Exhibit 2.1
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
(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
11
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
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
13
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
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
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.
16
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
(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.
18
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.
19
(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 or any
of the PHSB Subsidiaries under any Environmental Law, including
without limitation any notices, demand letters or requests for
information from any federal or state environmental agency relating
to any such liabilities under or violations of Environmental Law,
except such which would not have or result in a Material Adverse
Effect.
2.16. Allowance
for Loan Losses and Real Estate Owned. The allowance for loan
losses reflected on PHSB’s consolidated balance sheets
included in the consolidated financial statements referred to in
Section 2.04 hereof is, or will be in the case of subsequently
delivered financial statements, as the case may be, in the opinion
of PHSB’s management adequate in all material respects as of
their respective dates under the requirements of generally accepted
accounting principles to provide for reasonably anticipated losses
on outstanding loans net of recoveries. The real estate owned
reflected on the consolidated balance sheets included in the
consolidated financial statements referred to in Section 2.04
hereof is, or will be in the case of subsequently delivered
financial statements, as the case may be, carried at the lower of
cost or fair value, or the lower of cost or net realizable value,
as required by generally accepted accounting principles.
2.17. Minute
Books. Since January 1, 2001, the minute books, including
any attachments thereto, of PHSB and the PHSB Subsidiaries contain
complete and accurate records in all material respects of all
meetings and other corporate action held or taken by their
respective Boards of Directors (including committees of their
respective Boards of Directors) and stockholders.
2.18. Affiliate
Transactions .
(a) All
“covered transactions” between Peoples Home Savings
Bank and an “affiliated person” or
“affiliate” within the meaning of Sections 23A and
23B of the Federal Reserve Act have been in compliance with such
provisions and the regulations of the Federal Reserve Board
thereunder.
(b) PHSB
Disclosure Schedule 2.18(b) sets forth the name and number of
shares of PHSB Common Stock owned as of the date hereof
beneficially or of record by any persons PHSB considers to be
affiliates of PHSB (“PHSB Affiliates”) as that term is
defined for purposes of Rule 145 under the 1933
Act.
2.19. Broker
Fees. Except as set forth in PHSB Disclosure
Schedule 2.19, none of PHSB, the PHSB Subsidiaries or any of
the respective directors or officers of such companies has employed
any consultant, broker or finder or incurred any liability for any
consultant’s, broker’s or finder’s fees or
commissions in connection with any of the transactions contemplated
by this Agreement.
2.20. Opinion
of Financial Advisor. PHSB has received the opinion of Sandler
O’Neill & Partners, L.P., dated as of the date of this
Agreement, to the effect that, as of such date, the
Merger
20
Consideration to be paid to the
stockholders of PHSB in the Merger is fair from a financial point
of view to such holders of PHSB Common Stock.
2.21.
Disclosures. No representation or warranty contained in
Article II of this Agreement, and no statement contained in
the PHSB Disclosure Schedules, contains any untrue statement of a
material fact or omits to state a material fact necessary in order
to make the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
ESB
References to
“ESB Disclosure Schedules” shall mean all of the
disclosure schedules required by this Article III, which have
been delivered by ESB to PHSB. ESB hereby represents and warrants
to PHSB as follows as of the date hereof:
3.01. Corporate
Organization.
(a) ESB is a
corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania. ESB 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 in Section 2.01). ESB is registered
as a thrift holding company under the HOLA. ESB Disclosure
Schedule 3.01(a) sets forth true and complete copies of the
Articles of Incorporation or other governing instrument and Bylaws
of ESB and the ESB Subsidiaries as in effect on the date
hereof.
(b) The only
direct or indirect subsidiaries of ESB are ESB Bank, AMSCO, Inc.,
ESB Financial Services, Inc., PennFirst Financial Services, Inc.,
THF, Inc., ESB Capital Trust II, ESB Statutory Trust III, ESB Bank
Building Associates, a limited partnership, McCormick Farms, LLC,
Madison Woods, a limited partnership, The Links at Deer Run, LLC,
and Brandwine Village, LLC (together the “ESB
Subsidiaries”). Each of the ESB 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 ESB and ESB Bank has satisfied in
all material respects all commitments, financial or otherwise, as
may have been agreed upon with their appropriate thrift regulatory
agencies. Other than the ESB Subsidiaries, ESB does not own or
control, directly or
21
indirectly, greater than a 5%
equity interest in any corporation, company, association,
partnership, joint venture or other entity.
3.02.
Capitalization. The authorized capital stock of ESB consists
of 30,000,000 shares of ESB Common Stock, of which 10,707,221 are
issued and outstanding and 223,077 shares which are held in
treasury as of the date hereof, and 5,000,000 shares of preferred
stock, par value $.01 per share, of which no shares are issued and
outstanding as of the date hereof. All issued and outstanding
shares of capital stock of ESB, and all issued and outstanding
shares of capital stock of each of the ESB 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 ESB Subsidiaries are owned
by ESB free and clear of any liens, encumbrances, charges,
restrictions or rights of third parties of any kind whatsoever,
and, except for options to purchase 901,350 shares of ESB Common
Stock which have been granted or assumed pursuant to ESB’s
2001 Stock Option Plan, the PennFirst Bancorp, Inc. 1997 Stock
Option Plan, the PennFirst Bancorp, Inc. 1992 Stock Incentive Plan,
the Ellwood Federal Savings Bank 1990 Stock Option Plan, the Troy
Hill Bancorp, Inc. 1994 Stock Option Plan and the SHS Bancorp, Inc.
1998 Stock Option Plan (or options granted by ESB pursuant thereto
after the date hereof) none of ESB or any of the ESB 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 ESB or any of the ESB 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.
3.03.
Authority; No Violation.
(a) Subject
to approval of this Agreement and the Agreement of Merger and the
transactions contemplated hereby and thereby by the Stockholders of
ESB, ESB 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
ESB. Except for the approval of ESB’s stockholders of this
Agreement and the Agreement of Merger, no other corporate
proceedings on the part of ESB are necessary to consummate the
transactions so contemplated. This Agreement and the Agreement of
Merger have been duly and validly executed and delivered by ESB and
constitute valid and binding obligations of ESB, 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 ESB, nor the consummation by ESB of the transactions
contemplated hereby and thereby in accordance with the terms hereof
and thereof, or compliance by ESB with any of the terms or
provisions hereof or thereof, will (i) violate any provision
of the Articles of Incorporation or other
22
governing instrument or Bylaws of
ESB or any of the ESB 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 ESB or any of the ESB
Subsidiaries or any of their respective properties or assets, or
(iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under,
result in the termination of, 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 ESB or any of the ESB 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 ESB or any of the ESB
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 for
consents and approvals of or filings or registrations with or
notices to the Commission, the Secretary of State of the
Commonwealth of Pennsylvania, the Department, the FDIC, the Federal
Reserve Board, the OTS, if required, and the stockholders of ESB,
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 ESB in connection with (a) the
execution and delivery of this Agreement and the Agreement of
Merger by ESB and (b) the consummation by ESB of the
transactions contemplated hereby and by the Agreement of
Merger.
3.04. Financial
Statements.
(a) ESB has
previously delivered to PHSB copies of the consolidated statements
of financial condition of ESB 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 Ernst & Young LLP, independent public
accountants, as well as the unaudited consolidated statement of
financial condition of ESB 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 statements of
financial condition of ESB referred to herein (including the
related notes, where applicable), as well as the consolidated
financial statements contained in the reports of ESB to be
delivered by ESB pursuant to Section 4.04 hereof, fairly
present or will fairly present, as the case may be, the
consolidated financial condition of ESB as of the respective dates
set forth therein, and the related consolidated statements of
operations, 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 ESB for the respective periods or as of the
respective dates set forth therein (it being understood that
ESB’s interim financial statements are not audited and are
not prepared with related notes but reflect all adjustments which
are, in the opinion of ESB, necessary for a fair presentation of
such financial statements).
&nb
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