all of the capital stock of
NPBank and the other NPB Subsidiaries, free and clear of any liens, security
interests, pledges, charges, encumbrances, agreements and restrictions of any
kind or nature. There are no subscriptions, options, warrants, calls,
commitments, agreements or other Rights outstanding with respect to the capital
stock of NPBank or any other NPB Subsidiary. Except for the NPB Subsidiaries,
NPB does not possess, directly or indirectly, any material equity interest in
any corporation, except for equity interests in the investment portfolios of
NPB's Subsidiaries, equity interests held by NPB's Subsidiaries in a fiduciary
capacity, and equity interests held in connection with the commercial loan
activities of NPB's Subsidiaries.
4.03 Authority; No Violation.
(a) NPB has full corporate power and authority to execute and deliver
this Agreement and to consummate the Contemplated Transactions. The execution
and delivery of this Agreement by NPB and the consummation by NPB of the
Contemplated Transactions (including, without limitation, the issuance of the
Adjusted PFI Options) have been duly and validly approved by the Board of
Directors of NPB by unanimous vote and no other corporate proceedings on the
part of NPB are necessary to consummate the Merger. This Agreement has been duly
and validly executed and delivered by NPB and, subject to receipt of the
required approvals of Regulatory Authorities described in Section 4.04 hereof,
constitutes the valid and binding obligation of NPB, enforceable against NPB in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
(b) (i) The execution and delivery of this Agreement by NPB, (ii)
subject to receipt of approvals from the Regulatory Authorities referred to in
Section 4.04 hereof and NPB's and PFI's compliance with any conditions contained
therein, the consummation of the Contemplated Transactions, and (iii) compliance
by NPB or any NPB Subsidiary with any of the terms or provisions hereof, do not
and will not:
(A) conflict with or result in a breach of any
provision of the respective articles of incorporation, articles of association
or bylaws of NPB or any NPB Subsidiary;
(B) violate any statute, rule, regulation, judgment,
order, writ, decree or injunction applicable to NPB or any NPB Subsidiary or any
of their respective properties or assets; or
(C) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
or acceleration of the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security interest,
36
charge or other encumbrance upon any of the properties or assets of NPB or any
NPB Subsidiary under, any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other instrument
or obligation to which NPB or any NPB Subsidiary is a party, or by which they or
any of their respective properties or assets may be bound or affected,
excluding from clauses (B) and (C) any such items which, in the aggregate, would
not have a Material Adverse Effect.
4.04 Consents. Except for consents and approvals of, or filings with,
the SEC, the FRB, the OCC, the PDB, the NASD and state securities or "blue sky"
authorities, no consents or approvals of, or filings or registrations with, any
public body or authority are necessary in connection with the execution and
delivery of this Agreement by NPB or the consummation of the Contemplated
Transactions.
4.05 Financial Statements.
(a) NPB has delivered to PFI the NPB Financials, except those
pertaining to quarterly periods commencing after September 30, 2003, which it
will deliver to PFI within 45 days after the end of the respective quarter. The
delivered NPB Financials fairly present, in all material respects, the
consolidated financial position, results of operations and cash flows of NPB as
of and for the periods ended on the dates thereof, in accordance with GAAP
consistently applied, and, in the case of interim period financial statements,
which are subject to normal year-end adjustments and footnotes thereto.
(b) To the Knowledge of NPB, NPB did not have any liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
which are not fully reflected or reserved against in the balance sheets included
in the NPB Financials at the date of such balance sheets which would have been
required to be reflected therein in accordance with GAAP consistently applied or
disclosed in a footnote thereto, except for liabilities and obligations which
were incurred in the ordinary course of business consistent with past practice,
and except for liabilities and obligations which are within the subject matter
of a specific representation and warranty herein or which otherwise have not had
a Material Adverse Effect.
4.06 No Material Adverse Change. Neither NPB nor any NPB Subsidiary has
suffered any adverse change in their respective assets, business, financial
condition or results of operations since September 30, 2003 which change has had
a Material Adverse Effect.
4.07 Taxes.
(a) NPB and the NPB Subsidiaries are members of the same affiliated
group within the meaning of IRC Section 1504(a) of which NPB is the common
parent. NPB has filed, and will file, all material federal, state and local tax
37
returns required to be filed by, or with respect to, NPB and the NPB
Subsidiaries on or prior to the Closing Date, except to the extent that any
failure to file or any inaccuracies would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid or will pay, or made or will make,
provisions for the payment of all federal, state and local taxes which are shown
on such returns to be due for the periods covered thereby from NPB or any NPB
Subsidiary to any applicable taxing authority, on or prior to the Closing Date,
other than taxes which (i) are not delinquent or are being contested in good
faith, (ii) have not been finally determined, or (iii) the failure to pay would
not, individually or in the aggregate, have a Material Adverse Effect.
(b) To the Knowledge of NPB, there are no material disputes pending, or
claims asserted in writing, for taxes or assessments upon NPB or any NPB
Subsidiary, nor has NPB or any NPB Subsidiary been requested in writing to give
any currently effective waivers extending the statutory period of limitation
applicable to any federal, state, county or local income tax return for any
period.
(c) Proper and accurate amounts have been withheld by NPB and each NPB
Subsidiary from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable federal,
state and local laws, except where failure to do so is not reasonably likely to
have a Material Adverse Effect.
4.08 Contracts. Except as described on NPB Disclosure Schedule 4.08,
neither NPB nor any NPB Subsidiary is a party to or subject to: (i) any
agreement which by its terms limits the payment of dividends by NPB or any NPB
Subsidiary, or (ii) any contract, other than this Agreement, which restricts or
prohibits it from engaging in any type of business permissible under applicable
law.
4.09 Ownership of Property; Insurance Coverage.
(a) NPB and each NPB Subsidiary has, and will have as to property
acquired after the date hereof, good, and as to real property, marketable, title
to all material assets and properties owned by NPB or such NPB Subsidiary,
whether real or personal, tangible or intangible, including securities, assets
and properties reflected in the balance sheets contained in the NPB Financials
or acquired subsequent thereto (except to the extent that such securities are
held in any fiduciary or agency capacity and except to the extent that such
assets and properties have been disposed of for fair value, in the ordinary
course of business, or have been disposed of as obsolete since the date of such
balance sheets), subject to no encumbrances, liens, mortgages, security
interests or pledges, except:
(i) those items that secure liabilities for borrowed money and
that are described in NPB Disclosure Schedule 4.08 or permitted under Article V
hereof;
(ii) statutory liens for amounts not yet delinquent or which
are being contested in good faith;
38
(iii) liens for current taxes not yet due and payable;
(iv) pledges to secure deposits and other liens incurred in
the ordinary course of banking business;
(v) such imperfections of title, easements and encumbrances,
if any, as are not material in character, amount or extent; and
(vi) dispositions and encumbrances for adequate consideration
in the ordinary course of business.
NPB and each NPB Subsidiary have the right under leases of material properties
used by NPB or such NPB Subsidiary in the conduct of their respective businesses
to occupy and use all such properties in all material respects as presently
occupied and used by them.
(b) With respect to all agreements pursuant to which NPB or any NPB
Subsidiary has purchased securities subject to an agreement to resell, if any,
NPB or such NPB Subsidiary has a valid, perfected first lien or security
interest in the securities or other collateral securing the repurchase
agreement, and the value of such collateral equals or exceeds the amount of the
debt secured thereby, except to the extent that any failure to obtain such a
lien or maintain such collateral would not, individually or in the aggregate,
have a Material Adverse Effect.
(c) NPB and each NPB Subsidiary maintain insurance in amounts
considered by NPB to be reasonable for their respective operations, and such
insurance is similar in scope and coverage in all material respects to that
maintained by other businesses similarly situated. Neither NPB nor any NPB
Subsidiary has received notice from any insurance carrier that:
(i) such insurance will be cancelled or that coverage
thereunder will be reduced or eliminated; or
(ii) premium costs with respect to such insurance will be
substantially increased;
except to the extent such cancellation, reduction, elimination or increase would
not have a Material Adverse Effect.
(d) NPB and each NPB Subsidiary maintain such fidelity bonds and errors
and omissions insurance as may be customary or required under applicable laws or
regulations.
39
4.10 Financing. At the Effective Date, NPB will have available cash
sufficient to pay the amounts required to be paid to PFI shareholders pursuant
to this Agreement and shares available and reserved to pay the Common Stock
Consideration, upon consummation of the Merger.
4.11 Legal Proceedings. Neither NPB nor any NPB Subsidiary is a party
to any, and there are no pending or, to the Knowledge of NPB, threatened, legal,
administrative, arbitration or other proceedings, claims, actions, customer
complaints, or governmental investigations or inquiries of any nature:
(a) against NPB or any NPB Subsidiary;
(b) to which the assets of NPB or any NPB Subsidiary are subject;
(c) challenging the validity or propriety of any of the Contemplated
Transactions; or
(d) which could materially adversely affect the ability of NPB or any
other NPB Subsidiary to perform their respective obligations under this
Agreement and the Bank Plan of Merger;
except for any proceedings, claims, actions, investigations, or inquiries
referred to in clauses (a) or (b) which, individually or in the aggregate, would
not have a Material Adverse Effect.
4.12 Compliance with Applicable Law.
(a) NPB and each NPB Subsidiary hold all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under, and have complied in all material respects with, applicable
laws, statutes, orders, rules or regulations of any Regulatory Authority
relating to them, other than where such failure to hold or such noncompliance
will neither result in a limitation in any material respect on the conduct of
their respective businesses nor otherwise have a Material Adverse Effect.
(b) NPB and each NPB Subsidiary have filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that they were required to file with any Regulatory Authority, and have
filed all other reports and statements required to be filed by them, including
without limitation any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, any state or any Regulatory
Authority, and have paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report, registration or
statement or to pay such fees and assessments, either individually or in the
aggregate, would not have a Material Adverse Effect.
40
(c) No Regulatory Authority has initiated any proceeding or, to the
Knowledge of NPB, investigation into the businesses or operations of NPB or any
of its Subsidiaries, except where any such proceedings or investigations will
not, individually or in the aggregate, have a Material Adverse Effect, or such
proceedings or investigations have been terminated or otherwise resolved.
(d) Neither NPB nor any NPB Subsidiary has received any notification or
communication from any Regulatory Authority:
(i) asserting that NPB or any NPB Subsidiary is not in
substantial compliance with any of the statutes, regulations or ordinances which
such Regulatory Authority enforces, unless such assertion has been waived,
withdrawn or otherwise resolved;
(ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to NPB or any NPB Subsidiary;
(iii) requiring or threatening to require NPB or any NPB
Subsidiary, or indicating that NPB or any NPB Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement restricting or limiting, or purporting to restrict or limit,
in any manner the operations of NPB or any NPB Subsidiary, including without
limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any manner the operations of NPB or any NPB
Subsidiary (any such notice, communication, memorandum, agreement or order
described in this sentence herein referred to as a "Regulatory Agreement");
in each case except as heretofore disclosed to PFI.
(e) Neither NPB nor any NPB Subsidiary has received, consented to, or
entered into any Regulatory Agreement except as heretofore disclosed to PFI.
(f) To the Knowledge of NPB, there is no unresolved violation,
criticism, or exception by any Regulatory Authority with respect to any
Regulatory Agreement which if resolved in a manner adverse to NPB or any NPB
Subsidiary would have a Material Adverse Effect.
(g) There is no injunction, order, judgment or decree imposed upon NPB
or any NPB Subsidiary or the assets of NPB or any NPB Subsidiary which has had,
or, to the Knowledge of NPB, would have, a Material Adverse Effect.
41
4.13 ERISA.
(a) NPB has delivered to PFI true and complete copies of any employee
pension benefit plans within the meaning of ERISA Section 3(2), profit sharing
plans, stock purchase plans, deferred compensation and supplemental income
plans, supplemental executive retirement plans, annual incentive plans, group
insurance plans, and all other employee welfare benefit plans within the meaning
of ERISA Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans) and all other material
employee benefit plans, policies, agreements and arrangements, all of which are
set forth in NPB Disclosure Schedule 4.13, currently maintained or contributed
to for the benefit of the employees or former employees (including retired
employees) and any beneficiaries thereof or directors or former directors of NPB
or any other entity (an "NPB ERISA Affiliate") that, together with NPB, is
treated as a single employer under IRC Sections 414(b),(c),(m) or (o)
(collectively, the "NPB Benefit Plans"), together with:
(i) the most recent actuarial reports (if any) and financial
reports relating to those NPB Benefit Plans which constitute "qualified plans"
under IRC Section 401(a);
(ii) the most recent Form 5500 (if any) relating to such NPB
Benefit Plans filed by them, respectively, with the IRS; and
(iii) the most recent IRS determination letters which pertain
to any such NPB Benefit Plans.
(b) Neither NPB nor any NPB ERISA Affiliate, and no pension plan
(within the meaning of ERISA Section 3(2)) maintained or contributed to by NPB
or any NPB ERISA Affiliate, has incurred any liability to the Pension Benefit
Guaranty Corporation or to the IRS with respect to any pension plan qualified
under IRC Section 401(a), except liabilities to the Pension Benefit Guaranty
Corporation pursuant to ERISA Section 4007, all of which have been fully paid,
nor has any reportable event under ERISA Section 4043(b) (with respect to which
the 30 day notice requirement has not been waived) occurred with respect to any
such pension plan.
(c) Neither NPB nor any NPB ERISA Affiliate has ever contributed to or
otherwise incurred any liability with respect to a multi-employer plan (within
the meaning of ERISA Section 3(37)).
(d) Each NPB Benefit Plan has been maintained, operated and
administered in compliance in all respects with its terms and related documents
or agreements and the applicable provisions of all laws, including ERISA and the
IRC, except where any such non-compliance would not have a Material Adverse
Effect.
(e) There is no existing, or, to the Knowledge of NPB, contemplated,
audit of any NPB Benefit Plan by the IRS, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation or any other governmental authority. In
42
addition, there are no pending or threatened claims by, on behalf of or with
respect to any NPB Benefit Plan, or by or on behalf of any individual
participant or beneficiary of any NPB Benefit Plan, alleging any violation of
ERISA or any other applicable laws, or claiming benefits (other than claims for
benefits not in dispute and expected to be granted promptly in the ordinary
course of business), nor to the Knowledge of NPB, is there any basis for such
claim.
(f) With respect to any services which NPB or any NPB Subsidiary may
provide as a record-keeper, administrator, custodian, fiduciary, trustee or
otherwise for any plan, program, or arrangement subject to ERISA (other than any
NPB Benefit Plan), NPB and each NPB Subsidiary:
(i) have correctly computed all contributions, payments or
other amounts for which it is responsible;
(ii) have not engaged in any prohibited transactions (as
defined in ERISA Section 406 for which an exemption does not exist);
(iii) have not breached any duty imposed by ERISA: and
(iv) have not otherwise incurred any liability to the IRS, the
Department of Labor, the Pension Benefit Guaranty Corporation, or to any
beneficiary, fiduciary or sponsor of any ERISA plan in the performance (or
non-performance) of services;
except where any such action or inaction would not have a Material Adverse
Effect.
4.14 Brokers and Finders. Neither NPB, any NPB Subsidiary, nor any of
their respective officers, directors, employees, independent contractors or
agents, has employed any broker, finder, investment banker or financial advisor,
or incurred any liability for any fees or commissions to any such person, in
connection with the Contemplated Transactions, except for Griffin Financial
Group LLC ("Griffin") whose engagement letter with NPB is included in NPB
Disclosure Schedule 4.14.
4.15 Environmental Matters.
(a) Except as set forth on NPB Disclosure Schedule 4.15, to the
Knowledge of NPB, neither NPB, any NPB Subsidiary, nor any property owned or
operated by NPB or any NPB Subsidiary, has been or is in violation of or liable
under any Environmental Law, except for such violations or liabilities that,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as set forth on NPB Disclosure Schedule 4.15, there are no actions, suits
or proceedings, or demands, claims or notices, including without limitation
notices, demand letters or requests for information from any Regulatory
Authority, instituted or pending, or to the Knowledge of NPB, threatened, or any
43
investigation pending, relating to the liability of NPB or any NPB Subsidiary
with respect to any property owned or operated by NPB or any NPB Subsidiary
under any Environmental Law, except as to any such actions or other matters
which would not result in a Material Adverse Effect.
(b) Except as set forth on NPB Disclosure Schedule 4.15, to the
Knowledge of NPB, no property, now or formerly owned or operated by NPB or any
NPB Subsidiary or on which NPB or any NPB Subsidiary holds or held a mortgage or
other security interest or has foreclosed or taken a deed in lieu or
foreclosure, has been listed or proposed for listing on the National Priority
List under CERCLA on the Comprehensive Environmental Response Compensation and
Liabilities Information System, or any similar state list, or which is the
subject of federal, state or local enforcement actions or other investigations
which may lead to claims against NPB or any NPB Subsidiary for response costs,
remedial work, investigation, damage to natural resources or for personal injury
or property damage claim, including, but not limited to, claims under CERCLA,
which would have a Material Adverse Effect.
4.16 Business of NPB. Since September 30, 2003, neither NPB nor any NPB
Subsidiary has, in any material respect:
(a) increased the wages, salaries, compensation, pension or other
employee benefits payable to any executive officer, employee or director;
(b) eliminated employee benefits;
(c) deferred routine maintenance of real property or leased premises;
(d) eliminated a reserve where the liability related to such reserve
has remained;
(e) failed to depreciate capital assets in accordance with past
practice or to eliminate capital assets which are no longer used in its
business; or
(f) had extraordinary reduction or deferral of ordinary or necessary
expenses.
4.17 CRA Compliance. NPB and NPBank are in material compliance with the
applicable provisions of the CRA, and, as of the date hereof, NPBank has
received a CRA rating of "satisfactory" or better from the OCC. To the Knowledge
of NPB, there is no fact or circumstance or set of facts or circumstances which
would cause NPBank to fail to comply with such provisions in a manner which
would have a Material Adverse Effect.
4.18 Allowance for Loan Losses. The allowance for loan losses shown,
and to be shown, on the balance sheets contained in the NPB Financials have
been, and will be, established in accordance with GAAP and all applicable
regulatory criteria.
44
4.19 Bank Merger.
(a) NPBank has full corporate power and authority to execute and
deliver the Bank Plan of Merger and to consummate the Bank Merger. The execution
and delivery of the Bank Plan of Merger by NPBank and the consummation by NPBank
of the Bank Merger have been duly and validly approved by the Board of Directors
of NPBank and by NPB as sole shareholder of NPBank, and no other corporate
proceedings on the part of NPBank are necessary to consummate the Bank Merger.
Subject to receipt of required approvals of Regulatory Authorities, the Bank
Plan of Merger, upon its execution and delivery by NPBank concurrently with the
execution and delivery of this Agreement, will constitute the valid and binding
obligation of NPBank, enforceable against NPBank in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity.
(b) The execution and delivery of the Bank Plan of Merger and the
consummation of the Bank Merger will not:
(i) conflict with or result in a breach of any provision of
the respective articles of incorporation or association or bylaws of NPB or
NPBank;
(ii) subject to receipt of required approvals of Regulatory
Authorities, violate any statute, rule, regulation, judgment, order, writ,
decree or injunction applicable to NPB or NPBank or any of their respective
properties or assets; or
(iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
or acceleration of the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the respective properties or assets of
NPB or NPBank under, any of the terms or conditions of any note, bond, mortgage,
indenture, license, lease, agreement, commitment or other instrument or
obligation to which NPB or NPBank is a party, or by which they or any of their
respective properties or assets may be bound or affected;
excluding from clauses (ii) and (iii) any such items which, in the aggregate,
would not have a Material Adverse Effect.
4.20 Information to be Supplied.
(a) The information supplied by NPB for inclusion in the Registration
Statement (including the Prospectus/Proxy Statement) will not, as of the date
the Registration Statement is declared effective pursuant to the Securities Act,
and as of the date the Prospectus/Proxy Statement is mailed to shareholders of
45
PFI, and up to and including the date of the PFI Shareholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances in which they were made, not misleading.
(b) The information supplied by NPB for inclusion in the Applications
will, at the time each such document is filed with any Regulatory Authority and
up to and including the dates of any required regulatory approvals or consents,
as such Applications may be amended by subsequent filings, be accurate in all
material respects.
4.21 Related Party Transactions.
(a) Except as set forth on NPB Disclosure Schedule 4.21 or in the
footnotes to the NPB Financials, as of the date hereof, neither NPB nor any NPB
Subsidiary is a party to any transaction (including any loan or other credit
accommodation but excluding deposits in the ordinary course of business) with
any Affiliate of NPB or any NPB Subsidiary, and all such transactions were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other "persons"
(as defined in Section 13(d) of the Exchange Act and the rules and regulations
thereunder), except with respect to variations in such terms as would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) Except as set forth in NPB Disclosure Schedule 4.21, as of the date
hereof, no loan or credit accommodation to any Affiliate of NPB or any NPB
Subsidiary is presently in default or, during the three-year period prior to the
date of this Agreement, has been in material default or has been restructured,
modified or extended in any manner which would have a Material Adverse Effect.
To the Knowledge of NPB, as of the date hereof, principal and interest with
respect to any such loan or other credit accommodation will be paid when due and
the loan grade classification accorded such loan or credit accommodation is
appropriate.
4.22 Loans. All loans reflected as assets in the NPB Financials are
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and correct, and to the extent secured, are secured by valid liens
and security interests which have been perfected, excluding loans as to which
the failure to satisfy the foregoing standards would not have a Material Adverse
Effect.
4.23 Reorganization. As of the date hereof, NPB does not have any
reason to believe that the Merger will fail to qualify as a reorganization under
Section 368(a) of the IRC. NPB shall not take any action which would preclude
the Merger from qualifying as a reorganization within the meaning of Section 368
of the IRC.
4.24 Fairness Opinion. NPB has received an oral opinion from Griffin to
the effect that, as of the date hereof, the consideration to be paid by NPB
46
pursuant to this Agreement is fair, from a financial point of view, to NPB and
the NPB Shareholders.
4.25 NPB Common Stock. The shares of NPB Common Stock to be issued and
delivered to PFI shareholders in accordance with this Agreement, and the shares
of NPB Common Stock issuable pursuant to the Adjusted PFI Options, when so
issued and delivered, will be validly authorized and issued and fully paid and
non-assessable, and no shareholder of NPB shall have any pre-emptive right with
respect thereto.
4.26 Securities Documents. NPB has delivered to PFI copies of:
(a) NPB's annual reports on SEC Form 10-K for the years ended December
31, 2001 and 2002;
(b) all other reports, registration statements and filings of NPB filed
with the SEC since January 1, 2003; and
(c) NPB's proxy materials used in connection with its meetings of
shareholders held in 2002 and 2003.
Such reports and proxy materials complied, in all material respects, and any
future SEC reports, filings, and proxy materials will comply, in all material
respects, with the rules and regulations of the SEC to the extent applicable
thereto. All such SEC reports, filings and proxy materials did not and will not,
at the time of their filing, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading.
4.27 Rights Agreement. No event or circumstance has occurred resulting
in, and the execution of this Agreement by NPB will not result in the grant,
issuance or triggering of any right or entitlement or the obligation to grant or
issue any interest in NPB Common Stock or enable or allow any right or other
interest associated with the Rights Agreement to be exercised, distributed or
triggered.
4.28 "Well Capitalized". NPB and NPBank are "well capitalized" within
the meaning of the FRB's and OCC's regulations, respectively. NPB and NPBank
will be "well capitalized" on the Closing Date.
4.29 Quality of Representations. To the Knowledge of NPB, no
representation made by NPB in this Agreement contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
47
ARTICLE V
---------
COVENANTS OF THE PARTIES
------------------------
5.01 Conduct of PFI's Business. Through the Closing Date, PFI shall,
and shall cause each PFI Subsidiary to, in all material respects, conduct its
businesses and engage in transactions only in the ordinary course and consistent
with past practice, except as otherwise required or contemplated by this
Agreement or with the written consent of NPB. PFI shall, and shall cause each
PFI Subsidiary to, use its reasonable good faith efforts to preserve its
business organization intact, maintain good relationships with employees, and
preserve the good will of customers of PFI or the PFI Subsidiaries and others
with whom business relationships exist, provided that non-customer contact job
vacancies that occur prior to the Effective Date through attrition shall not be
filled or any new employees hired, in each case without the prior written
consent of NPB. PFI shall have the right to replace customer contact employees
in the ordinary course of business consistent with past practice. Through the
Closing Date, except as otherwise consented to in writing by NPB (such consent
shall not be unreasonably withheld) or as permitted by this Agreement, PFI shall
not, and shall not permit any PFI Subsidiary to:
(a) change any provision of its articles of incorporation or of its
bylaws;
(b) change the number of authorized or issued shares of its capital
stock; repurchase any shares of capital stock; or issue or grant any option,
warrant, call, commitment, subscription, Right or agreement of any character
relating to its authorized or issued capital stock or any securities convertible
into shares of capital stock; declare, set aside or pay any dividend or other
distribution in respect of capital stock; or redeem or otherwise acquire any
shares of PFI capital stock; except that:
(i) PFI may issue shares of PFI Common Stock upon the valid
exercise of any PFI Options issued and outstanding on the date hereof, but
excluding any options where the exercise thereof would breach a signed Letter
Agreement;
(ii) PFI may declare and pay quarterly cash dividends at a
rate of $0.17 per share each quarter until the Closing Date in accordance with
past practice;
(iii) PFI may declare and pay a special 2003 year-end dividend
in an amount not to exceed $0.10 per share; and
(iv) subject to applicable regulatory restrictions, if any,
Peoples Bank may pay cash dividends to PFI sufficient for PFI to fund any
dividend by PFI permitted hereunder,
(c) grant any severance or termination pay, other than pursuant to
policies or agreements of PFI or any PFI Subsidiary in effect on the date
hereof, to, or enter into or amend any employment, consulting, severance,
"change-in-control" or termination contract or arrangement with, any officer,
director, employee, independent contractor, agent or other person associated
with PFI or any PFI Subsidiary;
48
(d) grant job promotions or increase the rate of compensation of, or
pay any bonus to, any director, officer, employee, independent contractor, agent
or other person associated with PFI or any PFI Subsidiary, except for:
(i) routine periodic pay increases, selective merit pay
increases and pay-raises in connection with promotions, all in accordance with
past practice; provided, however, that such pay increases and raises shall not
exceed five percent (5%) in the aggregate; and
(ii) annual bonuses in the ordinary course for 2003,
determined consistently with past practice, to be payable on or before December
31, 2003, to persons designated by PFI and approved by NPB (which approval shall
not be unreasonably withheld); and
(iii) annual bonuses in the ordinary course for 2004,
determined consistently with past practice but pro-rated to the Closing Date, to
be payable on or immediately prior to the Closing Date, to persons designated by
PFI and approved by NPB (which approval shall not be unreasonably withheld); and
(iv) retention bonuses on account of the Contemplated
Transactions granted in good faith reasonable amounts not to exceed $250,000 in
the aggregate and to be payable to persons designated by PFI and approved by NPB
(which approval shall not be unreasonably withheld) not earlier than 30 days,
nor later than 45 days, after the operational merger of Peoples Bank and NPBank
(including conversion of PFI's computer system), which operational merger NPB
presently anticipates will occur within sixty (60) days of the Effective Date;
(e) merge or consolidate with any other corporation; sell or lease all
or any substantial portion of its assets or businesses; make any acquisition of
all or any substantial portion of the business or assets of any other person,
firm, association, corporation or business organization; enter into a purchase
and assumption transaction with respect to deposits, loans or liabilities;
relocate or surrender its certificate of authority to maintain, or file an
application for the relocation of, any existing office; file an application for
a certificate of authority to establish a new office; change the status of any
office as to its supervisory jurisdiction; or fail to maintain and enforce in
any material respect its code of ethics and applicable compliance procedures;
(f) sell or otherwise dispose of any material asset, other than in the
ordinary course of business, consistent with past practice; subject any asset to
a lien, pledge, security interest or other encumbrance, other than in the
ordinary course of business consistent with past practice; modify in any
49
material manner the manner in which it has heretofore conducted its business or
enter into any new line of business; incur any indebtedness for borrowed money,
except in the ordinary course of business, consistent with past practice;
(g) take any action which would result in any of the conditions set
forth in Article VI hereof not being satisfied;
(h) change any method, practice or principle of accounting, except as
required by changes in GAAP concurred in by its independent certified public
accountants; or change any assumption underlying, or any method of calculation
of, depreciation of any type of asset or establishment of any reserve;
(i) waive, release, grant or transfer any rights of material value or
modify or change in any material respect any existing material agreement to
which it is a party, other than in the ordinary course of business, consistent
with past practice;
(j) implement any pension, retirement, profit-sharing, bonus, welfare
benefit or similar plan or arrangement that was not in effect on the date of
this Agreement, or amend any existing plan or arrangement except as required by
law;
(k) amend or otherwise modify its underwriting and other lending
guidelines and policies in effect as of the date hereof or otherwise fail to
conduct its lending activities in the ordinary course of business consistent
with past practice;
(l) enter into, renew, extend or modify any other transaction with any
Affiliate, other than deposit and loan transactions in the ordinary course of
business and which are in compliance with the requirements of applicable laws
and regulations;
(m) enter into any interest rate swap, floor or cap or similar
commitment, agreement or arrangement;
(n) take any action that would give rise to a right of payment to any
individual under any employment agreement, except (i) in the ordinary course of
business consistent with past practice, and (ii) for the execution of this
Agreement;
(o) purchase any security for its investment portfolio (i) rated less
than "AAA" by either Standard & Poor's Corporation or Moody's Investor Services,
Inc., or (ii) with a remaining maturity more than five (5) years;
(p) except as set forth on PFI Disclosure Schedule 5.01(p), make any
capital expenditure of $100,000 or more; or undertake or enter into any lease,
contract or other commitment for its account, other than in the ordinary course
of business, involving an unbudgeted expenditure by PFI of more than $75,000, or
extending beyond twelve (12) months from the date hereof;
(q) take any action that would preclude the Merger from qualifying as a
reorganization within the meaning of Section 368 of the IRC; or
50
(r) agree to do any of the foregoing.
5.02 Access; Confidentiality.
(a) Through the Closing Date, each party hereto shall afford to the
other, including its authorized agents and representatives, reasonable access to
its and its Subsidiaries' businesses, properties, assets, books and records and
personnel, at reasonable hours and after reasonable notice; and the officers of
each party shall furnish the other party making such investigation, including
its authorized agents and representatives, with such financial and operating
data and other information with respect to such businesses, properties, assets,
books and records and personnel as the party making such investigation, or its
authorized agents and representatives, shall from time to time reasonably
request.
(b) Each party hereto agrees that it, and its authorized agents and
representatives, will conduct such investigation and discussions hereunder in a
confidential manner and otherwise in a manner so as not to interfere
unreasonably with the other party's normal operations and customer and employee
relationships. Neither PFI, NPB, nor any of their respective subsidiaries, shall
be required to provide access to or disclose information where such access or
disclosure would violate or prejudice the rights of customers, jeopardize
attorney-client privilege or similar privilege with respect to such information
or contravene any law, rule, regulation, decree, order, fiduciary duty or
agreement entered into prior to the date hereof.
(c) All information furnished to NPB or PFI by the other in connection
with the Contemplated Transactions, whether prior to the date of this Agreement
or subsequent hereto, shall be held in confidence to the extent required by, and
in accordance with, the Confidentiality Agreement.
5.03 Regulatory Matters. Through the Closing Date:
(a) NPB and PFI shall cooperate with one another in the preparation of
the Registration Statement (including the Prospectus/Proxy Statement) and all
Applications and the making of all filings for, and shall use their reasonable
best efforts to obtain, as promptly as practicable, all necessary permits,
consents, approvals, waivers and authorizations of all Regulatory Authorities
necessary or advisable to consummate the Contemplated Transactions. NPB and PFI
shall each give the other reasonable time to review any Application to be filed
by it prior to the filing of such Application with the relevant Regulatory
Authority, and each shall consult the other with respect to the substance and
status of such filings.
(b) PFI and NPB shall each promptly furnish the other with copies of
51
written communications to, or received by them from, any Regulatory Authority in
respect of the Contemplate Transactions.
(c) PFI and NPB shall cooperate with each other in the foregoing
matters and shall furnish the other with all information concerning itself as
may be necessary or advisable in connection with any Application or filing,
including any report filed with the SEC, made by or on behalf of such party to
or with any Regulatory Authority in connection with the Contemplated
Transactions, and in each such case, such information shall be accurate and
complete in all material respects. In connection therewith, PFI and NPB shall
use their reasonable good faith efforts to provide each other certificates,
"comfort" letters and other documents reasonably requested by the other.
5.04 Taking of Necessary Actions. Through the Closing Date, in addition
to the specific agreements contained herein, each party hereto shall use
reasonable best efforts to take, or cause to be taken by each of its
Subsidiaries, all actions, and to do, or cause to be done by each of its
Subsidiaries, all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the Contemplated Transactions
including, if necessary, appealing any adverse ruling in respect of any
Application.
5.05 No Solicitation. PFI shall not, nor shall it authorize or permit
any of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it to:
(a) initiate, solicit, encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes any Acquisition Proposal (as defined
herein);
(b) enter into or maintain or continue discussions or negotiate with
any person in furtherance of an Acquisition Proposal; or
(c) agree to or endorse any Acquisition Proposal.
PFI shall (unless it believes, after consultation with its counsel, that such
notification would violate the PFI Board of Directors' fiduciary duties) notify
NPB as promptly as practicable, in reasonable detail, as to any inquiries and
proposals which it or any of its representatives or agents may receive;
provided, however, that, notwithstanding anything to the contrary contained in
this Agreement:
(i) PFI may furnish or cause to be furnished confidential and
non-public information concerning PFI and its businesses, properties or assets
to a third party;
(ii) PFI may engage in discussions or negotiations with a
third party;
52
(iii) following receipt of an Acquisition Proposal, PFI may
take and disclose to its shareholders a position with respect to such
Acquisition Proposal; and/or
(iv) following receipt of an Acquisition Proposal, the PFI
Board of Directors may withdraw or modify its recommendation of the Merger;
but in respect of the foregoing clauses (i) through (iv) only if the PFI Board
of Directors shall conclude in good faith after consultation with its legal and
financial advisors, that failure to do so would result in a breach by such
directors of their fiduciary duties to PFI's shareholders.
As used herein, the term "Acquisition Proposal" means the public announcement of
a bona fide proposal (including a written communication that is or becomes the
subject of public disclosure) for: (A) any merger, consolidation or acquisition
of all or substantially all the assets or liabilities of PFI, any PFI
Subsidiary, or any other business combination involving PFI or any PFI
Subsidiary; or (B) a transaction involving the transfer of beneficial ownership
of securities representing, or the right to acquire beneficial ownership or to
vote securities representing, 10% or more of the then outstanding shares of PFI
Common Stock or the then outstanding shares of common stock of any PFI
Subsidiary.
5.06 Update of Disclosure Schedules. Through the Closing Date, PFI
shall update the PFI Disclosure Schedule, and NPB shall update the NPB
Disclosure Schedule, as promptly as practicable after the occurrence of any
event which, if such event had occurred prior to the date hereof, would have
been disclosed on such schedule.
5.07 Other Undertakings by NPB and PFI.
(a) Undertakings of PFI.
(i) Shareholder Approval. PFI shall submit this Agreement to
its shareholders for approval at a meeting (the "PFI Shareholders Meeting") with
the recommendation (unless it believes, after consultation with its legal
counsel, that such recommendation would violate the PFI Board of Directors'
fiduciary duties) of its Board of Directors to such shareholders to approve this
Agreement. The PFI Shareholders Meeting may, in PFI's sole discretion, be held
after all consents of any Regulatory Authorities have been obtained. If any such
consent has not been obtained prior to the date established in the
Prospectus/Proxy Statement for such meeting, such meeting may be postponed or
adjourned at the sole discretion of PFI. The PFI Shareholders Meeting shall be
held not later than 45 days after all consents of Regulatory Authorities have
been received and all other conditions have been satisfied or waived (other than
those conditions which are to be fulfilled at the Closing).
(ii) Updated Fairness Opinion. PFI shall use its reasonable
53
best efforts to obtain an updated written opinion from Sandler to the effect
that the consideration to be received by shareholders of PFI pursuant to this
Agreement is fair, from a financial point of view, to such shareholders, dated
not more than ten days prior to the date of mailing of the Prospectus/Proxy
Statement to the shareholders of PFI, for inclusion in such Prospectus/Proxy
Statement.
(iii) Phase I Environmental Audit. PFI shall permit NPB, if
NPB elects to do so, at its own cost and expense, to cause a "phase I
environmental audit" to be performed at any physical location owned or occupied
by PFI or any PFI Subsidiary. NPB must commence a "phase I environmental audit"
within sixty (60) days of the date of this Agreement or NPB's right to perform
such an audit shall be waived.
(iv) Dividend Reinvestment Plan. Within ten days after the
date of this Agreement, PFI shall suspend, effective the date of this Agreement
and through the earlier of the Closing Date or the termination of this
Agreement, the operation of PFI's Dividend Reinvestment Plan.
(b) Undertakings of NPB and PFI.
(i) Filings and Approvals. NPB and PFI shall cooperate with
each other in the preparation and filing, as soon as practicable, of:
(A) the Applications;
(B) the Registration Statement (including the
Prospectus/Proxy Statement) and related filings, if any, under state securities
laws relating to the Merger; and
(C) all other documents necessary to obtain any other
approvals and consents required to effect consummation of the Contemplated
Transactions.
(ii) Public Announcements. NPB and PFI shall agree upon the
form and substance of any press release related to this Agreement and the
Contemplated Transactions, but nothing contained herein shall prohibit either
party, following notification to the other party, from making any disclosure
which its counsel deems necessary under applicable law.
(iii) Maintenance of Insurance. NPB and each NPB Subsidiary,
and PFI and each PFI Subsidiary, shall maintain insurance in such amounts as NPB
and PFI, respectively, believe are reasonable to cover such risks as are
customary in relation to the character and location of its and their respective
Subsidiaries' properties and the nature of its and their respective
Subsidiaries' businesses.
(iv) Maintenance of Books and Records. NPB and each NPB
54
Subsidiary, and PFI and each PFI Subsidiary, shall maintain books of account and
records on a basis consistent with past practice.
(v) Taxes. NPB and each NPB Subsidiary, and PFI and each PFI
Subsidiary, shall file all federal, state, and local tax returns required to be
filed by it on or before the date such returns are due, including any
extensions, and pay all taxes shown to be due on such returns on or before the
dates such payments are due, except those being contested in good faith.
(vi) Integration Team. NPB and PFI shall cooperate with each
other in the selection of an integration team, which team shall plan and
implement an orderly, cost-effective consolidation of Peoples Bank's back room
operations presently located in Oxford, Pennsylvania, into NP Bank's operations
in Boyertown, Pennsylvania. Consistent with PFI maintaining its independent
status prior to the Effective Date, NPB will provide sufficient resources and
personnel to effectively guide the integration team.
(vii) Outside Service Bureau Contracts. NPB and PFI shall
cooperate with each other, and if mutually agreed in the interest of an orderly,
cost-effective consolidation of operations, terminate any contract or
arrangement PFI or any PFI Subsidiary may have with an outside service bureau or
other vendor of services and substitute a contract or arrangement between NPB or
any NPB Subsidiary (as NPB shall elect) and PFI for the provision of similar
services to PFI or any PFI Subsidiary on terms and conditions mutually
acceptable to PFI and NPB.
(viii) In-House Operations. NPB and PFI shall, subject to
applicable legal requirements, cooperate with each other, and if mutually agreed
in the interest of an orderly, cost-effective consolidation of operations,
terminate any in-house back office, support, processing or other operational
activities or services of PFI or any PFI Subsidiary, including without
limitation accounting, loan processing and deposit services, and substitute a
contract or arrangement between NPB or any NPB Subsidiary (as NPB shall select)
and PFI for the provision of similar services to PFI or any PFI Subsidiary on
terms and conditions mutually acceptable to PFI and NPB.
(ix) Delivery of Financial Statements. NPB and PFI shall each
deliver to the other, as soon as practicable after the end of each month and
after the end of each calendar quarter prior to the Effective Date, commencing
with the month ended December 31, 2003, an unaudited consolidated balance sheet
as of such date and related unaudited consolidated statements of income for the
periods then ended, which financial statements shall fairly present, in all
material respects, its consolidated financial condition, results of operations
for the periods then ended in accordance with GAAP, subject to year-end audit
adjustments and footnotes.
(x) Delivery of SEC Documents. NPB and PFI shall each deliver
to the other copies of all reports filed with the SEC under the Exchange Act
promptly upon the filing thereof.
55
(c) Undertakings of NPB.
(i) Employees, Severance Policy.
(A) Subject to NPB's usual personnel and
qualification policies, NPB will endeavor to continue the employment of all
current non-management employees of PFI in positions that will contribute to the
successful performance of the combined organization. More specifically, NPB
will, after consultation with George C. Mason and Hugh J. Garchinsky, prior to
or soon after the Closing Date, inform each PFI employee of the likelihood of
such employee having continued employment with NPB, NPBank or any other NPB
Subsidiary following the Closing, and will permit any PFI employee to apply for
any employment position posted as available with NPB, NPBank or any other NPB
Subsidiary. NPB will give any PFI applicant priority consideration. Where there
is a coincidence of responsibilities, NPB will try to reassign the affected
individual to a needed position that utilizes the skills and abilities of the
individual. If that is impracticable or if NPB elects to eliminate a position or
does not offer the employee comparable employment (i.e., a position of
substantially similar job descriptions or responsibilities at substantially the
same salary level in a work location within twenty five (25) miles of the
employee's then current work location with PFI), NPB will make severance
payments to the displaced employee as set forth in this Section 5.07(c)(i).
(B) Subject to the following minimum and maximum
benefits, NPB will grant an eligible employee two weeks of severance pay (at his
then current pay rate) for each year of an employee's service with PFI or any
PFI Subsidiary prior to the employment termination date. The minimum benefit
shall be eight weeks' salary for full-time employees, which will be pro-rated
for part-time employees. The maximum severance benefit will be 26 weeks' salary.
(C) All employees of PFI or of any PFI Subsidiary on
the date hereof will be eligible for severance benefits set forth in this
Section 5.07(c)(i), except that:
(1) No employee of PFI or of any PFI
Subsidiary who shall receive any payment or benefit pursuant to any "change in
control" agreement or similar plan or right shall be eligible for any severance
benefits; and
(2) No employee of PFI or of any PFI
Subsidiary with an operating systems conversion support role of any kind shall
be eligible for any severance benefits unless such employee continues in
employment for 30 days following the actual consolidation and conversion of
Peoples Bank's operating systems with and into NPBank's operating systems,
which, as of the date hereof, is scheduled to be completed not later than sixty
days after the Effective Date.
56
(D) Each person eligible for severance benefits will
remain eligible for such benefits if his or her employment is terminated, other
than for "cause", within twelve months after the Effective Date. Any person
whose employment with NPB or any NPB Subsidiary is terminated without "cause"
after twelve months from the Effective Date shall receive such severance benefit
from NPB or such NPB Subsidiary as is provided for in NPB's general severance
policy for such terminations (with full credit being given for each year of
service with PFI or any PFI Subsidiary).
(E) For purposes of this Section 5.07(c)(i), "cause"
means the employer's good faith reasonable belief that the employee (1)
committed fraud, theft or embezzlement; (2) falsified corporate records; (3)
disseminated confidential information concerning customers, NPB, any NPB
Subsidiary or any of its or their employees in violation of any applicable
confidentiality agreement or policy; (4) had documented unsatisfactory job
performance under NPB's dismissal policy; or (5) violated NPB's Code of Conduct.
The foregoing definition of "cause" is the definition of "cause" used by NPB and
its Subsidiaries in the ordinary course of its business.
(ii) Employee Benefits.
(A) As of the Effective Date, each employee of PFI or
of any PFI Subsidiary who becomes an employee of NPB or of any NPB Subsidiary
shall be entitled to full credit for each year of service with PFI of the PFI
Subsidiary for purposes of determining eligibility for participation and
vesting, but not benefit accrual, in NPB's, or as appropriate, in the NPB
Subsidiary's, employee benefit plans, programs and policies. NPB shall use the
original date of hire by PFI or a PFI Subsidiary in making these determinations.
(B) The employee benefits provided to former
employees of PFI or a PFI Subsidiary after the Effective Date shall be
reasonably equivalent in the aggregate to the employee benefits provided by NPB
or its Subsidiaries to their similarly situated employees. The medical, dental
and life insurance plans, programs or policies, if any, that become applicable
to former employees of PFI or any PFI Subsidiary shall not contain any exclusion
or limitation with respect to any pre-existing condition of any such employees
or their dependents.
(C) NPB shall, or shall cause NP Bank to, honor the
supplemental retirement benefit plans for George C. Mason and Carl R. Fretz, and
honor the change in control agreements among PFI, Peoples Bank and Scott W.
Gundaker and Susan H. Reeves, as in effect on the date hereof.
(D) Subject to the other provisions of this Section
5.07(c)(ii) and Section 2.07, after the Effective Date, NPB may discontinue,
amend, convert to, or merge with, an NPB or NPB Subsidiary plan any PFI Benefit
Plan, subject to such plan's provisions and applicable law.
57
(iii) Election of NPBank Directors.
(A) Upon consummation of the Bank Merger and subject
to compliance with all applicable legal requirements, NPB shall cause NPBank to
elect one person selected by PFI's Board of Directors and approved by NPB (which
approval is hereby granted as to Hugh J. Garchinsky and will not otherwise be
unreasonably withheld) (a "PFI NPBank Nominee") as a director of NPBank,
effective the effective date of the Bank Merger, to hold office until his
successor is elected and qualified or otherwise in accordance with applicable
law, the articles of association and bylaws of NPBank; and NPB and NPBank shall
take all steps necessary to insure that the PFI NPBank Nominee is re-elected to
NPBank's Board of Directors for each of the three years following the effective
date of the Bank Merger if such person is in office as director of NPBank on the
annual election dates.
(B) If the PFI NPBank Nominee, or any successor,
resigns, dies or is otherwise removed from NPBank's Board of Directors prior to
the end of the third one-year term, the former PFI directors who are then
serving on the Peoples Bank Board, by a plurality vote, shall have the right to
select the successor to such PFI NPBank Nominee, or any successor, subject to
(A) compliance with the NPB/NPBank Bylaws Restrictions, (B) such person being
"independent" as defined by the SEC and Nasdaq, and (C) approval of such person
by NPB (which approval will not be unreasonably withheld). NPB shall take all
reasonable steps to elect such successor to the NPBank Board of Directors.
(iv) PFI Division, PFI Board.
(A) Upon consummation of the Contemplated
Transactions, NPB shall cause NPBank to establish and operate a separate banking
division called "Peoples Bank of Oxford, a Division of National Penn Bank" (the
"Peoples Bank Division"). Subject to the next sentence, the Peoples Bank
Division will consist of all Peoples Bank's present community offices and two
additional high profile community offices to be opened by the Peoples Bank
Division within the four years following the Effective Date unless otherwise
mutually agreed by the Peoples Bank Board. Notwithstanding the foregoing, the
Georgetown office of Peoples Bank will be combined with the Georgetown office of
NPBank's HomeTowne Heritage Bank division, and the combined office will become
and remain part of the HomeTowne Heritage Bank Division.
(B) NPB will utilize the Peoples Bank Division in the
further expansion of its business in Southern Chester County, Pennsylvania, as
well as points immediately south, including Cecil County and Harford County,
Maryland, and New Castle County, Delaware. NPB will accomplish the expansion of
the community office system through, among other things, the opening of de novo
offices or the acquisition of branch deposits or assets from other financial
institutions.
58
(C) All offices and operations of the Peoples Bank
Division will be branded using the name "Peoples Bank of Oxford, a Division of
National Penn Bank", including without limitation all branch signage,
statements, communications, business cards, stationary, brochures, web site,
marketing materials, promotional items, billing and all other aspects of the
Peoples Bank Division.
(D) Upon consummation of the Contemplated
Transactions, NPB shall cause NPBank to establish the "Peoples Bank of Oxford
Division Board of Directors" (the "Peoples Bank Board"). The Peoples Bank Board
shall initially consist of the members of PFI's Board of Directors at the
Effective Date and one or two NPB or NPBank representatives selected by NPB. In
accordance with NPB corporate governance procedures and guidelines, the Peoples
Bank Board will have authority to add additional members from time to time. NPB
anticipates that the emphasis of the Peoples Bank Board will be on business
development, marketing and expansion of the Peoples Bank Division throughout
Southern Chester County, Pennsylvania and points immediately south.
(E) PFI's current non-employee directors who become
Peoples Bank Board Members shall receive a $10,000 annual cash retainer. Other
persons who may be selected for service on the Peoples Bank Board shall be
compensated in accordance with NPB's standard compensation arrangements for
divisional board members, which is partially fixed and partially incentive-based
compensation. PFI's current non-employee directors who become Peoples Bank Board
Members shall have the option of electing to receive such NPB standard
compensation. The Peoples Bank Board shall have indemnification and insurance
coverage no less favorable than members of the Board of Directors of NPBank.
(F) NPB shall operate the Peoples Bank Division, and
maintain the Peoples Bank Board at the foregoing compensation level, for a
period of at least two years after the Effective Date, except that this covenant
shall expire if and when NPB shall be acquired or otherwise sold, or if agreed
to by a majority vote of both the Peoples Bank Board and the NPBank Board of
Directors. In the event that the Peoples Bank Board is discontinued for any
reason at any time prior to three (3) years after the Effective Date, any
remaining compensation due to Peoples Bank Board members for the balance of the
three (3) year period shall be accelerated and become immediately due and
payable.
(v) Indemnification, Insurance.
(A) NPB shall indemnify, defend, and hold harmless
the directors, officers, employees and agents of PFI and the PFI Subsidiaries
(each, an "Indemnified Party") against all losses, expenses (including
reasonable attorneys' fees), claims, damages or liabilities and amounts paid in
settlement arising out of actions or omissions or alleged acts or omissions
59
(collectively, "Prior Acts") occurring at or prior to the Effective Date
(including the Contemplated Transactions) to the fullest extent permitted by
Pennsylvania law, including provisions relating to advances of expenses incurred
in the defense of any proceeding to the full extent permitted by Pennsylvania
law upon receipt of any undertaking required by Pennsylvania law. Without
limiting the foregoing, in a case (if any) in which a determination by NPB is
required to effectuate any indemnification, NPB shall direct, at the election of
the Indemnified Party, that the determination shall be made by independent
counsel mutually agreed upon between NPB and the Indemnified Party.
(B) NPB shall, and it shall cause NPBank to, keep in
effect provisions in its articles of incorporation or association and bylaws
providing for exculpation of director and officer liability and its
indemnification of the Indemnified Parties to the fullest extent permitted by
Pennsylvania law, which provisions shall not be amended except as required by
applicable law or except to make changes permitted by law that would enlarge the
Indemnified Parties' right to indemnification.
(C) NPB shall use its reasonable best efforts (and
PFI shall cooperate and assist prior to the Effective Date in these efforts), at
no expense to the beneficiaries, to:
(1) maintain directors' and officers'
liability insurance ("D&O Insurance") for the Indemnified Parties with respect
to matters occurring at or prior to the Effective Date, issued by a carrier
assigned a claims-paying ability rating by A.M. Best & Co. of "A (Excellent)" or
higher; or
(2) obtain coverage for Prior Acts for the
Indemnified Parties under the directors' and officers' liability insurance
policies currently maintained by NPB;
in either case, providing at least the same coverage as the D&O Insurance
currently maintained by PFI and containing terms and conditions which are no
less favorable to the beneficiaries, for a period of at least six (6) years from
the Effective Date; provided, that NPB shall not be obligated to make annual
premium payments for such six-year period in respect of the D&O Insurance which
exceed, for the portion related to PFI's directors and officers, $69,064 (150%
of the annual premium payment, as of December 1, 2003, under PFI's current
policy in effect on the date of this Agreement) (the "Maximum Amount"). If the
amount of the premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, NPB shall use its reasonable best efforts to
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount.
(D) If any claim is made against present or former
directors, officers or employees of PFI or any PFI Subsidiary who are covered or
potentially covered by insurance, neither NPBank nor NPB shall do anything that
would forfeit, jeopardize, restrict or limit the insurance coverage available
60
for that claim until the final disposition thereof.
(E) If NPB or any of its successors or assigns shall
consolidate with or merge into any other person and shall not be the continuing
or surviving person of such consolidation or merger or shall transfer all or
substantially all of its assets to any person, then and in each case, proper
provision shall be made so that the successors and assigns of NPB shall assume
the obligations set forth in this Section 5.07(c)(v).
(F) The provisions of this Section 5.07(c)(v) are
intended to be for the benefit of and shall be enforceable by, each Indemnified
Party, his or her heirs and representatives.
(G) NPB shall pay all expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided for in this Section 5.07(c)(v).
(vi) Retention Bonuses. NPB shall cause the retention bonuses
described in Section 5.01(d) of this Agreement to be paid in accordance with
such Section 5.01(d).
(vii) Reorganization. Through the Closing Date, NPB shall not
take any action that would preclude the Merger from qualifying as a
reorganization within the meaning of Section 368 of the IRC.
(viii) Conduct of NPB's Business. Through the Closing Date,
NPB shall use its reasonable good faith efforts to preserve its business
organization intact, maintain good relationships with employees, and preserve
the good will of customers of NPB and others with whom business relationships
exist.
ARTICLE VI
----------
CONDITIONS
----------
6.01 Conditions to PFI's Obligations under this Agreement. The
obligations of PFI hereunder shall be subject to satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by PFI pursuant
to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, NPB and NPBank to authorize the execution, delivery and performance
of this Agreement and the Bank Plan of Merger, respectively, and the
consummation of the Contemplated Transactions, shall have been duly and validly
taken by NPB and NPBank, respectively, and PFI shall have received certified
copies of the resolutions evidencing such authorizations.
61
(b) Covenants; Representations. The obligations of NPB and NPBank
required by this Agreement to be performed by NPB or NPBank at or prior to the
Closing Date shall have been duly performed and complied with in all material
respects; and the representations and warranties of NPB set forth in this
Agreement shall be true and correct in all material respects, as of the date of
this Agreement, and as of the Closing Date as though made on and as of the
Closing Date, except as to any representation or warranty which specifically
relates to an earlier date and except as to any representation or warranty to
the extent the breach of such representation or warranty does not have a
Material Adverse Effect.
(c) Approvals of Regulatory Authorities. Procurement by PFI and NPB of
all requisite approvals and consents of Regulatory Authorities and the
expiration of the statutory waiting period or periods relating thereto for the
Contemplated Transactions; and no such approval or consent shall have imposed
any condition or requirement (other than conditions or requirements previously
disclosed) which would so materially and adversely impact the economic or
business benefits to PFI or NPB of the Contemplated Transactions that, had such
condition or requirement been known, such party would not, in its reasonable
judgment, have entered into this Agreement.
(d) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the Contemplated Transactions.
(e) Officer's Certificate. NPB shall have delivered to PFI a
certificate, dated the Closing Date and signed, without personal liability, by
its Chairman or President, to the effect that the conditions set forth in
subsections (a) through (d) of this Section 6.01 have been satisfied.
(f) Registration Statement. The Registration Statement shall be
effective under the Securities Act, and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; and all approvals deemed necessary by NPB's counsel from state
securities or "blue sky" authorities with respect to the transactions
contemplated by this Agreement shall have been obtained.
(g) Tax Opinion. PFI shall have received an opinion of Stevens & Lee,
P.C., special counsel to PFI, dated the Closing Date, to the effect that (a) the
Merger constitutes a reorganization under Section 368(a) of the IRC, and (b) any
gain realized in the Merger will be recognized only to the extent of cash or
other property (other than NPB Common Stock) received in the Merger, including
cash received in lieu of fractional share interests; in rendering their opinion,
such counsel may require and rely upon representations and reasonable
assumptions, including those contained in certificates of officers of PFI, NPB
and others.
62
(h) Approval by PFI's Shareholders. This Agreement shall have been
approved by the shareholders of PFI by such vote as is required by the BCL and
the articles of incorporation and bylaws of PFI.
(i) Other Documents. PFI shall have received such other certificates,
documents or instruments from NPB or its officers or others as PFI shall have
reasonably requested in connection with accounting or income tax treatment of
the Contemplated Transactions, or related securities law compliance.
(j) Nasdaq Listing. The NPB Common Stock, including the NPB Common
Stock to be issued in the Merger and pursuant to the Adjusted PFI Options, shall
be authorized for quotation on Nasdaq.
(k) Rights Agreement. No event shall have occurred which shall result
in the grant, issuance or triggering of any right or entitlement or the
obligation to grant or issue any interest in NPB Common Stock or enable or allow
any right or other interest associated with the Rights Agreement to be
exercised, distributed or triggered, and no other event shall have occurred
under the Rights Agreement which would materially adversely affect any current
or future right or interest of any holders of PFI Common Stock.
(l) Key Management Agreements. Neither NPB nor NPBank shall have
violated, or taken any action to renounce or repudiate, the Key Management
Agreements.
6.02 Conditions to NPB's Obligations under this Agreement. The
obligations of NPB hereunder shall be subject to satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived by NPB pursuant
to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on
the part of, PFI and Peoples Bank to authorize the execution, delivery and
performance of this Agreement and the Bank Plan of Merger, respectively, and the
consummation of the Contemplated Transactions, shall have been duly and validly
taken by PFI and Peoples Bank, respectively, and NPB shall have received
certified copies of the resolutions evidencing such authorizations.
(b) Covenants; Representations. The obligations of PFI and Peoples Bank
required by this Agreement to be performed by PFI and Peoples Bank at or prior
to the Closing Date shall have been duly performed and complied with in all
material respects; and the representations and warranties of PFI set forth in
this Agreement shall be true and correct in all material respects, as of the
date of this Agreement, and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty which specifically
relates to an earlier date and except as to any representation or warranty to
the extent the breach of such representation or warranty does not have a
Material Adverse Effect.
63
(c) Approvals of Regulatory Authorities. Procurement by NPB and PFI of
all requisite approvals and consents of Regulatory Authorities and the
expiration of the statutory waiting period or periods relating thereto for the
Contemplated Transactions; and no such approval or consent shall have imposed
any condition or requirement (other than conditions or requirements previously
disclosed) which would so materially and adversely impact the economic or
business benefits to NPB or PFI of the Contemplated Transactions that, had such
condition or requirement been known, such party would not, in its reasonable
judgment, have entered into this Agreement.
(d) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the Contemplated Transactions.
(e) Officer's Certificate. PFI shall have delivered to NPB a
certificate, dated the Closing Date and signed, without personal liability, by
its Chairman or President, to the effect that the conditions set forth in
subsections (a) through (d) of this Section 6.02 have been satisfied.
(f) Registration Statement. The Registration Statement shall be
effective under the Securities Act, and no proceedings shall be pending or
threatened by the SEC to suspend the effectiveness of the Registration
Statement; and all approvals deemed necessary by NPB's counsel from state
securities or "blue sky" authorities with respect to the transactions
contemplated by this Agreement shall have been obtained.
(g) Tax Opinion or Letter. NPB shall have received an opinion of
Ellsworth, Carlton, Mixell & Waldman, P.C., special counsel to NPB, or a letter
from Grant Thornton LLP, NPB's independent certified public accountants, dated
the Closing Date, to the effect that (a) the Merger constitutes a reorganization
under Section 368(a) of the IRC, and (b) any gain realized in the Merger will be
recognized only to the extent of cash or other property (other than NPB Common
Stock) received in the Merger, including cash received in lieu of fractional
share interests; in rendering their opinion, such counsel or firm may require
and rely upon representations and reasonable assumptions, including those
contained in certificates of officers of PFI, NPB and others.
(h) Approval by PFI's Shareholders. This Agreement shall have been
approved by the shareholders of PFI by such vote as is required by the BCL and
the articles of incorporation and bylaws of PFI.
(i) Other Documents. NPB shall have received such other certificates,
documents or instruments from PFI or its officers or others as NPB shall have
reasonably requested in connection with accounting or income tax treatment of
the Contemplated Transactions, or related securities law compliance.
64
(j) Phase I Environmental Audit Results. The results of any Phase I
environmental audit conducted pursuant to Section 5.07(a)(iii) hereof shall not
result in a Material Adverse Effect on PFI; provided, however that (i) any such
environmental audit must be initiated within thirty (30) days of the date of
this Agreement and (ii) NPB must terminate or irrevocably waive its right to
terminate the Agreement for failure of the condition set forth in this Section
6.02(j) within fifteen (15) days of receiving the results of such environmental
audit.
(k) Key Peoples Management. Each Key Peoples Management member shall
remain employed by PFI or any Peoples Subsidiary through the Effective Date.
ARTICLE VII
-----------
TERMINATION
-----------
7.01 Termination. This Agreement may be terminated on or at any time
prior to the Closing Date:
(a) By the mutual written consent of the parties hereto.
(b) By NPB or PFI:
(i) If there shall have been any breach of any representation,
warranty or obligation of the other party hereto (subject to the same standards
as set forth in Sections 6.01(b) or 6.02(b), as the case may be) and such breach
cannot be, or shall not have been, remedied within 30 days after receipt by such
party of written notice specifying the nature of such breach and requesting that
it be remedied; provided, that, if such breach cannot reasonably be cured within
such 30-day period but may reasonably be cured within 60 days, and such cure is
being diligently pursued, no such termination shall occur prior to the
expiration of such 60-day period;
(ii) If the Closing Date shall not have occurred prior to
September 30, 2004 (except that if the Closing Date shall not have occurred by
such date because of a breach of this Agreement by a party hereto, such
breaching party shall not be entitled to terminate this Agreement in accordance
with this provision);
(iii) If any Regulatory Authority whose approval or consent is
required for consummation of the Contemplated Transactions shall issue a
definitive written denial of such approval or consent and the time period for
appeals and requests for reconsideration has run; or
65
(iv) If the PFI Shareholders vote but fail to approve the
Merger at the PFI Shareholders Meeting.
(c) By PFI, no later than 5:00 p.m. prevailing Eastern Time on the
Business Day immediately preceding the Closing Date, if both of the following
conditions occur as of the close of business on the Determination Date:
(i) the NPB Market Value shall be less than $26.57 per share,
but not less than $24.24 per share; and
(ii) the quotient obtained by dividing the NPB Market Value by
$33.21 per share shall be less than (ii) the quotient obtained by dividing the
Average Index Price by the Index Price on the Starting Date and subtracting 0.10
from the quotient in this clause (ii).
For purposes of this Section 7.01(c), the following terms have the
meanings indicated.
"Index Group" means the bank holding companies listed below, the common
stocks of all of which shall be publicly traded and as to which there shall not
have been, since the Starting Date and before the Determination Date, any public
announcement of a proposal for such company to be acquired or for such company
to acquire another company or companies in transactions with a value exceeding
25% of the acquiror's market capitalization. The bank holding companies are as
follows: (1) Susquehanna Bancshares, Inc.; (2) Fulton Financial Corporation; (3)
Harleysville National Corporation; (4) Univest Corp.; (5) S&T Bancorp; (6) First
Commonwealth Financial; (7) Omega Financial Corp.; and (8) Sterling Financial
Corporation.
"Index Price" on a given date means the average of the closing sale
prices of the companies comprising the Index Group.
"Average Index Price" means the average of the Index Prices for the ten
(10) trading days ending on the Determination Date.
"Starting Date" means the last trading day immediately preceding the
date of the first public announcement of entry into this Agreement.
If any company belonging to the Index Group declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares, or similar transaction between the Starting Date and the Determination
Date, the prices for the common stock of such company shall be appropriately
adjusted for the purposes of applying this Section 7.01(c).
(d) By PFI, no later than 5:00 p.m. prevailing Eastern Time on the
66
Business Day immediately preceding the Closing Date, if the NPB Market Value
shall be less than $24.24 per share.
7.02 Effect of Termination. If this Agreement is terminated pursuant to
Section 7.01 hereof or otherwise, this Agreement shall forthwith become void,
other than Sections 5.02(c) and 8.01 hereof which shall remain in full force and
effect, and there shall be no further liability on the part of NPB or PFI to the
other, except for any liability of NPB or PFI under such sections of this
Agreement and except for any liability arising out of a willful breach of this
Agreement giving rise to such termination.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
8.01 Expenses and Other Fees.
(a) Except as set forth in Section 8.01(b), each party hereto shall
bear and pay all costs and expenses incurred by it in connection with the
Contemplated Transactions, including fees and expenses of its own financial
consultants, accountants and counsel.
(b) If PFI fails to complete the Merger after the occurrence of one of
the following events, and NPB shall not be in material breach of this Agreement,
PFI shall immediately pay NPB a fee of Seven Million Dollars ($7,000,000):
(i) a person or group (as those terms are defined in Section
13(d) of the Exchange Act and the rules and regulations thereunder), other than
NPB or an Affiliate of NPB:
(A) acquires beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act) of 25% or more of the then outstanding
shares of PFI Common Stock; or
(B) enters into an agreement, letter of intent or
memorandum of understanding with PFI pursuant to which such person or group or
any affiliate of such person or group would:
(1) merge or consolidate, or enter into any
similar transaction, with PFI;
(2) acquire all or substantially all of the
assets or liabilities of PFI; or
(3) acquire beneficial ownership of
67
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 25% or more of the then outstanding shares of PFI
Common Stock; or
(ii) PFI authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose, an
agreement, letter of intent or memorandum of understanding described in
subsection (b)(i)(B) above; or
(iii) the PFI shareholders vote but fail to approve the Merger
at the PFI Shareholders Meeting, or the PFI Shareholders Meeting is cancelled,
if prior to the shareholder vote or cancellation:
(A) the PFI Board of Directors shall have withdrawn
or modified its recommendation that PFI shareholders approve this Agreement;
(B) there has been an announcement by a person or
group (as those terms are defined in Section 13(d) of the Exchange Act and the
rules and regulations thereunder), other than NPB or an Affiliate of NPB, of an
offer or proposal to acquire 10% or more of the PFI Common Stock then
outstanding, or to acquire, merge, or consolidate with PFI, or to purchase all
or substantially all of PFI's assets; or
(C) any one or more directors or officers of PFI or
other persons who have signed a Letter Agreement, acting jointly or severally,
and who, individually or in the aggregate, beneficially own one percent (1%) or
more of the PFI Common Stock shall have failed to maintain continued ownership
of the shares of PFI Common Stock over which he, she or they exercise sole or
shared voting power (as identified on his, her or their signed Letter
Agreements), as required by such signed Letter Agreements; or
(D) any director or officer of PFI or other person
who has signed a Letter Agreement shall have failed to vote at the PFI
Shareholders Meeting the shares of PFI Common Stock over which he or she
exercises sole or shared voting power (as identified on his or her signed Letter
Agreement), as required by such signed Letter Agreement.
..
8.02 Non-Survival of Representations and Warranties; Disclosure
Schedules. All representations, warranties and, except to the extent
specifically provided otherwise herein, agreements and covenants shall terminate
on the Closing Date. Without limiting the foregoing, Sections 1.02(d), 2.07,
2.08, and 5.07(c)(i), (ii), (iii), (iv), (v) and (vi) shall survive the Closing.
8.03 Amendment, Extension and Waiver. Subject to applicable law, at any
time prior to the Closing Date, the parties may:
(a) amend this Agreement;
68
(b) extend the time for the performance of any of the obligations or
other acts of either party hereto;
(c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto; or
(d) to the extent permitted by law, waive compliance with any of the
agreements or conditions contained in Articles V and VI hereof or otherwise.
This Agreement may not be amended except by an instrument in writing
signed, by authorized officers, on behalf of the parties hereto. Any agreement
on the part of a party hereto to any extension or waiver shall be valid only if
set forth in an instrument in writing signed by a duly authorized officer on
behalf of such party, but such waiver or failure to insist on strict compliance
with such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
8.04 Entire Agreement.
(a) This Agreement, including the documents referred to herein or
delivered pursuant hereto, contains the entire agreement and understanding of
the parties with respect to its subject matter. This Agreement supersedes all
prior arrangements and understandings between the parties, both written and
oral, with respect to its subject matter other than the Confidentiality
Agreement.
(b) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and its successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto and their respective successors, any rights, remedies,
obligations or liabilities, and provided, further, that the Peoples Bank Board
Members may enforce the provisions of Sections 1.02(d), 2.07, 2.08, 5.07(c)(i),
(ii), (iii), (iv), (v) and (vi), and any Indemnified Party may enforce Section
5.07(c)(v).
8.05 No Assignment. Neither party hereto may assign any of its rights
or obligations hereunder to any other person, without the prior written consent
of the other party hereto.
8.06 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given upon delivery if delivered personally, two
business days after mailing if mailed by prepaid registered or certified mail,
return receipt requested, or upon confirmation of good transmission if sent by
telecopy, addressed as follows:
(a) If to NPB or NPBank, to:
69
National Penn Bancshares, Inc.
National Penn Bank
Philadelphia and Reading Avenues
P.O. Box 547
Boyertown, Pennsylvania 19512-0547
Attention: Wayne R. Weidner, Chairman and CEO
Glenn E. Moyer, President
Telecopy No.: 610-369-6349
with a copy to:
H. Anderson Ellsworth, Esquire
Jay W. Waldman, Esquire
Ellsworth, Carlton, Mixell & Waldman, P.C.
1105 Berkshire Boulevard
Suite 320
Wyomissing, Pennsylvania 19610
Telecopy No.: 610-371-9510
(b) If to PFI, to:
Peoples First Inc.
24 South Third Street
P O Box 500
Oxford, Pennsylvania 19363
Attention: George C. Mason, Chairman
Hugh J. Garchinsky, President and CEO
Telecopy No.:
with a copy to:
David W. Swartz, Esquire
Stevens & Lee, P.C.
111 North Sixth Street
P.O. Box 679
Reading, Pennsylvania 19603-0679
Telecopy No.: 610-376-5610
70
8.07 Disclosure Schedules. Information contained on either the PFI
Disclosure Schedule or the NPB Disclosure Schedule shall be deemed to cover the
express disclosure requirement contained in a representation or warranty of this
Agreement and any other representation or warranty of this Agreement of such
party where it is readily apparent it applies to such provision. The mere
inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that such
item represents a material exception or fact, event or circumstance or that such
item is or could result in a Material Adverse Effect.
8.08 Tax Disclosure. Notwithstanding anything else in this Agreement to
the contrary, each party hereto (and each employee, representative or other
agent of any party) may disclose to any and all persons, without limitation of
any kind, the federal income tax treatment and federal income tax structure of
any and all transaction(s) contemplated herein and all materials of any kind
(including opinions or other tax analyses) that are or have been provided to any
party (or to any employee, representative, or other agent of any party) relating
to such tax treatment or tax structure; provided, however, that this
authorization of disclosure shall not apply to restrictions reasonably necessary
to comply with securities laws. This authorization of disclosure is not
effective until the earlier of (i) the date of the public announcement of
discussions relating to the Contemplated Transactions, (ii) the date of the
public announcement of the Contemplated Transactions, or (iii) the date of
execution of an agreement (with or without conditions) to enter into the
Contemplated Transactions.
8.09 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
8.11 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
8.12 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic internal law of the Commonwealth of
Pennsylvania, except to the extent the National Bank Act is applicable by its
terms.
71
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
NATIONAL PENN BANCSHARES, INC.
(Corporate Seal) By: /s/ Wayne R. Weidner
----------------------------
Wayne R. Weidner
Chairman and CEO
Attest: /s/ Sandra L. Spayd
----------------------------
Sandra L. Spayd
Secretary
PEOPLES FIRST, INC.
(Corporate Seal) By: /s/ George C. Mason
----------------------------
George C. Mason
Chairman
By: /s/ Hugh J. Garchinsky
----------------------------
Hugh J. Garchinsky
President and CEO
Attest: /s/ Carl R. Fretz
----------------------------
Carl R. Fretz
Vice Chairman and
Secretary
72