AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BENEFICIAL SAVINGS BANK MHC
BENEFICIAL MUTUAL BANCORP, INC.
AND
BENEFICIAL MUTUAL SAVINGS BANK
AND
FMS FINANCIAL CORPORATION
AND
FARMERS AND MECHANICS BANK
DATED AS OF OCTOBER 12, 2006
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TABLE OF CONTENTS
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RECITALS......................................................................................................
1
ARTICLE I
DEFINITIONS....................................................................................................2
ARTICLE II
THE
MERGER....................................................................................................11
2.1 The
Merger..................................................................................11
2.2 Effect of
the
Merger........................................................................11
2.3 Conversion
of Shares Upon
Merger............................................................12
2.4 FMS Stock
Options...........................................................................12
2.5 Merger
Consideration........................................................................12
2.6 Exchange
of FMS Common
Stock................................................................16
2.7 Tax-Free
Reorganization.....................................................................18
2.8
Reserved....................................................................................19
2.9 Minority
Stock
Offering.....................................................................19
2.10
Alternative
Structure.......................................................................19
ARTICLE III
OTHER
AGREEMENTS..............................................................................................19
3.1
Confidentiality;
Access.....................................................................19
3.2 Disclosure
Schedules........................................................................20
3.3 Duties
Concerning
Representations...........................................................20
3.4 Deliveries
of Information;
Consultation.....................................................21
3.5
Directors'
and Officers' Indemnification and
Insurance......................................21
3.6 Letter(s)
of
Accountants....................................................................22
3.7 Legal
Conditions to
Merger..................................................................22
3.8 Stock
Listings..............................................................................22
3.9
Announcements...............................................................................22
3.10
Best
Efforts................................................................................22
3.11
Employee and Managerial
Matters.............................................................23
3.12
Employee Benefit
Matters....................................................................23
3.13
Listing of Bancorp Common
Stock.............................................................24
3.14
Affiliates..................................................................................24
3.15
Disclosure
Controls.........................................................................24
3.16
Appointment to Bancorp Board of
Directors...................................................25
3.17
Advisory
Board..............................................................................25
3.18
Meeting of FMS
Shareholders.................................................................26
3.19
Voting
Agreement............................................................................26
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
FMS.........................................................................26
4.1
Organization and Qualification;
Subsidiaries................................................26
4.2
Certificate of Incorporation and
Bylaws.....................................................27
4.3
Capitalization..............................................................................27
4.4
Authorization;
Enforceability...............................................................28
4.5 No
Violation or
Conflict....................................................................28
4.6 Title to
Assets;
Leases.....................................................................28
4.7
Litigation..................................................................................29
4.8 Securities
and Banking Reports; Books and
Records...........................................29
4.9 Absence of
Certain
Changes..................................................................30
4.10
Buildings and
Equipment.....................................................................30
4.11
FMS Existing
Contracts......................................................................31
4.12
Investment
Securities.......................................................................31
4.13
Contingent and Undisclosed
Liabilities......................................................31
4.14
Insurance
Policies..........................................................................31
4.15
Employee Benefit
Plans......................................................................31
4.16
No Violation of
Law.........................................................................32
4.17
Brokers.....................................................................................33
4.18
Taxes.......................................................................................33
4.19
Real
Estate.................................................................................34
4.20
Governmental
Approvals......................................................................34
4.21
No Pending
Acquisitions.....................................................................34
4.22
Labor
Matters...............................................................................34
4.23
Indebtedness................................................................................35
4.24
Permits.....................................................................................35
4.25
Disclosure..................................................................................35
4.26
Information
Supplied........................................................................35
4.27
Vote
Required...............................................................................35
4.28
Opinion of Financial
Advisor................................................................36
4.29
Environmental
Protection....................................................................36
4.30
Controls and
Procedures.....................................................................36
4.31
Community Reinvestment
Act..................................................................38
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
BANCORP.....................................................................38
5.1
Organization and Capitalization;
Business...................................................38
5.2
Authorization;
Enforceability...............................................................39
5.3 No
Violation or
Conflict....................................................................39
5.4
Litigation..................................................................................39
5.5
Governmental
Approvals......................................................................40
5.6 Cash
Payment................................................................................40
5.7
Compliance
with
Laws........................................................................40
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5.8
Consummation................................................................................40
5.9 Banking Reports;
Books and
Records..........................................................40
5.10
Absence of Certain
Changes..................................................................41
5.11
Taxes.......................................................................................41
5.12
Title to Assets;
Leases.....................................................................42
5.13
Contingent and Undisclosed
Liabilities......................................................42
5.14
Insurance
Policies..........................................................................42
5.15
Employee Benefit
Plans......................................................................43
5.16
Labor
Matters...............................................................................44
5.17
Disclosure..................................................................................44
5.18
Information
Supplied........................................................................44
5.19
Environmental
Protection....................................................................45
5.20
Community Reinvestment
Act..................................................................45
ARTICLE VI
CONDUCT OF BUSINESS BY FMS PENDING THE
MERGER.................................................................46
6.1 Conduct of
Business by FMS Until the Effective
Time.........................................46
6.2
Acquisition
Transactions....................................................................51
6.3 Minority
Stock
Offering.....................................................................52
6.4 Formation
of Merger Corp.
..................................................................52
6.5 Change in
Bank Control Act
Filings..........................................................52
6.6
FMS
Options.................................................................................53
ARTICLE VII
CONDITIONS PRECEDENT TO THE
MERGER............................................................................53
7.1 Conditions
to Each Parties Obligations to Effect the
Merger.................................53
7.2 Conditions
to Obligation of
Bancorp.........................................................54
7.3 Conditions
to Obligation of
FMS.............................................................55
ARTICLE VIII
TERMINATION...................................................................................................56
8.1
Termination.................................................................................56
8.2 Effect of
Termination.......................................................................58
8.3 Bancorp
Termination
Payment.................................................................60
ARTICLE IX
MISCELLANEOUS.................................................................................................61
9.1 Entire
Agreement;
Amendment.................................................................61
9.2 Governing
Law...............................................................................61
9.3
Assignment..................................................................................61
9.4
Notices.....................................................................................61
9.5
Counterparts;
Headings......................................................................62
9.6
Interpretation..............................................................................62
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9.7
Severability................................................................................62
9.8 Specific
Performance........................................................................63
9.9 No
Reliance.................................................................................63
9.10
Further
Assurances..........................................................................63
EXHIBITS
Exhibit A
Corporate Merger Agreement
Exhibit B
Mid-Tier Merger Agreement
Exhibit C
Bank Merger Agreement
Exhibit D
Form of Voting Agreement
Exhibit E
Form of Affiliate's Letters
Exhibit F
Directors and Officers of Bancorp
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iv
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AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER, dated as of October 12, 2006,
by and
among Beneficial
Savings Bank, MHC, a federally chartered mutual holding
company, Beneficial Mutual Bancorp, Inc., a federally chartered
mid-tier holding
company and wholly owned subsidiary of Beneficial MHC, Beneficial
Mutual Savings
Bank, a Pennsylvania-chartered
savings bank and
wholly owned
subsidiary
of
Bancorp, FMS Financial
Corporation,
a New Jersey
chartered corporation and
savings and loan holding company, and Farmers and Mechanics
Bank, a federally
chartered savings bank and wholly owned subsidiary of FMS.
RECITALS
WHEREAS, the
respective Boards of
Directors of Beneficial MHC, Bancorp,
BMSB, FMS and FMB
have determined that it is in the best
interest of their
respective companies
and shareholders
or depositors, as the case may be, to
consummate the business combination transactions provided for
herein, subject to
the terms and conditions set forth herein;
WHEREAS, FMS will
merge with and into Merger Corp., a federally chartered
interim corporation to
be formed as a subsidiary of Bancorp, with Merger Corp.
being the surviving
entity and
simultaneously with,
or as soon thereafter
as
practicable, Merger Corp. will be merged with and liquidated into
Bancorp;
WHEREAS, FMB will
merge with and into BMSB with BMSB as the surviving
entity;
WHEREAS, all of the directors and executive officers of FMS have
agreed, in
their capacity as
shareholders of FMS, to vote their shares of FMS Common Stock
in favor of this Agreement pursuant to separate voting
agreements (in the
form
attached as Exhibit D hereto);
WHEREAS, the Merger
will be conducted immediately following a Minority
Stock Offering by Bancorp; and
WHEREAS, the transactions provided herein are subject to various
regulatory
approvals and other conditions specified herein.
NOW,
THEREFORE,
in consideration of the premises and mutual promises
hereinafter set forth and for other good and valuable
consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree that:
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ARTICLE I
DEFINITIONS
When
used in this
Agreement, the
following terms shall
have the meanings
specified:
Acquisition. "Acquisition" shall mean any of the following
involving FMS or
FMB on the one hand, or Beneficial MHC, Bancorp or BMSB on the
other hand, other
than the Merger and the Minority Stock Offering:
(a) any merger, consolidation, share exchange, business combination
or
other similar transaction;
(b) any sale, lease,
exchange, mortgage,
pledge, transfer or other
disposition of 24.9%
or more of assets
in a single
transaction
or series of
related transactions,
excluding from this
calculation
any such transactions
undertaken in the ordinary course of business and consistent with
past practice;
(c) any sale of 24.9% or more of the outstanding shares of capital
stock (or securities
convertible or exchangeable into or otherwise evidencing,
or an agreement or instrument evidencing, the right to acquire
capital stock);
(d) the filing of an acquisition application (or the giving of
acquisition notice),
whether in draft or
final form,
under HOLA or under
any
other applicable Law with respect to it;
(e) any person shall have acquired beneficial ownership or the right
to acquire beneficial
ownership of, or any "group" (as such term is defined
under Section 13(d) of the Exchange Act and the rules and
regulations of the SEC
promulgated
thereunder) shall have
been formed which
beneficially owns or has
the right to acquire beneficial ownership of, 24.9% or more of the then
outstanding shares of capital stock; or
(f) any public announcement of a proposal, plan or intention to do
any
of the foregoing.
Acquisition Proposal.
"Acquisition Proposal"
shall mean the making of any
proposal by any Person concerning an Acquisition.
Affiliate. "Affiliate"
shall mean, with
respect to any Person,
any other
Person who directly or indirectly, through one or more
intermediaries, controls,
is controlled by, or
is under common
control with the first Person, including
without limitation all directors and executive officers of the
first Person.
Affiliate Letter.
"Affiliate
Letter" shall mean a letter from each
Affiliate of FMS
substantially
in the form of Exhibit E attached to this
Agreement.
2
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Agreement. "Agreement"
shall mean this Agreement and Plan of Merger,
together with the
Exhibits attached
hereto and together
with the Disclosure
Schedules, as the same
may be amended
or supplemented from time to time in
accordance with the terms hereof.
Bancorp. "Bancorp"
shall mean Beneficial Mutual Bancorp, Inc., a federally
chartered mid-tier
holding company and wholly owned
subsidiary of
Beneficial
Savings Bank MHC.
Bancorp Common Stock.
"Bancorp Common Stock"
shall mean the common stock,
$1.00 par value per share of Bancorp.
Bancorp Disclosure
Schedule. "Bancorp
Disclosure Schedule" shall mean the
disclosure schedule,
dated the date of this Agreement, delivered by Bancorp to
FMS contemporaneously
with the execution and
delivery of this Agreement and as
the same may be amended from time to time after the date of this
Agreement and
prior to the Closing Date in accordance with the terms of this
Agreement.
Bancorp
Subsidiaries.
"Bancorp
Subsidiaries"
shall mean
BMSB, a
wholly-owned subsidiary of Bancorp, and the following wholly-owned
subsidiaries
of BMSB: Beneficial
Investment Center,
LLC, Neumann
Corporation,
Beneficial
Insurance Services,
LLC and BSB Union Corporation, which constitute all of the
direct and indirect subsidiaries of Bancorp.
Beneficial MHC.
"Beneficial MHC" shall mean Beneficial Savings Bank MHC, a
federally chartered mutual holding company.
BMSB.
"BMSB" shall
mean
Beneficial
Mutual
Savings
Bank,
a
Pennsylvania-chartered savings bank headquartered in Philadelphia,
Pennsylvania,
which is a wholly owned subsidiary of Bancorp.
Buildings. "Buildings"
shall mean all buildings, fixtures, structures and
improvements (including without limitation stand-alone automated
teller machines
or similar devices) used by a Person or an Affiliate and located on
the Person's
Real Estate.
CERCLA. "CERCLA"
shall mean the Comprehensive Environmental Response,
Compensation and
Liability Act of 1980,
as the same may be in effect from time
to time.
Closing. "Closing"
shall mean the conference to be held at 9:00 a.m.,
Eastern Time,
on the Closing
Date at the offices of
Muldoon Murphy &
Aguggia
LLP, 5101 Wisconsin
Avenue, NW,
Washington,
DC 20016, or such
other time and
place as the parties may mutually agree to in writing, at which the
transactions
contemplated by this Agreement shall be consummated.
Closing Date. "Closing
Date" shall mean the
date of the Effective Time or
such other date as the parties may mutually agree to in
writing.
Code. "Code" shall
mean the Internal Revenue Code of 1986, as amended, as
the same may be in effect from time to time.
3
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Contracts. "Contracts" shall mean all of the contracts, agreements,
leases,
relationships and commitments, written or oral, to which the
relevant Person is
a party or by which it is bound.
Control. "Control,"
as used with
respect to any
Person, shall mean the
possession, directly
or indirectly, of the power to direct or cause the
direction of the
management and
policies of such Person, whether through the
ownership of voting
securities or by contract or otherwise. "Control," as used
with respect to securities or other property, shall mean the power to
exercise
or direct the exercise of any voting rights associated therewith, or the power
to dispose or direct the disposition thereof, or both.
Disclosure Schedules.
"Disclosure Schedules" shall mean the FMS Disclosure
Schedule and the Bancorp Disclosure Schedule.
Employee Benefit
Plans. "Employee Benefit Plans" shall mean any
pension
plan, profit sharing plan, bonus plan, incentive compensation plan, deferred
compensation plan, stock ownership plan, stock purchase plan, stock
option plan,
stock appreciation
plan, employee benefit plan, employee benefit policy,
retirement plan,
fringe benefit program, insurance plan, severance plan,
disability plan,
health care plan, sick
leave plan, death benefit plan, or any
other plan or program to provide retirement income, fringe benefits or other
benefits to former or current employees of the relevant Person.
Environmental Claim.
"Environmental
Claim"
shall mean any and all
administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives,
claims, Liens,
investigations,
proceedings
or notices of
noncompliance or
violation (written or
oral) by any Person alleging potential
liability (including,
without limitation,
potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs,
removal costs,
remedial costs, natural resources damages, property damages, personal
injuries,
or penalties) arising
out of, based on or resulting from: (A) the presence, or
release into the
environment,
of any Hazardous Materials at any location,
whether or
not owned by a Person or any of its Subsidiaries; or (B)
circumstances forming
the basis of any violation or alleged violation, of any
Environmental Law;
or (C) any and all
claims by any Person
seeking damages,
contribution, indemnification, cost, recovery, compensation or
injunctive relief
resulting from the presence or Release of any Hazardous
Materials.
Environmental Laws.
"Environmental
Laws" shall mean all
federal, state,
local or foreign statutes, Laws, rules, ordinances, codes,
policies, guidelines,
and regulations
relating to
pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground
water, land surface or subsurface strata), including, without limitation, Laws
and regulations
relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
Environmental Permits.
"Environmental
Permits" shall mean
environmental,
health and safety permits and governmental authorizations necessary for their
operations of a Person under Environmental Laws.
4
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Equipment. "Equipment"
shall mean all equipment, boilers, furniture,
fixtures, motor
vehicles, furnishings,
office equipment,
computers and
other
items of tangible
personal property
owned by the
relevant Person which are
either presently
used, or are used on
the Closing Date, by the relevant Person
in the conduct of its business.
ERISA. "ERISA" shall
mean the Employee
Retirement Income
Security Act of
1974, as the same may be in effect from time to time.
Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, as the same may be in effect from time to
time.
FDIA. "FDIA" shall
mean the Federal Deposit Insurance Act, as the same my
be in effect from time to time.
FDIC. "FDIC" shall mean the Federal Deposit Insurance
Corporation.
FHLB
of New York. "FHLB of
New York" shall mean the Federal Home Loan Bank
of New York.
FHLB
of Pittsburgh. "FHLB
of Pittsburgh" shall
mean the Federal Home Loan
Bank of Pittsburgh.
FMB.
"FMB" shall mean
Farmers and Mechanics
Bank, a federally
chartered
stock savings bank headquartered in Burlington, New Jersey.
FMS.
"FMS" shall mean FMS
Financial Corporation,
a New Jersey
chartered
corporation
headquartered in Burlington, New Jersey, which is registered as a
unitary savings
and loan holding company under HOLA and the rules and
regulations of the OTS promulgated thereunder.
FMS
Common Stock.
"FMS Common Stock" shall mean all of the authorized
shares of common stock, $.10 par value per share, of FMS.
FMS
Disclosure
Schedule.
"FMS
Disclosure
Schedule" shall mean the
disclosure schedule,
dated the date of this Agreement, delivered by FMS to
Bancorp
contemporaneously with the execution and delivery of this Agreement
and
as the same may be amended from time to time after the date of this
Agreement
and prior to the Closing Date in accordance with the terms of this
Agreement.
FMS
Executives. "FMS
Executives"
shall mean the
individuals who serve as
executive officers of FMS or FMB.
FMS
Existing Indebtedness. "FMS Existing Indebtedness" shall mean all
Indebtedness of FMS and the FMS Subsidiaries, all of which is listed on the
FMS
Disclosure Schedule.
5
<PAGE>
FMS
Existing Liens. "FMS Existing Liens" shall mean all Liens affecting
any
of the assets and properties of FMS or any FMS Subsidiary
(except for Liens
for
current taxes not yet
due and payable,
pledges to secure deposits and such
imperfections of
title, easements
and other encumbrances, if any, as do not
materially detract from the value of or substantially interfere
with the present
use of the property
affected thereby), all of which are listed
and briefly
described on the FMS Disclosure Schedule.
FMS
Existing Litigation.
"FMS Existing
Litigation" shall mean all pending
or, to the Knowledge of FMS, threatened claims, suits, audit
inquiries, charges,
workers compensation claims, litigation, arbitrations, proceedings,
governmental
investigations,
citations and
actions of any kind against FMS or any FMS
Subsidiary, or
affecting any assets or the business of FMS or any FMS
Subsidiary, all of
which are listed and briefly described on the FMS Disclosure
Schedule.
FMS
Existing Plans. "FMS
Existing Plans" shall
mean all Employee
Benefit
Plans of FMS and the FMS Subsidiaries including any tax-qualified
Benefit Plans
of such entities that have been terminated since December 31, 2004,
all of which
are listed on the FMS Disclosure Schedule.
FMS
Meeting. "FMS Meeting"
shall mean the special or annual meeting of the
FMS Shareholders for the purpose of approving the Merger, this
Agreement and the
transactions
contemplated by this Agreement, and for such other purposes as
may
be necessary or desirable.
FMS
Real Estate. "FMS Real
Estate" shall mean the parcels of real property
identified in the legal descriptions set forth in the FMS
Disclosure Schedule.
FMS
Shareholders. "FMS
Shareholders" shall
mean all Persons owning shares
of FMS Common Stock on the relevant date of inquiry.
FMS
Stock Option Plan. "FMS Stock Option Plan" shall mean the FMS
Financial
Corporation Stock Option Plan.
FMS
Stock Options.
"FMS Stock Options"
shall mean all options to purchase
shares of FMS Common
Stock granted
pursuant to the FMS
Stock Option Plan that
are outstanding as of the relevant time of inquiry, whether or not such options
are exercisable prior to the Effective Time.
FMS
Subsidiaries. "FMS
Subsidiaries" shall
mean those Subsidiaries of FMS
listed on the FMS
Disclosure
Schedule pursuant to Section 4.1(c) of this
Agreement.
Fraction Payment.
"Fraction
Payment" shall mean any cash paid for
fractional share interests paid pursuant to Section 2.6(c) of this
Agreement.
Hazardous Materials. "Hazardous Materials" shall mean: (a) any
petroleum or
petroleum products, radioactive materials, asbestos in any form
that is or could
become friable, urea
formaldehyde
foam insulation,
and transformers or
other
equipment that
contain dielectric
6
<PAGE>
fluid containing regulated levels of polychlorinated biphenyls (PCBs) and radon
gas; (b) any
chemicals,
materials or
substances
which are now defined
as or
included in the
definition
of "hazardous substances," "hazardous wastes,"
"hazardous materials,"
"extremely
hazardous wastes, restricted hazardous
wastes," "toxic
substances,"
"toxic pollutants," or words of similar
import,
under any Environmental Law; and (c) any other chemical,
material, substance
or
waste, exposure
to which is now prohibited, limited or regulated by any
governmental authority.
HOLA. "HOLA"
shall mean the Home
Owners' Loan Act, as
the same may be in
effect from
time to time,
including the rules and regulations of the OTS
promulgated thereunder.
Indebtedness.
"Indebtedness" shall
mean all liabilities
or obligations
(except deposit accounts) of the relevant Person, whether primary or secondary,
absolute or contingent: (a) for borrowed money; (b)
evidenced by notes,
bonds,
debentures or similar instruments; or (c) secured by Liens on any
assets of the
relevant Person.
Investment Securities.
"Investment
Securities" shall mean
all investment
securities of the relevant Person permitted to be held by the
relevant Person
under Law.
IRS.
"IRS" shall mean the United States Internal Revenue Service.
Knowledge. "Knowledge"
of a Person shall mean, for purposes of this
Agreement, when any
fact or matter is stated to be "to the Knowledge" of that
Person or words of similar import, the actual knowledge of the existence or
nonexistence of such fact or matter by the executive officers and
the Person and
its Subsidiaries.
Law.
"Law" shall mean any federal, state, local or other law, rule,
regulation, policy or
governmental
requirement
of any kind,
and the rules,
regulations and orders
promulgated
thereunder by any
regulatory
agencies or
other Persons.
Lien. "Lien"
shall mean,
with respect to any asset: (a) any mortgage,
pledge, lien, charge,
claim, restriction,
reservation,
condition,
easement,
covenant, lease, encroachment, title defect, imposition, security interest or
other encumbrance of
any kind; and (b) the interest of a vendor or lessor under
any conditional
sale agreement, financing lease or other title retention
agreement relating to such asset.
Material Adverse Effect. "Material Adverse Effect" shall mean any
change or
effect that is or is reasonably likely to be materially adverse to
the financial
condition or results of operations of the relevant Person and its
Subsidiaries,
taken as a whole
or that would reasonably be expected to materially and
adversely affect
the ability of the relevant Person to consummate the
transactions
contemplated in
this Agreement or to perform their material
obligations hereunder;
provided, however,
that "Material Adverse Effect" shall
not be deemed to include (i) the impact of actions or omissions of
a Party taken
with the prior written consent of the other in contemplation of the
transactions
contemplated by this
Agreement,
(ii) changes in laws and regulations or
interpretations
thereof that are generally applicable to the banking or savings
institutions
industries,
(iii) changes
in generally accepted accounting
principles, (iv)
expenses incurred in
connection with this
Agreement and the
Merger including
payments to be made
7
<PAGE>
pursuant to employment
and severance
agreements and the
termination of
other
benefit plans,
or (v) changes
attributable
to or resulting from changes in
general economic conditions generally affecting financial
institutions including
changes in interest rates.
Material Contract.
"Material Contract" shall mean any Contract of a Person
or any of its subsidiaries which constitutes:
(a) a lease of, or agreement to purchase or sell, any capital assets
involving in excess of $25,000 as to any asset or $100,000 in the
aggregate;
(b) any management, consulting, employment, personal service,
severance, agency or
other contract or
contracts providing
for employment or
rendition of services and which: (i) are in writing, or (ii) create other than
an at will employment relationship; or (iii) provide for any
commission, bonus,
profit sharing, incentive, retirement, consulting or additional
compensation;
(c) any agreements or notes evidencing any Indebtedness;
(d) a power of
attorney (whether
revocable or
irrevocable) given
to
any other person by the Person that is in force;
(e) an agreement
by the Person not to
compete in any
business or in
any geographical area;
(f) an agreement restricting the Person's right to use or disclose
any
information in its possession;
(g) a partnership, joint venture or similar arrangement;
(h) a license involving payments in excess of $10,000;
(i) an agreement or
arrangement
with any Affiliate which is not a
Subsidiary;
(j) an agreement for data processing services;
(k) any assistance
agreement, supervisory
agreement,
memorandum of
understanding, consent
order, cease and
desist order or other regulatory order
or decree with or by the SEC, OTS, FDIC, P.D.B. or any other regulatory
authority; or
(l) any other
agreement or set of
related agreements or series of
agreements which: (i)
involve an amount in excess of $25,000 on an annual basis
or $100,000 in the aggregate; or (ii) is not in the ordinary
course of business
of the Person or any Subsidiary of the Person.
8
<PAGE>
Merger.
"Merger" shall mean collectively the Corporate Merger, the
Mid-Tier Merger,
the Bank Merger and any other mergers by interim corporate
entities
necessary to
effectuate
the transactions contemplated by this
Agreement.
Merger
Corp. "Merger Corp." shall mean a federally chartered corporation
to be formed by Bancorp for the purpose of effecting the transactions
contemplated by this Agreement.
N.J.S.A.
"N.J.S.A." shall mean the New Jersey Statutes Annotated.
OTS.
"OTS" shall mean the Office of Thrift
Supervision,
United States
Department of the Treasury, or any successor agency.
Permits.
"Permits"
shall
mean all licenses, permits, approvals,
franchises,
qualifications,
permissions,
agreements, orders and
governmental
authorizations required for the conduct of the business of the
relevant Person.
Permitted
Liens. "Permitted Liens" shall mean those FMS or FMB
Existing
Liens which are expressly noted as Permitted Liens on a Disclosure
Schedule.
Person.
"Person" shall mean a
natural person,
corporation, bank,
trust,
partnership,
association,
governmental entity,
agency or branch or department
thereof, or any other legal entity.
P.D.B.
"P.D.B." shall mean the Pennsylvania Department of Banking.
Proxy Statement.
"Proxy Statement" shall mean the proxy
statement of FMS
to be filed
with the SEC and to be distributed to the FMS Shareholders in
connection with the
FMS Special Meeting
and the approval of
the Merger by the
FMS Shareholders
and which shall also
constitute a
prospectus with respect to
the shares of Bancorp Common Stock to be issued in the Merger.
Registration Statement. "Registration Statement" shall mean a
registration
statement on Form
S-1 (or other appropriate form) to be filed under the
Securities Act by
Bancorp in connection with the Merger for purposes of
registering the
shares of Bancorp Common Stock to be issued in the Merger
pursuant to this
Agreement and in connection with the Minority Stock Offering
for purposes of
registering the shares
of Bancorp Common Stock to be issued in
the Minority Stock Offering.
Regulatory
Approvals.
"Regulatory
Approvals"
shall mean all of the
approvals which are
conditions
precedent to
consummating
the Merger and the
Minority Stock Offering, as specified in Section 7.1(c) of this
Agreement.
Release.
"Release" shall mean any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into
the atmosphere, soil, surface water, groundwater or property.
SEC.
"SEC"
shall mean the United States Securities and Exchange
Commission.
9
<PAGE>
Securities
Act. "Securities Act" shall mean the Securities Act of 1933, as
amended, as the same may be in effect from time to time.
Subsidiary.
"Subsidiary"
shall mean
any corporation, financial
institution, joint
venture, partnership,
limited liability
company, trust or
other business entity:
(i) 25% or more of any outstanding class of whose voting
interests is directly or indirectly owned by the relevant Person,
or is held by
it with power to vote;
(ii) the election of a majority of whose directors,
trustees, general
partners or comparable
governing body is controlled in any
manner by the relevant
Person; or (iii) with respect to the management or
policies of which the relevant Person has the power, directly or
indirectly, to
exercise a
controlling
influence.
Subsidiary
shall include an indirect
Subsidiary of the relevant Person which is controlled in any manner
specified
above through one or
more corporations
or financial institutions which are
themselves Subsidiaries.
Other
Defined Terms.
The following
additional
terms are defined in
the
specific Section to which they relate:
TERM
SECTION
---------------------
-------
Acquisition Agreement
8.1(k)
Bank Merger
2.2(b)
Bancorp Proposal
6.2(b)
Bancorp Reports
5.9(a)
Benchmark Price
8.3(d)
Cash Consideration
2.5(a)(i)
Cash Conversion Number
2.5(b)(i)
Cash Election
2.5(d)(iii)
Cash Election Number
2.5(d)(iii)
Cash Election Shares
2.5(d)(iii)
Cash Proration Factor
2.5(e)(ii)
Certificates
2.5(d)(ii)
COBRA
3.12(d)
Corporate Merger
2.2 (a)
Costs
8.2(c)
Disclosure Schedule Change
3.2(d)
Effective Time
2.1
Election Deadline
2.5(d)(ii)
Election Form
2.5(d)(i)
Exchange Agent
2.6(a)
Exchange Fund
2.6(e)
Exchange Ratio
2.5(a)(ii)
Bancorp Reports
5.9
FMS Approvals
4.1(a)
FMS Reports
4.8
Indemnified Parties
3.5(a)
Minority Stock Offering
2.9(a)
Mixed Election
2.5(d)(iii)
10
<PAGE>
Merger Consideration
2.5(a)
Non-Election
2.5(d)(iii)
Non-Election Shares
2.5(d)(iii)
Non-Election Proration Factor
2.5(e)(ii)
Representative
2.5(d)(i)
Shortfall Number
2.5(e)(ii)
Special Payment
8.3(a)
Special Payment Event
8.3(a)
Stock Consideration
2.5(a)(ii)
Stock Conversion Number
2.5(b)(ii)
Stock Election
2.5(d)(iii)
Stock Election Number
2.5(d)(iii)
Stock Election Shares
2.5(d)(iii)
Stock Proration Factor
2.5(e)(i)
Superior Proposal
6.2(a)
ARTICLE II
THE MERGER
2.1
The Merger. This Agreement provides for the merger of FMS with and
into
Merger Corp., whereby
the stock of FMS and Merger Corp. outstanding as of the
Effective Time will be converted as described herein. The consummation of the
Merger shall be effected as promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article VII of this
Agreement. The
Merger
shall become effective
on the later of the date and time specified in Articles
of Merger filed with the OTS and the date and time specified in the
Certificate
of Merger to be filed
with the New Jersey
Office of the Secretary of State
pursuant to the
N.J.S.A. The date and time on which the
Merger shall
become
effective is referred to in this Agreement as the "Effective
Time."
2.2
Effect of the
Merger.
(a) The Corporate
Merger. FMS shall
merge with and into Merger Corp.
with Merger Corp. as the surviving entity (the "Corporate Merger").
Merger Corp.
and FMS shall enter into the Corporate Merger Agreement substantially in the
form of Exhibit A attached hereto. Immediately thereafter, Merger Corp. shall
merge with and into Bancorp with Bancorp as the surviving entity in accordance
with the Mid-Tier
Merger Agreement substantially in the form of Exhibit B
attached hereto.
(b) FMB shall merge
with and into
BMSB with BMSB as the surviving
institution (the "Bank Merger"). The Bank Merger shall be effected
pursuant to
the Bank Merger
Agreement substantially in the form of Exhibit C attached
hereto. As a result of
the Bank Merger,
the existence of FMB shall cease
and
BMSB shall be the surviving association and continue to existence as a
savings
bank under the laws of Pennsylvania.
(c) Charter and Bylaws of Bancorp. The Charter of Bancorp as in
effect
immediately prior
to the Effective Time shall be the Charter of Bancorp
immediately after
the
11
<PAGE>
Effective Time.
The Bylaws of Bancorp
as in effect
immediately
prior to the
Effective Time shall
be the Bylaws of Bancorp immediately after the Effective
Time.
(d) Directors and Officers of Bancorp. As of the Effective Time, the
directors and officers of Bancorp shall be the directors and
officers of Bancorp
serving immediately
prior the Effective Time, plus the current members of FMS's
Board appointed to Bancorp's Board pursuant to Section 3.16.
2.3
Conversion of Shares Upon Merger. At the Effective Time, by virtue of
the Merger and without any action on the part of Bancorp,
FMS or holders of
FMS
Common Stock, the following shall occur:
(a) FMS Common Stock.
Subject to Section
2.3(b) and Section
2.6(c),
each share of FMS Common Stock issued and outstanding immediately prior to the
Effective Time
shall be converted into the right to receive the Merger
Consideration, as defined and pursuant to Section 2.5.
(b) FMS Common
Stock Held by FMS.
All shares of FMS Common Stock
(other than shares of FMS Common Stock held directly or indirectly in trust
accounts, managed
accounts and the like or otherwise held in a fiduciary
capacity that are beneficially owned by third parties) that are (i)
owned by FMS
as treasury stock,
or (ii) owned
directly or
indirectly by FMS or
any of its
wholly owned
subsidiaries, shall be
cancelled and no Merger Consideration or
other consideration shall be delivered in exchange therefore.
2.4
FMS Stock Options. Upon the satisfaction of all conditions set
forth in
Article VII of this
Agreement, immediately
prior to the Effective
Time, each
holder of an
option that is outstanding under the FMS Stock Option Plan
immediately prior to
the Effective
Time, whether or not the option is then
exercisable, shall
receive from FMS in cancellation of such option (such
cancellation to be reflected in a written agreement) a cash payment
in an amount
determined by
multiplying
the number of shares
of FMS Common Stock subject to
option by such holder
by an amount equal to
the difference
between the Cash
Consideration and the
per share exercise price of such option, net of any cash
which must be
withheld under federal and state income tax requirements.
Immediately thereafter, FMS shall cancel each such option.
2.5
Merger
Consideration.
(a) Subject to the
provisions of this
Section 2.5, each share of FMS
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding shares to be cancelled pursuant to Section 2.3(b)) shall
be converted
at the election of the holder thereof, subject to and in accordance with the
procedures set forth in this Agreement, into:
(i) the right to receive in cash from Bancorp, without interest,
an amount equal to $28.00 (the "Cash Consideration");
13
<PAGE>
(ii) the right to receive from Bancorp that number of shares
of
Bancorp Common Stock
equal to the Exchange Ratio (as defined below) (the "Stock
Consideration"). The "Exchange Ratio" shall be equal to 2.80;
or
(iii) the right to
receive a combination
of the foregoing in
accordance with the procedures set forth in this Agreement.
"Merger Consideration"
means the Stock Consideration, the Cash
Consideration or any combination thereof.
(b) Maximum Conversion
Numbers. Subject to adjustment pursuant to
Section 2.5(c):
(i) the total number of shares of FMS Common Stock to be
converted into
the right to receive Cash Consideration for such shares
(including any such
shares subject to the
cash portion of a Mixed Election (as
defined below)),
shall be 42.5% of the
number of shares of
FMS Common
Stock
outstanding
immediately prior to
the Effective Time
(excluding
shares to be
cancelled pursuant to Section 2.3(b)) (the "Cash Conversion
Number"); (ii) the
total number of shares
of FMS Common Stock to
be converted
into the right to
receive Stock
Consideration for such
shares (including any such shares subject
to the stock portion of a Mixed Election) shall be 57.5% of the
number of shares
of FMS Common Stock outstanding immediately prior to the Effective Time
(excluding shares to
be cancelled
pursuant to Section 2.3(b)) (the "Stock
Conversion Number");
and (iii) the maximum
number of shares of
Bancorp Common
Stock which may be issued as Stock Consideration will be equal to the Exchange
Ratio multiplied by the Stock Conversion Number and the maximum amount of
cash
which will be paid as Cash Consideration will be equal to the Cash
Consideration
multiplied by Cash Conversion Number.
(c) Adjustments.
(i) Adjustments
To the Cash
Conversion
Number and the Stock
Conversion Number
Dependent Upon Minority Offering Appraisal. The Cash
Conversion Number and
Stock Conversion
Number will be adjusted to ensure the
OTS' requirement
that the percentage of Stock Consideration issued to FMS
Shareholders as Merger
Consideration
is less than 50% of
the amount of
stock
issued by Bancorp
publicly in the
Minority Stock
Offering is
satisfied.
In
addition, to the
extent necessary to
maintain the aggregate pro forma tangible
book value of the shares of Bancorp Common Stock to be issued in the Merger
at
not less than $65.609 million: (A) the Cash Conversion
Number will decrease
to
no lower than 35% of
the number
of shares of FMS Common Stock outstanding
immediately prior to
the Effective
Time (excluding shares to be cancelled
pursuant to Section 2.3(b)); and (B) the Stock Conversion
Number will
increase
to no greater than 65% of the number of shares of FMS Common
Stock outstanding
immediately prior
to the Effective Time (excluding shares to be canceled
pursuant to Section 2.3(b)). For purposes of this provision,
pro forma tangible
book value per share shall be as disclosed in the final appraisal
as approved by
the OTS in connection with the Minority Stock Offering.
(ii) Adjustment for
Dilution and Other Matters. If, between the
date of this Agreement and the Effective Time, each of the
outstanding shares of
FMS Common Stock shall have been changed into a different number of shares or
into a different class by reason of
14
<PAGE>
any stock dividend,
subdivision,
reclassification,
recapitalization,
split,
combination or
exchange of shares, the Exchange Ratio shall be adjusted
appropriately to
provide the
holders of FMS
Common Stock the same economic
effect as contemplated by this agreement prior to such event.
(d) Election Procedures.
(i) All elections contemplated by Section 2.5(a) shall be made
on
a form designed for that purpose prepared by FMS and reasonably acceptable to
Bancorp (an "Election
Form"). Holders of record of shares of FMS
Common stock
who hold such shares as nominees, trustees or in other
representative capacities
("Representatives")
may submit multiple
Election Forms, provided that such
Representative
certifies that each
such Election Form covers all the shares of
FMS Common Stock held by each such Representative for a particular beneficial
owner.
(ii) The Election
Form shall be mailed on the same date
as the
date on which the Proxy Statement is mailed to all holders of record
of shares
of FMS Common Stock as of the record date of the FMS Meeting.
Thereafter FMS and
Bancorp shall each use its reasonable and diligent efforts to mail the Election
Form to all persons
who become
record holders of shares of FMS Common
Stock
during the period between the record date for the Stockholders'
Meeting and 5:00
p.m., Eastern
Time, on the day five
(5) business days prior to the date of the
FMS Meeting. In order to be effective, an Election Form must be received
by the
Exchange Agent (as defined below), on or before 5:00 p.m.,
Eastern Time, on
the
business day prior to the FMS Meeting (the "Election Deadline"). An election
shall have been
properly made only if
the Exchange Agent
shall have
actually
received a
properly completed Election Form by the Election Deadline. An
Election Form shall be deemed properly completed only if accompanied by
one or
more certificates
theretofore
representing FMS Common Stock ("Certificate(s)")
(or customary affidavits and, if required by Bancorp pursuant to
Section 2.6(a),
indemnification
regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares of FMS
Common
Stock covered by such
Election Form,
together with duly
executed
transmittal
materials included
with the Election Form. Subject to the terms of this
Agreement and the
Election Form, the Exchange Agent shall have reasonable
discretion to determine wither any election has been properly or
timely made and
to disregard
immaterial
defects in any Election Form, and any good faith
decisions of the
Exchange Agent
regarding such matters shall be binding and
conclusive. All
elections will be revocable unit the Election Deadline and
thereafter shall be irrevocable.
(iii) Each Election
Form shall
entitle the holder of
shares of
FMS Common Stock (or the beneficial owner through appropriate and customary
documentation and
instructions) to (i) elect to receive the Cash Consideration
for all of such holder's shares (a "Cash Election"); (i i) elect to receive the
Stock Consideration for all of such holder's shares (a "Stock
Election"), (iii)
elect to receive the Cash Consideration with respect to some of such
holder's
shares and the Stock
Consideration
with respect to such holder's remaining
shares (a "Mixed
Election"), or (iv)
make no election or
indicate that such
holder has no
preference as to the
receipt of the Cash
Consideration
or the
Stock Consideration (a "Non-Election"). Shares of FMS Common Stock
as to which a
valid Cash Election has been made (including pursuant to a Mixed Election)
are
referred to herein as "Cash Election Shares." The aggregate number of
shares of
FMS Common Stock as to which a valid Cash Election is made is
referred to herein
as the "Cash Election
Number." Shares of FMS Common Stock as to
which a valid
Stock Election
has been made
(including
pursuant to a Mixed Election) are
referred to herein as "Stock Election Shares." The aggregate number
of shares of
14
<PAGE>
FMS Common Stock as to
which a valid Stock
Election is made is referred to
herein as the "Stock Election Number." Shares of FMS Common
Stock as to which a
Non-Election is deemed in effect are referred to as "Non-Election Shares." All
shares of FMS Common Stock of a holder whose properly completed
Election Form is
not received by the
Exchange Agent prior to the Election Deadline shall be
deemed to be
Non-Election Shares.
If the Exchange Agent
shall have determined
that any purported election was not properly made, such purported
election shall
be deemed to be of no force and effect and the shares of FMS Common Stock
subject to such
purported election
shall for purposes
hereof be deemed to
be
Non-Election Shares.
(e) Proration
Procedures. As soon as
practicable after the
Election
Deadline, Bancorp
shall cause the Exchange Agent to effect the allocation among
holders of FMS Common Stock of rights to receive the Cash
Consideration and
the
Stock Consideration as follows:
(i) If the Stock
Election Number
exceeds the Stock
Conversion
Number, then:
(A) all Cash Election
Shares and all
Non-Election
Shares
shall be converted into the right to receive the Cash
Consideration, and
(B) each holder of
Stock Election
Shares shall have the
right to receive:
(1) the number of shares of FMS Common Stock equal to
the product obtained
by multiplying (a) the
number of Stock Election
Shares held by such holder by (b) the Exchange Ratio by (c) a
fraction
(rounded to four decimal places) the numerator of which is the
Stock
Conversion Number (as
adjusted pursuant to Section 2.5(c)) and the
denominator of
which is the Stock Election Number (the "Stock
Proration Factor"), and
(2) cash in an amount equal to the product obtained by
multiplying (a) the
number of Stock Election shares held by such
holder by (b) the
Cash Consideration by (c) one minus the Stock
Proration Factor.
Except as provided herein and except as may be required by Section
2.5(c)(ii), no other
change shall be made with respect to the number of
shares of Bancorp Common Stock that may be received in respect to
shares of
FMS
Common Stock as to which a Stock Election has been made.
(ii) If the
Stock Election Number is less than the Stock
Conversion Number (as
adjusted pursuant to Section 2.5(c)) (the amount by which
the Stock Conversion
15
<PAGE>
Number exceeds
the Stock Election Number being referred to herein as the
"Shortfall Number"),
then all Stock Election Shares shall be converted into the
right to receive the Stock Consideration and the Non-Election Shares and Cash
Election Shares shall be treated in the following manner:
(A) if the Shortfall
Number is less than or equal to the
number of Non-Election Shares, then
(1) all Cash Election
Shares shall be
converted into
the right
to receive the Cash Consideration; and
(2) each holder of
Non-Election Shares
shall have the
right to receive
(a) the number of
shares of Bancorp
Common Stock
equal to the
product obtained by multiplying (x) the number of
Non-Election Shares
held by such holder by (y) the Exchange Ratio by
(z) a fraction (rounded to four decimal places) the numerator of
which
is the Shortfall
Number and the denominator of which is the total
number of Non-Election
Shares (the
"Non-Election
Proration Factor")
and (b) cash in an amount equal to the product obtained by
multiplying
(x) the number of
Non-Election Shares
held by such holder by (y) the
Cash Consideration by (z) one minus the Non-Election Proration
Factor;
or
(B) if the Shortfall Number exceeds the number of
Non-Election Shares, then:
(1) all Non-Election Shares shall be converted into the
right to receive the Stock Consideration; and
(2) each holder of Cash Election Shares shall have the
right to receive
(a) the number of
shares of Bancorp
Common Stock
equal to the product
obtained by
multiplying (x) the
number of Cash
Election Shares held by such holder by (y) the Exchange Ratio by
(z) a
fraction (rounded to
four decimal places)
the numerator of which
is
the amount
by which the Shortfall Number exceeds the number of
Non-Election Shares
and the denominator of which is the Cash Election
Number (the "Cash
Proration Factor") and
(b) cash in an amount equal
to the product obtained by multiplying (x) the number of Cash
Election
Shares held by such
holder by (y) the Cash
Consideration by (z)
one
minus the Cash Proration Factor.
2.6
Exchange of FMS Common
Stock.
(a) Surrender
of Certificates. As soon as practicable after the
Effective Time but in
no event later than five (5) business days following the
Effective Time a firm selected by Bancorp and reasonably
acceptable to FMS
(the
"Exchange Agent"),
pursuant to documentation reasonably acceptable to Bancorp
and FMS consistent with the terms hereof, shall mail to each holder
of record of
a Certificate who did not previously submit a properly completed Election Form
together with
duly executed transmittal materials prior to the Election
Deadline:
16
<PAGE>
(i) a form letter of
transmittal which
shall specify that
delivery
shall be effected, and
risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates (or a lost certificate
affidavit and bond
in a form reasonably
acceptable to the
Exchange Agent) to the
Exchange Agent;
and
(ii)
instructions for
use in effecting the surrender of the
Certificates in
exchange for the Merger Consideration (in the form or forms
determined in accordance with the provisions of Section
2.5). Upon surrender of
a Certificate for
cancellation
to the Exchange
Agent) or a lost
certificate
affidavit and bond in
a form reasonably
acceptable
to the Exchange Agent),
together with such
letter of transmittal,
duly executed, the holder of such
Certificate shall be entitled to receive, in exchange therfor, (i)
a certificate
evidencing the whole
number of shares of
Bancorp Common
Stock into which
the
shares of FMS
Common Stock theretofore represented by the Certificate so
surrendered, shall
have been converted
pursuant to the
provisions of
Section
2.5, if any,
plus (ii) a check for the aggregate amount of cash, without
interest, which such
holder would be
entitled to receive
pursuant to
Section
2.5, if any, including
any cash amount payable in lieu of fractional shares in
accordance with Section 2.6(c). Certificates so surrendered shall
be cancelled.
Bancorp shall direct the Exchange Agent to make such deliveries
within five (5)
business days of the
receipt of all
required documentation. If any Bancorp
Common Stock to be
exchanged for shares
of FMS Common Stock is to be delivered
in a name other than that in which the Certificate surrendered for exchange is
registered, it shall
be a condition to the
exchange that the
Certificate
so
surrendered shall be properly endorsed or otherwise in proper form
for transfer,
that all signatures shall be guaranteed by a member firm of any national
securities exchange
in the United States or the National Association of
Securities Dealers,
Inc., or by a commercial bank or trust company or other
financial institution
acceptable
to Bancorp having an office in the
United
States, and that the
person requesting the
payment shall either (a) pay to the
Exchange Agent any
transfer or other taxes required by reason of the payment to
a person other than the registered holder of the Certificate
surrendered, or (b)
establish to the
satisfaction of the
Exchange Agent that
such taxes have been
paid or are not payable. From and after the Effective
Time, there shall be no
transfers on the stock
transfer books of FMS
of any shares of FMS Common Stock
outstanding
immediately prior to
the Effective Time and any such shares of FMS
Common Stock presented
to the Exchange Agent shall be cancelled in exchange for
the Merger Consideration payable with respect thereto as provided
in Section 2.5
above.
(b) Failure to
Exchange FMS Common Stock. No dividends or other
distributions declared
after the Effective
Time with respect to Bancorp Common
Stock payable to the holders of record thereof after the Effective
Time shall be
paid to the holder of
any unsurrendered
Certificate
with respect to Bancorp
Common Stock
represented
thereby and no cash payment in lieu of fractional
shares shall be paid to any holder until the holder of record
shall surrender
such Certificate.
Subject to the effect,
if any, of applicable
law, after the
subsequent surrender
and exchange of a Certificate the holder thereof shall be
entitled to receive
any such dividends or distributions, without interest
thereon, which
theretofore
became payable with respect to the
Bancorp Common
Stock represented
by such Certificate. All dividends or other
distributions
declared on or after the Effective Time with respect to the Bancorp
Common Stock
and payable to the
holders of record
thereof on or after
the Effective
Time
which are payable to the holder of a Certificate not theretofore
surrendered and
exchanged for Bancorp
17
<PAGE>
Common Stock
pursuant to this
Section 2.6(b) shall be paid or delivered by
Bancorp to the Exchange Agent, in trust, for the benefit of such holders.
All
such dividends
and distributions held by the Exchange Agent for payment or
delivery to the holders of unsurrendered Certificates unclaimed at the end of
one (1) year from the
Effective Time
shall be repaid
or redelivered by the
Exchange Agent to
Bancorp after which time any holder of Certificates who has
not theretofore
surrendered such Certificates to the Exchange Agent, subject to
applicable law,
shall look only to
Bancorp for
payment or
delivery of such
dividends or
distributions,
as the case may be.
Any shares of Bancorp
Common
Stock or other
consideration
delivered or made available to the Exchange Agent
pursuant to this Section 2.6(b) and not exchanged for
Certificates
within one
(1) year after the
Effective Time shall
be returned by the
Exchange Agent to
Bancorp which shall
thereafter act as
exchange agent subject
to the rights of
holders of unsurrendered Certificates hereunder.
(c) Fractional
Shares.
No certificates or scrip representing
fractional shares of
Bancorp Common Stock shall be issued upon the surrender or
exchange of Certificates, no dividend or distribution of Bancorp
shall relate to
any fractional shares, and such fractional shares interests will
not entitle the
owner thereof to vote or assert any rights of a stockholder of
Bancorp. In lieu
of any fractional share of Bancorp Common Stock, Bancorp shall cause to be paid
to each holder of shares of FMS Common Stock who otherwise
would be entitled
to
receive a fractional share of Bancorp Common Stock an amount of
cash, rounded to
the nearest cent
(without interest), equal to the product of such fraction
multiplied by the Cash Consideration.
(d) Escheat.
Notwithstanding
anything in this Agreement to the
contrary, neither the
Exchange Agent nor any
party hereto shall be liable to a
former holder of FMS
Common Stock for any
consideration
delivered to a public
official pursuant to applicable escheat or abandoned property
laws.
(e) Exchange Fund.
On the date the
Effective Time occurs, Bancorp
shall deposit, or cause to be deposited, with the Exchange Agent
for the benefit
of the holders of FMS Common Stock, for exchange in accordance with
the terms of
this Agreement,
an aggregate
amount of cash,
sufficient to pay the
aggregate
Cash Consideration
payable pursuant to Section 2.5 of this
Agreement (plus an
additional amount of
cash sufficient to
cover amounts
payable in lieu of
any
fractional shares of FMS Common Stock ("Election Fund")).
(f) Investment of
Exchange Fund. The
Exchange Agent shall invest any
cash included in the
Exchange Fund as directed by Bancorp.
Any interest and
other income resulting
from such investments
shall be paid to Bancorp. In the
event the cash in the Exchange Fund shall be insufficient to fully satisfy all
of the payment
obligations to be made
by the Exchange Agent
hereunder,
then
Bancorp shall promptly deposit cash into the Exchange Fund in an
amount which is
equal to the
deficiency in the
amount of cash
required to fully
satisfy such
payment obligations.
2.7
Tax-Free
Reorganization. The
parties intend that
this Agreement be a
plan of reorganization within the meaning of Section 368(a) of the
Code and that
the Merger be a tax-free reorganization under Section
368(a) of the Code to the
extent that
shares of FMS
Common Stock are exchanged for shares of Bancorp
Common Stock as described in this Agreement. No
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party shall
voluntarily
take or cause
to be taken
any action which would
disqualify the Merger
as a tax-free
reorganization under
Section 368 of the
Code.
2.8
Reserved.
2.9
Minority Stock Offering.
In
connection with the
Merger and subject to the requirements of Section
6.3 of this Agreement,
Bancorp will take all steps necessary to conduct an
offering of shares of Bancorp Common Stock in accordance with the applicable
regulations of the OTS ("Minority Stock Offering"). Such shares
shall be offered
for sale at a price of $10.00 per share. Following the Minority
Stock Offering
and the Merger, no
more than 49% of the
outstanding shares of
Bancorp Common
Stock shall be owned by parties other than Beneficial MHC.
Following the Minority Stock Offering and the Merger,
Beneficial MHC
will
own at least 51% of Bancorp Common Stock issued and outstanding,
and the Bancorp
Common Stock
issued in the
Minority Stock Offering to parties other than
Beneficial MHC and in the Merger to the former FMS Shareholders
shall constitute
up to 49% of the issued and outstanding shares of Bancorp Common
Stock.
The
amount of Bancorp
Common Stock to be offered to parties other than
Beneficial MHC will be
determined
so that the total of
Bancorp Common
Stock
issued to parties other than Beneficial MHC in the Minority Stock
Offering, plus
shares of Bancorp Common Stock issued to FMS Shareholders in the Merger as
well
as shares reserved
for options or the
other future
compensation programs
for
directors and employees of Bancorp and its Subsidiaries, would constitute less
than 50% of the total
Bancorp Common
Stock issued and outstanding, and the
balance would be owned by Beneficial MHC.
2.10
Alternative Structure.
Notwithstanding
anything in this Agreement to
the contrary, Bancorp may specify (subject to FMS's approval, which
shall not be
unreasonably withheld)
that any of its or
Beneficial MHC's
direct or indirect
subsidiaries, and FMS and any of its direct or indirect
subsidiaries shall enter
into transactions
other than those
described in this Article II, in order
to
effect the purposes of this Agreement, and Bancorp and FMS shall
take all action
necessary and appropriate to effect, or cause to be affected, such
transactions;
provided, however,
that (i) other
than a change in
structure required by a
regulatory agency having jurisdiction over the transactions
contemplated by this
Agreement, no such
specification
shall materially and adversely affect the
timing of the consummation of the transactions contemplated herein; or (ii) no
such specifications
shall materially and
adversely affect the tax treatment or
economic benefits
of the Merger to the holders of FMS Common Stock or to
Beneficial MHC, its members or Subsidiaries.
ARTICLE III
OTHER AGREEMENTS
3.1
Confidentiality;
Access. The Confidentiality Agreement previously
entered into between Bancorp and FMS shall remain in full force and
effect. Upon
reasonable notice,
each
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party shall
afford to the
other's officers, employees, accountants, legal
counsel and other
representatives
access, during normal business hours, to all
of its and its
Subsidiaries'
properties, books,
contracts,
commitments
and
records; provided that
FMS shall have the right to redact any information from
such materials
which relates to assessments, analyses or discussions of a
possible Acquisition
engaged in by it prior
to the date of this Agreement, or
which, relates to
matters or issues
concerning its evaluation of the Merger or
its obligations
under this Agreement, or that would impair its Board of
Directors' ability to discharge its fiduciary duties.
3.2
Disclosure
Schedules.
(a) Contemporaneously
with
the execution and delivery of this
Agreement, FMS is
delivering to Bancorp the FMS Disclosure Schedule. The FMS
Disclosure Schedule is
deemed to constitute an integral part of this Agreement
and to modify the
representations,
warranties, covenants
or agreements of FMS
contained in this Agreement to the extent that such
representations, warranties,
covenants or agreements expressly refer to the FMS Disclosure
Schedule.
(b) Contemporaneously
with
the execution and delivery of this
Agreement, Bancorp is
delivering to FMS the Bancorp Disclosure Schedule. The
Bancorp Disclosure
Schedule is deemed to
constitute
an integral part of
this
Agreement and to modify the representations, warranties, covenants
or agreements
of Bancorp contained in this Agreement to the extent that such
representations,
warranties, covenants
or agreements
expressly refer to the Bancorp Disclosure
Schedule.
(c) All capitalized terms used in the Disclosure Schedules shall have
the definitions
specified in this
Agreement. All
descriptions or
listings of
documents contained in the Disclosure Schedules are qualified in their
entirety
by reference to the documents so described, true copies of which
heretofore have
been delivered or made available to the other. Except as expressly
stated to the
contrary in the
Disclosure Schedules,
disclosure of a matter
or document in a
Disclosure Schedule shall not be deemed to be an acknowledgment
that such matter
is material or outside the ordinary course of business of the
disclosing party.
Disclosure of any matter or event in any of the schedules included
in Disclosure
Schedule shall be deemed disclosure for purposes of any and
all other schedules
included therein
without the need of
specific cross
reference or duplication,
provided, however,
that disclosure of an agreement or other document in a
listing of agreements
or documents without
any summary or
description of the
substance thereof
shall be deemed
disclosure only for purposes of the schedule
in which such agreement or other document is listed.
(d) Updates.
At least 15 days prior to the Closing Date and
immediately prior to
the Closing Date, each party shall, to the extent a matter
required to be reported occurs, update its Disclosure Schedule by
written notice
to the other to reflect any matters which have occurred from and after
the date
of this Agreement
which, if existing on the date of this Agreement, would have
been required to be described in the Disclosure Schedule.
3.3
Duties Concerning Representations. Each party to this Agreement
shall:
(a) to the extent
within its control, use best efforts to cause all of its
representations and
warranties
20
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contained in this
Agreement to be true and correct in all material respects at
the Effective Time with the same force and effect as if such
representations and
warranties had
been made on and as of the Effective Time; and (b) use best
efforts to cause all of the conditions precedent set forth in Article VII of
this Agreement to be satisfied. Neither party shall take any
action, nor agree
to commit to take any action, which would or reasonably can be
expected to: (i)
adversely affect the
ability of either
Bancorp or FMS to obtain the Regulatory
Approvals; (ii)
adversely affect a
party's ability to perform its covenants or
agreements under this Agreement; or (iii) result in any of the
conditions to the
Merger set forth in Article VII not being satisfied.
3.4
Deliveries of Information; Consultation. From time to time prior to
the
Effective Time,
and subject to the
limitations on access
rights under Section
3.1 of this Agreement and to the Confidentiality Agreement:
(a) Deliveries. FMS
and Bancorp shall furnish promptly to the other:
(i) a copy of each significant report, schedule and other document filed
by or
received by it or its
Subsidiaries pursuant
to the requirements of
federal or
state securities or
banking Laws promptly
after such documents
are available;
(ii) its consolidated
monthly financial
statements (as
prepared in accordance
with its normal accounting procedures) promptly after such
financial statements
are available; (iii) a summary of any action taken by its, or its
Subsidiaries',
Boards of Directors,
or any committee
thereof; and (iv) all
other significant
information concerning
it and its Subsidiaries' business, properties and
personnel as the other may reasonably request.
(b) Consultation.
Representatives of FMS and Bancorp shall confer and
consult with
one another on a regular and frequent basis to report on
operational matters
and the general status of their respective ongoing business
operations.
(c) Regulatory
Matters. Representatives of FMS and Bancorp shall
discuss with one another any matters directly affecting them in which any
state
or federal regulator of FMS or Bancorp or any of their respective
Subsidiaries,
is involved.
(d) Litigation.
FMS and Bancorp shall
provide prompt notice to the
other of any litigation, arbitration, proceeding, governmental investigation,
citation or action of any kind which may be commenced, threatened
or proposed by
any Person concerning
the legality, validity
or propriety of the
transactions
contemplated by this Agreement. If any such litigation is
commenced against any
party to this
Agreement,
the parties shall cooperate in all respects in
connection with such litigation.
3.5
Directors' and
Officers' Indemnification and Insurance.
(a) Indemnification.
For a period
of six (6)
years following the
Effective Time,
Bancorp shall
indemnify, and advance
expenses in matters that
may be subject to
indemnification
to, persons who served as directors or
officers of FMS or FMB or any FMS Subsidiaries on or before the Effective
Time
("Indemnified
Parties") with
respect to
liabilities
and claims (and
related
expenses, including
fees and disbursements of counsel) made against them
resulting from their
service as such prior to the Effective Time in accordance
with and
21
<PAGE>
subject to
the requirements and other provisions of the Certificate of
Incorporation and
Bylaws of FMS in effect as of the date hereof and applicable
provisions of Law.
(b) Director and Officer Liability Insurance. Bancorp shall purchase
or cause FMS to purchase and keep in force for a period of six (6) years
following the Effective Time directors' and officers'
liability insurance to
provide coverage for
acts or omissions of the type and in the amount currently
covered by FMS's and
the FMB's existing
directors'
and officers' liability
insurance for acts or omissions occurring on or prior to the
Effective Time.
(c) Parties Benefited. The provisions of this Section 3.5 are
intended
to be for the benefit of, and shall be enforceable by, each
Indemnified
Party,
his or her heirs and his or her representatives, and shall survive
the Effective
Time and any merger, consolidation or reorganization of
Bancorp.
3.6
Letter(s) of Accountants. FMS shall use its best efforts to cause
to be
delivered to Bancorp a letter of Grant Thornton LLP, FMS's
independent auditors,
and/or a letter of PricewaterhouseCoopers
LLP,
FMS's former independent
auditors, each dated a
date within three (3)
business days before
the date on
which the Registration
Statement is declared
effective, and each
addressed to
Bancorp, in form and
substance reasonably satisfactory to Bancorp and each
customary in scope and substance for letters delivered by independent public
accountants in
connection
with registration statements similar to the
Registration Statement and proxy statements similar to the Proxy
Statement.
3.7
Legal Conditions to Merger. Each party to this Agreement will: (a)
take
all reasonable actions
necessary to comply promptly with all legal requirements
which may be imposed on it with respect to the Merger (including making all
filings and requests in connection with the Regulatory Approvals and furnishing
all information required in connection therewith); (b) promptly cooperate with
and furnish
information
to the other party in connection with any such
requirements imposed
upon any of them in
connection with the
Merger; and (c)
take all reasonable
actions necessary to obtain (and will
cooperate with the
other party in obtaining) any consent, authorization, order or approval of, or
any exemption by, any
governmental
entity or other public
or private Person,
required to be obtained by the parties to this Agreement in
connection with
the
Merger or the taking of any action contemplated thereby or by this
Agreement.
3.8
Stock Listings.
FMS shall use its
reasonable best efforts to maintain
the listing
of FMS Common Stock on the Nasdaq Global Market through the
Effective Time.
3.9
Announcements. Subject
to each party's disclosure obligations imposed
by Law, FMS and Bancorp will cooperate with each other in the
development
and
distribution of all news releases and other public information
disclosures with
respect to this
Agreement or any of the transactions contemplated hereby and
shall not issue any public announcement or statement with
respect thereto prior
to consultation with the other party.
3.10 Best Efforts. Subject to the terms and conditions of this
Agreement and subject to the fiduciary duties of the Board of Directors
of each
party, each of the
parties agrees to use
its
22
<PAGE>
best efforts to take, or cause to be taken, all action and to do,
or cause to be
done, all things necessary or advisable to consummate the transactions
contemplated by this Agreement including, but not limited to, the
Merger.
3.11
Employee and Managerial Matters.
(a) Employees. FMB
will continue to employ substantially all present
employees who are employed without employment contracts as employees at
will,
subject to the
determinations of FMB
management
and the FMB's and
Bancorp's
boards of directors.
(b) Bancorp Executive
Officers. Following the Effective
Time, the
Executive Officers of Bancorp shall be as set forth in Exhibit
F.
(c) Bonus and Retention Program. Officers and employees of FMB
and/or
FMS will be paid bonus
and retention
awards as disclosed on FMS Disclosure
Schedule 3.11(c).
(d) Employee
Severance.
Employees of FMS and FMB who continue as
employees after
the Effective Time will be eligible to receive severance
benefits on the terms set forth on FMS Disclosure Schedule
3.11(d).
3.12
Employee Benefit Matters.
(a) FMS Defined
Benefit Plan. The FMS Defined Benefit Plan shall
continue, except to
the extent
inconsistent
with Law, after the Merger for
employees of FMB until such time as Bancorp's Board of Directors
elects to take
alternative action.
(b) Health and Welfare
Benefits. After the Merger, Bancorp shall
continue, except to the extent not consistent with Law, FMB's
health and welfare
benefit plans,
programs, insurance and policies
until such time as
Bancorp's
Board of Directors elects to take alternative action.
(c) Replacement. With
respect to each employee and health and welfare
benefit plan or program that replaces a FMS or FMB Existing
Plan, for purposes
of determining
eligibility to participate and vesting, service with FMS or an
Affiliate of FMS shall be treated as service with Bancorp; provided, however,
that such service shall not be recognized to the extent that such
recognition
would result in a
duplication of
benefits. Such service
shall also apply
for
purposes of satisfying any waiting periods, actively-at-work requirements, and
evidence of insurability requirements. No pre-existing condition limitations
will apply to any of FMB's employees or their dependents who were participants
in the FMS or FMB
Existing Plans
comparable
to the plan in
question at the
Closing Date. Each of the FMB's continuing employees and their dependents
shall
be given credit for amounts paid under a corresponding benefit plan during the
same period for purposes of applying deductibles, co-payments and out-of-pocket
maximums as
though such amounts had been in accordance with the terms and
conditions of the corresponding FMS Existing Plan.
23
<PAGE>
(d) COBRA.
Until the Effective Time, FMS shall be liable for all
obligations for continued health coverage pursuant to Section 4980B of the
Code
and Sections
601 through 609 of ERISA ("COBRA") with respect to each FMS
qualifying beneficiary
(as defined in COBRA) who incurs a qualifying event (as
defined in COBRA) before the Effective Time. Bancorp shall be
liable for (i) all
obligations for
continued health
coverage under COBRA with respect to each FMS
qualified beneficiary
(as defined in COBRA)
who incurs a qualifying event (as
defined in COBRA) from
and after the
Effective Time,
and (ii) for
continued
health coverage
under COBRA from and after the Effective Time for each FMS
qualified beneficiary who incurs a qualifying event before the
Effective Time.
(e) As of the Effective Time, FMB employees that shall continue as
Bancorp or
BMSB employees immediately thereafter shall be eligible to
participate in any
employee stock
ownership plan ("ESOP") that is
purchasing
Bancorp Common Stock in the Minority Stock Offering or immediately
thereafter,
on the same basis as all other Bancorp or BMSB employees as of the Effective
Time, and such FMB employees shall receive credit for employment service with
FMB prior to the
Effective Time in the
same manner as other
Bancorp or BMSB
employees shall
receive credit for employment service with Bancorp and BMSB
prior to the Effective
Time for purposes of
eligibility to participate in such
ESOP and the vesting of benefits under such ESOP.
(f) As of the Effective Time, FMB employees that shall continue as
Bancorp or
BMSB employees immediately thereafter shall be eligible to
participate in any tax-qualified defined contribution plan, including any
401k
plan then maintained
or thereafter
established by Bancorp
or BMSB on the same
basis as all other Bancorp or BMSB employees employed as of the Effective
Time,
and such FMB employees
shall receive
credit for
employment
service with FMB
prior to the Effective
Time for purposes of
eligibility to participate in such
plan and vesting of benefits under such plan.
3.13
Listing of Bancorp Common Stock. Bancorp shall use its best efforts
to
cause the shares of Bancorp Common Stock to be issued pursuant to
this Agreement
to be approved
for listing on the Nasdaq Global Market subject to official
notice of issuance, prior to the Effective Time.
3.14
Affiliates.
FMS shall use its best
efforts to obtain and
deliver to
Bancorp on the
date hereof a signed representation letter as to certain
restrictions on resale
substantially in the
form of Exhibit E hereto from each
executive officer and
director of FMS and
each stockholder
of FMS who may be
deemed an "affiliate" of FMS within the meaning of such term as
used in Rule 145
under the Securities
Act, and shall use best efforts to
obtain and deliver to
Bancorp a signed
representation letter
substantially in the
form of Exhibit E
from any person who
becomes an
executive officer or director of FMS or any
stockholder who becomes such an "affiliate" after the date hereof
as promptly as
practicable after
(and shall use its reasonable best efforts to obtain and
deliver within five (5) business days after) such person achieves
such status.
3.15
Disclosure
Controls. (a) Between the date of this
Agreement and the
Effective Time, FMS shall maintain disclosure controls and procedures that
are
effective to
ensure that material information relating to FMS and FMS
Subsidiaries is made
known to the President
and
24
<PAGE>
Chief Executive
Officer and Chief Financial Officer of FMS to permit FMS
to
record, process,
summarize and report
financial data in a
timely and accurate
manner; (ii) such
officers shall
promptly disclose to
FMS' auditors and audit
committee any
significant
deficiencies in the
design or operation of internal
controls which could adversely affect FMS' ability to record
process, summarize
and report financial
data, any material weaknesses identified in internal
controls, and any
fraud, whether or not
material, that
involves management or
other employees who have a significant role in FMS' internal
controls; and (iii)
FMS shall take
appropriate corrective
actions to address any
such significant
deficiencies or material weaknesses identified in the internal
controls.
(b) Between the date of this Agreement and the Effective Time, FMS
shall, upon reasonable
notice during normal business hours, permit Bancorp (a)
to meet with the
officers of FMS and
any FMS
