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Title: |
Merger Agreement |
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Entities: |
East Penn Financial Corp. |
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Date: |
2007 |
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Size: |
Preview shows 68KB of 212KB total |
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Price: |
$71 |
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ID: |
#2885499 |
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Start of
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MERGER AGREEMENT
THIS MERGER AGREEMENT (Agreement) is made and entered into as of May 15, 2007, by and among HARLEYSVILLE NATIONAL CORPORATION, a Pennsylvania corporation (HNC), EAST PENN FINANCIAL CORPORATION, a Pennsylvania corporation (East Penn Financial), and EAST PENN BANK, a Pennsylvania bank (Bank).
BACKGROUND
A. East Penn Financial is a registered bank holding company and the sole shareholder of Bank. East Penn Financial has approximately 2,751 shareholders of record as of the date hereof and its common stock is registered with the U.S. Securities and Exchange Commission.
B. HNC, East Penn Financial and Bank have each determined that it is advisable and in each of their respective best interests, and consistent with and in furtherance of their respective business strategies and goals, that East Penn Financial merge with and into HNC, with HNC as the surviving corporation, upon the terms and subject to the conditions set forth herein (the Merger).
C. Each of the Parties, by signing this Agreement, adopts it as a plan of reorganization as defined in IRC Section 368(a), and intends the Merger to be a reorganization as defined in IRC Section 368(a).
D. In furtherance of this Agreement, the Boards of Directors of HNC, East Penn Financial and Bank have each duly, as required by law, approved the execution and delivery of this Agreement, and the Directors of East Penn Financial have executed a directors support agreement in connection with this transaction (Director Support Agreement).
NOW, THEREFORE, in consideration of the mutual promises, covenants, representations, warranties, and conditions and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and upon the terms and subject to the conditions set forth herein, the Parties, intending to be legally bound hereby, do agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions Whenever used in this Agreement, the following terms, unless the context requires otherwise, shall have the meanings specified below in this Article.
Acquisition means an acquisition of substantially all the assets of, or a stock acquisition merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction in which more than 50% of the voting common stock interests or assets of, East Penn Financial or the Bank, on the one hand, or HNC or HNB on the other hand is acquired by a third party then unaffiliated with the company which is being acquired or whose assets are being acquired.
Acquisition Proposal means any inquiry, proposal or offer, filing of any regulatory
application or notice, whether in draft or final form, or disclosure of an intention to do any of the foregoing from any Person relating to any (w) direct or indirect acquisition or purchase of a business that constitutes a substantial portion of the net revenues, net income or net assets of East Penn Financial, (x) direct or indirect acquisition or purchase of East Penn Financial Common Stock after the date of this Agreement by a Person who on the date of this Agreement does not own 10% or more of East Penn Financials Common Stock and such Person by reason of such purchase or acquisition first becomes the owner of 10% or more of East Penn Financials Common Stock after the date of this Agreement or the direct or indirect acquisition or purchase of 5% or more of East Penn Financials Common Stock after the date of this Agreement by a Person who on the date of this Agreement owns 10% or more of East Penn Financials Common Stock, (y) tender offer or exchange offer that if consummated would result in any Person beneficially owning 10% or more of any class of equity securities of East Penn Financial or (z) merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving East Penn Financial other than the transactions contemplated by this Agreement.
Affiliate means and includes, with respect to the entity in question: (i) any director or executive officer of the entity in question, (ii) any owner of 5% of more of any class of voting securities or interests in such entity, and (iii) any Person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with, such entity.
Agreement means this Merger Agreement, as the same may from time to time be amended or supplemented (as permitted by the terms of this Agreement) by one or more instruments executed by all Parties hereto.
Aggregate Converted Share Cash has the meaning assigned to that term in Section 2.2(i).
Applicable Requirements means and includes, as of the time of reference, all of the following: (i) all material contractual obligations as set forth in the Agreement and any Disclosure Schedules or exhibits thereto; (ii) all applicable material federal, state and local laws and regulations (including without limitation, statutes, rules and regulations) binding upon East Penn Financial, the Bank or any Subsidiary; (iii) all other applicable material requirements of each federal, state or local governmental agency, board, commission, instrumentality or other governmental or quasi-governmental body or office; and (iv) all other applicable material judicial and administrative judgments, orders, stipulations, awards, writs and injunctions.
Bank Merger means a merger of Bank with and into HNB as described in the Bank Plan of Merger.
Bank Plan of Merger means a Bank Plan of Merger in the form attached to this Agreement as Exhibit 1.1, completed as indicated therein, with such additional provisions as shall be mutually agreeable to the parties thereto, and executed by the Bank and HNB.
Bank Common Stock means the shares of common stock of the Bank, par value $0.625 per share, authorized for issuance by the Bank.
Bank Financial Statements shall mean (i) the consolidated quarterly report of condition of the Bank as filed with the Banks regulators as of any fiscal quarter end of the Bank, and (ii) interim calendar month-end financial statements of the Bank and its Subsidiaries, stated in the Banks customary format as of each interim calendar month end.
Bank Share means any share of the Bank Common Stock, and Bank Shares means all of them collectively.
Business Day means any day except for (i) a Saturday or Sunday, and (ii) any other day on which banking institutions in the Commonwealth of Pennsylvania are required or permitted by law or by executive order to be closed.
Cash Consideration has the meaning assigned to that term in Section 2.2.
Cash EPF Share Price has the meaning assigned to that term in Section 2.8.
Charter shall mean the articles of incorporation, certificate of incorporation, articles of association or equivalent charter document of East Penn Financial, the Bank, a Subsidiary or HNC, as applicable.
Claim means any pending or threatened claim, demand, dispute, litigation or proceeding, whether asserted by one or more governmental or judicial agency or body or one or more private Persons.
Closing shall have the meaning ascribed in Section 2.1(c).
Closing Date means the date on which Closing shall be held.
Consent shall mean any consent, waiver, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Person other than a Regulatory Authority, including but not limited to those (if any) referred to on East Penn Financial Disclosure Schedule 3.4 or HNC Disclosure Schedule 4.4.
Converted Option Shares means the number of East Penn Financial Shares represented by the East Penn Financial Options that are exercised between the date of this Agreement and prior to the Effective Time.
Determination Date means the 11th Business Day prior to the Effective Time.
East Penn Financial Certificatemeans a certificate that immediately prior to the Effective Time represented one or more issued and outstanding shares of East Penn Financial Common Stock.
East Penn Financial Common Stock has the meaning assigned thereto in Section 3.2(a) of this Agreement.
East Penn Financial Disclosure Schedule means a schedule attached hereto, setting forth exceptions to any of the representations, warranties and covenants of East Penn Financial or the Bank contained herein.
East Penn Financial Employment Agreements has the meaning assigned thereto in Section 3.8(a).
East Penn Financial Employee Benefit Plans has the meaning assigned thereto in Section 3.12(a).
East Penn Financial Equity Plan has the meaning assigned thereto in Section 3.13.
East Penn Financial ERISA Affiliate has the meaning assigned thereto in Section 3.12(a).
East Penn Financial Option means the rights and interests represented by each of the East Penn Financial Stock Options, which are convertible upon exercise into an aggregate of 203,248 East Penn Financial Shares.
East Penn Financial Proxy Statement means the Proxy Statement of East Penn Financial on Schedule 14A for its annual meeting in 2007, as heretofore filed with the SEC.
East Penn Financial Securities Documents has the meaning assigned thereto in Section 3.27.
East Penn Financial Share means one (1) share of East Penn Financial Common Stock.
East Penn Financial Shareholders Meeting has the meaning provided in Section 5.6(a) of this Agreement.
East Penn Financial Statements means East Penn Financials Form 10-K and Annual Report, including the audited consolidated financial statements of East Penn Financial as of December 31, 2006, as heretofore filed with the SEC.
Effective Time means the effective date and time of the completion of the Merger, as determined pursuant to Section 2.1(b), subject to the terms and conditions of, this Agreement.
Election Form shall have the meaning assigned thereto in Section 2.4(c)(i).
Encumbrance shall mean any claim, lien, pledge, option, encumbrance, security interest, charge, right of first refusal, option, easement, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction, conditional sales agreement, restriction, restrictive covenant or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof.
Environmental Claim shall mean any Claim alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries or penalties) arising out of, based on, or resulting from the presence, or release into the environment, of any Hazardous Materials.
Environmental Laws shall mean 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 (i) the protection, preservation or restoration of the environment (including air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (ii) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Materials. The term Environmental Law includes, without limitation, (i) 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. 1101, et seq.; the Safe Drinking Water Act, 42 U.S.C. 300f, et seq.; and all comparable state and local laws, and (ii) any common law (including 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 Materials.
ERISA means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
Exchange Agent means the agent designated by HNC (reasonably promptly following execution of this Agreement) to act as the exchange agent for purposes of conducting the election procedures and the exchange procedure described in Article II of this Agreement.
Exchange Fund has the meaning assigned to that term in Section 2.9(a).
FDIC means the Federal Deposit Insurance Corporation.
FRB means the Board of Governors of the Federal Reserve System.
GAAP means those generally accepted accounting principles and practices that are recognized as such by the American Institute of Certified Public Accountants acting through the Financial Accounting Standards Board or through other appropriate boards or committees thereof.
Hazardous Materials includes, without limitation, any flammable explosives, radioactive
materials, hazardous materials, asbestos, hazardous wastes, hazardous or toxic substances, or other materials or substances regulated under the Environmental Laws.
HMS means Harleysville Management Services, LLC, an affiliate of HNC.
HNB means HNCs wholly owned subsidiary, The Harleysville National Bank and Trust Company, a national banking association.
HNC Benefit Plans has the meaning assigned thereto in Section 4.13(a).
HNC Certificate has the meaning assigned thereto in Section 2.9(d).
HNC Common Stock means the common stock, par value $1.00 per share, that HNC is presently authorized to issue, or the equivalent amount of any common stock of HNC or any successor to HNC for which HNC common stock may hereafter be exchanged or into which HNC common stock may be converted.
HNC Disclosure Schedule means a schedule attached hereto setting forth exceptions to any of the representations, warranties and covenants of HNC contained herein.
HNC ERISA Affiliate has the meaning assigned thereto in Section 4.13(a).
HNC Group means HNC and each of its subsidiaries, including without limitation HNB.
HNC Securities Documents has the meaning assigned thereto in Section 4.20.
HNC Share means one (1) share of HNC Common Stock.
IRC means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
IRS means the U.S. Internal Revenue Service.
Material Adverse Effect means, with respect to HNC, East Penn Financial or Bank, respectively, any effect that (i) is material and adverse to the financial position, results of operations or business of HNC and its subsidiaries taken as a whole or East Penn Financial and its Subsidiaries taken as a whole, as the case may be, or (ii) would materially impair the ability of any of HNC and its subsidiaries or East Penn Financial or its Subsidiaries, as the case may be, to perform their respective obligations under this Agreement or otherwise materially impede the consummation of the Merger; provided, however, that Material Adverse Effect shall not be deemed to include the impact of (a) changes after the date hereof in banking and similar laws of general applicability or interpretations thereof by Governmental Authorities, (b) changes after the date hereof in GAAP or regulatory accounting requirements applicable to banks, federal savings institutions and their holding companies generally, (c) changes after the date hereof in general economic or market conditions affecting banks and their holding companies generally, including changes in interest
rates, (d) public disclosure of the Merger contemplated hereby, (e) costs incurred in connection with the Merger including, without limitation, change in control and severance payments, as disclosed herein on the East Penn Financial Disclosure Schedules, investment banking fees, legal fees, accounting fees and printing costs, in each case in accordance with GAAP and (f) any action or omission of HNC or any of its subsidiaries, or East Penn Financial or Bank or any other of the Subsidiaries, as the case may be, taken with the prior consent of the other or as otherwise contemplated by this Agreement in connection with the consummation of the Merger.
Merger Consideration shall have the meaning assigned to that term in Section 2.2.
Merger Documents means this Agreement, the Bank Plan of Merger and all other documents, certificates, instruments and agreements executed (or to be executed) by any of HNC, East Penn Financial, Bank, or HNB in connection with the transactions contemplated by this Agreement.
OCC means the Office of the Comptroller of the Currency of the United States Department of Treasury.
Option Cash-Out Price has the meaning assigned to that term in Section 2.8.
Ordinary Course of Business means the ordinary course of business consistent with past custom or practice.
Outside Effective Time means 11:59 p.m. on March 31, 2008.
PADOB means the Department of Banking of the Commonwealth of Pennsylvania.
Party or Parties means East Penn Financial, Bank and HNC, as the case may be.
Person means an individual, partnership, limited liability company, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity or a federal, state, local or foreign government, or a political subdivision thereof, or any agency of such government or subdivision.
Prospectus/Proxy Statement means the prospectus/proxy statement in compliance with the standard proxy rules of the SEC whether or not directly applicable, together with any supplements thereto, to be sent to holders of East Penn Financial Common Stock in connection with East Penn Financial Shareholders Meeting and the approval of the Merger and this Agreement.
Regulatory Approvals means the approval orders or letters, or statements of non-objection, from the Regulatory Authorities that are required in order to consummate the transactions identified or contemplated in connection with the Merger Documents, including, but not limited to, the approvals referred to in East Penn Financial Disclosure Schedule 3.4 or HNC Disclosure Schedule 4.4.
Regulatory Filings means (i) the filings, notices and registrations with applicable regulatory authorities that are required in order to consummate the transactions identified or contemplated in connection with the Merger Documents, (ii) the Securities Filings, (iii) the filings required for Regulatory Approvals, including, and (iv) any other filings referred to in East Penn Financial Disclosure Schedule 3.4 or HNC Disclosure Schedule 4.4.
Regulatory Authorities means, as applicable, the PADOB, the OCC, the FDIC, the FRB and any other federal, state or local government or government agency having or claiming jurisdiction over Bank, any of the Subsidiaries or the transactions contemplated by this Agreement.
Resulting Bank means the banking institution that survives the Bank Merger.
SEC means the U.S. Securities and Exchange Commission.
Securities Filings means HNCs registration statement on Form S-4 including any pre-effective or post-effective amendments or supplements thereto, as filed with the SEC under the Securities Act with respect to the HNC Common Stock to be issued in connection with the Merger, together with any applicable state blue sky securities filings, and the East Penn Financial Proxy Statement including any amendments thereto, as filed with the SEC under the Exchange Act in connection with the East Penn Financial Shareholders Meeting.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
Special Loan means each loan classified or properly classifiable as "Other Loans Specially Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned Loans" or words of similar import.
Special REO Property means each property owned by Bank or any Subsidiary and acquired for debts or leases previously contracted.
State Corporation Law means the Pennsylvania Business Corporation Law, as amended.
Stock Consideration has the meaning assigned to that term in Section 2.2.
Subsidiary shall mean each corporation, partnership, limited partnership, limited liability partnership, limited liability company, business trust or other organization or entity, the majority equity or voting interest in which is owned, directly or indirectly, by East Penn Financial, the Bank or any other Subsidiary, and Subsidiaries means them collectively.
Superior Proposal means any bona fide, unsolicited written Acquisition Proposal made by any person or entity, other than HNC, to acquire more than 50% of the combined voting power of the shares of East Penn Financial Common Stock then outstanding or all or substantially all of East Penn Financials consolidated assets for consideration consisting of cash and/or securities that is on terms that the Board of Directors of East Penn Financial in good faith concludes, after consultation
with its financial advisors and outside counsel, taking into account, among other things, all legal, financial, regulatory and other aspects of the proposal and the person making the proposal, including any break-up fees, expense reimbursement provisions and conditions to consummation, (A) is on terms that the Board of Directors of East Penn Financial in its good faith judgment believes to be more favorable from a financial point of view to its shareholders than the Merger; (B) for which financing, to the extent required, is then fully committed or reasonably determined to be available by the Board of Directors of East Penn Financial and (C) is reasonably capable of being completed.
Tax means any federal, state, local or foreign taxes, assessments and other governmental charges, duties, impositions and liabilities relating to taxes, including without limitation, taxes based upon or measured by income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including without limitation, taxes under IRC Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, recapture, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, all of the foregoing together with all interest, penalties, or additions thereto, whether disputed or not, and any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity.
Tax Return means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including without limitation, any schedule or attachment thereto, and including without limitation, any amendment thereof.
Valuation Date means the close of business on the last day of the calendar month ended on or immediately preceding the Closing Date.
ARTICLE II
THE MERGER
Section 2.1The Merger; Closing.
(a) Subject to the terms and conditions of this agreement, at the Closing, effective as of the Effective Time, the Parties shall effectuate the Merger under the following provisions:
(i) In accordance with State Corporation Law, (A) East Penn Financial shall merge with and into HNC; (B) the separate existence of East Penn Financial shall cease; and (C) HNC shall be the surviving corporation in the Merger;
(ii) Each share of East Penn Financial Common Stock issued and outstanding prior to the Effective Time shall be converted into the right to receive Stock Consideration, Cash Consideration or a combination of both, as more fully provided in this Article II; and
(iii) All of the property (real, personal or mixed), rights, powers, duties, obligations and liabilities of East Penn Financial shall be taken and deemed transferred to and vest in HNC, as the surviving corporation in the Merger, without further act or deed.
(b) Upon completion of Closing but subject further to the terms hereof, the Parties shall cause Articles of Merger relating to the Merger to be filed with the Secretary of the Commonwealth of Pennsylvania, and the Merger shall become effective at a date and time, which in all events shall be a time of day after the close of trading but before midnight on a Business Day (the Effective Time) and, subject to the foregoing and the other provisions of this Agreement, shall be a date and time to be mutually agreed by HNC and East Penn Financial.
(c) Closing on the Merger (the Closing) shall be held on a date and time to be designated by HNC, but no later than ten (10) Business Days after the complete satisfaction or waiver of the conditions set forth in this Agreement (other than conditions that by their nature are to be satisfied at Closing but subject nevertheless to fulfillment or waiver of those conditions), at the offices of HNC at 483 Main Street, Harleysville, Pennsylvania, unless another time or place is agreed to in writing by the Parties. Subject to the terms and conditions of this Agreement, each of the Parties agrees to use all commercially reasonable efforts to cause the Closing to be completed on the earliest practicable date.
(d) At the Closing, East Penn Financial shall deliver and shall cause Bank and the Subsidiaries to deliver to HNC the following:
(i) All certificates representing all Bank Shares, and all certificates representing all shares or ownership interests issued by each of the Subsidiaries, duly endorsed in blank, with signatures guaranteed by a bank or trust.
(ii) All minute books, corporate seals, stock certificate books and other stock records of the Bank and each of the Subsidiaries.
(iii) All necessary documents required by any banks or other depository institutions for Bank and each of the Subsidiaries to remove the authorized signatories and replace them with the HNC's designees.
(e) The Bank and HNB shall have taken the additional actions and performed the additional terms and conditions set forth in the Bank Plan of Merger.
(f) HNC shall deliver the Merger Consideration to the Exchange Agent at the time and in the manner provided in this Agreement.
Section 2.2 Exchange of and Consideration for East Penn Financial Shares. Upon the Effective Time, all of the East Penn Financial Shares issued and outstanding immediately prior to the Effective Time, shall, at the Effective Time, by reason of the Merger and without any action on the part of the holder thereof, cease to be outstanding and shall be converted into the Merger Consideration, which shall be comprised of :
(i) the Cash Consideration, which shall be the sum of $50,284,464.00 (or $14.50 per Cash Election Share as defined below assuming 6,305,262 East Penn Financial Shares are outstanding at the Effective Time) plus $7.97 per share for each of the Converted Option Shares (the Aggregate Converted Share Cash); plus
(ii) shares of HNC Common Stock as more fully provided below (the Stock Consideration).
Holders of East Penn Financial Shares shall be entitled to receive, for each East Penn Financial Share, either HNC Common Shares only (a Stock Election Share) or cash only (a Cash Election Share), based on an allocation of the Cash Consideration identified above and the "Stock Consideration" shown below according to the provisions of this Article II, including without limitation Section 2.4:
(a) If the Indicated HNC Share Price (as defined in Section 2.4(b)) is equal to or less than $19.84 and equal to or greater than $14.66, the Stock Consideration shall be (I) 2,385,172 shares of HNC Common Stock, plus (II) 0.3782 shares of HNC Common Stock for each of the Converted Option Shares.
FOR EXAMPLE:
Under subsection (a), if the Indicated HNC Share Price is $17.25 and 6,305,262 East Penn Financial Shares are outstanding, an East Penn Financial shareholder will receive 0.8406 shares of HNC Common Stock for each Stock Election Share and $14.50 in cash for each Cash Election Share.
(b) If the Indicated HNC Share Price is less than $14.66, the Stock Consideration shall be (I) that number of HNC Common Shares equal to the result obtained by dividing $34,970,559.00 by the Indicated HNC Share Price, plus (II) for each of the Converted Option Shares, that number of HNC Common Shares equal to the result obtained by dividing $5.55 by the Indicated HNC Share Price.
FOR EXAMPLE:
Under subsection (b), if the Indicated HNC Share Price is $14.50 and 6,305,262 East Penn Financial Shares are outstanding, an East Penn Financial shareholder will receive 0.8500 shares of HNC Common Stock for each Stock Election Share and $14.50 in cash for each Cash Election Share.
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