<PAGE>
Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF
JANUARY 15, 2007
BY AND BETWEEN
MORGAN BANCORP, INC.
AND
LNB BANCORP, INC.
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TABLE OF CONTENTS
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ARTICLE I
CERTAIN DEFINITIONS.........................................
1
ARTICLE II THE
MERGER..................................................
9
2.01 The Parent Merger..........................................
9
2.02 The Subsidiary Merger......................................
9
2.03 Effectiveness of the Parent Merger.........................
9
2.04 Effective Date and Effective Time..........................
9
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES..........................
10
3.01 Merger Consideration.......................................
10
3.02 Rights as Shareholders; Stock Transfers....................
14
3.03 Fractional Shares..........................................
14
3.04 Exchange Procedures........................................
15
3.05
Anti-Dilution Provisions...................................
17
3.06 Treatment of Stock Options.................................
17
ARTICLE IV
ACTIONS PENDING ACQUISITION.................................
17
4.01 Forbearances of Morgan.....................................
17
4.02 Forbearances of Parent.....................................
21
ARTICLE V
REPRESENTATIONS AND WARRANTIES..............................
22
5.01 Disclosure Schedules.......................................
22
5.02 Standard...................................................
22
5.03 Representations and Warranties of Morgan...................
22
5.04 Representations and Warranties of Parent...................
35
ARTICLE VI
COVENANTS...................................................
42
6.01 Reasonable Best Efforts....................................
42
6.02 Shareholder Approval.......................................
42
6.03 Registration Statement.....................................
42
6.04 Press Releases.............................................
43
6.05 Access; Confidentiality....................................
44
6.06 Acquisition Proposals......................................
45
6.07 Affiliate Agreements.......................................
46
6.08 Takeover Laws..............................................
46
6.09 No Rights Triggered........................................
47
6.10 Conformance of Policies and Practices......................
47
6.11 Transition.................................................
47
6.12 Facilities Optimization....................................
48
6.13 Investments................................................
48
6.14 NASDAQ Listing or Notification.............................
48
6.15 Regulatory Applications....................................
48
6.16 Indemnification............................................
49
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TABLE OF CONTENTS
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6.17 Employee Benefits..........................................
50
6.18 Notification of
Certain Matters........................... 51
6.19 Dividend Coordination......................................
51
6.20 Tax Treatment..............................................
52
6.21 No Breaches of Representations and Warranties..............
52
6.22 Consents...................................................
52
6.23 Insurance Coverage.........................................
52
6.24 Correction of Information..................................
52
6.25 Supplemental Assurances....................................
52
6.26 Regulatory Matters.........................................
53
6.27 Parent Board of Directors..................................
53
ARTICLE VII CONDITIONS
TO CONSUMMATION OF THE PARENT MERGER............. 54
7.01 Conditions to Each Party's Obligation to Effect the Parent
Merger.....................................................
54
7.02 Conditions to Obligation of Morgan.........................
54
7.03 Conditions to Obligation of Parent.........................
55
7.04 Frustration of Closing Conditions..........................
56
ARTICLE VIII
TERMINATION.................................................
56
8.01 Termination................................................
56
8.02 Effect of Termination and Abandonment; Enforcement of
Agreement..................................................
58
8.03 Termination Fee; Expenses..................................
58
ARTICLE IX
MISCELLANEOUS...............................................
59
9.01 Survival...................................................
59
9.02 Waiver; Amendment..........................................
60
9.03 Counterparts...............................................
60
9.04 Governing Law..............................................
60
9.05 Expenses...................................................
60
9.06 Notices....................................................
60
9.07 Entire Agreement; No Third Party Beneficiaries.............
61
9.08 Interpretation; Effect.....................................
61
9.09 Waiver of Jury Trial.......................................
62
9.10 Severability...............................................
62
9.11 Assignment.................................................
62
9.12 Submission to Jurisdiction.................................
62
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Exhibit A Form
of Voting Agreement
Exhibit B Form
of Morgan Affiliate Agreement
Exhibit C Form
of Employment Agreement for W. A. Dougherty
ii
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This
AGREEMENT AND PLAN OF MERGER, dated as of January 15, 2007
(this
"Agreement"), is by and between Morgan Bancorp, Inc., an Ohio
corporation
("Morgan") and LNB Bancorp, Inc., an Ohio corporation
("Parent").
RECITALS
A.
The Proposed Transaction. Upon the terms and conditions of this
Agreement, the parties intend to effect a strategic business
combination
pursuant to which Morgan will merge with and into Parent. Parent
will be the
surviving corporation in the Parent Merger (as defined below). It
is the
intention of Parent that, immediately following the Parent Merger,
Morgan Bank,
National Association, a national banking association that is a
wholly-owned
subsidiary of Morgan ("Morgan Bank"), will merge with and into The
Lorain
National Bank, a national banking association that is a
wholly-owned subsidiary
of Parent ("Lorain National"), with Lorain National being the
surviving bank.
B.
Board Determinations. The respective boards of directors of Morgan
and
Parent have each determined that the Parent Merger and the other
transactions
contemplated hereby are consistent with, and will further, their
respective
business strategies and goals, and are in the best interests of
their respective
shareholders and, therefore, have approved, this Agreement, the
Parent Merger
and the other transactions contemplated hereby.
C.
Intended Tax Treatment. The parties intend the Parent Merger to
be
treated as a reorganization under Section 368(a) of the Internal
Revenue Code of
1986, as amended (the "Code").
NOW,
THEREFORE, in consideration of the foregoing premises and of
the
mutual covenants, representations, warranties and agreements
contained herein,
intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
The
following terms are used in this Agreement with the meanings set
forth
below:
"Acquisition Proposal" means, other than with respect to the Parent
Merger,
any offer, proposal or inquiry, whether in writing or otherwise,
relating to, or
any Third Party indication of interest in, (a) any acquisition,
purchase or
other similar transaction, direct or indirect, of 20% or more of
the
consolidated assets of Morgan and its Subsidiary or over 20% of any
class of
equity or voting securities of Morgan or its Subsidiary (or Morgan
securities
convertible or exchangeable into any such equity or voting
securities) whose
assets, individually or in the aggregate, constitute more than 20%
of the
consolidated assets of Morgan, (b) any tender offer (including a
self-tender
offer), exchange offer or other similar transaction that, if
consummated, would
result in such Third Party beneficially owning 20% or more of any
class of
equity or voting securities of Morgan or its Subsidiary (or Morgan
securities
convertible or exchangeable into any such equity or voting
securities) whose
assets, individually or in the aggregate, constitute more than 20%
of the
consolidated assets of Morgan, (c) a merger, consolidation, share
exchange,
business combination, sale of substantially all the assets,
reorganization,
<PAGE>
recapitalization, liquidation, dissolution or other similar
transaction
involving Morgan or its Subsidiary whose assets, individually or in
the
aggregate, constitute more than 20% of the consolidated assets of
Morgan or (d)
any other transaction the consummation of which would reasonably be
expected to
materially impede, interfere with, prevent or delay the Parent
Merger or that
would reasonably be expected to dilute materially the benefits to
Parent of the
transactions contemplated hereby.
"Affiliate" means, with respect to any Person, another Person that
directly
or indirectly, through one or more intermediaries, controls, is
controlled by or
is under common control with, such first Person.
"Agreement" means this Agreement, as amended or modified from time
to time
in accordance with Section 9.02.
"Agreement to Merge" has the meaning set forth in Section 2.02.
"All
Cash Election" has the meaning set forth in Section
3.01(b)(ii).
"All
Stock Election" has the meaning set forth in Section
3.01(b)(i).
"Cash Exchange Amount" has the meaning set forth in Section
3.01(a).
"Change in Recommendation" has the meaning set forth in Section
8.01(g).
"Claim" has the meaning set forth in Section 6.16(a).
"COBRA" has the meaning set forth in Section 6.17(a).
"Code" has the meaning set forth in the preamble to this
Agreement.
"Compensation and Benefit Plans" has the meaning set forth in
Section
5.03(m).
"Confidentiality Agreement" means the Confidentiality Agreement
between
Parent and Morgan, dated August 24, 2006.
"Consultants" has the meaning set forth in Section 5.03(m).
"Contract" means, with respect to any Person, any agreement,
indenture,
undertaking, debt instrument, contract, lease, understanding or
other
commitment, whether oral or in writing, to which such Person or any
of its
Subsidiaries is a party or by which any of them is bound or to
which any of
their properties is subject.
"Costs" has the meaning set forth in Section 6.16(a).
"Directors" has the meaning set forth in Section 5.03(m).
"Disclosure Schedule" has the meaning set forth in Section
5.01.
2
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"Dissenting Shares" means Morgan Common Shares with respect to
which rights
pursuant to Section 1701.85 of the OGCL have been properly
exercised.
"Effective Date" means the date on which the Effective Time occurs,
as
provided for in Section 2.04.
"Effective Time" means the effective time of the Parent Merger, as
provided
for in Section 2.04.
"Election" has the meaning set forth in Section 3.01(e).
"Election Deadline" has the meaning set forth in Section
3.01(e).
"Election Form/Letter of Transmittal" has the meaning set forth in
Section
3.01(e).
"Election Period" has the meaning set forth in Section 3.01(e).
"Employees" has the meaning set forth in Section 5.03(m)(i). All
references
herein to "employees of Morgan" or "Morgan employees" shall be
deemed to mean
employees of Morgan Bank.
"Employment Agreement" means the form of employment agreement
between
Parent and William A. Dougherty, Morgan's Chief Executive Officer,
the form of
which is attached hereto as Exhibit C, which is an inducement to
Parent's
willingness to enter into this Agreement.
"Environmental Laws" means all applicable local, state and
federal
environmental, health and safety Laws, permits, authorizations,
common Law or
agency requirement, including, without limitation, the Resource
Conservation and
Recovery Act, the Comprehensive Environmental Response,
Compensation and
Liability Act, the Clean Water Act, the Federal Clean Air Act, and
the
Occupational Safety and Health Act, each as amended, regulations
promulgated
thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended.
"ERISA Affiliate" has the meaning set forth in Section
5.03(m)(iii).
"ERISA Affiliate Plan" has the meaning set forth in Section
5.03(m)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04(a).
"Excluded Representations" has the meaning set forth in Section
5.02.
"Exchange Fund" has the meaning set forth in Section 3.04(a).
"FDIA" has the meaning set forth in Section 5.03(dd).
3
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"FDIC" means the Federal Deposit Insurance Corporation.
"Fill Offer" has the meaning set forth in Section 8.01(e).
"Fill Option" has the meaning set forth in Section 8.01(e).
"FRB" means the Federal Reserve Board.
"GAAP" means generally accepted accounting principles as adopted
for U.S.
accounting principles, practices and methods.
"Governing Documents" means with respect to any Person, such
Person's
articles or certificate of incorporation and its code of
regulations/bylaws, or
similar governing document.
"Governmental Authority" means any court, administrative agency
or
commission or other federal, state or local governmental authority
or
instrumentality.
"Indemnified Party" has the meaning set forth in Section
6.16(a).
"Information" has the meaning set forth in Section 6.05(c).
"Intellectual Property Rights" has the meaning set forth in
Section
5.03(ff).
"IRS" has the meaning set forth in Section 5.03(m)(ii).
The
term "knowledge" means, with respect to a party hereto, knowledge
after
due inquiry of any officer of that party with the title of not less
than a
senior vice president.
"Law" means any federal, state, foreign or local statute, law, rule
or
regulation or any order, decision, decree, injunction, judgment,
award or decree
of any Governmental Authority.
"Lien" means any charge, mortgage, pledge, security interest,
restriction,
claim, lien or encumbrance of any nature whatsoever.
"Loans" means loans, leases, extensions of credit (including
guarantees),
commitments to extend credit and other similar assets or
obligations, as the
case may be.
"Lorain National" has the meaning set forth in the preamble to
this
Agreement.
"Material Adverse Effect" means, with respect to Parent or Morgan,
any
effect that (a) is material and adverse to the condition (financial
or
otherwise), results of operations, assets, liabilities or business
of Parent and
its Subsidiaries taken as a whole, or Morgan and its Subsidiary
taken as a
whole, respectively, or (b) would materially impair the ability of
either Parent
or Morgan to perform its obligations under this Agreement or
otherwise
materially threaten or materially impede the consummation of the
Parent Merger
and the other transactions contemplated by this Agreement;
provided, however,
that Material Adverse Effect shall not be deemed to include the
impact of (i)
changes in banking and similar Laws of general applicability or
interpretations
thereof by Governmental Authorities or other changes affecting
depository
institutions generally that do not have a materially more adverse
effect on such
party than that experienced by similarly situated financial
services companies,
including changes in general economic conditions and changes in
prevailing
interest and deposit rates that do not have a materially more
adverse effect on
such party than that
4
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experienced by similarly situated financial services companies,
(ii) any
modifications or changes to valuation policies and practices in
connection with
the Parent Merger or restructuring charges taken in connection with
the Parent
Merger, in each case in accordance with GAAP, (iii) changes
resulting from
expenses (such as legal, accounting and investment bankers' fees)
incurred in
connection with this Agreement or the transactions contemplated
herein, (iv)
changes resulting from the announcement or pendency of this
Agreement and the
transactions contemplated thereby, or (v) actions or omissions of a
party that
have been waived in accordance with Section 9.02 hereof.
"Material Interest" has the meaning set forth in the definition of
"Related
Person."
"Merger Consideration" has the meaning set forth in Section
3.01(a).
"Mixed Election" has the meaning set forth in Section
3.01(b)(iii).
"Morgan" has the meaning set forth in the preamble to this
Agreement.
"Morgan Affiliate" has the meaning set forth in Section 6.07.
"Morgan Articles" means the Articles of Incorporation of Morgan,
as
amended.
"Morgan Bank" has the meaning set forth in the preamble to this
Agreement.
"Morgan Board" means the Board of Directors of Morgan.
"Morgan Code" means Morgan's Code of Regulations.
"Morgan Common Shares" means common shares, no par value per share,
of
Morgan.
"Morgan Financial Statements" has the meaning set forth in Section
5.03(g).
"Morgan Meeting" has the meaning set forth in Section 6.02.
"Morgan Off Balance Sheet Transaction" has the meaning set forth in
Section
5.03(v).
"Morgan
Recommendation" has the meaning set forth in Section 6.02.
"Morgan Stock Plan" means the option plan and agreements of Morgan
and its
Subsidiary pursuant to which rights to purchase Morgan Common
Shares are
outstanding immediately prior to the Effective Time pursuant to the
Morgan
Bancorp 1999 Stock Option Plan.
"NASD" means The National Association of Securities Dealers,
Inc.
"NASDAQ" means The NASDAQ Stock Market, Inc.'s National Market
System.
"New
Certificates" has the meaning set forth in Section 3.04(a).
5
<PAGE>
"OGCL" means the Ohio General Corporation Law.
"Old
Certificates" has the meaning set forth in Section 3.04(a).
"OSS" means the Office of the Secretary of State of the State of
Ohio.
"Out-of-Pocket Expenses" has the meaning set forth in Section
8.03(c).
"Parent" has the meaning set forth in the preamble to this
Agreement.
"Parent Articles" means the Second Amended Articles of
Incorporation of
Parent.
"Parent Board" means the Board of Directors of Parent.
"Parent Code" means the Amended Code of Regulations of Parent.
"Parent Common Shares" means the common stock, without par value,
of
Parent. (together with the preferred share purchase rights attached
thereto
issued pursuant to that certain Rights Agreement (the "Rights
Agreement"), dated
as of October 24, 2000, by and between Parent and The Registrar and
Transfer
Company, as rights agent, as amended May 17, 2006.
"Parent Financial
Statements" has the meaning set forth in Section 5.04(l).
"Parent Merger" has the meaning set forth in Section 2.01.
"Parent Preferred Shares" means the serial preferred shares, no par
value
per share, of Parent.
"Parent Reference Price" has the meaning set forth in Section
8.01(e).
"Parent SEC Documents" has the meaning set forth in Section
5.04(g).
"Parent Shares" means the Parent Common Shares and Parent Preferred
Shares.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section
5.03(m)(ii).
"Person" means any individual, bank, savings bank, corporation,
partnership, limited liability company, association, joint-stock
company,
business trust or unincorporated organization.
"Previously Disclosed" by a party means information set forth in
its
Disclosure Schedule.
"Proxy Statement/Prospectus" has the meaning set forth in Section
6.03(a).
"Proxy Statement" has the meaning set forth in Section 6.03(a).
"Registration Statement" has the meaning set forth in Section
6.03(a).
6
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"Regulatory Authority" means any federal or state governmental
agency or
authority charged with the supervision or regulation of financial
institutions
(or their holding companies) or issuers of securities or engaged in
the issuance
of deposits (including, without limitation, the OCC, FRB and the
FDIC) or the
supervision or regulation of it or any of its subsidiaries.
"Regulatory Reporting Document" has the meaning set forth in
Section
5.03(g)(i).
"Related Person" means any Person (or family member of such Person)
(a)
that directly or indirectly, controls, or is under common control
with, Morgan
or any of its Affiliates, (b) that serves as a director, officer,
employee,
partner, member, executor or trustee of Morgan or any of its
Affiliates or
Subsidiary (or in any other similar capacity), (c) that has, or is
a member of a
group buying, direct or indirect beneficial ownership (as defined
for purposes
of Rule 13c1-3 under the Exchange Act) of voting securities or
other voting
interests representing at least five percent of the outstanding
voting power or
equity securities or other equity interests representing at least
five percent
of the outstanding equity interests (a "Material Interest") in
Morgan or any of
its Affiliates or (d) in which any Person (or family member of such
Person) that
falls under (a), (b) or (c) above directly or indirectly holds a
Material
Interest or serves as a director, officer, employee, partner,
member, executor
or trustee (or in any other similar capacity).
"Required Morgan Vote" has the meaning set forth in Section
5.03(d).
"Required Party" has the meaning set forth in Section 6.05(c).
"Requisite Regulatory Approvals" has the meaning set forth in
Section
7.01(b).
"Rights" means, with respect to any Person, securities or
obligations
convertible into or exercisable or exchangeable for, or giving any
Person any
right to subscribe for or acquire, or any options, calls or
commitments relating
to, or any stock appreciation right or other instrument the value
of which is
determined in whole or in part by reference to the market price or
value of,
shares of capital stock of such Person.
"Rights Agreement" has the meaning set forth in the definition of
"Parent
Common Shares."
"Sarbanes-Oxley" means the Sarbanes-Oxley Act of 2002 and the rules
and
regulations thereunder.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the
rules and regulations thereunder.
"Stock Exchange Ratio" has the meaning set forth in Section
3.01(a).
"Subsidiary" and "Significant Subsidiary" have the meanings
ascribed to
them in Rule 1-02 of Regulation S-X of the SEC.
"Subsidiary Merger" has the meaning set forth in Section 2.02.
7
<PAGE>
"Superior Proposal" means a bona fide, unsolicited written
Acquisition
Proposal for at least a majority of the Morgan Common Shares then
outstanding on
terms that the Board of Directors of Morgan determines in good
faith by a
majority vote (excluding any members of the Board of Directors that
are not
independent of the Third Party making such Acquisition Proposal),
after
considering the advice of Roetzel & Andress, Morgan's
independent legal counsel
and a financial advisor of nationally recognized reputation, and
after taking
into account all terms and conditions of such Acquisition Proposal,
including
all legal, financial, regulatory, timing and other aspects of the
Acquisition
Proposal and the Third Party making such Acquisition Proposal
(including the
conditions precedent to (or other conditionality in respect of)
consummation of
such Acquisition Proposal relative to those required pursuant to
this
Agreement), are more favorable from a financial point of view to
Morgan's
shareholders than the Parent Merger and other transactions
contemplated by this
Agreement.
"Surviving Corporation" has the meaning set forth in Section
2.01.
"Takeover Laws" has the meaning set forth in Section 5.03(o).
"Tax" and "Taxes" means all federal, state, local or foreign
taxes,
charges, fees, levies or other assessments, however denominated,
including,
without limitation, all net income, gross income, gains, gross
receipts, sales,
use, ad valorem, goods and services, capital, production, transfer,
franchise,
windfall profits, license, withholding, payroll, employment,
disability,
employer health, excise, estimated, severance, stamp, occupation,
property,
environmental, unemployment or other taxes, custom 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.
"Tax
Returns" means any return, amended return or other report
(including
elections, declarations, disclosures, schedules, estimates and
information
returns) required to be filed with respect to any Tax.
"Termination Fee" has the meaning set forth in Section 8.03(a).
"Third Party" means any Person, including as defined in Section
13(d) of
the Exchange Act, other than the Parent or any of its
Affiliates.
"Treasury Stock" means Morgan Common Shares held by Morgan or
its
Subsidiary, in each case other than in a fiduciary capacity or as a
result of
debts previously contracted in good faith.
"Voting Agreements," the form of which is attached hereto as
Exhibit A,
pursuant to which, among other things, certain shareholders have
agreed to vote
all of their Morgan Common Shares in favor of approval of this
Agreement, the
Parent Merger and any other matters required to be approved or
adopted in order
to effect the Parent Merger and the other transactions contemplated
hereby, and
are an inducement to Parent's willingness to enter into this
Agreement.
"Walkaway Right" has the meaning set forth in Section 8.01(e).
8
<PAGE>
ARTICLE II
THE MERGER
2.01
The Parent Merger.
At the Effective Time, (a) Morgan shall be merged with and into
Parent
(the "Parent Merger") and (b) the separate corporate existence of
Morgan shall
cease and Parent shall survive and continue to exist as an Ohio
corporation
(Parent, as the surviving corporation in the Parent Merger,
sometimes being
referred to herein as the "Surviving Corporation"). The Parent
Articles, as in
effect immediately prior to the Effective Time, shall be the
Articles of
Incorporation of the Surviving Corporation, and the Parent Code, as
in effect
immediately prior to the Effective Time, shall be the Code of
Regulations of the
Surviving Corporation. Parent may at any time prior to the
Effective Time change
the method of effecting the Parent Merger (including, without
limitation, the
provisions of this Article II) if and to the extent it deems such
change to be
necessary, appropriate or desirable; provided, however, that no
such change
shall (i) alter or change the amount or kind of consideration to be
issued to
holders of Morgan Common Shares as provided for in Article III of
this Agreement
(subject to adjustment as provided in Sections 3.05 and 8.01(e)),
(ii) adversely
affect the tax treatment of Morgan's shareholders as a result of
receiving the
Merger Consideration or (iii) materially impede or delay
consummation of the
transactions contemplated by this Agreement. If Parent makes such
an election,
Parent and Morgan shall execute an appropriate amendment to this
Agreement in
order to reflect such election.
2.02
The Subsidiary Merger.
At the time determined by Parent, Morgan Bank shall merge with
and
into Lorain National (the "Subsidiary Merger") pursuant to an
agreement to merge
(the "Agreement to Merge") to be executed by Morgan Bank and Lorain
National.
Upon consummation of the Subsidiary Merger, the separate corporate
existence of
Morgan Bank shall cease and Lorain National shall survive and
continue to exist
as a national banking association. Parent may at any time prior to
the Effective
Time change the method of effecting the Subsidiary Merger
(including, without
limitation, the provisions of this Section 2.02) if and to the
extent it deems
such change to be necessary, appropriate or desirable; provided,
however, that
no such change shall adversely affect the tax treatment of Morgan's
shareholders
as a result of receiving the Merger Consideration.
2.03
Effectiveness of the Parent Merger.
Subject to the satisfaction or waiver of the conditions set forth
in
Article VII, the Parent Merger shall become effective upon the
occurrence of the
filing in the office of the OSS of a Certificate of Merger for the
Parent Merger
in accordance with Section 1701.81 of the OGCL, or such later date
and time as
may be set forth in such filing.
2.04
Effective Date and Effective Time.
Subject to the satisfaction or waiver of the conditions set forth
in
Article VII, the parties shall cause the effective date of the
Parent Merger
(the "Effective Date") to occur on a
9
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date to be determined by Parent and Morgan in their reasonable
discretion, which
date shall be within 30 days after the last of the conditions set
forth in
Article VII shall have been satisfied or waived in accordance with
the terms of
this Agreement; provided, however, that no such designation shall
cause the
Effective Date to fall after the date specified in Section 8.01(c)
hereof or
after the date or dates on which any Regulatory Authority approval
or any
extension thereof expires. The time on the Effective Date when the
Parent Merger
shall become effective is referred to as the "Effective Time."
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01
Merger Consideration.
Subject to the provisions of this Agreement, at the Effective
Time,
automatically by virtue of the Parent Merger and without any action
on the part
of any Person:
(a) Outstanding Morgan Common Shares. Except as otherwise provided
in
this
Article III, at the Effective Time, each Morgan Common Share
(excluding Treasury Stock and Morgan Common Shares held by Parent)
issued
and
outstanding immediately prior to the Effective Time shall, by
virtue of
the
Parent Merger and on the Effective Date, be converted at the
election
of
the holder thereof (in accordance with the election and
allocation
procedures set forth in Section 3.01(b), (e), (h), and (i)) into
either (i)
Parent Common Shares based upon a fixed exchange ratio of 3.162
Parent
Common Shares for each Morgan Common Share (the "Stock Exchange
Ratio");
(ii)
cash in the amount of $52.00 for each Morgan Common Share (the
"Cash
Exchange Amount"); or (iii) a combination of such Parent Common
Shares and
cash, as more fully set forth in Section 3.01(b)(iii).
Subject to adjustment for cash paid in lieu of fractional shares
in
accordance with Section 3.03, it is understood and agreed that
the
aggregate consideration will be a mixture of Parent Common Shares
and cash,
with
50% of the Morgan Common Shares issued and outstanding as of
the
Effective Time being
exchanged for Parent Common Shares and 50% of the
Morgan Common Shares issued and outstanding as of the Effective
Time being
exchanged for cash (collectively, the "Merger Consideration").
(b) Election as to Outstanding Morgan Common Shares. The Morgan
shareholders will have the following alternatives in connection
with the
exchange of their Morgan Common Shares in connection with the
Parent Merger
(which alternatives shall in each case be subject to the
allocation
procedures set forth in Sections 3.01(h) and (i)):
(i) AT THE OPTION OF THE HOLDER, all of such holder's Morgan
Common Shares deposited with the Exchange Agent shall be
converted
into and become Parent Common Shares at the Stock Exchange Ratio
(such
election, the "All Stock Election"); provided, however, that
fractional shares will not be issued and cash (payable by check)
will
be paid in lieu thereof as provided in Section 3.03; or
10
<PAGE>
(ii) AT THE OPTION OF THE HOLDER, all of such holder's Morgan
Common Shares deposited with the Exchange Agent shall be
converted
into and become cash (payable by check) at the Cash Exchange
Amount
(such election, the "All Cash Election"); or
(iii) AT THE OPTION OF THE HOLDER, any whole number of such
holder's Morgan Common Shares will be converted into and become
Parent
Common Shares at the rate of the Stock Exchange Ratio and the
remainder of such holder's Morgan Common Shares deposited with
the
Exchange Agent shall be converted into and become cash (payable
by
check) at the rate of the Cash Exchange Amount (such election,
the
"Mixed Election"); provided, however, that fractional shares will
not
be issued and cash (payable by check) will be paid in lieu thereof
as
provided in Section 3.03; or
(iv)
IF NO ELECTION (AS DEFINED IN SECTION 3.01(e)) IS MADE BY
THE HOLDER BY THE ELECTION DEADLINE (AS DEFINED IN SECTION
3.01(e)),
all of such holder's Morgan Common Shares will be converted into
the
right to receive Parent Common Shares as set forth in Section
3.01(b)(i), cash as set forth in Section 3.01(b)(ii), or any
combination of Parent Common Shares and cash as determined by
Parent
or, at Parent's direction, by the Exchange Agent at the Stock
Exchange
Ratio and the Cash Exchange Amount, as applicable; provided,
however,
that fractional shares will not be issued and cash will be paid
in
lieu thereof as provided in Section 3.03. Such Morgan Common
Shares
will be
allocated by the Exchange Agent pro rata among non-electing
holders based upon the number of Morgan Common Shares for which
an
election has not been received by the Election Deadline in order
to
(A) achieve the overall ratio of 50% Morgan Common Shares to be
converted into Parent Common Shares and 50% of Morgan Common Shares
to
be converted into cash, and (B) satisfy the elections made by
Morgan
shareholders to the greatest extent possible. Notice of such
allocation shall be provided promptly to each shareholder whose
Morgan
Common Shares are allocated pursuant to this Section
3.01(b)(iv).
(c) Treasury Shares and Shares Held by Parent. Each Morgan
Common
Share held as Treasury
Stock or held by Parent immediately prior to the
Effective Time shall be canceled and retired at the Effective Time
and no
consideration shall be issued in exchange therefor. For purposes of
this
provision, shares held by Subsidiaries of Parent shall not be
deemed to be
held
by Parent.
(d) Outstanding Parent Common Shares. Each Parent Common Share
issued
and
outstanding immediately prior to the Effective Time shall remain
issued
and
outstanding and shall be unaffected by the Parent Merger.
(e) Procedures for Election. An election form and other
appropriate
transmittal materials in such form as Morgan and Parent shall
mutually
agree (the "Election Form/Letter of Transmittal") shall be mailed
to
shareholders of Morgan prior to the Election Period (defined
below). The
"Election Period" shall be such period of time as Morgan and Parent
shall
mutually agree, within which Morgan shareholders may
11
<PAGE>
validly elect the form of Merger Consideration set forth in Section
3.01(b)
(the
"Election") that they will receive, occurring between (i) the date
of
the
mailing by Morgan of the Proxy Statement for the special meeting
of
shareholders of Morgan at which this Agreement is presented for
approval
and
(ii) five days prior to the Effective Date. The "Election
Deadline"
shall be the time, specified by Parent after consultation with
Morgan, on
the last day of the
Election Period, which shall be no earlier than the
fifth trading day prior to the Effective Date.
(f) Perfection of the Election. An Election shall be considered
to
have
been validly made by a Morgan shareholder only if (i) the
Exchange
Agent (as defined in Section 3.04) shall have received an
Election
Form/Letter of Transmittal properly completed and executed by
such
shareholder, accompanied by a certificate or certificates
representing the
Morgan Common Shares as to which such Election is being made, duly
endorsed
in
blank or otherwise in form acceptable for transfer on the books
of
Morgan, or containing an appropriate guaranty of delivery in the
form
customarily used in transactions of this nature from a member of a
national
securities exchange or a member of the NASD or a commercial bank or
trust
company in the United States and (ii) such Election Form/Letter
of
Transmittal and such certificate(s) or such guaranty of delivery
shall have
been
received by the Exchange Agent prior to the Election Deadline.
(g) Withdrawal of Election. Any Morgan shareholder may at any
time
prior to the Election Deadline revoke its election and either (i)
submit a
new Election
Form/Letter of Transmittal in accordance with the procedures
in
Section 3.01(f), or (ii) withdraw the certificate(s) for Morgan
Common
Shares deposited therewith by providing written notice that is
received by
the
Exchange Agent by 5:00 p.m., local time for the Exchange Agent, on
the
business day prior to the Election Deadline. Elections may be
similarly
revoked if this Agreement is terminated.
(h) Reduction of Shares Deposited for Cash. If more than 50% of
the
total number of Morgan Common Shares issued and outstanding have,
at the
Election Deadline, been deposited with the Exchange Agent for cash
pursuant
to
the All Cash Election and the Mixed Election and not withdrawn
pursuant
to
Section 3.01(g), the Exchange Agent will promptly eliminate from
the
shares deposited pursuant to the All Cash Election and the Mixed
Election
(subject to the limitations described in Section 3.01(h)(iv)), a
sufficient
number of such shares so that the total number of shares remaining
on
deposit for cash pursuant to the All Cash Election and the Mixed
Election
is
50% of the Morgan Common Shares issued and outstanding on the
Effective
Date. After giving effect to Section 3.01(b)(iv), such elimination
will be
effected as follows:
(i) Subject to the limitations described in Section
3.01(h)(iv),
the Exchange Agent will eliminate from the shares deposited for
cash
pursuant to the All Cash Election and the Mixed Election, and will
add
or cause to be added to the shares deposited for Parent Common
Shares,
on a pro rata basis in relation to the total number of shares
deposited pursuant to the All Cash Election and the Mixed
Election
minus the number of shares so deposited by the holders described
in
Section 3.01(h)(iv), such whole number of Morgan Common Shares
on
deposit for cash pursuant to the All Cash Election and the
Mixed
Election as may be
12
<PAGE>
necessary so that the total number of shares remaining on deposit
for
cash pursuant to All Cash Election and the Mixed Election is 50%
of
the Morgan Common Shares issued and outstanding on the Effective
Date;
(ii) All Morgan Common Shares that are eliminated pursuant to
Section 3.01(h)(i) from the shares deposited for cash shall be
converted into Parent Common Shares as provided by Sections
3.01(b)(i)
and 3.01(b)(iii);
(iii) Notice of such allocation shall be provided promptly to
each shareholder whose Morgan Common Shares are eliminated from
the
shares on deposit for cash pursuant to Section 3.01(h)(i); and
(iv) Notwithstanding the foregoing, the holders of 100 or fewer
Morgan Common Shares of record on the date of this Agreement who
have
elected the All Cash Election shall not be required to have any
of
their Morgan Common Shares converted into Parent Common Shares.
(i) Increase of Shares Deposited for Cash. If fewer than 50% of
the
total number of Morgan Common Shares issued and outstanding have,
at the
Election Deadline, been deposited with the Exchange Agent for cash
pursuant
to
the All Cash Election and the Mixed Election and not withdrawn
pursuant
to
Section 3.01(g), Parent will promptly add, or cause to be added by
the
Exchange Agent, to such deposited shares, a sufficient number of
Morgan
Common Shares deposited for Parent Common Shares pursuant to the
All Stock
Election and the Mixed Election (subject to the limitation
described in
Section 3.01(h)(iv)) so that the total number of Morgan Common
Shares on
deposit for cash pursuant to the All Cash Election and the Mixed
Election
on
the Effective Date is 50% of the Morgan Common Shares issued
and
outstanding on the Effective Date. After giving effect to
Section
3.01(b)(iv), such addition will be effected as follows:
(i) Subject to the limitation described in Section 3.01(h)(iv),
Parent will add or cause to be added to the shares deposited for
cash,
and the Exchange Agent will eliminate or cause to be eliminated
from
the shares deposited for Parent Common Shares pursuant to the
All
Stock Election and the Mixed Election, on a pro rata basis in
relation
to the total number of Morgan Common Shares deposited for
Parent
Common Shares pursuant to the All Stock Election and the Mixed
Election, such whole number of Morgan Common Shares not then on
deposit for cash as may be necessary so that the number of
shares
remaining on deposit for cash is 50% of the Morgan Common
Shares
issued and outstanding on the Effective Date;
(ii) All Morgan Common Shares that are eliminated pursuant to
Section 3.01(i)(i) from the shares to be converted into Parent
Common
Shares shall be converted into cash, as provided by Sections
3.01(b)(ii) and 3.01(b)(iii); and
13
<PAGE>
(iii) Notice of such allocation shall be provided promptly to
each shareholder whose Morgan Common Shares are added to the shares
on
deposit for cash pursuant to Section 3.01(i)(i).
(j) Notwithstanding anything in this Agreement to the contrary,
to
preserve the status of the Parent Merger as a tax-free
reorganization
within the meaning of Section 368(a)(1)(A) of the Code, if, based
upon the
closing price of the Parent Common Shares as reported on the
primary market
on
which the Parent Common Shares are listed for trading (the
"Parent
Exchange") on the business day immediately preceding the Effective
Time,
the
aggregate value of the Parent Common Shares to be issued in
connection
with
the Parent Merger would be less than 50% of the sum of the
aggregate
cash
to be received by the holders of the Morgan Common Shares
(including
amounts paid to dissenters), plus the value of the Parent Common
Shares to
be
received by the holders of the Morgan Common Shares, as
consideration in
connection with the Parent Merger, then Parent will increase the
Stock
Exchange Ratio so that the aggregate value of the Parent Common
Shares to
be
issued to the holders of the Morgan Common Shares in connection
with the
Parent Merger, as determined based upon the closing price of the
Parent
Common Shares on the Parent Exchange on the business day
immediately
preceding the Effective Time, is equal to 50% of the sum of the
aggregate
cash
to be received by the holders of the Morgan Common Shares
(including
amounts paid to dissenters), plus the value of the Parent Common
Shares to
be
received by the holders of the Morgan Common Shares as
consideration in
connection with the Parent Merger.
3.02
Rights as Shareholders; Stock Transfers.
At the Effective Time, the Morgan Common Shares shall no longer
be
outstanding and shall automatically be canceled and cease to exist
and holders
of Morgan Common Shares shall cease to be, and shall have no rights
as,
shareholders of Morgan, other than to receive any dividend or other
distribution
with respect to such Morgan Common Shares with a record date
occurring prior to
the Effective Time, the consideration provided under this Article
III and the
appraisal rights in the case of Dissenting Shares. After the
Effective Time,
there shall be no transfers on the stock transfer books of Morgan
or the
Surviving Corporation of any Morgan Common Shares (other than
Dissenting Shares,
if applicable).
3.03
Fractional Shares.
Notwithstanding any
other provision hereof, no fractional Parent
Common Shares and no certificates or scrip therefor, or other
evidence of
ownership thereof, will be issued in the Parent Merger and no
Parent dividend or
other distribution or stock split or combination will relate to any
fractional
Parent Common Share, and such fractional Parent Common Shares will
not entitle
the owner thereof to vote or to any rights of a security holder of
Parent;
instead, Parent shall pay to each holder of Morgan Common Shares
who would
otherwise be entitled to a fractional Parent Common Share (after
taking into
account all Old Certificates delivered by such holder) an amount in
cash
(without interest) determined by multiplying such fractional Parent
Common Share
to which the holder would be entitled by $52.00.
14
<PAGE>
3.04
Exchange Procedures.
(a) At or prior to the Effective Time, Parent shall deposit, or
shall
cause to be deposited, with Registrar and Transfer Company (in
such
capacity, the "Exchange Agent"), for the benefit of the holders
of
certificates representing Morgan Common Shares ("Old
Certificates"), for
exchange in accordance with this Article III, certificates
representing the
Parent Common Shares
("New Certificates") and an estimated amount of cash
(such cash and New Certificates, together with any dividends or
distributions with a record date occurring on or after the
Effective Date
with
respect thereto and any cash to be paid in lieu of fractional
Parent
Common Shares, being hereinafter referred to as the "Exchange
Fund") to be
paid
pursuant to this Article III in exchange for outstanding Morgan
Common
Shares. Parent shall make available directly or indirectly to the
Exchange
Agent, from time to time as needed, cash sufficient to pay cash in
lieu of
fractional Parent Common Shares pursuant to Section 3.03 and any
dividends
and
other distributions pursuant to Section 3.04(e).
(b)
No interest will be paid on any cash, including any cash to be
paid
in lieu of fractional Parent Common Shares or in respect of
dividends
or
distributions that any such Person shall be entitled to receive
pursuant
to
this Article III.
(c) Promptly after the Effective Time, but not later than 10
days
thereafter, Parent shall cause the Exchange Agent to mail to each
holder of
record of an Old Certificate that was converted pursuant to Section
3.01
(i)
a form of letter of transmittal (the "Letter of Transmittal")
specifying that delivery will be effected, and risk of loss and
title to
the
Old Certificates will pass, only upon proper delivery of the
Old
Certificates to the Exchange Agent and (ii) instructions and
procedures for
surrendering such Old Certificates in exchange for the New
Certificates.
Upon
surrender of an Old Certificate for cancellation to the
Exchange
Agent, together with such Letter of Transmittal, duly executed, the
holder
of
such Old Certificate shall receive in exchange therefor (A) a
New
Certificate representing that number of whole Parent Common Shares
that
such
holder has the right to receive pursuant to the provisions of
this
Article III, and/or (B) a check in an amount equal to the sum of
the cash
to
be paid to such holder as part of the Merger Consideration, the
cash to
be
paid in lieu of any fractional Parent Common Shares to which such
holder
is
entitled pursuant to Section 3.03 and/or the cash to be paid in
respect
of
any dividends or distributions to which such holder may be
entitled
pursuant to Section 3.04(e), after giving effect to any required
tax
withholdings, and the Old Certificate so surrendered shall
forthwith be
canceled. In the event of a transfer of ownership of Morgan Common
Shares
that
is not registered in the transfer records of Morgan, a New
Certificate
representing the proper number of Parent Common Shares may be
issued,
and/or the cash to be paid as part of the Merger Consideration, in
lieu of
any
fractional Parent Common Shares and/or in respect of any dividends
or
distributions may be paid, to a transferee if the Old Certificate
is
presented to the Exchange Agent, accompanied by all documents
required to
evidence and effect such transfer, and by evidence that any
applicable
stock transfer taxes have been paid. Until surrendered as
contemplated by
this
Section 3.04(c), each Old Certificate will be deemed at any time
after
the
Effective Time to represent only the right to receive upon such
surrender a New Certificate and/or a check in an amount equal to
the sum of
the
cash to be paid as part of
15
<PAGE>
the
Merger Consideration, the cash to be paid in lieu of any
fractional
Parent Common Shares and/or the cash to be paid in respect of any
dividends
or
distributions to which the holder may be entitled pursuant to
Section
3.04(e) hereof.
(d) Promptly following the date that is six months after the
Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation
all
cash, certificates and other documents in its possession relating
to the
transactions described in this Agreement; and any holders of Morgan
Common
Shares who have not theretofore complied with this Article III may
look
thereafter only to the Surviving Corporation for the Parent Common
Shares,
any
dividends or distributions thereon and any cash to be paid as part
of
the
Merger Consideration or in lieu of fractional Parent Common Shares
to
which they are entitled pursuant to this Article III, in each case,
without
any
interest thereon. Notwithstanding the foregoing, neither the
Exchange
Agent nor any party hereto shall be liable to any former holder of
Morgan
Common Shares for any Parent Common Shares, any dividends or
distributions
thereon or any cash to be paid as part of the Merger Consideration
or in
lieu
of fractional Parent Common Shares delivered to a public
official
pursuant to applicable abandoned property, escheat or similar
Laws.
(e) No dividends or other distributions with respect to Parent
Common
Shares with a record
date occurring on or after the Effective Date shall be
paid
to the holder of any unsurrendered Old Certificate representing
Morgan
Common Shares converted in the Parent Merger into the right to
receive such
Parent Common Shares until the holder thereof shall be entitled to
receive
New
Certificates in exchange therefor in accordance with the procedures
set
forth in this Section 3.04. After becoming so entitled in
accordance with
this
Section 3.04, the record holder thereof also shall be entitled
to
receive any such dividends or other distributions, without any
interest
thereon, which theretofore had become payable with respect to
Parent Common
Shares such holder had the right to receive upon surrender of the
Old
Certificates.
(f) If any Old Certificate has been lost, stolen or destroyed,
upon
the
making of an affidavit of that fact by the Person claiming such
Old
Certificate to be lost, stolen or destroyed and, if required by
Parent, the
posting by such Person of a bond in such reasonable amount as
Parent may
direct as indemnity against any claim that may be made against it
with
respect to such Old Certificate, the Exchange Agent shall deliver
in
exchange for such lost, stolen or destroyed Old Certificate (i) the
number
of
Parent Common Shares to which such Person is entitled pursuant
to
Section 3.01(a) with respect to the Morgan Common Shares
formerly
represented thereby, and/or (ii) a check in an amount equal to the
sum of
the
cash to be paid to such Person as part of the Merger Consideration,
the
cash
to be paid in lieu of any fractional Parent Common Shares to
which
such
Person is entitled pursuant to Section 3.03 and/or the cash to be
paid
in
respect of any dividends or distributions to which such Person may
be
entitled pursuant to Section 3.04(e).
(g) Parent is entitled to deduct and withhold from the
consideration
otherwise payable pursuant to this Agreement to any holder of
Morgan Common
Shares and Morgan Stock Options such amounts as it is required to
deduct
and
withhold with respect to the making of such payment under the Code
and
the
rules and regulations promulgated
16
<PAGE>
thereunder, or any applicable Law. To the extent that amounts are
so
withheld by Parent, such withheld amounts may be treated for all
purposes
of
this Agreement as having been paid to the holders of Morgan
Common
Shares and Morgan Stock Options in respect of which such deduction
and
withholding were made by Parent.
3.05
Anti-Dilution Provisions.
In the event Parent changes (or establishes a record date for
changing) the number of Parent Common Shares issued and outstanding
between the
date hereof and the Effective Date as a result of a stock split,
stock dividend,
recapitalization, reclassification, split up, combination, exchange
of shares,
readjustment or similar transaction with respect to the outstanding
Parent
Common Shares and the record date therefor shall be prior to the
Effective Date,
the Stock Exchange Ratio shall be proportionately adjusted. In the
event that
Rights are issued under the Rights Agreement, and such Rights are
issued between
the date of this Agreement and the Effective Date, then Morgan
shareholders who
receive Parent Common Shares as a result of the Parent Merger shall
additionally
receive Rights on the Effective Date to the same extent they would
have received
Rights if they had held such Parent Common Shares when such Rights
were issued.
3.06
Treatment of Stock Options.
There are currently outstanding options to purchase 74,500
Morgan
Common Shares under the Morgan Stock Plan (each, a "Morgan Stock
Option"). Each
Morgan Stock Option that is outstanding and unexercised immediately
prior to the
Effective Time, whether or not then vested and exercisable, shall
be terminated
immediately prior to the Effective Time and each grantee thereof
shall be
entitled to receive, in lieu of the Morgan Common Shares, that
would otherwise
have been issuable upon exercise thereof, an amount in cash
computed by
multiplying (a) the excess of (i) $52.00 over (ii) the exercise
price of such
Morgan Stock Option by (b) the number of Morgan Common Shares
subject to the
Morgan Stock Option. Morgan shall use commercially reasonable
efforts to take or
cause to be taken all action necessary to obtain a written consent
from each
holder of a Morgan Stock Option to permit such termination
effective at the
Effective Date. Morgan may elect to pay immediately prior to the
Effective Time
to each holder of a Morgan Stock Option from whom a written consent
has been
obtained pursuant to the preceding sentence the aggregate amount to
which such
holder is entitled pursuant to this Section 3.06.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01
Forbearances of Morgan.
From the date hereof until the earlier of the Effective Time and
the
termination of this Agreement, except as expressly contemplated by
this
Agreement and/or disclosed on Morgan's Disclosure Schedule, without
the prior
written consent of Parent, which consent shall not be unreasonably
withheld,
Morgan shall not, and shall cause its Subsidiary not to:
17
<PAGE>
(a) Ordinary Course. Conduct the business of Morgan and its
Subsidiary
other than in the ordinary and usual course consistent with past
practice
or
fail to use reasonable efforts to preserve intact their
business
organizations and assets and maintain their rights, franchises and
existing
relations with customers, suppliers, employees and business
associates, or
voluntarily take any action which, at the time taken, is reasonably
likely
to
have an adverse effect upon Morgan's ability to perform any of
its
material obligations under this Agreement.
(b) New Activities. Engage in any material new activities or lines
of
business or make any material changes to its existing activities or
lines
of
business.
(c) Capital Stock. Other than pursuant to Rights Previously
Disclosed
and
outstanding on the date hereof, (i) issue, sell or otherwise permit
to
become outstanding, or authorize the creation of, any additional
Morgan
Common Shares or any Rights, (ii) permit any additional Morgan
Common
Shares to become subject to new grants of employee or director
stock
options, other Rights or similar stock-based employee rights, (iii)
permit
any
purchases of Morgan Common Shares to be made under the Morgan
Stock
Plan, (iv) effect any recapitalization, reclassification, stock
split or
like
change in capitalization or (iv) enter into, or take any action
to
cause any holders of Morgan Common Shares to enter into, any
agreement,
understanding or commitment relating to the right of holders of
Morgan
Common Shares to vote any Morgan Common Shares, or cooperate in
any
formation of any voting trust or similar arrangement relating to
such
shares, other than the Voting Agreements.
(d) Dividends, Etc. (i) Make, declare, pay or set aside for
payment
any
dividend or distribution on any shares of its capital stock, other
than
(A)
quarterly cash dividends on Morgan Common Shares in an amount not
to
exceed the per share amount declared and paid in its most recent
quarterly
cash
dividend, with record and payment dates consistent with past
practice,
and
(B) dividends from its wholly owned Subsidiary to Morgan; (ii)
otherwise declare or make any distribution on any shares of its
capital
stock; or (iii) directly or indirectly adjust, split, combine,
redeem,
reclassify, purchase or otherwise acquire any shares of its capital
stock.
(e) Subsidiaries. (i) Issue, sell or otherwise permit to become
outstanding, (ii) transfer, mortgage, encumber or otherwise dispose
of
(iii) permit the creation of any Lien in respect of, or (iv) amend
or
modify the terms of, any equity interests held in a Subsidiary of
Morgan.
(f) Compensation; Employment Agreements; Etc. Enter into,
amend,
modify, renew or terminate any employment, consulting, severance,
change in
control or similar agreements or arrangements with any director,
officer or
employee of, or independent contractor with respect to, Morgan or
its
Subsidiary, or grant any salary, wage or other increase or increase
any
employee benefit (including incentive or bonus payments), except
(i) for
normal individual increases in compensation to employees in the
ordinary
and
usual course of business consistent with past practice, (ii) for
other
changes that are required or made advisable by applicable Law, and
(iii) to
satisfy Previously Disclosed contractual obligations existing as of
the
date
hereof.
18
<PAGE>
(g) Benefit Plans. Enter into, establish, adopt, amend, modify
or
terminate (except (i) as may be required by applicable Law, (ii) to
satisfy
Previously Disclosed contractual obligations existing as of the
date hereof
or
(iii) the regular annual renewal of insurance Contracts) any
pension,
retirement, stock option, stock purchase, savings, profit sharing,
deferred
compensation, consulting, bonus, group insurance or other employee
benefit,
incentive or welfare contract, plan or arrangement, or any trust
agreement
(or
similar arrangement) related thereto, in respect of any
director,
officer or employee of, or independent contractor with respect to,
Morgan
or
its Subsidiary (or any dependent or beneficiary of any of the
foregoing
Persons), or take any action to accelerate the vesting or
exercisability
of,
or the payment or distribution with respect to, stock options,
restricted stock or other compensation or benefits payable
thereunder,
other than pursuant to this Agreement.
(h) Dispositions. Sell, transfer, mortgage, encumber or
otherwise
dispose of or permit the creation of any Lien for sales of Loans,
debt
securities or similar investments (except for a Lien for Taxes not
yet due
and
payable) in respect of, or discontinue any portion of, any of
its
assets, deposits, business or properties except in the ordinary and
usual
course of business consistent with past practice.
(i) Acquisitions. Acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each
case in
the
ordinary and usual course of business consistent with past
practice)
all
or any portion of, the assets, business, deposits or properties of
any
other entity, or acquire mortgage servicing rights, except in
connection
with
existing correspondent lending relationships in the ordinary and
usual
course of business consistent with past practice.
(j) Governing Documents. Amend the Morgan Articles, Morgan Code or
the
Governing Documents of Morgan's Subsidiary.
(k) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be
required
by
GAAP.
(l) Contracts. Except in the ordinary and usual course of
business
consistent with past practice, enter into or terminate any
material
contract (as defined in Section 5.03(k)) or amend or modify in any
material
respect any of its existing material contracts, or enter into any
new
contract that would be required to be disclosed pursuant to the
standards
set
forth in Section 5.03(k).
(m) Claims. Settle any claim, action or proceeding, except for
any
claim, action or proceeding that does not involve precedent for
other
material claims, actions or proceedings and that involve solely
money
damages in an amount, individually or in the aggregate for all
such
settlements, that is immaterial to Morgan and its Subsidiary, taken
as a
whole.
(n) Adverse Actions. (i) Take any action while knowing that
such
action would, or is reasonably likely to, prevent or impede the
Parent
Merger from qualifying
as
19
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a
reorganization within the meaning of Section 368(a) of the Code; or
(ii)
knowingly take any action that is intended or is reasonably likely
to
result in (A) any of its representations and warranties set forth
in this
Agreement being or becoming untrue in any material respect at any
time at
or
prior to the Effective Time, (B) any of the conditions to the
Parent
Merger set forth in Article VII not being satisfied or (C) a
material
violation of any provision of this Agreement except, in each case,
as may
be
required by applicable Law or (iii) engage in any new line of
business
or
make any acquisition that would not be permissible for a United
States
bank
holding company (as defined in the Bank Holding Company Act of
1956)
or
would subject Parent, Morgan or any Subsidiary of either to
material
regulation by a Regulatory Authority that does not presently
regulate such
company or to regulation by a Regulatory Authority that is
materially
different from current regulation.
(o) Risk Management. Except as required by applicable Law, (i)
implement or adopt any material change in its credit risk and
interest rate
risk
management and hedging policies and other risk management
policies,
procedures or practices; (ii) fail to follow its existing policies
or
practices with respect to managing its exposure to credit and
interest rate
and
other risk; or (iii) fail to use commercially reasonable means to
avoid
any
material increase in its aggregate exposure to interest rate
risk.
(p) Indebtedness. Incur, cancel, release, assign, modify,
assume,
guarantee, endorse or otherwise as an accommodation become
responsible for
the
obligations of any other Person with respect to any indebtedness
for
borrowed money in an amount in excess of $500,000; provided,
however, that
Morgan may continue to borrow from the Federal Home Loan Bank
of
Cincinnati, National City Bank and/or Great Lakes Bankers Bank
in
accordance with past practices.
(q) Related Party Transactions. Make any payment of cash or
other
consideration to, or make any Loan to or on behalf of, or enter
into, amend
or
grant a consent or waiver under, or fail to enforce, any Contract
with,
any
Related Person.
(r) Taxes. Make or change any material election with respect to
Taxes,
settle any material Tax audit or proceeding, enter into any Tax
closing
agreement or request any Tax private letter or similar ruling.
(s) Loans. Extend credit for new loans, renewals and extensions on
a
secured or unsecured basis, except in accordance with the lending
limits
set
forth in Morgan's loan policy dated July 27, 2006 and pursuant
to
historic business practices, which policy shall not be modified
without the
prior written consent of Parent.
(t) Capital Expenditures. Make any capital expenditures in excess
of
$50,000 in any one case or $100,000 in the aggregate or enter into
any
agreement contemplating capital expenditures in excess of $100,000
for any
twelve-month period.
(u) Capitalization Status. Fail to maintain Morgan Bank's status as
a
"well-capitalized" bank within the meaning of the risk-based
capital
guidelines issued by the Board of Governors of the Federal Reserve
System;
provided that, for purposes of this
20
<PAGE>
clause (u), charges relating to the transactions contemplated by
this
Agreement shall be excluded from the determination of such
status.
(v) Commitments. Agree or commit to do, or enter into any
Contract
regarding, anything that would be precluded by clauses (a) through
(u).
4.02
Forbearances of Parent.
From the date hereof until the Effective Time, except as
expressly
contemplated by this Agreement and/or disclosed on Parent's
Disclosure Schedule,
without the prior written consent of Morgan, which consent shall
not be
unreasonably withheld, Parent shall not, and shall cause each of
its
Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Parent and its
Subsidiaries other than in the ordinary and usual course consistent
with
past
practice or fail to use reasonable efforts to preserve intact
their
business organizations and assets and maintain their rights,
franchises and
existing relations with customers, suppliers, employees and
business
associates, or voluntarily take any action which, at the time
taken, is
reasonably likely to have an adverse affect upon Parent's ability
to
perform any of its material obligations under this Agreement.
(b) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be
required
by
GAAP.
(c) Adverse Actions. (i) Take any action while knowing that
such
action would, or is reasonably likely to, prevent or impede the
Parent
Merger from qualifying as a reorganization within the meaning of
Section
368(a) of the Code; (ii) knowingly take any action that is intended
or is
reasonably likely to result in (A) any of its representations
and
warranties set forth in this Agreement being or becoming untrue in
any
material respect at any time at or prior to the Effective Time, (B)
any of
the
conditions to the Parent Merger set forth in Article VII not
being
satisfied or (C) a material violation of any provision of this
Agreement
except, in each case, as may be required by applicable Law.
(d) Risk Management. Except as required by applicable Law, (i) fail
to
follow its existing policies or practices with respect to managing
its
exposure to credit and interest rate hedging policies and other
risk, or
(ii)
fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk.
(e) Commitments. Agree or commit to do, or enter into any
Contract
regarding, anything that would be precluded by clauses (a) through
(d).
21
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01
Disclosure Schedules.
On or prior to the date hereof, Parent delivered to Morgan a
schedule
and Morgan delivered to Parent a schedule (respectively, its
"Disclosure
Schedule") setting forth, among other things, items, the disclosure
of which are
necessary or appropriate either in response to an express
disclosure requirement
contained in a provision hereof or as an exception to one or
more
representations or warranties contained in Section 5.03 or 5.04 or
to one or
more of its respective covenants contained in Article IV and
Article VI;
provided, however, that (a) no such item is required to be set
forth in a
Disclosure Schedule as an exception to a representation or warranty
if its
absence would not be reasonably likely to result in the related
representation
or warranty being deemed untrue or incorrect under the standard
established by
Section 5.02, and (b) the mere inclusion of an item in a Disclosure
Schedule as
an exception to a representation or warranty shall not be deemed an
admission by
a party that such item represents a material exception or fact,
event or
circumstance or that such item is reasonably likely to have or
result in a
Material Adverse Effect on the party making the representation.
Morgan's
representations, warranties and covenants contained in this
Agreement shall not
be deemed to be untrue, incorrect or to have been breached as a
result of
effects on Morgan arising solely from actions taken in compliance
with a written
request of Parent.
5.02
Standard.
No representation or warranty of Morgan or Parent contained in
Section
5.03 (other than Sections 5.03(h), (i), (k), (l), (n), (q), (s),
(t) and (w)
(collectively, the "Excluded Representations")) or 5.04 shall be
deemed untrue
or incorrect, and no party hereto shall be deemed to have breached
a
representation or warranty, as a consequence of the existence of
any fact, event
or circumstance unless such fact, circumstance or event,
individually or taken
together with all other facts, events or circumstances inconsistent
with any
representation or warranty contained in Section 5.03 (other than
the Excluded
Representations) or 5.04 (without giving effect to any limitation
set forth in
Section 5.03 (other than in the Excluded Representations) or 5.04
arising from
the use of the words "material" or "materially" or the phrase
"Material Adverse
Effect" or similar qualifiers) has had, or is reasonably likely to
have, a
Material Adverse Effect.
5.03 Representations
and Warranties of Morgan.
Subject to Sections 5.01 and 5.02 and except as Previously
Disclosed,
Morgan hereby represents and warrants to Parent as follows:
(a) Organization, Standing and Authority. Morgan is a corporation
duly
organized, validly existing and in good standing under the Laws of
the
State of Ohio and any foreign jurisdictions where its ownership or
leasing
of
property or assets or the conduct of its business requires it to be
so
qualified. Morgan is
registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended. Morgan Bank is a national
banking
association, duly organized, validly existing and in good standing
under
the
laws of the United States of America. Morgan Bank is not required
to
22
<PAGE>
be
qualified to do business in any state or in any foreign
jurisdictions
where it owns or leases property or assets or conducts its
business.
(b) Capital Structure of Morgan. The authorized capital stock
of
Morgan consists solely of 600,000 Morgan Common Shares, of which
466,302
Morgan Common Shares were outstanding as of the date hereof. As of
the date
hereof, no shares of Treasury Stock were held by Morgan and none
were
otherwise owned by Morgan or its Subsidiary. The outstanding Morgan
Common
Shares have been duly authorized, are validly issued and
outstanding, fully
paid
and nonassessable, and are not subject to any preemptive rights
(and
were
not issued in violation of any preemptive rights). As of the
date
hereof, (i) there were no Morgan Common Shares authorized and
reserved for
issuance, and (ii) Morgan did not have any commitment to authorize,
issue
or
sell any Morgan Common Shares or Rights, except pursuant to
this
Agreement and the Morgan Stock Plan. Morgan does not have
outstanding any
bonds, debentures, notes or other obligations the holders of which
have the
right to vote (or that are
convertible into or exercisable for securities
having the right to vote) with the shareholders of Morgan on any
matter.
(c) Subsidiaries.
(i) (A) Morgan has Previously Disclosed a list of all of its
Subsidiaries together with the jurisdiction of organization of
each
such Subsidiary, (B) Morgan owns, directly or indirectly, all
the
issued and outstanding equity securities of its Subsidiary, (C)
no
equity securities of its Subsidiary is or may become required to
be
issued (other than to it or its wholly-owned Subsidiary) by reason
of
any Right or otherwise, (D) there are no Contracts by which of
such
Subsidiary is or may be bound to sell or otherwise transfer any
equity
securities of such Subsidiary (other than to Morgan or its
wholly-owned Subsidiary), (E) there are no Contracts relating
to
Morgan's rights to vote or to dispose of any equity securities of
any
such Subsidiary and (F) all the equity securities of the
Subsidiary
held by Morgan or its Subsidiary are fully paid and
nonassessable
(except pursuant to 12 U.S.C. Section 55) and are owned by Morgan
or
its Subsidiary free and clear of any Liens.
(ii) Except as Previously Disclosed, Morgan does not own
beneficially, directly or indirectly, any equity securities or
similar
interests of any Person, or any interest in a partnership or
joint
venture of any kind, other than its Subsidiary. Morgan has
Previously
Disclosed, as of the date of this Agreement, a list of all
equity
securities it or its Subsidiary holds involving, in the
aggregate,
beneficial ownership
or control by Morgan or any such Subsidiary of 5%
or more of any class of the issuer's voting securities or 25% or
more
of any class of the issuer's securities, including a description
of
any such issuer and the percentage of the issuer's voting
and/or
non-voting securities and, as of the Effective Time, no
additional
Persons would need to be included on such a list.
(iii) Morgan's Subsidiary has been duly organized and is
validly
existing in good standing under the Laws of the jurisdiction of
its
organization,
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<PAGE>
and is duly qualified to do business and in good standing in
the
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified. Morgan Bank
is
Morgan's only depository institution Subsidiary, and it (A) is
an
"insured depository institution" as defined in the Federal
Deposit
Insurance Act and the applicable regulations thereunder and (B) has
a
rating of "Satisfactory" or better under the Community
Reinvestment
Act of 1977 as of the date of this Agreement.
(d) Corporate Power; Authorized and Effective Agreement. Each
of
Morgan and its Subsidiary has full corporate power and authority to
carry
on
its business as it is now being conducted and to own all its
properties
and
assets. Subject to the adoption of this Agreement by the holders of
the
requisite number of outstanding Morgan Common Shares entitled to
vote on
this
Agreement (the "Required Morgan Vote") and the approval of
Regulatory
Authorities, Morgan has the corporate power and authority to
execute,
deliver and perform its obligations under this Agreement and to
consummate
the
transactions contemplated hereby and thereby, and, subject to
approval
by
the board of directors of Morgan Bank and by Morgan as sole
shareholder
of
Morgan Bank, Morgan Bank has the corporate power and authority
to
consummate the Subsidiary Merger as contemplated by Section
2.02.
(e) Corporate Authority. Subject to adoption of this Agreement by
the
Required Morgan Vote (which is the only shareholder vote required
thereon),
this
Agreement and the transactions contemplated hereby have been
authorized by all necessary corporate action of Morgan and the
Morgan Board
on
or before the date hereof. The Agreement to Merge, when executed
by
Morgan Bank, shall have been approved by the Board of Directors of
Morgan
Bank
and by the Morgan Board, as the sole shareholder of Morgan Bank.
This
Agreement is a valid and legally binding obligation of Morgan,
enforceable
against Morgan in accordance with its terms (except as
enforceability may
be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar Laws of general
applicability
relating to or affecting creditors' rights or by general equity
principles
and
except to the extent such enforceability may be limited by laws
relating to the safety and soundness of insured depository
institutions as
set
forth in 12 U.S.C. Section 1818(b) or the appointment of a
conservator
by
the FDIC).
(f) Fairness Opinion. The Morgan Board has received the written
opinion of Ryan Beck & Co., Inc., to the effect that, as of the
date
hereof, the consideration to be received by the holders of Morgan
Common
Shares in the Parent Merger is fair to the holders of Morgan Common
Shares
from
a financial point of view, which opinion will be updated by Ryan
Beck
& Co., Inc. and provided to the Morgan Board on the date of the
Proxy
Statement.
(g) Regulatory Filings; No Defaults.
(i) No consents or approvals of, or filings or registrations
with, any Governmental Authority or with any third party are
required
to be made or obtained by Morgan or any of its Subsidiaries in
connection with the execution, delivery or performance by Morgan
of
this Agreement or to consummate the
24
<PAGE>
Parent Merger or the other transactions contemplated hereby except
for
(A) filings of applications and notices, as applicable, with
Regulatory Authorities, and (B) the filing of the Certificates
of
Merger with the OSS pursuant to the OGCL. As of the date
hereof,
Morgan is not aware of any reason why the Requisite Regulatory
Approvals (as defined in Section 7.01(b)) will not be received
without
the imposition of a condition, restriction or requirement of the
type
described in Section 7.01(b).
(ii) Subject to receipt of the regulatory and shareholder
approvals referred to above and expiration of related
regulatory
waiting periods, and required filings under federal and state
securities Laws by Parent, except as Previously Disclosed, the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and
will
not (A) constitute a breach or violation of, or a default under,
or
give rise to any Lien, any acceleration of remedies or any right
of
termination under, any Law, governmental permit or license, or
Contract of Morgan or its Subsidiary or to which Morgan or its
Subsidiary or properties is subject or bound, (B) constitute a
breach
or violation of, or a default under, the Governing Documents of
Morgan
or its Subsidiary or (C) require any consent or approval under
any
such Law, governmental permit or license, or governmental
Contract.
(h) Regulatory Reports; Material Adverse Effect.
(i) Morgan (A) has delivered to Parent copies of the audited
consolidated balance sheets and the related audited
consolidated
statements of income, shareholders' equity and cash flows
(including
related notes and schedules) of Morgan and its consolidated
Subsidiary
as of and for each of the three full fiscal years ended December
31,
2005, and of the unaudited balance sheet and the related
unaudited
statement of income, as of and for the three and nine months
ended
September 30, 2006 and 2005 (the "Morgan Financial Statements"),
and
(B) has furnished Parent with a true and complete copy of each
material report filed by Morgan with the Federal Reserve Board or
by
its Subsidiary with any Regulatory Authorities from and after
January
1, 2001 (each, a "Regulatory Reporting Document"), which are all
the
material documents that Morgan or its Subsidiary was required to
file
with the Regulatory Authorities since such date and all of
which
complied when filed in all material respects with all applicable
laws
and regulations.
(ii) The Morgan Financial Statements (as of the dates thereof
and
for the periods covered thereby) (A) are in accordance with the
books
and records of Morgan and its Subsidiary, which are complete
and
accurate in all material respects and which have been maintained
in
accordance with good business practices, and (B) present fairly
the
consolidated financial position and the consolidated results of
operations, changes in shareholders' equity and cash flows of
Morgan
and its Subsidiary as of the dates and for the periods indicated.
The
Morgan Financial Statements have been prepared in accordance
with
GAAP, subject in the case of unaudited interim financial
statements
for the three and nine
25
<PAGE>
months ended September 30, 2006 to normal recurring year-end
adjustments and except for the absence of certain footnote
information
in such unaudited interim financial statements. Neither S.R.
Snodgrass, AC nor any other firm of independent certified
public
accountants has prepared or delivered to Morgan any management
letters
that express any material concerns or issues regarding Morgan's
internal controls, accounting practices or financial conditions
since
January 1, 2001.
(iii) To the knowledge of Morgan, S.R. Snodgrass, AC, which has
expressed its opinion with respect to the audited financial
statements
of Morgan and its Subsidiaries included in the Morgan Financial
Statements (including the related notes), is and has been
throughout
the periods covered by such financial statements an independent
registered public accounting firm with respect to Morgan within
the
meaning of the Securities Act and the related rules of the SEC and
the
requirements of the Public Company Accounting Oversight Board.
(i) Litigation. Except as Previously Disclosed, no material
litigation, claim or other proceeding before any court or
governmental
agency is pending against Morgan or its Subsidiary and, to
Morgan's
knowledge, no such litigation, claim or other proceeding has
been
threatened.
(j) Regulatory Matters.
(i) Neither Morgan nor its Subsidiary or properties is a party
to
or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter
or
similar submission to, or extraordinary supervisory letter from
any
Regulatory Authorities.
(ii) Neither Morgan nor its Subsidiary has been advised by any
Regulatory Authority that such Regulatory Authority is
contemplating
issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement,
memorandum
of understanding, commitment letter, supervisory letter or
similar
submission.
(k) Compliance with Laws.
(i) Except as Previously Disclosed, each of Morgan and its
Subsidiary:
(A) is in material compliance with all Laws applicable
thereto or to the employees conducting such businesses,
including, without limitation, the USA Patriot Act of 2001, the
International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001, the Equal Credit Opportunity Act, the
Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending Laws and
other Laws relating to discriminatory business practices;
26
<PAGE>
(B) has all material permits, licenses, authorizations,
orders and approvals of, and has made all filings, applications
and registrations with, all Regulatory Authorities and
Governmental Authorities that are required in order to permit
them to own or lease their properties and to conduct their
businesses as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full
force
and effect and, to Morgan's knowledge, no suspension or
cancellation of any of them is threatened or would reasonably
be
expected to occur, and all such filings, applications and
registrations are current; and
(C) has received, since December 31, 2005, no notification
or communication from any Regulatory Authority or Governmental
Authority (1) asserting that Morgan or its Subsidiary is not in
material compliance with any of the statutes, regulations, or
ordinances that such Regulatory Authority or Governmental
Authority enforces, (2) threatening to revoke a
