SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PIONEER AMERICAN HOLDING COMPANY CORP.
-----------------------
(Name of Issuer)
Common Stock, par value $1.00 per share
-------------------------------------------------
(Title of Class of Securities)
723544 10 2
-----------------------------------------------
(CUSIP Number of Class of Securities)
Mr. Daryl R. Forsythe
President and Chief Executive Officer
NBT Bancorp Inc.
52 South Broad Street
Norwich, New York 13815
(607) 337-2265
------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
Copy to:
Brian D. Alprin, Esq.
Laurence S. Lese, Esq.
Duane, Morris & Heckscher LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
(202) 776-7800
1
December 7, 1999
---------------------------------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Statement because of Rule
13d-1(b)(3) or (4), check the following:
[ ]
Check the following box if a fee is being paid with this Statement:
[ ]
- --------------------------------------------------------------------------------
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
NBT BANCORP INC.
16-1268674
- --------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC USE ONLY
- -------------------------------------------------------------------------------
(4) SOURCE OF FUNDS*
WC/00
- -------------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
[ ]
- -------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- -------------------------------------------------------------------------------
NUMBER OF SHARES (7) SOLE VOTING POWER
BENEFICIALLY OWNED BY 569,997(1)
EACH REPORTING PERSON ---------------------------
WITH: (8) SHARED VOTING
-0-
---------------------------
2
(9) SOLE DISPOSITIVE
569,997(1)
---------------------------
(10) SHARED DISPOSITIVE
-0-
- -------------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
569,997(1)
- -------------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* [ ]
N/A
- -------------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
APPROXIMATELY 16.6%(2)
- -------------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT!
(1) The shares of Issuer common stock covered by this report are
purchasable by Reporting Person upon exercise of an option granted by
Issuer to Reporting Person as of December 7, 1999, and described in
Item 4 of this report. Prior to the exercise of the option, Reporting
Person is not entitled to any rights as a stockholder of Issuer as to
the shares covered by the option. The option may be exercised only upon
the happening of certain events referred to in Item 4, none of which
has occurred as of the date hereof. Reporting Person expressly
disclaims beneficial ownership of any of the shares of common stock of
Issuer which are purchasable by Reporting Person upon exercise of the
option until such time as Reporting Person purchases any such shares
upon any such exercise. The number of shares indicated represents 19.9%
of the total outstanding shares of common stock of Issuer as of
December 7, 1999, excluding shares issuable upon exercise of the
option.
(2) After giving effect to the exercise of the option as described herein.
ITEM 1. SECURITY AND ISSUER.
3
This statement on Schedule 13D (the "Schedule 13D") relates to the common stock,
$1.00 par value per share (the "Shares" or the "Issuer Common Stock"), of
Pioneer American Holding Company Corp., a Pennsylvania corporation ("Issuer").
The principal executive office of Issuer is located at 41 North Main Street,
Carbondale, PA 18407.
The information set forth in the Exhibits hereto is hereby expressly
incorporated herein by reference and the responses to each item of this Schedule
13D are qualified in their entirety by the provisions of such Exhibits.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) This Schedule 13D is filed by NBT Bancorp Inc., a Delaware corporation
("Reporting Person").
The business address of Reporting Person is 52 South Broad Street, Norwich, New
York 13815. The principal business of Reporting Person is a bank holding
company.
To the best of Reporting Person's knowledge as of the date hereof, the name;
business address; present principal occupation or employment; name, principal
business and address of any corporation or other organization in which such
employment is conducted; and citizenship of each executive officer and director
of Reporting Person is set forth in Schedule I hereto. The information contained
in Schedule I is incorporated herein by reference.
(d)-(e) During the last five years, neither Reporting Person nor, to the best
knowledge of Reporting Person, any of the executive officers or directors of
Reporting Person, has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such items.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Option (defined in Item 4 below) to acquire Shares was granted by Issuer to
Reporting Person as an inducement to Reporting Person's entering into an
Agreement and Plan of Merger, dated as of December 7, 1999, by and between
Reporting Person and Issuer (the "Plan of Merger"), providing for the merger of
a subsidiary of Reporting Person with and into Issuer with Issuer being the
surviving corporation, followed immediately by the merger of Issuer with and
into Reporting Person with Reporting Person being the surviving corporation
(together, the "Merger"). Pursuant to the Plan of Merger, each outstanding Share
will be converted into the right to receive shares of common stock, no par
value, $1.00 stated value per share or $.01 par value per share, as the case may
be, of Reporting Person ("Reporting Person Common Stock"). At its special
stockholders' meeting to consider its merger with Lake Ariel Bancorp, Inc.,
Reporting Person is also requesting that its stockholders consider a proposal to
change the par value of Reporting Person's common
4
stock from no par value, $1.00 stated value per share to $.01 par value per
share. Depending upon the outcome of that vote by the stockholders of Reporting
Person, the stockholders of Issuer will receive in the Merger Shares of
Reporting Person Common Stock with such par value as determined by such vote of
Reporting Person's stockholders. The Merger is subject to the approval of
Issuer's and Reporting Person's stockholders, respectively, regulatory
approvals, and the satisfaction or waiver of various other conditions, as more
fully described in the Plan of Merger. None of the Triggering Events (defined in
Item 4 below) permitting the exercise of the Option has occurred as of the date
hereof. In the event that the Option becomes exercisable and Reporting Person
wishes to purchase the Shares subject thereto, Reporting Person anticipates that
it would fund the exercise price of $13,679,928 (assuming full exercise of the
Option) with working capital or through other financing sources available to
Reporting Person at the time of exercise. A copy of the Plan of Merger is
attached hereto as Exhibit 2.1. See also Item 4 below.
ITEM 4. PURPOSE OF THE TRANSACTION.
The information set forth in Item 3 is hereby incorporated herein by reference.
The purpose of the transaction is for Issuer to merge with and into Reporting
Person, with Reporting Person being the surviving entity. In connection with the
Plan of Merger and in consideration thereof, Issuer and Reporting Person entered
into that certain Stock Option Agreement (the "Option Agreement"), dated
December 7, 1999, whereby Issuer granted to Reporting Person an option (the
"Option") to purchase, under certain circumstances described therein, up to
569,997 Shares at a cash purchase price per Share equal to $24.00 subject to
antidilution adjustment as provided therein (the "Purchase Price"). Based on the
number of Shares outstanding on December 7, 1999, the Option would be
exercisable for approximately 19.9% of the outstanding Shares, or approximately
16.6% of the Shares that would be outstanding after giving effect to the
exercise of the Option.
Reporting Person may exercise the Option, in whole or in part, at any time and
from time to time following the happening of certain events (each, a "Triggering
Event"), provided that Reporting Person provide written notice of such exercise
to Issuer in accordance with the Option Agreement. A Triggering Event includes
any one or more of the following events:
(a) Issuer or Pioneer American Bank, N. A. ("Bank Subsidiary"), without
having received Reporting Person's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as defined below)
with any person (the term "person" for purposes of the Option Agreement having
the meaning assigned thereto in sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder) other than Reporting Person or any of its subsidiaries
(each a "Reporting Person Subsidiary");
(b) Any person other than Reporting Person or any Reporting Person
Subsidiary shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10 percent or more of
5
the outstanding Shares (the term "beneficial ownership" for purposes of the
Option Agreement having the meaning assigned thereto in section 13(d) of the
Exchange Act and the rules and regulations thereunder), or, to the extent any
such person has currently acquired beneficial ownership or the right to acquire
beneficial ownership of 10 percent or more of the outstanding Shares, such
person shall have acquired beneficial ownership or the right to acquire
beneficial ownership of any additional Shares;
(c) The shareholders of Issuer shall have voted on and failed to
approve the Plan of Merger at a meeting which has been held for that purpose or
any adjournment or postponement thereof, or such meeting shall not have been
held in violation of the Plan of Merger or shall have been canceled prior to
termination of the Plan of Merger if, prior to such meeting (or if such meeting
shall not have been held or shall have been canceled, prior to such
termination), it shall have been publicly announced that any person (other than
Reporting Person or any Reporting Person Subsidiary) shall have made a bona fide
proposal to engage in an Acquisition Transaction;
(d) The Board of Directors of Issuer (the "Issuer Board") shall have
withdrawn or modified (or publicly announced its intention to withdraw or
modify) in any manner adverse to Reporting Person its recommendation that the
shareholders of Issuer approve the transactions contemplated by the Plan of
Merger or Issuer or the Issuer Board or the Bank Subsidiary or the Board of
Directors of the Bank Subsidiary shall have authorized, recommended or proposed
(or publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other than
Reporting Person or any Reporting Person Subsidiary, or that the shareholders of
Issuer approve or accept any Acquisition Transaction other than as contemplated
by the Plan of Merger;
(e) Any person other than Reporting Person or any Reporting Person
Subsidiary shall have made a bona fide proposal to Issuer or its shareholders to
engage in an Acquisition Transaction and such proposal shall have been publicly
announced;
(f) Any person other than Reporting Person or any Reporting Person
Subsidiary shall have filed with the Securities and Exchange Commission ("SEC")
a registration statement or tender offer materials with respect to a potential
exchange or tender offer that would constitute an Acquisition Transaction;
(g) Issuer shall have breached any covenant or obligation contained
in the Plan of Merger in anticipation of engaging in an Acquisition Transaction
with any person other than Reporting Person or a Reporting Person Subsidiary,
and following such breach, Reporting Person would be entitled to terminate the
Plan of Merger pursuant to section 11.2(b) of the Plan of Merger, or
(h) any person other than Reporting Person or any Reporting Person
Subsidiary shall have filed an application or notice with the Board of Governors
of the Federal Reserve System or other federal or state bank regulatory or
antitrust authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
6
The term "Acquisition Transaction" means any transaction under which a person
proposes to or will acquire a majority of the stock of, merge or consolidate
with, or acquire all or substantially all of the assets of Issuer or Bank
Subsidiary, or otherwise engage in any substantially similar transaction with
Issuer or Bank Subsidiary.
The Option and the Option Agreement will terminate upon the earliest of (a)
occurrence of the Effective Time (as such term is defined in the Plan of
Merger); (b) termination of the Plan of Merger in accordance with the provisions
thereof except (each of the following exceptions being hereinafter collectively
referred to as an "Excepted Termination") a termination by Reporting Person
pursuant to section 11.2(b) of the Plan of Merger as a result of a breach by
Issuer of the type described in such provision, or a termination by Issuer
pursuant to section 11.2(c)(iii) of the Plan of Merger; or (c) the passage of 18
months (or such longer period as provided in section 10) after an Excepted
Termination.
Upon the occurrence of certain events set forth in the Option Agreement, the
Option may be repurchased by Issuer (the "Repurchase"). In addition, the Option
Agreement grants certain registration rights (the "Registration Rights") to
Reporting Person with respect to the Shares represented by the Option. The terms
of such Repurchase and Registration Rights are set forth in the Option
Agreement.
A copy of the Option Agreement is attached hereto as Exhibit 2.3.
The purpose of the Option Agreement is to facilitate consummation of the Merger.
(a)-(j) Upon consummation of the Merger as contemplated by the Plan of Merger,
(a) Issuer will be merged into Reporting Person and the separate existence of
Issuer will terminate, (b) Reporting Person by operation of law will own the
assets and be subject to the liabilities of Issuer in exchange for Reporting
Person Common Stock to be distributed to holders of the Issuer's securities, (c)
the Board of Directors of Issuer will be terminated, (d) the Certificate of
Incorporation and Bylaws of Issuer will be canceled, (e) all the Shares will be
canceled upon effectiveness of the Merger and the Shares will cease to be
authorized to be traded in the over-the-counter market, and (f) the Shares will
become eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934, as amended.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The number of Shares covered by the Option is equal to 569,997 which
constitute (i) 19.9% of Issuer Common Stock based on the Shares issued and
outstanding on December 7, 1999, or (ii) 16.6% of the shares of Issuer Common
Stock that would be outstanding after giving effect to the exercise of the
Option.
Prior to the exercise of the Option, Reporting Person (i) is not entitled to any
rights as a stockholder of Issuer as to the Shares covered by the option and
(ii) disclaims any beneficial ownership of the shares of Issuer Common Stock
which are purchasable by Reporting Person upon exercise of the
7
Option because the Option is exercisable only in the limited circumstances
referred to in Item 4 above, none of which has occurred as of the date hereof.
If the Option were exercised, Reporting Person would have the sole right to vote
or to dispose of the shares of Issuer Common Stock issued as a result of such
exercise.
(c) Other than as set forth in this Item 5, to the best of Reporting Person's
knowledge as of the date hereof (i) neither Reporting Person nor any subsidiary
or affiliate of Reporting Person nor any of Reporting Person's executive
officers or directors beneficially owns any shares of Issuer Common Stock, and
(ii) there have been no transactions in the shares of Issuer Common Stock
effected during the past 60 days by Reporting Person, nor to the best of
Reporting Person's knowledge, by any subsidiary or affiliate of Reporting Person
or any of Reporting Person's executive officers or directors.
(d) No other person is known by Reporting Person to have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale
of, the Issuer Common Stock obtainable by Reporting Person upon exercise of the
Option.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The disclosure set forth in Items 3 and 4 above regarding the Plan of Merger and
Option Agreement is hereby incorporated herein by reference.
As a part of the Plan of Merger, each of Issuer's directors has agreed
individually and as a group, subject to their fiduciary duties to the
stockholders, to support the Plan of Merger and to recommend its adoption by
other stockholders of Issuer and has further agreed, individually and as a
group, to refrain from soliciting or, subject to their fiduciary duties to
shareholders, negotiating, or accepting any offer of merger, consolidation, or
acquisition of any of the Shares or all or substantially all of the assets of
Issuer or Bank Subsidiary.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of December 7, 1999,
by and among NBT Bancorp Inc., Levon Acquisition Company and
Pioneer American Holding Company Corp.
2.2 The Directors' Agreement, dated as of December 7, 1999, is
part of the Plan of Merger, which is filed as Exhibit 2.1
above.
8
2.3 Stock Option Agreement, dated December 7, 1999, by and
between Pioneer American Holding Company Corp. as "Issuer"
and NBT Bancorp Inc. as "Grantee."
2.4 Form of Employment Agreement with John W. Reuther.
2.5 Form of Change-in-Control Agreement.
2.6 Shareholders Voting Agreement.
9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that this statement is true, complete and correct.
NBT BANCORP INC.
By: /s/ Daryl R. Forsythe
--------------------------
Name: Daryl R. Forsythe
Title: President and Chief
Executive Officer
Dated: December 16, 1999
10
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF NBT BANCORP INC.
The following table sets forth the name, business address
and present principal occupation or employment of each director and executive
officer of Reporting Person. Each such person is a U.S. citizen, and the
business address of each such person is 52 South Broad Street, Norwich, New York
13815.
Name and Business Present Principal
Address Occupation
------- ----------
*Daryl R. Forsythe President and Chief Executive Officer
*Everett A. Gilmour Chairman, Retired
Joe C. Minor President and Chief Operating Officer,
NBT Financial Services, Inc.
Michael J. Chewens Executive Vice President, Chief Financial
and Operating Officer
John D. Roberts Vice President and Secretary
*J. Peter Chaplin Retired
*Peter B. Gregory Partner, Gatehouse Antiques
*Andrew S. Kowalczyk, Jr. Partner, Kowalczyk, Tolles, Deery
& Johnston, attorneys
*Dan B. Marshman Marshman Farms, Inc.
*John C. Mitchell President, I.L. Richer Co.
(agribusiness)
*William L. Owens Partner, Stafford, Trombley, Owens
& Curtin, P.C., attorneys
*Paul O. Stillman Chairman, Preferred Mutual
Insurance Co.
11
*Director of NBT Bancorp Inc.
EXHIBIT INDEX
EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of December 7, 1999,
by and among NBT Bancorp Inc., Levon Acquisition Company and
Pioneer American Holding Company Corp.
2.2 The Directors' Agreement, dated as of December 7, 1999, is
part of the Plan of Merger, which is filed as Exhibit 2.1
above.
2.3 Stock Option Agreement, dated December 7, 1999, by and
between Pioneer American Holding Company Corp. as "Issuer"
and NBT Bancorp Inc. as "Grantee."
2.4 Form of Employment Agreement with John W. Reuther.
2.5 Form of Change-in-Control Agreement.
2.6 Shareholders Voting Agreement.
12
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER made as of the seventh day of December,
1999, among NBT BANCORP INC. ("NBTB"), a Delaware corporation having its
principal office in Norwich, New York, LEVON ACQUISITION COMPANY ("Newco"), a
Delaware corporation having its principal office in Norwich, New York, and
PIONEER AMERICAN HOLDING COMPANY CORP. ("PAHC"), a Pennsylvania corporation
having its principal office in Carbondale, Pennsylvania
W I T N E S S E T H T H A T :
WHEREAS, NBTB and PAHC are bank holding companies which desire to affiliate
with each other through the merger of Newco with and into PAHC, with PAHC to be
the surviving corporation (the "First Merger"), and the immediately subsequent
merger of PAHC into NBTB, with NBTB to be the surviving corporation (the "Second
Merger") (the First Merger and the Second Merger being referred to herein
collectively as the "Merger");
WHEREAS, the Board of Directors of PAHC has determined that it would be in
the best interests of PAHC, its shareholders, its customers, and the areas
served by PAHC to become affiliated with NBTB through the Merger;
WHEREAS, subject to the terms and conditions hereof, the respective Boards
of Directors of NBTB and PAHC have agreed to cause the Merger pursuant to the
provisions of section 251 et seq. of the Delaware General Corporation Law (the
"GCL") and section 1921 et seq. of the Pennsylvania Business Corporation Law
(the "BCL");
WHEREAS, the parties intend that the Merger qualify as one or more tax-free
reorganizations under section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that the business combination contemplated hereby be
accounted for under the "pooling-of-interests" accounting method; and
WHEREAS, the parties desire to make certain representations, warranties,
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger;
NOW, THEREFORE, in consideration of these premises and the mutual
agreements hereinafter set forth, intending to be legally bound, the parties
agree as follows:
1
1. COMBINATION.
1.1. First Merger. Subject to the provisions of this Agreement, on the date
and at the time to be specified in the Certificate of Merger to be filed on the
date of the Closing with the Secretary of State of the State of Delaware
pursuant to the GCL and in the Articles of Merger to be filed on the date of the
Closing with the Secretary of State of the Commonwealth of Pennsylvania pursuant
to the BCL (the "Effective Time"), Newco will be merged with and into PAHC.
1.2. Effect of First Merger. At the Effective Time:
(a) Newco and PAHC (the "First Merger Constituent Corporations") shall
be merged into a single corporation, which shall be PAHC. PAHC is hereby
designated as the surviving corporation in the First Merger and is hereinafter
sometimes called the "First Merger Surviving Corporation."
(b) The separate existence of Newco shall cease.
(c) The First Merger Surviving Corporation shall have all the rights,
privileges, immunities, and powers and shall assume and be subject to all the
duties and liabilities of a corporation organized under the BCL.
(d) The First Merger Surviving Corporation shall thereupon and
thereafter possess all of the rights, privileges, immunities, and franchises, of
a public as well as of a private nature, of each of the First Merger Constituent
Corporations; and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions for shares and all other choses in
action, and all and every other interest of and belonging to or due to each of
the First Merger Constituent Corporations shall be taken and deemed to be
transferred to and vested in the First Merger Surviving Corporation without
further action, act or deed; and the title to any real estate, or any interest
therein, vested in either of the First Merger Constituent Corporations shall not
revert or be in any way impaired by reason of the First Merger.
(e) The First Merger Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each of the
First Merger Constituent Corporations; and any claim existing or action or
proceeding pending by or against either of the First Merger Constituent
Corporations may be prosecuted to judgment as if the First Merger had not taken
place, or the First Merger Surviving Corporation may be proceeded against or
substituted in its place. The First Merger Surviving Corporation expressly
assumes and agrees to perform all of Newco's liabilities and obligations.
Neither the rights of creditors nor any liens upon the property of either of the
First Merger Constituent Corporations shall be impaired by the First Merger.
(f) Any taxes, penalties, and public accounts of the State of Delaware,
claimed against either of the First Merger Constituent Corporations but not
settled, assessed, or determined prior to the First Merger shall be settled,
assessed, or determined against the First Merger Surviving Corporation and,
together with interest thereon, shall be a lien against the franchises and
property,
2
both real and personal, of the First Merger Surviving Corporation.
(g) The Certificate of Incorporation of PAHC as it exists immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
First Merger Surviving Corporation until later amended pursuant to Pennsylvania
law.
(h) The By-Laws of PAHC as they exist immediately prior to the
Effective Time shall be the By-Laws of the First Merger Surviving Corporation
until later amended pursuant to Pennsylvania law.
(i) The authorized shares of capital stock of PAHC as of the Effective
Time shall be 25,000,000 shares of Common Stock, $1.00 par value (the "PAHC
Common Stock").
(j) Subject to the terms, conditions, and limitations set forth herein,
at the Effective Time and until surrendered for exchange and payment, each
outstanding stock certificate which, prior to the Effective Time, represented
shares of the common stock, $1.00 par value, of PAHC (the "PAHC Common Stock"),
other than any shares of PAHC Common Stock held by NBTB (other than in a
fiduciary, representative, or custodial capacity), which shall be canceled
without any payment therefor, except for any dividends declared prior to the
Effective Time but not yet paid as of the Effective Time, and other than shares
of PAHC Common Stock held by PAHC, which shall be canceled without any payment
therefor, shall, by virtue of this Agreement and without any action on the part
of the holder or holders thereof, cease to represent an issued and existing
share and shall be converted into a right to receive from NBTB, and shall for
all purposes represent the right to receive, upon surrender of the certificate
formerly representing such shares, a certificate representing the number of
shares of NBTB Common Stock specified in section 1.5 of this Agreement; provided
that, with respect to any matters relating to stock certificates representing
PAHC Common Stock, NBTB may rely conclusively upon the record of stockholders
maintained by PAHC containing the names and addresses of the holders of record
of PAHC's Common Stock at the Effective Time.
(k) All shares of capital stock of Newco outstanding at the Effective
Time shall be converted into and exchanged for 100 shares of common stock of the
First Merger Surviving Corporation, and any shares of capital stock of Newco
held in the treasury of Newco shall be canceled.
1.3. Second Merger. Subject to the provisions of this Agreement, on the
date of the Effective Time, and at such time subsequent to the Effective Time on
such date as shall be designated by NBTB, which date and time shall be specified
in the Certificate of Merger to be filed on the date of the Closing with the
Secretary of State of the State of Delaware pursuant to the GCL and in the
Articles of Merger to be filed on the date of the Closing with the Secretary of
State of the Commonwealth of Pennsylvania pursuant to the BCL (the "Second
Merger Effective Time"), PAHC will be merged with and into NBTB.
1.4. Effect of Second Merger. At the Second Merger Effective Time:
3
(a) PAHC and NBTB (the "Second Merger Constituent Corporations") shall
be merged into a single corporation, which shall be NBTB. NBTB is hereby
designated as the surviving corporation in the Second Merger and is hereinafter
sometimes called the "Second Merger Surviving Corporation."
(b) The separate existence of PAHC shall cease.
(c) The Second Merger Surviving Corporation shall have all the rights,
privileges, immunities, and powers and shall assume and be subject to all the
duties and liabilities of a corporation organized under the GCL.
(d) The Second Merger Surviving Corporation shall thereupon and
thereafter possess all of the rights, privileges, immunities, and franchises, of
a public as well as of a private nature, of each of the Second Merger
Constituent Corporations; and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions for shares and all other
choses in action, and all and every other interest of and belonging to or due to
each of the Second Merger Constituent Corporations shall be taken and deemed to
be transferred to and vested in the Second Merger Surviving Corporation without
further action, act or deed; and the title to any real estate, or any interest
therein, vested in either of the Second Merger Constituent Corporations shall
not revert or be in any way impaired by reason of the Second Merger.
(e) The Second Merger Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each of the
Second Merger Constituent Corporations; and any claim existing or action or
proceeding pending by or against either of the Second Merger Constituent
Corporations may be prosecuted to judgment as if the Second Merger had not taken
place, or the Second Merger Surviving Corporation may be proceeded against or
substituted in its place. The Second Merger Surviving Corporation expressly
assumes and agrees to perform all of PAHC's liabilities and obligations. Neither
the rights of creditors nor any liens upon the property of either of the Second
Merger Constituent Corporations shall be impaired by the Second Merger.
(f) Any taxes, penalties, and public accounts of the Commonwealth of
Pennsylvania, claimed against either of the Second Merger Constituent
Corporations but not settled, assessed, or determined prior to the Second Merger
shall be settled, assessed, or determined against the Second Merger Surviving
Corporation and, together with interest thereon, shall be a lien against the
franchises and property, both real and personal, of the Second Merger Surviving
Corporation.
(g) The Certificate of Incorporation of NBTB as it exists immediately
prior to the Second Merger Effective Time shall be the Certificate of
Incorporation of the Second Merger Surviving Corporation until later amended
pursuant to Delaware law.
(h) The By-Laws of NBTB as they exist immediately prior to the Second
Merger Effective Time shall be the By-Laws of the Second Merger Surviving
Corporation until later amended pursuant to Delaware law.
4
(i) The authorized shares of capital stock of NBTB as of the Second
Merger Effective Time shall be that number of shares of preferred stock as exist
immediately prior to the Second Merger Effective Date, with a par value or no
par value and, if applicable, a stated value as exist immediately prior to the
Second Merger Effective Date, and that number of shares of common stock as exist
immediately prior to the Second Merger Effective Date, with a par value or no
par value and, if applicable, a stated value as exist immediately prior to the
Second Merger Effective Date (the "NBTB Common Stock").
(j) At the Second Merger Effective Time, all the shares of PAHC shall
be canceled and only the shares of the Second Merger Surviving Corporation shall
remain as validly issued shares of the Second Merger Surviving Corporation,
fully paid and nonassessable.
1.5. Consideration for First Merger. Subject to the terms, conditions, and
limitations set forth herein (including the procedures specified in section
11.2(d)(ii) of this Agreement), as a result of the First Merger, each share of
PAHC Common Stock other than shares of PAHC Common Stock held by NBTB (other
than in a fiduciary, representative, or custodial capacity) or by PAHC shall be
converted into the right to receive, in exchange for each share of PAHC Common
Stock held of record as of the Effective Time, 1.805 shares of NBTB Common Stock
(the "Exchange Ratio").
1.6. No Fractional Shares. NBTB will not issue fractional shares of its
stock. In lieu of fractional shares of NBTB Common Stock, if any, each
shareholder of PAHC who is entitled to a fractional share of NBTB Common Stock
shall receive an amount of cash equal to the product of such fraction times the
average of the closing bid price and the closing asked price per share for NBTB
Common Stock as reported on the Nasdaq National Market (or, in the absence
thereof, as reported by or determined by reference to such other source upon
which NBTB and PAHC shall agree) for each of the twenty consecutive trading days
ending on and including the eighth trading day before the Effective Time (the
"Average Closing Price"). Such fractional share interest shall not include the
right to vote or to receive dividends or any interest thereon.
1.7. Dividends; Interest. No shareholder of PAHC will be entitled to
receive dividends on his, her or its NBTB Common Stock until he, she or it
exchanges his, her or its certificates representing PAHC Common Stock for NBTB
Common Stock. Any dividends declared on NBTB Common Stock to holders of record
on or after the Effective Time shall, with respect to stock to be delivered
pursuant to this Agreement to shareholders of PAHC who have not exchanged their
certificates representing PAHC Common Stock for NBTB Common Stock, be paid to
the Exchange Agent (as designated in section 1.8 of this Agreement) and, upon
receipt from a former shareholder of PAHC of certificates representing shares of
PAHC Common Stock, the Exchange Agent shall forward to such former shareholder
of PAHC (i) certificates representing his, her or its shares of NBTB Common
Stock, (ii) dividends declared thereon subsequent to the Effective Time (without
interest) and (iii) the cash value of any fractional shares determined in
accordance with section 1.6 hereof.
5
1.8. Designation of Exchange Agent.
(a) The parties to this Agreement hereby designate American Stock
Transfer and Trust Company, New York, New York ("AST") as Exchange Agent to
effect the exchanges contemplated hereby.
(b) NBTB will, promptly after the Effective Time, issue and deliver to
AST the share certificates representing shares of NBTB Common Stock (each a "New
Certificate") and the cash to be paid to holders of PAHC Common Stock in
accordance with this Agreement.
(c) If any New Certificate is to be issued in a name other than that in
which the certificate formerly representing PAHC Common Stock (an "Old
Certificate") and surrendered for exchange was issued, the Old Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and the person requesting such exchange shall pay to AST any transfer or other
taxes required by reason of the issuance of the New Certificate in any name
other than that of the registered holder of the Old Certificate surrendered, or
establish to the satisfaction of AST that such tax has been paid or is not
payable.
(d) In the event that any Old Certificates have not been surrendered
for exchange in accordance with this Agreement on or before the second
anniversary of the Effective Time, NBTB may at any time thereafter, with or
without notice to the holders of record of such Old Certificates, sell for the
accounts of any or all of such holders any or all of the shares of NBTB Common
Stock which such holders are entitled to receive under Section 1.5 hereof (the
"Unclaimed Shares"). Any such sale may be made by public or private sale or sale
at any broker's board or on any securities exchange in such manner and at such
times as NBTB shall determine. If, in the opinion of counsel for NBTB, it is
necessary or desirable, any Unclaimed Shares may be registered for sale under
the Securities Act of 1933, as amended (the "Securities Act") and applicable
state laws. NBTB shall not be obligated to make any sale of Unclaimed Shares if
it shall determine not to do so, even if notice of sale of the Unclaimed Shares
has been given. The net proceeds of any such sale of Unclaimed Shares shall be
held for holders of the unsurrendered Old Certificates whose Unclaimed Shares
have been sold, to be paid to them upon surrender of the Old Certificates. From
and after any such sale, the sole right of the holders of the unsurrendered Old
Certificates whose Unclaimed Shares have been sold shall be the right to collect
the net sale proceeds held by NBTB for their respective accounts, and such
holders shall not be entitled to receive any interest on such net sale proceeds
held by NBTB.
(e) If any Old Certificates are not surrendered prior to the date on
which such certificates or the proceeds of the sale of the Unclaimed Shares, as
the case may be, would otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed items shall, to the extent permitted
by abandoned property and any other applicable law, become the property of NBTB
(and to the extent not in its possession shall be paid over to it), free and
clear of all claims or interest of any person previously entitled to such
claims. Notwithstanding the foregoing, neither NBTB nor its agents or any other
person shall be liable to any former holder of PAHC Common Stock for any
property delivered to a public official pursuant to applicable
6
abandoned property, escheat or similar laws.
1.9. Notice of Exchange. Promptly after the Effective Time, AST shall mail
to each holder of one or more certificates formerly representing PAHC Common
Stock a notice specifying the Effective Time and notifying such holder to
surrender his, her or its certificate or certificates to AST for exchange. Such
notice shall be mailed to holders by regular mail at their addresses on the
records of PAHC.
1.10. Acts to Carry Out This Merger Plan.
(a) PAHC and its proper officers and directors shall do all such acts
and things as may be necessary or proper to vest, perfect, or confirm in NBTB
title to such property or rights as are specified in sections 1.4(c) and 1.4(d)
of this Agreement and otherwise to carry out the purposes of this Agreement.
(b) If, at any time after the Effective Time, NBTB shall consider or be
advised that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect, or confirm, of record or otherwise,
in NBTB its right, title, or interest in or under any of the rights, properties,
or assets of PAHC acquired or to be acquired by NBTB as a result of, or in
connection with, the Merger, or (ii) otherwise carry out the purposes of this
Agreement, PAHC and its proper officers and directors shall be deemed to have
granted to NBTB an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments, and assurances in law and to do all acts necessary or
proper to vest, perfect, or confirm title to and possession of such rights,
properties, or assets in NBTB and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of NBTB are fully authorized in
the name of PAHC or otherwise to take any and all such action.
1.11. Treatment of Stock Options. At the Effective Time, each stock option
to purchase PAHC Common Stock not exercised prior to the Effective Time (each, a
"Converted Option"), whether vested or unvested, shall automatically be
converted into an option (a "Replacement Option") to acquire, on the same terms
and conditions as were applicable under the terms of such Converted Option and
any option plan under which such Converted Option was issued (or as near thereto
as is practicable), a number of shares of NBTB Common Stock equal to (rounded
down to the nearest whole number of shares) (a) the number of shares of PAHC
Common Stock subject to such Converted Option as of the Effective Time
multiplied by (b) the Exchange Ratio, at an exercise price per share (rounded
down to the nearest whole cent) equal to (x) the aggregate exercise price under
such Converted Option for all of the shares of PAHC Common Stock subject to such
Converted Option at the Effective Time divided by (y) the number of shares of
NBTB Common Stock subject to such Replacement Option. Notwithstanding the
foregoing, in the case of each Converted Option to which section 421 of the Code
applies by reason of its qualification under section 422 of the Code, the terms
of the Replacement Option into which such Converted Option is converted,
including the option price, the number of shares of NBTB Common Stock
purchasable pursuant to such option, and the terms and conditions of exercise of
such option shall be determined so as to comply with section 424(a) of the Code.
At or prior to the Effective Time, PAHC shall
7
take all action, if any, necessary with respect to any Converted Options or
stock plans under which Converted Options have been issued to permit the
replacement of the Converted Options with Replacement Options as contemplated by
this section 1.11. At the Effective Time, NBTB shall assume such stock plans;
provided, that such assumption shall only be in respect of the Replacement
Options and that NBTB shall have no obligation with respect to any awards under
such plans other than the Replacement Options and shall have no obligation to
make any additional grants or awards under such assumed plans.
1.12. Stock Option Agreement. Simultaneously herewith, NBTB and PAHC shall
execute and deliver the Stock Option Agreement in the form attached hereto as
Exhibit I. The option that is the subject of the Stock Option Agreement will
terminate as of, and will not be exercisable following, the Effective Time.
1.13. Executive Officers and Directors of PAHC.
(a) At the Effective Time, in consideration for and against delivery of
a full and unconditional release granted in favor of NBTB, PAHC, and Pioneer
American Bank, National Association ("PA Bank") by John W. Reuther ("Reuther")
from any and all claims, actions, or liabilities which Reuther may have, may
have had, or could have against NBTB, PAHC, or PA Bank (except entitlements
granted to Reuther by this Agreement or the employment agreement described in
section 4.8 hereof (the "Reuther Employment Agreement") or granted to Reuther by
the Executive Retirement Plan of PA Bank adopted on October 25, 1988 or the
Split Dollar Agreement/Key Executive Equity Program dated February 15, 1994, as
restated April 16, 1999), and subject in every case to section 18(k) of the
Federal Deposit Insurance Act (12 U.S.C. ss. 1828(k)), NBTB will tender to
Reuther the Reuther Employment Agreement and the change-in- control agreement
described in section 5.5 hereof.
(b) At the Effective Time, in consideration for and against delivery of
a full and unconditional release granted in favor of NBTB, PAHC, and PA Bank by
Patricia A. Cobb ("Cobb") from any and all claims, actions, or liabilities which
Cobb may have, may have had, or could have against NBTB, PAHC, or PA Bank
(except entitlements granted to Cobb by this Agreement), and subject in every
case to section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. ss.
1828(k)), NBTB will tender to Cobb the change-in-control agreement described in
section 5.5 hereof.
(c) At the Effective Time, in consideration for and against delivery of
a full and unconditional release granted in favor of NBTB, PAHC, and PA Bank by
James E. Jackson ("Jackson") from any and all claims, actions, or liabilities
which Jackson may have, may have had, or could have against NBTB, PAHC, or PA
Bank (except entitlements granted to Jackson by this Agreement), and subject in
every case to section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. ss.
1828(k)), NBTB will tender to Jackson the change-in-control agreement described
in section 5.5 hereof.
(d) Subject to the fiduciary duties of its directors to NBTB, NBTB will
cause Joseph
8
G. Nasser ("Nasser"), Gene E. Goldenziel ("Goldenziel"), and Richard Chojnowski
("Chojnowski") to be elected or appointed as directors of NBTB with terms
commencing at the Effective Time, with Nasser to serve as a director of the
class whose term expires in 2000, Goldenziel to serve as a director of the class
whose term expires in 2001, and Chojnowski to serve as a director of the class
whose term expires in 2002.
(e) If the Merger has occurred prior to the date of mailing of the
proxy materials to NBTB stockholders in connection with the 2000 annual meeting
of the stockholders of NBTB, NBTB will propose to its stockholders in those
proxy materials that Nasser be reelected to the board of directors of NBTB as a
member of the class whose term shall expire in 2003.
1.14. Employee Benefits.
(a) If any employee of PAHC or of PA Bank becomes a participant in any
employment benefit plan, practice, or policy of NBTB or NBT Bank, National
Association ("NBT Bank"), such employee shall be given credit under such plan,
practice, or policy for all service prior to the Effective Time with PAHC or PA
Bank for purposes of eligibility and vesting, but not for benefit accrual
purposes, for which such service is taken into account or recognized, and, if
necessary, NBTB shall cause any and all pre-existing condition limitations and
eligibility waiting periods under group health plans to be waived with respect
to such participants and their eligible dependents (except to the extent such
pre-existing condition limitations are no more onerous than similar limitations,
or such waiting periods do not extend any waiting period, applicable to such
employee under the plans of PAHC or PA Bank), provided that there be no
duplication of such benefits as are provided under any employee benefit plans,
practices, or policies of PAHC or PA Bank that continue in effect following the
Effective Time.
(b) Each employee of PAHC or PA Bank (except Reuther, Cobb, and
Jackson) who becomes an employee of NBTB or any of its subsidiaries or who,
following the Effective Time, remains an employee of PA Bank and is terminated
by NBTB or any of its subsidiaries (including PA Bank) subsequent to the
Effective Time shall be entitled to severance pay, if any, in accordance with
the general severance policy of NBTB. Such employee's service with PAHC or PA
Bank shall be treated as service with NBTB for purposes of determining the
amount of severance pay, if any, under the severance policy of NBTB.
1.15. Voting Agreements. Simultaneously herewith, each shareholder of PAHC
who is listed on Schedule 1.15 attached hereto shall each enter into an
agreement with NBTB, substantially in form and substance as that set forth as
Exhibit II attached hereto, in which he or she agrees to vote all shares of PAHC
Common Stock which may be voted, or whose vote may be directed, by him or her,
in favor of the transactions contemplated by this Agreement at the meeting of
shareholders at which such transactions shall be considered.
1.16. Optional Bank Merger Transaction. NBTB in its sole and absolute
discretion may elect to cause a merger of PA Bank to be consummated in
accordance with the following terms and conditions:
9
(a) At any time following the date of this Agreement, and until and
including February 5, 2000, NBTB shall be entitled to give notice to PAHC that
NBTB wishes on the date of the Effective Time, and at such time subsequent to
the Effective Time on such date as shall be designated by NBTB, to consummate
the merger of PA Bank with and into LA Bank, National Association ("LA Bank"),
or the merger of LA Bank into PA Bank, as the case may be specified in such
notice (in either case, the "Bank Merger"). The day on which NBTB gives any such
notice is referred to herein as the "Bank Merger Notice Date."
(b) Following the Bank Merger Notice Date, NBTB shall use commercially
reasonable efforts to cause LA Bank to promptly enter into, and PAHC shall cause
PA Bank to promptly enter into, an agreement of merger substantially in form and
substance as that set forth as Exhibit III attached hereto.
(c) Following the Bank Merger Notice Date and at the request of NBTB,
PAHC shall cause PA Bank to promptly become a party to this Agreement and to
join in such representations, warranties, covenants, and agreements to or with
NBTB as PAHC has, with respect to PA Bank, made to or with NBTB in this
Agreement.
(d) Following the Bank Merger Notice Date, NBTB shall use commercially
reasonable efforts to cause LA Bank to promptly seek to obtain the approval of
the Office of the Comptroller of the Currency (the "OCC") and such other
approvals, if any, as LA Bank may require for the consummation of the Bank
Merger, and PAHC shall cause PA Bank to promptly seek to obtain such approvals,
if any, as PA Bank may require for the consummation of the Bank Merger.
(e) Anything in this Agreement to the contrary notwithstanding, the
Bank Merger shall not occur unless, at the time of the Bank Merger, LA Bank is a
direct or indirect subsidiary of NBTB.
2. EFFECTIVE TIME.
The Effective Time shall be the date and time specified in the articles of
merger to be filed with the Secretary of State of the Commonwealth of
Pennsylvania pursuant to section 1927 of the BCL to effectuate the First Merger,
the date of which shall be the latest of:
2.1. PAHC Shareholder Approval. The day upon which the shareholders of PAHC
approve, ratify, and confirm the Merger by the affirmative vote of the holders
of at least 70 percent of the votes which all shareholders of PAHC are entitled
to cast thereon;
2.2. NBTB Shareholder Approval. The day upon which the shareholders of NBTB
approve the issuance of NBTB Common Stock pursuant to this Agreement and ratify
this Agreement;
2.3. Federal Reserve Approval. The first to occur of (a) the date thirty
days following the date of the order of the Board of Governors of the Federal
Reserve System or the Federal Reserve Bank of New York acting pursuant to
authority delegated to it by the Board of Governors of the Federal
10
Reserve System (collectively, the "Board of Governors") approving the Merger, or
(b) if, pursuant to section 321(a) of the Riegle Community Development and
Regulatory Improvement Act of 1994 (the "Riegle Act"), the Board of Governors
shall have prescribed a shorter period of time with the concurrence of the
Attorney General of the United States, the date on which such shorter period of
time shall elapse, or (c) the date ten days following the date on which the
Board of Governors indicates its waiver of jurisdiction over the Merger; or
2.4. OCC Approval. If the Bank Merger Notice Date shall have timely
occurred, the first to occur of (a) the date thirty days following the date of
the order of the OCC approving the Bank Merger, or (b) if, pursuant to section
321(b) of the Riegle Act, the OCC shall have prescribed a shorter period of time
with the concurrence of the Attorney General of the United States, the date on
which such shorter period of time shall elapse; or
2.5. Pennsylvania Department of Banking Approval. The date ten days
following the date of the order of the Department of Banking of the Commonwealth
of Pennsylvania (the "Department") approving the transactions contemplated by
this Agreement;
2.6. Other Regulatory Approvals. The date upon which any other material
order, approval, or consent of a federal or state regulator of financial
institutions or financial institution holding companies authorizing consummation
of the transactions contemplated by this Agreement is obtained or any waiting
period mandated by such order, approval, or consent has run;
2.7. Expiration of Stays. Ten days after any stay of the approvals of any
of the Board of Governors or the Department of the transactions contemplated by
this Agreement or any injunction against closing of said transactions is lifted,
discharged, or dismissed; or
2.8. Mutual Agreement. Such other date as shall be mutually agreed to by
NBTB and PAHC.
3. CONDITIONS PRECEDENT TO PERFORMANCE OF OBLIGATIONS OF THE PARTIES.
The obligations of NBTB and PAHC to consummate the Merger shall be subject
to the conditions that on or before the Effective Time:
3.1. Regulatory Approvals. Orders, consents, and approvals required to
consummate the Merger and, if the Bank Merger Notice Date shall have timely
occurred, the Bank Merger shall have been entered by the requisite governmental
authorities, and all statutory waiting periods in respect thereof shall have
expired.
3.2. Registration Statement.
(a) Effectiveness. The registration statement to be filed by NBTB with
the Securities and Exchange Commission (the "SEC") pursuant to the Securities
Act in connection with the registration of the shares of NBTB Common Stock to be
used as consideration in connection with
11
the Merger (the "Registration Statement") shall have become effective under the
Securities Act, and NBTB shall have received all required state securities laws
or "blue sky" permits and other required authorizations or confirmations of the
availability of exemptions from registration requirements necessary to issue
NBTB Common Stock in the Merger.
(b) Absence of Stop-Order. Neither the Registration Statement nor any
such required permit, authorization, or confirmation shall be subject to a
stop-order or threatened stop-order by the SEC or any state securities
authority.
3.3. Approval by Shareholders of PAHC. The shareholders of PAHC shall have
authorized, ratified, and confirmed the Merger by the affirmative vote of the
holders of at least 70 percent of the votes which all shareholders of PAHC are
entitled to cast thereon.
3.4. Approval by Shareholders of NBTB.
(a) The shareholders of NBTB shall have approved the issuance of NBTB
Common Stock pursuant to this Agreement and ratified this Agreement.
(b) The shareholders of NBTB shall have approved a proposed amendment
to NBTB's Certificate of Incorporation to increase the number of authorized
shares of NBTB common stock from fifteen million to thirty million (the "Share
Increase Amendment").
3.5. Federal Income Taxation. NBTB and PAHC shall have received a written
opinion of Blank Rome Comisky & McCauley LLP, or of Duane, Morris & Heckscher
LLP, or of another firm mutually agreeable to NBTB and PAHC, applying existing
law, that the Merger shall qualify as one or more reorganizations under section
368(a)(1) of the Code and the regulations and rulings promulgated thereunder. In
rendering such opinion, the firm rendering the opinion may require and rely upon
representations contained in certificates of officers of NBTB, PAHC, and others.
3.6. Adverse Legislation. Subsequent to the date of this Agreement, no
legislation shall have been enacted and no regulation or other governmental
requirement shall have been adopted or imposed that renders or will render
consummation of the Merger impossible or illegal.
3.7. Absence of Litigation. No action, suit, or proceeding shall have been
instituted or shall have been threatened before any court or other governmental
body or by any public authority to restrain, enjoin, or prohibit the Merger, or
which would reasonably be expected to restrict materially the operation of the
business of NBTB, that of PAHC, or that of PA Bank or the exercise of any rights
with respect thereto or to subject either of the parties hereto or any of their
subsidiaries, directors, or officers to any liability, fine, forfeiture,
divestiture, or penalty on the ground that the transactions contemplated hereby,
the parties hereto, or their subsidiaries, directors, or officers have breached
or will breach any applicable law or regulation or have otherwise acted
improperly in connection with the transactions contemplated hereby and with
respect to which the parties hereto have been advised by counsel that, in the
opinion of such counsel, such action, suit, or proceeding raises substantial
questions of law or fact which could reasonably be decided materially adversely
to
12
either party hereto or its subsidiaries, directors, or officers.
4. CONDITIONS PRECEDENT TO PERFORMANCE OF THE OBLIGATIONS OF NBTB.
The obligations of NBTB hereunder are subject to the satisfaction, on or
prior to the Effective Time, of all the following conditions, compliance with
which or the occurrence of which may be waived in whole or in part by NBTB in
writing unless not so permitted by law:
4.1. Representations and Warranties; Performance of Obligations. All
representations and warranties of PAHC contained in this Agreement shall be true
and correct in all material respects as of the Effective Time with the same
effect as if such representations and warranties had been made or given at and
as of such date, except that representations and warranties of PAHC contained in
this Agreement which specifically relate to an earlier date shall be true and
correct in all material respects as of such earlier date. All covenants and
obligations to be performed or met by PAHC on or prior to the Effective Time
shall have been so performed or met. On the date of the Effective Time, the
president and chief executive officer and the chief financial officer of PAHC
shall deliver to NBTB a certificate to that effect. The delivery of such
certificates shall in no way diminish the warranties, representations,
covenants, and obligations of PAHC made in this Agreement.
4.2. Opinion of PAHC Counsel. NBTB shall have received (a) a favorable
opinion from Blank Rome Comisky & McCauley LLP, dated the date of the Effective
Time, substantially in form and substance as that set forth as Exhibit IV(a)
attached hereto, and (b) a favorable opinion from Patricia A. Cobb, Esq., Senior
Executive Vice President/In-House Counsel of PAHC, dated the date of the
Effective Time, substantially in form and substance as that set forth in Exhibit
IV(b) attached hereto.
4.3. Opinion of PAHC Litigation Counsel. NBTB shall have received a
favorable opinion from legal counsel handling litigation matters for PAHC and PA
Bank, dated the date of the Effective Time, substantially in form and substance
as that set forth as Exhibit V attached hereto.
4.4. No Adverse Developments.
(a) During the period from September 30, 1999 to the Effective Time,
(i) there shall not have been any material adverse effect as defined in section
12.7(d) (a "Material Adverse Effect") with respect to PAHC; and (ii) none of the
events described in clauses (a) through (f) of section 6.16 of this Agreement
shall have occurred, and each of the practices and conditions described in
clauses (x) through (z) of that section shall have been maintained.
(b) As of the Effective Time, the capital structure of PAHC and the
capital structure of PA Bank shall be as stated in section 6.9.
(c) As of the Effective Time, other than liabilities incurred in the
ordinary course of business subsequent to September 30, 1999, there shall be no
liabilities of PAHC or PA Bank
13
which are material to PAHC on a consolidated basis which were not reflected on
the consolidated statement of condition of PAHC as of September 30, 1999 or in
the related notes to the consolidated statement of condition of PAHC as of
September 30, 1999.
(d) No adverse action shall have been instituted or threatened against
PAHC or any of its subsidiaries by any governmental authority, or referred by a
governmental authority to another governmental authority, for the enforcement or
assessment of penalties for the violation of any laws of regulations relating to
equal credit opportunity, fair housing, or fair lending.
(e) NBTB shall have received a certificate dated the date of the
Effective Time, signed by the president and the chief financial officer of PAHC,
certifying to the matters set forth in paragraphs (a), (b), (c), and (d) of this
section 4.4. The delivery of such officers' certificate shall in no way diminish
the warranties and representations of PAHC made in this Agreement.
4.5. Consolidated Net Worth. On and as of the Effective Time, the
consolidated net worth of PAHC as determined in accordance with generally
accepted accounting principles but without regard to the change in unrealized
gains and losses on securities (net of reclassification adjustment and tax
effects) between September 30, 1999 and the Effective Time, shall not be less
than the sum of (a) $31,906,000, (b) the proceeds to PAHC of the sale of
treasury stock since September 30, 1999, and (c) the proceeds to PAHC of the
exercise of stock options to purchase shares of PAHC Common Stock since
September 30, 1999.
4.6. Loan Loss Reserve. On and as of the Effective Time, the aggregate
reserve for loan losses of PA Bank as determined in accordance with generally
accepted accounting principles shall not be less than $3,000,000.
4.7. CRA Rating. The CRA rating of PA Bank shall be no lower than
"satisfactory."
4.8. Employment Agreement. Reuther shall have entered into an employment
agreement with NBTB substantially in form and substance as that set forth as
Exhibit VI attached hereto.
4.9. Releases. The releases described in sections 1.13(a), (b), and (c)
shall have been delivered to NBTB.
4.10. Accounting Treatment. NBTB shall have received letters (the "Pooling
Letters") from KPMG LLP ("KPMG"), in its capacity as the independent auditing
firm of NBTB, dated the date of or shortly prior to each of the mailing date of
the proxy materials to the shareholders of PAHC, and the date of the Effective
Time, stating the opinion of KPMG that the Merger shall qualify for
pooling-of-interest accounting treatment.
4.11. Affiliates' Agreements. NBTB shall have received a written agreement
substantially in form and substance as that set forth as Exhibit VII attached
hereto (an "Affiliates Agreement"):
(a) on or before the date of this Agreement, from each person who, on
the date of this
14
Agreement, is an "affiliate" of PAHC (as that term is used in section 7.6 of
this Agreement), and
(b) not later than ten days after any other person becomes an
"affiliate" of PAHC (as that term is used in section 7.6 of this Agreement),
from such person.
4.12. Fairness Opinion. NBTB shall have received a letter from McConnell,
Budd & Downes, Inc. ("MB&D"), dated the date of or shortly prior to the mailing
date of the proxy materials to the shareholders of NBTB, stating the opinion of
MB&D that the Exchange Ratio is fair, from a financial point of view, to the
shareholders of NBTB.
5. CONDITIONS PRECEDENT TO PERFORMANCE OF OBLIGATIONS OF PAHC.
The obligations of PAHC hereunder are subject to the satisfaction, on or
prior to the Effective Time, of all the following conditions, compliance with
which or the occurrence of which may be waived in whole or in part by PAHC in
writing unless not so permitted by law:
5.1. Representations and Warranties; Performance of Obligations. All
representations and warranties of NBTB contained in this Agreement shall be true
and correct in all material respects as of the Effective Time with the same
effect as if such representations and warranties had been made or given at and
as of such date, except that representations and warranties of NBTB contained in
this Agreement which specifically relate to an earlier date shall be true and
correct in all material respects as of such earlier date. All covenants and
obligations to be performed or met by NBTB on or prior to the Effective Time
shall have been so performed or met. On the date of the Effective Time, either
the president or an executive vice president of NBTB shall deliver to PAHC a
certifi cate to that effect. The delivery of such officer's certificate shall in
no way diminish the warranties, representations, covenants, and obligations of
NBTB made in this Agreement.
5.2. Opinion of NBTB Counsel. PAHC shall have received a favorable opinion
of Duane, Morris & Heckscher LLP, dated the date of the Effective Time,
substantially in form and substance as that set forth as Exhibit VIII attached
hereto.
5.3. No Adverse Developments. During the period from September 30, 1999 to
the Effective Time, there shall not have been any Material Adverse Effect with
respect to NBTB, and PAHC shall have received a certificate dated the date of
the Effective Time signed by either the President or an Executive Vice President
of NBTB to the foregoing effect. The delivery of such officer's certificate
shall in no way diminish the warranties and representations of NBTB made in this
Agreement.
5.4. Status of NBTB Common Stock. The shares of NBTB Common Stock to be
issued to the shareholders of PAHC upon consummation of the Merger shall have
been authorized for inclusion on the Nasdaq National Market (or another national
securities exchange) subject to official notice of issuance.
15
5.5. Change-in-Control Agreements. NBTB shall have tendered to each of
Reuther, Cobb, and Jackson a change-in-control agreement substantially in form
and substance as that set forth as Exhibit IX attached hereto.
5.6. Board of Directors. Subject to the fiduciary duties of its directors
to NBTB, NBTB shall have taken all necessary action to comply with its
obligations under section 1.13(d) of this Agreement.
5.7. Fairness Opinion. PAHC shall have received a letter from Danielson
Associates Inc. ("Danielson"), dated the date of or shortly prior to the mailing
date of the proxy materials to the shareholders of PAHC, stating the opinion of
Danielson that the Exchange Ratio is fair, from a financial point of view, to
the shareholders of PAHC.
5.8. Accounting Treatment. NBTB shall have received the Pooling Letters,
provided, however, that if NBTB shall not have received the Pooling Letters as a
result of the action of PAHC or one or more of its affiliates, directors,
officers, or shareholders, then PAHC shall be deemed to have duly waived the
condition set forth in this section 5.8.
6. REPRESENTATIONS AND WARRANTIES OF PAHC.
PAHC represents and warrants to NBTB as follows:
6.1. Organization, Powers, and Qualification. Each of PAHC and PA Bank is a
corporation which is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to own and operate its properties and assets, to
lease properties used in its business, and to carry on its business as now
conducted. Each of PAHC and PA Bank owns or possesses in the operation of its
business all franchises, licenses, permits, branch certificates, consents,
approvals, waivers, and other authorizations, governmental or otherwise, which
are necessary for it to conduct its business as now conducted, except for those
where the failure of such ownership or possession would not have a Material
Adverse Effect on PAHC or PA Bank. Each of PAHC and PA Bank is duly qualified
and licensed to do business and is in good standing in every jurisdiction with
respect to which the failure to be so qualified or licensed could result in a
Material Adverse Effect on PAHC or PA Bank.
6.2. Execution and Performance of Agreement. Subject to the approval of
this Agreement by the affirmative vote of the holders of at least 70 percent of
the votes which all shareholders of PAHC are entitled to cast thereon, PAHC has
all requisite corporate power and authority to execute and deliver this
Agreement and to perform its respective terms.
6.3. Absence of Violations.
(a) Neither PAHC nor PA Bank is (i) in violation of its respective
charter documents or bylaws, (ii) in violation of any applicable federal, state,
or local law or ordinance or any order,
16
rule, or regulation of any federal, state, local, or other governmental agency
or body, or (iii) in violation of or in default with respect to any order, writ,
injunction, or decree of any court, or any order, license, regulation, or demand
of any governmental agency, except, in the case of (ii) or (iii), for such
violations or defaults which in the aggregate could not reasonably be expected
to have a Material Adverse Effect on PAHC or PA Bank; and neither PAHC nor PA
Bank has received any claim or notice of violation with respect thereto;
(b) neither PAHC nor PA Bank nor any member of the management of either
of them is a party to any assistance agreement, supervisory agreement,
memorandum of understanding, consent order, cease and desist order or condition
of any regulatory order or decree with or by the Board of Governors, the Federal
Reserve Bank of Philadelphia, the OCC, the Federal Deposit Insurance Corporation
(the "FDIC"), the SEC, the Department, any other banking or securities authority
of the United States or the Commonwealth of Pennsylvania, or any other
regulatory agency that relates to the conduct of the business of PAHC or PA Bank
or any of their subsidiaries or their assets; and except as previously disclosed
to NBTB in writing, no such agreement, memorandum, order, condition, or decree
is pending or threatened;
(c) PA Bank has established policies and procedures to provide
reasonable assurance of compliance in a safe and sound manner with the federal
banking, credit, housing, consumer protection, and civil rights laws and the
regulations adopted under each of those laws, so that transactions be executed
and assets be maintained in accordance with such laws and regulations; and the
policies and practices of PA Bank with respect to all such laws and regulations
reasonably limit noncompliance and detect and report noncompliance to its
management; and
(d) PA Bank has established a CRA policy which provides for goals and
objectives consistent with CRA and for procedures whereby all significant
CRA-related activity is documented; and PA Bank has officially designated a CRA
officer who reports directly to the board of directors and is responsible for
the CRA program of PA Bank.
6.4. Compliance with Agreements. Neither PAHC nor PA Bank is in violation
of any term of any security agreement, mortgage, indenture, or any other
contract, agreement, instrument, lease, or certificate, except for such
violations which in the aggregate could not reasonably be expected to have a
Material Adverse Effect on PAHC or PA Bank.
6.5. Binding Obligations. Subject to the approval of its shareholders, this
Agreement consti tutes valid, legal, and binding obligations of PAHC,
enforceable against it in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, moratorium or similar law, or
by general principles of equity. The execution, delivery, and performance of
this Agreement and the transactions contemplated thereby have been duly and
validly authorized by the board of directors of PAHC.
6.6. Absence of Default; Due Authorization.
(a) None of the execution or the delivery of this Agreement, the
consummation of the
17
transactions contemplated thereby, or the compliance with or fulfillment of the
terms thereof will conflict with, or result in a breach of any of the terms,
conditions, or provisions of, or constitute a default under the organizational
documents or bylaws of PAHC or PA Bank or any subsidiary of either of them. Such
execution, consummation, and fulfillment will not (i) conflict with, or result
in a breach of the terms, conditions, or provisions of, or constitute a
violation, conflict, or default under, or, except as set forth on Schedule 6.6
hereof, give rise to any right of termination, cancel lation, or acceleration
with respect to, or result in the creation of any lien, charge, or encumbrance
upon, any property or assets of PAHC or PA Bank or any subsidiary of either of
them pursuant to any agreement or instrument under which PAHC or PA Bank or any
such subsidiary is obligated or by which any of its properties or assets may be
bound, including without limitation any lease, contract, mortgage, promissory
note, deed of trust, loan, credit arrangement, or other commitment or
arrangement of PAHC or PA Bank or any subsidiary of either of them in respect of
which it is an obligor, except for such conflicts, breaches, violations,
defaults, rights of termination, cancellation, or acceleration, or results which
in the aggregate could not reasonably be expected to have a Material Adverse
Effect on PAHC or PA Bank; (ii) if the Merger is approved by the Board of
Governors under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"), or if the Board of Governors waives its jurisdiction over the Holding
Company Merger, and if the Bank Merger is approved by the OCC, and if the
transactions contemplated by this Agreement are approved by the Department,
violate any law, statute, rule, or regulation of any government or agency to
which PAHC or PA Bank or any subsidiary of either of them is subject and which
is material to its operations; or (iii) violate any judgment, order, writ,
injunction, decree, or ruling to which PAHC or PA Bank or any subsidiary of
either of them or any of the properties or assets of either of them is subject
or bound. None of the execution or delivery of this Agreement, the consummation
of the transactions contemplated hereby, or the compliance with or fulfillment
of the terms hereof will require any authorization, consent, approval, or
exemption by any person which has not been obtained, or any notice or filing
which has not been given or done, other than approval of the transactions
contemplated by this Agreement by, notices to, or filings with by the Board of
Governors, the OCC, the Securities and Exchange Commission (the "SEC"), state
securities commissions, the Department, the Secretary of State of the State of
Delaware, and the Secretary of State of the Commonwealth of Pennsylvania.
(b) Except for approval of this Agreement by the affirmative vote of
the holders of at least 70 percent of the votes which all shareholders of PAHC
are entitled to cast thereon, and except for approval of the Bank Merger by the
board of directors and shareholders of PA Bank, no other corporate proceedings
on the part of PAHC are necessary to approve or authorize this Agreement, the
Merger, the Stock Option Agreement, the issuance of the stock options
contemplated by the Stock Option Agreement, the subsequent exercise of the stock
options thereby issued, the Bank Merger, or the other transactions contemplated
by this Agreement and the Stock Option Agreement or the carrying out of the
transactions contemplated hereby or thereby.
(c) The Board of Directors of PAHC has taken all necessary action under
the articles of incorporation of PAHC to approve unconditionally and irrevocably
the right of NBTB and any transferee of NBTB and the right of any "person" that
includes either NBTB or any such transferee (i) to cast more than 10 percent of
the total votes entitled to be cast by all holders of the voting
18
securities of PAHC at any meeting, and (ii) to have "holdings" (as defined in
the articles of incorporation of PAHC) that exceed 10 percent of the voting
securities of PAHC, whether such votes or holdings are acquired by NBTB in the
First Merger, by the issuance of the stock options contemplated by the Stock
Option Agreement, by the subsequent exercise of the stock options issued
thereby, or otherwise.
(d) The Board of Directors of PAHC has taken all necessary action so
that the provisions of sections 2561 et seq. of the BCL (and any applicable
provisions of the takeover laws of any other state) and any comparable
provisions of PAHC's articles of incorporation do not and will not apply to this
Agreement, the First Merger, the Second Merger, the Stock Option Agreement, or
the transactions contemplated hereby.
(e) PAHC has not adopted any shareholder rights plan, "poison pill" or
similar plan, or any other plan which could result in the grant of any rights to
any person, or which could enable or require any rights to be exercised,
distributed or triggered, in the event of the execution, delivery, or
announcement of this Agreement or the Stock Option Agreement, or in the event of
the consummation of the Merger or the Bank Merger or any of the transactions
contemplated by this Agreement or the Stock Option Agreement.
6.7. Compliance with BHC Act; Certain Banking Regulatory Matters.
(a) PAHC is duly registered as a bank holding company under the BHC
Act. All of the activities and investments of PAHC conform to the requirements
applicable generally to bank holding companies under the BHC Act and the
regulations of the Board of Governors adopted thereunder.
(b) No corporation or other entity, other than PAHC, is registered or
is required to be registered as a bank holding company under the BHC Act by
virtue of its control over PA Bank or over any company that directly or
indirectly has control over PA Bank.
(c) Each of the activities engaged in by PAHC and its direct and
indirect subsidiaries has been determined by regulation of the Board of
Governors to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto.
(d) The capital ratios of each of PAHC and PA Bank comply fully with
all terms of all currently outstanding supervisory and regulatory requirements
and with the conditions of all regulatory orders and decrees.
6.8. Subsidiaries.
(a) Other than PA Bank, which is a direct, wholly-owned subsidiary of
PAHC, PAHC does not have any direct or indirect subsidiaries and does not
directly or indirectly own, control, or hold with the power to vote any shares
of the capital stock of any company (except shares held by PA Bank for the
account of others in a fiduciary or custodial capacity in the ordinary course of
its
19
business and shares of the Federal Reserve Bank of Philadelphia and the Federal
Home Loan Bank of Pittsburgh). There are no outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, or agreements calling for
or requiring the issuance, transfer, sale, or other disposition of any shares of
the capital stock of PA Bank, or calling for or requiring the issuance of any
securities or rights convertible into or exchangeable for shares of capital
stock of PA Bank. There are no other direct or indirect subsidiaries of PAHC
which are required to be consolidated or accounted for on the equity method in
the consolidated financial statements of PAHC or the financial statements of PA
Bank prepared in accordance with generally accepted accounting principles.
(b) Except as specified in the previous subsection, neither PAHC nor PA
Bank has a direct or indirect equity or ownership interest which represents 5
percent or more of the aggregate equity or ownership interest of any entity
(including, without limitation, corporations, partnerships, and joint ventures).
6.9. Capital Structure.
(a) The authorized capital stock of PAHC consists of 1,000,000 shares
of PAHC Preferred Stock, $10.00 par value, none of which have been issued as of
the date of this Agreement, and 25,000,000 shares of PAHC Common Stock, of
which, as of the date of this Agreement, 2,864,307 shares have been duly issued
and are validly outstanding, fully paid, and nonassessable, and held by
approximately 1,460 shareholders of record, and an additional 71,600 shares are
held in the treasury of PAHC. The aforementioned shares of PAHC Common Stock are
the only voting securities of PAHC authorized, issued, or outstanding as of such
date; and except as set forth on Schedule 6.9 hereof, there are no outstanding
subscriptions, options, warrants, convertible securi ties, calls, commitments,
or agreements calling for or requiring the issuance, transfer, sale, or other
disposition of any shares of the capital stock of PAHC, or calling for or
requiring the issuance of any securities or rights convertible into or
exchangeable for shares of capital stock of PAHC. None of the PAHC Common Stock
is subject to any restrictions upon the transfer thereof under the terms of the
articles of incorporation or bylaws of PAHC.
(b) Schedule 6.9 hereof lists all options to purchase PAHC securities
currently outstanding and, for each such option, the date of issuance, date of
exercisability, exercise price, type of security for which exercisable, and date
of expiration. Schedule 6.9 hereof further lists all shares of PAHC Common Stock
reserved for issuance pursuant to stock option plans, agreements, or
arrangements but not yet issued and all options upon shares of PAHC Common Stock
designated or made available for grant but not yet granted.
(c) The authorized capital stock of PA Bank consists of 325,000 shares
of common stock, $10.00 par value (the "PA Bank Common Stock"), of which, as of
the date of this Agreement, 267,748 shares have been duly issued and are validly
outstanding, fully paid, and nonassessable, and all of which are held of record
and beneficially by PAHC directly, free and clear of any adverse claims. The
aforementioned shares of PA Bank Common Stock are the only voting securities of
PA Bank authorized, issued, or outstanding as of such date. None of the PA Bank
20
Common Stock is subject to any restrictions upon the transfer thereof under the
terms of the corporate charter or bylaws of PA Bank or under the terms of any
agreement to which PA Bank is a party or under which it is bound.
(d) None of the shares of PAHC Common Stock or PA Bank Common Stock has
been issued in violation of the preemptive rights of any shareholder.
(e) As of the date hereof, to the best of the knowledge of PAHC, and
except for this Agreement, there are no shareholder agreements, or other
agreements, understandings, or commitments relating to the right of any holder
or beneficial owner of more than 1 percent of the issued and outstanding shares
of any class of the capital stock of either PAHC or PA Bank to vote or to
dispose of his, her or its shares of capital stock of that entity.
6.10. Articles of Incorporation, Bylaws, and Minute Books. The copies of
the articles of incorporation or association and all amendments thereto and of
the bylaws, as amended, of PAHC and PA Bank that have been provided to NBTB are
true, correct, and complete copies thereof. The minute books of PAHC and PA Bank
that have been made available to NBTB contain accurate minutes of all meetings
and accurate consents in lieu of meetings of the board of directors (and any
committee thereof) and of the shareholders of PAHC and PA Bank since their
respective inceptions. These minute books accurately reflect all transactions
referred to in such minutes and consents in lieu of meetings and disclose all
material corporate actions of the shareholders and boards of directors of PAHC
and PA Bank and all committees thereof. Except as reflected in such minute
books, there are no minutes of meetings or consents in lieu of meetings of the
board of directors (or any committee thereof) or of shareholders of PAHC or PA
Bank.
6.11. Books and Records. The books and records of each of PAHC and PA Bank
fairly reflect the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all material respects with all
applicable accounting and legal requirements. Each of PAHC and PA Bank follows
generally accepted accounting principles applied on a consistent basis in the
preparation and maintenance of its books of account and financial statements.
6.12. Regulatory Approvals and Filings, Contracts, Commitments, etc. PAHC
has made available to NBTB:
(a) All regulatory approvals received since January 1, 1992, of PAHC
and PA Bank relating to all bank and nonbank acquisitions or the establishment
of de novo operations;
(b) All employment contracts, election contracts, retention contracts,
deferred compensation, non-competition, bonus, stock option, profit-sharing,
pension, retirement, consul tation after retirement, incentive, insurance
arrangements or plans (including medical, disability, group life or other
insurance plans), and any other remuneration or fringe benefit arrangements
applicable to employees, officers, or directors of PAHC or PA Bank, accompanied
by any agreements, including trust agreements, embodying such contracts, plans,
or arrangements, and all
21
employee manuals and memoranda relating to employment and benefit policies and
practices of any nature whatsoever (whether or not distributed to employees or
any of them), and any actuarial reports and audits relating to such plans;
(c) All material contracts, agreements, leases, mortgages, and
commitments to which PAHC or PA Bank is a party or may be bound; or, if any of
the same be oral, true, accurate, and complete written summaries of all such
oral contracts, agreements, leases, mortgages, and commitments;
(d) All contracts, agreements, leases, mortgages, and commitments,
whether or not material, to which PAHC or PA Bank is a party or may be bound and
which require the consent or approval of third parties to the execution and
delivery of this Agreement or to the consummation or performance of any of the
transactions contemplated thereby or, if any of the same be oral, true,
accurate, and complete written summaries of all such oral contracts, agreements,
leases, mortgages, and commitments;
(e) All deeds, leases, contracts, agreements, mortgages, and
commitments, whether or not material, to which PAHC or PA Bank is a party or may
be bound and which relate to land, buildings, fixtures, or other real property
upon or within which PAHC or PA Bank operates its businesses or is authorized to
operate its businesses, or with respect to which PAHC or PA Bank has any
application pending for authorization to operate its businesses;
(f) Any pending application, including any documents or materials
related thereto, which has been filed by PAHC or PA Bank with any federal or
state regulatory agency with respect to the establishment of a new office or the
acquisition or establishment of any additional banking or nonbanking subsidiary;
and
(g) All federal, state, and local tax returns, including any amended
returns, filed by PAHC or PA Bank for the years 1995 through 1998, a copy of the
calculation of the 1999 tax provision made by PAHC for the year 1999 as recorded
on its books and records, and a copy of all substantive correspondence or other
documents with respect to any examination that has not yet been resolved, a copy
of the most recent examination from each state or local tax agency if any, for
each of PAHC and PA Bank, and a copy of all substantive correspondence or other
documents with respect to any examination that has not yet been resolved, and
all tax rulings, closing agreements, settlement agreements, or similar documents
with respect to PAHC or PA Bank received from or entered into with the Internal
Revenue Service (the "IRS") or any other taxing authority since January 1, 1989
or that would have continuing effect after the Effective Time.
6.13. Financial Statements. PAHC has furnished to NBTB its consolidated
audited statement of condition as of each of December 31, 1996, December 31,
1997, and December 31, 1998, and its related audited consolidated statement of
income, consolidated statement of cash flows, and consolidated statement of
changes in stockholders' equity for each of the periods then ended, and the
notes thereto, and its consolidated unaudited statement of condition as of
September 30, 1999 and its related unaudited consolidated statement of income,
consolidated statement of cash flows,
22
and consolidated statement of changes in stockholders' equity for the period
then ended, and the notes thereto, each as filed with the SEC (collectively, the
"PAHC Financial Statements"). All of the PAHC Financial Statements, including
the related notes, (a) except as indicated in the notes thereto, were prepared
in accordance with generally accepted accounting principles consistently applied
in all material respects (subject, in the case of unaudited statements, to
recurring audit adjustments normal in nature and amount), (b) are in accordance
with the books and records of PAHC and PA Bank, (c) fairly reflect the
consolidated financial position of PAHC as of such dates, and the consolidated
results of operations of PAHC for the periods ended on such dates, and do not
fail to disclose any material extraordinary or out-of-period items, and (d)
reflect, in accordance with generally accepted accounting principles
consistently applied in all material respects, adequate provision for, or
reserves against, the consolidated loan losses of PAHC as of such dates.
6.14. Call Reports; Bank Holding Company Reports.
(a) PA Bank has made available to NBTB its FFIEC Consolidated Reports
of Condition and Income ("Call Reports") for the calendar quarter dated March
31, 1996 and each calendar quarter thereafter. All of such Call Reports,
including the related schedules and memorandum items, were prepared in
accordance with generally accepted accounting principles consistently applied in
all material respects or, to the extent different from generally accepted
accounting principles, accounting principles mandated by the applicable
instructions to such Call Reports.
(b) No adjustments are required to be made to the equity capital
account of PA Bank as reported on any of the Call Reports referred to in
Subsection 6.14(a) hereof, in any material amount, in order to conform such
equity capital account to equity capital as would be determined in accordance
with generally accepted accounting principles as of such date.
(c) PAHC has furnished to NBTB its annual report on Form FR Y-6 as
filed with the Board of Governors as of December 31, 1998 and all amendments and
periodic and current reports filed with the Board of Governors under the BHC Act
subsequent to December 31, 1998.
6.15. Absence of Undisclosed Liabilities. At September 30, 1999, neither
PAHC nor PA Bank had any obligation or liability of any nature (whether
absolute, accrued, contingent, or otherwise, and whether due or to become due)
which was material, or which when combined with all similar obligations or
liabilities would have been material, to PAHC, except (a) as disclosed in the
PAHC Financial Statements, or (b) as set forth on Schedule 6.15 hereof, or (c)
for unfunded loan commitments made by PAHC or PA Bank in the ordinary course of
their business consistent with past practice. The amounts set up as current
liabilities for taxes in the PAHC Financial Statements are sufficient for the
payment of all federal, state, local and foreign income, payroll, withholding,
excise, sales, use, personal property, use and occupancy, business and
occupation, mercantile, real estate, gross receipts, license, employment,
severance, stamp, premium, windfall profits, social security (or similar
unemployment), disability, transfer, registration, value added, alternative, or
add-on minimum, estimated, or capital stock and franchise tax and other tax of
any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not ("Tax" or
23
"Taxes") accrued in accordance with generally accepted accounting principles and
unpaid at September 30, 1999. Since September 30, 1999, neither PAHC nor PA Bank
has incurred or paid any obligation or liability that would be material (on a
consolidated basis) to PAHC, except (x) for obligations incurred or paid in
connection with transactions by it in the ordinary course of its business
consistent with past practices, or (y) as set forth on Schedule 6.15 hereof, or
(z) as expressly contemplated herein.
6.16. Absence of Certain Developments. Since September 30, 1999, except as
set forth on Schedule 6.16 hereof, there has been (a) no Material Adverse Effect
with respect to PAHC and PA Bank, (b) no material deterioration in the quality
of the consolidated loan portfolio of PAHC, and no material increase in the
consolidated level of nonperforming assets or non-accrual loans at PAHC or in
the level of its consolidated provision for credit losses or its consolidated
reserve for credit losses; (c) no declaration, setting aside, or payment by PAHC
or PA Bank of any regular dividend, special dividend, or other distribution with
respect to any class of capital stock of PAHC or PA Bank, other than, subject to
the dividend-coordination provisions of section 7.9 of this Agreement, customary
cash dividends paid by PAHC whose amounts have not exceeded $0.20 per share per
calendar quarter and the intervals between which dividends have not been more
frequent than past practice, and other than customary cash dividends paid by PA
Bank whose amounts have not exceeded past practice and the intervals between
which dividends have not been more frequent than past practice; (d) no
repurchase by PAHC of any of its capital stock; (e) no material loss,
destruction, or damage to any material property of PAHC or PA Bank, which loss,
destruction, or damage is not covered by insurance; and (f) no material
acquisition or disposition of any asset, nor any material contract outside the
ordinary course of business entered into by PAHC or PA Bank nor any substantial
amendment or termination of any material contract outside the ordinary course of
business to which PAHC or PA Bank is a party, nor any other transaction by PAHC
or PA Bank involving an amount in excess of $50,000 other than for fair value in
the ordinary course of its business. Since September 30, 1999, except as set
forth on Schedule 6.16 hereof, (x) each of PAHC and PA Bank has conducted its
business only in the ordinary course of such business and consistent with past
practice; (y) PAHC, on a consolidated basis, has maintained the quality of its
loan portfolio and that of each of its major components at approximately the
same level as existed at September 30, 1999; and (z) PAHC, on a consolidated
basis, has administered its investment portfolio pursuant to essentially the
same policies and procedures as existed during 1997 and 1998 and the first nine
months of 1999, and has taken no action to lengthen the average maturity of the
investment portfolio, or of any significant category thereof, to any material
extent.
6.17. Reserve for Credit Losses. The most recent of the PAHC Financial
Statements reflect a consolidated reserve for credit losses that is adequate in
accordance with generally accepted accounting principles to absorb reasonably
anticipated losses in the consolidated loan and lease portfolios of PAHC, in
view of the size and character of such portfolios, current economic conditions,
and other pertinent factors. Management reevaluates the adequacy of such reserve
quarterly based on portfolio performance, current economic conditions, and other
factors.
24
6.18. Tax Matters.
(a) Except as set forth on Schedule 6.18 hereof, all Tax returns and
reports required to be filed by or on behalf of PAHC or PA Bank have been timely
filed with the appropriate governmental agencies in all jurisdictions in which
such returns and reports are required to be filed, or requests for extensions
have been timely filed, granted, and have not expired for periods ending on or
before December 31, 1998, and all returns filed are complete and accurate and
properly reflect its Taxes for the periods covered thereby. All Taxes shown or
required to be shown on filed returns have been paid, except for any not yet due
and payable. As of the date hereof, there is no audit, examination, deficiency,
or refund litigation or tax claim or any notice of assessment or proposed
assessment by the IRS or any other taxing authority, or any other matter in
controversy with respect to any Taxes that might result in a determination
adverse to PAHC or PA Bank, except as reserved against in the PAHC Financial
Statements. All Taxes due with respect to completed and settled examinations or
concluded litigation have been properly accrued or paid.
(b) Except as set forth on Schedule 6.18 hereof, neither PAHC nor PA
Bank has executed an extension or waiver of any statute of limitations on the
assessment or collection of any Tax due that is currently in effect.
(c) To the extent any Taxes are due from, but have not yet been paid
by, PAHC or PA Bank for the period or periods beginning January 1, 1999 or
thereafter through and including the Effective Time, adequate provision on an
estimated basis has been made for the payment of such taxes by establishment of
appropriate tax liability accounts on the monthly financial statements of PAHC.
(d) Deferred Taxes of PAHC and PA Bank have been provided for in
accordance with generally accepted accounting principles as in effect on the
date of this Agreement.
(e) The deductions of PA Bank for bad debts taken and the reserve of PA
Bank for loan losses for federal income tax purposes at December 31, 1998, were
not greater than the maximum amount permitted under the provisions of section
585 of the Code.
(f) Other than liens arising under the laws of the United States or the
Commonwealth of Pennsylvania with respect to Taxes assessed and not yet due and
payable, there are no tax liens on any of the properties or assets of PAHC or PA
Bank.
(g) PAHC and PA Bank (i) have timely filed all information returns or
reports required to be filed with respect to Taxes, including but not limited to
those required by sections 6041, 6041A, 6042, 6045, 6049, 6050H, and 6050J of
the Code, (ii) have properly and timely provided to all persons, other than
taxing authorities, all information reports or other documents (for example,
Form 1099s, Form W-2s, and so forth) required to be provided to such persons
under applicable law, and (iii) have exercised due diligence in obtaining
certified taxpayer identification numbers as required under applicable law.
25
(h) The taxable year end of PAHC for federal income tax purposes is,
and since the inception of PAHC has continuously been, December 31.
(i) PAHC and PA Bank have in all material respects satisfied all
federal, state, local, and foreign withholding tax requirements including but
not limited to income, social security, and employment tax withholding.
(j) Neither PAHC nor PA Bank (i) is, or has been, a member of a group
filing a consolidated, combined, or unitary tax return, other than a group the
common parent of which is or was PAHC, or (ii) has any liability for the Taxes
of any person (other than PAHC and PA Bank) under Treas. Reg. ss. 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
6.19. Consolidated Net Worth. The consolidated net worth of PAHC on the
date of this Agreement, as determined in accordance with generally accepted
accounting principles but without regard to the change in unrealized gains and
losses on securities (net of reclassification adjustment and tax effects)
between September 30, 1999 and the date of this Agreement, is not less than the
sum of (a) $31,906,000, (b) the proceeds to PAHC of the sale of treasury stock
since September 30, 1999, and (c) the proceeds to PAHC of the exercise of stock
options to purchase shares of PAHC Common Stock since September 30, 1999.
6.20. Examinations. To the extent consistent with law, PAHC has heretofore
disclosed to NBTB relevant information contained in the most recent
safety-and-soundness, compliance, Community Reinvestment Act, and other Reports
of Examination with respect to PAHC issued by the Board of Governors and the
most recent safety-and-soundness, compliance, Community Reinvestment Act, and
other Reports of Examination with respect to PA Bank issued by the OCC. Such
information so disclosed consists of all material information with respect to
the financial, operational, and legal condition of the entity under examination
which is included in such reports.
6.21. Reports. Since January 1, 1996, each of PAHC and PA Bank has effected
all registrations and filed all reports and statements, together with any
amendments required to be made with respect thereto, which it was required to
effect or file with (a) the Board of Governors, (b) the OCC, (c) the FDIC, (d)
the United States Department of the Treasury, (e) the Department, (e) the
Securities and Exchange Commission, and (f) any other governmental or regulatory
authority or agency having jurisdiction over its operations. Each of such
registrations, reports, and documents, including the financial statements,
exhibits, and schedules thereto, does not contain any statement which, at the
time and in the light of the circumstances under which it was made, is false or
misleading with respect to any material fact or which omits to state any
material fact necessary in order to make the statements contained therein not
false or misleading.
6.22. FIRA Compliance and Other Transactions with Affiliates. Except as set
forth on Schedule 6.22 hereof, (a) none of the officers, directors, or
beneficial holders of 5 percent or more of the common stock of PAHC or PA Bank
and no person "controlled" (as that term is defined in the Financial
Institutions Regulatory and Interest Rate Control Act of 1978) by PAHC or PA
Bank
26
(collectively, "Insiders") has any ongoing material transaction with PAHC or PA
Bank on the date of this Agreement; (b) no Insider has any ownership interest in
any business, corporate or otherwise, which is a party to, or in any property
which is the subject of, business arrangements or relationships of any kind with
PAHC or PA Bank not in the ordinary course of business; and (c) all other
extensions of credit by PAHC or PA Bank to any Insider have heretofore been
disclosed in writing by PAHC to NBTB.
6.23. SEC Registered Securities. Other than the PAHC Common Stock, no
equity or debt securities of PAHC or PA Bank are registered or required to be
registered under the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
6.24. Legal Proceedings. Except as disclosed in the PAHC Financial
Statements or as set forth on Schedule 6.24 hereof, there is no claim, action,
suit, arbitration, investigation, or other proceeding pending against PAHC or PA
Bank before any court, governmental agency, authority or commission, arbitrator,
or "impartial mediator" or, to the best of the knowledge of PAHC and PA Bank,
threatened or contemplated against or affecting it or its property, assets,
interests, or rights, or any basis therefor of which notice has been given,
which, if adversely determined, would have a Material Adverse Effect on PAHC or
which otherwise could prevent, hinder, or delay consummation of the transactions
contemplated by this Agreement.
6.25. Absence of Governmental Proceedings. Except as set forth on Schedule
6.25 hereof, neither PAHC nor PA Bank is a party defendant or respondent to any
pending legal, equitable, or other proceeding commenced by any governmental
agency and, to the best of the knowledge of PAHC and PA Bank, no such proceeding
is threatened.
6.26. Federal Deposit Insurance.
(a) The deposits held by PA Bank are insured within statutory limits by
the Bank Insurance Fund of the FDIC (the "BIF") pursuant to the provisions of
the Federal Deposit Insurance Act, as amended (12 U.S.C. ss. 1811 et seq.) (the
"FDI Act"), and PA Bank has paid all regular premiums and special assessments
and filed all related reports and statements required under the FDI Act.
(b) PA Bank is a member of and pays insurance assessments to the BIF.
None of the deposits of PA Bank are insured by the Savings Association Insurance
Fund of the FDIC (the "SAIF"), and PA Bank pays no insurance assessments to the
SAIF.
6.27. Other Insurance. Each of PAHC and PA Bank carries insurance with
reputable insurers, including blanket bond coverage, in such amounts as are
reasonable to cover such risks as are customary in relation to the character and
location of its properties and the nature of its businesses. All such policies
of insurance are in full force and effect, and no notice of cancellation has
been received. All premiums to date have been paid in full. Neither PAHC nor PA
Bank is in default with respect to any such policy which is material to it.
27
6.28. Labor Matters.
(a) Neither PAHC nor PA Bank is a party to or bound by any collective
bargaining contracts with respect to any employees of PAHC or PA Bank. Since
their respective inceptions there has not been, nor to the best of the knowledge
of PAHC and PA Bank was there or is there threatened, any strike, slowdown,
picketing, or work stoppage by any union or other group of employees against
PAHC or PA Bank or any of its premises, or any other labor trouble or other
occurrence, event, or condition of a similar character. As of the date hereof,
neither PAHC nor PA Bank is aware of any attempts to organize a collective
bargaining unit to represent any of its employee groups.
(b) As of the date hereof, each of PAHC and PA Bank is, to the best of
its knowledge, in compliance in all material respects with all federal and state
laws, regulations, and orders respecting employment and employment practices
(including Title VII of the Civil Rights Act of 1964), terms and conditions of
employment, and wages and hours; and neither PAHC nor PA Bank is engaged in any
unfair labor practice. As of the date hereof, except as set forth on Schedule
6.28 hereof, no dispute exists between PAHC or PA Bank and any of its employee
groups regarding any employee organization, wages, hours, or conditions of
employment which would materially interfere with the business or operations of
PAHC or PA Bank.
6.29. Employee Benefit Plans.
(a) Schedule 6.29 hereto contains a complete list of all pension,
retirement, stock purchase, stock bonus, stock ownership, stock option,
performance share, stock appreciation right, phantom stock, savings, and
profit-sharing plans, all employment, deferred compensation, consul ting, bonus,
and collective bargaining agreements, and group insurance contracts and other
incentive, welfare, life insurance, death or survivor's benefit, health
insurance, sickness, disability, medical, surgical, hospital, severance, layoff
and vacation plans, contracts, and arrangements and employee benefit plans and
agreements, whether or not subject to ERISA, whether formal or informal, whether
written or oral, whether legally binding or not, under which any current or
former employee of PAHC or PA Bank has any present right to future benefits or
payments or under which PAHC or PA Bank has any present or future liability
(together, the "PAHC Plans").
(b) As to each of the PAHC Plans, PAHC has made available to NBTB true,
complete, current, and accurate copies of (i) the executed document or documents
governing the plan, including the related trust agreement, insurance policy, and
summary plan description (or other description in the case of an unwritten
plan); (ii) the most recent and prior two years' actuarial and financial report
prepared with respect to the plan if it constitutes a "qualified plan" under
section 401(a) of the Code; (iii) the Forms 5500 with all schedules for the last
three years; (iv) all IRS rulings, determination letters, and any open requests
for such rulings and letters that pertain to the plan; and (v) to the extent
they pertain to the plan, attorneys' responses to auditors' requests for
information for the last three years.
(c) Except for funding obligations and liabilities to the Pension
Benefit Guaranty
28
Corporation ("PBGC") pursuant to section 4007 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), all of which have been fully paid,
neither PAHC nor PA Bank has any tax, penalty, or liability with respect to any
PAHC Plan under ERISA, the Code, or any other applicable law, regulation, or
ruling. As to each PAHC Plan with respect to which a Form 5500 has been filed,
no material change has occurred with respect to the matters covered by the most
recent Form 5500 since the date thereof, other than regular accruals and
contributions.
(d) Each PAHC Plan intended to be a "qualified plan" under the Code
complies with ERISA and applicable provisions of the Code. Neither PAHC nor PA
Bank has any material liability under any PAHC Plan which is not reflected on
the PAHC Financial Statements (other than such normally unrecorded liabilities
under the Plans for sick leave, holiday, education, bonus, vacation, incentive
compensation, and anniversary awards, provided that such liabilities are not in
any event material). There have not been any "prohibited transactions" with
respect to any PAHC Plan within the meaning of section 406 of ERISA or, where
applicable, section 4975 of the Code, nor have there been any "reportable
events" within section 4043 of ERISA nor any accumulated funding deficiency
within section 302 of ERISA or section 402 of the Code. Neither PAHC nor PA Bank
nor any entity under common control under section 414(b), (c), or (m) of the
Code has or had any obligation to contribute to any multiemployer plan. As to
each PAHC Plan that is subject to Title IV of ERISA, the value of assets of such
PAHC Plan is at least equal to the present value of the vested and unvested
accrued benefits in such PAHC Plan on a termination and ongoing basis, based
upon applicable PBGC regulations and the actuarial methods and assumptions used
in the most recent actuarial report. Except as set forth on Schedule 6.29
hereof, neither PAHC nor PA Bank has any obligation to provide retiree welfare
benefits.
(e) No action, claim, or demand of any kind has been brought or
threatened by any potential claimant or representative of such a claimant under
any plan, contract, or arrangement referred to in subsection (a) of this section
6.29, other than routine claims for benefits in the ordinary course, where PAHC
or PA Bank may be either (i) liable directly on such action, claim, or demand;
or (ii) obligated to indemnify any person, group of persons, or entity with
respect to such action, claim, or demand which is not fully covered by insurance
maintained with reputable, responsible financial insurers or by a self-insured
plan.
6.30. Compensation. Schedule 6.30 hereto contains a true and correct
statement of the names, relationships with PAHC and PA Bank, present rates of
compensation (whether in the form of salary, bonuses, commissions, or other
supplemental compensation now or hereafter payable), and aggregate compensation
for the fiscal year ended December 31, 1998 of each director, officer, or other
employee of PAHC and PA Bank whose aggregate compensation for the fiscal year
ended December 31, 1998 exceeded $60,000 or whose aggregate compensation at
present exceeds the rate of $60,000 per annum. Except as set forth on Schedule
6.30 hereto, since December 31, 1998 neither PAHC nor PA Bank has changed the
rate of compensation of any of its directors, officers, employees, agents,
dealers, or distributors, nor has any PAHC Plan or program been instituted or
amended to increase benefits thereunder. Except as set forth on Schedule 6.30
hereto, there is no contract, agreement, plan, arrangement, or understanding
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by PAHC or
29
PA Bank by reason of section 280G of the Code.
6.31. Fiduciary Activities. PA Bank engages and, since January 1, 1998, has
engaged in (a) no fiduciary or custodial activity that would require its
qualification or registration under the laws of any jurisdiction and (b) no
advisory activity that would require it to register under the Investment
Advisers Act of 1940.
6.32. Environmental Liability.
(a) Except as set forth on Schedule 6.32 hereof, neither PAHC nor PA
Bank is in violation of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including those arising under
the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, the Federal Water Pollution Control
Act, the Federal Clean Air Act, the Toxic Substances Control Act or any state or
local statute, regulation, ordinance, order or decree relating to health, safety
or the environment ("Environmental Laws").
(b) Except as set forth on Schedule 6.32 hereof, neither PAHC, PA Bank,
nor, to the best of the knowledge of either of them, any borrower of PAHC or of
PA Bank has received notice that it has been identified by the United States
Environmental Protection Agency as a potentially responsible party under CERCLA
with respect to a site listed on the National Priorities List, 40 C.F.R. Part
300 Appendix B, nor has PAHC or PA Bank or, to the best of the knowledge of
either of them, any borrower of PAHC or of PA Bank received any notification
that any hazardous waste, as defined by 42 U.S.C. ss. 6903(5), any hazardous
substances, as defined by 42 U.S.C. ss. 9601(14), any "pollutant or
contaminant," as defined by 42 U.S.C. ss. 9601(33), or any toxic substance,
hazar dous materials, oil, or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") that it has disposed of has been
found at any site at which a federal or state agency is conducting a remedial
investigation or other action pursuant to any Environmental Law.
(c) No portion of any real property at any time owned or leased by PAHC
or PA Bank (collectively, the "PAHC Real Estate") has been used by PAHC or PA
Bank for the handling, processing, storage or disposal of Hazardous Substances
in a manner which violates any Environ mental Laws and, to the best of the
knowledge of PAHC and PA Bank, no underground tank or other underground storage
receptacle for Hazardous Substances is located on any of the PAHC Real Estate.
In the course of its activities, neither PAHC nor PA Bank has generated or is
generating any hazardous waste on any of the PAHC Real Estate in a manner which
violates any Environmental Laws. There has been no past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping (collectively, a "Release") of
Hazardous Substances by PAHC or PA Bank on, upon, or into any of the PAHC Real
Estate. In addition, to the best of the knowledge of PAHC and PA Bank, except as
set forth on Schedule 6.32 hereof, there have been no such Releases on, upon, or
into any real property in the vicinity of any of the PAHC Real Estate that,
through soil or groundwater contamination, may be
30
located on any of such PAHC Real Estate.
(d) With respect to any real property at any time held as collateral
for any outstanding loan by PAHC or PA Bank (collectively, the "Collateral Real
Estate"), except as set forth on Schedule 6.32 hereof, neither PAHC nor PA Bank
has since January 1, 1988 received notice from any borrower thereof or third
party, and has no knowledge, that such borrower has generated or is generating
any hazardous waste on any of the Collateral Real Estate in a manner which
violates any Environmental Laws or that there has been any Release of Hazardous
Substances by such borrower on, upon, or into any of the Collateral Real Estate,
or that there has been any Release on, upon, or into any real property in the
vicinity of any of the Collateral Real Estate that, through soil or groundwater
contamination, may be located on any of such Collateral Real Estate.
(e) As used in this section 6.32, each of the terms "PAHC" and "PA
Bank" includes the applicable entity and any partnership or joint venture in
which it or any of its subsidiaries has an interest.
6.33. Intangible Property. To the best of the knowledge of PAHC and PA
Bank, each of them owns or possesses the right, free of the claims of any third
party, to use all material trademarks, service marks, trade names, copyrights,
patents, and licenses currently used by it in the conduct of its business. To
the best of the knowledge of PAHC and PA Bank, no material product or service
offered and no material trademark, service mark, or similar right used by either
of them infringes any rights of any other person, and, as of the date hereof,
neither PAHC nor PA Bank has received any written or oral notice of any claim of
such infringement.
6.34. Real and Personal Property. Except as set forth on Schedule 6.34
hereof, and except for property and assets disposed of in the ordinary course of
business, each of PAHC and PA Bank possesses good and marketable title to and
owns, free and clear of any mortgage, pledge, lien, charge, or other encumbrance
or other third party interest of any nature whatsoever which would materially
interfere with the business or operations of either PAHC or PA Bank, its real
and personal property and other assets, including without limitation those
properties and assets reflected in the PAHC Financial Statements as of September
30, 1999, or acquired by PAHC or PA Bank subsequent to the date thereof. The
leases pursuant to which PAHC and PA Bank lease real or personal property as
lessee are valid and effective in accordance with their respective terms; and
there is not, under any such lease, any material existing default or any event
which, with the giving of notice or lapse of time or otherwise, would constitute
a material default. The real and personal property leased by either PAHC or PA
Bank as lessee is free from any adverse claim which would materially interfere
with its business or operation taken as a whole. The material properties and
equipment owned or leased as lessee by PAHC and PA Bank are in normal operating
condition, free from any known defects, except such minor defects as do not
materially interfere with the continued use thereof in the conduct of its normal
operations.
31
6.35. Loans, Leases, and Discounts.
(a) To the best of the knowledge of PAHC and PA Bank, each loan, lease,
and discount reflected as an asset of PAHC in the PAHC Financial Statements as
of September 30, 1999, or acquired since that date, is the legal, valid, and
binding obligation of the obligor named therein, enforceable in accordance with
its terms; and no loan, lease, or discount having an unpaid balance (principal
and accrued interest) in excess of $50,000, and no outstanding letter of credit
or commitment to extend credit having a notional amount in excess of $50,000, is
subject to any asserted defense, offset, or counterclaim known to PAHC or PA
Bank.
(b) Except as set forth on Schedule 6.35 hereof, neither PAHC nor PA
Bank holds any loans or loan-participation interests purchased from, or
participates in any loans originated by, any person other than PAHC or PA Bank.
6.36. Material Contracts. Neither PAHC nor PA Bank nor any of the assets,
businesses, or operations of either of them is as of the date hereof a party to,
or is bound or affected by, or receives benefits under any material agreement,
arrangement, or commitment not cancelable by it without penalty, other than (a)
the agreements set forth on Schedule 6.36 hereof or set forth in one or more
other schedules of this Agreement, and (b) agreements, arrangements, or
commitments entered into in the ordinary course of its business consistent with
past practice, or, if there has been no past practice, consistent with prudent
banking practices.
6.37. Employment and Severance Arrangements. Schedule 6.37 hereof sets
forth
(a) all employment contracts granted by PAHC or PA Bank to any of its
officers, directors, shareholders, consultants, or other management officials
and any officer, director, shareholder, consultant, or management official of
any affiliate providing for increased or acceler ated compensation in the event
of a change of control with respect to PAHC or PA Bank or any other event
affecting the ownership, control, or management of PAHC or PA Bank; and
(b) all employment and severance contracts, agreements, and
arrangements between PAHC or PA Bank and any officer, director, consultant, or
other management official of any of them.
6.38. Material Contract Defaults. All contracts, agreements, leases,
mortgages, or commitments referred to in section 6.12(c) hereof are valid and in
full force and effect on the date hereof. As of the date of this Agreement and
as of the Effective Time, neither PAHC nor PA Bank is or will be in default in
any material respect under any material contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a party
or by which its assets, business, or operations may be bound or affected or
under which it or its assets, business, or operations receive benefits; and
there has not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a default.
6.39. Capital Expenditures. Except as set forth on Schedule 6.39 hereof,
neither PAHC nor PA
32
Bank has any outstanding commitments to make capital expenditures which in the
aggregate exceed $50,000.
6.40. Repurchase Agreements. With respect to all agreements pursuant to
which PAHC or PA Bank has purchased securities subject to an agreement to
resell, it has a valid, perfected first lien or security interest in the
securities securing the agreement, and the value of the collateral securing each
such agreement equals or exceeds the amount of the debt secured by such
collateral under such agreement.
6.41. Internal Controls; Year 2000 Problem.
(a) Each of PAHC and PA Bank maintains internal controls to provide
reasonable assurance to its board of directors and officers that its assets are
safeguarded, its records and reports are prepared in compliance with all
applicable legal and accounting requirements and with its internal policies and
practices, and applicable federal, state, and local laws and regulations are
complied with. These controls extend to the preparation of its financial
statements to provide reasonable assurance that the statements are presented
fairly in conformity with generally accepted accounting principles or, in the
case of PA Bank and to the extent different from generally accepted accounting
principles, accounting principles mandated by the OCC. The controls contain
self- monitoring mechanisms, and appropriate actions are taken on significant
deficiencies as they are identified.
(b) Each of PAHC and PA Bank has reviewed the areas within its business
and operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis the risk that certain computer
applications used by it or by any of its major suppliers may be unable to
recognize and perform properly date-sensitive functions involving dates prior to
and after December 31, 1999 and prior to and after February 28, 2000 (the "Year
2000 Problem"). The Year 2000 Problem will not result, and is not reasonably
expected to result, in any Material Adverse Effect on PAHC or PA Bank.
6.42. Dividends. Neither PAHC nor PA Bank has paid any dividend to its
shareholders which caused its regulatory capital to be less than the amount then
required by applicable law, or which exceeded any other limitation on the
payment of dividends imposed by law, agreement, or regulatory policy.
6.43. Brokers and Advisers. Except as set forth on Schedule 6.43 hereof,
(a) there are no claims for brokerage commissions, finder's fees, or similar
compensation arising out of or due to any act of PAHC or PA Bank in connection
with the transactions contemplated by this Agreement or based upon any agreement
or arrangement made by or on behalf of PAHC or PA Bank, and (b) neither PAHC nor
PA Bank has entered into any agreement or understanding with any party relating
to financial advisory services provided or to be provided with respect to the
transactions contemplated by this Agreement.
33
6.44. Interest Rate Risk Management Instruments.
(a) Schedule 6.44 contains a true, correct, and complete list of all
interest-rate swaps, caps, floors, and options agreements and other
interest-rate risk management arrangements to which PAHC or PA Bank is a party
or by which any of its properties or assets may be bound.
(b) All interest rate swaps, caps, floors, and option agreements and
other interest rate risk management arrangements to which PAHC or PA Bank is a
party or by which any of its properties or assets may be bound were entered into
in the ordinary course of its business and, to the best of its knowledge, in
accordance with prudent banking practice and applicable rules, regulations, and
regulatory policies and with counterparties believed to be financially
responsible at the time and are legal, valid, and binding obligations
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting
the rights of creditors generally and the availability of equitable remedies),
and are in full force and effect. PAHC and PA Bank have duly performed in all
material respects of all of their respective obligations thereunder to the
extent that such obligations to perform have accrued; and to the best of the
knowledge of PAHC and PA Bank, there are no breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
6.45. Accounting Treatment. PAHC is aware of no reason why the Merger will
fail to qualify for "pooling of interests" accounting treatment.
6.46. COBRA Matters. Schedule 6.46 sets forth the name, address, telephone
number, social security number, and date of Qualifying Event (as defined in
section 603 of ERISA) of each individuals covered under a group health plan that
is subject to section 601 of ERISA and sponsored by PAHC or PA Bank or any of
their subsidiaries who have experienced a Qualifying Event since June 7, 1998,
together with documentation of compliance by PAHC or PA Bank, as the case may
be, with applicable notice requirements.
6.47. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by PAHC or PA Bank hereunder
or in connection with this Agreement or any of the transactions contemplated
thereunder contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to PAHC which reasonably might have a Material Adverse Effect on
PAHC or PA Bank which has not been disclosed in the PAHC Financial Statements or
a certificate or other document delivered to NBTB by PAHC. All copies of
documents delivered to NBTB by PAHC under this Agreement are true, correct, and
complete copies thereof and include all amendments, supplements, and
modifications thereto and all waivers thereunder.
6.48. Regulatory and Other Approvals. As of the date hereof, PAHC is not
aware of any reason why all material consents and approvals shall not be
procured from all regulatory agencies having jurisdiction over the transactions
contemplated by this Agreement, as shall be necessary for (a) consummation of
the transactions contemplated by this Agreement, and (b) the continuation
34
after the Effective Time of the business of PAHC and PA Bank as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of PAHC, could have a Material
Adverse Effect on PAHC. As of the date hereof, PAHC is not aware of any reason
why all material consents and approvals shall not be procured from all other
persons and entities whose consent or approval shall be necessary for (y)
consummation of the transactions contemplated by this Agreement, or (z) the
continuation after the Effective Time of the business of PAHC and PA Bank as
such business is carried on immediately prior to the Effective Time.
7. COVENANTS OF PAHC.
PAHC covenants and agrees as follows:
7.1. Rights of Access. In addition and not in limitation of any other
rights of access provided to NBTB herein, until the Effective Time PAHC and PA
Bank will give to NBTB and to its representatives, including its certified
public accountants, KPMG, full access during normal business hours to all of the
property, documents, contracts, books, and records of PAHC and PA Bank, and such
information with respect to their business affairs and properties as NBTB from
time to time may reasonably request.
7.2. Monthly and Quarterly Financial Statements; Minutes of Meetings and
Other Materials.
(a) PAHC and PA Bank will continue to prepare all of the monthly and
quarterly financial statements and financial reports to regulatory authorities
for the months and quarterly periods ending between October 1, 1999 and the
Effective Time which it customarily prepared during the period between January
1, 1996 and September 30, 1999 and shall promptly provide NBTB with copies of
all such financial statements and reports. All of such financial statements and
reports, including the related notes, schedules, and memorandum items, will have
been prepared in accordance with generally accepted accounting principles
consistently applied in all material respects (except that Call Reports may be
prepared in accordance with the official instructions applicable thereto at the
time of filing).
(b) PAHC and PA Bank shall promptly provide NBTB with (i) copies of all
of its periodic reports to directors and to shareholders, whether or not such
reports were prepared or distributed in connection with a meeting of the board
of directors or a meeting of the shareholders, prepared or distributed between
the date of this Agreement and the Effective Time, and (ii) complete copies of
all minutes of meetings of its board of directors and shareholders which
meetings take place between the date of this Agreement and the Effective Time,
certified by the secretary or cashier or an assistant secretary or assistant
cashier of PAHC or PA Bank, as the case may be.
(c) From the date of this Agreement to the Effective Time, PAHC shall,
contemporaneously with its filing with the SEC of any periodic or current report
pursuant to section
35
13 of the Exchange Act, deliver a copy of such report to NBTB.
7.3. Extraordinary Transactions. Without the prior written consent of NBTB,
neither PAHC nor PA Bank will, on or after the date of this Agreement: (a)
subject to section 7.9, declare or pay any cash dividends or property dividends
with respect to any class of its capital stock, with the exception of (i)
subject to the dividend-coordination provisions of section 7.9 of this
Agreement, customary periodic cash dividends paid by PAHC to holders of its
common stock in amounts not exceeding $0.20 per share per calendar quarter and
at intervals that are not shorter than past practice, and (ii) customary cash
dividends paid by PA Bank whose amounts have not exceeded past practice and at
intervals that are not shorter than past practice; (b) declare or distribute any
stock dividend, authorize a stock split, or authorize, issue or make any
distribution of its capital stock or any other securities (except for issuances
of PAHC Common Stock upon exercise of stock options outstanding on the date of
this Agreement), or grant any options to acquire such additional securities; (c)
either (i) merge into, consolidate with, or sell or otherwise dispose of its
assets to any other corporation or person, or enter into any other transaction
or agree to effect any other transaction not in the ordinary course of its
business except as explicitly contemplated herein, or (ii) engage in any
discussions concerning such a possible transaction except as explicitly
contemplated herein unless the board of directors of PAHC, based upon the advice
of Blank Rome Comisky & McCauley LLP, determines in good faith that such action
is required for the board of directors to comply with its fiduciary duties to
stockholders imposed by law; (d) convert the charter or form of entity of PA
Bank from that in existence on the date of this Agreement to any other charter
or form of entity; (e) make any direct or indirect redemption, purchase, or
other acquisition of any of its capital stock; (f) except in the ordinary course
of its business or to accomplish the transactions contemplated by this
Agreement, incur any liability or obligation, make any commitment or
disbursement, acquire or dispose of any property or asset, make any contract or
agreement, pay or become obligated to pay any legal, accounting, or
miscellaneous other expense, or engage in any transaction; (g) other than in the
ordinary course of business, subject any of its properties or assets to any
lien, claim, charge, option, or encumbrance; (h) enter into or assume any one or
more commitments to make capital expenditures, any of which individually exceeds
$20,000 or which in the aggregate exceed $50,000; (i) except for increases in
the ordinary course of business in accordance with past practices, which
together with all other compensation rate increases do not exceed 4.5 percent
per annum of the aggregate payroll as of September 30, 1999, and except as
explicitly contemplated by this Agreement, increase the rate of compensation of
any employee or enter into any agreement to increase the rate of compensation of
any employee; (j) except as otherwise required by law, create or modify any
pension or profit sharing plan, bonus, deferred compensation, death benefit, or
retirement plan, or the level of benefits under any such plan, nor increase or
decrease any severance or termination pay benefit or any other fringe benefit;
(k) enter into any employment or personal services contract with any person or
firm, including without limitation any contract, agreement, or arrangement
described in section 6.37(a) hereof, except directly to facilitate the
transactions contemplated by this Agreement; nor (l) purchase any loans or
loan-participation interests from, or participate in any loans originated by,
any person other than PAHC or PA Bank.
7.4. Preservation of Business. Each of PAHC and PA Bank will (a) carry on
its business and
36
manage its assets and properties diligently and substantially in the same manner
as heretofore; (b) maintain the ratio of its loans to its deposits at
approximately the same level as existed at September 30, 1999, as adjusted to
allow for seasonal fluctuations of loans and deposits of a kind and amount
experienced traditionally by it; (c) manage its investment portfolio in
substantially the same manner and pursuant to substantially the same investment
policies as in 1997 and 1998, and will take no action to change to any material
extent the percentage which its investment portfolio bears to its total assets,
or to lengthen to any material extent the average maturity of its investment
portfolio, or of any significant category thereof; (d) use commercially
reasonable efforts to continue in effect its present insurance coverage on all
properties, assets, business, and personnel; (e) use commercially reasonable
efforts to preserve its business organization intact, to keep available its
present employees, and to preserve its present relationships with customers and
others having business dealings with it; (f) not do anything and not fail to do
anything which will cause a breach of or default in any contract, agreement,
commitment, or obligation to which it is a party or by which it may be bound;
(g) conduct its affairs so that at the Effective Time none of its
representations and warranties will be inaccurate, none of its covenants and
agreements will be breached, and no condition in this Agreement will remain
unfulfilled by reason of its actions or omissions; and (h) not amend its
articles of incorporation or bylaws.
7.5. Comfort Letter. At the time of the effectiveness of the Registration
Statement, but prior to the mailing of the Joint Proxy Statement, and on the
date of the Effective Time, PAHC shall furnish NBTB with a letter from KPMG LLP,
in its capacity as the independent auditors of PAHC, in form and substance
acceptable to NBTB, stating that (a) they are independent accountants with
respect to PAHC within the meaning of the Securities Act and the published rules
and regulations thereunder, (b) in their opinion the consolidated financial
statements of PAHC included in the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act and the published rules and regulations thereunder, and (c) a
reading of the latest available unaudited consolidated financial statements of
PAHC and unaudited financial statements of PA Bank and inquiries of certain
officials of PAHC and PA Bank responsible for financial and accounting matters
as to transactions and events since the date of the most recent consolidated
statement of condition included in their most recent audit report with respect
to PAHC did not cause them to believe that (i) such latest available unaudited
consolidated financial statements of PAHC are not stated on a basis consistent
with that followed in PAHC's audited consolidated financial statements; or (ii)
except as disclosed in the letter, at a specified date not more than five
business days prior to the date of such letter, there was any change in PAHC's
capital stock or any change in consolidated long-term debt or any decrease in
the consolidated net assets of PAHC or the consolidated allowance for loan and
lease losses of PAHC as compared with the respective amounts shown in the most
recent PAHC audited consolidated financial statements. The letter shall also
cover such other matters pertaining to PAHC's and PA Bank's financial data and
statistical information included in the Registration Statement as may reasonably
be requested by NBTB.
7.6. Affiliates' Agreements.
(a) PAHC will furnish to NBTB (i) a list of all persons known to PAHC
who at the date of this Agreement and (ii) if different from the list required
by section 7.6(a)(i), a list of all
37
persons known to PAHC who at the date of PAHC's special meeting of shareholders
to vote upon the transactions contemplated by this Agreement may be deemed to be
"affiliates" of PAHC within the meaning of Rule 145 under the Securities Act and
for purposes of qualifying the Merger for "pooling of interests" accounting
treatment.
(b) PAHC will use commercially reasonable efforts to cause each such
"affiliate" of PAHC to deliver to NBTB on or before the date of this Agreement
(or, in the case of any person who becomes an "affiliate" of PAHC after the date
of this Agreement, not later than ten days after such person becomes an
"affiliate" of PAHC) an Affiliates Agreement.
7.7. Pooling Treatment.
(a) PAHC will take no action that would prevent or impede the Merger
from qualifying for "pooling of interests" accounting treatment or KPMG from
delivering the Pooling Letters.
(b) PAHC shall deliver to KPMG such certificates or representations as
KPMG may reasonably request to enable it to deliver the Pooling Letters.
7.8. Shareholders' Meeting. PAHC shall hold a meeting of its shareholders
in accordance with the BCL as promptly as possible after the effectiveness of
the Registration Statement, after at least twenty days' prior written notice
thereof to the shareholders of PAHC, to consider and vote upon the adoption of
this Agreement. Subject to its fiduciary duty to shareholders, the board of
directors of PAHC shall approve this Agreement and recommend to its shareholders
that it be adopted.
7.9. Dividend Coordination. After the date of this Agreement, each of NBTB
and PAHC shall coordinate with the other the declaration of any dividends in
respect of NBTB Common Stock and PAHC Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties hereto
that holders of PAHC Common Stock shall not receive two dividends, or fail to
receive one dividend, for any quarter with respect to their shares of PAHC
Common Stock and any shares of NBTB Common Stock any such holder receives in
exchange therefor in the Merger.
7.10. Inconsistent Activities.
(a) Subject to subsection (b) of this section 7.10, unless and until
the Merger has been consummated or this Agreement has been terminated in
accordance with its terms, neither PAHC nor PA Bank will (a) solicit or
encourage, directly or indirectly, any inquiries or proposals (each an
"Alternative Proposal") to acquire more than 1 percent of the PAHC Common Stock
or any capital stock of PA Bank or any significant portion of the assets of
either of them (whether by tender offer, merger, purchase of assets, or other
transactions of any type) (each an "Alternative Transaction"); (b) afford any
third party which may be considering an Alternative Proposal or Alternative
Transaction access to its properties, books or records except as required by
mandatory provisions of law; (c) enter into any discussions or negotiations for,
or enter into any agreement or understanding which provides for, any Alternative
Transaction, or (d) authorize or permit any of its directors,
38
officers, employees or agents to do or permit any of the foregoing. If PAHC or
PA Bank becomes aware of any Alternative Proposal or of any other matter which
could adversely affect this Agreement or the Merger, PAHC and PA Bank shall
immediately give notice thereof to NBTB.
(b) Nothing contained in subsection (a) of this section 7.10 shall
prohibit the board of directors of PAHC from furnishing information to or
entering into discussions or negotiations with any person that makes an
unsolicited bona fide Alternative Proposal if, and only to the extent that, (i)
the board of directors of the Company, based upon the advice of Blank Rome
Comisky & McCauley LLP, determines in good faith that such action is required
for the board of directors to comply with its fiduciary duties to stockholders
imposed by law, (ii) prior to furnishing such information to, or entering into
discussions or negotiations with, such person, PAHC provides written notice to
NBTB to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person, and (iii) PAHC keeps NBTB
informed of the status and all material information with respect to any such
discussions or negotiations.
(c) Nothing in subsection (b) of this section 7.10 or in subsection (c)
of section 7.3 of this Agreement shall (i) permit PAHC to terminate this
Agreement (except as specifically provided in section 11.1 or 11.2 of this
Agreement), (ii) permit PAHC or PA Bank to enter into any agreement with respect
to an Alternative Transaction for as long as this Agreement remains in effect
(it being agreed that for as long as this Agreement remains in effect, PAHC and
PA Bank shall not enter into any agreement with any person that provides for, or
in any way facilitates, an Alternative Transaction (other than a confidentiality
agreement in customary form)), or (iii) affect any other obligation of PAHC or
PA Bank under this Agreement.
7.11. COBRA Obligations. For all individuals covered under a group health
plan that is subject to section 601 of ERISA and sponsored by PAHC or PA Bank or
any of their subsidiaries, and who experience a Qualifying Event (as defined in
section 603 of ERISA) within thirty days of the date of this Agreement, PAHC or
PA Bank, as the case may be, shall remain responsible for providing all notices
and election forms necessary to comply with ERISA and the Code, and will take
all steps necessary to implement elections pursuant to such notices.
7.12. Updated Schedules. Not less than fifteen business days prior to the
Effective Time and as of the Effective Time, PAHC will deliver to NBTB any
updates to the schedules to its representations which may be required to
disclose events or circumstances arising after the date hereof. Such schedules
shall be updated only for the purpose of making the representations and
warranties contained in this Agreement to which such part of such schedules
relate true and correct in all material respects as of the date such schedule is
updated, and the updated schedule shall not have the effect of making any
representation or warranty contained in this Agreement true and correct in all
material respects as of a date prior to the date of such updated schedule. For
purposes of determining whether the condition set forth in section 4.1 to NBTB's
obligations have been met, any such updated schedules delivered to NBTB shall be
disregarded unless NBTB shall have agreed to accept any changes reflected in
such updated schedules.
7.13. Subsequent Events. Until the Effective Time, PAHC will immediately
advise NBTB in a
39
detailed written notice of any fact or occurrence or any pending or threatened
occurrence of which it obtains knowledge and which (if existing and known at the
date of the execution of this Agreement) would have been required to be set
forth or disclosed in or pursuant to this Agreement which (if existing and known
at any time prior to or at the Effective Time) would make the performance by
PAHC of a covenant contained in this Agreement impossible or make such
performance materially more difficult than in the absence of such fact or
occurrence, or which (if existing and known at the time of the Effective Time)
would cause a condition to NBTB's obligations under this Agreement not to be
fully satisfied.
8. REPRESENTATIONS AND WARRANTIES OF NBTB.
NBTB represents and warrants to PAHC as follows:
8.1. Organization, Powers, and Qualification. NBTB is a corporation which
is duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own and operate its properties and assets, to lease properties used
in its business, and to carry on its business as now conducted. NBTB owns or
possesses in the operation of its business all franchises, licenses, permits,
branch certificates, consents, approvals, waivers, and other authorizations,
governmental or otherwise, which are necessary for it to conduct its business as
now conducted, except for those where the failure of such ownership or
possession would not have a Material Adverse Effect on NBTB. NBTB is duly
qualified and licensed to do business and is in good standing in every
jurisdiction with respect to which the failure to be so qualified or licensed
could result in a Material Adverse Effect on NBTB.
8.2. Execution and Performance of Agreement. Provided that prior to the
Effective Time the shareholders of NBTB approve the Share Increase Amendment and
an appropriate Certificate of Amendment is filed with the Delaware Secretary of
State reflecting such approval, NBTB has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its respective
terms.
8.3. Binding Obligations; Due Authorization. This Agreement constitutes the
valid, legal, and binding obligations of NBTB enforceable against it in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, moratorium or similar law, or by general principles of
equity. The execution, delivery, and performance of this Agreement and the
transactions contemplated thereby have been duly and validly authorized by the
board of directors of NBTB. No other corporate proceedings on its part are
necessary to authorize this Agreement or the carrying out of the transactions
contemplated hereby.
8.4. Absence of Default. Provided that prior to the Effective Time the
shareholders of NBTB approve the Share Increase Amendment and an appropriate
Certificate of Amendment is filed with the Delaware Secretary of State
reflecting such approval, none of the execution or the delivery of this
Agreement, the consummation of the transactions contemplated hereby, or the
compliance with or fulfillment of the terms hereof will conflict with, or result
in a breach of any of the terms,
40
conditions, or provisions of, or constitute a default under the organizational
documents or bylaws of NBTB. None of such execution, consummation, or
fulfillment will (a) conflict with, or result in a material breach of the terms,
conditions, or provisions of, or constitute a material violation, conflict, or
default under, or give rise to any right of termination, cancellation, or
acceleration with respect to, or result in the creation of any lien, charge, or
encumbrance upon, any of the property or assets of NBTB pursuant to any material
agreement or instrument under which it is obligated or by which any of its
properties or assets may be bound, including without limitation any material
lease, contract, mortgage, promissory note, deed of trust, loan, credit
arrangement or other commitment or arrangement of it in respect of which it is
an obligor, or (b) if the Merger is approved by the Board of Governors under the
BHC Act, or if the Board of Governors waives its jurisdiction over the Holding
Company Merger, and if the Bank Merger is approved by the OCC, and if the
transactions contemplated by this Agreement are approved by the Department,
violate any law, statute, rule, or regulation of any government or agency to
which NBTB is subject and which is material to its operations, or (c) violate
any judgment, order, writ, injunction, decree, or ruling to which it or any of
its properties or assets is subject or bound. None of the execution or delivery
of this Agreement, the consummation of the transactions contemplated hereby, or
the compliance with or fulfillment of the terms hereof will require any
authorization, consent, approval, or exemption by any person which has not been
obtained, or any notice or filing which has not been given or done, other than
approval of the transactions contemplated by this Agreement by, notices to, or
filings with by the Board of Governors, the OCC, the SEC, state securities
commissions, the Department, the Secretary of State of the State of Delaware,
and the Secretary of State of the Commonwealth of Pennsylvania.
8.5. Capital Structure.
(a) The authorized capital stock of NBTB as of the date of this
Agreement consists of (i) 2,500,000 shares of preferred stock, no par value,
stated value $1.00 per share ("NBTB Preferred Stock"), of which, as of the date
of this Agreement, no shares are issued or outstanding, and (ii) 15,000,000
shares of NBTB Common Stock, of which, as of the date of this Agreement,
12,440,384 shares have been duly issued and are validly outstanding and fully
paid, and 575, 405 additional shares are issued and held in the treasury of
NBTB. The aforementioned shares of NBTB Preferred Stock and NBTB Common Stock
are the only voting securities of NBTB authorized, issued, or outstanding as of
such date.
(b) None of the shares of NBTB Common Stock has been issued in
violation of the preemptive rights of any shareholder.
(c) As of the date hereof, to the best of the knowledge of NBTB, and
except for this Agreement, there are no shareholder agreements, or other
agreements, understandings, or commitments relating to the right of any holder
or beneficial owner of more than 1 percent of the issued and outstanding shares
of any class of the capital stock of NBTB to vote or to dispose of his, her or
its shares of capital stock of NBTB.
8.6. Books and Records. The books and records of each of NBTB and NBT Bank
fairly reflect
41
the transactions to which it is a party or by which its properties are subject
or bound. Such books and records have been properly kept and maintained and are
in compliance in all material respects with all applicable accounting and legal
requirements. Each of NBTB and NBT Bank follows generally accepted accounting
principles applied on a consistent basis in the preparation and maintenance of
its books of account and financial statements, including but not limited to the
application of the accrual method of accounting for interest income on loans,
leases, discounts, and investments, interest expense on deposits and all other
liabilities, and all other items of income and expense. Each of NBTB and NBT
Bank has made all accruals in amounts which accurately report income and expense
in the proper periods in accordance with generally accepted accounting
principles. Each of NBTB and NBT Bank has filed all material reports and returns
required by any law or regulation to be filed by it.
8.7. Financial Statements. NBTB has furnished to PAHC its consolidated
audited statement of condition as of each of December 31, 1996, December 31,
1997, and December 31, 1998, and its related audited consolidated statement of
income, consolidated statement of cash flows, and consolidated statement of
changes in stockholders' equity for each of the periods then ended, and the
notes thereto, and its consolidated unaudited statement of condition as of
September 30, 1999, and its related unaudited consolidated statement of income,
consolidated statement of cash flows, and consolidated statement of changes in
stockholders' equity for the period then ended, and the notes thereto, each as
filed with the SEC (collectively, the "NBTB Financial Statements"). All of the
NBTB Financial Statements, including the related notes, (a) except as indicated
in the notes thereto, were prepared in accordance with generally accepted
accounting principles consistently applied in all material respects (subject, in
the case of unaudited statements, to recurring audit adjustments normal in
nature and amount), and (b) are in accordance with the books and records of
NBTB, (c) fairly reflect the consolidated financial position of NBTB as of such
dates, and the consolidated results of operations of NBTB for the periods ended
on such dates, and do not fail to disclose any material extraordinary or
out-of-period items, and (d) reflect, in accordance with generally accepted
accounting principles consistently applied in all material respects, adequate
provision for, or reserves against, the consolidated loan losses of NBTB as of
such dates.
8.8. Nasdaq Reporting. Trading of NBTB Common Stock is reported on the
Nasdaq National Market.
8.9. Absence of Certain Developments. Since September 30, 1999, there has
been (a) no Material Adverse Effect with respect to NBTB, and (b) no material
deterioration in the quality of the loan portfolio of NBTB or of any major
component thereof, and no material increase in the level of nonperforming assets
or nonaccrual loans at NBTB or in the level of its provision for credit losses
or its reserve for credit losses.
8.10. Brokers and Advisers. Other than with respect to MB&D, (a) there are
no claims for brokerage commissions, finder's fees, or similar compensation
arising out of or due to any act of NBTB in connection with the transactions
contemplated by this Agreement or based upon any agreement or arrangement made
by or on behalf of NBTB, and (b) NBTB has not entered into any agreement or
understanding with any party relating to financial advisory services provided or
to be
42
provided with respect to the transactions contemplated by this Agreement.
8.11. Disclosure. No representation or warranty hereunder and no
certificate, statement, or other document delivered by NBTB hereunder or in
connection with this Agreement or any of the transactions contemplated
thereunder contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to NBTB which might materially adversely affect its business,
assets, liabilities, financial condition, results of operations, or prospects
which has not been disclosed in the NBTB Financial Statements or a certificate
or other document delivered by NBTB to PAHC. Copies of all documents delivered
to PAHC by NBTB under this Agreement are true, correct, and complete copies
thereof and include all amendments, supplements, and modifications thereto and
all waivers thereunder.
8.12. Regulatory and Other Approvals. As of the date hereof, NBTB is not
aware of any reason why all material consents and approvals shall not be
procured from all regulatory agencies having jurisdiction over the transactions
contemplated by this Agreement, as shall be necessary for (a) consummation of
the transactions contemplated by this Agreement, and (b) the continuation after
the Effective Time of the business of NBTB as such business is carried on
immediately prior to the Effective Time, free of any conditions or requirements
which, in the reasonable opinion of NBTB, could have a Material Adverse Effect
on NBTB. As of the date hereof, NBTB is not aware of any reason why all material
consents and approvals shall not be procured from all other persons and entities
whose consent or approval shall be necessary for (y) consummation of the
transactions contemplated by this Agreement, or (z) the continuation after the
Effective Time of the business of NBTB as such business is carried on
immediately prior to the Effective Time.
9. COVENANTS OF NBTB.
NBTB covenants and agrees as follows:
9.1. Rights of Access. From the date hereof to the Effective Time, NBTB
shall give to PAHC and to its representatives, including its certified public
accountants, KPMG LLP, full access during normal business hours to all of the
property, documents, contracts, books, and records of NBTB, and such information
with respect to their business affairs and properties as PAHC from time to time
may reasonably request.
9.2. Securities Reports. From the date hereof to the Effective Time, NBTB
shall, contemporaneously with the filing with the SEC of any periodic or current
report pursuant to section 13 of the Exchange Act, deliver a copy of such report
to PAHC.
9.3. Shareholders' Meeting. NBTB shall hold a meeting of its shareholders
in accordance with the GCL as promptly as possible after the effectiveness of
the Registration Statement, after at least twenty days' prior written notice
thereof to the shareholders of NBTB, to consider and vote upon this Agreement,
it being agreed, however, that nothing in this Agreement shall require NBTB to
43
hold a special meeting of its shareholders within the thirty-day period prior to
its 2000 annual meeting of shareholders if NBTB proposes for the consideration
of its shareholders at such annual meeting that the issuance of shares of NBTB
Common Stock pursuant to this Agreement be approved and that this Agreement be
ratified. Subject to its fiduciary duty to shareholders, the board of directors
of NBTB shall recommend to its shareholders that the issuance of shares of NBTB
Common Stock pursuant to this Agreement be approved and that this Agreement be
ratified.
9.4. Nasdaq Approval. NBTB shall use its commercially reasonable efforts to
cause the shares of NBTB Common Stock to be issued in the Merger to be approved
for inclusion on the Nasdaq National Market, subject to official notice of
issuance, prior to the Effective Time.
9.5. Options. At or prior to the Effective Time, NBTB shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of NBTB Common Stock for delivery upon exercise of options to purchase PAHC
Common Stock assumed by it in accordance with section 1.11 hereof. NBTB shall
use commercially reasonable efforts to maintain the effectiveness of the
registration statement that pertains to the shares subject to such options (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding. NBTB shall at and after the
Effective Time have reserved sufficient shares of NBTB Common Stock for issuance
with respect to such options. NBTB shall also take any action required to be
taken under any applicable state blue sky or securities laws in connection with
the issuance of such shares.
9.6. Indemnification of Directors and Officers. Following the Effective
Time NBTB will take no action to abrogate or diminish any right accorded under
the articles of incorporation or by-laws of PAHC as they existed immediately
prior to the Effective Time to any person who, on or prior to the Effective
Time, was a director or officer of PAHC to indemnification from or against
losses, expenses, claims, demands, damages, liabilities, judgments, fines,
penalties, costs, expenses (including without limitation reasonable attorneys
fees) and amounts paid in settlement pertaining to or incurred in connection
with any threatened or actual action, suit, claim, or proceeding (whether civil,
criminal, administrative, arbitration, or investigative) arising out of events,
matters, actions, or omissions occurring on or prior to the Effective Time. To
the extent not provided by the foregoing, following the Effective Time and to
the extent permitted by law, all rights to such indemnification accorded under
the articles of incorporation and by-laws of PAHC to any person who, on or prior
to the Effective Time, was a director or officer of PAHC shall survive the
Effective Time and, following the Merger, to the extent permitted by law, NBTB
will honor such obligations in accordance with their terms with respect to
events, acts, or omissions occurring prior to the Effective Time.
9.7. Subsequent Events. Until the Effective Time, NBTB will immediately
advise PAHC in a detailed written notice of any fact or occurrence or any
pending or threatened occurrence of which it obtains knowledge and which (if
existing and known at the date of the execution of this Agreement) would have
been required to be set forth or disclosed in or pursuant to this Agreement
which (if existing and known at any time prior to or at the Effective Time)
would make the performance by NBTB of a covenant contained in this Agreement
impossible or make such performance materially
44
more difficult than in the absence of such fact or occurrence, or which (if
existing and known at the time of the Effective Time) would cause a condition to
PAHC's obligations under this Agreement not to be fully satisfied.
10. CLOSING.
10.1. Place and Time of Closing. Closing shall take place at the principal
executive offices of NBTB or at such other place as the parties choose,
commencing at 9:00 a.m., local time, on the date of the Effective Time, provided
that all conditions precedent to the obligations of the parties hereto to close
have then been met or waived.
10.2. Events To Take Place at Closing. At the Closing, the following
actions will be taken:
(a) Such certificates and other documents as are required by this
Agreement to be executed and delivered at or prior to the Effective Time and
have not been so executed and delivered, and such other certificates and
documents as are mutually deemed by the parties to be otherwise desirable for
the effectuation of the Closing, will be so executed and delivered; and then
(b) the First Merger and the issuance of shares incident thereto shall
be effected; provided, however, that the administrative and ministerial aspects
of the issuance of shares incident to the Merger will be settled as soon
thereafter as shall be reasonable under the circumstances; and then
(c) the Second Merger and the Bank Merger shall be effected.
11. TERMINATION, DAMAGES FOR BREACH, WAIVER, AND AMENDMENT.
11.1. Termination by Reason of Lapse of Time. This Agreement may be
terminated by any party on or after July 31, 2000, by instrument duly authorized
and executed and delivered to the other parties, unless (a) the Effective Time
shall have occurred on or before such date or (b) the failure of the Effective
Time to have occurred on or before such date has been due to the failure of the
party seeking to terminate this Agreement to perform or observe its covenants
and agreements as set forth herein.
11.2. Grounds for Termination. This Agreement may be terminated by written
notice of termination at any time before the Effective Time (whether before or
after action by shareholders of PAHC or NBTB):
(a) by mutual consent of the parties hereto;
(b) by NBTB, upon written notice to PAHC given at any time (i) if any
of the representations and warranties of PAHC contained in section 6 hereof was
materially incorrect when made, or (ii) in the event of a material breach or
material failure by PAHC of any covenant or
45
agreement of PAHC contained in this Agreement which has not been, or cannot be,
cured within thirty days after written notice of such breach or failure is given
to PAHC, and which inaccuracy, breach, or failure, if continued to the Effective
Time, would result in any condition set forth in section 4 hereof not being
satisfied;
(c) by PAHC, upon written notice to NBTB given at any time (i) if any
of the representations and warranties of NBTB contained in section 8 hereof was
materially incorrect when made, or (ii) in the event of a material breach or
material failure by NBTB of any covenant or agreement of NBTB contained in this
Agreement which has not been, or cannot be, cured within thirty days after
written notice of such breach or failure is given to NBTB, and which inaccuracy,
breach, or failure, if continued to the Effective Time, would result in any
condition set forth in section 4 hereof not being satisfied or (iii) if the
board of directors of PAHC, based upon the advice of Blank Rome Comisky &
McCauley LLP, determines in good faith that such termination is required for the
board of directors to comply with its fiduciary duties to stockholders imposed
by law by reason of an Alternative Proposal being made; provided that PAHC shall
notify NBTB promptly of its intention to terminate this Agreement or enter into
a definitive agreement with respect to any Alternative Proposal, but in no event
shall such notice be given less than 48 hours prior to the public announcement
of PAHC's termination of this Agreement;
(d) by PAHC, in accordance with the following provisions:
(i) at any time during the three-business-day period
beginning on the Determination Date, if both of the following conditions are
satisfied, subject, however, to subsection 11.2(d)(ii):
(A) The Average Closing Price is less than $15.00;
and
(B) The number, expressed as a percentage, obtained
by dividing the Average Closing Price by $16.75 is more than 15 percentage
points less than the Index Differential.
(ii) If PAHC chooses to exercise its right pursuant to this
section 11.2(d), it shall give immediate written notice thereof to NBTB. During
the three-business-day period commencing with receipt of such notice, NBTB shall
have the option to agree that the Exchange Ratio shall be $15.00 divided by the
Average Closing Price. If NBTB so elects within such three-business-day period,
it shall give immediate written notice thereof to PAHC, whereupon no termination
shall have occurred pursuant to this section 11.2(d) and this Agreement shall
remain in effect in accordance with its terms (except that the Exchange Ratio
shall be $15.00 divided by the Average Closing Price).
(iii) Definitions. The following terms used in this section
11.2(d) shall have the meanings set forth in this Subparagraph (iii).
(A) Determination Date. The seventh business day
preceding the Effective Time.
46
(B) Index Price. For any member of the Index Group,
the Average Closing Price calculated using, instead of NBTB Common Stock, the
common stock of that member of the Index Group.
(C) Index Differential. The sum of the respective
numbers (expressed as percentages), for each of the members of the Index Group,
obtained by multiplying the weighting (as set forth in section 11.2(d)(iii)(D))
of that member of the Index Group times the quotient of the Index Price for that
member of the Index Group divided by the Base Price (as set forth in section
11.2(d)(iii)(D)) for that member of the Index Group.
(D) Index Group. The twenty companies listed below,
the common stock of all of which shall be publicly traded and as to which there
shall not have been a publicly announced proposal between the day before the
date of the execution of this Agreement and the Determination Date for any such
company to be Acquired. In the event that the common stock of any such company
ceases to be publicly traded or a proposal to Acquire that company is announced
between the day before the date of the execution of this Agreement and the
Determination Date, such company will be removed from the Index Group, and the
weights attributed to the remaining companies will be adjusted proportionately
for purposes of determining the Index Price. The twenty companies and the
weights attributed to them are as follows:
47
Company Weighting Base Price
- ----------------------------------------------------------------------- ----------
Arrow Financial Corporation, Glens Falls, NY 4.051% $20.2500
BSB Bancorp, Inc., Binghamton, NY 5.622% $20.9375
BT Financial Corporation, Johnstown, PA 9.340% $22.3750
CCBT Bancorp, Inc., Hyannis, MA 3.532% $15.1250
Century Bancorp, Inc., Medford, MA 1.589% $16.8750
Community Bank System, Inc., Dewitt, NY 4.796% $25.5625
Community Banks, Inc., Millersburg, PA 4.020% $22.4375
F&M Bancorp, Frederick, MD 5.810% $23.6250
Granite State Bankshares, Inc., Keene, NH 3.325% $21.8750
Harleysville National Corporation, Harleysville, PA 6.706% $32.2500
Independent Bank Corp., Rockland, MA 4.922% $13.3750
National Penn Bancshares, Inc., Boyertown, PA 12.082% $25.8750
Sandy Spring Bancorp, Inc., Olney, MD 6.765% $26.7500
State Bancorp, Inc., New Hyde Park, NY 2.805% $13.3125
Sterling Bancorp, New York, NY 3.810% $18.1250
Suffolk Bancorp, Riverhead, NY 4.350% $27.3125
Sun Bancorp, Inc., Vineland, NJ 3.010% $11.3750
U.S.B. Holding Co., Inc., Orangeburg, NY 6.282% $15.0625
Washington Trust Bancorp, Inc., Westerly, RI 5.095% $17.8125
Yardville National Bancorp, Mercerville, NJ 2.088% $12.0000
-------
100.000%
=======
(E) Acquire. A company within the Index Group is deemed to
have been "Acquired" in any combination in which, immediately thereafter, its
equity holders do not control more than 50 percent of the equity of the entity
resulting from the combination;
(e) by either NBTB or PAHC upon written notice given to the other if
the board of directors of either NBTB or PAHC shall have determined in its sole
judgment made in good faith, after due consideration and consultation with
counsel, that the Merger has become inadvisable or impracticable by reason of
the institution of litigation by the federal government or the government of the
State of New York or the Commonwealth of Pennsylvania to restrain or invalidate
the transactions contemplated by this Agreement;
(f) by either NBTB or PAHC upon written notice given to the other if
any of the approvals referred to in section 3.1 (other than approvals that
relate solely to the Bank Merger) are denied and such denial has become final
and nonappealable;
(g) by either NBTB or PAHC upon written notice given to the other if
(i) the shareholders of either NBTB or PAHC shall have voted on and failed to
adopt this Agreement, at the meeting of such shareholders called for such
purpose, or (ii) the shareholders of NBTB shall
48
have voted on and failed to approve the Share Increase Amendment; or
(h) by either NBTB or PAHC upon written notice given to the other if
NBTB shall have been advised by KPMG that KPMG is unable to deliver its
favorable opinion under section 4.10 of this Agreement due to the action of a
party or one or more of the affiliates, directors, officers, or shareholders of
that party.
11.3. Effect of Termination. In the event of the termination and
abandonment hereof pursuant to the provisions of section 11.1 or section 11.2,
this Agreement shall become void and have no force or effect, without any
liability on the part of NBTB, PAHC, PA Bank, or their respective directors or
officers or shareholders, in respect of this Agreement. Notwithstanding the
foregoing, (a) as provided in section 12.4 of this Agreement, the
confidentiality agreement contained in that section shall survive such
termination; (b) the provisions of sections 11.3(b), 11.3(c), 12.1, and 12.11
shall survive; (c) if such termination is a result of any of the representations
and warranties of a party being materially incorrect when made or a result of
the material breach or material failure by a party of a covenant or agreement
hereunder, such party whose representations and warranties were materially
incorrect or who materially breached or failed to perform its covenant or
agreement shall be liable in the amount of $500,000 to the other party or
parties hereto that are not affiliated with it; and (d) if
(i) such termination is pursuant to section 11.2(c)(iii) of
this Agreement, or if
(ii) this Agreement is terminated for any reason specified
in section 11.2(b)(ii) of this Agreement and a definitive agreement with respect
to an Alternative Proposal is executed by PAHC or PA Bank within one year after
such termination,
then in either case, and in addition to any amount payable or paid under
subsection (c) of this section 11.3, PAHC shall be liable to NBTB for liquidated
damages in the further amount of $3,000,000, which amount will be payable to
NBTB in immediately available funds within two business days after such amount
becomes due. PAHC acknowledges that the agreements contained in subsection (d)
of this section 11.3 are an integral part of the transactions contemplated in
this Agreement and that, without these agreements, NBTB would not enter into
this Agreement.
11.4. Waiver of Terms or Conditions. Any of the terms or conditions of this
Agreement, to the extent legally permitted, may be waived at any time prior to
the Effective Time by the party which is, or whose shareholders are, entitled to
the benefit thereof, by action taken by that party (if an individual) or by the
board of directors of such party (if a corporation), or by its chairman, or by
its president; provided that such waiver shall be in writing and shall be taken
only if, in the judgment of the party, board of directors, or officer taking
such action, such waiver will not have a materially adverse effect on the
benefits intended hereunder to it or to the shareholders of its or his
corporation; and the other parties hereto may rely on the delivery of such a
waiver as conclusive evidence of such judgment and the validity of the waiver.
49
11.5. Amendment. Anything herein or elsewhere to the contrary
notwithstanding, to the extent permitted by law, this Agreement and the exhibits
hereto may be amended, supplemented, or interpreted at any time prior to the
Effective Time by written instrument duly authorized and executed by each of the
parties hereto; provided, however, that (except as specifically provided herein
or as may be approved by such shareholders) this Agreement may not be amended
after:
(a) the action by shareholders of PAHC in any respect that would change
(i) the amount or kind of shares, obligations, cash, property, or rights to be
received in exchange for or on conversion of the PAHC Common Stock; (ii) any
term of the certificate of incorporation of NBTB to be effected by the Merger;
or (iii) any of the terms and conditions of this Agreement if the change would
adversely affect the shareholders of PAHC, or
(b) the action by shareholders of NBTB in any respect that would change
(i) the amount or kind of shares, obligations, cash, property, or rights to be
received in exchange for the NBTB Common Stock to be delivered in the Merger;
(ii) any term of the certificate of incorporation of NBTB to be effected by the
Merger; or (iii) any of the terms and conditions of this Agreement if the change
would adversely affect the shareholders of NBTB.
12. GENERAL PROVISIONS.
12.1. Allocation of Costs and Expenses. Except as provided in this section,
each party hereto shall pay its own fees and expenses, including without
limitation the fees and expenses of its own counsel and its own accountants and
tax advisers, incurred in connection with this Agreement and the transactions
contemplated thereby. For purposes of this section, (i) the cost of printing the
Joint Proxy Statement shall be apportioned between NBTB and PAHC based upon the
number of copies each shall request to be printed, (ii) the cost of delivering
the Joint Proxy Statement and other material to be transmitted to shareholders
of NBTB shall be deemed to be incurred on behalf of NBTB, (iii) the cost of
delivering the Joint Proxy Statement and other material to be transmitted to
shareholders of PAHC shall be deemed to be incurred on behalf of PAHC, (iv) the
cost of registering under federal and state securities laws the stock of NBTB to
be received by the shareholders of PAHC shall be deemed to be incurred on behalf
of NBTB, and (v) the cost of procuring the tax opinion referred to in section
3.4 of this Agreement shall be deemed to be incurred on behalf of PAHC.
12.2. Mutual Cooperation.
(a) Subject to the terms and conditions herein provided, each party
shall use its best efforts, and shall cooperate fully with the other party, in
expeditiously carrying out the provisions of this Agreement and in expeditiously
making all filings and obtaining all necessary governmental approvals, and as
soon as practicable shall execute and deliver, or cause to be executed and
delivered, such governmental notifications and additional documents and
instruments and do or cause to be done all additional things necessary, proper,
or advisable under applicable law to consummate and make effective on the
earliest practicable date the transactions contemplated
50
hereby.
(b) NBTB and PAHC shall promptly prepare and file with the SEC the
Joint Proxy Statement, and NBTB shall promptly prepare and file with the SEC the
Registration Statement in which the Joint Proxy Statement will be included as a
prospectus. NBTB and PAHC shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Each party will supply in a timely fashion
such information concerning such party as shall be necessary or appropriate for
inclusion in the Joint Proxy Statement and Registration Statement.
12.3. Form of Public Disclosures. NBTB and PAHC shall mutually agree in
advance upon the form and substance of all public disclosures concerning this
Agreement and the transactions contemplated hereby.
12.4. Confidentiality. NBTB, PAHC, and their respective subsidiaries shall
use all information that each obtains from the other pursuant to this Agreement
solely for the effectuation of the trans actions contemplated by this Agreement
or for other purposes consistent with the intent of this Agreement. Neither
NBTB, PAHC, nor their respective subsidiaries shall use any of such informa tion
for any other purpose, including, without limitation, the competitive detriment
of any other party. NBTB and PAHC shall maintain as strictly confidential all
information each of them learns from the other and shall, at any time after
termination of this Agreement in accordance with the terms thereof, upon the
request of the other, return promptly to it all documentation provided by it or
made available to third parties. Each of the parties may disclose such
information to its respective affiliates, counsel, accountants, tax advisers,
and consultants, provided that such parties are advised of the confidential
nature of such information and agree to be bound by the terms of this section
12.4. The confidentiality agreement contained in this section 12.4 shall remain
operative and in full force and effect, and shall survive the termination of
this Agreement.
12.5. Claims of Brokers.
(a) PAHC shall indemnify, defend, and hold NBTB harmless for, from, and
against any claim, suit, liability, fees, or expenses (including, without
limitation, attorneys' fees and costs of court) arising out of any claim for
brokerage commissions, finder's fees, or similar compensation arising out of or
due to any of its acts in connection with the transactions contemplated by this
Agreement or based upon any agreement or arrangement made by it or on its behalf
with respect to NBTB.
(b) NBTB shall indemnify, defend, and hold PAHC harmless for, from, and
against any claim, suit, liability, fees, or expenses (including, without
limitation, attorneys' fees and costs of court) arising out of any claim for
brokerage commissions, finder's fees, or similar compensation arising out of or
due to any of its acts in connection with any of the transactions contemplated
by this Agreement or based upon any agreement or arrangement made by it or on
its behalf with respect to PAHC.
51
12.6. Information for Applications and Registration Statement.
(a) Each party represents and warrants that all information concerning
it which is included in any statement and application (including the
Registration Statement) made to any governmental agency in connection with the
transactions contemplated by this Agreement shall not, with respect to such
party, contain an untrue statement of a material fact or omit any material fact
required to be stated therein or necessary to make the statements made, in light
of the circumstances under which they were made, not misleading. The party so
representing and warranting will indemnify, defend, and hold harmless the other,
each of its directors and officers, each underwriter and each person, if any,
who controls the other within the meaning of the Securities Act, for, from and
against any and all losses, claims, suits, damages, expenses, or liabilities to
which any of them may become subject under applicable laws (including, but not
limited to, the Securities Act and the Exchange Act) and rules and regulations
thereunder and will reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any actions
whether or not resulting in liability, insofar as such losses, claims, damages,
expenses, liabilities, or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in any such
application or statement or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary in order to make the statements therein not misleading, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing by the representing and
warranting party expressly for use therein. Each party agrees at any time upon
the request of the other to furnish to the other a written letter or statement
confirming the accuracy of the information contained in any proxy statement,
registration statement, report, or other application or statement, and
confirming that the information contained in such document was furnished
expressly for use therein or, if such is not the case, indicating the
inaccuracies contained in such document or draft or indicating the information
not furnished expressly for use therein. The indemnity agreement contained in
this section 12.6(a) shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any of the other
parties, and shall survive the termination of this Agreement or the consummation
of the transactions contemplated thereby.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement contained in section 12.6(a) of
this Agreement is for any reason held by a court of competent jurisdiction to be
unenforceable as to any or every party, then the parties in such circumstances
shall contribute to the aggregate losses, claims, damages and liabilities
(including any investigation, legal and other expenses incurred in connection
with, and any amounts paid in settlement of, any action, suit or proceeding or
any claims asserted) to which any party may be subject in such proportion as the
court of law determines based on the relative fault of the parties.
12.7. Standard of Materiality and of Material Adverse Effect.
(a) For purposes of sections 4, 6, and 7 of this Agreement, the terms
"material" and "materially," when used with reference to items normally
expressed in dollars, shall be deemed to refer to amounts individually and in
the aggregate in excess of 3 percent of the shareholders' equity
52
of PAHC as of September 30, 1999, as determined in accordance with generally
accepted accounting principles.
(b) For purposes of sections 5, 8, and 9 of this Agreement, the terms
"material" and "materially," when used with reference to items normally
expressed in dollars, shall be deemed to refer to amounts individually and in
the aggregate in excess of 3 percent of the shareholders' equity of NBTB as of
September 30, 1999, as determined in accordance with generally accepted
accounting principles.
(c) For other purposes and, notwithstanding subsections (a) and (b) of
this section 11.7, when used anywhere in this Agreement with explicit reference
to any of the federal securities laws or to the Proxy Statement or the
Registration Statement, the terms "material" and "materially" shall be construed
and understood in accordance with standards of materiality as judicially
determined under the federal securities laws.
(d) The term "Material Adverse Effect" wherever used in this Agreement
shall mean, with respect to a person, a material adverse effect on the business,
results of operations, financial condition or prospects of such person and its
subsidiaries taken as a whole or a material adverse effect on such person's
ability to consummate the transactions contemplated hereby on a timely basis;
provided, that, in determining whether a Material Adverse Effect has occurred,
there shall be excluded any effect on the referenced person the cause of which
is (i) any change in banking laws, rules or regulations of general applicability
or interpretations thereof by courts or governmental authorities, (ii) any
change in generally accepted accounting principles or regulatory accounting
requirements applicable to banks or their holding companies generally, (iii) any
action or omission of PAHC or any of its subsidiaries taken with the prior
written consent of NBTB, or of NBTB or any of its subsidiaries taken with the
prior written consent of PAHC, or (iv) any changes in general economic
conditions affecting banks or their holding companies.
12.8. Adjustments for Certain Events. Anything in this agreement to the
contrary notwithstanding, all prices per share, share amounts, per-share
amounts, and exchange ratios referred to in this Agreement (including without
limitation section 11.2(d) of this Agreement) shall be appropriately adjusted to
account for stock dividends, split-ups, mergers, recapitalizations,
combinations, conversions, exchanges of shares or the like, but not for normal
and recurring cash dividends declared or paid in a manner consistent with the
established practice of the payer.
12.9. Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed to constitute an original, but such
counterparts together shall be deemed to be one and the same instrument and to
become effective when one or more counterparts have been signed by each of the
parties hereto. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for the other counterpart.
12.10. Entire Agreement. This Agreement sets forth the entire understanding
of the parties hereto with respect to their commitments to each other and their
undertakings vis-a-vis each other on the subject matter hereof. Any previous
agreements or understandings among the parties
53
regarding the subject matter hereof are merged into and superseded by this
Agreement. Nothing in this Agreement express or implied is intended or shall be
construed to confer upon or to give any person, other than NBTB, Newco, PAHC,
and their respective shareholders, any rights or remedies under or by reason of
this Agreement.
12.11. Survival of Representations, Warranties, and Covenants. None of the
representations, warranties, covenants, and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than the Stock Option
Agreement, the employment agreement described in section 4.8 hereof, and the
change-in-control agreements described in section 5.5 hereof, each of which
shall terminate in accordance with its terms), shall survive the Effective Time,
except for sections 9.6, 12.4, 12.6, and those other covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time.
12.12. Section Headings. The section and subsection headings herein have
been inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. Any reference to a "person"
herein shall include an individual, firm, corporation, partnership, trust,
government or political subdivision or agency or instrumentality thereof,
association, unincorporated organization, or any other entity.
12.13. Notices. All notices, consents, waivers, or other communications
which are required or permitted hereunder shall be in writing and deemed to have
been duly given if delivered personally or by messenger, transmitted by telex or
telegram, by express courier, or sent by registered or certified mail, return
receipt requested, postage prepaid. All communications shall be addressed to the
appropriate address of each party as follows:
If to NBTB:
NBT Bancorp Inc.
52 South Broad Street
Norwich, New York 13815
Attention: Mr. Daryl R. Forsythe
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Duane, Morris & Heckscher LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
54
If to PAHC or PA Bank:
Pioneer American Holding Company Corp.
41 North Main Street
Carbondale, Pennsylvania 18407
Attention: Mr. John W. Reuther
President and Chief Executive Officer
With a required copy to:
Lawrence R. Wiseman, Esq.
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, Pennsylvania 19103-6998
All such notices shall be deemed to have been given on the date
delivered, transmitted, or mailed in the manner provided above.
12.14. Choice of Law and Venue. This Agreement shall be governed
by, construed, and enforced in accordance with the laws of the State of
Delaware, without giving effect to the principles of conflict of law thereof,
except that the BCL (in the case of PAHC) shall govern with respect to the terms
and conditions of the Merger, the approval and effectiveness thereof, and the
authorization, cancellation, or issuance of the stock or options of PAHC with
respect thereto. The parties hereby designate the Chancery Court in New Castle
County, Delaware to be the proper jurisdiction and venue for any suit or action
arising out of this Agreement. Each of the parties consents to personal
jurisdiction in such venue for such a proceeding and agrees that it may be
served with process in any action with respect to this Agreement or the
transactions contemplated thereby by certified or registered mail, return
receipt requested, or to its registered agent for service of process in the
State of Delaware. Each of the parties irrevocably and unconditionally waives
and agrees, to the fullest extent permitted by law, not to plead any objection
that it may now or hereafter have to the laying of venue or the convenience of
the forum of any action or claim with respect to this Agreement or the
transactions contemplated thereby brought in the courts aforesaid.
12.15. Knowledge of a Party. References in this Agreement to the
knowledge of a party shall mean the actual knowledge possessed by the present
executive officers of such party.
12.16. Binding Agreement. This Agreement shall be binding upon the
parties and their respective successors and assigns.
55
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
NBT BANCORP INC.
By: DARYL R. FORSYTHE
-------------------------------------
Daryl R. Forsythe
President and Chief Executive Officer
By: JOHN D. ROBERTS
-------------------------------------
John D. Roberts
Senior Vice President and Secretary
LEVON ACQUISITION COMPANY
By: DARYL R. FORSYTHE
-------------------------------------
Daryl R. Forsythe
President and Chief Executive Officer
By: JOHN D. ROBERTS
-------------------------------------
John D. Roberts
Secretary
56
PIONEER AMERICAN HOLDING
COMPANY CORP.
By: JOHN W. REUTHER
-------------------------------------
John W. Reuther
President and Chief Executive Officer
By: ANTOINETTE STICKER
-------------------------------------
Antoinette Sticker
Secretary
57
- ----------------------------------------------------------)
State of New York )
) ss.
County of Chenango )
)
- ----------------------------------------------------------)
On this seventh day of December, 1999, before me personally appeared
Daryl R. Forsythe, to me known to be the President and Chief Executive Officer
of NBT Bancorp Inc., and John D. Roberts, to me known to be the Senior Vice
President and Secretary of NBT Bancorp Inc., and each acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath each stated that he was
authorized to execute said instrument and that the seal affixed is the corporate
seal of said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
DAVID R. THELEMAN
-------------------------------
Notary Public
DAVID R. THELEMAN
Notary Public, State of New York
Broome County, # 4940266
Commission Expires Aug. 8, 2000
58
- ----------------------------------------------------------)
State of New York )
) ss.
County of Chenango )
)
- ----------------------------------------------------------)
On this seventh day of December, 1999, before me personally appeared
Daryl R. Forsythe, to me known to be the President and Chief Executive Officer
of Levon Acquisition Company, and John D. Roberts, to me known to be the
Secretary of Levon Acquisition Company, and each acknowledged said instrument to
be the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath each stated that he was authorized to
execute said instrument and that the seal affixed is the corporate seal of said
corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
DAVID R. THELEMAN
----------------------------
Notary Public
DAVID R. THELEMAN
Notary Public, State of New York
Broome County, # 4940266
Commission Expires Aug. 8, 2000
59
- ----------------------------------------------------------)
Commonwealth of Pennsylvania )
) ss.
County of Lackawanna )
)
- ----------------------------------------------------------)
On this seventh day of December, 1999, before me personally appeared
John W. Reuther, to me known to be the President and Chief Executive Officer of
Pioneer American Holding Company Corp., and Antoinette Sticker, to me known to
be the Secretary of Pioneer American Holding Company Corp., and each
acknowledged said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, and on oath each
stated that he was authorized to execute said instrument and that the seal
affixed is the corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year first above written.
LISA ANN BUCHINSKI
--------------------------
Notary Public
Notarial Seal
Lisa Ann Buchinski, Notary Public
Carbondale, Lackawanna County
My Commission Expires Oct. 16, 2000
60
The undersigned members of the Board of Directors of Pioneer American
Holding Company Corp. ("PAHC"), acknowledging that NBT Bancorp Inc. ("NBTB") has
relied upon the action heretofore taken by the board of directors in entering
into the Agreement, and has required the same as a prerequisite to NBTB's
execution of the Agreement, do individually and as a group agree, subject to
their fiduciary duties to shareholders, to support the Agreement and to
recommend its adoption by the other shareholders of PAHC.
The undersigned do hereby, individually and as a group, until the
Effective Time or termination of the Agreement, further agree to refrain from
soliciting or, subject to their fiduciary duties to shareholders, negotiating or
accepting any offer of merger, consolidation, or acquisition of any of the
shares or all or substantially all of the assets of PAHC or PA Bank, National
Association.
JOSEPH G. NASSER MICHAEL M. MURPHY
- ---------------------------------------- ---------------------------------
R. CHOJNOWSKI JOHN W. WALSKI
- ---------------------------------------- ---------------------------------
ELDORE SEBASTIANELLI GENE E. GOLDENZIEL
- ---------------------------------------- ---------------------------------
JOHN W. REUTHER MARGARET O'CONNOR-FLETCHER
- ---------------------------------------- ---------------------------------
61
SCHEDULE 1.10
Richard Chojnowski
Gene E. Goldenziel
Michael M. Murphy
Joseph G. Nasser
William K. Nasser, Sr.
William K. Nasser, Jr.
Margaret L. O'Connor-Fletcher
John W. Reuther
Eldore Sebastianelli
John W. Walski
62
EXHIBIT 2.3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of the seventh day
of December, 1999 between NBT Bancorp Inc., a Delaware corporation ("Grantee"),
and Pioneer American Holding Company Corp., a Pennsylvania corporation
("Issuer").
RECITALS
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Grantee and Issuer have entered into an Agreement and Plan of Merger
dated as of December 7, 1999 (the "Merger Agreement"); and
WHEREAS, as an inducement to the willingness of Grantee to enter into
the Merger Agreement, Grantee has requested that Issuer grant and Issuer has
agreed to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, intending
to be legally bound, the parties hereto agree as follows:
1. Grant of Option.
(a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to an aggregate of 569,997 fully paid and nonassessable shares of common stock,
par value $1.00 per share, of Issuer ("Common Stock") at a price per share equal
to $24.00 (such price, as adjusted in the manner set forth herein, the "Option
Price"); provided, however, that in no event shall the number of shares for
which this Option is exercisable exceed 19.9 percent of the issued and
outstanding shares of Common Stock. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock
are issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement and other than pursuant to an event
described in section 5(a) hereof), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, such number,
together with any shares of Common Stock previously issued pursuant hereto,
equals 19.9 percent of the number of shares subject or issued pursuant to the
Option. Nothing contained in this section 1(b) or elsewhere in this Agreement
shall be deemed to authorize Issuer to issue shares in breach of any provision
of the Merger Agreement.
1
2. Exercise of Option.
(a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, at any time after the occurrence of a Triggering Event
(as hereinafter defined), provided that such Triggering Event shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), and provided further that the date of the Holder's
exercise of the Option precedes the occurrence of an Exercise Termination Event.
Each of the following shall be an "Exercise Termination Event": (i) occurrence
of the Effective Time (as such term is defined in the Merger Agreement); (ii)
termination of the Merger Agreement in accordance with the provisions thereof
except (each of the following exceptions being hereinafter collectively referred
to as an "Excepted Termination") a termination by Grantee pursuant to section
11.2(b) of the Merger Agreement as a result of a breach by Issuer of the type
described in such provision, or a termination by Issuer pursuant to section
11.2(c)(iii) of the Merger Agreement; or (iii) the passage of 18 months (or such
longer period as provided in section 10) after an Excepted Termination. The term
"Holder" shall mean the holder or holders of the Option.
(b) The term "Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or Pioneer American Bank, National
Association (the "Bank Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as defined below) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder) other than Grantee or
any of its subsidiaries (each a "Grantee Subsidiary");
(ii) Any person other than the Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10 percent or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in section 13(d) of the Exchange Act and the rules and
regulations thereunder), or, to the extent any such person has currently
acquired beneficial ownership or the right to acquire beneficial ownership of 10
percent or more of the outstanding shares of Common Stock, such person shall
have acquired beneficial ownership or the right to acquire beneficial ownership
of any additional shares of Common Stock;
(iii) The shareholders of Issuer shall have voted on
and failed to approve the Merger Agreement at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have been
canceled prior to termination of the Merger Agreement if, prior to such meeting
(or if such meeting shall not have been held or shall have been canceled, prior
to such termination), it shall have been publicly announced that any person
(other than Grantee or any Grantee Subsidiary) shall have made a bona fide
proposal to engage in an Acquisition Transaction;
2
(iv) The Board of Directors of the Issuer (the
"Issuer Board") shall have withdrawn or modified (or publicly announced its
intention to withdraw or modify) in any manner adverse to Grantee its
recommendation that the shareholders of Issuer approve the transactions
contemplated by the Merger Agreement, or Issuer or the Issuer Board or the Bank
Subsidiary or the Board of Directors of the Bank Subsidiary shall have
authorized, recommended or proposed (or publicly announced its intention to
authorize, recommend or propose) an agreement to engage in an Acquisition
Transaction with any person other than Grantee or any Grantee Subsidiary, or
that the shareholders of Issuer approve or accept any Acquisition Transaction
other than as contemplated by the Merger Agreement;
(v) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or its shareholders to
engage in an Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any person other than Grantee or any Grantee
Subsidiary shall have filed with the Securities and Exchange Commission ("SEC")
a registration statement or tender offer materials with respect to a potential
exchange or tender offer that would constitute an Acquisition Transaction;
(vii) Issuer shall have breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary, and following such breach, Grantee would be entitled to terminate
the Merger Agreement pursuant to section 11.2(b) of the Merger Agreement; or
(viii) any person other than Grantee or any Grantee
Subsidiary shall have filed an application or notice with the Board of Governors
of the Federal Reserve System (the "Board of Governors") or other federal or
state bank regulatory or antitrust authority, which application or notice has
been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Acquisition Transaction" shall mean any
transaction under which a person proposes to or will acquire a majority of the
stock of, merge or consolidate with, or acquire all or substantially all of the
assets of the Issuer or the Bank Subsidiary, or otherwise engage in any
substantially similar transaction with the Issuer or the Bank Subsidiary.
(d) Issuer shall notify Grantee in writing of the occurrence
of any Triggering Event promptly after becoming aware of the occurrence thereof,
it being understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event that the Holder is entitled to and wishes
to exercise the Option (or any portion thereof), it shall send to Issuer a
written notice (the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase pursuant to such
exercise and (ii) a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the closing of such
purchase (the "Closing"); provided, that
3
if prior notification to or approval of the Board of Governors or any other
federal or state regulatory or antitrust authority is required in connection
with such purchase, the Holder shall promptly file the required notice or
application for approval, shall promptly notify Issuer of such filing, and shall
expeditiously process the same, and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approval shall have
been obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the Closing, the Holder shall (i) pay the Issuer the
aggregate purchase price for the shares of Common Stock purchased pursuant to
the exercise of the Option in immediately available funds by wire transfer to a
bank account designated by Issuer and (ii) present and surrender this Agreement
to Issuer at its principal executive offices, provided that the failure or
refusal of the Issuer to designate such a bank account or accept surrender of
this Agreement shall not preclude the Holder from exercising the Option.
(g) At any Closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
shall have been exercised in part only, a new Option evidencing the rights of
the Holder thereof to purchase the balance of the shares purchasable hereunder.
Certificates for shares of Common Stock purchased by the Holder hereunder shall
be delivered by Issuer free and clear of all liens, claims, charges and
encumbrances of any kind, and shall be in such denominations and in such names
designated by the Holder.
(h) Certificates for Common Stock delivered at a Closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement, dated as of December 7, 1999, between
the registered holder hereof and Issuer and to
resale restrictions arising under the Securities
Act of 1933, as amended. A copy of such agreement
is on file at the principal office of Issuer and
will be provided to the holder hereof without
charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder or any Owner (as defined below), as the case may be,
shall have delivered to Issuer a copy of a letter from the staff of the SEC, or
an opinion of counsel, in form and substance reasonably satisfactory to Issuer,
to the effect that such legend is not required for purposes of the Securities
Act; (ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with the provisions of
this
4
Agreement and under circumstances that do not require the retention of such
references in the reasonable opinion of counsel to the Holder or any Owner (as
defined below), as the case may be; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. Issuer shall pay all expenses, and any and all federal, state and
local taxes and other charges that may be payable in connection with the initial
preparation, issue and delivery of stock certificates under this section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Covenants of Issuer.
Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance of performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer (it
being agreed that this clause (ii) shall not be deemed to prohibit or restrict
Issuer from engaging in one or more transactions contemplated by section 8(a)
hereof if the provisions of section 8 hereof shall be complied with in
connection with each such transaction); (iii) promptly to take all action as may
from time to time be required (including (x) complying with all applicable
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. section 18a and regulations promulgated thereunder and (y) in the
event that, under the Bank Holding Company Act of 1956, as amended, or any other
applicable federal or state banking law, prior notice to or approval of the
Board of Governors or any other federal or state regulatory authority is
necessary before the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such information to the
Board of Governors or such other federal or state regulatory authority as they
may require) in order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided in sections 5 and 8 as and when required
pursuant to such sections.
4. Exchangeability.
This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the Holder
5
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date in substitution for the lost, stolen, destroyed or mutilated
Agreement.
5. Adjustment.
In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to section 1 of this
Agreement, the number of shares of Common Stock purchasable upon exercise of the
Option and the Option Price shall be subject to adjustment from time to time as
provided in this section 5.
(a) In the event of any change in, or distributions in
respect of, the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, reclassifications, combinations, subdivisions, exchanges of
shares or the like, the type and number of shares of Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision shall
be made so that, in the event that the number of shares of Common Stock that are
issued or issuable is to be increased or decreased (other than pursuant to an
exercise of the Option), the number of shares of Common Stock that remain
subject to the Option shall be increased or decreased, as the case may be, so
that, after such issuance and together with shares of Common Stock previously
issued pursuant to the exercise of the Option (as adjusted on account of any of
the foregoing changes in the Common Stock), such number is equal to 19.9 percent
of the number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise hereof is adjusted as provided in this section 5, the
Option Price shall be adjusted by multiplying the Option Price immediately prior
to the adjustment by a fraction, the numerator of which shall be equal to the
number of shares of Common Stock purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of Common Stock
purchasable after the adjustment.
6. Registration of Option Shares.
Upon the occurrence of the first Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered from time to time (but not more frequently than once every six months)
after such Triggering Event (whether on its own behalf or on behalf of any
subsequent Holder of this Option (or part thereof) or any Owner (as defined
below) of any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a registration statement under the Securities Act
covering any shares issued and issuable
6
pursuant to this Option and shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable best efforts to
cause such registration statement promptly to become effective and then to
remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand no more than two such registrations. Issuer shall bear
the cost of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees), except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto. The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of Option Shares as provided
above, Issuer is in registration with respect to an underwritten public offering
by Issuer of shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if none, the sole underwriter
or underwriters, of such offering the offer and sale of the Option Shares would
interfere with the successful marketing of the shares of Common Stock offered by
Issuer, the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced, provided, however, that after any
such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25 percent of
the total number of shares to be sold by Holder and Issuer in the aggregate; and
provided further, however, that if such reduction occurs, then Issuer shall file
a registration statement for the balance as promptly as practicable thereafter
as to which no reduction pursuant to this section 6 shall be permitted or occur
and the Holder shall thereafter be entitled to one additional registration. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for Issuer. Upon receiving any request under this
section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall the number of registrations
that Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement.
7. Option Repurchase.
(a) At any time after the occurrence of a Repurchase Event
(as defined below), (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in section 10),
Issuer (or any successor thereto) shall repurchase the Option from the Holder at
a price (the "Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option
7
Shares from time to time (the "Owner"), delivered prior to an Exercise
Termination Event (or such later period as provided in section 10), Issuer (or
any successor thereto) shall repurchase such number of the Option Shares from
the Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the Market/Offer Price multiplied by the number of Option
Shares so designated. The term "Market/Offer Price" shall mean the highest of
(i) the highest price per share of Common Stock paid by any person that acquires
beneficial ownership of 50 percent or more of the then outstanding Common Stock,
(ii) the price per share of Common Stock to be paid by any third party pursuant
to an agreement with Issuer entered into after the date hereof and prior to the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case may
be, (iii) the highest closing price for shares of Common Stock within the
six-month period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of the Issuer's or Bank Subsidiary's assets or
deposits, the sum of the net price paid in such sale of such assets or deposits
and the current market value of the remaining net assets of Issuer or Issuer
Subsidiary as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to Issuer, divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale on a fully-diluted basis. In determining
the Market/Offer Price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder or any Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option or any Option
Shares pursuant to this section 7 by surrendering for such purpose to Issuer, at
its principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating that
the Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor
or the portion thereof that Issuer is not then prohibited under applicable law,
regulation and administrative policy from so delivering.
(c) To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this section 7 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Holder and/or the Owner, as appropriate, the
Option Repurchase Price and the Option Share Repurchase Price,
8
respectively, in full (and Issuer hereby undertakes to use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish each such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option and/or Option Shares, either in whole or to the extent of the
prohibition. If the Holder or Owner revokes its notice of repurchase of the
Option and/or the Option Shares in its entirety, Issuer shall promptly deliver
to the Holder and/or the Owner, as appropriate, all documents delivered to the
Issuer by the Holder and/or Owner under paragraph (b) of this section 7. If the
Holder or Owner revokes its notice of repurchase of the Option and/or Option
Shares to the extent of the prohibition to which the Issuer is subject, Issuer
shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering, and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price and/or (B) to the Owner, a certificate for the Option Shares it
is then so prohibited from repurchasing. If an Exercise Termination Event shall
have occurred prior to the date of the notice by Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Holder shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
(d) For purposes of this section 7, a "Repurchase Event"
shall be deemed to have occurred upon the occurrence of any of the following
events or transactions after the date hereof:
(i) the acquisition by any person (other than Grantee
or any Grantee Subsidiary) of beneficial ownership of 50 percent or more of the
then outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction by
any person other than Grantee or any Grantee Subsidiary.
8. Conversion or Exchange of Option.
(a) In the event that, prior to an Exercise Termination
Event, Issuer or Bank Subsidiary shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or a Grantee
Subsidiary, or engage in a plan of exchange with any person, other than Grantee
or a Grantee Subsidiary, and Issuer or the Bank Subsidiary shall not be the
continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or the Bank Subsidiary or be
acquired by Issuer or the Bank Subsidiary in a plan of exchange and Issuer or
the Bank Subsidiary shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be
9
changed into or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of Common Stock shall
after such merger or plan of exchange represent less than 50 percent of the
outstanding shares and share equivalents of the merged or acquiring company, or
(iii) to sell or otherwise transfer all or substantially all of the Issuer's or
the Bank Subsidiary's assets or deposits to any person, other than Grantee or a
Grantee Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined), or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving person of a consolidation or merger with Issuer or the
Bank Subsidiary (if other than Issuer or the Bank Subsidiary), (ii) the
acquiring person in a plan of exchange in which Issuer or Bank Subsidiary is
acquired, (iii) the Issuer or the Bank Subsidiary in a merger or plan of
exchange in which Issuer or the Bank Subsidiary is the continuing or surviving
or acquiring person, and (iv) the transferee of all or substantially all of
Issuer's or the Bank Subsidiary's assets or deposits.
(ii) "Substitute Common Stock" shall mean the
common stock issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the Market/Offer
Price, as defined in section 7.
(iv) "Average Price" shall mean the average
closing price of a share of the Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale in question; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the person merging into Issuer or
the Bank Subsidiary or by any company which controls or is controlled by such
person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement (after giving
effect for such purpose to the provisions of section 9), which agreement shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in
10
the first sentence of section 8(a), divided by the Average Price. The exercise
price of the Substitute Option per share of Substitute Common Stock shall then
be equal to the Option Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
section 8(a) and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 19.9
percent of the shares of Substitute Common Stock outstanding prior to exercise
of the Substitute Option. In the event that the Substitute Option would be
exercisable for more than the maximum number of the shares of Substitute Common
Stock permitted by the preceding sentence but for this clause (e), the issuer of
the Substitute Option (the "Substitute Option Issuer") shall make a cash payment
to Holder equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by the Holder and reasonably acceptable to the Issuer.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. Substitute Option Repurchase.
(a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to the Highest Closing Price multiplied by the number of
Substitute Shares so designated. The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-month
period immediately preceding the date the Substitute Option Holder gives notice
of the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of Substitute Shares, as
applicable.
(b) The Substitute Option Holder or any Substitute Share
Owner, as the case may be, may exercise its respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option or any Substitute
Shares pursuant to this section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or in the absence of such an agreement, a copy of this
Agreement) and/or certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option
11
Holder or the Substitute Share Owner, as the case may be, elects to require the
Substitute Option Issuer to repurchase the Substitute Option and/or the
Substitute Shares in accordance with the provisions of this section 9. As
promptly as practicable, and in any event within five business days after the
surrender of the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice of notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law, regulation and administrative policy from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Substitute Option and/or the
Substitute Shares in full, the Substitute Option Issuer shall immediately so
notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Option Repurchase Price and/or the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that if the
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to paragraph (b) of this section 9 prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer hereby undertakes to use
its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or
Substitute Shares, either in whole or to the extent of the prohibition. If the
Substitute Option Holder or Substitute Share Owner revokes its notice of
repurchase of the Substitute Option and/or Substitute Shares in its entirety,
the Substitute Option Issuer shall promptly deliver to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, all documents
delivered to the Substitute Option Issuer by the Substitute Option Holder or the
Substitute Share Owner under paragraph (b) of this Paragraph 9. If the
Substitute Option Holder or the Substitute Share Owner revokes its notice of
repurchase of the Substitute Option and/or the Substitute Shares to the extent
of the prohibition to which the Substitute Option Issuer is subject, the
Substitute Option Issuer shall promptly (i) deliver to the Substitute Option
Holder or the Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Issuer is not prohibited from delivering, and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price
12
and/or (B) to the Substitute Share Owner, a certificate for the Substitute
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by the
Substitute Option Issuer described in the first sentence of this subsection (c),
or shall be scheduled to occur at any time before the expiration of a period
ending on the thirtieth day after such date, the Substitute Option Holder shall
nevertheless have the right to exercise the Substitute Option until the
expiration of such 30-day period.
10. Extension of Time Periods.
The periods of exercise of those rights of any party other than the
Issuer and the Bank Subsidiary set forth in sections 2, 6, 7, and 9 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; (ii) during the pendency of any temporary
restraining order, injunction or other legal bar to exercise of such rights; and
(iii) to the extent necessary to avoid liability under section 16(b) of the
Exchange Act by reason of such exercise.
11. Representations and Warranties of Issuer.
Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board on the date hereof and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance, upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
12. Assignment.
Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person without the express written consent of the other party, except that, in
the event a Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole
13
or in part its rights and obligations hereunder following the date of such
Triggering Event; provided, however, that until the date 15 days following the
date on which the Board of Governors has approved an application by Grantee to
acquire the shares of Common Stock subject to the Option, Grantee may not assign
its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2 percent of the voting shares of Issuer, (iii) an
assignment to a single party (e.g., a broker or investment banker) for the sole
purpose of conducting a widely dispersed public distribution on Grantee's behalf
or (iv) any other manner approved by the Board of Governors.
13. Further Assurances.
Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties (including
but not limited to their respective stockholders) and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
14. Remedies.
The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party through
injunctive or other equitable relief. In connection therewith, both parties
waive the posting of any bond or similar requirement.
15. Validity.
If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to section 7, the full number of shares of Common Stock
provided in section 1(a) hereof (as adjusted pursuant to section 1(b) or section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
16. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in the manner
and at the respective addresses of the parties set forth in section 12.13 of the
Merger Agreement.
14
17. Governing Law.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of Delaware, without regard to the conflict of law
principles thereof.
18. Execution.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. Expenses.
Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
20. Entire Agreement.
Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings in respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
21. Meaning of Terms.
Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
15
IN WITNESS WHEREOF, each of the parties had caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
NBT BANCORP INC.
By: DARYL R. FORSYTHE
------------------------------------------
Daryl R. Forsythe
President and Chief Executive Officer
By: JOHN D. ROBERTS
------------------------------------------
John D. Roberts
Senior Vice President and Secretary
PIONEER AMERICAN HOLDING
COMPANY CORP.
By: JOHN W. REUTHER
------------------------------------------
John W. Reuther
President and Chief Executive Officer
By: ANTOINETTE STICKER
------------------------------------------
Antoinette Sticker
Secretary
16
EXHIBIT 2.4
FORM OF EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") made and entered into this
[ ] day of [ ], 2000, by and between JOHN W. REUTHER ("Executive") and NBT
BANCORP INC., a Delaware corporation having its principal office in Norwich, New
York ("NBTB")
W I T N E S S E T H T H A T :
WHEREAS, the Agreement and Plan of Merger (the "Merger Agreement")
dated as of December 7, 1999 by and between NBTB and Pioneer American Holding
Company Corp., a Pennsylvania corporation having its principal office in
Carbondale, Pennsylvania ("PAHC"), provides that PAHC will be merged with and
into NBTB (the "Merger");
WHEREAS, Executive is the president and chief executive officer of PAHC
and president and chief executive officer of Pioneer American Bank, National
Association, a national banking association which is a wholly-owned subsidiary
of PAHC ("PA Bank");
WHEREAS, NBTB desires to secure the employment of Executive upon
consummation of the Merger;
WHEREAS, Executive is desirous of entering into the Agreement for such
periods and upon the terms and conditions set forth herein; and
WHEREAS, to assist in achieving the objectives of the transactions
described in the Merger Agreement, section 4.8 of the Merger Agreement
contemplates that Executive will enter into an employment agreement as a
condition to the consummation of the transactions described therein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agree ments hereinafter set forth, intending to be legally bound, the
parties agree as follows:
1. Employment; Responsibilities and Duties.
(a) Contingent upon the occurrence of the Merger, NBTB hereby
agrees to cause PA Bank to employ Executive, and Executive hereby agrees to
serve as president and chief operating officer of PA Bank, or of the
northeastern Pennsylvania operations of any successor entity to PA Bank, during
the Term of Employment. Executive shall have such executive duties,
responsibilities, and authority as shall be set forth in the bylaws of PA or
such successor entity Bank on the date of this Agreement or as may otherwise be
determined by NBTB or by PA Bank or such successor entity. During the Term of
Employment, Executive shall report directly to the chief
1
executive officer of NBTB.
(b) Contingent upon the occurrence of the Merger, NBTB hereby
agrees to cause Executive to be reelected to the board of directors of PA Bank
for successive terms throughout the Term of Employment.
(c) Executive shall devote his full working time and best
efforts to the performance of his responsibilities and duties hereunder and to
the retention of the customer relationships to which PA Bank has been a party
prior to the date of this Agreement and the expansion of the customer
relationships of PA Bank subsequent to the date of this Agreement. During the
Term of Employment, Executive shall not, without the prior written consent of
the Board of Directors of PA Bank, render services as an employee, independent
contractor, or otherwise, whether or not compensated, to any person or entity
other than PA Bank or its affiliates; provided that Executive may, where
involvement in such activities does not individually or in the aggregate
significantly interfere with the performance by Executive of his duties or
violate the provisions of section 4 hereof, (i) render services to charitable
organizations, (ii) manage his personal investments, and (iii) with the prior
permission of the Board of Directors of NBTB, hold such other directorships or
part-time academic appointments or have such other business affiliations as
would otherwise be prohibited under this section 1.
2. Term of Employment.
(a) The term of this Agreement ("Term of Employment") shall be
the period commencing on the first business day following the date of the Merger
(the "Commencement Date") and continuing until the Termination Date, which shall
mean the earliest to occur of:
(i) the third anniversary of the Commencement Date;
(ii) the death of Executive;
(iii) Executive's inability to perform his duties
hereunder, as a result of physical or mental disability as reasonably determined
by the personal physician of Executive, for a period of at least 180 consecutive
days or for at least 180 days during any period of twelve consecutive months
during the Term of Employment; or
(iv) the discharge of Executive by NBTB "for cause,"
which shall mean one or more of the following:
(A) any willful or gross misconduct by Executive
with respect to the business and affairs of NBTB or PA Bank, or with respect to
any of its affiliates for which Executive is assigned material responsibilities
or duties;
(B) the conviction of Executive of a felony
(after the earlier of the expiration of any applicable appeal period without
perfection of an appeal by Executive or the
2
denial of any appeal as to which no further appeal or review is available to
Executive) whether or not committed in the course of his employment by NBTB;
(C) Executive's willful neglect, failure, or
refusal to carry out his duties hereunder in a reasonable manner (other than any
such failure resulting from disability or death or from termination by Executive
for Good Reason, as hereinafter defined) after a written demand for substantial
performance is delivered to Executive that specifically identifies the manner in
which NBTB believes that Executive has not substantially performed his duties
and Executive has not resumed substantial performance of his duties on a
continuous basis within thirty days of receiving such demand; or
(D) the breach by Executive of any representation
or warranty in section 6(a) hereof or of any agreement contained in section 1,
4, 5, or 6(b) hereof, which breach is material and adverse to NBTB or PA Bank or
any of its affiliates for which Executive is assigned material responsibilities
or duties; or
(v) Executive's resignation from his position as
chief operating officer of PA Bank other than for "Good Reason," as hereinafter
defined; or
(vi) the termination of Executive's employment by NBTB
"without cause," which shall be for any reason other than those set forth in
subsections (i), (ii), (iii), (iv), or (v) of this section 2(a), at any time,
upon the thirtieth day following notice to Executive; or
(vii) Executive's resignation for "Good Reason."
"Good Reason" shall mean, without Executive's express written consent,
reassignment of Executive to a position other than as president and chief
operating officer of PA Bank, or of the northeastern Pennsylvania operations of
any successor entity to PA Bank, other than for "Cause," or a decrease in the
amount or level of Executive's salary or benefits from the amount or level
established in section 3 hereof.
(b) In the event that the Term of Employment shall be
terminated for any reason other than that set forth in section 2(a)(vi) or
2(a)(vii) hereof, Executive shall be entitled to receive, upon the occurrence of
any such event:
(i) any salary (as hereinafter defined) payable pursuant
to section 3(a)(i) hereof which shall have accrued as of the Termination Date;
and
(ii) such rights as Executive shall have accrued as of
the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to section 3(b) hereof, any right to reimbursement for
expenses accrued as of the Termination Date payable pursuant to section 3(i)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(d) hereof.
3
(c) In the event that the Term of Employment shall be
terminated for the reason set forth in section 2(a)(vi) or 2(a)(vii) hereof,
Executive shall be entitled to receive:
(i) any salary payable pursuant to section
3(a)(i) hereof which shall have accrued as of the Termination Date, and, for the
period commencing on the date immediately following the Termination Date and
ending upon and including the third anniversary of the Commencement Date, salary
payable at the rate established pursuant to section 3(a)(i) hereof, in a manner
consistent with the normal payroll practices of PA Bank with respect to
executive personnel as presently in effect or as they may be modified by PA Bank
from time to time; and
(ii) such rights as Executive may have accrued as
of the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to section 3(b) hereof, any right to reimbursement for
expenses accrued as of the Termination Date payable pursuant to section 3(i)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(d) hereof.
(d) Any provision of this section 2 to the contrary
notwithstanding, in the event that the employment of Executive with NBTB or PA
Bank is terminated in any situation described in section 3 of the
change-in-control letter agreement dated [ ] between NBTB and Executive
(the "Change-in-Control Agreement") so as to entitle Executive to a severance
payment and other benefits described in section 3 of the Change-in-Control
Agreement, then Executive shall be entitled to receive the following, and no
more, under this section 2:
(i) any salary payable pursuant to section 3(a)(i)
hereof which shall have accrued as of the Termination Date;
(ii) such rights as Executive shall have accrued as of
the Termination Date under the terms of any plans or arrangements in which he
participates pursuant to section 3(b) hereof, any right to reimbursement for
expenses accrued as of the Termination Date payable pursuant to section 3(i)
hereof, and the right to receive the cash equivalent of paid annual leave and
sick leave accrued as of the Termination Date pursuant to section 3(d) hereof;
and
(iii) the severance payment and other benefits provided
in the Change-in- Control Agreement.
3. Compensation. For the services to be performed by Executive
for PA Bank under this Agreement, Executive shall be compensated in the
following manner:
(a) Salary. During the Term of Employment:
(i) PA Bank shall pay Executive a salary which, on
an annual basis, shall not be less than $230,000, assuming Executive performs
competently. Salary shall be payable in accordance with the normal payroll
practices of PA Bank with respect to executive personnel as presently in effect
or as they may be modified by PA Bank from time to time.
4
(ii) Executive shall be eligible to be considered
for salary increases, upon review, in accordance with the compensation policies
of NBTB with respect to executive personnel as presently in effect or as they
may be modified by NBTB from time to time.
(iii) Executive shall be eligible to be considered
for performance bonuses of up to 75 percent of salary (with his performance
evaluated primarily based upon the performance of PA Bank, or of the
northeastern Pennsylvania operations of any successor entity to PA Bank, and
secondarily based upon the performance of NBTB taken as a whole), in accordance
with the compensation policies of NBTB with respect to executive personnel as
presently in effect or as they may be modified by NBTB from time to time.
(b) Employee Benefit Plans or Arrangements. During the Term of
Employment, Executive shall be entitled to participate in all employee benefit
plans of NBTB, as presently in effect or as they may be modified by NBTB from
time to time, under such terms as may be applicable to officers of Executive's
rank employed by NBTB or its affiliates, including, without limitation, plans
providing retirement benefits, stock options, medical insurance, life insurance,
disability insurance, and accidental death or dismemberment insurance, provided
that there be no duplication of such benefits as are provided under any other
provision of this Agreement. During the Term of Employment, medical insurance
for Executive will be procured through the same carrier that provided insurance
coverage to Executive as an employee of PA Bank as of September 30, 1999, or
from such other insurance carrier as shall be mutually acceptable to Executive
and NBTB.
(c) Executive Retirement Plan; Split Dollar Agreement. NBTB
shall assume and continue in effect the PA Bank Executive Retirement Plan dated
October 25, 1988, but only to the extent that the same relates to Executive, and
the Split Dollar Agreement/Key Executive Equity Program dated February 15, 1994,
as restated April 16, 1999, but only to the extent the same relates to
Executive, and, in return therefor, Executive renounces entitlement to benefits
under any supplemental executive retirement plan to which he would otherwise be
entitled as an executive of NBTB or an affiliate of NBTB.
(d) Vacation and Sick Leave. During the Term of Employment,
Executive shall be entitled to paid annual vacation periods and sick leave in
accordance with the policies of NBTB as in effect as of the Commencement Date or
as may be modified by NBTB from time to time as may be applicable to officers of
Executive's rank employed by NBTB or its affiliates, but in no event less than
four weeks of paid vacation per year.
(e) Automobile. During the Term of Employment, Executive shall
be entitled to the use of an automobile owned by PA Bank, the make, model, and
year of which automobile shall be appropriate to an officer of Executive's rank
employed by NBTB or its affiliates and consistent with that provided to others
of Executive's rank employed by NBTB or its affiliates. Executive shall be
responsible for all expenses of ownership and use of such automobile, subject to
reimburse ment of expenses for business use in accordance with section 3(i).
5
(f) Country Club Dues. During the Term of Employment,
Executive shall be reimbursed for dues and assessments incurred in relation to
Executive's membership at [ ].
(g) Life Insurance. During the Term of Employment, life
insurance paid by PA Bank on the life of Executive for the benefit of his
designated beneficiary or beneficiaries shall be maintained at no less than the
level of insurance maintained as of September 30, 1999.
(h) Withholding. All compensation to be paid to Executive
hereunder shall be subject to required withholding and other taxes.
(i) Expenses. During the Term of Employment, Executive shall
be reimbursed for reasonable travel and other expenses incurred or paid by
Executive in connection with the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as may from time to time be requested, in accordance with
such policies of NBTB as are in effect as of the Commencement Date and as may be
modified by NBTB from time to time, under such terms as may be applicable to
officers of Executive's rank employed by NBTB or its affiliates.
4. Confidential Business Information; Non-Competition.
(a) Executive acknowledges that certain business methods,
creative techniques, and technical data of NBTB and its affiliates and the like
are deemed by NBTB to be and are in fact confidential business information of
NBTB or its affiliates or are entrusted to third parties. Such confidential
information includes but is not limited to procedures, methods, sales
relationships developed while in the service of NBTB or its affiliates,
knowledge of customers and their require ments, marketing plans, marketing
information, studies, forecasts, and surveys, competitive analyses, mailing and
marketing lists, new business proposals, lists of vendors, consultants, and
other persons who render service or provide material to NBTB or PA Bank or their
affiliates, and compositions, ideas, plans, and methods belonging to or related
to the affairs of NBTB or PA Bank or their affiliates. In this regard, NBTB
asserts proprietary rights in all of its business information and that of its
affiliates except for such information as is clearly in the public domain.
Notwithstanding the foregoing, information that would be generally known or
available to persons skilled in Executive's fields shall be considered to be
"clearly in the public domain" for the purposes of the preceding sentence.
Executive agrees that he will not disclose or divulge to any third party, except
as may be required by his duties hereunder, by law, regulation, or order of a
court or government authority, or as directed by NBTB, nor shall he use to the
detriment of NBTB or its affiliates or use in any business or on behalf of any
business competitive with or substantially similar to any business of NBTB or PA
Bank or their affiliates, any confidential business information obtained during
the course of his employment by PA Bank. The foregoing shall not be construed as
restricting Executive from disclosing such information to the employees of NBTB
or PA Bank or their affiliates.
(b) Executive hereby agrees that from the Commencement Date
until the second
6
anniversary of the Termination Date (or, in the event that the Term of
Employment has been terminated for the reason set forth in section 2(a)(vi) or
2(a)(vii) hereof, Executive agrees that until the first anniversary of the
Termination Date), Executive will not (i) engage in the banking business other
than on behalf of NBTB or PA Bank or their affiliates within the Market Area (as
hereinafter defined), (ii) directly or indirectly own, manage, operate, control,
be employed by, or provide management or consulting services in any capacity to
any firm, corporation, or other entity (other than NBTB or PA Bank or their
affiliates) engaged in the banking business in the Market Area, or (iii)
directly or indirectly solicit or otherwise intentionally cause any person known
to Executive to be an employee, officer, or member of the respective Boards of
Directors of PA Bank or any of its affiliates to engage in any action prohibited
under (i) or (ii) of this section 4(b); provided that the ownership by Executive
as an investor of not more than five percent of the outstanding shares of stock
of any corporation, or the shares of any investment company as defined in
section 3 of the Investment Company Act of 1940, as amended, shall not in itself
constitute a violation of Executive's obligations under this section 4(b).
(c) Executive acknowledges and agrees that irreparable injury
will result to NBTB in the event of a breach of any of the provisions of this
section 4 (the "Designated Provisions") and that NBTB will have no adequate
remedy at law with respect thereto. Accordingly, in the event of a material
breach of any Designated Provision, and in addition to any other legal or
equitable remedy NBTB or PA Bank may have, NBTB shall be entitled to the entry
of a preliminary and permanent injunction (including, without limitation,
specific performance) by a court of competent jurisdiction in Chenango County,
New York, Lackawanna County, Pennsylvania, or elsewhere, to restrain the
violation or breach thereof by Executive, and Executive submits to the
jurisdiction of such court in any such action.
(d) It is the desire and intent of the parties that the
provisions of this section 4 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this section
4 shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. In
addition, should any court determine that the provisions of this section 4 shall
be unenforceable with respect to scope, duration, or geographic area, such court
shall be empowered to substitute, to the extent enforceable, provisions similar
hereto or other provisions so as to provide to NBTB, to the fullest extent
permitted by applicable law, the benefits intended by this section 4.
(e) As used herein, "Market Area" shall mean the area or areas
delineated by circles formed by radii extending twenty-five miles from (i) the
head office of PA Bank, (ii) the authorized branches of PA Bank as they may
exist from time to time, and (iii) each branch of a depository institution
affiliated with PA Bank for which Executive has or has had significant executive
or managerial responsibilities.
5. Life Insurance. In light of the unusual abilities and experience of
Executive, NBTB
7
in its discretion may apply for and procure as owner and for its own benefit
insurance on the life of Executive, in such amount and in such form as NBTB may
choose. NBTB shall make all payments for such insurance and shall receive all
benefits from it. Executive shall have no interest whatsoever in any such policy
or policies but, at the request of NBTB, shall submit to medical examinations
and supply such information and execute such documents as may reasonably be
required by the insurance company or companies to which NBTB has applied for
insurance.
6. Representations and Warranties.
(a) Executive represents and warrants to NBTB that his
execution, delivery, and performance of this Agreement will not result in or
constitute a breach of or conflict with any term, covenant, condition, or
provision of any commitment, contract, or other agreement or instrument,
including, without limitation, any other employment agreement, to which
Executive is or has been a party.
(b) Executive shall indemnify, defend, and hold harmless NBTB
for, from, and against any and all losses, claims, suits, damages, expenses, or
liabilities, including court costs and counsel fees, which NBTB has incurred or
to which NBTB may become subject, insofar as such losses, claims, suits,
damages, expenses, liabilities, costs, or fees arise out of or are based upon
any failure of any representation or warranty of Executive in section 6(a)
hereof to be true and correct when made.
7. Notices. All notices, consents, waivers, or other communications
which are required or permitted hereunder shall be in writing and deemed to have
been duly given if delivered personally or by messenger, transmitted by telex or
telegram, by express courier, or sent by registered or certified mail, return
receipt requested, postage prepaid. All communications shall be addressed to the
appropriate address of each party as follows:
If to NBTB:
NBT Bancorp Inc.
52 South Broad Street
Norwich, New York 13815
Attention: Mr. Daryl R. Forsythe
President and Chief Executive Officer
With a required copy to:
Brian D. Alprin, Esq.
Duane, Morris & Heckscher LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
8
If to Executive:
Mr. John W. Reuther
Four David Terrace
Scranton, Pennsylvania 18505
All such notices shall be deemed to have been given on the date delivered,
transmitted, or mailed in the manner provided above.
8. Assignment.
(a) Neither party may assign this Agreement or any rights or
obligations hereunder without the consent of the other party.
(b) The parties contemplate that at the time of the Merger,
or subsequent to such time, PA Bank may engage in a merger or similar
transaction with an affiliated bank, in which case references in this Agreement
to PA Bank shall be construed to apply to the successor institution in such
transaction.
9. Governing Law. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflict of law thereof. The parties hereby
designate the Chancery Court in New Castle County, Delaware to be the proper
jurisdiction and venue for any suit or action arising out of this Agreement.
Each of the parties consents to personal jurisdiction in such venue for such a
proceeding and agrees that it may be served with process in any action with
respect to this Agreement or the transactions contem plated thereby by certified
or registered mail, return receipt requested, or to its registered agent for
service of process in the State of Delaware. Each of the parties irrevocably and
unconditionally waives and agrees, to the fullest extent permitted by law, not
to plead any objection that it may now or hereafter have to the laying of venue
or the convenience of the forum of any action or claim with respect to this
Agreement or the transactions contemplated thereby brought in the courts
aforesaid.
10. Entire Agreement. This Agreement constitutes the entire
understanding among NBTB, PA Bank, and Executive relating to the subject matter
hereof. Any previous agreements or understandings between the parties hereto or
between Executive and PA Bank or any of its affiliates regarding the subject
matter hereof, including without limitation the terms and conditions of
employment, compensation, benefits, retirement, competition following
employment, and the like, are merged into and superseded by this Agreement.
Neither this Agreement nor any provisions hereof can be modified, changed,
discharged, or terminated except by an instrument in writing signed by the party
against whom any waiver, change, discharge, or termination is sought.
11. Illegality; Severability.
(a) Anything in this Agreement to the contrary
notwithstanding, this Agreement is not intended and shall not be construed to
require any payment to Executive which would violate
9
any federal or state statute or regulation, including without limitation the
"golden parachute payment regulations" of the Federal Deposit Insurance
Corporation codified to Part 359 of title 12, Code of Federal Regulations.
(b) If any provision or provisions of this Agreement shall
be held to be invalid, illegal, or unenforceable for any reason whatsoever:
(i) the validity, legality, and enforceability of the
remaining provisions of this Agreement (including, without limitation, each
portion of any section of this Agreement containing any such provision held to
be invalid, illegal, or unenforceable) shall not in any way be affected or
impaired thereby; and
(ii) to the fullest extent possible, the provisions of
this Agreement (including, without limitation, each portion of any section of
this Agreement containing any such provisions held to be invalid, illegal, or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal, or unenforceable.
12. Arbitration. Subject to the right of each party to seek specific
performance (which right shall not be subject to arbitration), if a dispute
arises out of or related to this Agreement, or the breach thereof, such dispute
shall be referred to arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). A dispute subject to the
provisions of this section will exist if either party notifies the other party
in writing that a dispute subject to arbitration exists and states, with
reasonable specificity, the issue subject to arbitration (the "Arbitration
Notice"). The parties agree that, after the issuance of the Arbitration Notice,
the parties will try in good faith to resolve the dispute by mediation in
accordance with the Commercial Rules of Arbitration of AAA between the date of
the issuance of the Arbitration Notice and the date the dispute is set for
arbitration. If the dispute is not settled by the date set for arbitration, then
any controversy or claim arising out of this Agreement or the breach hereof
shall be resolved by binding arbitration and judgment upon any award rendered by
arbitrator(s) may be entered in a court having jurisdiction. Any person serving
as a mediator or arbitrator must have at least ten years' experience in
resolving commercial disputes through arbitration. In the event any claim or
dispute involves an amount in excess of $100,000, either party may request that
the matter be heard by a panel of three arbitrators; otherwise all matters
subject to arbitration shall be heard and resolved by a single arbitrator. The
arbitrator shall have the same power to compel the attendance of witnesses and
to order the production of documents or other materials and to enforce discovery
as could be exercised by a United States District Court judge sitting in the
Northern District of New York. In the event of any arbitration, each party shall
have a reasonable right to conduct discovery to the same extent permitted by the
Federal Rules of Civil Procedure, provided that such discovery shall be
concluded within ninety days after the date the matter is set for arbitration.
In the event of any arbitration, the arbitrator or arbitrators shall have the
power to award reasonable attorney's fees to the prevailing party. Any provision
in this Agreement to the contrary notwithstanding, this section shall be
governed by the Federal Arbitration Act and the parties have entered into this
Agreement pursuant to such Act.
10
13. Costs of Litigation. In the event litigation is commenced to
enforce any of the provisions hereof, or to obtain declaratory relief in
connection with any of the provisions hereof, the prevailing party shall be
entitled to recover reasonable attorney's fees. In the event this Agreement is
asserted in any litigation as a defense to any liability, claim, demand, action,
cause of action, or right asserted in such litigation, the party prevailing on
the issue of that defense shall be entitled to recovery of reasonable attorney's
fees.
14. Affiliation. A company will be deemed to be "affiliated" with
NBTB or PA Bank according to the definition of "Affiliate" set forth in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
15. Headings. The section and subsection headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof.
16. Agreement Contingent Upon Merger. This Agreement is contingent
upon the occurrence of the Merger and, if the Merger fails to occur, this
Agreement will be null and void and of no past or future effect.
IN WITNESS WHEREOF, the parties hereto executed or caused this
Agreement to be executed as of the day and year first above written.
NBT BANCORP INC.
By:
----------------------------------------
Daryl R. Forsythe
President and Chief Executive Officer
JOHN W. REUTHER
-------------------------------------------
11
EXHIBIT 2.5
FORM OF CHANGE-IN-CONTROL AGREEMENT
[_____________________], 2000
[___________________]
[___________________]
[___________________]
Dear Mr. [___________________]:
NBT Bancorp Inc. (which, together with its wholly-owned subsidiaries,
NBT Bank, National Association, LA Bank, National Association, and Pioneer
American Bank, National Association, is referred to as the "Company") considers
the stability of its key management group to be essential to the best interests
of the Company and its shareholders. The Company recognizes that, as is the case
with many publicly-held corporations, the possibility of a change in control may
arise and that the attendant uncertainty may result in the departure or
distraction of key management personnel to the detriment of the Company and its
shareholders.
Accordingly, the Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to encourage members of the
Company's key management group to continue as employees notwithstanding the
possibility of a change in control of the Company.
The Board also believes it important that, in the event of a proposal
for transfer of control of the Company, you be able to assess the proposal and
advise the Board without being influenced by the uncertainties of your own
situation.
In order to induce you to remain in the employ of the Company, this
Agreement, which has been approved by the Board, sets forth the severance
compensation which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change in control" of
the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
(a) Termination Prior to Certain Offers. Except as otherwise
provided in paragraph (b) below, or in any written employment agreement between
you and the Company, the Company or you may terminate your employment at any
time. If, and only if, such termination occurs after a change in control of the
Company (as defined in section 6), the provisions of this Agreement regarding
the payment of severance compensation and benefits shall apply.
(b) Termination Subsequent to Certain Offers. In the event a
tender offer or exchange offer is made by a person (as defined in section 6) for
more than 30 percent of the
1
combined voting power of the Company's outstanding securities ordinarily having
the right to vote at elections of directors ("Voting Securities"), including
shares of common stock, no par value, of the Company (the "Company Shares"), you
agree that you will not leave the employ of the Company (other than as a result
of Disability as such term is defined in section 6) and will render services to
the Company in the capacity in which you then serve until such tender offer or
exchange offer has been abandoned or terminated or a change in control of the
Company has occurred as a result of such tender offer or exchange offer. If,
during the period you are obligated to continue in the employ of the Company
pursuant to this section 1(b), the Company reduces your compensation, your
obligations under this section 1(b) shall thereupon terminate.
2. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect until the third anniversary of the date
hereof; provided, however, that commencing on the first anniversary of the date
hereof, and each such anniversary thereafter, the remaining term of this
Agreement shall automatically be extended for one additional year (to a total of
three years) unless at least 90 days prior to such anniversary, the Company or
you shall have given notice that this Agreement shall not be extended; and
provided, however, that if a change in control of the Company shall occur while
this Agreement is in effect, this Agreement shall auto matically be extended for
24 months from the date the change in control occurs. This Agreement shall
terminate if you or the Company terminates your employment prior to a change in
control of the Company but without prejudice to any remedy the Company may have
for breach of your obligations, if any, under section 1(b).
3. Severance Payment and Benefits If Termination Occurs Following
Change in Control for Disability, Without Cause, or With Good Reason. If, within
24 months from the date of occurrence of any event constituting a change in
control of the Company (it being recognized that more than one such event may
occur in which case the 24-month period shall run from the date of occurrence of
each such event), your employment with the Company is terminated (i) by the
Company for Disability, (ii) by the Company without Cause, or (iii) by you with
Good Reason (as defined in section 6), you shall be entitled to a severance
payment and other benefits as follows:
(a) Disability. If your employment with the Company is
terminated for Disability, your benefits shall thereafter be determined in
accordance with the Company's long-term disability income insurance plan. If the
Company's long-term disability income insurance plan is modified or terminated
following a change in control, the Company shall substitute such a plan with
benefits applicable to you substantially similar to those provided by such plan
prior to its modification or termination. During any period that you fail to
perform your duties hereunder as a result of incapacity due to physical or
mental illness, you shall continue to receive your full base salary at the rate
then in effect until your employment is terminated by the Company for
Disability.
(b) Termination Without Cause or With Good Reason. If your
employment with the Company is terminated without Cause by the Company or with
Good Reason by you, then the Company shall pay to you, upon demand, the
following amounts (net of applicable payroll taxes):
2
(i) Your full base salary plus year-to-date accrued
vacation through the Date of Termination at the rate in effect on the date the
change in control occurs.
(ii) As severance pay, an amount equal to the product of
your "Base Amount" multiplied by the number [ ]. (1) As used in the previous
sentence, your "Base Amount" is your average annual compensation includible in
your gross income for federal income tax purposes for the five years immediately
preceding the year in which the change in control occurs (or, if you shall have
been employed by the Company for less than those five years, for the number of
those years during which you shall have been employed by the Company, with any
partial year annualized), including base salary, non-deferred amounts under
annual incentive, long-term performance, and profit-sharing plans, distributions
of previously deferred amounts under such plans, and ordinary income recognized
with respect to stock options.
(c) Related Benefits. Unless you die or your employment is
terminated by the Company for Cause or Disability, or by you other than for Good
Reason, the Company shall maintain in full force and effect, for the continued
benefit of you for one year after the Date of Termination, all noncash employee
benefit plans, programs, or arrangements (including, without limitation, pension
and retirement plans and arrangements, stock option plans, life insurance and
health and accident plans and arrangements, medical insurance plans, disability
plans, and vacation plans) in which you were entitled to participate immediately
prior to the Date of Termination provided that your continued participation is
possible after Termination under the general terms and provisions of such plans,
programs, and arrangements; provided, however, that if you become eligible to
participate in a benefit plan, program, or arrangement of another employer which
confers substantially similar benefits upon you, you shall cease to receive
benefits under this subsection in respect of such plan, program, or arrangement.
In the event that your participation in any such plan, program, or arrangement
is barred, the Company shall arrange to provide you with benefits substantially
similar to those which you are entitled to receive under such plans, programs
and arrangements.
4. Payment If Termination Occurs Following Change In Control, Because
of Death, For Cause, or Without Good Reason. If your employment shall be
terminated following any event constituting a change in control of the Company
because of your death, or by the Company for Cause, or by you other than for
Good Reason, the Company shall pay you such amounts as are to be paid to you in
such circumstance under any written employment agreement in effect between you
and the Company or, if there be no such written employment agreement in effect,
the Company shall pay you your full base salary plus year-to-date accrued
vacation through the Date of Termination at the rate in effect on the date the
change in control occurs. The Company shall have no further obligations to you
under this Agreement.
- --------------
(1) [John W. Reuther: insert "2.99."]
[Patricia A. Cobb: insert "2."]
[James E. Jackson: insert "2."]
3
5. No Mitigation. You shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor, except as expressly set forth herein, shall the amount of any
payment provided for in this Agreement be reduced by any compensation earned by
you as the result of employment by another employer after the Date of
Termination, or otherwise.
6. Definitions of Certain Terms. For the purpose of this Agreement,
the terms defined in this section 6 shall have the meanings assigned to them
herein.
(a) Cause. Termination of your employment by the Company for
"Cause" shall mean termination because, and only because, you committed an act
of fraud, embezzlement, or theft constituting a felony or an act intentionally
against the interests of the Company which causes the Company material injury.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for the purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct constituting Cause as
defined above and specifying the particulars thereof in detail.
(b) Change in Control. A "Change in Control" of the Company shall
mean:
(i) A change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A as in
effect on the date hereof pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a change in control
shall be deemed to have occurred at such time as any Person hereafter becomes
the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 30 percent or more of the combined voting power of
the Company's Voting Securities; or
(ii) During any period of two consecutive years,
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof unless the election, or the
nomination for election by the Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period; or
(iii) There shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which Voting Securities would be converted into cash,
securities, or other property, other than a merger of the Company in which the
holders of Voting Securities immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (y) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all of
the assets of the Company, provided that any such consolidation, merger, sale,
lease, exchange or other transfer consummated at the insistence of an
4
appropriate banking regulatory agency shall not constitute a change in control;
or
(iv) Approval by the shareholders of the Company of any
plan or proposal for the liquidation or dissolution of the Company.
(c) Date of Termination. "Date of Termination" shall mean
(i) if your employment is terminated by the Company for Disability, 30 days
after Notice of Termination is given (provided that you shall not have returned
to the performance of your duties on a full-time basis during such 30-day
period), and (ii) if your employment is terminated for any other reason, the
date on which a Notice of Termination is given; provided that if within 30 days
after any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties or by a
final judg ment, order, or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected). The
term of this Agreement shall be extended until the Date of Termination.
(d) Disability. Termination of your employment by the
Company for "Disability" shall mean termination because of your absence from
your duties with the Company on a full-time basis for 180 consecutive days as a
result of your incapacity due to physical or mental illness and your failure to
return to the performance of your duties on a full-time basis during the 30-day
period after Notice of Termination is given.
(e) Good Reason. Termination by you of your employment for
"Good Reason" shall mean termination based on any of the following:
(i) A change in your status or position(s) with the
Company, which in your reasonable judgment, does not represent a promotion from
your status or position(s) as in effect immediately prior to the change in
control, or a change in your duties or responsibilities which, in your
reasonable judgment, is inconsistent with such status or position(s), or any
removal of you from, or any failure to reappoint or reelect you to, such
position(s), except in connection with the termination of your employment for
Cause or Disability or as a result of your death or by you other than for Good
Reason.
(ii) A reduction by the Company in your base salary as
in effect immediately prior to the change in control.
(iii) The failure by the Company to continue in effect
any Plan (as hereinafter defined) in which you are participating at the time of
the change in control of the Company (or Plans providing you with at least
substantially similar benefits) other than as a result of the normal expiration
of any such Plan in accordance with its terms as in effect at the time of the
change in control, or the taking of any action, or the failure to act, by the
Company which would adversely affect your continued participation in any of such
Plans on at least as favorable a basis to you as is the case on the date of the
change in control or which would materially reduce your
5
benefits in the future under any of such Plans or deprive you of any material
benefit enjoyed by you at the time of the change in control.
(iv) The failure by the Company to provide and credit
you with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy as in effect immediately
prior to the change in control.
(v) The Company's requiring you to be based anywhere
other than where your office is located immediately prior to the change in
control except for required travel on the Company's business to an extent
substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the change in control.
(vi) The failure by the Company to obtain from any
successor the assent to this Agreement contemplated by section 8 hereof.
(vii) Any purported termination by the Company of your
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of this Agree ment; and for purposes of this Agreement, no such
purported termination shall be effective.
(viii) Any refusal by the Company to continue to allow
you to attend to matters or engage in activities not directly related to the
business of the Company which, prior to the change in control, you were
permitted by the Board to attend to or engage in.
For purposes of this subsection, "Plan" shall mean any compensation plan such as
an incentive or stock option plan or any employee benefit plan such as a thrift,
pension, profit sharing, medical, disability, accident, life insurance plan, or
a relocation plan or policy or any other plan, program, or policy of the Company
intended to benefit employees.
(f) Notice of Termination. A "Notice of Termination" of your
employment given by the Company shall mean a written notice given to you of the
termination of your employment which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(g) Person. The term "Person" shall mean and include any
individual, corporation, partnership, group, association, or other "person," as
such term is used in section 14(d) of the Exchange Act, other than the Company
or any employee benefit plan(s) sponsored by the Company.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
attention of the Chief Executive
6
Officer of the Company with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
8. Successors; Binding Agreement.
(a) This Agreement shall inure to the benefit of, and be
binding upon, any corporate or other successor or assignee of the Company which
shall acquire, directly or indirectly, by merger, consolidation or purchase, or
otherwise, all or substantially all of the business or assets of the Company.
The Company shall require any such successor, by an agreement in form and
substance satisfactory to you, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee, or
other designee or, if there is no such designee, to your estate.
9. Increased Severance Payments Upon Application of Excise Tax.
(a) Adjustment of Payment. In the event any payments or
benefits you become entitled to pursuant to the Agreement or any other payments
or benefits received or to be received by you in connection with a change in
control of the Company or your termination of employment (whether pursuant to
the terms of any other agreement, plan, or arrangement, or otherwise, with the
Company, any person whose actions result in a change in control or any person
affiliated with the Company or such person) (collectively the "Severance
Payments") will be subject to the tax (the "Excise Tax") imposed by section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall
pay you an additional amount (the "Gross-Up Payment") so that the net amount
retained by you, after deduction of the Excise Tax (but before deduction for any
federal, state or local income tax) on the Severance Payments and after
deduction for the aggregate of any federal, state, or local income tax and
Excise Tax upon the gross-Up Payment, shall be equal to the Severance Payments.
For purposes of determining whether any of the Severance Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) the entire
amount of the Severance Payments shall be treated as "parachute payments" within
the meaning of section 280G(b)(2) of the Code and as subject to the Excise Tax,
unless and to the extent, in the written opinion of outside tax counsel selected
by the Company's independent accountants and reasonably acceptable to you, such
payments (in whole or in part) are not subject to the Excise Tax; and (ii) the
value of any noncash benefits or any deferred payment or benefit (constituting a
part of the Severance Payments) shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, you shall
be deemed to pay federal income taxes at the highest marginal rate of the
federal income
7
taxation applicable to individuals (without taking into account surtaxes or loss
or reduction of deductions) for the calendar year in which the Gross-Up Payment
is to be made and state and local income taxes at the highest marginal rates of
taxation in the state and locality of your residence on the date of Termination.
In the event that the amount of Excise Tax you are required to pay is
subsequently determined to be less than the amount taken into account hereunder,
you shall repay to the Company promptly after the time that the amount of such
reduction in Excise Tax is finally determined the amount of the reduction,
together with interest on the amount of such reduction at the rate of 6 percent
per annum from the date of the Gross-Up Payment, plus, if in the written opinion
of outside tax counsel selected by the Company's independent accountants and
reasonably acceptable to you, such payment (or a portion thereof) was not
taxable income to you when reported or is deductible by you for federal income
tax purposes, the net federal income tax benefit you actually realize as a
result of making such payment pursuant to this sentence. In the event that the
amount of Excise Tax you are required to pay is subsequently determined to
exceed the amount taken into account hereunder, the Company shall make an
additional Gross-Up Payment in the manner set forth above in respect of such
excess (plus any interest, additions to tax, or penalties payable by you with
respect to such excess) promptly after the time that the amount can be
reasonably determined.
(b) Time of Payment: Estimated Payment. The payments
provided for in subsection (a) above, shall be made not later than the fifth
business day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day, the
Company shall pay to you on such day an estimate, as determined in good faith by
the Company, of the minimum amount of such payments, and shall pay the remainder
of such payments (together with interest at the rate of 6 percent per annum) as
soon as the amount thereof can be determined. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to you, payable on the
fifth day after demand by the Company (together with interest at the rate of 6
percent per annum).
10. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is agreed
to in a writing signed by you and the Chief Executive Officer or President of
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same, or at any prior or
subsequent, time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by laws of the State of New York without giving effect to the
principles of conflict of laws thereof.
11. Legal Fees and Expenses. The Company shall pay or reimburse any
reasonable legal fees and expenses you may incur in connection with any legal
action to enforce your rights under, or to defend the validity of, this
Agreement. The Company will pay or reimburse such legal fees and expenses on a
regular, periodic basis upon presentation by you of a statement or statements
8
prepared by your counsel in accordance with its usual practices.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Payments During Controversy. Notwithstanding the pendency of any
dispute or controversy, the Company will continue to pay you your full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary and installments of incentive
compensation) and continue you as a participant in all compensation, benefit,
and insurance plans in which you were participating when the notice giving rise
to the dispute was given, until the dispute is finally resolved in accordance
with section 7(c). Amounts paid under this section are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement. You shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed copy of this
letter, which will then constitute our agreement on this subject.
Very truly yours,
NBT BANCORP INC.
By:
-----------------------------------
Daryl R. Forsythe
President and Chief Executive Officer
AGREED TO:
- ---------------------------
[______________]
9
EXHIBIT 2.6
SHAREHOLDERS VOTING AGREEMENT
December 7, 1999
NBT Bancorp Inc.
52 South Broad Street
Norwich, New York 13815
Mesdames and Gentlemen:
The undersigned understands that NBT Bancorp Inc. ("NBTB") and its
affiliate, Levon Acquisition Company ("Newco"), are about to enter into an
Agreement and Plan of Merger (the "Agreement") with Pioneer American Holding
Company Corp. ("PAHC"). The Agreement provides for the merger of Newco with and
into PAHC (the "First Merger") and the merger of PAHC with and into NBTB (the
"Second Merger") (the First Merger and the Second Merger being referred to
herein collectively as the "Merger") and the conversion of outstanding shares of
PAHC Common Stock into NBTB Common Stock and cash in lieu of fractional shares
in accordance with the formula therein set forth.
In order to induce NBTB to enter into the Agreement, and intending to
be legally bound hereby, the undersigned, subject to the conditions hereinafter
stated, represents, warrants, and agrees that at the PAHC Shareholders' Meeting
contemplated by section 3.3 of the Agreement (the "Meeting"), and any
adjournment thereof, the undersigned will, in person or by proxy, vote or cause
to be voted in favor of the Agreement and the Merger the shares of PAHC Common
Stock beneficially owned by the undersigned individually or, to the extent of
the undersigned's proportionate voting interest, jointly with other persons, as
well as, to the extent of the under signed's proportionate voting interest, any
other shares of PAHC Common Stock over which the undersigned may hereafter
acquire beneficial ownership in such capacities (collectively, the "Shares").
Subject to the final paragraph of this agreement, the undersigned further agrees
that he or she will use his or her best efforts to cause any other shares of
PAHC Common Stock over which he or she has or shares voting power to be voted in
favor of the Agreement and the Merger.
The undersigned further represents, warrants, and agrees that
beginning upon the authorization and execution of the Agreement by PAHC until
the earlier of (i) the consummation of the Merger or (ii) the termination of the
Agreement in accordance with its terms, the undersigned will not, directly or
indirectly:
(a) solicit proxies or become a "participant" in a "solicitation" (as
such terms are defined in Regulation 14A under the Securities Exchange Act of
1934) in opposition to the Agreement or the Merger or in opposition to the
recommendation of the majority of the directors of
1
PAHC with respect to any other matter related in any way to the Agreement or the
Merger, or encourage or recommend to any shareholder of PAHC that he, she or it
vote in opposition to or abstain from voting upon or not vote with respect to
the Agreement or the Merger.
(b) voluntarily sell or otherwise transfer any of the Shares, or
cause or permit any of the Shares to be sold or otherwise transferred (i) for
the purpose of avoiding the obligations of the undersigned under this agreement,
or (ii) to any transferee unless such transferee expressly agrees in writing to
be bound by the terms of this agreement in all events.
It is understood and agreed that this agreement relates solely to the
capacity of the undersigned as a shareholder or other beneficial owner of the
Shares and does not prohibit the undersigned, if a member of the Board of
Directors of PAHC, from acting, in his or her capacity as a director, as the
undersigned may determine to be appropriate in light of the obligations of the
undersigned as a director. It is further understood and agreed that the term
"Shares" shall not include any securities beneficially owned by the undersigned
as a trustee or fiduciary for another (unless such other person is affiliated
with the undersigned or is bound by an agreement with NBTB substantially similar
to this agreement), and that this agreement is not in any way intended to affect
the exercise by the undersigned of the undersigned's fiduciary responsibility in
respect of any such securities.
Very truly yours,
(*)
--------------------------------
Accepted and Agreed to:
NBT BANCORP INC.
By:
---------------------------
Title:
------------------------
- -------------
(*) [this form of agreement has been executed by each of RICHARD CHOJNOWSKI,
GENE E. GOLDENZIEL, MICHAEL M. MURPHY, JOSEPH G. NASSER, WILLIAM K. NASSER, SR.,
WILLIAM K. NASSER, JR., MARGARET L. O'CONNOR-FLETCHER, JOHN W. REUTHER, ELDORE
SEBASTIANELLI, and JOHN W. WALSKI]
2
Name of Shareholder:
Shares of Common Stock of Pioneer American Holding Company Corp.
Beneficially Owned
As of December 7, 1999
Name(s) of Number of
Record Owner(s) Beneficial Ownership (2) Shares
- --------------- ------------------------ ------
- -------------
(2) For purposes of this Agreement, shares are beneficially owned by
the shareholder named above if held in any capacity other than a fiduciary
capacity (other than a revocable living trust and other than a fiduciary
capacity on behalf of a person who is affiliated with the shareholder or is
bound by an agreement with NBTB substantially similar to this agreement) and if
the shareholder named above has the power (alone or, in the case of shares held
jointly with his or her spouse, together with his or her spouse) to direct the
voting of such shares.
3