EXHIBIT 4
STANDSTILL AGREEMENT
Agreement made this 28th day of July, 1998 by and between Patriot Bank
Corp., a Delaware corporation and registered bank holding company ("Patriot"),
having its principal place of business at High and Hanover Streets, Xxxxxxxxx,
Xxxxxxxxxxxx 00000 and Xxxxx X. Xxxxxx, an individual residing at 0000 Xxxx
Xxxx, Xxxxxxxxx, Xxxxxxxxxxxx 00000.
Background
Patriot and First Lehigh Corporation, a Pennsylvania corporation and
registered bank holding company ("FLC") have entered into an Agreement and Plan
of Consolidation (the "Agreement") pursuant to which (i) FLC and Patriot will
consolidate into a new Pennsylvania corporation (the "Holding Company"), to be
named Patriot Bank Corp. (the "Consolidation") and, (ii) shareholders of FLC
would receive (A) shares of Holding Company common stock, no par value per share
("Holding Company Common Stock") in exchange for each share of issued and
outstand ing FLC common stock, par value $.01 per share ("FLC Common Stock"),
(B) shares of Holding Company Common Stock in exchange for each issued and
outstanding share of FLC Senior Preferred Stock (the "FLC Senior Preferred
Stock") and (C) shares of Holding Company Common Stock in exchange for each
issued and outstanding share of FLC Series A Preferred Stock (the "FLC Series A
Preferred Stock" and together with the FLC Common Stock and the FLC Senior
Preferred Stock, the "FLC Capital Stock") all as more particularly set forth in
the Agreement.
Xx. Xxxxxx is the Chairman of FLC and the owner of a substantial equity
interest in FLC.
As a condition of Patriot's willingness to execute the Agreement, Patriot
has required Xx. Xxxxxx to enter into this Standstill Agreement pursuant to
which Xx. Xxxxxx will agree to certain restrictions on the voting and
disposition of his (i) FLC Capital Stock prior to the Consolidation and (ii)
Holding Company Common Stock after the Consolidation, and certain other
conditions and restrictions, and Xx. Xxxxxx has agreed to accept such conditions
and restrictions.
Agreement
The parties hereto, intending to be legally bound, hereby agree as follows:
1. Representations, Warranties and Covenants of Xx. Xxxxxx.
Xx. Xxxxxx represents, warrants and covenants as follows:
(a) Xx. Xxxxxx has full power, right and authority to enter into this
Agreement and to perform all transactions provided for in this Agreement.
(b) Except for shares of FLC Capital Stock pledged to Citizens National
Bank of Slatington to secure a loan in the approximate principal amount of
$600,000 and shares of FLC Capital Stock pledged to Royal Bank of Pennsylvania
to secure a loan in the approximate principal
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amount of $350,000, Xx. Xxxxxx owns free and clear of all liens and restrictions
(except such restrictions upon transfer as may arise under federal or state
securities laws as a result of Xx. Xxxxxx'x status as an "affiliate" of FLC and
restrictions imposed by the Federal Deposit Insurance Corporation ("FDIC"), the
Board of Governors of the Federal Reserve System (the "FRB") or the Pennsylvania
Department of Banking ("PDB")) including without limitation any restrictions set
forth in any agreement to which he may be a party, the following shares of FLC
Capital Stock:
(i) seven hundred thousand (700,000) shares of FLC Common Stock;
(ii) no shares of FLC Senior Preferred Stock;
(iii) four hundred thousand (400,000) shares of FLC Series A
Preferred Stock.; and
(iv) no shares of Patriot common stock, no par value per share
("Patriot Common Stock").
In addition, Xx. Xxxxxx represents that he holds no options to acquire shares of
FLC Common Stock and holds no other options to acquire FLC Capital Stock.
(c) Subject to the terms of the FDIC Order (as hereinafter defined), Xx.
Xxxxxx, in his capacity as Chairman of FLC and in his capacity as a shareholder
of FLC Capital Stock shall use his best efforts to cause the transactions
provided for in the Agreement to be completed. Xx. Xxxxxx, as a shareholder,
shall be present (in person or by proxy) at all shareholder meetings FLC holds
and his FLC Capital Stock may be counted for the purposes of determining the
presence of a quorum at such meetings. Moreover, subject to the terms of the
FDIC Order, Xx. Xxxxxx, as a shareholder, shall vote, or cause to be voted, all
FLC Capital Stock beneficially owned by him and having the right to vote thereon
to approve the Agreement at the special meeting of sharehold ers of FLC to be
held to consider such approval and shall not vote any FLC Capital Stock in favor
of any transaction with any person other than Patriot or aid, abet or otherwise
lend his support to any other person in connection with any transaction or in
connection with a tender offer or exchange offer. In addition, Xx. Xxxxxx shall
disclose, or permit Patriot and FLC to disclose that he has entered into this
Standstill Agreement and that he supports the Consolidation and recommends a
vote in favor of the Consolidation.
(d) Prior to the completion of the Consolidation, Xx. Xxxxxx shall not
sell, transfer or otherwise dispose of, or permit the sale, transfer or other
disposition of any FLC Capital Stock. During such period, Xx. Xxxxxx shall not
engage in any negotiations or initiate discussions with any other party with
respect to any sale, transfer or other disposition of any FLC Capital Stock, and
shall not vote, or permit to be voted, any FLC Capital Stock in favor of any
merger, consolida tion, sale of assets, stock or similar transactions involving
FLC or its subsidiary with any party other than Patriot or a subsidiary of
Patriot.
(e) Xx. Xxxxxx shall file on a timely basis an amendment to his report
on Form 13-D with the Securities and Exchange Commission pursuant to Section
13(d) of the
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Securities Exchange Act of 1934 (the "Exchange Act"), with respect to the
transactions provided for herein and shall provide Patriot with a copy thereof
prior to its filing.
2. Representation and Warranties of Patriot.
Patriot represents and warrants that it is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power, right and authority to enter into this Standstill Agreement
and to perform all transactions provided for in this Standstill Agreement. The
execution, delivery and performance of this Standstill Agreement has been duly
authorized by all necessary corporate or other action of Patriot.
3. Covenants of Xx. Xxxxxx.
Prior to June 30, 2013, and subject to the further provisions hereof:
(a) Except as provided pursuant to the Agreement, neither Xx. Xxxxxx nor
any corporation, entity or other affiliate controlled by Xx. Xxxxxx
(collectively, the "Leuthe Group"), will, directly or indirectly, acquire any
FLC Capital Stock, Patriot Common Stock or Holding Company Common Stock (except
by way of stock dividends or other distributions or offerings made available to
holders of FLC Capital Stock, Patriot Common Stock or Holding Company Common
Stock generally).
(b) Xx. Xxxxxx shall take such actions as may be required so that all
Holding Company Common Stock owned by a member of the Leuthe Group are voted for
nominees to the Board of Directors of the Holding Company and, unless the
Holding Company otherwise consents in writing, on all other matters to be voted
on by the holders of Holding Company Common Stock in the manner directed by the
Holding Company. The members of the Leuthe Group, as holders of Holding Company
Common Stock, shall be present, in person or by proxy at all meetings of
shareholders of the Holding Company so that all Holding Company Common Stock
beneficially owned by them may be counted for the purpose of determining the
presence of a quorum at such meetings.
(c) No member of the Leuthe Group shall deposit any Holding Company
Common Stock in a voting trust or subject any Holding Company Common Stock to
any arrangement or agreement with respect to the voting of such Holding Company
Common Stock, except as may otherwise be required by the Federal Deposit
Insurance Corporation ("FDIC") or the terms of this Standstill Agreement.
(d) No member of the Leuthe Group shall solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act) in opposition to the recommendation of the majority of
the directors of the Holding Company with respect to any matter.
(e) No member of the Leuthe Group shall join a partnership, limited
partnership, syndicate or other group, or otherwise act in concert with any
other person, for the purpose of acquiring, holding, voting or disposing of
Holding Company Common Stock, or otherwise become
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a "person" within the meaning of Section 13(d)(3) of the Exchange Act (in each
case other than solely with members of the Leuthe Group).
(f) Subject to paragraph 4(e), no member of the Leuthe Group shall,
directly or indirectly, offer, sell or transfer any Holding Company Common Stock
without first offering Patriot a right of first refusal in the manner provided
in paragraph 4, except (i) pursuant to a bona fide public offering registered
under the Securities Act of 1933, as amended (the "Act") (provided that no sales
of Holding Company Common Stock are made to any person or related group of
persons who would immediately thereafter, to the knowledge of any member of the
Leuthe Group, own or have the right to acquire Holding Company Common Stock
representing more than 1% of the total combined voting power of all Holding
Company Common Stock then outstanding), and (ii) as the result of any pledge or
hypothecation to a bona fide broker or financial institution to secure a bona
fide loan, or the foreclosure of any lien or encumbrance which may be placed
upon any Holding Company Common Stock (whether voluntarily or involuntarily).
(g) Notwithstanding anything contained herein to the contrary, for the
entire term of this Standstill Agreement, Xx. Xxxxxx (i) hereby grants, and
directs any party who acts as a record holder of FLC Capital Stock for Xx.
Xxxxxx to grant, to the Board of Directors of Patriot an irrevocable proxy in
the form attached hereto as Exhibit A to vote all shares of FLC Capital Stock at
any special or regular meeting of shareholders of FLC and (ii) upon completion
of the Consolidation, will grant, and will direct any party who acts as a record
holder for Xx. Xxxxxx to xxxxx, to the Board of Directors of the Holding Company
an irrevocable proxy in the form attached hereto as Exhibit B to vote all shares
of Holding Company Common Stock at any special or regular meeting of
shareholders of the Holding Company. Each such proxy, in consideration of the
Agreement and the benefit conferred upon Xx. Xxxxxx thereby, shall be deemed
coupled with an interest. In the event that the terms and provisions of this
paragraph 3(g) are not complied with by any member of the Leuthe Group or any
party who acts as a record holder of FLC Capital Stock on behalf of any member
of the Leuthe Group, then, in addition to any remedy, the Holding Company may
have under section 7, Xx. Xxxxxx, upon written demand by the Holding Company,
shall immediately contribute or cause to be contributed all Holding Company
Common Stock beneficially owned by Xx. Xxxxxx to a voting trust, the trustee of
which will be designated by the Holding Company.
(h) Xx. Xxxxxx shall transfer no shares of FLC Capital Stock to a broker
to be held in street name unless the proposed broker shall be approved by
Patriot or the Holding Company, as the case may be, and such broker, prior to
any transfer shall (A) execute a proxy in favor of the Board of Directors of
Patriot or the Holding Company, as the case may be, and (B) agree in writing to
provide to Patriot or the Holding Company, as the case may be, copies of all
statements delivered to Xx. Xxxxxx and all trade confirmations delivered to Xx.
Xxxxxx relating to FLC Capital Stock or Holding Company Common Stock.
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4. Right of First Refusal.
To the extent required by paragraph 3(f), any member of the Leuthe Group,
prior to making any offer to sell or transfer Holding Company Common Stock,
shall give the Holding Company the opportunity to purchase such Holding Company
Common Stock in the following manner:
(a) Any member of the Leuthe Group intending to make such an offer, sale
or transfer shall give notice (the "Transfer Notice") to the Holding Company in
writing of such intention, specifying the number of shares of Holding Company
Common Stock proposed to be disposed of and certifying in writing that such
transfer will be an open market sale through a broker acceptable to the Holding
Company.
(b) The Holding Company shall have the right, exercisable by written
notice given by the Holding Company to the party which gave the Transfer Notice
within fifteen (15) business days after receipt of such Transfer Notice to
purchase (or to cause a corporation, entity, person or group designated by the
Holding Company to purchase) all, but not a part of, the Holding Company Common
Stock specified in such Transfer Notice for cash at the mean between the high
bid and low asked price for the Holding Company Common Stock on the Nasdaq Stock
Market as of the date of the Transfer Notice.
(c) If the Holding Company exercises its right of first refusal
hereunder, the closing of the purchase of the Holding Company Common Stock with
respect to which such right has been exercised shall take place within thirty
(30) calendar days (or if approval of such purchase is required by the Holding
Company shareholders or any regulatory authority as required by law or pursuant
to any stock exchange rule or policy, within ninety (90) calendar days) after
the Holding Company gives notice of such exercise. Upon exercise of its right of
first refusal, the Holding Company shall be legally obligated to consummate the
purchase contemplated thereby and shall use its best efforts to secure all
approvals required in connection therewith.
(d) If the Holding Company does not exercise its right of first refusal
hereunder within the time specified for such exercise, the party giving the
Transfer Notice shall be free during the period of ninety (90) calendar days
following the expiration of such time for exercise to sell the Holding Company
Common Stock specified in such Transfer Notice in an open market sale through a
broker acceptable to the Holding Company and not knowingly to an affiliate
provided the party giving such Transfer Notice gives written direction to the
broker completing the sale to provide the Holding Company with a copy of any
trade confirmation.
(e) Notwithstanding the foregoing, this Section 4 shall not be
applicable to any sale of shares of Holding Company Common Stock by the Leuthe
Group in an amount not to exceed 20,000 shares per calendar quarter if each sale
or sales are made in open market transactions through a broker designated by the
Holding Company and such broker agrees to give to the Holding Company notice of
any such sale.
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5. FDIC Agreement.
The parties acknowledge that Xx. Xxxxxx is the subject of an order of the
FDIC dated June 26, 1998 (the "FDIC Order") that affects the voting and
disposition of FLC Capital Stock and Holding Company Common Stock. Xx. Xxxxxx
acknowledges and agrees that the provisions of this Agreement are in addition
to, and not in lieu of the provisions of the FDIC order and Xx. Xxxxxx shall use
his best efforts to obtain the consent of the FDIC to the terms of this
Standstill Agreement.
6. Waiver of Indemnification.
Xx. Xxxxxx hereby waives any rights he may have under the articles of
incorporation or bylaws of FLC, the certificate of incorporation or bylaws of
Patriot, the articles of incorporation or bylaws of the Holding Company, the
Agreement, the laws of the State of Delaware, the laws of the Commonwealth of
Pennsylvania or any federal law to any indemnification against any action, claim
or liability arising out of, or as a result of his position as an officer or
director of FLC other than indemnification against any action, claim or
liability arising solely out of the approval of the Agreement and the completion
of the transactions contemplated thereby with respect to which Xx. Xxxxxx shall
be entitled to indemnification as, and to the same extent as, set forth in the
Agreement. Xx. Xxxxxx also hereby waives any right to advancement of expenses or
any right to common law contribution with respect to any action, claim or
liability as to which he has waived indemnification.
7. Escrow.
(a) Notwithstanding anything contained herein to the contrary or in the
Agreement, upon completion of the Consolidation, Xx. Xxxxxx shall deposit into
escrow pursuant to a separate escrow agreement to be executed on or before the
closing of the Consolidation (the "Escrow Agreement") by and among Patriot, Xx.
Xxxxxx and an independent escrow agent determined by Patriot (the "Escrow
Agent"), an amount of Holding Company Common Stock, cash or other securities
equal to (i) $430,000 to secure any obligation now owed or hereafter determined
by the FDIC or any other state or federal regulatory authority to be owed by Xx.
Xxxxxx to FLC, its subsidiary, or their successors and assigns as a result of a
determination that Xx. Xxxxxx was not entitled to indemnification or advancement
of expenses in connection with proceedings related to the FDIC Order or any
action or proceeding brought against Xx. Xxxxxx as a result of any breach of
fiduciary or other duty, or any other tort or breach of contract committed by
Xx. Xxxxxx (the "Restitution Fund") and (ii) $700,000 of Holding Company Common
Stock, cash or other securities to secure and Xx. Xxxxxx'x obligation under this
Standstill Agreement (the "Collateral Fund"). Except as set forth in paragraphs
(b) and (c) below, Xx. Xxxxxx shall at all times maintain the balance held in
escrow for these purposes at $1,130,000 million or more.
(b) Funds shall be released from the Restitution Fund in accordance with
this Standstill Agreement and the Escrow Agreement upon the later of (i) five
(5) years from the date hereof, in which case the entire amount of the
Restitution Fund shall be returned to Xx. Xxxxxx, or (ii) the issuance of a
final, binding, unappealable order by the FDIC or a court of competent
jurisdiction either (A) that no amount is due and owing by Xx. Xxxxxx to FLC,
its subsidiary or
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its successors and assign, or (B) of the amount due and owing by Xx. Xxxxxx to
FLC, its subsidiary or their successors and assigns. If an amount is determined
to be due and owing by Xx. Xxxxxx and such amount equals or exceeds the
Restitution Fund, the Escrow Agent shall pay or deliver the entire Restitution
Fund to the Holding Company. If the amount determined to be due and owing by Xx.
Xxxxxx is less than the amount escrowed therefor, the Escrow Agent shall pay or
deliver from the Restitution Fund the amount due and owing to the Holding
Company and the difference of the Restitution Fund shall be paid or delivered to
Xx. Xxxxxx. Notwithstanding the foregoing, in the event FLC (or the Holding
Company as successor to FLC) receives any insurance or other proceeds from
whatever source (including any claim for malpractice against FLC's counsel) as a
result of its claim that payments made to Xx. Xxxxxx by FLC are covered under
FLC's directors and officers liability policy, the Restitution Fund shall be
reduced, and the Escrow Agent shall pay from the Restitution Fund to Xx. Xxxxxx,
an amount equal to such insurance proceeds.
(c) Upon receipt of a certificate from Xx. Xxxxxx accompanied by any
relevant trade confirmation, funds shall be released from the Collateral Fund as
follows:
Number of Holding Company
Shares Beneficially Owned by Required Amount of
the Leuthe Group Collateral Fund
---------------------------- ------------------
400,000 or more $700,000
300,000 - 399,000 600,000
200,000 - 299,000 500,000
100,000 - 199,000 400,000
25,000 - 99,000 350,000
Less than 25,000 0
8. Miscellaneous.
(a) Xx. Xxxxxx on the one hand, and Patriot, on the other, acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
holding Company, shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Standstill Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state thereof having jurisdiction, in addition to any other remedy to
which Patriot or the Holding Company may be entitled at law or equity.
(b) As used herein, the term "affiliate" includes parent, spouse,
sibling, any child, grandchild, mother-in-law, father-in-law or any spouse of
any of the foregoing and otherwise shall
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have the meaning set forth in Rule 12b-2 under the Exchange Act and the term
"person" shall mean any individual, partnership, corporation, limited liability
company, trust or other entity.
(c) This Standstill Agreement contains the entire understanding of the
parties with respect to the transactions contemplated hereby and this Standstill
Agreement may be amended only by an agreement in writing executed by the parties
hereto.
(d) Descriptive headings are for convenience only and shall not control
or affect the meaning or construction of any provision of this Standstill
Agreement.
(e) For the convenience of the parties, any number of counterparts of
this Standstill Agreement may be executed by the parties hereto and each such
executed counterpart shall be, and shall be deemed to be, an original
instrument.
(f) All notices, consents, requests, instructions, approvals and other
communications provided for herein shall be validly given or made, if in
writing delivered personally or registered mail, postage prepaid, if to:
Patriot or the Holding Company:
Patriot Bank Corp.
High and Xxxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Major, President
Copy To:
Xxxxxxx X. Xxxxxxx, Esquire
Xxxxxxx & Xxx
0000 Xxxxxxxx Xxxx
X.X. Xxx 000
Xxxxx, XX 00000-0000
Xx. Xxxxxx:
Xxxxx X. Xxxxxx
0000 Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
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Copy To:
Duane, Morris & Heckscher
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: A. Xxxx Xxx, Esquire
(g) This Standstill Agreement shall be binding upon the parties hereto
and their respective heirs, executors, personal representatives, successors and
assigns.
IN WITNESS WHEREOF, the parties have executed this Standstill Agreement
this 28th day of July, 1998.
-----------------------------------
Xxxxx X. Xxxxxx,
individually
PATRIOT BANK CORP.
By
--------------------------------
Xxxxxx X. Major,
President
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Exhibit A
FIRST LEHIGH CORPORATION
IRREVOCABLE PROXY
Pursuant to the terms of a Standstill Agreement dated July 27, 1998 between
Xxxxx X. Xxxxxx and Patriot Bank Corp., the undersigned hereby irrevocably
appoints the full Board of Directors of Patriot Bank Corp., with full powers of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of First Lehigh Corporation Common Stock, Senior Preferred Stock and
Series A Preferred Stock which the undersigned is entitled to vote at any
meeting of shareholders of First Lehigh Corporation. The undersigned
acknowledges that this proxy is coupled with an interest and is therefore
irrevocable until June 30, 2013 as provided in the Standstill Agreement.
-----------------------------------
Xxxxx X. Xxxxxx
July 27, 1998
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Exhibit B
PATRIOT BANK CORP.
IRREVOCABLE PROXY
Pursuant to the terms of a Standstill Agreement dated July 27, 1998 between
Xxxxx X. Xxxxxx and Patriot Bank Corp., a Delaware corporation, as predecessor
of Patriot Bank Corp., a Pennsylvania corporation, the undersigned hereby
irrevocably appoints the full Board of Directors of Patriot Bank Corp., a
Pennsylvania corporation, with full powers of substitution, to act as attorneys
and proxies for the undersigned to vote all shares of Patriot Bank Corp. Common
Stock, which the undersigned is entitled to vote at any meeting of shareholders
of Patriot Bank Corp. The undersigned acknowledges that this proxy is coupled
with an interest and is therefore irrevocable until June 30, 2013 as provided in
the Standstill Agreement.
-----------------------------------
Xxxxx X. Xxxxxx
Date:
-----------------------------
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