AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT
AND PLAN OF REORGANIZATION, dated as of August 12, 2004
("Agreement"), between ESB Financial Corporation ("ESB"), a Pennsylvania
corporation headquartered in Ellwood City, Pennsylvania, and PHSB Financial
Corporation ("PHSB"), a Pennsylvania
corporation
headquartered in Beaver Falls,
Pennsylvania.
WITNESSETH:
WHEREAS, the
Boards of Directors of ESB and PHSB have determined that it is
in the best interests of their respective companies and their stockholders to
consummate the business combination
transactions provided
for herein, including
the merger of PHSB with and into ESB
subject to the terms
and conditions
set
forth herein; and
WHEREAS,
the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection
with the
transactions contemplated hereby; and
WHEREAS, as a
material inducement to ESB to enter into this Agreement,
and
simultaneously with the execution of this
Agreement,
each director of PHSB
is
entering into an agreement, in the form of Exhibit A hereto,
pursuant to which
such persons have agreed, among other things, to vote their shares of PHSB
Common Stock (as defined herein) in favor of this
Agreement and, as a
material
inducement to PHSB to enter into this
Agreement,
and simultaneously with the
execution of this Agreement, each director
of ESB is entering into an agreement,
in the form of Exhibit B hereto,
pursuant to which such
persons have agreed,
among other things, to vote their shares of
ESB Common Stock (as defined herein)
in favor of this Agreement (collectively,
the "Stockholder Agreements").
NOW, THEREFORE,
in consideration of
the premises and the mutual covenants,
representations, warranties and agreements herein
contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01. THE
MERGER. Subject to the terms and conditions of this Agreement
and
the Agreement of Merger, dated as of the date hereof,
between ESB and PHSB,
a
copy of which is attached hereto as Exhibit
C, at the Effective Time (as defined
in Section 1.02 hereof), PHSB shall be merged with and into
ESB in accordance
with Chapter 19, Subchapter C of the Pennsylvania Business Corporation Law
("PBCL") (the "Merger"), with ESB as the surviving
corporation
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(hereinafter sometimes called the
"Surviving Corporation"). Each share of common
stock, par value $.10 per share,
of PHSB ("PHSB Common Stock") outstanding
immediately prior to the Effective Time (other
than shares held other than in a
fiduciary capacity by PHSB (including
treasury shares) or ESB or any of their
respective wholly-owned subsidiaries)
shall, by virtue of the Merger and without
any further action by the holder thereof, be converted into and represent
the
right to receive shares of common stock,
par value $.01 per
share, of ESB ("ESB
Common Stock") or $27.00 in cash ("Merger Consideration"), as provided in
Section 1.03 hereof and subject to the terms, conditions, limitations and
procedures set forth in this Agreement and
the Agreement of Merger.
1.02.
EFFECTIVE TIME. The
Merger shall become effective on the date and at
the time that Articles of Merger are filed with
the Secretary
of State of the
Commonwealth of Pennsylvania pursuant to Section 1927 of the PBCL, unless a
later date and time is specified as the effective time in such Articles of
Merger ("Effective Time"). A closing (the "Closing") shall take place
immediately prior to the Effective Time at
10:00 a.m., on the fifth business day
following the receipt of all necessary
regulatory or governmental approvals and
consents and the expiration of all
statutory waiting
periods in respect thereof
and the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to the consummation of the Merger specified in Article V of this
Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the
Closing), at the offices of
ESB, 600 Lawrence Avenue, Ellwood City,
Pennsylvania, or at such other place, at
such other time, or on such other date as the
parties may mutually
agree upon.
At the Closing, there shall be delivered to ESB and PHSB the opinions,
certificates and other documents required to be delivered under Article V
hereof.
1.03
CONVERSION OF SHARES.
At the Effective Time,
by virtue of the Merger
and without any action on the part of a
holder of shares of PHSB Common Stock:
(a) Each share of ESB Common Stock that is issued and outstanding
immediately prior to the Effective Time shall
remain issued and outstanding and
shall be unchanged by the Merger.
(b) All
shares of PHSB
Common Stock owned by PHSB (including treasury
shares) or ESB or any of their respective wholly-owned subsidiaries, in each
case other than in a fiduciary capacity,
shall be canceled and retired and shall
not represent capital stock of the Surviving Corporation and shall not be
exchanged for shares of ESB Common Stock,
cash or other consideration.
(c) (1) Subject
to Sections 1.04 and 1.05, each share of PHSB Common
Stock
issued and outstanding at the Effective Time (other than
shares to be canceled
in accordance with Section 1.03(b)) shall be converted into, and shall be
canceled in exchange for, the right to receive, at the election of the holder
thereof:
(i) the number of shares of ESB Common
Stock which is equal to the
quotient (the
"Exchange Ratio") determined by dividing (x) $27.00
by (y)
the Average Share Price of the ESB Common
Stock (the "Per Share Stock
Consideration"),
or
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(ii) a cash amount equal to $27.00 per share of PHSB Common Stock
(the
"Per Share Cash
Consideration").
(2) For purposes of this Agreement:
(i) the "Aggregate Cash Consideration" shall amount to the product of
the number of
shares of PHSB Common
Stock (other
than PHSB Common
Stock
owned by PHSB
(including treasury
shares) or ESB other than in a fiduciary
capacity)
outstanding at the Effective Time multiplied by .50 multiplied
by
$27.00; and
(ii) the "Average
Share Price" of the
ESB Common Stock shall mean the
average of the closing sales price of a share of ESB Common
Stock, as
reported on the
Nasdaq Stock Market's
National Market (as reported by an
authoritative
source), for the 20
trading-day period ending with the close
of business on
the business day which is three days preceding the Effective
Time; provided,
however, that if a
Triggering Event (as defined in Section
1.03(c)(2)(iii))
has occurred, then the Average Share Price of the ESB
Common
Stock shall mean the
average of the closing
sales price of a share
of ESB Common
Stock, as reported on the Nasdaq
Stock Market's National
Market (as
reported by an
authoritative source),
for the 20
trading-day
period ending
with the close of business on the fifth business day prior to
the date of this
Agreement.
The closing
sales prices during the 20-day
trading
period shall be
subject to appropriate
adjustments
in the event
that,
during such 20-day
trading period,
the outstanding shares of ESB
Common
Stock shall have been increased, decreased, changed into or
exchanged for a
different number or
kind of shares or
securities through
reorganization,
recapitalization,
reclassification,
stock dividend, stock
split, reverse
stock split or other like changes in ESB's capitalization.
(iii) "Triggering
Event" shall mean any
one or more of the following
events:
(a) ESB shall have authorized, recommended, publicly proposed
or
publicly
announced an intention to authorize, recommend or propose, or
entered into an
agreement with any person to effect any merger in which the
shareholders
of ESB immediately prior to such merger would not own more
than 50% of the
outstanding
capital stock of the surviving corporation
after such
merger, or the sale by
ESB of more than 25% of its consolidated
assets or
liabilities
not in the
ordinary course of business (an "ESB
Acquisition
Transaction"); or
(b) Any person
shall have become the
beneficial
owner of more
than 25% of the
issued and outstanding shares of ESB Common Stock or if ESB
shall
have publicly announced its recommendation in support of, or
non-objection
to, another party
acquiring more than
25% of the issued and
outstanding
shares of ESB Common Stock.
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1.04 ELECTION
AND EXCHANGE PROCEDURES
(a) The parties
shall designate an exchange agent to act as agent (the
"Exchange Agent") for purposes of
conducting
the election
procedure and the
exchange procedure as described in Sections
1.04 and 1.05.
No later than five
(5) business days following the Effective Time, ESB shall cause the Exchange
Agent to mail or make available to each holder of record of a
certificate
or
certificates which immediately prior to the Effective Time
represented issued
and outstanding shares of PHSB Common Stock (i) a notice and letter of
transmittal (which shall specify that delivery shall be effected and risk of
loss and title to the certificates theretofore representing shares of PHSB
Common Stock shall pass only upon proper
delivery of such
certificates
to the
Exchange Agent) advising such holder of the
effectiveness of the
Merger and the
procedure for surrendering to the Exchange Agent such certificate or
certificates which immediately prior to the Effective Time
represented issued
and outstanding shares of PHSB Common Stock in
exchange for the
consideration
set forth in Section 1.03(c) hereof
deliverable in respect
thereof pursuant
to
this Agreement and (ii) an election form in such form as ESB and PHSB
shall
mutually agree ("Election Form"). Each
Election Form shall permit the holder (or
in the case of nominee record holders, the beneficial owner through proper
instructions and documentation) (i) to elect to receive ESB Common
Stock with
respect to the designated number of such holder's PHSB Common Stock as
hereinabove provided (the "Stock Election Shares"), (ii) to elect to receive
cash with respect to the designated number
of such holder's PHSB Common Stock as
hereinabove provided (the "Cash Election Shares"), or (iii) to indicate that
such holder makes no such election with
respect to such holder's shares of PHSB
Common Stock (the "No-Election Shares"). Nominee record holders who hold
PHSB
Common Stock on behalf of multiple
beneficial owners
shall indicate how many of
the shares held by them are Stock
Election Shares, Cash Election Shares and
No-Election Shares. Any shares of PHSB Common
Stock with respect to
which the
holder thereof shall not, as of the Election Deadline, have made such an
election by submission to the Exchange
Agent of an effective, properly completed
Election Form shall be deemed to be
No-Election Shares.
(b) The term
"Election Deadline" shall mean 5:00 p.m., Eastern Time, on the
20th business day following but not including the date of mailing of the
Election Form or such other date as ESB and
PHSB shall mutually agree upon.
(c) Any
election to receive ESB Common Stock or cash 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 will be
properly completed only if accompanied by
certificates
representing all shares
of PHSB Common Stock covered thereby, subject to the provisions of subsection
(h) below of this Section 1.04. Any Election Form may be revoked
or changed by
the person submitting such Election Form to
the Exchange Agent by written notice
to the Exchange Agent only if such notice is
actually received by
the Exchange
Agent at or prior to the Election
Deadline. The certificate or certificates
representing PHSB Common Stock relating to any revoked
Election Form shall
be
promptly returned without charge to the
person submitting the
Election Form to
the Exchange Agent. The Exchange Agent shall have reasonable discretion to
determine when any election, modification or revocation is
received and whether
any such election, modification or
revocation has been properly made.
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(d) Within ten
business days after the Election Deadline, the Exchange
Agent shall effect the allocation among holders of PHSB Common Stock
of rights
to receive ESB Common Stock or cash in the Merger in accordance with the
Election Forms as follows:
(i) If the number of
Cash Election
Shares times the Per Share Cash
Consideration is
less than the Aggregate Cash Consideration, then:
(1) all Cash Election Shares shall be converted into the right
to
receive cash,
(2) No-Election
Shares shall then be
deemed to be Cash Election
Shares to the
extent necessary to have the total number of Cash
Election Shares
times the Per
Share Cash Consideration equal the
Aggregate Cash
Consideration.
If less than all of the No-Election
Shares need to be treated as Cash Election Shares, then the Exchange
Agent shall select which No-Election Shares shall be treated as
Cash
Election Shares in such manner as the Exchange Agent shall
determine,
and all remaining
No-Election Shares
shall thereafter be
treated as
Stock Election Shares,
(3) If all of the No-Election Shares are treated as Cash
Election
Shares under the
preceding subsection and the total number of Cash
Election Shares times
the Per Share Cash
Consideration is less
than
the Aggregate
Cash Consideration, then the Exchange Agent shall
convert on a pro rata basis as described below a sufficient
number of
Stock Election Shares
into Cash Election
Shares ("Reallocated
Cash
Shares") such that the sum of the number of Cash Election
Shares plus
the number of
Reallocated
Cash Shares times the Per Share Cash
Consideration equals
the Aggregate Cash Consideration, and all
Reallocated Cash
Shares will be
converted into the
right to receive
cash, and
(4) the Stock
Election Shares which are not Reallocated Cash
Shares shall be converted into the right to receive ESB Common
Stock.
(ii) If the number of
Cash Election
Shares times the Per
Share Cash
Consideration is
greater than the Aggregate Cash Consideration, then:
(1) all Stock Election Shares and all No-Election Shares shall
be
converted into the right to receive ESB Common Stock,
(2) the Exchange Agent shall convert on a pro rata basis as
described below
a sufficient number of Cash Election Shares
("Reallocated Stock
Shares") such that the
number of remaining
Cash
Election Shares
times the Per Share
Cash Consideration equals the
Aggregate Cash
Consideration, and all
Reallocated Stock Shares shall
be converted into the right to receive ESB Common Stock, and
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(3) the Cash
Election Shares which are not Reallocated Stock
Shares shall be converted into the right to receive cash.
(iii) If the number of Cash Election Shares times the Per Share
Cash
Consideration
is equal to the Aggregate Cash Consideration, then
subparagraphs
(d)(i) and (ii) above shall not apply and all
No-Election
Shares and all
Stock Election
Shares will be
converted into the
right to
receive ESB
Common Stock.
(e) In the event
that the Exchange
Agent is required
pursuant to
Section
1.04(d)(i)(3) to convert some Stock Election Shares into Reallocated Cash
Shares, each holder of Stock Election Shares shall be allocated a pro rata
portion of the total Reallocated Cash
Shares. In the event the Exchange Agent is
required pursuant to Section 1.04(d)(ii)(2)
to convert some Cash Election Shares
into Reallocated Stock Shares, each holder of Cash Election Shares shall be
allocated a pro rata portion of the total
Reallocated Stock Shares.
(f) At the
Effective Time, ESB shall deliver to the Exchange
Agent the
number of shares of ESB Common Stock
issuable and the
amount of cash payable in
the Merger (which shall be held by the
Exchange Agent in
trust for the holders
of PHSB Common Stock and invested
only in deposit
accounts of an
FDIC-insured
institution, direct obligations of the U.S.
Government or obligations issued or
guaranteed by an agency thereof which carry the full faith and credit of
the
United States). No later than ten business
days after the Election Deadline, the
Exchange Agent shall distribute ESB Common Stock and cash as
provided herein.
The Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the shares of ESB
Common Stock held by it from time to
time hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with
respect to such shares for the account of
the persons entitled thereto.
(g) After the
completion
of the foregoing
allocation,
each holder of an
outstanding certificate or certificates which
prior thereto
represented shares
of PHSB Common Stock who surrenders such certificate or certificates to the
Exchange Agent will, upon acceptance
thereof by the
Exchange Agent, be entitled
to a certificate or certificates
representing
the number of full
shares of ESB
Common Stock and/or the amount of cash into
which the aggregate number of shares
of PHSB Common Stock previously
represented by such
certificate or certificates
surrendered shall have been converted pursuant to this Agreement and, if
such
holder's shares of PHSB Common Stock have
been converted into ESB Common Stock,
any other distribution theretofore paid with respect to ESB Common Stock
issuable in the Merger, in each case
without interest. The
Exchange Agent shall
accept such certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. Each outstanding
certificate which prior to the Effective Time
represented PHSB Common Stock and
which is not surrendered to the Exchange
Agent in accordance with the procedures
provided for herein shall, except as otherwise herein provided, until duly
surrendered to the Exchange Agent be deemed
to evidence ownership
of the number
of shares of ESB Common Stock or the right to receive the amount of cash into
which such PHSB Common Stock shall have been converted. After the Effective
Time, there shall be no further transfer
on the records of PHSB of certificates
representing shares of PHSB Common Stock and if
such certificates are presented
to
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PHSB for transfer, they shall be cancelled against
delivery of certificates for
ESB Common Stock or cash as hereinabove
provided. No dividends which have been
declared will be remitted to any person
entitled to receive shares of ESB Common
Stock under this Section 1.04 until such
person surrenders
the certificate or
certificates representing PHSB Common Stock, at
which time such dividends shall
be remitted to such person, without
interest.
(h) ESB shall not be
obligated to deliver cash and/or a certificate or
certificates representing shares of ESB Common Stock to
which a holder of PHSB
Common Stock would otherwise be entitled as a result of the
Merger until such
holder surrenders the certificate or certificates
representing
the shares of
PHSB Common Stock for exchange as provided
in this Section 1.04,
or, in default
thereof, an appropriate affidavit of loss and indemnity
agreement and/or a bond
as may be required by ESB. If any
certificates
evidencing shares of
ESB Common
Stock are to be issued in a name other than that in which the certificate
evidencing PHSB Common Stock surrendered in
exchange therefor is registered, it
shall be a condition of the issuance
thereof that the certificate so surrendered
shall be properly endorsed or accompanied by an executed form of assignment
separate from the certificate and otherwise
in proper form for transfer and that
the person requesting such exchange pay to the Exchange
Agent any transfer
or
other tax required by reason of the
issuance of a certificate for shares of ESB
Common Stock in any name other than that of the registered holder of the
certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid
or is not payable.
(i) Any portion
of the shares of ESB Common Stock and cash delivered to the
Exchange Agent by ESB pursuant to Section
1.04(f) that remains
unclaimed by the
stockholders of PHSB for six months
after the Effective Time (as well as any
proceeds from any investment thereof), at
the request of ESB, shall be delivered
by the Exchange Agent to ESB. After
delivery to ESB, any
stockholders
of PHSB
who have not theretofore complied with Section 1.04(g) shall thereafter look
only to ESB for the consideration deliverable in respect of each
share of PHSB
Common Stock such stockholder holds as determined pursuant to this Agreement
without any interest thereon. If outstanding certificates for shares of PHSB
Common Stock are not surrendered or the
payment for them is not claimed prior to
the date on which such shares of ESB Common Stock or cash 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 ESB
(and to the extent not in its
possession shall be delivered to it),
free and clear of all
claims or interest
of any person previously entitled to such property.
Neither the Exchange
Agent
nor any party to this Agreement shall be liable to any holder of stock
represented by any certificate for any
consideration
paid to a public
official
pursuant to applicable abandoned property,
escheat or similar
laws. ESB and the
Exchange Agent shall be entitled to rely
upon the stock
transfer books of PHSB
to establish the identity of those persons entitled to receive consideration
specified in this Agreement, which books shall be conclusive with respect
thereto. In the event of a dispute with respect to ownership of stock
represented by any certificate,
ESB and the Exchange
Agent shall be entitled to
deposit any consideration represented thereby in escrow with an independent
third party and thereafter be relieved with
respect to any claims thereto.
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1.05 NO
FRACTIONAL
SHARES. Notwithstanding any other provision of this
Agreement, neither certificates nor scrip for
fractional shares of
ESB Common
Stock shall be issued in the Merger.
Each holder who
otherwise would have
been
entitled to a fraction of a share of ESB Common
Stock shall receive in lieu
thereof cash (without interest) in an amount
determined
by multiplying the
fractional share interest to which such holder
would otherwise be
entitled by
the Average Share Price. No such holder shall be entitled
to dividends,
voting
rights or any other rights in respect of
any fractional share.
1.06 STOCK
OPTIONS AND RESTRICTED
STOCK AWARDS. Each option to purchase
PHSB Common Stock (a "PHSB Stock Option") that has been issued pursuant to
PHSB's 1998 Stock Option Plan or PHSB's 2002 Stock
Option Plan (together,
the
"PHSB Option Plans") that is outstanding
and exercisable at the Effective
Time
shall be canceled and converted
into the right to
receive by the option holder,
cash in an amount equal to the difference between the Per Share Cash
Consideration and the per share exercise price of such PHSB Stock
Option for
each share of PHSB Common Stock subject to such PHSB Stock Option
(the "Option
Consideration"). The payment of the Option
Consideration, subject to withholding
taxes if any, to such holder of PHSB Stock Options shall be subject to the
execution by such holder of such
instruments of cancellation and release as PHSB
and ESB may reasonably require. Plan shares
which have been awarded under PHSB's
1998 Restricted Stock Plan and PHSB's 2002
Restricted Stock Plan (together, the
"PHSB Restricted Stock Plans") as of the
date of this Agreement and which remain
outstanding immediately prior to the
Effective Time shall become fully earned as
of the Effective Time, and the holders of
such PHSB Restricted Stock Plan shares
shall be entitled to receive, in lieu of distribution of PHSB Common Stock
payment, subject to any applicable tax
withholding,
from PHSB or Peoples
Home
Savings Bank of the Per Share Cash
Consideration
for each share of PHSB
Common
Stock represented by each PHSB Restricted Stock Plan award in exchange for
a
release executed by such holder of a PHSB
Restricted Stock Plan award.
1.07
WITHHOLDING
RIGHTS. ESB (through the Exchange Agent,
if applicable)
shall be entitled to deduct and
withhold from any amounts otherwise payable
pursuant to this Agreement to any holder of shares of PHSB
Common Stock such
amounts as ESB is required under the Internal Revenue Code of 1986, as
amended
("Code"), or any provision of state, local or foreign tax law to deduct and
withhold with respect to the making of such
payment. Any amounts so withheld
shall be treated for all purposes of this Agreement as having been paid to
the
holder of PHSB Common Stock in respect of
which such deduction
and withholding
was made by ESB.
1.08
ADDITIONAL
ACTIONS. If at any time after the Effective Time the
Surviving Corporation shall consider that
any further assignments or assurances
in law or any other acts are necessary or desirable to (i) vest, perfect or
confirm, of record or otherwise,
in the Surviving
Corporation its rights, title
or interest in, to or under any of the
rights, properties or assets of PHSB
acquired or to be acquired by the
Surviving Corporation as a result of, or in
connection with, the Merger, or (ii) otherwise carry out the purposes of this
Agreement, PHSB and its proper officers and directors
shall be deemed to
have
granted to the Surviving Corporation 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
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assets in the Surviving Corporation and otherwise to carry out the
purposes of
this Agreement; and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of PHSB or otherwise
to take any
and all such action.
1.09
MODIFICATION
OF STRUCTURE. Notwithstanding any provision to this
Agreement to the contrary, ESB, with the prior written
consent of PHSB,
which
consent shall not be unreasonably
withheld, may elect,
subject to the filing of
all necessary applications and the receipt
of all required regulatory approvals,
to modify the structure of the transactions
contemplated
hereby so long as
(i)
there are no adverse federal income tax
consequences to the stockholders of PHSB
as a result of the modification, (ii) the consideration to be paid to the
holders of PHSB Common Stock under this
Agreement is not thereby changed in kind
or reduced in amount solely because of such modification and (iii) such
modification will not be likely to
materially delay or jeopardize receipt of any
required regulatory approvals or impair or prevent the satisfaction of any
conditions of the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PHSB
References to
"PHSB Disclosure
Schedules" shall mean all of the disclosure
schedules required by this Article II,
which have been delivered by PHSB to ESB.
PHSB hereby represents and warrants to ESB
as follows as of the date hereof:
2.01. CORPORATE
ORGANIZATION.
(a) PHSB is a
corporation
duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. PHSB has the
corporate power and authority to own or
lease all of its
properties and assets
and to carry on its business as it is now
being conducted
and is duly
licensed
or qualified to do business and is in good
standing in each
jurisdiction
in
which the nature of the business conducted
by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so
licensed,
qualified
or in good standing would not have a
Material Adverse Effect (as defined below).
PHSB is registered as a bank holding
company under the Bank
Holding Company Act
of 1956, as amended ("BHCA"). PHSB Disclosure Schedule 2.01(a) sets forth
true
and complete copies of the Articles of Incorporation or other governing
instrument and Bylaws of PHSB and the PHSB
Subsidiaries as in effect on the date
hereof.
For purposes of
this Agreement, the
term "Material Adverse
Effect", when
applied to a party, shall mean any event,
change or occurrence
which, together
with any other event, change or occurrence,
has a material adverse impact on (i)
the financial position, business or results
of operation,
financial performance
of such party and their respective
subsidiaries,
taken as a whole, or
(ii) the
ability of such party to perform
its obligations under this Agreement or to
consummate the Merger and the other
transactions
contemplated by this Agreement
in a timely fashion; provided, however, that a "Material Adverse
Effect" shall
not be deemed to include the impact of (a)
actions or omissions of a party taken
with the prior written consent of the other
in contemplation of the
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transactions contemplated by this Agreement,
(b) changes in banking and similar
laws of general applicability or interpretations thereof by courts or
governmental authorities, (c) changes in generally accepted accounting
principles or regulatory accounting
requirements applicable to banks and bank or
thrift holding companies generally, (d) changes attributable to or resulting
from changes in general economic
conditions, including changes in the prevailing
level of interest rates, or (e) the Merger
and related expenses
associated with
the transactions contemplated by this
Agreement.
(b) The only
direct or indirect subsidiaries of PHSB are Peoples Home
Savings Bank and Homeco Service Corporation
(together, the "PHSB Subsidiaries").
Each of the PHSB Subsidiaries (i) is duly organized and validly
existing or in
good standing under the laws of its
respective
jurisdiction of
incorporation,
(ii) has the corporate power and authority
to own or lease all of its properties
and assets and to conduct its business as
it is now being
conducted, and
(iii)
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes
such licensing or qualification necessary, except where the failure to be
so
licensed, qualified or in good standing would not have a Material Adverse
Effect. Each of PHSB and Peoples Homes Savings Bank has satisfied in all
material respects all commitments, financial or otherwise, as may have been
agreed upon with their appropriate bank
regulatory agencies. Other than the PHSB
Subsidiaries, PHSB does not own or control,
directly or indirectly, greater than
a 5% equity interest in any corporation, company, association, partnership,
joint venture or other entity.
2.02.
CAPITALIZATION.
The authorized capital stock of PHSB consists of
80,000,000 shares of PHSB Common Stock, of which 2,903,353 are issued and
outstanding (including 33,440 Plan Shares under PHSB's
Restricted Stock Plans,
all of which have been allocated under the
plans) and 616,358 shares are held in
treasury as of the date hereof, and
20,000,000 shares of preferred stock, no par
value, of which no shares are issued and
outstanding as of the date hereof. All
issued and outstanding shares of capital stock of PHSB, and all issued and
outstanding shares of capital stock of each
of the PHSB Subsidiaries, have been
duly authorized and validly issued and are
fully paid, nonassessable and free of
preemptive rights. All of the outstanding
shares of capital stock of each of the
PHSB Subsidiaries are owned by PHSB
free and clear of any liens, encumbrances,
charges, restrictions or rights of third
parties of any kind
whatsoever, and,
except for options to purchase 290,527 shares of PHSB Common Stock which have
been granted pursuant to PHSB's Stock Option
Plans, and which are
outstanding,
none of PHSB or any of the PHSB
Subsidiaries has or is
bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the transfer, purchase or issuance of any shares of
capital stock of PHSB or any of the PHSB Subsidiaries or any securities
representing the right to purchase or otherwise receive any shares of such
capital stock or any securities
convertible
into or representing
the right to
purchase or subscribe for any such
stock.
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2.03. AUTHORITY;
NO VIOLATION.
(a) Subject to
the approval of this
Agreement and the
Agreement of Merger
and the transactions contemplated hereby and thereby by the
stockholders
of
PHSB, PHSB has full corporate power and authority to execute and
deliver this
Agreement and the Agreement of Merger and to consummate the transactions
contemplated hereby and thereby in
accordance with the terms hereof and thereof.
The execution and delivery of this
Agreement and the Agreement of Merger and the
consummation of the transactions
contemplated hereby
and thereby have been duly
and validly approved by the Board of
Directors of PHSB.
Except for the approval
by PHSB's stockholders of this Agreement and
the Agreement of Merger, no other
corporate proceedings on the part of PHSB are necessary to consummate the
transactions so contemplated. This Agreement and the Agreement
of Merger have
been duly and validly executed and delivered by PHSB and
constitute
valid and
binding obligations of PHSB, enforceable against it in accordance with and
subject to their terms, except as limited
by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting creditors' rights
generally, and except that the availability
of equitable remedies
(including,
without limitation, specific performance) is within the discretion of the
appropriate court.
(b) None of the
execution and delivery of this Agreement and the Agreement
of Merger by PHSB, nor the consummation by
PHSB of the transactions contemplated
hereby and thereby in accordance with the terms hereof and thereof, or
compliance by PHSB with any of the terms or
provisions hereof or
thereof, will
(i) violate any provision of the Articles
of Incorporation
or other governing
instrument or Bylaws of PHSB or any of the
PHSB Subsidiaries, (ii) assuming that
the consents and approvals set forth below are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to PHSB or any of the
PHSB Subsidiaries
or any of their
respective properties or assets, or (iii)
except as disclosed in PHSB Disclosure
Schedule 2.03(b), violate, conflict with, result in a breach
of any provisions
of, constitute a default (or an event
which, with notice or
lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the
creation of any lien,
security interest, charge or other encumbrance upon any of the respective
properties or assets of PHSB or any of the
PHSB Subsidiaries
under any of the
terms, conditions or provisions of any
note, bond, mortgage,
indenture, deed of
trust, license, lease, agreement or other
instrument or obligation to which PHSB
or any of the PHSB Subsidiaries is a party, or by
which any of their respective
properties or assets may be bound or
affected, except, with
respect to (ii) and
(iii) above, such as individually or in the aggregate
will not have a Material
Adverse Effect. Except as set forth in PHSB
Disclosure Schedule 2.03(b) and for
consents and approvals of or filings or
registrations
with or notices to
the
Securities and Exchange Commission
("Commission"), the Secretary of State of the
Commonwealth of Pennsylvania, the Pennsylvania Department of Banking (the
"Department"), the Federal Deposit
Insurance Corporation (the "FDIC"), the Board
of Governors of the Federal Reserve System
(the "Federal Reserve
Board"), the
Office of Thrift Supervision (the "OTS"), if
required, and the
stockholders of
PHSB, no consents or approvals of or
filings or registrations with or notices to
any federal, state, municipal or other governmental or
regulatory
commission,
board, agency, or non-governmental third
party are required on behalf of PHSB in
connection with (a) the execution and delivery of this Agreement and the
Agreement of Merger by PHSB and (b) the
consummation
by
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PHSB of the Merger and the other transactions contemplated hereby and by the
Agreement of Merger.
2.04. FINANCIAL
STATEMENTS.
(a) PHSB has
previously delivered to ESB copies of the consolidated balance
sheets of PHSB as of December 31, 2003 and 2002 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years ended December 31, 2003, 2002 and 2001, in each case
accompanied by the
audit reports of S.R. Snodgrass,
A.C., independent
public accountants, as
well
as the unaudited consolidated balance sheet
of PHSB as of March 31, 2004 and the
related unaudited consolidated statements of income, changes in stockholders'
equity and cash flows for the three
months ended March 31, 2004 and 2003.
The
consolidated balance sheets of PHSB referred to herein
(including the
related
notes, where applicable), as well as the consolidated financial statements
contained in the reports of PHSB to be
delivered by PHSB pursuant to Section
4.05 hereof, fairly present or will fairly
present, as the case may be, the
consolidated financial condition of PHSB as of the
respective dates set
forth
therein, and the related consolidated statements of income, changes in
stockholders' equity and cash flows (including the related notes, where
applicable) fairly present or will fairly present, as the case may be, the
results of the consolidated operations,
changes in stockholders' equity and cash
flows of PHSB for the respective periods or
as of the respective dates set forth
therein (it being understood that PHSB's interim
financial statements are not
audited and are not prepared with related notes but reflect all adjustments
which are, in the opinion of PHSB,
necessary for a fair presentation of such
financial statements).
(b) Each of the
financial statements referred to in this Section 2.04
(including the related notes, where
applicable) has been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods
involved. The books
and records of PHSB
and the PHSB Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements and reflect only actual
transactions.
(c) Except to
the extent reflected,
disclosed or reserved
against in the
consolidated financial statements referred to in the
first sentence of Section
2.04(a) or the notes thereto or liabilities
incurred since March 31, 2004 in the
ordinary course of business and consistent
with past practice,
none of PHSB or
any of the PHSB Subsidiaries has any
obligation or liability, whether absolute,
accrued, contingent or otherwise,
material to the
business, operations,
assets
or financial condition of PHSB and the PHSB
Subsidiaries taken as a whole.
2.05. ABSENCE OF
CERTAIN CHANGES OR EVENTS.
(a) Except as set forth in PHSB Disclosure Schedule 2.05(a), there
has
not been any material adverse change in the business,
results of
operations,
assets or financial condition of PHSB and
the PHSB Subsidiaries taken as a whole
since March 31, 2004, other than: (i) any such effect attributable to or
resulting from any change in banking or
similar laws, rules or
regulations of
general applicability to banks, savings banks or their
holding companies or
interpretations thereof by courts or
governmental
authorities; (ii)
changes in
generally accepted accounting principles that are
12
<PAGE>
generally applicable to the banking or savings industries; (iii) expenses
incurred in connection with the
transactions
contemplated hereby;
(iv) actions
or omissions of a party (or any of its subsidiaries) taken with the prior
informed written consent of the other
party; or (v) changes
attributable to or
resulting from changes in general economic
conditions, including
changes in the
prevailing level of interest rates. To the best knowledge of PHSB, no
fact or
condition exists which PHSB believes will
cause such a material
adverse change
in the future.
(b) Neither
PHSB nor any of the
PHSB Subsidiaries
has taken or
permitted
any of the actions set forth in Section
4.02 hereof between
March 31, 2004 and
the date hereof.
2.06. LEGAL
PROCEEDINGS. Neither PHSB nor any of the PHSB Subsidiaries is a
party to any, and there are no pending or, to the best knowledge of PHSB,
threatened legal, administrative, arbitration or other proceedings, claims,
actions or governmental investigations of any nature
against PHSB or any of the
PHSB Subsidiaries, except such proceedings, claims, actions or governmental
investigations which in the good faith judgment of PHSB are not reasonably
expected to have a Material Adverse Effect. Neither PHSB nor any of the PHSB
Subsidiaries is a party to any order,
judgment or decree which has had or is
reasonably expected to have a Material
Adverse Effect.
2.07. TAXES AND
TAX RETURNS.
(a) Each of PHSB
and the PHSB
Subsidiaries has duly
filed (and until
the
Effective Time will so timely file) all returns, declarations, reports,
information returns and statements
("Returns")
required to be filed
or sent by
or with respect to them in respect of any
Taxes (as hereinafter
defined), and
has duly paid (and until the Effective Time will so pay) all Taxes due
and
payable other than Taxes or other charges
which (i) are being
contested in good
faith (and disclosed in writing to ESB) and (ii) have not finally been
determined. PHSB and each of the PHSB
Subsidiaries have
established (and until
the Effective Time will establish) on their books and records reserves or
accruals that are adequate for the payment
of all Taxes not yet due and payable,
whether or not disputed, accrued or applicable. Except as set forth in PHSB
Disclosure Schedule 2.07(a), (i) the
federal income tax returns of PHSB and each
of the PHSB Subsidiaries have been examined by the Internal
Revenue Service
("IRS") (or are closed to examination due to the expiration of the applicable
statute of limitations), and (ii) the Pennsylvania income tax returns of PHSB
and each of the PHSB Subsidiaries
have been examined by
applicable
authorities
(or are closed to examination due to the expiration of the statute of
limitations), and in the case of both (i)
and (ii) no deficiencies were asserted
as a result of such examinations
which have not been
resolved and paid in full.
There are no audits or other administrative or court proceedings presently
pending nor any other disputes pending, or claims asserted for, Taxes or
assessments upon PHSB or any of the PHSB
Subsidiaries,
nor has PHSB or any
of
the PHSB Subsidiaries given any currently outstanding waivers or comparable
consents regarding the application of the
statute of limitations with respect to
any Taxes or Returns.
(b) Except as set
forth in PHSB Disclosure Schedule 2.07(b), none of PHSB
or any of the PHSB Subsidiaries (i) has requested any extension of
time within
which to file any Return which Return has
not since been filed,
(ii) is a party
to any agreement providing for the allocation or sharing
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<PAGE>
of Taxes or (iii) is required to include in income any
adjustment
pursuant to
Section 481(a) of the Code, by reason of a
voluntary change in accounting method
initiated by PHSB or the PHSB Subsidiaries (nor does PHSB have any
knowledge
that the IRS has proposed any such
adjustment or change of accounting method).
(c) For purposes
of this Agreement,
"Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment (including
withholding, payroll and employment
taxes required to be
withheld with respect
to income paid to employees), excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any
penalties, additions to tax
or additional amounts imposed by any taxing
authority (domestic or foreign) upon
PHSB or any of its Affiliates.
2.08. EMPLOYEE
BENEFIT PLANS.
(a) Each
employee benefit plan
or arrangement
of PHSB or any of the
PHSB
Subsidiaries which is an "employee benefit plan" within the meaning
of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), is listed in PHSB Disclosure
Schedule 2.08(a)
("PHSB Plans").
PHSB
has previously furnished to ESB true and
complete copies of each of the PHSB
Plans together with (i) the most recent
actuarial and financial reports prepared
with respect to any qualified PHSB Plans, (ii) the most recent annual
reports
filed with any government agency, and (iii) all rulings and determination
letters and any open requests for rulings or letters that pertain to any
qualified PHSB Plans.
(b) Each of the
PHSB Plans has been
operated in compliance in all material
respects with the applicable provisions of ERISA, the Code, all regulations,
rulings and announcements promulgated or issued thereunder, and all other
applicable governmental laws and
regulations.
(c) Neither PHSB
nor any of the PHSB
Subsidiaries
participates in or
has
incurred any liability under Section 4201 of ERISA for a
complete or partial
withdrawal from a multiemployer plan (as
such term is defined in ERISA).
(d) Except as
set forth in PHSB Disclosure Schedule 2.08(d), the present
value of all accrued liabilities under each of the PHSB Plans
subject to Title
IV of ERISA did not, as of the latest valuation date of each such PHSB Plan,
exceed the fair market value of the assets
of such PHSB Plans
allocable to such
accrued liabilities, based upon the actuarial and accounting assumptions
currently utilized for such PHSB Plans (as
of the latest valuation date).
(e) Neither PHSB nor any of the PHSB Subsidiaries, nor, to the best
knowledge of PHSB, any trustee, fiduciary
or administrator of a PHSB Plan or any
trust created thereunder, has engaged in a "prohibited
transaction,"
as such
term is defined in Section 4975 of the
Code, which could
subject PHSB or any of
the PHSB Subsidiaries, or, to the best
knowledge of PHSB, any
14
<PAGE>
trustee, fiduciary or administrator
thereof, to the tax or penalty on prohibited
transactions imposed by Section 4975.
(f) No PHSB Plan
or any trust created
thereunder has been terminated, nor
have there been any "reportable events"
with respect to any PHSB Plan subject to
Title IV of ERISA, as that term is defined
in Section 4043(b) of ERISA.
(g) No PHSB Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined
in Section
302 of
ERISA.
(h) Each of the
PHSB Plans which is
intended to be a qualified plan under
Section 401(a) of the Code received a
favorable
determination letter
issued by
the IRS to the effect that such plan is
qualified under
Section 401(k) of the
Code, and PHSB is not aware of any fact or
circumstance
which would
adversely
affect the qualified status of any such
plan.
2.09. SECURITIES
DOCUMENTS AND REGULATORY REPORTS.
(a) PHSB has
previously delivered
or made available to ESB a complete copy
of each final registration statement,
prospectus,
annual, quarterly or
current
report and definitive proxy statement or
other communication (other than general
advertising materials) filed pursuant to the
Securities Act of 1933, as amended
("1933 Act"), or the Securities Exchange Act of 1934, as amended
("1934 Act"),
or mailed by PHSB to its stockholders as a
class since January 1, 2001, and each
such final registration statement, prospectus, annual, quarterly or current
report and definitive proxy statement or other
communication,
as of its date,
complied in all material respects with all applicable statutes, rules and
regulations and did not contain any untrue
statement of a
material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein,
in light of the
circumstances under
which
they were made, not misleading; provided that information as of a later date
shall be deemed to modify information as of
an earlier date.
(b) PHSB and
each of the PHSB
Subsidiaries has duly filed with the Federal
Reserve Board, the Department and the FDIC in correct form the monthly,
quarterly and annual reports required to be filed under
applicable
laws and
regulations, and PHSB has delivered or made available to ESB accurate and
complete copies of such reports.
PHSB Disclosure Schedule 2.09(b) lists all
examinations of PHSB or of the PHSB
Subsidiaries
conducted by the
applicable
bank regulatory authorities since January
1, 2001 and the dates of any responses
thereto submitted by PHSB. In connection
with the most recent
examinations of
PHSB or the PHSB Subsidiaries by the applicable
bank regulatory authorities,
neither PHSB nor any of the PHSB
Subsidiaries was
required to correct or change
any action, procedure or proceeding which PHSB or such PHSB Subsidiaries
believes has not been now corrected or
changed as required.
2.10. PHSB
INFORMATION.
None of the
information relating
to PHSB and the
PHSB Subsidiaries to be provided by PHSB or
the PHSB Subsidiaries for use in (i)
the Registration Statement on Form S-4 to
be filed by ESB in connection with the
issuance of shares of ESB
15
<PAGE>
Common Stock pursuant to the Merger, as amended or supplemented (or on any
successor or other appropriate form) ("Form S-4"), will, at the time the Form
S-4 becomes effective, contain any untrue statement of a
material fact or omit
to state a material fact necessary to make
the statements
therein, in light
of
the circumstances under which they were
made, not misleading, and (ii) the joint
proxy statement/prospectus
contained
in the Form S-4, as amended or
supplemented, and to be delivered to
stockholders of ESB and PHSB in connection
with the solicitation of their approval of this Agreement, the Agreement of
Merger and the transactions contemplated hereby and thereby ("Proxy
Statement/Prospectus"), as of the date(s) such Proxy Statement/Prospectus is
mailed to stockholders of ESB and PHSB and up to and
including the date(s)
of
the meetings of stockholders to which such
Proxy
Statement/Prospectus
relates,
will contain any untrue statement of a
material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not
misleading,
provided that
information as of
a
later date shall be deemed to modify
information as of an earlier date.
2.11. COMPLIANCE
WITH APPLICABLE LAW.
(a) PHSB and each of the PHSB Subsidiaries has all permits, licenses,
certificates of authority, orders and approvals of, and has
made all filings,
applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it
to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have
a Material Adverse
Effect; all such
permits, licenses, certificates of authority,
orders and approvals
are in full
force and effect; and to the best knowledge of PHSB
and the PHSB
Subsidiaries,
no suspension or cancellation of any of the
same is threatened.
(b) Neither
PHSB nor any of the
PHSB Subsidiaries
is in violation of
its
respective Articles of Incorporation or
other governing instrument or Bylaws, or
of any applicable federal, state or local
law or ordinance or any order, rule or
regulation of any federal, state, local or other governmental agency or body
(including, without limitation, all banking,
securities, municipal
securities,
safety, health, zoning,
anti-discrimination,
antitrust, and wage and hour laws,
ordinances, orders, rules and regulations),
or in default with
respect to any
order, writ, injunction or decree of any court,
or in default under any order,
license, regulation or demand of any governmental agency, any of which
violations or defaults could reasonably be expected to have a
Material Adverse
Effect; and neither PHSB nor any of the PHSB
Subsidiaries
has received any
notice or communication from any federal,
state or local
governmental authority
asserting that PHSB or any PHSB Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a
Material Adverse Effect.
Neither PHSB nor any PHSB Subsidiary is
subject to any regulatory or supervisory
cease and desist order, agreement, written directive, memorandum of
understanding or written commitment (other than those of
general
applicability
to all savings associations issued by governmental
authorities),
and none of
them has received any written communication
requesting that they
enter into any
of the foregoing.
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<PAGE>
2.12. DEPOSIT
INSURANCE AND OTHER REGULATORY MATTERS.
(a) The deposit
accounts of Peoples
Home Savings Bank are insured by
the
Savings Association Insurance Fund administered by the FDIC to the maximum
extent permitted by the Federal Deposit
Insurance Act, as amended ("FDIA"), and
Peoples Home Savings Bank has paid all
premiums and assessments required by the
FDIA and the regulations thereunder.
(b) Peoples Home
Savings Bank is a
member in good
standing of the Federal
Home Loan Bank ("FHLB") of Pittsburgh and
owns the requisite
amount of stock in
the FHLB of Pittsburgh.
(c) As of the
date hereof,
neither PHSB nor Peoples Home Savings Bank
is
aware of any reasons relating to PHSB or Peoples Home Savings Bank why all
consents and approvals shall not be
received from all regulatory agencies having
jurisdiction over the transactions contemplated by this Agreement as
shall be
necessary for consummation of the
transactions contemplated hereby. Furthermore,
Peoples Home Savings Bank's most recent
Community Reinvestment Act rating is not
less than satisfactory.
2.13. CERTAIN
CONTRACTS.
(a) Except as
disclosed in PHSB Disclosure Schedule 2.13(a), neither PHSB
nor any of the PHSB Subsidiaries is a party to, is bound or affected by,
receives, or is obligated to pay benefits
under, (i) any agreement, arrangement
or commitment, including without limitation, any
agreement, indenture
or other
instrument relating to the borrowing of money by PHSB or any of the PHSB
Subsidiaries or the guarantee by PHSB or any of the
PHSB Subsidiaries
of any
obligation, (ii) any agreement, arrangement or commitment relating to the
employment of a consultant or the
employment, election or retention in office of
any present or former director or officer of PHSB or any of the PHSB
Subsidiaries, (iii) any contract, agreement
or understanding with a labor union,
(iv) any agreement, arrangement or understanding
pursuant to which any
payment
(whether of severance pay or otherwise) became or may become due to any
director, officer or employee of PHSB or any of the PHSB
Subsidiaries
upon
execution of this Agreement or upon or following consummation of the
transactions contemplated by this Agreement
(either alone or in connection with
the occurrence of any additional acts or
events), (v) any agreement, arrangement
or understanding to which PHSB or any of
the PHSB Subsidiaries
is a party or by
which any of the same is bound which limits the freedom of PHSB or any of the
PHSB Subsidiaries to compete in any line of business
or with any person,
(vi)
any assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or
condition of any
regulatory order
or
decree with or by the Federal Reserve Board, the Department, the FDIC or any
other regulatory agency, (vii) any other
agreement, arrangement or understanding
which would be required to be filed as an
exhibit to PHSB's annual, quarterly or
current reports under the 1934 Act and which has
not been so filed, or
(viii)
any other agreement, arrangement or understanding to which PHSB or any
of the
PHSB Subsidiaries is a party and which
is material to the business, results of
operations, assets or financial condition of PHSB and the PHSB Subsidiaries
taken as a whole (excluding loan agreements or agreements
relating to
deposit
accounts), in each of the foregoing cases
whether written or oral.
17
<PAGE>
(b) Neither PHSB nor any of the PHSB
Subsidiaries
is in default or in
non-compliance, which default or non-compliance would have a Material Adverse
Effect, under any contract, agreement,
commitment, arrangement, lease, insurance
policy or other instrument to which it is a party or by which its assets,
business or operations may be bound or affected,
whether entered into in the
ordinary course of business or otherwise and whether written or oral, which
default or non-compliance would have a Material Adverse
Effect, and there
has
not occurred any event that with the lapse of
time or the giving of notice, or
both, would constitute such a default or
non-compliance.
2.14. PROPERTIES
AND INSURANCE.
(a) All
real and personal property owned by PHSB or any of the PHSB
Subsidiaries or presently used by any of
them in their respective business is in
an adequate condition (ordinary wear and tear excepted) and is sufficient to
carry on the business of PHSB and the PHSB
Subsidiaries
in the ordinary
course
of business consistent with their past
practices. PHSB and the PHSB Subsidiaries
have good and, as to owned real property, marketable title to all material
assets and properties, whether real or personal, tangible or intangible,
reflected in PHSB's consolidated balance sheet as of March 31, 2004, or
owned
and acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value in the ordinary course of
business since March 31, 2004),
subject to no
encumbrances, liens,
mortgages,
security interests or pledges, except (i) those items that secure
liabilities
that are reflected in said consolidated balance sheet or the notes thereto
or
have been incurred in the ordinary course of business after the date of such
consolidated balance sheet, (ii) statutory
liens for amounts not yet delinquent
or which are being contested in good faith, (iii) such encumbrances, liens,
mortgages, security interests, pledges and title imperfections
that are not in
the aggregate material to the business, results of operations, assets or
financial condition of PHSB and the PHSB
Subsidiaries taken as a whole, and (iv)
with respect to owned real property,
title imperfections
noted in title reports
prior to the date hereof. PHSB and the PHSB Subsidiaries as lessees have the
right under valid and subsisting leases to
occupy, use, possess
and control all
property leased by them in all material
respects as presently
occupied, used,
possessed and controlled by PHSB and the
PHSB Subsidiaries and
the consummation
of the transactions contemplated hereby and by the
Agreement of Merger will not
affect any such right in a manner
that would have a Material Adverse Effect.
PHSB Disclosure Schedule 2.14(a) sets forth an accurate
listing of each
lease
pursuant to which PHSB or any of the PHSB
Subsidiaries acts as lessor or lessee,
including the expiration date and the terms of any renewal
options which relate
to the same.
(b) The business
operations and all insurable properties and assets of PHSB
and the PHSB Subsidiaries are insured for
their benefit against all risks which,
in the reasonable judgment of the
management of PHSB, should be insured against,
in each case under valid, binding and enforceable policies or bonds issued by
insurers of recognized responsibility, in
such amounts with such deductibles and
against such risks and losses as are in
the opinion of the
management of PHSB
adequate for the business engaged in by PHSB and the PHSB
Subsidiaries.
As of
the date hereof, neither PHSB nor any of the PHSB
Subsidiaries has received any
notice of cancellation or notice of a material
amendment of any such
insurance
policy or bond or is in default under such policy or bond, no coverage
thereunder is being disputed and all
material claims
thereunder have been filed
in a timely fashion.
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2.15.
ENVIRONMENTAL MATTERS.
For purposes of this Agreement, the following
terms shall have the indicated meaning:
"Environmental
Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit,
authorization,
approval,
consent, order, judgment, decree, injunction or agreement
with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply,
surface soil,
subsurface
soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of
Hazardous Substances. The term
Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C.
`9601, et seq; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C.
`6901, et seq; the Clean Air Act, as amended,
42 U.S.C. `7401, et seq; the
Federal Water Pollution Control Act, as amended,
33 U.S.C. `1251, et seq; the
Toxic Substances Control Act, as amended,
15 U.S.C. `9601, et seq; the Emergency
Planning and Community Right to Know Act, 42 U.S.C.
`11001, et seq; the Safe
Drinking Water Act, 42 U.S.C. `300f, et seq; and all comparable
state and local
laws, and (2) any common law (including
without limitation common law that may
impose strict liability) that may impose
liability or
obligations for injuries
or damages due to, or threatened as a result of, the
presence of or exposure to
any Hazardous Substance.
"Hazardous
Substance"
means any substance presently listed, defined,
designated or classified as hazardous,
toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any regulated
material containing any such substance as
a
component. Hazardous Substances include
without limitation petroleum (including
crude oil or any fraction thereof), asbestos, radioactive material, and
polychlorinated biphenyls.
"Loan
Portfolio Properties and Other Properties Owned" means those
properties owned, leased or operated by PHSB or any
of the PHSB Subsidiaries or
those properties which serve as collateral
for loans owned by PHSB or any of the
PHSB Subsidiaries.
(a) To the best
knowledge of PHSB and the PHSB Subsidiaries, neither PHSB
nor any of the PHSB Subsidiaries has been or is in
violation of or liable under
any Environmental Law, except any such
violations or liabilities which would not
singly or in the aggregate have a Material
Adverse Effect.
(b) To the best
knowledge of PHSB and
the PHSB Subsidiaries,
none of the
Loan Portfolio Properties and Other Properties
Owned by PHSB or any of the PHSB
Subsidiaries has been or is in violation
of or liable under any
Environmental
Law, except any such violations or
liabilities which
singly or in the aggregate
would not have a Material Adverse
Effect.
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<PAGE>
(c) To the best
knowledge of PHSB and the PHSB Subsidiaries, there are no
actions, suits, demands, notices, claims,
investigations or
proceedings pending
or threatened relating to the liability of the
Loan Portfolio
Properties
and
Other Properties Owned by PHSB
