SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 30, 1999
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NORTH FORK BANCORPORATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 1-10458 36-3154608
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(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
275 BROAD HOLLOW ROAD MELVILLE, NEW YORK 11747
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (516) 844-1004
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ITEM 5. OTHER EVENTS
On August 30, 1999, North Fork Bancorporation, Inc., a Delaware
corporation (the "Registrant"), announced that it had entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Reliance
Bancorp, Inc., a Delaware corporation ("Reliance"), pursuant to which
Reliance will merge with and into the Registrant (the "Merger").
The Merger Agreement is attached hereto as Exhibit 2.1 and is
incorporated herein by reference in its entirety. The stock option
agreement dated as of August 30, 1999 by and between the Registrant and
Reliance (the "Stock Option Agreement") is attached hereto as Exhibit 99.1
and is incorporated herein by reference in its entirety. The press release
issued by the Registrant with respect to the announcement of the proposed
Merger is attached hereto as Exhibit 99.2 and is incorporated herein by
reference in its entirety. The presentation to be given by the Registrant
to investment analysts on August 31, 1999 with respect to the proposed
Merger is attached hereto as Exhibit 99.3 and is incorporated herein by
reference in its entirety. The unaudited pro forma condensed combined
financial statements which give effect to the Merger and the Registrant's
proposed merger with JSB Financial, Inc. ("JSB") in accordance with the
Agreement and Plan of Merger between the Registrant and JSB, dated as of
August 16, 1999 (the "JSB Merger Agreement"), are attached hereto as
Exhibit 99.4 and are incorporated herein by reference in their entirety.
The JSB Merger Agreement is attached hereto as Exhibit 2.2 and is
incorporated herein by reference in its entirety. The stock option
agreement dated as of August 16, 1999 by and between the Registrant and JSB
(the "JSB Stock Option Agreement") is attached hereto as Exhibit 99.5 and
is incorporated herein by reference in its entirety.
The press release and the analyst presentation incorporated
herein by reference contain certain forward looking statements with respect
to the financial condition, results of operations and business of the
Registrant following the consummation of the Merger, including statements
relating to (a) the cost savings, revenue enhancements and other
efficiencies that are expected to be realized as a result of the Merger and
(b) estimated pro forma 2000 earnings per share. Factors that may cause
actual results to differ materially from those contemplated by such forward
looking statements include, among others, the following possibilities: (1)
expected cost savings, revenue enhancements or other efficiencies from the
Merger cannot be fully realized; (2) deposit attrition, customer loss or
revenue loss following the Merger is greater than expected; (3) competitive
pressure in the banking and financial services industry increases
significantly; (4) changes in the interest rate environment reduce margins;
and (5) general economic conditions, either nationally or in New York, are
less favorable than expected.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of August
30, 1999, by and between North Fork Bancorporation,
Inc., and Reliance Bancorp, Inc.
2.2 Agreement and Plan of Merger, dated as of August
16, 1999, by and between North Fork Bancorporation,
Inc., and JSB Financial, Inc.
99.1 Stock Option Agreement, dated as of August 30,
1999, by and between North Fork Bancorporation,
Inc., and Reliance Bancorp, Inc.
99.2 Press Release issued by North Fork Bancorporation,
Inc. on August 30, 1999
99.3 Analyst Presentation
99.4 Unaudited Pro Forma Condensed Combined Financial
Statements
99.5 Stock Option Agreement, dated as of August 16,
1999, by and between North Fork Bancorporation,
Inc., and JSB Financial, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned
hereunto duly authorized.
NORTH FORK
BANCORPORATION, INC.
By: /s/ Daniel M. Healy
--------------------------------
Name: Daniel M. Healy
Title: Executive Vice President
and Chief Financial Officer
Date: August 30, 1999
EXHIBIT INDEX
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of August
30, 1999, by and between North Fork Bancorporation,
Inc., and Reliance Bancorp, Inc.
2.2 Agreement and Plan of Merger, dated as of August
16, 1999, by and between North Fork Bancorporation,
Inc., and JSB Financial, Inc.
99.1 Stock Option Agreement, dated as of August 30,
1999, by and between North Fork Bancorporation,
Inc., and Reliance Bancorp, Inc.
99.2 Press Release issued by North Fork Bancorporation,
Inc. on August 30, 1999
99.3 Analyst Presentation
99.4 Unaudited Pro Forma Condensed Combined Financial
Statements
99.5 Stock Option Agreement, dated as of August 16,
1999, by and between North Fork Bancorporation,
Inc., and JSB Financial, Inc.
AGREEMENT AND PLAN OF MERGER
Between
NORTH FORK BANCORPORATION, INC.
and
RELIANCE BANCORP, INC.
Dated as of August 30, 1999
TABLE of CONTENTS
Page
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Effects of the Merger . . . . . . . . . . . . . . . . . . . . 2
1.4. Conversion of Company Common Stock . . . . . . . . . . . . . . 2
1.5. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6. Buyer Common Stock . . . . . . . . . . . . . . . . . . . . . . 5
1.7. Certificate of Incorporation . . . . . . . . . . . . . . . . . 5
1.8. By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.9. Directors and Officers . . . . . . . . . . . . . . . . . . . . 5
1.10. Tax Consequences . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. Buyer to Make Shares Available . . . . . . . . . . . . . . . . 5
2.2. Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 9
3.1. Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . 9
3.2. Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . 10
4.1. Corporate Organization . . . . . . . . . . . . . . . . . . . 11
4.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . 12
4.3. Authority; No Violation . . . . . . . . . . . . . . . . . . 13
4.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . 15
4.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 16
4.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . 18
4.8. Absence of Certain Changes or Events . . . . . . . . . . . . 18
4.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 19
4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.12. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . 23
4.13. Company Information. . . . . . . . . . . . . . . . . . . . 23
4.14. Compliance with Applicable Law . . . . . . . . . . . . . . 24
4.15. Certain Contracts. . . . . . . . . . . . . . . . . . . . . 24
4.16. Agreements with Regulatory Agencies . . . . . . . . . . . . 25
4.17. Investment Securities . . . . . . . . . . . . . . . . . . . 25
4.18. State Takeover Laws; Business Combination Provision. . . . 25
4.19. Environmental Matters . . . . . . . . . . . . . . . . . . . 26
4.20. Derivative Transactions. . . . . . . . . . . . . . . . . . 27
4.21. Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.22. Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 28
4.23. Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . 28
4.24. Property . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.25. Reorganization . . . . . . . . . . . . . . . . . . . . . . 30
4.26. Company Rights Agreement . . . . . . . . . . . . . . . . . 30
4.27. Equity and Real Estate Investments . . . . . . . . . . . . 30
4.28. Year 2000 Matters . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.1. Corporate Organization . . . . . . . . . . . . . . . . . . . 31
5.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. Authority; No Violation . . . . . . . . . . . . . . . . . . 33
5.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . 34
5.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 35
5.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . 36
5.8. Absence of Certain Changes or Events . . . . . . . . . . . . 37
5.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 37
5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.12. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 40
5.13. Buyer Information . . . . . . . . . . . . . . . . . . . . . 41
5.14. Compliance with Applicable Law . . . . . . . . . . . . . . 41
5.15. Ownership of Company Common Stock . . . . . . . . . . . . . 41
5.16. Agreements with Regulatory Agencies . . . . . . . . . . . . 42
5.17. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.18. Tax Treatment for the Merger;
Reorganization . . . . . . . . . . . . . . . . . . . . . 42
5.19. Environmental Matters . . . . . . . . . . . . . . . . . . . 42
5.20. Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . 43
5.21. Property . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.22. Derivative Transactions. . . . . . . . . . . . . . . . . . 45
5.23. Year 2000 Matters . . . . . . . . . . . . . . . . . . . . . 45
5.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS. . . . . . . . . . . . .
6.1. Covenants of the Company . . . . . . . . . . . . . . . . . . 46
6.2. Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . .
7.1. Regulatory Matters. . . . . . . . . . . . . . . . . . . . . 51
7.2. Access to Information . . . . . . . . . . . . . . . . . . . 53
7.3. Stockholder Meetings . . . . . . . . . . . . . . . . . . . . 55
7.4. Legal Conditions to Merger . . . . . . . . . . . . . . . . . 55
7.5. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.6. Stock Exchange Listing . . . . . . . . . . . . . . . . . . . 56
7.7. Employee Benefit Plans; Existing Agreements . . . . . . . . 56
7.8. Indemnification . . . . . . . . . . . . . . . . . . . . . . 58
7.9. Additional Agreements . . . . . . . . . . . . . . . . . . . 61
7.10. Advice of Changes . . . . . . . . . . . . . . . . . . . . . 61
7.11. Current Information . . . . . . . . . . . . . . . . . . . . 61
7.12. Execution and Authorization of Bank Merger Agreement . . . 62
7.13. Coordination of Dividends . . . . . . . . . . . . . . . . . 62
7.14. Directorship . . . . . . . . . . . . . . . . . . . . . . . 63
7.15. Accountants' Letter . . . . . . . . . . . . . . . . . . . . 63
7.16. Certain Revaluations, Changes and Adjustments . . . . . . . 63
7.17. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.19. Advisory Board . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE VIII
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 64
8.1. Conditions to Each Party's Obligation To Effect the Merger . 64
8.2. Conditions to Obligations of Buyer . . . . . . . . . . . . . 65
8.3. Conditions to Obligations of the Company . . . . . . . . . . 67
ARTICLE IX
TERMINATION AND AMENDMENT. . . . . . . . . . . . . . . . . . . . . 68
9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . 68
9.2. Effect of Termination; Expenses . . . . . . . . . . . . . . 73
9.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.4. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 74
10.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.2. Alternative Structure . . . . . . . . . . . . . . . . . . . 75
10.3. Nonsurvival of Representations, Warranties and Agreements . 75
10.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.6. Interpretation . . . . . . . . . . . . . . . . . . . . . . 77
10.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 77
10.8. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 77
10.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 77
10.10. Enforcement of Agreement . . . . . . . . . . . . . . . . . 77
10.11. Severability . . . . . . . . . . . . . . . . . . . . . . . 78
10.12. Publicity . . . . . . . . . . . . . . . . . . . . . . . . 78
10.13. Assignment; No Third Party Beneficiaries . . . . . . . . . 78
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 30, 1999 (this
"Agreement"), by and between North Fork Bancorporation, Inc., a Delaware
corporation ("Buyer"), and Reliance Bancorp, Inc., a Delaware corporation
(the "Company"). Buyer and the Company are sometimes collectively referred
to herein as the "Constituent Corporations".
WHEREAS, the Boards of Directors of Buyer and the Company have
determined that it is in the best interests of their respective companies
and their stockholders to consummate the business combination transaction
provided for herein in which the Company will, subject to the terms and
conditions set forth herein, merge (the "Merger") with and into Buyer; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending
to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time (as defined in Section 1.2 hereof), the
Company shall merge with and into Buyer. Buyer shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") in
the Merger, and shall continue its corporate existence under the laws of
the State of Delaware. The name of the Surviving Corporation shall
continue to be North Fork Bancorporation, Inc. Upon consummation of the
Merger, the separate corporate existence of the Company shall terminate.
1.2. Effective Time. The Merger shall become effective as set
forth in the certificate of merger (the "Certificate of Merger") which
shall be filed with the Secretary of State of the State of Delaware (the
"Secretary") on the Closing Date (as defined in Section 10.1 hereof). The
term "Effective Time" shall be the date and time when the Merger becomes
effective, as set forth in the Certificate of Merger.
1.3. Effects of the Merger. At and after the Effective Time,
the Merger shall have the effects set forth in Sections 259 and 261 of the
DGCL.
1.4. Conversion of Company Common Stock. (a) At the Effective
Time, subject to Section 2.2(e) and Section 9.1(h) hereof, each share of
the common stock, par value $0.01 per share, of the Company (the "Company
Common Stock") issued and outstanding immediately prior to the Effective
Time (other than (x) shares of Company Common Stock held in the Company's
treasury, (y) shares of Company Common Stock held directly or indirectly
by Buyer or the Company or any of their respective Subsidiaries (as
defined below) (except for Trust Account Shares and DPC shares, as such
terms are defined in Section 1.4(b) hereof), or (z) unallocated shares of
Company Common Stock held in the Company's Recognition and Retention
Plans) together with the related Company Rights issued pursuant to the
Company Rights Agreement (each as defined in Section 4.2(a) hereof) shall,
by virtue of this Agreement and without any action on the part of the
holder thereof, be converted into and exchangeable for 2 (two) shares (the
"Exchange Ratio") of the common stock, par value $2.50 per share, of Buyer
("Buyer Common Stock"). All of the shares of Company Common Stock
converted into Buyer Common Stock pursuant to this Article I shall no
longer be outstanding and shall automatically be cancelled and shall cease
to exist, and each certificate (each a "Certificate") previously
representing any such shares of Company Common Stock shall thereafter only
represent the right to receive (i) the number of whole shares of Buyer
Common Stock and (ii) the cash in lieu of fractional shares into which the
shares of Company Common Stock represented by such Certificate have been
converted pursuant to this Section 1.4(a) and Section 2.2(e) hereof.
Certificates previously representing shares of Company Common Stock shall
be exchanged for certificates representing whole shares of Buyer Common
Stock and cash in lieu of fractional shares issued in consideration
therefor upon the surrender of such Certificates in accordance with
Section 2.2 hereof, without any interest thereon. If, between the date of
this Agreement and the Effective Time, the shares of Buyer Common Stock
shall be changed into a different number or class of shares by reason of
any reclassification, recapitalization, spilt-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with
a record date within said period, the Exchange Ratio shall be adjusted
accordingly.
(b) At the Effective Time, all shares of Company Common
Stock that are owned by the Company as treasury stock, all shares of
Company Common Stock that are owned directly or indirectly by Buyer or the
Company or any of their respective Subsidiaries (other than shares of
Company Common Stock (x) held directly or indirectly in trust accounts,
managed accounts and the like or otherwise held in a fiduciary capacity for
the benefit of third parties (any such shares, and shares of Buyer Common
Stock which are similarly held, whether held directly or indirectly by
Buyer or the Company, as the case may be, being referred to herein as
"Trust Account Shares") and (y) held by Buyer or the Company or any of
their respective Subsidiaries in respect of a debt previously contracted
(any such shares of Company Common Stock, and shares of Buyer Common Stock
which are similarly held, whether held directly or indirectly by Buyer or
the Company, being referred to herein as "DPC Shares") and all unallocated
shares of Company Common Stock that are held in the Company's Recognition
and Retention Plans) shall be cancelled and shall cease to exist and no
stock of Buyer or other consideration shall be delivered in exchange
therefor. All shares of Buyer Common Stock that are owned by the Company
or any of its Subsidiaries (other than Trust Account Shares and DPC Shares)
shall become treasury stock of Buyer.
1.5. Stock Options. At the Effective Time, each option granted
by the Company to purchase shares of Company Common Stock (a "Company
Option") which is outstanding and unexercised immediately prior thereto
shall cease to represent a right to acquire shares of Company Common Stock
and shall be converted automatically into an option to purchase shares of
Buyer Common Stock in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the Company's Amended
and Restated 1996 Incentive Stock Option Plan, 1994 Incentive Stock Option
Plan or Amended and Restated 1994 Stock Option Plan for Outside Directors
(collectively, the "Company Option Plans"), the agreements evidencing
grants thereunder, and any other agreements between the Company and an
optionee regarding Company Options):
(1) the number of shares of Buyer Common Stock to be
subject to the new option shall be equal to the product of the
number of shares of Company Common Stock subject to the original
option and the Exchange Ratio, provided that any fractional share
of Buyer Common Stock resulting from such multiplication shall be
rounded down to the nearest whole share; and
(2) the exercise price per share of Buyer Common Stock
under the new option shall be equal to the exercise price per
share of Company Common Stock under the original option divided
by the Exchange Ratio, provided that such exercise price shall be
rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are
intended to be "incentive stock options" (as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")) shall be and is
intended to be effected in a manner which is consistent with Section 424(a)
of the Code, and to the extent it is not so consistent, such Section 424(a)
shall override such adjustment. The duration and other terms of the new
option shall be the same as the original option, except that all references
to the Company shall be deemed to be references to Buyer, it being
understood that any option that is intended to be an incentive stock option
and which is exercised by the option holder more than 3 (three) months from
the date of the option holder's termination of employment from the Company
or its Subsidiaries or from Buyer or its Subsidiaries shall be treated as a
non-statutory option.
1.6. Buyer Common Stock. Except for shares of Buyer Common
Stock owned by the Company or any of its Subsidiaries (other than Trust
Account Shares and DPC Shares), which shall be converted into treasury
stock of Buyer as contemplated by Section 1.4 hereof, the shares of Buyer
Common Stock issued and outstanding immediately prior to the Effective Time
shall be unaffected by the Merger and such shares shall remain issued and
outstanding.
1.7. Certificate of Incorporation. At the Effective Time, the
Restated Certificate of Incorporation of Buyer, as in effect at the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation.
1.8. By-Laws. At the Effective Time, the By-Laws of Buyer, as
in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended in accordance with
applicable law.
1.9. Directors and Officers. Except as provided in Section 7.14
hereof, the directors and officers of Buyer immediately prior to the
Effective Time shall be the directors and officers of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
1.10. Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the
Code, and that this Agreement shall constitute a "plan of reorganization"
for the purposes of Section 368 of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1. Buyer to Make Shares Available. At or prior to the
Effective Time, Buyer shall deposit, or shall cause to be deposited, with a
bank or trust company (which may be a Subsidiary of Buyer) (the "Exchange
Agent") selected by Buyer and reasonably satisfactory to the Company, for
the benefit of the holders of Certificates, for exchange in accordance with
this Article II, certificates representing the shares of Buyer Common Stock
and the cash in lieu of fractional shares (such cash and certificates for
shares of Buyer Common Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange Fund")
to be issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in
exchange for outstanding shares of Company Common Stock.
2.2. Exchange of Shares. (a) As soon as practicable after the
Effective Time, and in no event more than three business days thereafter,
the Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent)
and instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing the shares of Buyer Common Stock and
the cash in lieu of fractional shares into which the shares of Company
Common Stock represented by such Certificate or Certificates shall have
been converted pursuant to this Agreement. Upon surrender of a Certificate
for exchange and cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor (x) a certificate representing
that number of whole shares of Buyer Common Stock to which such holder of
Company Common Stock shall have become entitled pursuant to the provisions
of Article I hereof and (y) a check representing the amount of cash in lieu
of fractional shares, if any, which such holder has the right to receive in
respect of the Certificate surrendered pursuant to the provisions of this
Article II, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on the cash in lieu of
fractional shares and unpaid dividends and distributions, if any, payable
to holders of Certificates.
(b) No dividends or other distributions declared after the
Effective Time with respect to Buyer Common Stock and payable to the
holders of record thereof shall be paid to the holder of any unsurrendered
Certificate until the holder thereof shall surrender such Certificate in
accordance with this Article II. After the surrender of a Certificate in
accordance with this Article II, the record holder thereof shall be
entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to
shares of Buyer Common Stock represented by such Certificate. No holder of
an unsurrendered Certificate shall be entitled, until the surrender of such
Certificate, to vote the shares of Buyer Common Stock into which his
Company Common Stock shall have been converted.
(c) If any certificate representing shares of Buyer Common
Stock is to be issued in a name other than that in which the Certificate
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 appropriate instrument of transfer) and
otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other
taxes required by reason of the issuance of a certificate representing
shares of Buyer Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or required for any other reason, or
shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
(d) After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the shares of Company Common
Stock which were issued and outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates representing such shares
are presented for transfer to the Exchange Agent, they shall be cancelled
and exchanged for certificates representing shares of Buyer Common Stock as
provided in this Article II.
(e) Notwithstanding anything to the contrary contained
herein, no certificates or scrip representing fractional shares of Buyer
Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to Buyer Common
Stock shall be payable on or with respect to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote or
to any other rights of a shareholder of Buyer. In lieu of the issuance of
any such fractional share, Buyer shall pay to each former stockholder of
the Company who otherwise would be entitled to receive a fractional share
of Buyer Common Stock an amount in cash determined by multiplying (i) the
average of the closing sale prices of Buyer Common Stock on the New York
Stock Exchange (the "NYSE") as reported by The Wall Street Journal for the
five trading days immediately preceding the date on which the Effective
Time shall occur by (ii) the fraction of a share of Buyer Common Stock to
which such holder would otherwise be entitled to receive pursuant to
Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed
by the stockholders of the Company for six months after the Effective Time
shall be paid to Buyer. Any stockholders of the Company who have not
theretofore complied with this Article II shall thereafter look only to
Buyer for payment of their shares of Buyer Common Stock, cash in lieu of
fractional shares and unpaid dividends and distributions on the Buyer
Common Stock deliverable in respect of each share of Company Common Stock
such stockholder holds as determined pursuant to this Agreement, in each
case, without any interest thereon. Notwithstanding the foregoing, none of
Buyer, the Company, the Exchange Agent or any other person shall be liable
to any former holder of shares of Company Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Buyer, the posting by such person of a bond in such amount as
Buyer may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Buyer Common
Stock and cash in lieu of fractional shares deliverable in respect thereof
pursuant to this Agreement.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1. Disclosure Schedules. Prior to the execution and delivery
of this Agreement, the Company has delivered to Buyer, and Buyer has
delivered to the Company, a schedule (in the case of the Company, the
"Company Disclosure Schedule," and in the case of Buyer, the "Buyer
Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more of such party's representations or warranties
contained in Article IV, in the case of the Company, or Article V, in the
case of Buyer, or to one or more of such party's covenants contained in
Article VI; provided, however, that notwithstanding anything in this
Agreement to the contrary (a) no such item is required to be set forth in
the Disclosure Schedule as an exception to a representation or warranty
(other than a representation or warranty contained in Sections 4.2, 4.3(a),
4.3(b)(i), 4.6, 4.7, 4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18,
4.21, 4.26 and 4.27, with respect to the Company Disclosure Schedule, or
Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a) 5.12
and 5.15, with respect to the Buyer Disclosure Schedule) if its absence
would not result in the related representation or warranty being deemed
untrue or incorrect under the standard established by Section 3.2, and (b)
the mere inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or material fact, event or
circumstance or that such item has had or is reasonably likely to have a
Material Adverse Effect (as defined herein) with respect to either the
Company or Buyer, respectively.
3.2. Standards. (a) No representation or warranty of the
Company contained in Article IV (other than the representations and
warranties contained in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6, 4.7,
4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27) or
of Buyer contained in Article V (other than the representations and
warranties contained in Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7,
5.8(ii), 5.11(a), 5.12 and 5.15) shall be deemed untrue or incorrect for
any purpose under this Agreement, and no party hereto shall be deemed to
have breached any such representation or warranty for any purpose under
this Agreement, in any case as a consequence of the existence or absence of
any fact, circumstance or event unless such fact, circumstance or event,
individually or when taken together with all other facts, circumstances or
events inconsistent with any representations or warranties contained in
Article IV, in the case of the Company, or Article V, in the case of Buyer,
has had or is reasonably likely to have a Material Adverse Effect with
respect to the Company or Buyer, respectively.
(b) As used in this Agreement, the term "Material Adverse
Effect" means, with respect to Buyer or the Company, as the case may be, a
material adverse effect on (i) the business, assets, liabilities, results
of operations or financial condition of such party and its Subsidiaries
taken as a whole, other than any such effect attributable to or resulting
from (x) any change in banking or similar laws, rules or regulations of
general applicability or interpretations thereof by courts or governmental
authorities, (y) any change in GAAP (as defined herein) or regulatory
accounting principles, in each case which affects banks, thrifts or their
holding companies generally, except to the extent any such condition or
change affects the referenced party to a materially greater extent than
banks, thrifts or their holding companies generally, or (z) any change in
interest rates, provided, that any such change in interest rates shall not
affect the referenced party to a materially greater extent than banks,
thrifts or their holding companies generally, and provided further, that
any such change shall not have a materially adverse effect on the credit
quality of such party's assets, or (ii) the ability of such party and its
Subsidiaries to consummate the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III hereof and except as set forth in the
Company Disclosure Schedule, the Company hereby represents and warrants to
Buyer as follows:
4.1. Corporate Organization. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company 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 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. The Company
is duly registered as a non-diversified unitary savings and loan holding
company under the Home Owners' Loan Act of 1933, as amended. The Restated
Certificate of Incorporation and By-laws of the Company, copies of which
have previously been made available to Buyer, are true and correct copies
of such documents as in effect as of the date of this Agreement. As used
in this Agreement, the word "Subsidiary" when used with respect to any
party means any corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes.
(b) Reliance Federal Savings Bank (the "Company Bank") is a
stock savings bank duly organized, validly existing and in good standing
under the laws of the United States of America. The deposit accounts of
the Company Bank are insured by the Federal Deposit Insurance Corporation
(the "FDIC") through the Savings Association Insurance Fund to the fullest
extent permitted by law, and all premiums and assessments required to be
paid in connection therewith have been paid when due. Each of the
Company's other Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of the Company's Subsidiaries 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 in each jurisdiction in which the
nature of the business conducted by it or the character or the location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary. The articles of incorporation, by-laws and
similar governing documents of each Subsidiary of the Company, copies of
which have previously been made available to Buyer, are true and correct
copies of such documents as in effect as of the date of this Agreement.
(c) The minute books of the Company and each of its
Subsidiaries contain true and correct records of all meetings and other
corporate actions held or taken since December 31, 1996 of their respective
stockholders and Boards of Directors (including committees of their
respective Boards of Directors).
4.2. Capitalization. (a) The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock and 4,000,000
shares of preferred stock, par value $.01 per share (the "Company Preferred
Stock"). As of the date of this Agreement, there are (x) 8,584,410 shares
of Company Common Stock outstanding and 2,166,410 shares of Company Common
Stock held in the Company's treasury, (y) no shares of Company Common Stock
reserved for issuance upon exercise of outstanding stock options or
otherwise except for (i) 1,080,876 shares of Company Common Stock reserved
for issuance pursuant to the Company Option Plans and described in Section
4.2(a) of the Company Disclosure Schedule, (ii) 1,708,297 shares of Company
Common Stock reserved for issuance upon exercise of the option issued to
Buyer pursuant to the Stock Option Agreement, dated August 30, 1999,
between Buyer and the Company (the "Option Agreement") and (iii)
approximately 25,000 shares of Company Common Stock issuable pursuant to an
agreement between the Company and Continental Bank and (z) no shares of
Company Preferred Stock issued or outstanding, held in the Company's
treasury or reserved for issuance upon exercise of outstanding stock
options or otherwise, except for [150,000] shares of Company Series A
Junior Participating Preferred Stock reserved for issuance upon exercise of
the rights (the "Company Rights") distributed to holders of Company Common
Stock pursuant to the Stockholder Protection Rights Agreement, dated
September 18, 1996 between the Company and Registrar and Transfer Co., as
Rights Agent (the "Company Rights Agreement"). All of the issued and
outstanding shares of Company Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof.
Except as referred to above or reflected in Section 4.2(a) of the Company
Disclosure Schedule, and except for the Option Agreement, the Company does
not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Company Common Stock or Company
Preferred Stock or any other equity security of the Company or any
securities representing the right to purchase or otherwise receive any
shares of Company Common Stock or any other equity security of the Company.
The names of the optionees, the date of each option to purchase Company
Common Stock granted, the number of shares subject to each such option, the
expiration date of each such option, and the price at which each such
option may be exercised under the Company Option Plans are set forth in
Section 4.2(a) of the Company Disclosure Schedule.
(b) Section 4.2(b) of the Company Disclosure Schedule sets
forth a true and correct list of all of the Subsidiaries of the Company.
Except as set forth in Section 4.2(b) of the Company Disclosure Schedule,
the Company owns, directly or indirectly, all of the issued and outstanding
shares of the capital stock of each of such Subsidiaries, free and clear of
all liens, charges, encumbrances and security interests whatsoever, and all
of such shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No Subsidiary of the Company has or is
bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of
such Subsidiary or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security
of such Subsidiary. Assuming compliance by Buyer with Section 1.5 hereof,
at the Effective Time, there will not be any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character by
which the Company or any of its Subsidiaries will be bound calling for the
purchase or issuance of any shares of the capital stock of the Company or
any of its Subsidiaries.
4.3. Authority; No Violation. (a) The Company has full
corporate power and authority to execute and deliver this Agreement and the
Option Agreement (this Agreement and the Option Agreement, collectively,
the "Company Documents") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of each of the Company
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by the Board of Directors of
the Company. The Board of Directors of the Company has directed that this
Agreement and the transactions contemplated hereby be submitted to the
Company's stockholders for approval at a meeting of such stockholders and,
except for the approval and adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of the Company
Common Stock, no other corporate proceedings on the part of the Company are
necessary to approve the Company Documents and to consummate the
transactions contemplated hereby and thereby. Each of the Company
Documents has been duly and validly executed and delivered by the Company,
and (assuming due authorization, execution and delivery by Buyer) this
Agreement constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied
in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 4.3(b) of the Company
Disclosure Schedule, neither the execution and delivery of the Company
Documents by the Company, nor the consummation by the Company of the
transactions contemplated hereby, nor compliance by the Company with any of
the terms or provisions hereof, will (i) violate any provision of the
Certificate of Incorporation or By-Laws of the Company or the certificate
of incorporation, by-laws or similar governing documents of any of its
Subsidiaries, or (ii) assuming that the consents and approvals referred to
in Section 4.4 hereof are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Company or any of its Subsidiaries, or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, 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 or a right of
termination or cancellation under, accelerate the performance required by,
or result in the creation of any lien, pledge, security interest, charge or
other encumbrance upon any of the respective properties or assets of the
Company or any of its 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 the Company or
any of its Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected.
4.4. Consents and Approvals. Except for (a) the filing of an
application with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as
amended (the "BHC Act") and approval of such application, (b) the filing of
an application with the FDIC under the Bank Merger Act and approval of such
application, in the event the parties enter into the Bank Merger Agreement
(as defined in Section 7.12) (c) the filing of applications and notices, as
applicable, with the Office of Thrift Supervision (the "OTS") and approval
of such applications and notices, (d) the filing of an application with the
New York State Banking Department (the "Banking Department") and the
approval of such application, (e) the filing with the Securities and
Exchange Commission (the "SEC") of a proxy statement in definitive form
relating to the meeting of the Company's stockholders to be held in
connection with this Agreement and the transactions contemplated hereby
(the "Proxy Statement") and the filing and declaration of effectiveness of
the registration statement on Form S-4 (the "S-4") in which the Proxy
Statement will be included as a prospectus, (f) the approval of this
Agreement by the requisite vote of the stockholders of the Company, (g) the
filing of the Certificate of Merger with the Secretary pursuant to the
DGCL, (h) such filings and approvals as are required to be made or obtained
under the securities or "Blue Sky" Laws of various states in connection
with the issuance of the shares of Buyer Common Stock pursuant to this
Agreement, (i) approval of the listing of the Buyer Common Stock to be
issued in the Merger on the NYSE, and (j) such filings, authorizations or
approvals as may be set forth in Section 4.4 of the Company Disclosure
Schedule, no consents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority
or instrumentality (each a "Governmental Entity") or with any third party
are necessary in connection with the execution and delivery by the Company
of the Company Documents or the consummation by the Company of the Merger
and the other transactions contemplated hereby and thereby.
4.5. Reports. The Company and each of its Subsidiaries have
timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1996 with (i) the OTS, (ii) the FDIC,
(iii) any state banking commissions or any other state regulatory authority
(each a "State Regulator") and (iv) any other self-regulatory organization
("SRO") (collectively, with the Federal Reserve Board, the "Regulatory
Agencies"), and have paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of the Company and
its Subsidiaries, and except as set forth in Section 4.5 of the Company
Disclosure Schedule, no Regulatory Agency has initiated any proceeding or,
to the knowledge of the Company, investigation into the business or
operations of the Company or any of its Subsidiaries since December 31,
1996. There is no unresolved violation, criticism, or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of the Company or any of its Subsidiaries.
4.6. Financial Statements. The Company has previously made
available to Buyer copies of (a) the consolidated statements of condition
of the Company and its Subsidiaries as of June 30 for the fiscal years 1997
and 1998, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1996 through 1998,
inclusive, as reported in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1998 filed with the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in each case
accompanied by the audit report of KPMG LLP, independent public accountants
with respect to the Company, (b) the unaudited consolidated statements of
condition of the Company and its Subsidiaries as of March 31, 1998 and
March 31, 1999 and the related unaudited consolidated statements of income,
cash flows and changes in stockholders' equity for the nine-month periods
then ended as reported in the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 1999 filed with the SEC under the Exchange Act,
and (c) the consolidated statements of condition of the Company and its
Subsidiaries as of June 30 for the fiscal years 1998 and 1999, and the
related consolidated statements of income, changes in stockholders' equity
and cash flows for the fiscal years 1997 through 1999, inclusive, as
reported in the draft of the Company's Annual Report for the fiscal year
ended June 30, 1999 to be filed with the SEC (the "Draft Financials"). The
June 30, 1998 and June 30, 1999 consolidated statements of condition of the
Company (including the related notes, where applicable) fairly present the
consolidated financial position of the Company and its Subsidiaries as of
the dates thereof, and the other financial statements referred to in this
Section 4.6 (including the related notes, where applicable) fairly present,
and the financial statements to be filed by the Company with the SEC after
the date of this Agreement will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and consolidated
financial position of the Company and its Subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth; each of
such statements (including the related notes, where applicable) complies,
and the financial statements to be filed by the Company with the SEC after
the date of this Agreement will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related notes,
where applicable) has been, and the financial statements to be filed by the
Company with the SEC after the date of this Agreement will be, prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as indicated in
the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q. The books and records of the Company and its Subsidiaries have
been, and are being, maintained in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions.
Section 4.6 of the Company Disclosure Schedule sets forth a true
and correct description of the Company's "Borrowed Funds" as reflected in
the Draft Financials.
4.7. Broker's Fees. Neither the Company nor any Subsidiary of
the Company nor any of their respective officers or directors has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by the Company Documents, except that the Company has engaged,
and will pay a fee or commission to, Sandler, O'Neill & Partners, L.P.
("Sandler O'Neill") in accordance with the terms of a letter agreement
between Sandler O'Neill and the Company, a true and correct copy of which
has been previously delivered by the Company to Buyer.
4.8. Absence of Certain Changes or Events. (a) Except as may
be set forth in Section 4.8(a) of the Company Disclosure Schedule or as
disclosed in any Company Report filed with the SEC prior to the date of
this Agreement, since June 30, 1998, (i) neither the Company nor any of its
Subsidiaries has incurred any liability, except in the ordinary course of
their business consistent with their past practices, and (ii) there has
been no change or development or combination of changes or developments
which has had, or is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(b) Except as set forth in Section 4.8(b) of the Company
Disclosure Schedule or as disclosed in any Company Report filed with the
SEC prior to the date of this Agreement, since June 30, 1998, the Company
and its Subsidiaries have carried on their respective businesses in the
ordinary course consistent with their past practices.
(c) Except as set forth in Section 4.8(c) of the Company
Disclosure Schedule, since June 30, 1999, neither the Company nor any of
its Subsidiaries has (i) increased the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any executive
officer, employee, or director from the amount thereof in effect as of June
30, 1999 (which amounts have been previously disclosed to Buyer), granted
any severance or termination pay, entered into any contract to make or
grant any severance or termination pay, or paid any bonus, (ii) suffered
any strike, work stoppage, slow-down, or other labor disturbance, (iii)
been a party to a collective bargaining agreement, contract or other
agreement or understanding with a labor union or organization, or (iv) had
any union organizing activities.
4.9. Legal Proceedings. (a) Except as set forth in Section 4.9
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any, and there are no pending or, to the
Company's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations
of any nature against the Company or any of its Subsidiaries or challenging
the validity or propriety of the transactions contemplated by any of the
Company Documents.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon the Company, any of its Subsidiaries or
the assets of the Company or any of its Subsidiaries.
4.10. Taxes. (a) Except as set forth in Section 4.10(a) of the
Company Disclosure Schedule, each of the Company and its Subsidiaries has
(i) duly and timely filed (including applicable extensions granted without
penalty) all Tax Returns (as hereinafter defined) required to be filed at
or prior to the Effective Time, and such Tax Returns are true and correct,
and (ii) paid in full or made adequate provision in the financial
statements of the Company (in accordance with GAAP) for all Taxes (as
hereinafter defined). No deficiencies for any Taxes have been proposed,
asserted, assessed or, to the knowledge of the Company, threatened against
or with respect to the Company or any of its Subsidiaries. Except as set
forth in Section 4.10(a) of the Company Disclosure Schedule, (i) there are
no liens for Taxes upon the assets of either the Company or its
Subsidiaries except for statutory liens for current Taxes not yet due, (ii)
neither the Company nor any of its Subsidiaries has requested any extension
of time within which to file any Tax Returns in respect of any fiscal year
which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, (iii) with respect to each
taxable period of the Company and its Subsidiaries, the federal and state
income Tax Returns of the Company and its Subsidiaries have been audited by
the Internal Revenue Service or appropriate state tax authorities or the
time for assessing and collecting income Tax with respect to such taxable
period has closed and such taxable period is not subject to review, (iv)
neither the Company nor any of its Subsidiaries has filed or been included
in a combined, consolidated or unitary income Tax Return other than one in
which the Company was the parent of the group filing such Tax Return, (v)
neither the Company nor any of its Subsidiaries is a party to any agreement
providing for the allocation or sharing of Taxes (other than the allocation
of federal income taxes as provided by Regulation 1.1552-1(a)(1) under the
Code), (vi) neither the Company nor any of its Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code (or
any similar or corresponding provision or requirement of state, local or
foreign income Tax law), by reason of the voluntary change in accounting
method (nor has any taxing authority proposed any such adjustment or change
of accounting method), (vii) neither the Company nor any of its
Subsidiaries has filed a consent pursuant to Section 341(f) of the Code,
and (viii) neither the Company nor any of its Subsidiaries has made any
payment or provided any benefit or may be obligated to make any payment or
provide any benefit (by contract or otherwise) which will not be deductible
by reason of Section 280G or Section 162(m) of the Code.
(b) Except as set forth in Section 4.10(b) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries owns,
directly or indirectly (including, without limitation, through
partnerships, corporations, trusts or other entities), interests in real
property ("Real Property Interests") situated in (A) New York State, which
by reason of the Merger would be subject to either (i) the New York State
Real Property Transfer Tax, or (ii) the New York City Real Property
Transfer Tax (collectively, the "New York Transfer Taxes"), or (B) any
state other than New York State which by reason of the Merger would be
subject to any tax similar to the New York Transfer Taxes. For purposes of
this Section 4.10(b), Real Property Interests include, without limitation,
titles in fee, leasehold interests, beneficial interests, encumbrances,
developments rights or any other interests with the right to use or occupy
real property or the right to receive rents, profits or other income
derived therefrom, or any options or contracts to purchase real property.
(c) For the purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies, penalties or other assessments imposed by
any United States federal, state, local or foreign taxing authority,
including, but not limited to income, excise, property, sales, transfer,
franchise, payroll, withholding, social security or other taxes, including
any interest, penalties or additions attributable thereto. For purposes of
this Agreement, "Tax Return" shall mean any return, report, information
return or other document (including any related or supporting information)
with respect to Taxes.
4.11. Employees. (a) Section 4.11(a) of the Company Disclosure
Schedule sets forth a true and correct list of each deferred compensation
plan, incentive compensation plan, equity compensation plan, "welfare"
plan, fund or program (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")); "pension"
plan, fund or program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that
is sponsored, maintained or contributed to or required to be contributed to
(the "Plans") by the Company, any of its Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with the Company would be deemed a "single employer" within the
meaning of Section 4001 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), for the benefit of any employee or former
employee of the Company or any Subsidiary.
(b) The Company has heretofore made available to Buyer true
and correct copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial report for such Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the Internal Revenue Service (if applicable) for
such Plan.
(c) Except as set forth in Section 4.11(c) of the Company
Disclosure Schedule, (i) each of the Plans has been operated and
administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code, (ii) each
of the Plans intended to be "qualified" within the meaning of Section
401(a) of the Code either (1) has received a favorable determination letter
from the IRS, or (2) is or will be the subject of an application for a
favorable determination letter, and the Company is not aware of any
circumstances likely to result in the revocation or denial of any such
favorable determination letter, (iii) with respect to each Plan which is
subject to Title IV of ERISA, the present value of accrued benefits under
such Plan, based upon the actuarial assumptions used for funding purposes
in the most recent actuarial report prepared by such Plan's actuary with
respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current
or former employees of the Company, its Subsidiaries or any ERISA Affiliate
beyond their retirement or other termination of service, other than (w)
coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in
Section 3(2) of ERISA, (y) deferred compensation benefits accrued as
liabilities on the books of the Company, its Subsidiaries or the ERISA
Affiliates or (z) benefits the full cost of which is borne by the current
or former employee (or his beneficiary), (v) no liability under Title IV of
ERISA has been incurred by the Company, its Subsidiaries or any ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to the Company, its Subsidiaries or an ERISA
Affiliate of incurring a material liability thereunder, (vi) no Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA, (vii) all contributions or other amounts payable by the Company, its
Subsidiaries or any ERISA Affiliates as of the Effective Time with respect
to each Plan in respect of current or prior plan years have been paid or
accrued in accordance with generally accepted accounting practices and
Section 412 of the Code, (viii) neither the Company, its Subsidiaries nor
any ERISA Affiliate has engaged in a transaction in connection with which
the Company, its Subsidiaries or any ERISA Affiliate could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a tax imposed pursuant to Section 4975 or 4976 of the Code, (ix) there
are no pending, or, to the best knowledge of the Company, threatened or
anticipated claims or proceedings (other than routine claims for benefits)
by, on behalf of or against any of the Plans or any trusts related thereto
and (x) the consummation of the transactions contemplated by this Agreement
will not (y) entitle any current or former employee or officer of the
Company or any ERISA Affiliate to severance pay, termination pay or any
other payment or benefit, except as expressly provided in this Agreement or
(z) accelerate the time of payment or vesting or increase the amount or
value of compensation or benefits due any such employee or officer.
4.12. SEC Reports. The Company has previously made available to
Buyer a true and correct copy of each (a) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since
January 1, 1997 by the Company with the SEC pursuant to the Securities Act
of 1933, as amended (the "Securities Act") or the Exchange Act (the
"Company Reports") and (b) communication mailed by the Company to its
stockholders since January 1, 1997, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made,
not misleading. The Company has timely filed all Company Reports and other
documents required to be filed by it under the Securities Act and the
Exchange Act, and, as of their respective dates, all Company Reports
complied with the published rules and regulations of the SEC with respect
thereto.
4.13. Company Information. The information relating to the
Company and its Subsidiaries which is provided to Buyer by the Company or
any of its affiliates or representatives for inclusion in the Proxy
Statement and the S-4, or in any other document filed with any other
regulatory agency in connection herewith, will not 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 in which they
are made, not misleading. The Proxy Statement (except for such portions
thereof that relate only to Buyer or any of its Subsidiaries) will comply
with the provisions of the Exchange Act and the rules and regulations
thereunder.
4.14. Compliance with Applicable Law. The Company and each of
its Subsidiaries hold, and have at all times held, all licenses,
franchises, permits and authorizations necessary for the lawful conduct of
their respective businesses under and pursuant to all, and have complied
with and are not in default in any respect under any, applicable law,
statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries knows of, or has received
notice of, any violations of any of the above.
4.15. Certain Contracts. (a) Except as set forth in Section
4.15(a) of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is a party to or bound by any contract, arrangement,
commitment or understanding (whether written or oral) (i) with respect to
the employment of any directors, officers, employees or consultants, (ii)
which, upon the consummation of the transactions contemplated by this
Agreement, will (either alone or upon the occurrence of any additional acts
or events) result in any payment or benefits (whether of severance pay or
otherwise) becoming due, or any increase in the amount of or acceleration
or vesting of any rights to any payment or benefits, from Buyer, the
Company, the Surviving Corporation or any of their respective Subsidiaries
to any director, officer, employee or consultant thereof, (iii) which is a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the
SEC) to be performed after the date of this Agreement that has not been
filed or incorporated by reference in the Company Reports, (iv) which is a
consulting agreement (including data processing, software programming and
licensing contracts) not terminable on 60 days or less notice involving the
payment of more than $100,000 per annum, or (v) which materially restricts
the conduct of any line of business by the Company or any of its
Subsidiaries. Each contract, arrangement, commitment or understanding of
the type described in this Section 4.15(a), whether or not set forth in
Section 4.15(a) of the Company Disclosure Schedule, is referred to herein
as a "Company Contract." The Company has previously delivered or made
available to Buyer true and correct copies of each Company Contract.
(b) Except as set forth in Section 4.15(b) of the Company
Disclosure Schedule, (i) each Company Contract is valid and binding and in
full force and effect, (ii) the Company and each of its Subsidiaries has
performed all obligations required to be performed by it to date under each
Company Contract, (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a default on the
part of the Company or any of its Subsidiaries under any Company Contract,
and (iv) no other party to such Company Contract is, to the knowledge of
the Company, in default in any respect thereunder.
4.16. Agreements with Regulatory Agencies. Except as set forth
in Section 4.16 of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of (each, whether or not set forth on
Section 4.16 of the Company Disclosure Schedule, a "Regulatory Agreement"),
any Regulatory Agency or other Governmental Entity that restricts the
conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, nor has the
Company or any of its Subsidiaries been advised by any Regulatory Agency or
other Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
4.17. Investment Securities. Section 4.17 of the Company
Disclosure Schedule sets forth the book and market value as of July 31,
1999 of the investment securities, mortgage backed securities and
securities held for sale of the Company and its Subsidiaries. Section 4.17
of the Company Disclosure Schedule sets forth, with respect to such
securities, descriptions thereof, CUSIP numbers, pool face values and
coupon rates.
4.18. State Takeover Laws; Business Combination Provision. The
Board of Directors of the Company has approved the transactions
contemplated by this Agreement and the Option Agreement such that the
provisions of Section 203 of the DGCL and Article VIII of the Company's
Certificate of Incorporation will not, assuming the accuracy of the
representations contained in Section 5.15 hereof, apply to this Agreement
or the Option Agreement or any of the transactions contemplated hereby or
thereby.
4.19. Environmental Matters. Except as set forth in Section
4.19 of the Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries and, to the
knowledge of the Company, each of the Participation Facilities and the Loan
Properties (each as hereinafter defined) are and have been in compliance
with all applicable federal, state and local laws including common law,
regulations and ordinances and with all applicable decrees, orders and
contractual obligations relating to pollution or the discharge of, or
exposure to Hazardous Materials (as hereinafter defined) in the environment
or workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending
or, to the knowledge of the Company, threatened, before any Governmental
Entity or other forum in which the Company, any of its Subsidiaries, any
Participation Facility or any Loan Property, has been or, with respect to
threatened proceedings, may be, named as a defendant (x) for alleged
noncompliance (including by any predecessor), with any Environmental Laws,
or (y) relating to the release, threatened release or exposure to any
Hazardous Material whether or not occurring at or on a site owned, leased
or operated by the Company or any of its Subsidiaries, any Participation
Facility or any Loan Property;
(c) During the period of (x) the Company's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) the Company's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) to
the knowledge of the Company, the Company's or any of its Subsidiaries'
interest in a Loan Property, there has been no release of Hazardous
Materials in, on, under or affecting any such property. To the knowledge
of the Company, prior to the period of (x) the Company's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) the Company's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) the
Company's or any of its Subsidiaries' interest in a Loan Property, there
was no release or threatened release of Hazardous Materials in, on, under
or affecting any such property, Participation Facility or Loan Property;
and
(d) The following definitions apply for purposes of this
Section 4.19: (x) "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or other regulated
substances or materials, (y) "Loan Property" means any property in which
the Company or any of its Subsidiaries holds a security interest, and,
where required by the context, said term means the owner or operator of
such property; and (z) "Participation Facility" means any facility in which
the Company or any of its Subsidiaries participates in the management and,
where required by the context, said term means the owner or operator of
such property.
4.20. Derivative Transactions. Except as set forth in Section
4.20 of the Company Disclosure Schedule, since June 30, 1998, neither
Company nor any of its Subsidiaries has engaged in transactions in or
involving forwards, futures, options on futures, swaps or other derivative
instruments except (i) as agent on the order and for the account of others,
or (ii) as principal for purposes of hedging interest rate risk on U.S.
dollar-denominated securities and other financial instruments. None of the
counterparties to any contract or agreement with respect to any such
instrument is in default with respect to such contract or agreement and no
such contract or agreement, were it to be a Loan (as defined below) held by
the Company or any of its Subsidiaries, would be classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or
words of similar import. The financial position of the Company and its
Subsidiaries on a consolidated basis under or with respect to each such
instrument has been reflected in the books and records of the Company and
such Subsidiaries in accordance with GAAP consistently applied, and no open
exposure of the Company or any of its Subsidiaries with respect to any such
instrument (or with respect to multiple instruments with respect to any
single counterparty) exceeds $250,000.
4.21. Opinion. Prior to the execution of this Agreement, the
Company has received an opinion from Sandler O'Neill to the effect that as
of the date thereof and based upon and subject to the matters set forth
therein, the Exchange Ratio is fair to the stockholders of the Company from
a financial point of view. Such opinion has not been amended or rescinded
as of the date of this Agreement.
4.22. Approvals. As of the date of this Agreement, the Company
knows of no reason why all regulatory approvals required for the
consummation of the transactions contemplated hereby should not be
obtained.
4.23. Loan Portfolio. (a) Except as set forth in Section 4.23
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any written or oral (i) loan agreement, note or
borrowing arrangement (including, without limitation, leases, credit
enhancements, commitments, guarantees and interest-bearing assets)
(collectively, "Loans"), other than any Loan the unpaid principal balance
of which does not exceed $100,000, under the terms of which the obligor
was, as of June 30, 1999, over 90 days delinquent in payment of principal
or interest or in default of any other provision, or (ii) Loan with any
director, executive officer or five percent or greater stockholder of the
Company or any of its Subsidiaries, or to the knowledge of the Company, any
person, corporation or enterprise controlling, controlled by or under
common control with any of the foregoing. Section 4.23 of the Company
Disclosure Schedule sets forth (i) all of the Loans in original principal
amount in excess of $100,000 of the Company or any of its Subsidiaries that
as of June 30, 1999, were classified by any bank examiner (whether
regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized",
"Credit Risk Assets", "Concerned Loans", "Watch List" or words of similar
import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower thereunder,
(ii) by category of Loan (i.e., commercial, consumer, etc.), all of the
other Loans of the Company and its Subsidiaries that as of June 30, 1999,
were classified as such, together with the aggregate principal amount of
and accrued and unpaid interest on such Loans by category and (iii) each
asset of the Company that as of June 30, 1999, was classified as "Other
Real Estate Owned" and the book value thereof. The Company shall promptly
inform Buyer in writing of any Loan that becomes classified in the manner
described in the previous sentence, or any Loan the classification of which
is changed, at any time after the date of this Agreement.
(b) Each Loan in original principal amount in excess of
$250,000 (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to
the extent secured, has been secured by valid liens and security interests
which have been perfected and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
4.24. Property. Each of the Company and its Subsidiaries has
good and marketable title free and clear of all liens, encumbrances,
mortgages, pledges, charges, defaults or equitable interests to all of the
properties and assets, real and personal, tangible or intangible, which are
reflected on the consolidated statement of financial condition of the
Company as of June 30, 1999 or acquired after such date, except (i) liens
for taxes not yet due and payable or contested in good faith by appropriate
proceedings, (ii) pledges to secure deposits and other liens incurred in
the ordinary course of business, (iii) such imperfections of title,
easements and encumbrances, if any, as do not interfere with the use of the
property as such property is used on the date of this Agreement, (iv) for
dispositions and encumbrances of, or on, such properties or assets in the
ordinary course of business or (v) mechanics', materialmen's, workmen's,
repairmen's, warehousemen's, carrier's and other similar liens and
encumbrances arising in the ordinary course of business. All leases
pursuant to which the Company or any Subsidiary of the Company, as lessee,
leases real or personal property are valid and enforceable in accordance
with their respective terms and neither the Company nor any of its
Subsidiaries nor, to the knowledge of the Company, any other party thereto
is in default thereunder.
4.25. Reorganization. As of the date of this Agreement, the
Company has no reason to believe that the Merger will fail to qualify as a
reorganization under Section 368(a) of the Code.
4.26. Company Rights Agreement. The Company has (a) duly
entered into an appropriate amendment to the Company Rights Agreement and
(b) taken all other action necessary or appropriate, in each case so that
the execution of this Agreement and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby
(including, without limitation, the Merger) do not and will not result in
the ability of any person to exercise any rights under the Company Rights
Agreement or enable or require the Company Rights to separate from the
shares of Company Common Stock to which they are attached or to be
triggered or become exercisable.
4.27. Equity and Real Estate Investments. Except as set forth
in Section 4.27 of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has (i) equity investments other than investments
in wholly owned Subsidiaries or (ii) investments in real estate or real
estate development projects, other than assets classified as "other real
estate owned."
4.28. Year 2000 Matters. Section 4.28 of the Company Disclosure
Schedule contains a true and correct copy of the Company's plan for
addressing year 2000 computer issues (the "Year 2000 Plan"). The Company
is in material compliance with the Company's Year 2000 Plan. The Company
has been examined by the OTS with respect to being "Year 2000 Compliant"
and the Company's Year 2000 Plan has been reviewed by the OTS and the
Company has received a "satisfactory" rating in connection therewith, and
neither the Company nor the Company Bank has received any written
communication from the OTS commenting adversely with respect to the ability
of the Company to become Year 2000 compliant.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Subject to Article III hereof and except as set forth in the
Buyer Disclosure Schedule, Buyer hereby represents and warrants to the
Company as follows:
5.1. Corporate Organization. (a) Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer 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 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. Buyer is duly
registered as a bank holding company under the BHC Act. The Restated
Certificate of Incorporation and By-laws of Buyer, copies of which have
previously been made available to the Company, are true and correct copies
of such documents as in effect as of the date of this Agreement.
(b) North Fork Bank ("Buyer Bank") is a commercial bank
duly organized, validly existing and in good standing under the laws of the
State of New York. The deposit accounts of Buyer Bank are insured by the
FDIC through the Bank Insurance Fund to the fullest extent permitted by
law, and all premiums and assessments required in connection therewith have
been paid when due. Each of Buyer's other Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Subsidiary of Buyer 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 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. The articles of organization and by-laws of Buyer
Bank, copies of which have previously been made available to the Company,
are true and correct copies of such documents as in effect as of the date
of this Agreement.
(c) The minute books of Buyer and each of its Subsidiaries
contain true and correct records of all meetings and other corporate
actions held or taken since December 31, 1996 of their respective
stockholders and Boards of Directors (including committees of their
respective Boards of Directors).
5.2. Capitalization. (a) As of the date of this Agreement, the
authorized capital stock of Buyer consists of 200,000,000 shares of Buyer
Common Stock and 10,000,000 shares of preferred stock, par value $1.00 per
share ("Buyer Preferred Stock"). As of August 23, 1999, (i) 135,802,670
shares of Buyer Common Stock were issued and outstanding, (ii) no shares of
Buyer Preferred Stock were issued and outstanding, (iii) no shares of Buyer
Common Stock were reserved for issuance, except that 2,000,000 shares of
Buyer Common Stock were reserved for issuance pursuant to the Buyer
Dividend Investment and Stock Purchase Plan, 1,973,140 shares of Buyer
Common Stock were reserved for issuance pursuant to the Buyer 1985
Incentive Stock Option Plan, the Buyer 1987 Long-Term Incentive Plan, the
Buyer 1989 Executive Management and Compensation Plan, the Buyer 1994 Key
Employee Stock Plan, the Buyer 1997 Non-Officer Stock Plan and the Buyer
1998 Stock Compensation Plan (the "Buyer Stock Plans"), and 31,000,000
shares of Buyer Common Stock were reserved for issuance pursuant to the
Agreement and Plan of Merger, dated as of August 16, 1999, between Buyer
and JSB Financial, Inc., (iv) no shares of Buyer Preferred Stock were
reserved for issuance and (v) 9,323,852 shares of Buyer Common Stock were
held by Buyer in its treasury or by Buyer's Subsidiaries. All of the
issued and outstanding shares of Buyer Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as referred to above or
reflected in Section 5.2(a) of the Buyer Disclosure Schedule, Buyer does
not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Buyer Common Stock or Buyer Preferred
Stock or any other equity securities of Buyer or any securities
representing the right to purchase or otherwise receive any shares of Buyer
Common Stock or Buyer Preferred Stock or any other equity security of the
Buyer. The shares of Buyer Common Stock to be issued pursuant to the
Merger will be duly authorized and validly issued and, at the Effective
Time, all such shares will be fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof.
(b) Section 5.2(b) of the Buyer Disclosure Schedule sets
forth a true and correct list of all of the Subsidiaries of the Buyer as of
the date of this Agreement. Except as set forth in Section 5.2(b) of the
Buyer Disclosure Schedule, as of the date of this Agreement, Buyer owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock of each of the Subsidiaries of Buyer, free and clear of all liens,
charges, encumbrances and security interests whatsoever, and all of such
shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, no
Subsidiary of Buyer has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character with
any party that is not a direct or indirect Subsidiary of Buyer calling for
the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary.
5.3. Authority; No Violation. (a) Buyer has full corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of Buyer, and no
other corporate proceedings on the part of Buyer are necessary to approve
this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Buyer
and (assuming due authorization, execution and delivery by the Company)
this Agreement constitutes a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied
in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 5.3(b) of the Buyer
Disclosure Schedule, neither the execution and delivery of this Agreement
by Buyer nor the consummation by Buyer of the transactions contemplated
hereby, nor compliance by Buyer with any of the terms or provisions hereof,
will (i) violate any provision of the Restated Certificate of Incorporation
or By-Laws of Buyer, or the articles of incorporation or by-laws or similar
governing documents of any of its Subsidiaries or (ii) assuming that the
consents and approvals referred to in Section 4.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Buyer or any of its Subsidiaries
or any of their respective properties or assets, or (y) violate, conflict
with, result in a breach of any provision of or the loss of any benefit
under, 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 or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of Buyer or any of its 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 Buyer or any of its Subsidiaries is a party, or by which they or
any of their respective properties or assets may be bound or affected.
5.4. Consents and Approvals. Except for (a) the filing of an
application with the Federal Reserve Board under the BHC Act, and approval
of such application, (b) the filing of an application with the FDIC under
the Bank Merger Act and approval of such application, in the event the
parties enter into the Bank Merger Agreement (as defined in Section 7.12),
(c) the filing of applications and notices, as applicable, with the OTS and
approval of such applications and notices, (d) the State Banking Approvals,
(e) the filing with the SEC of the Proxy Statement and the filing and
declaration of effectiveness of the S-4, (f) the approval of this Agreement
by the requisite vote of the stockholders of the Company, (g) the filing of
the Certificate of Merger with the Secretary, (h) such filings and
approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of the
shares of Buyer Common Stock pursuant to this Agreement, (i) approval of
the listing of the Buyer Common Stock to be issued in the Merger on the
NYSE, and (j) such filings, authorizations or approvals as may be set forth
in Section 5.4 of the Buyer Disclosure Schedule, no consents or approvals
of or filings or registrations with any Governmental Entity or with any
third party are necessary in connection with the execution and delivery by
Buyer of this Agreement or the consummation by Buyer of the Merger and the
other transactions contemplated hereby.
5.5. Reports. Buyer and each of its Subsidiaries have timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1996 with any Regulatory Agency, and
have paid all fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a Regulatory Agency in the
regular course of the business of Buyer and its Subsidiaries, and except as
set forth in Section 5.5 of the Buyer Disclosure Schedule, no Regulatory
Agency has initiated any proceeding or, to the knowledge of Buyer,
investigation into the business or operations of Buyer or any of its
Subsidiaries since December 31, 1996. There is no unresolved violation,
criticism, or exception by any Regulatory Agency with respect to any report
or statement relating to any examinations of Buyer or any of its
Subsidiaries.
5.6. Financial Statements. Buyer has previously made available
to the Company copies of (a) the consolidated statements of financial
condition of Buyer and its Subsidiaries as of December 31 for the fiscal
years 1997 and 1998 and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the fiscal years 1996
through 1998, inclusive, as reported in Buyer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 filed with the SEC under the
Exchange Act, in each case accompanied by the audit report of KPMG LLP,
independent public accountants with respect to Buyer, and (b) the unaudited
consolidated statements of financial condition of Buyer and its
Subsidiaries as of March 31, 1998 and March 31, 1999 and the related
unaudited consolidated statements of income, changes in stockholder's
equity and cash flows for the three-month periods then ended as reported in
Buyer's Quarterly Report on Form 10-Q for the period ended March 31, 1999
filed with the SEC under the Exchange Act. The December 31, 1998
consolidated statements of financial condition of Buyer (including the
related notes, where applicable) fairly presents the consolidated financial
position of Buyer and its Subsidiaries as of the date thereof, and the
other financial statements referred to in this Section 5.6 (including the
related notes, where applicable) fairly present, and the financial
statements to be filed by Buyer with the SEC after the date of this
Agreement will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount),
the results of the consolidated operations and changes in stockholders'
equity and consolidated financial position of Buyer and its Subsidiaries
for the respective fiscal periods or as of the respective dates therein set
forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed by Buyer
with the SEC after the date of this Agreement will comply, with applicable
accounting requirements and with the published rules and regulations of the
SEC with respect thereto; and each of such statements (including the
related notes, where applicable) has been, and the financial statements to
be filed by Buyer with the SEC after the date of this Agreement will be,
prepared in accordance with GAAP consistently applied during the periods
involved, except as indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q. The books and records of
Buyer and its Subsidiaries have been, and are being, maintained in
accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
5.7. Broker's Fees. Neither Buyer nor any Subsidiary of Buyer,
nor any of their respective officers or directors, has employed any broker
or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by
this Agreement or the Option Agreement, except that Buyer has engaged, and
will pay a fee or commission to, Donaldson, Lufkin & Jenrette Securities
Corporation.
5.8. Absence of Certain Changes or Events. (a) Except as may
be set forth in Section 5.8(a) of the Buyer Disclosure Schedule or as
disclosed in any Buyer Report filed with the SEC prior to the date of this
Agreement, since December 31, 1998, (i) neither Buyer nor any of its
Subsidiaries has incurred any liability, except in the ordinary course of
their business consistent with their past practices, and (ii) there has
been no change or development or combination of changes or developments
which has had, or is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Buyer.
(b) Except as disclosed in any Buyer Report filed with the
SEC prior to the date of this Agreement, since December 31, 1998, the Buyer
and its Subsidiaries have carried on their respective businesses in the
ordinary course consistent with prudent banking practices.
(c) Since December 31, 1998, neither the Buyer nor any of
its Subsidiaries has (i)suffered any strike, work stoppage, slow-down, or
other labor disturbance, (ii) been a party to a collective bargaining
agreement, contract or other agreement or understanding with a labor union
or organization, or (iii) had any union organizing activities.
5.9. Legal Proceedings. (a) Except as set forth in Section 5.9
of the Buyer Disclosure Schedule, neither Buyer nor any of its Subsidiaries
is a party to any and there are no pending or, to Buyer's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Buyer or any of its Subsidiaries or challenging the validity or propriety
of the transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Buyer, any of its Subsidiaries or the
assets of Buyer or any of its Subsidiaries.
5.10. Taxes. Except as set forth in Section 5.10 of the Buyer
Disclosure Schedule, each of Buyer and its Subsidiaries has (i) duly and
timely filed (including applicable extensions granted without penalty) all
Tax Returns required to be filed at or prior to the Effective Time, and
such Tax Returns are true and correct, and (ii) paid in full or made
adequate provision in the financial statements of Buyer (in accordance with
GAAP) for all Taxes. No deficiencies for any Taxes have been proposed,
asserted, assessed or, to the best knowledge of Buyer, threatened against
or with respect to Buyer or any of its Subsidiaries. Except as set forth
in Section 5.10 of the Buyer Disclosure Schedule, (i) there are no liens
for Taxes upon the assets of either Buyer or its Subsidiaries except for
statutory liens for current Taxes not yet due, (ii) neither Buyer nor any
of its Subsidiaries has requested any extension of time within which to
file any Tax Returns in respect of any fiscal year which have not since
been filed and no request for waivers of the time to assess any Taxes are
pending or outstanding, (iii) with respect to each taxable period of Buyer
and its Subsidiaries, the federal and state income Tax Returns of Buyer and
its Subsidiaries have been audited by the Internal Revenue Service or
appropriate state tax authorities or the time for assessing and collecting
income Tax with respect to such taxable period has closed and such taxable
period is not subject to review, (iv) neither Buyer nor any of its
Subsidiaries has filed or been included in a combined, consolidated or
unitary income Tax Return other than one in which Buyer was the parent of
the group filing such Tax Return, (v) neither Buyer nor any of its
Subsidiaries is a party to any agreement providing for the allocation or
sharing of Taxes (other than the allocation of federal income taxes as
provided by Regulation 1.1552-1(a)(1) under the Code), (vi) neither Buyer
nor any of its Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code (or any similar or corresponding
provision or requirement of state, local or foreign income Tax law), by
reason of the voluntary change in accounting method (nor has any taxing
authority proposed in writing any such adjustment or change of accounting
method), and (vii) neither Buyer nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code.
5.11. Employees. (a) Section 5.11(a) of the Buyer Disclosure
Schedule sets forth a true and correct list of each deferred compensation
plan, incentive compensation plan, equity compensation plan, "welfare"
plan, fund or program (within the meaning of section 3(1) of the ERISA);
"pension" plan, fund or program (within the meaning of section 3(2) of
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each
case, that is sponsored, maintained or contributed to or required to be
contributed to as of the date of this Agreement (the "Buyer Plans") by
Buyer, any of its Subsidiaries or by any trade or business, whether or not
incorporated (a "Buyer ERISA Affiliate"), all of which together with Buyer
would be deemed a "single employer" within the meaning of Section 4001 of
ERISA, for the benefit of any employee or former employee of Buyer, any
Subsidiary or any Buyer ERISA Affiliate.
(b) Except as set forth in Section 5.11(b) of the Buyer
Disclosure Schedule, (i) each of the Buyer Plans has been operated and
administered in accordance with its terms and applicable law, including but
not limited to ERISA and the Code, (ii) each of the Buyer Plans intended to
be "qualified" within the meaning of Section 401(a) of the Code has either
(1) received a favorable determination letter from the IRS, or (2) is or
will be the subject of an application for a favorable determination letter,
and Buyer is not aware of any circumstances likely to result in the
revocation or denial of any such favorable determination letter, (iii) with
respect to each Buyer Plan which is subject to Title IV of ERISA, the
present value of accrued benefits under such Buyer Plan, based upon the
actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by such Buyer Plan's actuary with respect to such
Buyer Plan, did not, as of its latest valuation date, exceed the then
current value of the assets of such Buyer Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current
or former employees of Buyer, its Subsidiaries or any Buyer ERISA Affiliate
beyond their retirement or other termination of service, other than (w)
coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in
Section 3(2) of ERISA, (y) deferred compensation benefits accrued as
liabilities on the books of Buyer, its Subsidiaries or the ERISA Affiliates
or (z) benefits the full cost of which is borne by the current or former
employee (or his beneficiary), (v) no liability under Title IV of ERISA has
been incurred by Buyer, its Subsidiaries or any Buyer ERISA Affiliate that
has not been satisfied in full and no condition exists that presents a
material risk to the Buyer, its Subsidiaries or an ERISA Affiliate of
incurring a material liability thereunder, (vi) no Buyer Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA, (vii) all contributions or other amounts payable by Buyer, its
Subsidiaries or any ERISA Affiliate as of the Effective Time with respect
to each Plan in respect of current or prior plan years have been paid or
accrued in accordance with generally accepted accounting practices and
Section 412 of the Code, (viii) neither Buyer, its Subsidiaries nor any
Buyer ERISA Affiliate has engaged in a transaction in connection with which
Buyer, its Subsidiaries or any Buyer ERISA Affiliate could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a tax imposed pursuant to Section 4975 or 4976 of the Code, (ix) there
are no pending, or, to the best knowledge of Buyer, threatened or
anticipated claims or proceedings (other than routine claims for benefits)
by, on behalf of or against any of the Buyer Plans or any trusts related
thereto and (x) the consummation of the transactions contemplated by this
Agreement will not (y) entitle any current or former employee or officer of
Buyer or any Buyer ERISA Affiliate to severance pay, termination pay or any
other payment or benefit, except as expressly provided in this Agreement or
(z) accelerate the time of payment or vesting or increase in the amount or
value of compensation or benefits due any such employee or officer.
5.12. SEC Reports. Buyer has previously made available to the
Company a true and correct copy of each (a) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since
January 1, 1997 by Buyer with the SEC pursuant to the Securities Act or the
Exchange Act (the "Buyer Reports") and (b) communication mailed by Buyer to
its stockholders since January 1, 1997, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made,
not misleading. Buyer has timely filed all Buyer Reports and other
documents required to be filed by it under the Securities Act and the
Exchange Act, and, as of their respective dates, all Buyer Reports complied
with the published rules and regulations of the SEC with respect thereto.
5.13. Buyer Information. The information relating to Buyer and
its Subsidiaries to be contained in the Proxy Statement and the S-4, or in
any other document filed with any other regulatory agency in connection
herewith, will not 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 in which they are made, not misleading. The S-4 will
comply with the provisions of the Securities Act and the rules and
regulations thereunder.
5.14. Compliance with Applicable Law. Buyer and each of its
Subsidiaries hold, and have at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and
are not in default in any respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to Buyer or any of its Subsidiaries, and neither Buyer nor any of
its Subsidiaries knows of, or has received notice of violation of, any
violations of any of the above.
5.15. Ownership of Company Common Stock. (a) Except for the
Option Agreement and 55,000 shares of Company Common Stock beneficially
owned by Buyer, neither Buyer nor any of its affiliates or associates (as
such terms are defined under the Exchange Act), (i) beneficially owns,
directly or indirectly, or (ii) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing
of, in each case, any shares of capital stock of the Company (other than
Trust Account Shares and DPC Shares).
(b) Neither Buyer nor any of its Subsidiaries is an
"affiliate" (as such term is defined in DGCL section 203(c)(1)) or an
"associate" (within the meaning of DGCL section 203(c)(2)) of the Company
or an "Interested Stockholder" (as such term is defined in Article VIII of
the Company's Certificate of Incorporation).
5.16. Agreements with Regulatory Agencies. Neither Buyer nor
any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of (each, whether or not set forth in
Section 5.16 of the Buyer Disclosure Schedule, a "Buyer Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor
has Buyer or any of its Subsidiaries been advised by any Regulatory Agency
or other Governmental Entity that it is considering issuing or requesting
any Regulatory Agreement.
5.17. Approvals. As of the date of this Agreement, Buyer knows
of no reason why all regulatory approvals required for the consummation of
the transactions contemplated hereby should not be obtained.
5.18. Tax Treatment for the Merger; Reorganization. As of the
date of this Agreement, Buyer has no reason to believe that the Merger will
fail to qualify as a reorganization under Section 368(a) of the Code.
5.19. Environmental Matters. Except as set forth in Section
5.19 of the Buyer Disclosure Schedule:
(a) Each of Buyer and its Subsidiaries and, to the
knowledge of the Buyer, each of the Participation Facilities and the Loan
Properties (each as hereinafter defined) are and have been in compliance
with all Environmental Laws;
(b) There is no suit, claim, action or proceeding, pending
or, to the knowledge of Buyer, threatened, before any Governmental Entity
or other forum in which Buyer, any of its Subsidiaries, any Participation
Facility or any Loan Property, has been or, with respect to threatened
proceedings, may be, named as a defendant (x) for alleged noncompliance
(including by any predecessor) with any Environmental Laws, or (y) relating
to the release, threatened release or exposure to any Hazardous Material
whether or not occurring at or on a site owned, leased or operated by Buyer
or any of its Subsidiaries, any Participation Facility or any Loan
Property. As used in this Section 5.19, "Hazardous Materials" means any
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum or
other regulated substances or materials;
(c) During the period of (x) Buyer's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Buyer's or any of its Subsidiaries' participation in
the management of any Participation Facility, or (z) to the knowledge of
the Buyer, Buyer's or any of its Subsidiaries' interest in a Loan Property,
there has been no release of Hazardous Materials in, on, under or affecting
any such property. To the knowledge of the Buyer, prior to the period of
(x) Buyer's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties, (y) Buyer's or any of its
Subsidiaries' participation in the management of any Participation
Facility, or (z) Buyer's or any of its Subsidiaries' interest in a Loan
Property, there was no release of Hazardous Materials in, on, under or
affecting any such property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this
Section 5.19: (x) "Loan Property" means any property in which Buyer or any
of its Subsidiaries holds a security interest, and, where required by the
context, said term means the owner or operator of such property; and (y)
"Participation Facility" means any facility in which Buyer or any of its
Subsidiaries participates in the management and, where required by the
context, said term means the owner or operator of such property.
5.20. Loan Portfolio. Section 5.20 of the Buyer Disclosure
Schedule sets forth, by category, the aggregate book value amount of (i)
all of the Loans in original principal amount in excess of $100,000 of the
Buyer or any of its Subsidiaries that as of July 31, 1999, were classified
by any bank examiner (whether regulatory or internal) as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans", "Watch
List" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan and the identity of the
borrower thereunder and (ii) all assets of the Buyer that as of June 30,
1999, were classified as "Other Real Estate Owned".
(b) Each Loan in original principal amount in excess of
$250,000 (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to
the extent secured, has been secured by valid liens and security interests
which have been perfected and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
5.21. Property. Each of the Buyer and its Subsidiaries has good
and marketable title free and clear of all liens, encumbrances, mortgages,
pledges, charges, defaults or equitable interests to all of the properties
and assets, real and personal, tangible or intangible, which are reflected
on the consolidated statement of financial condition of the Buyer as of
June 30, 1999 or acquired after such date, except (i) liens for taxes not
yet due and payable or contested in good faith by appropriate proceedings,
(ii) pledges to secure deposits and other liens incurred in the ordinary
course of business, (iii) such imperfections of title, easements and
encumbrances, if any, as do not interfere with the use of the property as
such property is used on the date of this Agreement, (iv) for dispositions
and encumbrances of, or on, such properties or assets in the ordinary
course of business or (v) mechanics', materialmen's, workmen's,
repairmen's, warehousemen's, carrier's and other similar liens and
encumbrances arising in the ordinary course of business. All leases
pursuant to which the Buyer or any Subsidiary of the Buyer, as lessee,
leases real or personal property are valid and enforceable in accordance
with their respective terms and neither the Buyer nor any of its
Subsidiaries nor, to the knowledge of the Buyer, any other party thereto is
in default thereunder.
5.22. Derivative Transactions. Except as set forth in Section
5.22 of the Buyer Disclosure Schedule, since December 31, 1998, neither
Buyer nor any of its Subsidiaries has engaged in transactions in or
involving forwards, futures, options on futures, swaps or other derivative
instruments except (i) as agent on the order and for the account of others,
or (ii) as principal for purposes of hedging interest rate risk on U.S.
dollar-denominated securities and other financial instruments. None of the
counterparties to any contract or agreement with respect to any such
instrument is in default with respect to such contract or agreement and no
such contract or agreement, were it to be a Loan (as defined below) held by
the Buyer or any of its Subsidiaries, would be classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or
words of similar import. The financial position of Buyer and its
Subsidiaries on a consolidated basis under or with respect to each such
instrument has been reflected in the books and records of Buyer and such
Subsidiaries in accordance with GAAP consistently applied, and no open
exposure of Buyer or any of its Subsidiaries with respect to any such
instrument (or with respect to multiple instruments with respect to any
single counterparty) exceeds $250,000.
5.23. Year 2000 Matters. Section 5.23 of the Buyer Disclosure
Schedule contains a true and correct copy of the Buyer's plan for
addressing year 2000 computer issues (the "Year 2000 Plan"). The Buyer is
in material compliance with the Buyer's Year 2000 Plan.
5.24. Insurance. The Buyer and its Subsidiaries are presently
insured, and since December 31, 1998, have been insured, for reasonable
amounts with financially sound and reputable insurance companies, against
such risks as companies engaged in a similar business would, in accordance
with good business practice, customarily be insured. All of the insurance
policies and bonds maintained by the Buyer and its Subsidiaries are in full
force and effect, the Buyer and its Subsidiaries are not in default
thereunder and all material claims thereunder have been filed in due and
timely fashion.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of the Company. During the period from the date
of this Agreement and continuing until the Effective Time, except as
expressly contemplated or permitted by this Agreement or the Option
Agreement or with the prior written consent of Buyer, the Company and its
Subsidiaries shall carry on their respective businesses in the ordinary
course consistent with past practice and consistent with prudent banking
practice. The Company will use its best efforts to (x) preserve its
business organization and that of its Subsidiaries intact, (y) keep
available to itself and Buyer the present services of the employees of the
Company and its Subsidiaries and (z) preserve for itself and Buyer the
goodwill of the customers of the Company and its Subsidiaries and others
with whom business relationships exist. Without limiting the generality of
the foregoing, and except as set forth in Section 6.1 of the Company
Disclosure Schedule or as otherwise contemplated by this Agreement or
consented to in writing by Buyer, the Company shall not, and shall not
permit any of its Subsidiaries to:
(a) solely in the case of the Company, declare or pay any
dividends on, or make other distributions in respect of, any of its capital
stock, other than normal quarterly dividends not in excess of $0.21 per
share of Company Common Stock;
(b) (i) split, combine or reclassify any shares of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (ii) repurchase, redeem or otherwise acquire (except for the
acquisition of Trust Account Shares and DPC Shares, as such terms are
defined in Section 1.4(b) hereof) any shares of the capital stock of the
Company or any Subsidiary of the Company, or any securities convertible
into or exercisable for any shares of the capital stock of the Company or
any Subsidiary of the Company; or (iii) issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of its
capital stock or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing, except, in the case of
clauses (i) and (iii), for the issuance of Company Common Stock upon the
exercise or fulfillment of rights or options issued or existing pursuant to
employee benefit plans, programs or arrangements, all to the extent
outstanding and in existence on the date of this Agreement and in
accordance with their present terms;
(c) amend its Certificate of Incorporation, By-laws or
other similar governing documents;
(d) authorize any of its officers, directors, or agents to
directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a "takeover
proposal" (as defined below), or recommend or endorse any takeover
proposal, or participate in any discussions or negotiations, or provide
third parties with any nonpublic information, relating to any such inquiry
or proposal or otherwise facilitate any effort or attempt to make or
implement a takeover proposal; provided, however, that the Company may
communicate information about any such takeover proposal to its
stockholders if, in the judgment of the Company's Board of Directors, based
upon the advice of outside counsel, such communication is required under
applicable law; provided further, however, that nothing contained in this
Section 6.1(d) shall prohibit the Company from furnishing information to,
or entering into discussions or negotiations with, any person or entity
that makes an unsolicited, bona fide takeover proposal that constitutes a
Superior Proposal (as defined below) in each case if, and only to the
extent that (A) such actions occur at a time prior to approval of the
Merger Agreement by the Company's stockholders, (B) the Board of Directors
of the Company concludes in good faith, after consultation with and based
upon the advice of outside counsel, that it is required to do so in order
to comply with its fiduciary duties to the Company's stockholders under
applicable law, and (C) prior to taking such action, the Company receives
from such person or entity an executed confidentiality agreement and an
executed standstill agreement, each in reasonably customary form (provided
that such agreements shall contain terms that are no less restrictive than
the terms of any such agreement between Buyer and the Company). For
purposes of this Agreement, "Superior Proposal" means any bona fide written
takeover proposal for or in respect of all of the outstanding shares of
Company Common Stock, (i) on terms that the Board of Directors of the
Company determines in its good faith judgment (after consultation with a
financial advisor of nationally recognized reputation and taking into
account all the terms and conditions of the takeover proposal deemed
relevant by such Board of Directors, including the consideration to be paid
pursuant thereto, any break-up fees, expense reimbursement provisions,
conditions to consummation, and the ability of the party making such
proposal to obtain financing therefor) are more favorable from a financial
point of view to its stockholders than the Merger, and (ii) that
constitutes a transaction that, in such Board of Directors' good faith
judgment, is reasonably likely to be consummated on the terms set forth,
taking into account all legal, financial, regulatory and other aspects of
such proposal. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations previously
conducted with any parties other than Buyer with respect to any of the
foregoing. The Company will take all actions necessary or advisable to
inform the appropriate individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 6.1(d). The
Company will notify Buyer immediately if any such inquiries or takeover
proposals are received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated or continued
with, the Company, and the Company will promptly inform Buyer in writing of
all of the relevant details with respect to the foregoing. As used in this
Agreement, "takeover proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business combination
involving the Company or any Subsidiary of the Company or any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, the Company or any Subsidiary of the
Company other than the transactions contemplated or permitted by this
Agreement and the Option Agreement;
(e) make any capital expenditures other than those which
(i) are made in the ordinary course of business or are necessary to
maintain existing assets in good repair and (ii) in any event are in an
amount of no more than $500,000 in the aggregate;
(f) enter into any new line of business;
(g) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof or otherwise acquire any assets, which would be
material, individually or in the aggregate, to the Company, other than in
connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with prudent banking practices;
(h) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth
in this Agreement being or becoming untrue in any material respect, or in
any of the conditions to the Merger set forth in Article VIII not being
satisfied;
(i) change its methods of accounting in effect at June 30,
1998 except as required by changes in GAAP or regulatory accounting
principles as concurred to by the Company's independent auditors;
(j) (i) except as required by applicable law or as required
to maintain qualification pursuant to the Code, adopt, amend, renew or
terminate any employee benefit plan (including, without limitation, any
Plan) or any agreement, arrangement, plan or policy between the Company or
any Subsidiary of the Company and one or more of its current or former
directors, officers or employees or (ii) except for normal increases in the
ordinary course of business consistent with past practice or except as
required by applicable law, increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any Plan or agreement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or
performance units or shares);
(k) take or cause to be taken any action which would
disqualify the Merger as a tax free reorganization under Section 368(a) of
the Code;
(l) other than activities in the ordinary course of
business consistent with past practice, sell, lease, encumber, assign or
otherwise dispose of, or agree to sell, lease, encumber, assign or
otherwise dispose of, any of its material assets, properties or other
rights or agreements;
(m) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or
other entity;
(n) file any application to relocate or terminate the
operations of any banking office of it or any of its Subsidiaries;
(o) make any equity investment or commitment to make such
an investment in real estate or in any real estate development project,
other than in connection with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt restructurings in the ordinary course
of business consistent with prudent banking practices;
(p) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract,
agreement or lease for goods, services or office space to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or their respective properties is bound;
(q) other than in prior consultation with Buyer,
restructure or materially change its investment securities portfolio,
through purchases, sales or otherwise, or the manner in which the portfolio
is classified or reported; or
(r) agree to do any of the foregoing.
6.2. Covenants of Buyer. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or the Option Agreement or with
the prior written consent of the Company, Buyer and its Subsidiaries shall
carry on their respective businesses in the ordinary course consistent with
prudent banking practice. Except as set forth in Section 6.2 of the Buyer
Disclosure Schedule or as otherwise contemplated by this Agreement or
consented to in writing by the Company, Buyer shall not, and shall not
permit any of its Subsidiaries to:
(a) solely in the case of Buyer, declare or pay any
extraordinary or special dividends on or make any other extraordinary or
special distributions in respect of any of its capital stock; provided,
however, that nothing contained herein shall prohibit Buyer from increasing
the quarterly cash dividend on the Buyer Common Stock;
(b) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth
in this Agreement being or becoming untrue in any material respect, or in
any of the conditions to the Merger set forth in Article VIII not being
satisfied;
(c) change its methods of accounting in effect at December
31, 1998, except in accordance with changes in GAAP or regulatory
accounting principles as concurred to by Buyer's independent auditors;
(d) take or cause to be taken any action which would
disqualify the Merger as a tax free reorganization under Section 368(a) of
the Code; or
(e) change any provisions of the Certificate of
Incorporation of the Buyer, other than as disclosed in Section 6.2(e) of
the Buyer Disclosure Schedule;
(f) agree to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters. (a) The Company shall promptly
prepare and file with the SEC the Proxy Statement and Buyer shall promptly
prepare and file with the SEC the S-4, in which the Proxy Statement will be
included as a prospectus. Each of the Company and Buyer shall use all
reasonable efforts to have the S-4 declared effective under the Securities
Act as promptly as practicable after such filing, and the Company shall
thereafter mail the Proxy Statement to its stockholders. Buyer shall also
use all reasonable efforts to obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and the Company shall furnish all
information concerning the Company and the holders of Company Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and
use their reasonable best efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
which are necessary or advisable to consummate the transactions
contemplated by this Agreement. The Company and Buyer shall have the right
to review in advance, and to the extent practicable each will consult the
other on, in each case subject to applicable laws relating to the exchange
of information, all the information relating to the Company or Buyer, as
the case may be, and any of their respective Subsidiaries, which appears in
any filing made with, or written materials submitted to, any third party or
any Governmental Entity in connection with the transactions contemplated by
this Agreement. In exercising the foregoing right, each of the parties
hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party
will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) Buyer and the Company shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries,
directors, officers and stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Proxy Statement,
the S-4 or any other statement, filing, notice or application made by or on
behalf of Buyer, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement.
(d) Buyer and the Company shall promptly furnish each other
with copies of written communications received by Buyer or the Company, as
the case may be, or any of their respective Subsidiaries, Affiliates or
Associates (as such terms are defined in Rule 12b-2 under the Exchange Act
as in effect on the date of this Agreement) from, or delivered by any of
the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
7.2. Access to Information. (a) Upon reasonable notice and
subject to applicable laws relating to the exchange of information, the
Company shall, and shall cause each of its Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of
Buyer, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments,
records, officers, employees, accountants, counsel and other
representatives and, during such period, the Company shall, and shall cause
its Subsidiaries to, make available to Buyer (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of Federal securities laws
or Federal or state banking laws (other than reports or documents which the
Company is not permitted to disclose under applicable law) and (ii) all
other information concerning its business, properties and personnel as
Buyer may reasonably request. Neither the Company nor any of its
Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of the Company's customers, jeopardize any attorney-client privilege
or contravene any law, rule, regulation, order, judgment, decree, fiduciary
duty or binding agreement entered into prior to the date of this Agreement.
The parties hereto will make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence
apply.
(b) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, Buyer shall, and shall cause its
Subsidiaries to, afford to the officers, employees, accountants, counsel
and other representatives of the Company, access, during normal business
hours during the period prior to the Effective Time, to such information
regarding Buyer and its Subsidiaries as shall be reasonably necessary for
the Company to fulfill its obligations pursuant to this Agreement to assist
in the preparation of the Proxy Statement or which may be reasonably
necessary for the Company to confirm that the representations and
warranties of Buyer contained herein are true and correct and that the
covenants of Buyer contained herein have been performed in all material
respects. Neither Buyer nor any of its Subsidiaries shall be required to
provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of Buyer's customers,
jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will
make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(c) All information furnished by either party to the other
party or its representatives pursuant hereto shall be treated as the sole
property of the delivery party and, if the Merger shall not occur, the
receiving party and its representatives shall return to the delivering
party all of such written information and all documents, notes, summaries
or other materials containing, reflecting or referring to, or derived from,
such information. The receiving party shall, and shall use its best
efforts to cause its representatives to, keep confidential all such
information, and shall not directly or indirectly use such information for
any competitive or other commercial purpose. The obligation to keep such
information confidential shall continue for ten years from the date the
proposed Merger is abandoned and shall not apply to (i) any information
which (x) was already in the receiving party's possession prior to the
disclosure thereof by the delivering party; (y) was then generally known to
the public; or (z) was disclosed to the receiving party by a third party
not bound by an obligation of confidentiality or (ii) disclosures made as
required by law. It is further agreed that, if in the absence of a
protective order or the receipt of a waiver hereunder the receiving party
is nonetheless, in the opinion of its counsel, compelled to disclose
information concerning delivering party to any tribunal or governmental
body or agency or else stand liable for contempt or suffer other censure or
penalty, the receiving party may disclose such information to such tribunal
or governmental body or agency without liability hereunder.
(d) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
7.3. Stockholder Meetings. The Company shall take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders to be held as soon as is reasonably practicable after the date
on which the S-4 becomes effective for the purpose of voting upon the
approval of this Agreement and the consummation of the transactions
contemplated hereby. The Company will, through its Board of Directors,
recommend to its stockholders approval of this Agreement and the
transactions contemplated hereby and such other matters as may be submitted
to its stockholders in connection with this Agreement; provided, however,
that nothing shall prohibit the Board of Directors of the Company from
withdrawing or modifying in a manner adverse to Buyer such recommendation
to the Company's stockholders if (a) the Company is not in breach of, and
has not breached, any of the provisions of Section 6.1(d), (b) the Company
receives an unsolicited, bona fide written takeover proposal which
constitutes a Superior Proposal (each as defined in Section 6.1(d)), and
(c) the Board of Directors of the Company determines in good faith that it
is required to take such action, but only after consultation with outside
counsel and only if such outside counsel concludes and advises the Board
that the failure to take such action would result in a violation of its
fiduciary duties under applicable law.
7.4. Legal Conditions to Merger. Each of Buyer and the Company
shall, and shall cause its Subsidiaries to, use their reasonable best
efforts (a) to take, or cause to be taken, all actions necessary, proper or
advisable to comply promptly with all legal requirements which may be
imposed on such party or its Subsidiaries with respect to the Merger and,
subject to the conditions set forth in Article VIII hereof, to consummate
the transactions contemplated by this Agreement and (b) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order
or approval of, or any exemption by, any Governmental Entity and any other
third party which is required to be obtained by the Company or Buyer or any
of their respective Subsidiaries in connection with the Merger and the
other transactions contemplated by this Agreement, and to comply with the
terms and conditions of such consent, authorization, order or approval.
7.5. Affiliates. The Company shall use its reasonable best
efforts to cause each director, executive officer and other person who is
an "affiliate" (for purposes of Rule 145 under the Securities Act) of the
Company to deliver to Buyer, as soon as practicable after the date of this
Agreement, a written agreement, in the form of Exhibit 7.5 hereto.
7.6. Stock Exchange Listing. Buyer shall use all reasonable
efforts to cause the shares of Buyer Common Stock to be issued in the
Merger to be approved for listing on the NYSE, subject to official notice
of issuance, as of the Effective Time.
7.7. Employee Benefit Plans; Existing Agreements. (a) As soon
as practicable following the Effective Time, the employees of the Company
and its Subsidiaries (the "Company Employees") shall be eligible to
participate in Buyer's employee benefit plans in which similarly situated
employees of Buyer or Buyer Bank participate, to the same extent as
similarly-situated employees of Buyer or Buyer Bank (it being understood
that inclusion of Company Employees in Buyer's employee benefit plans may
occur at different times with respect to different plans) provided,
however, that Buyer shall continue the comparable plans of Company and its
Subsidiaries for the exclusive benefit of Company Employees until such time
Company Employees become eligible to participate in the plans of Buyer or
Buyer Bank. Company's ESOP shall terminate as of the Effective Time and
prior to such time Company shall make contributions to the ESOP sufficient
to enable the trustee of the plan to repay in full all outstanding
acquisition loans of the plan. If Company cannot make contributions
sufficient to enable the trustee to repay such loans in full by reasons of
the operation of Section 415(c) of the Code then, in accordance with the
terms of the ESOP, the trustee shall sell a number of shares sufficient to
repay the remaining portion of the loan. All shares of stock and cash held
by the plan as of the Effective Time shall be allocated to participants of
the ESOP in accordance with its terms.
(b) With respect to each Buyer Plan that is an "employee benefit
plan," as defined in Section 3(3)of ERISA, for purposes of determining
eligibility to participate, vesting, and entitlement to benefits, including
for severance benefits and vacation entitlement (but not for accrual of
pension benefits), service with the Company and its Subsidiaries shall be
treated as service with Buyer; provided however, that such service shall
not be recognized to the extent that such recognition would result in a
duplication of benefits. Such service also shall apply for purposes of
satisfying any waiting periods, evidence of insurability requirements, or
the application of any preexisting condition limitations. Company
Employees shall be given credit for amounts paid under a corresponding
benefit plan during the same period for purposes of applying deductibles,
copayments and out-of-pocket maximums as though such amounts had been paid
in accordance with the terms and conditions of the Buyer Plan.
(c) Buyer shall honor and shall cause the appropriate
Subsidiaries of Buyer to honor and Company shall pay at the Closing Date,
in accordance with their terms all employment, severance and other
compensation agreements and arrangements existing prior to the execution of
this Agreement which are between the Company or any of its Subsidiaries and
any director, officer or employee thereof and which have been disclosed in
the Company Disclosure Schedule and previously have been delivered to
Buyer. All payments under employment and change in control agreements,
identified in Section 4.15(a) of the Company Disclosure Schedule between
the Company or its Subsidiaries and individual officers and employees of
the Company or its Subsidiaries shall be paid by the Company at the Closing
Date regardless of whether or not such individual continues in employment
with Buyer or its Subsidiaries. The Company Disclosure Schedule sets forth
the reasonable, good faith estimates of amounts payable under employment
and severance agreements between the Company or its Subsidiaries and
certain individuals and the amounts shown and methodology used in preparing
such estimates shall be followed in determining the actual amounts payable
under such agreements.
(d) Employees of the Company and its Subsidiaries shall be
entitled to receive payment for accrued but unused vacation days and any
accrued but unused vacation days of employees of the Company or its
Subsidiaries as of the Closing Date shall, at the employee's option, either
be paid immediately prior to the Closing Date or taken as vacation as soon
as practicable following the Closing Date; provided, however, that the
Company shall deliver to Buyer, not later than fifteen (15) business days
after the date of this Agreement, a schedule of employees indicating their
accrued but unused vacation days as of the most recent date practicable.
(e) The Company or its Subsidiaries shall pay bonuses in
accordance with its past practices through December 31, 1999, and the
compensation with respect to which bonuses are paid for any individual
shall be for the period of time that has elapsed since the payment of the
last bonus. At the Closing Date each Company Employee shall be entitled to
receive a bonus equal to the bonus received by such Company Employee for
the period ended as of December 31, 1999, multiplied by a fraction, the
numerator of which shall be the number of days from December 31 through the
date on which the Closing Date occurs and the denominator of which is 366
(in the case of employees who were paid annual bonuses as of December 31)
and 180 days (in the case of employees who received semi annual bonuses as
of both June 30 and December 31), as the case may be.
7.8. Indemnification. (a) In the event of any threatened or
actual claim, action, suit, proceeding or investigation, whether civil,
criminal or administrative, including, without limitation, any such claim,
action, suit, proceeding or investigation in which any person who is now,
or has been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, a director or officer of the Company or any of
its Subsidiaries (the "Indemnified Parties") is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director or
officer of the Company, any of the Subsidiaries of the Company or any of
their respective predecessors or (ii) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate
and use their best efforts to defend against and respond thereto. It is
understood and agreed that after the Effective Time, Buyer shall indemnify
and hold harmless, as and to the extent permitted by law, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses in advance of
the final disposition of any claim, suit, proceeding or investigation to
each Indemnified Party to the fullest extent permitted by law upon receipt
of any undertaking required by applicable law), judgments, fines and
amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any
such threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time), the
Indemnified Parties may retain counsel reasonably satisfactory to them
after consultation with Buyer; provided, however, that (1) Buyer shall have
the right to assume the defense thereof with counsel reasonably acceptable
to the Indemnified party and upon such assumption Buyer shall not be liable
to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by any Indemnified Party in connection
with the defense thereof, except that if Buyer elects not to assume such
defense or counsel for the Indemnified Parties reasonably advises that
there are issues which raise conflicts of interest between Buyer and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with Buyer, and Buyer shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties,
(2) Buyer shall in all cases be obligated pursuant to this paragraph to pay
for only one firm of counsel with respect to any claim, action or suit for
all Indemnified Parties, (3) Buyer shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (4) Buyer shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 7.8, upon learning of
any such claim, action, suit, proceeding or investigation, shall notify
promptly Buyer thereof, provided that the failure to so notify shall not
affect the obligations of Buyer under this Section 7.8 except to the extent
such failure to notify prejudices Buyer. Buyer's obligations under this
Section 7.8 shall continue in full force and effect for a period of six (6)
years from the Effective Time; provided, however, that all rights to
indemnification in respect of any claim (a "Claim") asserted or made within
such period shall continue until the final disposition of such Claim.
(b) Buyer shall cause the persons serving as officers and
directors of the Company immediately prior to the Effective Time to be
covered for a period of six (6) years from the Effective Time by the
directors' and officers' liability insurance policy maintained by the
Company (provided that Buyer may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are not
less advantageous than such policy) with respect to acts or omissions
occurring prior to the Effective Time which were committed by such officers
and directors in their capacity as such; provided, however, that in no
event shall Buyer be required to expend on an annual basis more than 175%
of the current amount expended by the Company (the "Insurance Amount") to
maintain or procure insurance coverage, and further provided that if Buyer
is unable to maintain or obtain the insurance called for by this Section
7.8(b) Buyer shall use all reasonable efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
(c) In the event Buyer or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Buyer assume the obligations set forth in this section.
(d) The provisions of this Section 7.8 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party and
his or her heirs and representatives.
7.9. Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by
Buyer.
7.10. Advice of Changes. Buyer and the Company shall promptly
advise the other party of any change or event having a Material Adverse
Effect on it or which it believes would or would be reasonably likely to
cause or constitute a material breach of any of its representations,
warranties or covenants contained herein. From time to time prior to the
Effective Time (and on the date prior to the Closing Date), each party will
supplement or amend its Disclosure Schedules delivered in connection with
the execution of this Agreement to reflect any matter which, if existing,
occurring or known at the date of this Agreement, would have been required
to be set forth or described in such Disclosure Schedules or which is
necessary to correct any information in such Disclosure Schedules which has
been rendered inaccurate thereby. No supplement or amendment to such
Disclosure Schedules shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Sections 8.2(a) or 8.3(a)
hereof, as the case may be, or the compliance by the Company or Buyer, as
the case may be, with the respective covenants and agreements of such
parties contained herein.
7.11. Current Information. (a) During the period from the
date of this Agreement to the Effective Time, the Company will cause one or
more of its designated representatives to confer on a regular and frequent
basis (not less than monthly) with representatives of Buyer and to report
the general status of the ongoing operations of the Company and its
Subsidiaries. The Company will promptly notify Buyer of any material
change in the normal course of business or in the operation of the
properties of the Company or any of its Subsidiaries and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the
threat of significant litigation involving the Company or any of its
Subsidiaries, and will keep Buyer fully informed of such events.
(b) During the period from the date of this Agreement to
the Effective Time, Buyer shall inform the Company of any proposed
acquisition or merger transaction involving Buyer.
7.12. Execution and Authorization of Bank Merger Agreement. As
soon as reasonably practicable following a request made by Buyer, (a) Buyer
shall (i) cause the Board of Directors of Buyer Bank to approve an
Agreement and Plan of Merger providing for the merger of Company Bank into
Buyer Bank (the "Bank Merger Agreement"), (ii) cause Buyer Bank to execute
and deliver the Bank Merger Agreement, and (iii) approve the Bank Merger
Agreement as the sole stockholder of Buyer Bank, and (b) the Company shall
(i) cause the Board of Directors of the Company Bank to approve the Bank
Merger Agreement, (ii) cause the Company Bank to execute and deliver the
Bank Merger Agreement, and (iii) approve the Bank Merger Agreement as the
sole stockholder of the Company Bank. The Bank Merger Agreement shall
contain terms that are normal and customary in light of the transactions
contemplated hereby and such additional terms as are necessary to carry out
the purposes of this Agreement.
7.13. Coordination of Dividends. From the date of this
Agreement to the Effective Time, each of Buyer and the Company shall
coordinate with the other the declaration, record and payment dates with
respect to dividends in respect of the Buyer Common Stock and the Company
Common Stock and the record dates and payments dates relating thereto, it
being the intention of the parties that the holders of Buyer Common Stock
or Company Common Stock shall not receive more than one dividend, or fail
to receive one dividend, for any single calendar quarter with respect to
their shares of Buyer Common Stock and/or Company Common Stock and any
shares of Buyer Common Stock any holder of Company Common Stock receives in
exchange therefor in the Merger.
7.14. Directorship. Effective as of the Effective Time, Buyer
shall cause its Board of Directors to be expanded by one member and shall
appoint Raymond A. Nielsen to fill the vacancy on Buyer's Board of
Directors created by such increase as of the Effective Time and shall cause
Mr. Nielsen to be nominated for election to the Board of Directors for a
period not less than three (3) years.
7.15. Accountants' Letter. The Company shall use its reasonable
efforts to cause to be delivered to Buyer a letter of its independent
public accountants dated (i) the date on which the S-4 shall become
effective and (ii) a date shortly prior to the Effective Time, and
addressed to Buyer, in form and substance customary for "comfort" letters
delivered by independent accountants in accordance with Statement of
Financial Accounting Standards No. 72.
7.16. Certain Revaluations, Changes and Adjustments. At or
before the Effective Time, upon the request of Buyer, the Company shall,
consistent with GAAP, modify and change its loan, litigation and real
estate valuation policies and practices (including loan classifications and
levels of reserves) so as to be applied consistently on a mutually
satisfactory basis with those of Buyer and establish such accruals and
reserves as shall be necessary to reflect Merger-related expenses and costs
incurred by the Company, provided, however, that the Company shall not be
required to take such action unless Parent acknowledges in writing that all
conditions to closing set forth in Article VIII have been satisfied or
waived (other than those conditions relating to delivery of documents on
the Closing Date); provided further, however, that no accrual or reserve
made by the Company or any Company Subsidiary pursuant to this Section 7.16
shall constitute or be deemed to be a breach, violation of or failure to
satisfy any representation, warranty, covenant, condition or other
provision of this Agreement or otherwise be considered in determining
whether any such breach, violation or failure to satisfy shall have
occurred.
7.17. Year 2000. Each of Buyer and the Company shall use its
commercially reasonable efforts to implement its respective Y2K Plan. At
the request of the other party, each of Buyer and the Company shall
periodically update the other party regarding its process with respect to
its Y2K Plan.
7.18. It is understood by the parties that the Merger shall be
accounted for under the Purchase Method of accounting. Accordingly, the
parties agree to use all reasonable efforts to cause the Effective Time to
occur prior to the consummation of the Merger of Buyer with JSB Financial,
Inc. pursuant to the Agreement and Plan of Merger between such parties
dated as of August 16, 1999.
7.19. Advisory Board. Buyer shall, as of the Effective Time,
invite Gerald M. Sauvigne and all of the members of the Company's Board of
Directors as of the date of this Agreement, other than Mr. Nielsen, who are
willing to serve to be appointed as members of Buyer's advisory board (the
"Advisory Board"). The members of the Advisory Board who are willing to so
serve shall be elected to a term of three (3) years beginning on the
Closing Date and shall receive an annual retainer fee in the amount set
forth in Section 7.19 of the Buyer Disclosure Schedule.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the holders of the
outstanding shares of Company Common Stock under applicable law.
(b) NYSE Listing. The shares of Buyer Common Stock which
shall be issued to the stockholders of the Company upon consummation of the
Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
(c) Other Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby (including the Merger)
shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired (all such
approvals and the expiration of all such waiting periods being referred to
herein as the "Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the S-4
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect. No statute,
rule, regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger.
8.2. Conditions to Obligations of Buyer. The obligation of
Buyer to effect the Merger is also subject to the satisfaction or waiver by
Buyer at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section
3.2, the representations and warranties of the Company set forth in this
Agreement (other than those set forth in Sections 4.2, 4.3(a), 4.3(b)(i),
4.6, 4.7, 4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and
4.27) shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date; and (ii) the representations and warranties of the Company
set forth in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6, 4.7, 4.8(a)(ii), 4.8(b),
4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27 of this Agreement shall
be true and correct in all material respects (without giving effect to
Section 3.2 of this Agreement) as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date.
Buyer shall have received a certificate signed on behalf of the Company by
the Chief Executive Officer and the Chief Financial Officer of the Company
to the foregoing effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date,
and Buyer shall have received a certificate signed on behalf of the Company
by the Chief Executive Officer and the Chief Financial Officer of the
Company to such effect.
(c) Consents Under Agreements. The consent, approval or
waiver of each person (other than the Governmental Entities referred to in
Section 8.1(c)) whose consent or approval shall be required in order to
permit the succession by the Surviving Corporation pursuant to the Merger
to any obligation, right or interest of the Company or any Subsidiary of
the Company under any loan or credit agreement, note, mortgage, indenture,
lease, license or other agreement or instrument shall have been obtained,
except where the failure to obtain such consent, approval or waiver would
not have a Material Adverse Effect on the Company.
(d) No Pending Governmental Actions. No proceeding
initiated by any Governmental Entity seeking an Injunction shall be
pending.
(e) Federal Income Tax Opinion. Buyer shall have received
an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Buyer
("Buyer's Counsel"), dated the Effective Date, in form and substance
reasonably satisfactory to Buyer, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective
Time, the Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, Buyer's Counsel may
require and rely upon representations and covenants, including those
contained in certificates of officers of Buyer, the Company and others
reasonably satisfactory in form and substance to such counsel.
8.3. Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger is also subject to the satisfaction or
waiver by the Company at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. (i) Subject to
Section 3.2, the representations and warranties of Buyer (other than those
set forth in Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii),
5.11(a), 5.12 and 5.15) set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; and (ii) the
representations and warranties of Buyer set forth in Sections 5.2, 5.3(a),
5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a), 5.12 and 5.15 of this
Agreement shall be true and correct in all material respects (without
giving effect to Section 3.2 of this Agreement) as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and
as of the Closing Date. The Company shall have received a certificate
signed on behalf of Buyer by the Chief Executive Officer and the Chief
Financial Officer of Buyer to the foregoing effect.
(b) Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of Buyer by the Chief
Executive Officer and the Chief Financial Officer of Buyer to such effect.
(c) Consents Under Agreements. The consent, approval or
waiver of each person (other than the Governmental Entities referred to in
Section 8.1(c)) whose consent or approval shall be required in connection
with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument to which Buyer or any of its Subsidiaries is a party or is
otherwise bound shall have been obtained, except where failure to obtain
such consents and approvals would not, individually or in the aggregate,
have a Material Adverse Effect on Buyer and its Subsidiaries taken as a
whole (after giving effect to the transactions contemplated hereby).
(d) No Pending Governmental Actions. No proceeding
initiated by any Governmental Entity seeking an Injunction shall be
pending.
(e) Federal Income Tax Opinion. The Company shall have
received an opinion of Muldoon, Murphy & Faucette LLP (the "Company's
Counsel"), in form and substance reasonably satisfactory to the Company,
dated the Effective Date, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the
Merger will be treated as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, the Company's Counsel may
require and rely upon representations and covenants, including those
contained in certificates of officers of Buyer, the Company and others,
reasonably satisfactory in form and substance to such counsel.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual consent of the Company and Buyer in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Buyer or the Company upon written notice to
the other party (i) 60 days after the date on which any request or
application for a Requisite Regulatory Approval shall have been denied or
withdrawn at the request or recommendation of the Governmental Entity which
must grant such Requisite Regulatory Approval, unless within the 60-day
period following such denial or withdrawal a petition for rehearing or an
amended application has been filed with the applicable Governmental Entity,
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 9.1(b)(i) if such denial or request or
recommendation for withdrawal shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein or (ii) if any Governmental
Entity of competent jurisdiction shall have issued a final nonappealable
order enjoining or otherwise prohibiting the Merger;
(c) by either Buyer or the Company if the Merger shall not
have been consummated on or before June 30, 2000, unless the failure of the
Closing to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(d) by either Buyer or the Company (provided that the
terminating party shall not be in material breach of any of its obligations
under Section 7.3) if any approval of the stockholders of the Company
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of
such stockholders or at any adjournment or postponement thereof;
(e) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the representations or warranties set
forth in this Agreement on the part of the other party, which breach is not
cured within thirty days following written notice to the party committing
such breach, or which breach, by its nature, cannot be cured prior to the
Closing; provided, however, that neither party shall have the right to
terminate this Agreement pursuant to this Section 9.1(e) unless the breach
of representation or warranty, together with all other such breaches, would
entitle the party receiving such representation not to consummate the
transactions contemplated hereby under Section 8.2(a) (in the case of a
breach of representation or warranty by the Company) or Section 8.3(a) (in
the case of a breach of representation or warranty by Buyer);
(f) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of the other party, which breach shall not have
been cured within thirty days following receipt by the breaching party of
written notice of such breach from the other party hereto, or which breach,
by its nature, cannot be cured prior to the Closing;
(g) by Buyer, if the Board of Directors of the Company does
not publicly recommend in the Proxy Statement that the Company's
stockholders approve and adopt this Agreement or if, after recommending in
the Proxy Statement that stockholders approve and adopt this Agreement, the
Board of Directors of the Company shall have withdrawn, modified or amended
such recommendation in any manner adverse to Buyer; or
(h) by the Company at any time during the five business-day
period commencing on the first business day after the Determination Date
(as defined below), if both of the following conditions are satisfied:
(1) the Average Closing Price (as defined below) shall be less
than $16.20 and
(2) (i) the number obtained by dividing the Average Closing
Price by the Starting Price (such number being referred to herein as
the "Buyer Ratio") shall be less than (ii) the number obtained by
dividing the Index Price on the Determination Date by the Index Price
on the Starting Date and subtracting 0.15 from such quotient (such
number being referred to herein as the "Index Ratio"),
subject to the following provisions. If the Company elects to exercise its
termination right pursuant to the immediately preceding sentence, it shall
give prompt written notice to Buyer; provided that such notice of election
to terminate may be withdrawn at any time within the aforementioned five
business-day period. During the five business-day period commencing with
its receipt of such notice, Buyer shall have the option of adjusting the
Exchange Ratio to equal the lesser of (i) a number equal to a quotient
(rounded to the nearest one-ten-thousandth), the numerator of which is the
product of 0.85, the Starting Price and the Exchange Ratio (as then in
effect) and the denominator of which is the Average Closing Price, and (ii)
a number equal to a quotient (rounded to the nearest one-ten-thousandth),
the numerator of which is the Index Ratio multiplied by the Exchange Ratio
(as then in effect) and the denominator of which is the Buyer Ratio. If
Buyer makes the election contemplated by the preceding sentence, within
such five business-day period, it shall give prompt written notice to the
Company of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 9.1(h) and this
Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 9.1(h). For purposes
of this Section 9.1(h), the following terms shall have the meanings
indicated:
"Average Closing Price" means the average of the last reported
sale prices per share of Buyer Common Stock as reported on NYSE (as
reported in The Wall Street Journal or, if not reported therein, in another
mutually agreed upon authoritative source) for the 20 consecutive trading
days on the NYSE ending at the close of trading on the Determination Date.
"Determination Date" means the business day prior to the date on
which the last of the Requisite Regulatory Approvals shall have been
received, without regard to any requisite waiting periods in respect
thereof.
"Index Group" means the group of each of the twenty-one (21) bank
holding companies listed below, the common stock of each of which shall be
publicly traded and as to which there shall not have been, since the
Starting Date and before the Determination Date, an announcement of a
proposal for such company to be acquired or for such company to acquire
another company or companies in transactions with a value exceeding 25% of
the acquiror's market capitalization as of the Starting Date. In the event
that, on or prior to the date immediately preceding the Determination Date,
the common stock of any such company ceases to be publicly traded or any
such announcement is made with respect to any such company, such company
will be removed from the Index Group, and the weights (which have been
determined based on the number of outstanding shares of common stock)
redistributed proportionately for purposes of determining the Index Price.
The twenty-one (21) bank holding companies and the weights attributed to
them are as follows:
Company Symbol Weighting
Astoria Financial Corporation ASFC 5.67%
CCB Financial Corporation CCB 5.71%
Charter One Financial, Inc. COFI 12.05%
Chittenden Corporation CHZ 2.25%
Commerce Bancorp, Inc./NJ CBH 3.53%
Dime Bancorp, Inc. DME 6.52%
First Commonwealth Financial Corporation FCF 2.01%
FirstMerit Corporation FMER 7.00%
Fulton Financial Corporation FULT 4.04%
GreenPoint Financial Corp. GPT 9.27%
Independence Community Bank Corp. ICBC 2.62%
Keystone Financial, Inc. KSTN 3.86%
M & T Bank Corporation MTB 10.89%
Peoples Heritage Financial Group, Inc. PHBK 5.33%
Queens County Bancorp, Inc. QCSB 1.70%
Richmond County Financial Corp. RCBK 1.88%
Roslyn Bancorp, Inc. RSLN 3.91%
Staten Island Bancorp, Inc. SIB 2.14%
Susquehanna Bancshares, Inc. SUSQ 1.81%
Valley National Bancorp VLY 4.77%
Webster Financial Corporation WBST 3.03%
-------
99.99%
"Index Price" on a given date means the weighted average
(weighted in accordance with the factors listed above) of the closing
prices of the companies comprising the Index Group.
"Starting Date" means August 27, 1999.
"Starting Price" shall mean the last reported sale price per
share of Buyer Common Stock on the Starting Date, as reported by NYSE (as
reported in The Wall Street Journal or, if not reported therein, in another
mutually agreed upon authoritative source).
If Buyer of any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting
Date and the Determination Date, the prices for the common stock of such
company or Buyer shall be appropriately adjusted for the purposes of
applying this Section 9.1(h).
9.2. Effect of Termination; Expenses. In the event of
termination of this Agreement by either Buyer or the Company as provided in
Section 9.1, this Agreement shall forthwith become void and have no effect
except that (i) Sections 7.2(c), 9.2 and 10.4 shall survive any termination
of this Agreement, and (ii) notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from
any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
9.3. Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Merger by
the stockholders of the Company; provided, however, that after any approval
of the transactions contemplated by this Agreement by the Company's
stockholders, there may not be, without further approval of such
stockholders, any amendment of this Agreement which reduces the amount or
changes the form of the consideration to be delivered to the Company
stockholders hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective
Time, each of the parties hereto, by action taken or authorized by its
Board of Directors, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other
party hereto, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by the other party with any of its
agreements contained herein, or waive compliance with any of the conditions
to its obligations hereunder. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1. Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") will take place at
10:00 a.m. on the first day which is (a) the last business day of a month
and (b) at least two business days after the satisfaction or waiver
(subject to applicable law) of the latest to occur of the conditions set
forth in Article VIII hereof (other than those conditions which relate to
actions to be taken at the Closing)(the "Closing Date"), at the offices of
Buyer's Counsel unless another time, date or place is agreed to in writing
by the parties hereto.
10.2. Alternative Structure. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, Buyer
shall be entitled to revise the structure of the Merger and the related
transactions contemplated hereby (including, without limitation, (x)
substituting a subsidiary of Buyer as a Constituent Corporation in the
Merger, (y) providing that a different entity shall be the Surviving
Corporation in the Merger, and (z) providing for the merger of Company Bank
into Buyer Bank in accordance with a Bank Merger Agreement), provided that
each of the transactions comprising such revised structure shall (i) fully
qualify as, or fully be treated as part of, one or more tax-free
reorganizations within the meaning of Section 368(a) of the Code, (ii) not
change the amount of consideration to be received by the stockholders of
the Company, and (iii) be capable of consummation in as timely a manner as
the structure contemplated herein. This Agreement and any related
documents shall be appropriately amended in order to reflect any such
revised structure.
10.3. Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement (other
than pursuant to the Option Agreement which shall terminate in accordance
with its terms) shall survive the Effective Time, except for those
covenants and agreements contained herein and therein which by their terms
apply in whole or in part after the Effective Time.
10.4. Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid
by the party incurring such expense, provided, however, that the costs and
expenses of printing and mailing the Proxy Statement to the stockholders of
the Company and Buyer, and all filing and other fees paid to the SEC or any
other Governmental Entity in connection with the Merger and the other
transactions contemplated hereby, shall be borne equally by Buyer and the
Company, provided further, however, that nothing contained herein shall
limit either party's rights to recover any liabilities or damages arising
out of the other party's willful breach of any provision of this Agreement.
10.5. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail
(return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Buyer, to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Facsimile: (516) 844-1471
Attention: Mr. John Adam Kanas
Chairman, President and
Chief Executive Officer
with a copy to:
William S. Rubenstein, Esq.
Skadden, Arps Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2000
and
(b) if to the Company, to:
Reliance Bancorp, Inc.
585 Stewart Avenue
Garden City, New York 11530
Facsimile: (516) 222-1805
Attention: Mr. Raymond A. Nielsen
President and Chief
Executive Officer
with a copy to:
Lawrence M.F. Spaccasi
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile: (202) 966-9409
10.6. Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". The phrases "the date of
this Agreement", "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to August 30, 1999.
10.7. Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
10.8. Entire Agreement. This Agreement (including the documents
and the instruments referred to herein), together with the Option
Agreement, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
10.9. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York, without
regard to any applicable conflicts of law.
10.10. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained
in and Section 7.2(c) of this Agreement were not performed in accordance
with its specific terms or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions
to prevent breaches of Section 7.2(c) of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United
States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
10.11. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as
is enforceable.
10.12. Publicity. Except as otherwise required by law or by the
rules of the NYSE or The NASDAQ Stock Market, so long as this Agreement is
in effect, neither Buyer nor the Company shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be
unreasonably withheld.
10.13. Assignment; No Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective
successors and assigns. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
IN WITNESS WHEREOF, Buyer and the Company have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
NORTH FORK BANCORPORATION, INC.
By: /s/ John Adam Kanas
--------------------------
John Adam Kanas
Chairman of the Board,
President and Chief Executive Officer
RELIANCE BANCORP, INC.
By: /s/ Raymond A. Nielsen
----------------------------
Raymond A. Nielsen
President and Chief Executive
Officer
AGREEMENT AND PLAN OF MERGER
dated as of August 16, 1999
by and between
NORTH FORK BANCORPORATION, INC.
and
JSB FINANCIAL, INC.
TABLE OF CONTENTS
INTRODUCTORY STATEMENT
PAGE
ARTICLE I
THE MERGER
Section 1.1. Structure of the Merger.......................................2
Section 1.2. Effect on Outstanding Shares of JSB Common Stock..............2
Section 1.3. Exchange Procedures...........................................3
Section 1.4. Stock Options.................................................4
Section 1.5. Bank Merger...................................................5
Section 1.6. Directors of NFB after Effective Time.........................5
Section 1.7. Alternative Structure.........................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Disclosure Letters............................................6
Section 2.2. Standards.....................................................6
Section 2.3. Representations and Warranties of JSB.........................7
Section 2.4. Representations and Warranties of NFB........................18
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.1. Conduct of JSB's Business Prior to the Effective Time........28
Section 3.2. Forbearance by JSB...........................................28
Section 3.3. Conduct of NFB's Business Prior to the Effective Time........30
Section 3.4. Forbearance by NFB...........................................30
ARTICLE IV
COVENANTS
Section 4.1. Acquisition Proposals........................................31
Section 4.2. Certain Policies of JSB......................................32
Section 4.3. Access and Information.......................................33
Section 4.4. Certain Filings, Consents and Arrangements...................34
Section 4.5. Antitakeover Provisions......................................34
Section 4.6. Additional Agreements........................................34
Section 4.7. Publicity....................................................34
Section 4.8. Stockholders Meetings........................................34
Section 4.9. Proxy Statements; Comfort Letters............................35
Section 4.10. Registration of NFB Common Stock.............................35
Section 4.11. Affiliate Letters............................................36
Section 4.12. Notification of Certain Matters..............................36
Section 4.13. Directors and Officers.......................................36
Section 4.14. Indemnification; Directors' and Officers' Insurance..........37
Section 4.15. Employees; Benefit Plans and Programs........................38
Section 4.16. Advisory Board...............................................41
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.1. Conditions to Each Party's Obligations.......................41
Section 5.2. Conditions to the Obligations of NFB and NFB Bank............42
Section 5.3. Conditions to the Obligations of JSB and JSB Bank............43
ARTICLE VI
TERMINATION
Section 6.1. Termination..................................................44
Section 6.2. Effect of Termination........................................47
Section 6.3 Termination Fee..............................................47
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time............................49
Section 7.2. Deliveries at the Closing....................................49
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation..........................49
Section 8.2. Survival.....................................................49
Section 8.3. Waiver; Amendment............................................50
Section 8.4. Counterparts.................................................50
Section 8.5. Governing Law................................................50
Section 8.6. Expenses.....................................................50
Section 8.7. Notices......................................................50
Section 8.8. Entire Agreement; etc........................................51
Section 8.9. Assignment...................................................51
EXHIBITS AND SCHEDULES
Exhibit A Plan of Bank Merger
Exhibit B Form of Affiliate Letter for JSB Affiliates
Exhibit C Form of Affiliate Letter for NFB Affiliates
Schedule 4.13(d)
Schedule 4.15(e)
INDEX OF DEFINED TERMS
Acquisition Proposal........................................................32
Acquisition Transaction.....................................................31
Advisory Board .............................................................41
Agreement ..............................................................1
Bank Merger ..............................................................1
Bank Regulator .............................................................10
BHCA .............................................................19
BIF ..............................................................7
Closing .............................................................49
Closing Date .............................................................49
Code ..............................................................1
Converted Options............................................................5
Costs .............................................................37
Covered Person .............................................................17
Date Data .............................................................18
Date-Sensitive System.......................................................18
Derivatives Contract........................................................17
Disclosure Letter............................................................6
Effective Date .............................................................49
Effective Time .............................................................49
Environmental Law...........................................................14
ERISA .............................................................12
Exchange Act .............................................................16
Exchange Agent ..............................................................3
Exchange Ratio ..............................................................2
Excluded Shares..............................................................2
FDIA ..............................................................7
FDIC ..............................................................7
FHLB .............................................................17
Final Index Price...........................................................45
Final Price .............................................................45
FRB ..............................................................9
GAAP ..............................................................9
GATT .............................................................40
Governmental Entity.........................................................10
Hazardous Material..........................................................15
HOLA ..............................................................7
Indemnified Party...........................................................37
Index Group .............................................................45
Index Ratio .............................................................45
Initial Index Price.........................................................47
Initial NFB Market Value....................................................47
Initial Termination Date....................................................44
IRS .............................................................12
Joint Proxy Statement-Prospectus............................................18
JSB ..............................................................1
JSB Bank ..............................................................1
JSB Bank BRP .............................................................40
JSB Bank ESOP .............................................................41
JSB Bank Outside Directors' Plan............................................36
JSB Certificate..............................................................3
JSB Common Stock.............................................................1
JSB Employee .............................................................38
JSB Employee Plans..........................................................12
JSB ERISA Affiliate.........................................................12
JSB Option ..............................................................4
JSB Option Agreement.........................................................1
JSB Option Plans.............................................................4
JSB Pension Plan............................................................12
JSB Preferred Stock..........................................................7
JSB Qualified Plan..........................................................12
JSB Y2K Plan .............................................................18
JSB's Reports ..............................................................9
Letter of Transmittal........................................................3
Loan .............................................................15
Loan Property .............................................................14
Material Adverse Effect......................................................6
Maximum Agreement...........................................................38
Merger ..............................................................2
Merger Consideration.........................................................2
Named Individual............................................................13
New Compensation and Benefits Program.......................................39
New NFB Director............................................................36
NFB ..............................................................1
NFB Bank ..............................................................1
NFB Common Stock.............................................................2
NFB Employee Plans..........................................................23
NFB ERISA Affiliate.........................................................23
NFB Market Value.............................................................2
NFB Pension Plan............................................................23
NFB Preferred Stock.........................................................19
NFB Qualified Plan..........................................................23
NFB Ratio .............................................................44
NFB Stock Plans.............................................................19
NFB Y2K Plan .............................................................27
NFB's Reports .............................................................21
NYSBD ..............................................................9
NYSE ..............................................................2
OREO .............................................................16
OTS ..............................................................9
Participation Facility......................................................14
PBGC .............................................................12
Permitted Transaction.......................................................47
Registration Statement......................................................18
Requisite Regulatory Approvals...............................................9
SEC ..............................................................9
Securities Act .............................................................18
Skadden .............................................................42
Specified Compensation and Benefit Programs.................................13
SRO ..............................................................9
Stock Adjustment.............................................................2
Stockholder Meeting.........................................................34
Subsidiary ..............................................................7
Superfund .............................................................15
Superlien .............................................................15
Thacher Proffitt............................................................43
Unsolicited Acquisition Proposal............................................32
Valuation Date ..............................................................2
Voting Debt ..............................................................8
Year 2000 Compliance........................................................18
AGREEMENT AND PLAN OF MERGER
This is an AGREEMENT AND PLAN OF MERGER, dated as of the
16th day of August, 1999 ("Agreement"), by and between NORTH FORK
BANCORPORATION, INC., a Delaware corporation ("NFB"), and JSB FINANCIAL,
INC., a Delaware corporation ("JSB").
INTRODUCTORY STATEMENT
The Board of Directors of NFB (i) has determined that this
Agreement and the business combination and related transactions
contemplated hereby are in the best interests of NFB and its stockholders,
(ii) has determined that this Agreement and the transactions contemplated
hereby are consistent with, and in furtherance of, its business strategy
and (iii) has approved this Agreement.
The Board of Directors of JSB (i) has determined that this
Agreement and the business combination and related transactions
contemplated hereby are in the best interests of JSB and in the best
long-term interests of its stockholders, (ii) has determined that this
Agreement and the transactions contemplated hereby are consistent with, and
in furtherance of, its business strategy and (iii) has approved this
Agreement.
Concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to NFB's willingness to enter
into this Agreement, NFB and JSB have entered into a stock option agreement
("JSB Option Agreement"), pursuant to which JSB has granted to NFB an
option to purchase shares of JSB's common stock, par value $.01 per share
("JSB Common Stock"), upon the terms and conditions therein contained.
Following the consummation of the Merger (as defined below),
Jamaica Savings Bank, a wholly owned subsidiary of JSB Financial, Inc.
("JSB Bank"), may be merged with and into North Fork Bank, a wholly owned
subsidiary of North Fork Bancorporation, Inc. ("NFB Bank"), with NFB Bank
being the surviving entity ("Bank Merger").
The parties hereto intend that the Merger and the Bank
Merger, if effected, each shall qualify as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("Code"), for federal income tax purposes, and that the Merger
shall be accounted for as a pooling-of-interests for financial accounting
purposes.
NFB and JSB desire to make certain representations,
warranties and agreements in connection with the business combination and
related transactions provided for herein and to prescribe
various conditions to such transactions.
In consideration of their mutual promises and obligations
hereunder, the parties hereto adopt and make this Agreement and prescribe
the terms and conditions hereof and the manner and basis of carrying it
into effect, which shall be as follows:
ARTICLE I
THE MERGER
Section 1.1. Structure of the Merger. On the Effective Date
(as defined in Section 7.1), JSB will merge with and into NFB ("Merger"),
with NFB being the surviving entity, pursuant to the provisions of, and
with the effect provided in, the Delaware General Corporation Law. Upon
consummation of the Merger, the separate corporate existence of JSB shall
cease. NFB shall continue to be governed by the laws of the State of
Delaware and its name and separate corporate existence, with all of its
rights, privileges, immunities, powers and franchises, shall continue
unaffected by the Merger.
Section 1.2. Effect on Outstanding Shares of JSB Common Stock.
(a) By virtue of the Merger, automatically and without any
action on the part of the holder thereof, each share of JSB Common Stock
issued and outstanding at the Effective Time (as defined in Section 7.1),
other than (i) shares held directly or indirectly by NFB (other than shares
held in a fiduciary capacity or in satisfaction of a debt previously
contracted) and (ii) shares held by JSB as treasury stock (such shares
referred to in clauses (i) and (ii) being referred to herein as the
"Excluded Shares"), shall become and be converted into the right to receive
3.0 shares (the "Exchange Ratio") of NFB's common stock, par value $2.50
per share ("NFB Common Stock"); provided, however, that, notwithstanding
any other provision hereof, no fraction of a share of NFB Common Stock and
no certificates or scrip therefor will be issued in the Merger; instead,
NFB shall pay to each holder of JSB Common Stock who would otherwise be
entitled to a fraction of a share of NFB Common Stock an amount in cash,
rounded to the nearest cent, determined by multiplying such fraction by the
NFB Market Value (as defined below). The shares of NFB Common Stock and any
cash for fractional shares are collectively referred to in this Agreement
as the "Merger Consideration."
(b) As used herein, "NFB Market Value" shall be the average
of the daily closing sales prices of a share of NFB Common Stock (and if
there is no closing sales price on any such day, then the mean between the
closing bid and the closing asked prices on that day), as reported on the
New York Stock Exchange ("NYSE"), for the 15 consecutive trading days
immediately preceding the Valuation Date.
(c) As used herein, "Valuation Date" shall mean the date
that is the latest of (i) the day of expiration of the last waiting period
with respect to any of the Requisite Regulatory Approvals (as defined in
Section 2.3(e)), (ii) the day on which the last of the Requisite Regulatory
Approvals is obtained and (iii) the day on which the last of the required
stockholder approvals have been obtained.
(d) If, between the date of this Agreement and the Effective
Time, the outstanding shares of NFB Common Stock shall have been changed
into a different number of shares or into a different class by reason of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares (each, a "Stock Adjustment"), the
Exchange Ratio shall be adjusted correspondingly to the extent appropriate
to reflect the Stock Adjustment.
(e) As of the Effective Time, each Excluded Share shall be
canceled and retired and shall cease to exist, and no exchange or payment
shall be made with respect thereto. All shares of NFB Common Stock and NFB
Preferred Stock (as defined in Section 2.4(b)) that are held by JSB, if
any, other than shares held in a fiduciary capacity or in satisfaction of a
debt previously contracted, shall become treasury stock of NFB.
Section 1.3. Exchange Procedures.
(a) Appropriate transmittal materials ("Letter of
Transmittal") shall be mailed as soon as reasonably practicable after the
Effective Time, and in no event later than 5 business days thereafter, to
each holder of record of JSB Common Stock as of the Effective Time. A
Letter of Transmittal will be deemed properly completed only if accompanied
by certificates representing all shares of JSB Common Stock to be converted
thereby.
(b) At and after the Effective Time, each certificate ("JSB
Certificate") previously representing shares of JSB Common Stock (except as
specifically set forth in Section 1.2) shall represent
only the right to receive the Merger Consideration.
(c) Prior to the Effective Time, NFB shall deposit, or shall
cause to be deposited, with such bank or trust company that is selected by
NFB and is reasonably acceptable to JSB to act as exchange agent ("Exchange
Agent"), for the benefit of the holders of shares of JSB Common Stock, for
exchange in accordance with this Section 1.3, an estimated amount of cash
sufficient to pay the aggregate amount of cash in lieu of fractional shares
to be paid pursuant to Section 1.2, and NFB shall reserve for issuance with
its transfer agent and registrar a sufficient number of shares of NFB
Common Stock to provide for payment of the Merger Consideration.
(d) The Letter of Transmittal shall (i) specify that
delivery shall be effected, and risk of loss and title to the JSB
Certificates shall pass, only upon delivery of the JSB Certificates to the
Exchange Agent, (ii) be in a form and contain any other provisions as NFB
may reasonably determine and (iii) include instructions for use in
effecting the surrender of the JSB Certificates in exchange for the Merger
Consideration. Upon the proper surrender of the JSB Certificates to the
Exchange Agent, together with a properly completed and duly executed Letter
of Transmittal, the holder of such JSB Certificates shall be entitled to
receive in exchange therefor (m) a certificate representing that number of
whole shares of NFB Common Stock that such holder has the right to receive
pursuant to Section 1.2 and (n) a check in the amount equal to the cash in
lieu of fractional shares, if any, that such holder has the right to
receive pursuant to Section 1.2 and any dividends or other distributions to
which such holder is entitled pursuant to this Section 1.3. JSB
Certificates so surrendered shall forthwith be canceled. As soon as
practicable, but no later than 10 business days following receipt of the
properly completed Letter of Transmittal and any necessary accompanying
documentation, the Exchange Agent shall distribute NFB 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 NFB
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. If there is a transfer of ownership of any shares of JSB Common
Stock not registered in the transfer records of JSB, the Merger
Consideration shall be issued to the transferee thereof if the JSB
Certificates representing such JSB Common Stock are presented to the
Exchange Agent, accompanied by all documents required, in the reasonable
judgment of NFB and the Exchange Agent, (x) to evidence and effect such
transfer and (y) to evidence that any applicable stock transfer taxes have
been paid.
(e) No dividends or other distributions declared or made
after the Effective Time with respect to NFB Common Stock shall be remitted
to any person entitled to receive shares of NFB Common Stock hereunder
until such person surrenders his or her JSB Certificates in accordance with
this Section 1.3. Upon the surrender of such person's JSB Certificates,
such person shall be entitled to receive any dividends or other
distributions, without interest thereon, which theretofore had become
payable with respect to shares of NFB Common Stock represented by such
person's JSB Certificates.
(f) From and after the Effective Time there shall be no
transfers on the stock transfer records of JSB of any shares of JSB Common
Stock. If, after the Effective Time, JSB Certificates are presented to NFB,
they shall be canceled and exchanged for the Merger Consideration
deliverable in respect thereof pursuant to this Agreement in accordance
with the procedures set forth in this Section 1.3.
(g) Any portion of the aggregate amount of cash to be paid
in lieu of fractional shares pursuant to Section 1.2, any dividends or
other distributions to be paid pursuant to this Section 1.3 or any proceeds
from any investments thereof that remain unclaimed by the stockholders of
JSB for six months after the Effective Time shall be repaid by the Exchange
Agent to NFB upon the written request of NFB. After such request is made,
any stockholders of JSB who have not theretofore complied with this Section
1.3 shall look only to NFB for the Merger Consideration deliverable in
respect of each share of JSB Common Stock such stockholder holds, as
determined pursuant to Section 1.2 of this Agreement, without any interest
thereon. If outstanding JSB Certificates are not surrendered prior to the
date on which such payments would otherwise escheat to or become the
property of any governmental unit or agency, the unclaimed items shall, to
the extent permitted by any abandoned property, escheat or other applicable
laws, become the property of NFB (and, to the extent not in its possession,
shall be paid over to it), free and clear of all claims or interest of any
person previously entitled to such claims. Notwithstanding the foregoing,
none of NFB, NFB Bank, the Exchange Agent or any other person shall be
liable to any former holder of JSB Common Stock for any amount delivered to
a public official pursuant to applicable abandoned property, escheat or
similar laws.
(h) NFB and the Exchange Agent shall be entitled to rely
upon JSB's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be
conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any JSB Certificate, NFB and the Exchange
Agent shall be entitled to deposit any Merger Consideration represented
thereby in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
(i) If any JSB Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such JSB Certificate to be lost, stolen or destroyed and, if
required by the Exchange Agent, the posting by such person of a bond in
such amount as the Exchange Agent may direct as indemnity against any claim
that may be made against it with respect to such JSB Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
JSB Certificate the Merger Consideration deliverable in respect thereof
pursuant to Section 1.2.
Section 1.4. Stock Options.
(a) Each option to purchase shares of JSB Common Stock
issued by JSB and outstanding at the Effective Time (a "JSB Option")
pursuant to the JSB 1990 Incentive Stock Option Plan, the JSB 1990 Stock
Option Plan for Outside Directors and the JSB 1996 Stock Option Plan
(collectively, the "JSB Option Plans") shall be converted into an option to
purchase shares of NFB Common Stock as follows:
(i) the aggregate number of shares of NFB Common
Stock issuable upon the exercise of the converted JSB Option after
the Effective Time shall be equal to the product of the Exchange
Ratio multiplied by the number of shares of JSB Common Stock
issuable upon exercise of the JSB Option immediately prior to the
Effective Time, such product to be rounded to the nearest whole
share of NFB Common Stock; and
(ii) the exercise price per share of each converted
JSB Option shall be equal to the quotient of the exercise price of
such JSB Option at the Effective Time divided by the Exchange
Ratio, such quotient to be rounded to the nearest whole cent;
provided, however, that, in the case of any JSB Option that is intended to
qualify as an incentive stock option under Section 422 of the Code, the
number of shares of NFB Common Stock issuable upon exercise of and the
exercise price per share for such converted JSB Option determined in the
manner provided above shall be further adjusted in such manner as NFB may
determine to be necessary to conform to the requirements of Section 424(b)
of the Code. Options to purchase shares of NFB Common Stock that arise from
the operation of this Section 1.4 shall be referred to as the "Converted
Options." All Converted Options shall be exercisable for the same period
and otherwise have the same terms and conditions applicable to the JSB
Options that they replace; provided, however, that such exercise period,
terms and conditions shall be further modified if and to the extent
necessary to enable the Merger to qualify for pooling-of-interests
accounting treatment. Prior to the Effective Time, NFB shall take, or cause
to be taken, all necessary action to effect the intent of the provisions
set forth in this Section 1.4.
(b) Prior to the date of the JSB stockholders meeting
contemplated by Section 4.8, JSB shall take, or cause to be taken,
appropriate action under the terms of any stock option plan, agreement or
arrangement under which JSB Options have been granted to provide for the
conversion of JSB Options outstanding at the Effective Time into Converted
Options and to effect any other modifications contemplated by Section
1.4(a).
(c) Concurrently with the reservation of shares of NFB
Common Stock to provide for the payment of the Merger Consideration, NFB
shall take all corporate action necessary to reserve for future issuance a
sufficient additional number of shares of NFB Common Stock to provide for
the satisfaction of its obligations with respect to the Converted Options.
On or before the Effective Time, NFB shall file a registration statement on
Form S-8 (or any successor or other appropriate form) and make any state
filings or obtain state exemptions with respect to the NFB Common Stock
issuable upon exercise of the Converted Options. Within 15 days after the
Effective Time, NFB shall cause to be executed and delivered to each holder
of a Converted Option an agreement, certificate or other instrument, in
such form and of such substance as NFB may reasonably determine, evidencing
such holder's rights with respect to the Converted Options. JSB shall use
its best efforts to obtain from each person holding JSB Options, within 30
days after the date of this Agreement, a waiver of such person's limited
stock appreciation rights for purposes of the Merger, in the form mutually
agreed to by the parties.
Section 1.5. Bank Merger. At the election of NFB,
concurrently with or within 60 days after the execution and delivery of
this Agreement, NFB Bank and JSB Bank shall enter into the Plan of Bank
Merger, in the form attached hereto as Exhibit A, pursuant to which the
Bank Merger will be effected. The parties hereto intend that, if the Plan
of Bank Merger is entered into, the Bank Merger shall become effective
promptly following consummation of the Merger. The Plan of Bank Merger
shall provide that the directors of NFB Bank as the surviving entity of the
Bank Merger shall be all of the directors of NFB Bank serving immediately
prior to the Bank Merger and the additional person who shall become a
director of NFB Bank in accordance with Section 4.13.
Section 1.6. Directors of NFB after Effective Time. At and
after the Effective Time, the directors of NFB shall consist of all of the
directors of NFB serving immediately prior to the Effective Time and the
additional person who shall become a director of NFB in accordance with
Section 4.13.
Section 1.7. Alternative Structure. Notwithstanding anything
to the contrary contained in this Agreement, prior to the Effective Time,
NFB may specify that the structure of the transactions contemplated hereby
be revised and the parties shall enter into such alternative transactions
as NFB may determine to effect the purposes of this Agreement; provided,
however, that such revised structure shall not adversely affect the tax
effects or economic benefits of the transactions contemplated hereby to the
holders of JSB Common Stock, and, further, such revised structure shall not
materially delay the Closing Date (as defined in Section 7.1). This
Agreement and any related documents shall be appropriately amended in order
to reflect any such revised structure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Disclosure Letters. On or prior to the
execution and delivery of this Agreement, JSB and NFB each shall have
delivered to the other a letter (each, its "Disclosure Letter") setting
forth, among other things, facts, circumstances and events the disclosure
of which is required or appropriate in relation to any or all of their
respective representations and warranties (and making specific reference to
the Section of this Agreement to which they relate), other than Section
2.3(g) and Section 2.4(g); provided, that (a) no such fact, circumstance or
event is required to be set forth in the Disclosure Letter as an exception
to a representation or warranty if its absence is not reasonably likely to
result in the related representation or warranty being deemed untrue or
incorrect under the standards established by Section 2.2 and (b) the mere
inclusion of a fact, circumstance or event in a Disclosure Letter shall not
be deemed an admission by a party that such item represents a material
exception or that such item is reasonably likely to result in a Material
Adverse Effect (as defined in Section 2.2(b)).
Section 2.2. Standards.
(a) No representation or warranty of JSB or NFB contained in
Sections 2.3 or 2.4, respectively, shall be deemed untrue or incorrect, and
no party hereto shall be deemed to have breached a representation or
warranty, on account of the existence of any fact, circumstance or event
unless, as a direct or indirect consequence of such fact, circumstance or
event, individually or taken together with all other facts, circumstances
or events inconsistent with any paragraph of Sections 2.3 or 2.4, as
applicable, there is reasonably likely to exist a Material Adverse Effect.
JSB's representations, warranties and covenants contained in this Agreement
shall not be deemed to be untrue or breached as a result of effects arising
solely from actions taken in compliance with a written request of NFB.
(b) As used in this Agreement, the term "Material Adverse
Effect" means either:
(i) an effect which is material and adverse to the
business, financial condition or results of operations of JSB or
NFB, as the context may dictate, and its Subsidiaries taken as a
whole; provided, however, that any such effect resulting from any
(A) changes in laws, rules or regulations or generally accepted
accounting principles or interpretations thereof that apply to both
NFB and NFB Bank and JSB and JSB Bank, as the case may be, or (B)
changes in the general level of market interest rates shall not be
considered in determining if a Material Adverse Effect has
occurred; or
(ii) the failure of (x) a representation or warranty
contained in Section 2.3(a)(i) and (iv), Section 2.3(d), Section
2.3(g)(iii), Section 2.4(a)(i) and (iv), Section 2.4(d), Section
2.4(g)(ii) or Section 2.4(l) to be true and correct or (y) a
representation or warranty contained in Section 2.3(b)(i), Section
2.3(c), clause (ii) of Section 2.3(e), the last sentence of Section
2.3(e), Section 2.3(f), Section 2.3(j), the first sentence of
Section 2.3(m), Section 2.3(q), Section 2.3(u), Section 2.3(v), the
first two sentences of Section 2.3(bb), Section 2.4(b)(i), Section
2.4(c), clause (ii) of Section 2.4(e), the last sentence of Section
2.4(e), Section 2.4(f), Section 2.4(j), the first sentence of
Section 2.4(n), Section 2.4(q), Section 2.4(t) and the first two
sentences of 2.4(w) to be true and correct in all material
respects.
(c) For purposes of this Agreement, "knowledge" shall mean,
with respect to a party hereto, actual knowledge of the members of the
Board of Directors of that party, its counsel, any officer of that party
with the title ranking not less than senior vice president and, with
respect to JSB, any Vice President of JSB whose name is listed in Section
4.13(d) hereof.
Section 2.3. Representations and Warranties of JSB. Subject
to Sections 2.1 and 2.2, JSB represents and warrants to NFB that, except as
disclosed in JSB's Disclosure Letter:
(a) Organization. (i) JSB is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and is duly registered as a savings and loan holding company under
the Home Owners' Loan Act of 1933, as amended ("HOLA"). JSB Bank is a
savings association duly organized, validly existing and in good standing
under the laws of the United States of America and is a wholly owned
Subsidiary (as defined below) of JSB. Each Subsidiary of JSB, other than
JSB Bank, is a corporation, limited liability company or partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of JSB and its
Subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
As used in this Agreement, unless the context requires otherwise, the term
"Subsidiary" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial reporting purposes or which is
controlled, directly or indirectly, by such party.
(ii) JSB and each of its Subsidiaries has the
requisite corporate power and authority, and is duly qualified and is in
good standing, to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary.
(iii) JSB's Disclosure Letter sets forth all of JSB's
Subsidiaries and all entities (whether corporations, partnerships or
similar organizations), including the corresponding percentage ownership,
in which JSB owns, directly or indirectly, 5% or more of the ownership
interests as of the date of this Agreement and indicates for each of JSB's
Subsidiaries, as of such date, its jurisdiction of organization and the
jurisdiction(s) wherein it is qualified to do business. All such
Subsidiaries and ownership interests are in compliance with all applicable
laws, rules and regulations relating to direct investments in equity
ownership interests. JSB owns, either directly or indirectly, all of the
outstanding capital stock of each of its Subsidiaries. No Subsidiary of JSB
other than JSB Bank is an "insured depository institution" as defined in
the Federal Deposit Insurance Act, as amended ("FDIA"), and the applicable
regulations thereunder. All of the shares of capital stock of each of the
Subsidiaries of JSB are duly authorized and validly issued, fully paid and
nonassessable and not subject to any preemptive rights and are owned by JSB
or a Subsidiary of JSB free and clear of any claims, liens, encumbrances or
restrictions (other than those imposed by applicable federal and state
securities laws), and there are no agreements or understandings with
respect to the voting or disposition of any such shares.
(iv) The deposits of JSB Bank are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation
("FDIC") to the extent provided in the FDIA. JSB Bank is a member of the
Federal Home Loan Bank of New York.
(b) Capital Structure. (i) The authorized capital stock of
JSB consists of 65,000,000 shares of JSB Common Stock and 15,000,000 shares
of preferred stock, par value $.01 per share ("JSB Preferred Stock"). As of
the date of this Agreement: (A) 9,286,897 shares of JSB Common Stock were
issued and outstanding, (B) no shares of JSB Preferred Stock were issued
and outstanding, (C) no shares of JSB Common Stock were reserved for
issuance, except that 952,676 shares of JSB Common Stock were reserved for
issuance pursuant to the JSB Option Plans, which includes 810,676 shares
reserved for issuance upon the exercise of options that have already been
granted under the JSB Option Plans, plus 142,000 shares reserved for
issuance upon the exercise of options that will be automatically granted
pursuant to the terms of the JSB 1996 Option Plan as a result of the
execution of this Agreement, (D) no shares of JSB Preferred Stock were
reserved for issuance and (E) 6,713,103 shares of JSB Common Stock were
held by JSB in its treasury or by its Subsidiaries. The authorized capital
stock of JSB Bank consists of 40,000,000 shares of common stock, par value
$1.00 per share, and 20,000,000 shares of preferred stock, par value $1.00
per share. As of the date of this Agreement, 1,000 shares of such common
stock were outstanding, no shares of such preferred stock were outstanding
and all outstanding shares of such common stock were, and as of the
Effective Time will be, owned by JSB. All outstanding shares of capital
stock of JSB and JSB Bank are duly authorized and validly issued, fully
paid and nonassessable and not subject to any preemptive rights and, with
respect to shares held by JSB in its treasury or by its Subsidiaries, are
free and clear of all claims, liens, encumbrances or restrictions (other
than those imposed by applicable federal or state securities laws) and
there are no agreements or understandings with respect to the voting or
disposition of any such shares. JSB's Disclosure Letter sets forth a
complete and accurate list of all outstanding options to purchase JSB
Common Stock that have been granted pursuant to the JSB Option Plans,
including the dates of grant, exercise prices, dates of vesting, dates of
termination and shares subject to each grant, and all options to purchase
JSB Common Stock that will be automatically granted as a result of the
execution of this Agreement.
(ii) No bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which stockholders
may vote ("Voting Debt") of JSB are issued or outstanding.
(iii) As of the date of this Agreement, except for
this Agreement, the JSB Option Agreement, the JSB Option Plans and as set
forth in JSB's Disclosure Letter, neither JSB nor any of its Subsidiaries
has or is bound by any outstanding options, warrants, calls, rights,
convertible securities, commitments or agreements of any character
obligating JSB or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, any additional shares of capital
stock of JSB or any of its Subsidiaries or obligating JSB or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, convertible security, commitment or agreement. As of the date
hereof, there are no outstanding contractual obligations of JSB or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of JSB or any of its Subsidiaries.
(c) Authority. Each of JSB and JSB Bank has the requisite
corporate power and authority to enter into this Agreement and the Plan of
Bank Merger, respectively, and, subject to approval of this Agreement by
the requisite vote of JSB's stockholders and receipt of all required
regulatory or governmental approvals, as contemplated by Section 5.1(b) of
this Agreement, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, and, subject to the approval of
this Agreement by JSB's stockholders, the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
actions on the part of JSB and JSB Bank. This Agreement has been duly
executed and delivered by JSB and constitutes a valid and binding
obligation of JSB, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity, whether applied in a court of law or a court of
equity.
(d) Stockholder Approval; Fairness Opinion. The affirmative
vote of the holders of a majority of the outstanding shares of JSB Common
Stock entitled to vote on this Agreement is the only vote of the
stockholders of JSB required for approval of this Agreement by JSB and the
consummation by JSB of the Merger and the related transactions contemplated
hereby. JSB has received the written opinion of Northeast Capital &
Advisory, Inc. to the effect that, as of the date hereof, the Exchange
Ratio is fair, from a financial point of view, to JSB's stockholders.
(e) No Violations. The execution, delivery and performance
of this Agreement by JSB do not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming receipt of all
Requisite Regulatory Approvals (as defined below) and requisite stockholder
approvals, a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license,
or agreement, indenture or instrument of JSB or any of its Subsidiaries, or
to which JSB or any of its Subsidiaries (or any of their respective
properties) is subject, (ii) a breach or violation of, or a default under,
the certificate of incorporation or bylaws of JSB or the similar
organizational documents of any of its Subsidiaries or (iii) a breach or
violation of, or a default under (or an event which, with due notice or
lapse of time or both, would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of JSB or any of its
Subsidiaries, under, any of the terms, conditions or provisions of any
note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which JSB or any of its Subsidiaries is a
party, or to which any of their respective properties or assets may be
subject; and the consummation of the transactions (including the Bank
Merger) contemplated hereby (exclusive of the effect of any changes
effected pursuant to Section 1.7) will not require any approval, consent or
waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any
other party to any such agreement, indenture or instrument, other than (x)
the approval of the holders of a majority of the outstanding shares of JSB
Common Stock and the approval of JSB as the sole stockholder of JSB Bank
and (y) the provision of notice to or the approval of, if required, the
Office of Thrift Supervision ("OTS") under HOLA, the approval, if required,
of the Federal Deposit Insurance Corporation under Section 18(c) of the
FDIA, the approval of the Board of Governors of the Federal Reserve System
("FRB") under the Bank Holding Company Act of 1956, as amended, and the
approval of the New York State Banking Department ("NYSBD") under the
Banking Law of the State of New York (collectively, the "Requisite
Regulatory Approvals"), and (z) such approvals, consents or waivers as are
required under the federal and state securities or "blue sky" laws in
connection with the transactions contemplated by this Agreement. As of the
date hereof, the executive officers of JSB know of no reason pertaining to
JSB why any of the approvals referred to in this Section 2.3(e) should not
be obtained.
(f) Reports. (i) As of their respective dates, none of the
reports or other statements filed by JSB or JSB Bank on or subsequent to
December 31, 1997 with the Securities and Exchange Commission ("SEC")
(collectively, "JSB's Reports"), contained, or will contain, any untrue
statement of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Each of the financial statements of JSB included in JSB's
Reports complied as to form, as of their respective dates of filing with
the SEC, in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect
thereto and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved ("GAAP") (except as may be indicated in the notes thereto or, in
the case of unaudited financial statements, as permitted by Form 10-Q of
the SEC). Each of the consolidated statements of condition, consolidated
statements of operations, consolidated statements of cash flows and
consolidated statements of changes in stockholders' equity contained or
incorporated by reference in JSB's Reports (including in each case any
related notes and schedules) fairly presented, or will fairly present, as
the case may be, the financial position, results of operations, cash flows
and stockholders' equity, as the case may be, of the entity or entities to
which it relates for the periods set forth therein (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments that are
not material in amount or effect), in each case in accordance with GAAP,
except as may be noted therein.
(ii) JSB and its Subsidiaries have each timely filed
all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1996 with (A) the OTS, (B) the FDIC,
(C) the SEC, (D) the NYSE and (E) any other self-regulatory organization
("SRO"), and have paid all fees and assessments due and payable in
connection therewith.
(g) Absence of Certain Changes or Events. Except as
disclosed in JSB's Reports filed on or prior to the date of this Agreement,
since December 31, 1998, (i) JSB and its Subsidiaries have not incurred any
liability, except in the ordinary course of their businesses consistent
with past practice, (ii) JSB and its Subsidiaries have conducted their
respective businesses only in the ordinary and usual course of such
businesses and (iii) there has not been any Material Adverse Effect with
respect to JSB.
(h) Absence of Claims. Except as disclosed in JSB's
Disclosure Letter, no litigation, proceeding, controversy, claim or action
before any court or any federal, state, local or foreign governmental or
regulatory body (each, a "Governmental Entity") is pending against JSB or
any of its Subsidiaries and, to the best of JSB's knowledge, no such
litigation, proceeding, controversy, claim or action has been threatened.
(i) Absence of Regulatory Actions. Neither JSB nor any of
its Subsidiaries is a party to any cease and desist order, written
agreement or memorandum of understanding with, or any commitment letter or
similar written undertaking to, or is subject to any action, proceeding,
order or directive by, or is a recipient of any extraordinary supervisory
letter from any federal or state governmental authority charged with the
supervision or regulation of depository institutions or depository
institution holding companies or engaged in the insurance of bank and/or
savings and loan deposits (each, a "Bank Regulator"), or has adopted any
board resolutions at the request of any Bank Regulator, nor has it been
advised by any Bank Regulator that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such action, proceeding, order, directive, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar written undertaking.
(j) Taxes. All federal, state, local and foreign tax returns
required to be filed by or on behalf of JSB or any of its Subsidiaries have
been timely filed or requests for extensions have been timely filed and any
such extension shall have been granted and not have expired, and all such
filed returns are complete and accurate in all material respects. All taxes
shown on such returns, all taxes required to be shown on returns for which
extensions have been granted and all other taxes required to be paid by JSB
or any of its Subsidiaries have been paid in full or adequate provision has
been made for any such taxes on JSB's balance sheet (in accordance with
GAAP). For purposes of this Section 2.3(j), the term "taxes" shall include
all federal, state, local or foreign taxes, charges or other assessments,
including, without limitation, income, franchise, gross receipts, real and
personal property, real property transfer and gains, wage and employment
taxes, and the term "tax return" shall mean any return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any tax. Except
as disclosed in JSB's Disclosure Letter, as of the date of this Agreement,
there is no audit examination, deficiency assessment, tax investigation or
refund litigation with respect to any taxes of JSB or any of its
Subsidiaries, and no claim has been made by any authority in a jurisdiction
where JSB or any of its Subsidiaries do not file tax returns that JSB or
any such Subsidiary is subject to taxation in that jurisdiction. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to JSB or any of its
Subsidiaries have been paid in full or adequate provision has been made for
any such taxes on JSB's balance sheet (in accordance with GAAP). JSB and
its Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. JSB and each of its Subsidiaries has withheld and paid
all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and JSB and each of its Subsidiaries has
timely complied with all applicable information reporting requirements
under Part III, Subchapter A of Chapter 61 of the Code and similar
applicable state and local information reporting requirements. Neither JSB
nor any of its Subsidiaries (i) has made an election under Section 341(f)
of the Code, (ii) has issued or assumed any obligation under Section 279 of
the Code, any high yield discount obligation as described in Section 163(i)
of the Code or any registration-required obligation within the meaning of
Section 163(f)(2) of the Code that is not in registered form or (iii) is or
has been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code.
(k) Agreements. (i) Except for the JSB Option Agreement and
arrangements made in the ordinary course of business, and except as
disclosed in JSB's Disclosure Letter, JSB and its Subsidiaries are not
bound by any material contract (as defined in Item 601(b)(10) of Regulation
S-K) to be performed after the date hereof that has not been filed with or
incorporated by reference in JSB's Reports. Except as disclosed in JSB's
Reports filed prior to the date of this Agreement or as disclosed in JSB's
Disclosure Letter, neither JSB nor any of its Subsidiaries is a party to an
oral or written (A) consulting agreement (other than data processing,
software programming and licensing contracts entered into in the ordinary
course of business) not terminable on 60 days' or less notice, (B)
agreement with any executive officer or other key employee of JSB or any of
its Subsidiaries the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction
involving JSB or any of its Subsidiaries of the nature contemplated by this
Agreement or the JSB Option Agreement, (C) agreement with respect to any
employee or director of JSB or any of its Subsidiaries providing any term
of employment or compensation guarantee extending for a period longer than
60 days or for the payment of in excess of $50,000 per annum, (D) agreement
or plan, including any stock option plan, phantom stock or stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting or payment of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the JSB Option Agreement or
the value of any of the benefits of which will be calculated on the basis
of any of the transactions contemplated by this Agreement or the JSB Option
Agreement or (E) agreement containing covenants that limit the ability of
JSB or any of its Subsidiaries to compete in any line of business or with
any person, or that involve any restriction on the geographic area in
which, or method by which, JSB (including any successor thereof) or any of
its Subsidiaries may carry on its business (other than as may be required
by law or any regulatory agency).
(ii) Neither JSB nor any of its Subsidiaries is in
default under or in violation of any provision of any note, bond,
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement to which it is a party or by which it is bound or to which any of
its respective properties or assets is subject.
(iii) JSB and each of its Subsidiaries owns or
possesses valid and binding licenses and other rights to use without
payment all patents, copyrights, trade secrets, trade names, servicemarks
and trademarks used in its businesses, and neither JSB nor any of its
Subsidiaries has received any notice of conflict with respect thereto that
asserts the right of others. Each of JSB and its Subsidiaries has performed
all the obligations required to be performed by it and are not in default
under any contact, agreement, arrangement or commitment relating to any of
the foregoing.
(l) Labor Matters. Neither JSB nor any of its Subsidiaries
is or has ever been a party to, or is or has ever been bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization with respect to its
employees, nor is JSB or any of its Subsidiaries the subject of any
proceeding asserting that it has committed an unfair labor practice or
seeking to compel it to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike, other labor dispute or
organizational effort involving JSB or any of its Subsidiaries pending or,
to the best of JSB's knowledge, threatened. JSB and its Subsidiaries are in
compliance with applicable laws regarding employment of employees and
retention of independent contractors and are in compliance with applicable
employment tax laws.
(m) Employee Benefit Plans. JSB's Disclosure Letter contains
a complete and accurate list of all pension, retirement, stock option,
stock purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance,
severance and other benefit plans, contracts, agreements and arrangements,
including, but not limited to, "employee benefit plans," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), incentive and welfare policies, contracts, plans and
arrangements and all trust agreements related thereto with respect to any
present or former directors, officers or other employees of JSB or any of
its Subsidiaries (hereinafter collectively referred to as the "JSB Employee
Plans"). Except as disclosed in JSB's Disclosure Letter:
(i) all of the JSB Employee Plans comply in all
material respects with all applicable requirements of ERISA, the
Code and other applicable laws; there has occurred no "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) which is likely to result in the imposition of any
penalties or taxes under Section 502(i) of ERISA or Section 4975 of
the Code upon JSB or any of its Subsidiaries.
(ii) no liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been or is expected by JSB or any of its
Subsidiaries to be incurred with respect to any JSB Employee Plan
which is subject to Title IV of ERISA ("JSB Pension Plan"), or with
respect to any "single-employer plan" (as defined in Section
4001(a) of ERISA) currently or formerly maintained by JSB or any
entity which is considered one employer with JSB under Section
4001(b)(1) of ERISA or Section 414 of the Code (a "JSB ERISA
Affiliate");
(iii) no JSB Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, as of the last day of the end of the most recent plan year
ending prior to the date hereof; the fair market value of the
assets of each JSB Pension Plan exceeds the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA)
under such JSB Pension Plan as of the end of the most recent plan
year with respect to the respective JSB Pension Plan ending prior
to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such
JSB Pension Plan as of the date hereof; and no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which
the 30-day reporting requirement has not been waived has been
required to be filed for any JSB Pension Plan within the 12-month
period ending on the date hereof;
(iv) neither JSB nor any of its Subsidiaries has
provided, or is required to provide, security to any JSB Pension
Plan or to any single-employer plan of a JSB ERISA Affiliate
pursuant to Section 401(a)(29) of the Code;
(v) neither JSB, its Subsidiaries, nor any JSB ERISA
Affiliate has contributed to any "multiemployer plan," as defined
in Section 3(37) of ERISA, on or after
September 26, 1980;
(vi) each JSB Employee Plan that is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and
which is intended to be qualified under Section 401(a) of the Code
("JSB Qualified Plan") has received a favorable determination
letter from the Internal Revenue Service ("IRS"), and JSB and its
Subsidiaries are not aware of any circumstances likely to result in
revocation of any such favorable determination letter;
(vii) there is no pending or, to JSB's knowledge,
threatened litigation, administrative action or proceeding relating
to any JSB Employee Plan;
(viii) there has been no announcement or commitment
by JSB or any of its Subsidiaries to create an additional JSB
Employee Plan, or to amend any JSB Employee Plan, except for
amendments required by applicable law which do not materially
increase the cost of such JSB Employee Plan; and, except as
specifically identified in JSB's Disclosure Letter, JSB and its
Subsidiaries do not have any obligations for post-retirement or
post-employment benefits under any JSB Employee Plan that cannot be
amended or terminated upon 60 days' notice or less without
incurring any liability thereunder, except for coverage required by
Part 6 of Title I of ERISA or Section 4980B of the Code, or similar
state laws, the cost of which is borne by the insured individuals;
(ix) neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will result in any payment or series of payments by JSB or
any of its Subsidiaries to any person which is an "excess parachute
payment" (as defined in Section 280G of the Code), increase or
secure (by way of a trust or other vehicle) any benefits payable
under any JSB Employee Plan or accelerate the time of payment or
vesting of any such benefit; and
(x) with respect to each JSB Employee Plan, JSB has
made available to NFB a true and correct copy of (A) the annual
report on the applicable form of the Form 5500 series filed with
the IRS for the most recent three plan years, if required to be
filed, (B) such JSB Employee Plan, including amendments thereto,
(C) each trust agreement, insurance contract or other funding
arrangement relating to such JSB Employee Plan, including
amendments thereto, (D) the most recent summary plan description
and summary of material modifications thereto for such JSB Employee
Plan, if the JSB Employee Plan is subject to Title I of ERISA, (E)
the most recent actuarial report or valuation if such JSB Employee
Plan is a JSB Pension Plan and any subsequent changes to the
actuarial assumptions contained therein and (F) the most recent
determination letter issued by the IRS if such JSB Employee Plan is
a Qualified Plan.
(n) Termination Benefits. JSB's Disclosure Letter contains a
schedule identifying the types of benefits and other payments due under the
Specified Compensation and Benefit Programs (as defined herein) for each
Named Individual (as defined herein) individually and for all persons other
than the Named Individuals as a group. For purposes hereof, "Specified
Compensation and Benefit Programs" shall include all employment agreements,
change in control agreements, severance or special termination agreements,
severance plans, pension, retirement or deferred compensation plans for
non-employee directors, supplemental executive retirement programs, tax
indemnification agreements, outplacement programs, cash bonus programs,
deferred compensation plans, all performance and/or bonus plans, stock
appreciation right, phantom stock or stock unit plan, and health, life,
disability and other insurance or welfare plans, but shall not include any
tax-qualified pension, profit-sharing or employee stock ownership plan or
any JSB Option Plans. For purposes hereof, "Named Individual" shall include
each non-employee director of JSB or any of its Subsidiaries and each
executive officer of JSB.
(o) Title to Assets. JSB and each of its Subsidiaries has
good and marketable title to its properties and assets (including any
intellectual property asset such as any trademark, servicemark, trade name
or copyright) and property acquired in a judicial foreclosure proceeding or
by way of a deed in lieu of foreclosure or similar transfer, other than
property as to which it is lessee, in which case the related lease is valid
and in full force and effect. Each lease pursuant to which JSB or any of
its Subsidiaries is lessor is valid and in full force and effect and no
lessee under any such lease is in material default or violation of any
provisions of any such lease. All material tangible properties of JSB and
each of its Subsidiaries are in a good state of maintenance and repair,
conform with all applicable ordinances, regulations and zoning laws and are
considered by JSB to be adequate for the current business of JSB and its
Subsidiaries.
(p) Compliance with Laws. JSB and each of its Subsidiaries
has all permits, licenses, certificates of authority, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Entities that are required in order to permit it to carry on
its business as it is presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and
effect, and, to the best knowledge of JSB, no suspension or cancellation of
any of them is threatened. Since the date of its incorporation, the
corporate affairs of JSB have not been conducted in violation of any law,
ordinance, regulation, order, writ, rule, decree or approval of any
Governmental Entity. The businesses of JSB and its Subsidiaries are not
being conducted in violation of any law, ordinance, regulation, order,
writ, rule, decree or condition to approval of any Governmental Entity.
(q) Fees. Other than financial advisory services performed
for JSB by Northeast Capital & Advisory, Inc. pursuant to an agreement
dated May 27, 1999, a true and complete copy of which has been previously
delivered to NFB, neither JSB nor any of its Subsidiaries, nor any of their
respective officers, directors, employees or agents, has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has
acted directly or indirectly for JSB or any of its Subsidiaries in
connection with this Agreement or the transactions contemplated hereby.
(r) Environmental Matters. (i) With respect to JSB and each
of its Subsidiaries, except as disclosed in JSB's Disclosure Letter:
(A) each of JSB and its Subsidiaries and, to JSB's
knowledge, the Participation Facilities (as defined herein)
and the Loan Properties (as defined herein) are, and have
been, in substantial compliance with, and are not liable
under, all Environmental Laws (as defined herein);
(B) there is no suit, claim, action, demand,
executive or administrative order, directive, investigation
or proceeding pending or, to the best of JSB's knowledge,
threatened, before any court, Governmental Entity or board
or other forum against it or any of its Subsidiaries or any
Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or
release into the environment of any Hazardous Material (as
defined herein), whether or not occurring at or on a site
owned, leased or operated by it or any of its Subsidiaries
or any Participation Facility;
(C) to the best of JSB's knowledge, there is no suit,
claim, action, demand, executive or administrative order,
directive, investigation or proceeding pending or threatened
before any court, Governmental Entity or board or other
forum relating to or against any Loan Property (or JSB or
any of its Subsidiaries in respect of such Loan Property)
(x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law
or (y) relating to the presence of or release into the
environment of any Hazardous Material, whether or not
occurring at or on a site owned, leased or operated by a
Loan Property; and
(D) to the best of JSB's knowledge, during the period
of (l) JSB's or any of its Subsidiaries' ownership or
operation of any of their respective current properties or
(m) JSB's or any of its Subsidiaries' participation in the
management of any Participation Facility, there has been no
contamination by or release of Hazardous Materials in, on,
under or affecting such properties.
(ii) The following definitions apply for purposes of
this Section 2.3(r) and Section 2.4(r): (w) "Loan Property" means any
property in which the applicable party (or any of its Subsidiaries) holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property; (x)
"Participation Facility" means any facility in which the applicable party
(or any of its Subsidiaries) participates in the management (including all
property held as trustee or in any other fiduciary capacity) and, where
required by the context, includes the owner or operator of such property,
but only with respect to such property; (y) "Environmental Law" means (i)
any federal, state or local law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine,
order, directive, executive or administrative order, judgment, decree,
injunction, legal requirement or agreement with any Governmental Entity
relating to (A) the protection, preservation or restoration of the
environment (which includes, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, structures, soil, surface land,
subsurface land, plant and animal life or any other natural resource), or
to human health or safety as it relates to Hazardous Materials, or (B) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of, Hazardous Materials, in each case as amended and as now in
effect. The term Environmental Law includes all federal, state and local
laws, rules, regulations or requirements relating to the protection of the
environment or health and safety, including, without limitation, (i) the
Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act
of 1976 (including, but not limited to, the Hazardous and Solid Waste
Amendments thereto and Subtitle I relating to underground storage tanks),
the Federal Solid Waste Disposal and the Federal Toxic Substances Control
Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Federal
Occupational Safety and Health Act of 1970 as it relates to Hazardous
Materials, the Federal Hazardous Substances Transportation Act, the
Emergency Planning and Community Right-To-Know Act, the Safe Drinking Water
Act, the Endangered Species Act, the National Environmental Policy Act, the
Rivers and Harbors Appropriation Act or any so-called "Superfund" or
"Superlien" law, each as amended and as now or hereafter in effect, and
(ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass
and 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 Material; and (z) "Hazardous Material" means any
substance (whether solid, liquid or gas) which is or could be detrimental
to human health or safety or to the environment, currently or hereafter
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 substance containing any such
substance as a component. Hazardous Material includes, without limitation,
any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance, oil or
petroleum, or any derivative or by-product thereof, radon, radioactive
material, asbestos, asbestos-containing material, urea formaldehyde foam
insulation, lead and polychlorinated biphenyl.
(s) Loan Portfolio; Allowance; Asset Quality. (i) With
respect to each loan owned by JSB or its Subsidiaries in whole or in part
(each, a "Loan"), to the best knowledge of JSB:
(A) the note and the related security documents are
each legal, valid and binding obligations of the maker or
obligor thereof, enforceable against such maker or obligor
in accordance with their terms;
(B) neither JSB nor any of its Subsidiaries, nor any
prior holder of a Loan, has modified the note or any of the
related security documents in any material respect or
satisfied, canceled or subordinated the note or any of the
related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(C) JSB or a Subsidiary is the sole holder of legal
and beneficial title to each Loan (or JSB's applicable
participation interest, as applicable), except as otherwise
referenced on the books and records of JSB;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and
correct copies of the documents they purport to be and have
not been suspended, amended, modified, canceled or otherwise
changed, except as otherwise disclosed by documents in the
applicable Loan file;
(E) there is no pending or threatened condemnation
proceeding or similar proceeding affecting the property that
serves as security for a Loan, except as otherwise
referenced on the books and records of JSB;
(F) there is no litigation or proceeding pending or
threatened relating to the property that serves as security
for a Loan that would have a material adverse effect upon
the related Loan; and
(G) with respect to a Loan held in the form of a
participation, the participation documentation is legal,
valid, binding and enforceable.
(ii) The allowance for possible losses reflected in
JSB's audited statement of condition at December 31, 1998 was, and the
allowance for possible losses shown on the balance sheets in JSB's Reports
for periods ending after December 31, 1998 will be, adequate, as of the
dates thereof, under GAAP.
(iii) JSB's Disclosure Letter sets forth by category
the amounts of all loans, leases, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets of JSB and
its Subsidiaries that have been classified by any bank examiner (whether
regulatory or internal) as "Special Mention," "Substandard," "Doubtful,"
"Loss" or words of similar import, and JSB and its Subsidiaries shall
promptly after the end of any month inform NFB of any such classification
arrived at any time after the date hereof. The other real estate owned
("OREO") included in any non-performing assets of JSB or any of its
Subsidiaries is carried net of reserves at the lower of cost or fair value,
less estimated selling costs, based on current management appraisals or
evaluations to the extent material; provided, however, that "current" shall
mean within the past 12 months. JSB's Disclosure Letter sets forth a list
of the unsold cooperative shares owned by JSB or its Subsidiaries.
(t) Deposits. None of the deposits of JSB or any of its
Subsidiaries is a "brokered" deposit.
(u) Accounting Matters. Except as disclosed in JSB's
Disclosure Letter, neither JSB nor any of its Subsidiaries or, to the best
of its knowledge, any of its other affiliates has, through the date hereof,
taken or agreed to take any action that would prevent NFB from accounting
for the business combination to be effected by the Merger as a
pooling-of-interests, and JSB has no knowledge of any fact or circumstance
that would prevent such accounting treatment.
(v) Antitakeover Provisions Inapplicable. JSB and its
Subsidiaries have taken all actions required to exempt JSB, the Agreement,
the Plan of Bank Merger, the Merger, the Bank Merger and the JSB Option
Agreement from any provisions of an antitakeover nature in their
organization certificates and bylaws, including Article Eighth of JSB's
certificate of incorporation, and the provisions of any federal or state
"antitakeover," "fair price," "moratorium," "control share acquisition" or
similar laws or regulations.
(w) Material Interests of Certain Persons. Except as
disclosed in JSB's Proxy Statement for its 1999 Annual Meeting of
Stockholders, no officer or director of JSB, or any "associate" (as such
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended ("Exchange Act")) of any such officer or director, has any material
interest in any material contract or property (real or personal), tangible
or intangible, used in or pertaining to the business of JSB or any of its
Subsidiaries. No such interest has been created or modified since the date
of the last regulatory examination of JSB or its Subsidiaries.
(x) Insurance. JSB and its Subsidiaries are presently
insured, and since December 31, 1996, have been insured, for reasonable
amounts with financially sound and reputable insurance companies, against
such risks as companies engaged in a similar business would, in accordance
with good business practice, customarily be insured. All of the insurance
policies and bonds maintained by JSB and its Subsidiaries are in full force
and effect, JSB and its Subsidiaries are not in default thereunder and all
material claims thereunder have been filed in due and timely fashion.
(y) Investment Securities; Borrowings. (i) Except for
investments in Federal Home Loan Bank ("FHLB") stock and pledges to secure
FHLB borrowings and reverse repurchase agreements entered into in
arms-length transactions pursuant to normal commercial terms and conditions
and entered into in the ordinary course of business and restrictions that
exist for securities to be classified as "held to maturity," none of the
investments reflected in the consolidated balance sheet of JSB included in
JSB's Report on Form 10-K for the year ended December 31, 1998, and none of
the investment securities held by it or any of its Subsidiaries since
December 31, 1998, is subject to any restriction (contractual or statutory)
that would materially impair the ability of the entity holding such
investment freely to dispose of such investment at any time.
(ii) Neither JSB nor any Subsidiary is a party to or
has agreed to enter into an exchange-traded or over-the-counter equity,
interest rate, foreign exchange or other swap, forward, future, option,
cap, floor or collar or any other contract that is not included on the
consolidated statements of condition and is a derivative contract
(including various combinations thereof) (each, a "Derivatives Contract")
or owns securities that (A) are referred to generically as "structured
notes," "high risk mortgage derivatives," "capped floating rate notes" or
"capped floating rate mortgage derivatives" or (B) are likely to have
changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and listed (as of the date hereof) in JSB's Disclosure Letter or
disclosed in JSB's Reports filed on or prior to the date hereof.
(iii) Set forth in JSB's Disclosure Letter is a true
and complete list of JSB's borrowed funds (excluding deposit accounts) as
of the date hereof.
(z) Indemnification. Except as provided in JSB's Disclosure
Letter, JSB's Employment Agreements or the organization certificate or
bylaws of JSB and its Subsidiaries, neither JSB nor any Subsidiary is a
party to any indemnification agreement with any of its present or future
directors, officers, employees, agents or other persons who serve or served
in any other capacity with any other enterprise at the request of JSB (a
"Covered Person"), and, except as disclosed in JSB's Disclosure Letter, to
the best knowledge of JSB, there are no claims for which any Covered Person
would be entitled to indemnification under the organization certificate or
bylaws of JSB or any of its Subsidiaries, under any applicable law or
regulation or under any indemnification agreement.
(aa) Books and Records. The books and records of JSB and its
Subsidiaries on a consolidated basis have been, and are being, maintained
in accordance with applicable legal and accounting requirements and reflect
in all material respects the substance of events and transactions that
should be included therein.
(bb) Corporate Documents. JSB has made available to NFB true
and complete copies of its certificate of incorporation and bylaws and of
JSB Bank's organization certificate and bylaws. The minute books of JSB and
JSB Bank constitute a complete and correct record of all actions taken by
their respective boards of directors (and each committee thereof) and their
stockholders. The minute books of each of JSB's Subsidiaries constitutes a
complete and correct record of all actions taken by the respective boards
of directors (and each committee thereof) and the stockholders of each such
Subsidiary.
(cc) Liquidation Account. Neither the Merger nor the Bank
Merger will result in any payment or distribution payable out of the
liquidation account of JSB Bank established in connection with JSB Bank's
conversion from mutual to stock form.
(dd) Tax Treatment of the Merger. As of the date hereof, JSB
has no knowledge of any fact or circumstance that would prevent the Merger
or the Bank Merger, if effected, from qualifying as a reorganization under
Section 368(a) of the Code.
(ee) Beneficial Ownership of NFB Common Stock. As of the
date hereof, JSB does not beneficially own any shares of NFB Common Stock
and does not have any option, warrant or right of any kind to acquire the
beneficial ownership of any shares of NFB Common Stock.
(ff) Year 2000 Matters. (i) JSB's Disclosure Letter sets
forth a true and complete copy of JSB's plan to cause all of the
Date-Sensitive Systems owned, leased or used by JSB or any of its
Subsidiaries intended and necessary for use after December 31, 1999, or
licensed to JSB or any of its Subsidiaries for use by JSB or any of its
Subsidiaries, and all of the Date Data of JSB or any of its Subsidiaries to
be Year 2000 Compliant (the "JSB Y2K Plan"). JSB believes that the JSB Y2K
Plan can be substantially achieved on or before September 30, 1999, with
aggregate expenditures under the JSB Y2K Plan not materially in excess of
$200,000.
(ii) The following definitions apply for purposes of
this Section 2.3(ff) and Section 2.4(z): (x) "Date Data" means any data of
any type that includes date information or that is otherwise derived from,
dependent on or related to date information; (y) "Date-Sensitive System"
means, with respect to a particular entity, any software, microcode or
hardware system or component, including any electronic or electronically
controlled system or component, that processes any Date Data and that is
installed in a development or on order by such entity or any Subsidiary of
such entity for its internal use; and (z) "Year 2000 Compliance" means, (A)
with respect to Date Data, that such data are in proper format for all
dates in the twentieth and twenty-first centuries and (B) with respect to
Date-Sensitive Systems, that such system accurately processes all Date
Data, including for the twentieth and twenty-first centuries, without loss
of any functionality or performance, including calculating, comparing,
sequencing, storing and displaying such Date Data (including all leap-year
considerations), when used as a stand-alone system or in combination with
other software or hardware.
(gg) Registration Statement. The information regarding JSB
to be supplied by JSB for inclusion in (i) the Registration Statement on
Form S-4 and/or such other form(s) as may be appropriate to be filed under
the Securities Act of 1933, as amended ("Securities Act"), with the SEC by
NFB for the purpose of, among other things, registering the NFB Common
Stock to be issued to JSB's stockholders in the Merger (as amended or
supplemented from time to time, the "Registration Statement"), or (ii) the
joint proxy statement to be filed with the SEC by JSB and NFB under the
Exchange Act and distributed in connection with JSB's and NFB's respective
meeting of stockholders to vote upon this Agreement (together with the
prospectus included in the Registration Statement, the "Joint Proxy
Statement-Prospectus") will not, at the time such Registration Statement
becomes effective, 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 therein, in light of the circumstances under
which they are made, not misleading.
Section 2.4. Representations and Warranties of NFB. Subject
to Sections 2.1 and 2.2, NFB represents and warrants to JSB that, except as
disclosed in NFB's Disclosure Letter:
(a) Organization. (i) NFB is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and is duly registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended ("BHCA"). NFB Bank is a bank duly
organized, validly existing and in good standing under the laws of the
State of New York and is a wholly owned Subsidiary of NFB. Each Subsidiary
of NFB, other than NFB Bank, is a corporation, limited liability company or
partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization. Each of NFB and
its Subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
(ii) NFB and each of its Subsidiaries has the
requisite corporate power and authority, and is duly qualified and is in
good standing, to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary.
(iii) NFB's Disclosure Letter sets forth all of NFB's
Subsidiaries and all entities (whether corporations, partnerships or
similar organizations), including the corresponding percentage ownership,
in which NFB owns, directly or indirectly, 5% or more of the ownership
interests as of the date of this Agreement and indicates for each of NFB's
Subsidiaries, as of such date, its jurisdiction of organization and the
jurisdiction(s) wherein it is qualified to do business. All such
Subsidiaries and ownership interests are in compliance with all applicable
laws, rules and regulations relating to direct investments in equity
ownership interests. NFB owns, either directly or indirectly, all of the
outstanding capital stock of each of its Subsidiaries. No Subsidiary of NFB
other than NFB Bank and Superior Savings of New England is an "insured
depository institution" as defined in the FDIA and the applicable
regulations thereunder. All of the shares of capital stock of each of the
Subsidiaries of NFB are duly authorized and validly issued, fully paid and
nonassessable and not subject to any preemptive rights and are owned by NFB
or a Subsidiary of NFB free and clear of any claims, liens, encumbrances or
restrictions (other than those imposed by applicable federal and state
securities laws) and there are no agreements or understandings with respect
to the voting or disposition of any such shares.
(iv) The deposits of NFB Bank are insured by the BIF
or the Savings Association Insurance Fund of the FDIC to the extent
provided in the FDIA.
(b) Capital Structure. (i) The authorized capital stock of
NFB consists of 200,000,000 shares of NFB Common Stock and 10,000,000
shares of preferred stock, par value $1.00 per share ("NFB Preferred
Stock"). As of the date of this Agreement, (A) 135,767,087 shares of NFB
Common Stock were issued and outstanding, (B) no shares of NFB Preferred
Stock were issued and outstanding, (C) no shares of NFB Common Stock were
reserved for issuance, except that 2,000,000 shares of NFB Common Stock
were reserved for issuance pursuant to the NFB Dividend Reinvestment and
Stock Purchase Plan and 1,973,140 shares of NFB Common Stock were reserved
for issuance pursuant to the NFB 1985 Incentive Stock Option Plan, the NFB
1987 Long-Term Incentive Plan, the NFB 1989 Executive Management and
Compensation Plan, the NFB 1994 Key Employee Stock Plan, the NFB 1997
Non-Officer Stock Plan and the NFB 1998 Stock Compensation Plan (the "NFB
Stock Plans"), (D) no shares of NFB Preferred Stock were reserved for
issuance and (E) 9,359,435 shares of NFB Common Stock were held by NFB in
its treasury or by its Subsidiaries. The authorized capital stock of NFB
Bank consists of 5,500,000 shares of common stock, par value $1.00 per
share, and no shares of preferred stock. As of the date of this Agreement,
5,500,000 shares of such common stock were outstanding, no shares of such
preferred stock were outstanding and all outstanding shares of such common
stock were, and as of the Effective Time will be, owned by NFB. All
outstanding shares of capital stock of NFB and NFB Bank are duly authorized
and validly issued, fully paid and nonassessable and not subject to any
preemptive rights and, with respect to shares held by NFB in its treasury
or by its Subsidiaries, are free and clear of all claims, liens,
encumbrances or restrictions (other than those imposed by applicable
federal or state securities laws) and there are no agreements or
understandings with respect to the voting or disposition of any such
shares.
(ii) No Voting Debt of NFB is issued or outstanding.
(iii) As of the date of this Agreement, except for
this Agreement, the NFB Stock Plans and as set forth in NFB's Disclosure
Letter, neither NFB nor any of its Subsidiaries has or is bound by any
outstanding options, warrants, calls, rights, convertible securities,
commitments or agreements of any character obligating NFB or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, any additional shares of capital stock of NFB or any of its
Subsidiaries or obligating NFB or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, right, convertible security,
commitment or agreement. As of the date hereof, there are no outstanding
contractual obligations of NFB or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of NFB or any of
its Subsidiaries.
(c) Authority. Each of NFB and NFB Bank has the requisite
corporate power and authority to enter into this Agreement and the Plan of
Bank Merger, respectively and, subject to approval of this Agreement by the
requisite vote of NFB's stockholders and receipt of all required regulatory
or governmental approvals, as contemplated by Section 5.1(b) of this
Agreement, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, and, subject to the approval of
this Agreement by NFB's stockholders, the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
actions on the part of NFB and NFB Bank. This Agreement has been duly
executed and delivered by NFB and constitutes a valid and binding
obligation of NFB, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity, whether applied in a court of law or a court of
equity.
(d) Stockholder Approval; Fairness Opinion. The affirmative
vote of the holders of a majority of the outstanding shares of NFB Common
Stock entitled to vote on this Agreement is the only vote of the
stockholders of NFB required for approval of this Agreement by NFB and the
consummation by NFB of the Merger and the related transactions contemplated
hereby. NFB has received the written opinion of Donaldson, Lufkin &
Jenrette Securities Corporation to the effect that, as of the date hereof,
the Exchange Ratio is fair, from a financial point of view, to NFB's
stockholders.
(e) No Violations. The execution, delivery and performance
of this Agreement by NFB do not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming receipt of all
Requisite Regulatory Approvals and requisite stockholder approvals, a
breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of NFB or any of its Subsidiaries, or to which NFB
or any of its Subsidiaries (or any of their respective properties) is
subject, (ii) a breach or violation of, or a default under, the certificate
of incorporation or bylaws of NFB or the similar organizational documents
of any of its Subsidiaries or (iii) a breach or violation of, or a default
under (or an event which, with due notice or lapse of time or both, would
constitute a default under), or result in the termination of, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties
or assets of NFB or any of its Subsidiaries, under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which NFB or any
of its Subsidiaries is a party, or to which any of their respective
properties or assets may be subject; and the consummation of the
transactions (including the Bank Merger) contemplated hereby (exclusive of
the effect of any changes effected pursuant to Section 1.7) will not
require any approval, consent or waiver under any such law, rule,
regulation, judgment, decree, order, governmental permit or license or the
approval, consent or waiver of any other party to any such agreement,
indenture or instrument, other than (x) the approval of the holders of a
majority of the outstanding shares of NFB Common Stock, (y) the Requisite
Regulatory Approvals and (z) such approvals, consents or waivers as are
required under the federal and state securities or "blue sky" laws in
connection with the transactions contemplated by this Agreement. As of the
date hereof, the executive officers of NFB know of no reason pertaining to
NFB why any of the approvals referred to in this Section 2.4(e) should not
be obtained.
(f) Reports. (i) As of their respective dates, none of the
reports or other statements filed by NFB or NFB Bank on or subsequent to
December 31, 1997 with the SEC (collectively, "NFB's Reports"), contained,
or will contain, any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading. Each of the financial statements of NFB
included in NFB's Reports complied as to form, as of their respective dates
of filing with the SEC, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and have been prepared in accordance with GAAP (except as
may be indicated in the notes thereto or, in the case of unaudited
financial statements, as permitted by Form 10-Q of the SEC). Each of the
consolidated statements of condition, consolidated statements of
operations, consolidated statements of cash flows and consolidated
statements of changes in stockholders' equity contained or incorporated by
reference in NFB's Reports (including in each case any related notes and
schedules) fairly presented, or will fairly present, as the case may be,
the financial position, results of operations, cash flows and stockholders'
equity, as the case may be, of the entity or entities to which it relates
for the periods set forth therein (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments that are not
material in amount or effect), in each case in accordance with GAAP, except
as may be noted therein.
(ii) NFB and its Subsidiaries have each timely filed
all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1996 with (A) the NYSBD, (B) FRB (C)
the FDIC, (D) the SEC, (E) the NYSE and (F) any other SRO, and have paid
all fees and assessments due and payable in connection therewith.
(g) Absence of Certain Changes or Events. Except as
disclosed in NFB's Reports filed on or prior to the date of this Agreement,
since December 31, 1998, (i) NFB and its Subsidiaries have not incurred any
liability, except in the ordinary course of their businesses consistent
with past practice and (ii) there has not been any Material Adverse Effect
with respect to NFB.
(h) Absence of Claims. Except as disclosed in NFB's
Disclosure Letter, no litigation, proceeding, controversy, claim or action
before any court or Governmental Entity is pending against NFB or any of
its Subsidiaries, and, to the best of NFB's knowledge, no such litigation,
proceeding, controversy, claim or action has been threatened.
(i) Absence of Regulatory Actions. Neither NFB nor any of
its Subsidiaries is a party to any cease and desist order, written
agreement or memorandum of understanding with, or any commitment letter or
similar written undertaking to, or is subject to any action, proceeding,
order or directive by, or is a recipient of any extraordinary supervisory
letter from any Bank Regulator, or has adopted any board resolutions at the
request of any Bank Regulator, nor has it been advised by any Bank
Regulator that it is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such action, proceeding,
order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar written undertaking.
(j) Taxes. All federal, state, local and foreign tax returns
required to be filed by or on behalf of NFB or any of its Subsidiaries have
been timely filed or requests for extensions have been timely filed and any
such extension shall have been granted and not have expired, and all such
filed returns are complete and accurate in all material respects. All taxes
shown on such returns, all taxes required to be shown on returns for which
extensions have been granted and all other taxes required to be paid by NFB
or any of its Subsidiaries have been paid in full or adequate provision has
been made for any such taxes on NFB's balance sheet (in accordance with
GAAP). For purposes of this Section 2.4(j), the terms "taxes" and "tax
return" shall have the meanings assigned to such terms in Section 2.3(j) of
this Agreement. Except as disclosed in NFB's Disclosure Letter, as of the
date of this Agreement, there is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to any
taxes of NFB or any of its Subsidiaries, and no claim has been made by any
authority in a jurisdiction where NFB or any of its Subsidiaries do not
file tax returns that NFB or any such Subsidiary is subject to taxation in
that jurisdiction. All taxes, interest, additions and penalties due with
respect to completed and settled examinations or concluded litigation
relating to NFB or any of its Subsidiaries have been paid in full or
adequate provision has been made for any such taxes on NFB's balance sheet
(in accordance with GAAP). NFB and its Subsidiaries have not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any material tax due that is currently in effect. NFB and
each of its Subsidiaries has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third
party, and NFB and each of its Subsidiaries has timely complied with all
applicable information reporting requirements under Part III, Subchapter A
of Chapter 61 of the Code and similar applicable state and local
information reporting requirements. Neither NFB nor any of its Subsidiaries
(i) has made an election under Section 341(f) of the Code, (ii) has issued
or assumed any obligation under Section 279 of the Code, any high yield
discount obligation as described in Section 163(i) of the Code or any
registration-required obligation within the meaning of Section 163(f)(2) of
the Code that is not in registered form or (iii) is or has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code.
(k) Agreements. (i) Except for arrangements made in the
ordinary course of business, and except as disclosed in NFB's Disclosure
Letter, NFB and its Subsidiaries are not bound by any material contract (as
defined in Item 601(b)(10) of Regulation S-K) to be performed after the
date hereof that has not been filed with or incorporated by reference in
NFB's Reports. Except as disclosed in NFB's Reports filed prior to the date
of this Agreement or as disclosed in NFB's Disclosure Letter, neither NFB
nor any of its Subsidiaries is a party to an oral or written agreement
containing covenants that limit the ability of NFB or any of its
Subsidiaries to compete in any line of business or with any person, or that
involve any restriction on the geographic area in which, or method by
which, NFB (including any successor thereof) or any of its Subsidiaries may
carry on its business (other than as may be required by law or any
regulatory agency).
(ii) Neither NFB nor any of its Subsidiaries is in
default under or in violation of any provision of any note, bond,
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement to which it is a party or by which it is bound or to which any of
its respective properties or assets is subject.
(iii) NFB and each of its Subsidiaries owns or
possesses valid and binding licenses and other rights to use without
payment all patents, copyrights, trade secrets, trade names, servicemarks
and trademarks used in its businesses, and neither NFB nor any of its
Subsidiaries has received any notice of conflict with respect thereto that
asserts the right of others. Each of NFB and its Subsidiaries has performed
all the obligations required to be performed by it and are not in default
under any contact, agreement, arrangement or commitment relating to any of
the foregoing.
(l) NFB Common Stock. The shares of NFB Common Stock to be
issued pursuant to this Agreement, when issued in accordance with the terms
of this Agreement, will be duly authorized and validly issued, fully paid
and nonassessable and not subject to any preemptive rights.
(m) Labor Matters. Neither NFB nor any of its Subsidiaries
is or has ever been a party to, or is or has ever been bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization with respect to its
employees, nor is NFB or any of its Subsidiaries the subject of any
proceeding asserting that it has committed an unfair labor practice or
seeking to compel it to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike, other labor dispute or
organizational effort involving NFB or any of its Subsidiaries pending or,
to the best of NFB's knowledge, threatened. NFB and its Subsidiaries are in
compliance with applicable laws regarding employment of employees and
retention of independent contractors and are in compliance with applicable
employment tax laws.
(n) Employee Benefit Plans. NFB's Disclosure Letter contains
a complete and accurate list of all pension, retirement, stock option,
stock purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance,
severance and other benefit plans, contracts, agreements and arrangements,
including, but not limited to, "employee benefit plans," as defined in
Section 3(3) of ERISA, incentive and welfare policies, contracts, plans and
arrangements and all trust agreements related thereto with respect to any
present or former directors, officers or other employees of NFB or any of
its Subsidiaries (hereinafter collectively referred to as the "NFB Employee
Plans"). Except as disclosed in NFB's Disclosure Letter:
(i) all of the NFB Employee Plans comply in all
material respects with all applicable requirements of ERISA, the
Code and other applicable laws; there has occurred no "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) which is likely to result in the imposition of any
penalties or taxes under Section 502(i) of ERISA or Section 4975 of
the Code upon NFB or any of its Subsidiaries;
(ii) no liability to the PBGC has been or is expected
by NFB or any of its Subsidiaries to be incurred with respect to
any NFB Employee Plan which is subject to Title IV of ERISA ("NFB
Pension Plan"), or with respect to any "single-employer plan" (as
defined in Section 4001(a) of ERISA) currently or formerly
maintained by NFB or any entity which is considered one employer
with NFB under Section 4001(b)(1) of ERISA or Section 414 of the
Code (a "NFB ERISA Affiliate");
(iii) no NFB Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, as of the last day of the end of the most recent plan year
ending prior to the date hereof; the fair market value of the
assets of each NFB Pension Plan exceeds the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA)
under such NFB Pension Plan as of the end of the most recent plan
year with respect to the respective NFB Pension Plan ending prior
to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such
NFB Pension Plan as of the date hereof; and no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which
the 30-day reporting requirement has not been waived has been
required to be filed for any NFB Pension Plan within the 12-month
period ending on the date hereof;
(iv) neither NFB nor any of its Subsidiaries has
provided, or is required to provide, security to any NFB Pension
Plan or to any single-employer plan of a NFB ERISA Affiliate
pursuant to Section 401(a)(29) of the Code;
(v) neither NFB, its Subsidiaries, nor any NFB ERISA
Affiliate has contributed to any "multiemployer plan," as defined
in Section 3(37) of ERISA, on or after
September 26, 1980;
(vi) each NFB Employee Plan that is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and
which is intended to be qualified under Section 401(a) of the Code
("NFB Qualified Plan") has received a favorable determination
letter from the IRS, and NFB and its Subsidiaries are not aware of
any circumstances likely to result in revocation of any such
favorable determination letter;
(vii) there is no pending or, to NFB's knowledge,
threatened litigation, administrative action or proceeding relating
to any NFB Employee Plan;
(viii) there has been no announcement or commitment
by NFB or any of its Subsidiaries to create an additional NFB
Employee Plan, or to amend any NFB Employee Plan, except for
amendments required by applicable law which do not materially
increase the cost of such NFB Employee Plan; and, except as
specifically identified in NFB's Disclosure Letter, NFB and its
Subsidiaries do not have any obligations for post-retirement or
post-employment benefits under any NFB Employee Plan that cannot be
amended or terminated upon 60 days' notice or less without
incurring any liability thereunder, except for coverage required by
Part 6 of Title I of ERISA or Section 4980B of the Code, or similar
state laws, the cost of which is borne by the insured individuals;
(ix) neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will result in any payment or series of payments by NFB or
any of its Subsidiaries to any person which is an "excess parachute
payment" (as defined in Section 280G of the Code), increase or
secure (by way of a trust or other vehicle) any benefits payable
under any NFB Employee Plan or accelerate the time of payment or
vesting of any such benefit; and
(x) with respect to each NFB Employee Plan, NFB has
made available to JSB a true and correct copy of (A) the annual
report on the applicable form of the Form 5500 series filed with
the IRS for the most recent three plan years, if required to be
filed, (B) such NFB Employee Plan, including amendments thereto,
(C) each trust agreement, insurance contract or other funding
arrangement relating to such NFB Employee Plan, including
amendments thereto, (D) the most recent summary plan description
and summary of material modifications thereto for such NFB Employee
Plan, if the NFB Employee Plan is subject to Title I of ERISA, (E)
the most recent actuarial report or valuation if such NFB Employee
Plan is an NFB Pension Plan and any subsequent changes to the
actuarial assumptions contained therein and (F) the most recent
determination letter issued by the IRS if such NFB Employee Plan is
a Qualified Plan.
(o) Title to Assets. NFB and each of its Subsidiaries has
good and marketable title to its properties and assets (including any
intellectual property asset such as any trademark, servicemark, trade name
or copyright) and property acquired in a judicial foreclosure proceeding or
by way of a deed in lieu of foreclosure or similar transfer, other than
property as to which it is lessee, in which case the related lease is valid
and in full force and effect. Each lease pursuant to which NFB or any of
its Subsidiaries is lessor is valid and in full force and effect and no
lessee under any such lease is in material default or violation of any
provisions of any such lease. All material tangible properties of NFB and
each of its Subsidiaries are in a good state of maintenance and repair,
conform with all applicable ordinances, regulations and zoning laws and are
considered by NFB to be adequate for the current business of NFB and its
Subsidiaries.
(p) Compliance with Laws. NFB and each of its Subsidiaries
has all permits, licenses, certificates of authority, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Entities that are required in order to permit it to carry on
its business as it is presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and
effect, and, to the best knowledge of NFB, no suspension or cancellation of
any of them is threatened. Since the date of its incorporation, the
corporate affairs of NFB have not been conducted in violation of any law,
ordinance, regulation, order, writ, rule, decree or approval of any
Governmental Entity. The businesses of NFB and its Subsidiaries are not
being conducted in violation of any law, ordinance, regulation, order,
writ, rule, decree or condition to approval of any Governmental Entity.
(q) Fees. Other than financial advisory services performed
for NFB by Donaldson, Lufkin & Jenrette Securities Corporation pursuant to
an agreement dated July 29, 1999, a true and complete copy of which has
been previously delivered to JSB, neither NFB nor any of its Subsidiaries,
nor any of their respective officers, directors, employees or agents, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker
or finder has acted directly or indirectly for NFB or any of its
Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
(r) Environmental Matters. With respect to NFB and each of
its Subsidiaries, except as disclosed in NFB's Disclosure Letter:
(i) each of NFB and its Subsidiaries and, to NFB's
knowledge, the Participation Facilities and the Loan Properties
are, and have been, in substantial compliance with, and are not
liable under, all Environmental Laws;
(ii) there is no suit, claim, action, demand,
executive or administrative order, directive, investigation or
proceeding pending or, to the best of NFB's knowledge, threatened,
before any court, Governmental Entity or board or other forum
against it or any of its Subsidiaries or any Participation Facility
(x) for alleged noncompliance (including by any predecessor) with,
or liability under, any Environmental Law or (y) relating to the
presence of or release into the environment of any Hazardous
Material, whether or not occurring at or on a site owned, leased or
operated by it or any of its Subsidiaries or any Participation
Facility;
(iii) to the best of NFB's knowledge, there is no
suit, claim, action, demand, executive or administrative order,
directive, investigation or proceeding pending or threatened before
any court, Governmental Entity or board or other forum relating to
or against any Loan Property (or NFB or any of its Subsidiaries in
respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (y) relating to the presence of or
release into the environment of any Hazardous Material, whether or
not occurring at or on a site owned, leased or operated by a Loan
Property; and
(iv) to the best of NFB's knowledge, during the
period of (l) NFB's or any of its Subsidiaries' ownership or
operation of any of their respective current properties or (m)
NFB's or any of its Subsidiaries' participation in the management
of any Participation Facility, there has been no contamination by
or release of Hazardous Materials in, on, under or affecting such
properties.
(s) Loan Portfolio; Allowance; Asset Qua(i)y. With respect
to each Loan owned by NFB or its Subsidiaries in whole or in part, to the
best knowledge of NFB:
(A) the note and the related security documents are
each legal, valid and binding obligations of the maker or
obligor thereof, enforceable against such maker or obligor
in accordance with their terms;
(B) neither NFB nor any of its Subsidiaries nor any
prior holder of a Loan has modified the note or any of the
related security documents in any material respect or
satisfied, canceled or subordinated the note or any of the
related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(C) NFB or a Subsidiary is the sole holder of legal
and beneficial title to each Loan (or NFB Bank's applicable
participation interest, as applicable); except as otherwise
referenced on the books and records of NFB;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and
correct copies of the documents they purport to be and have
not been suspended, amended, modified, canceled or otherwise
changed, except as otherwise disclosed by documents in the
applicable Loan file;
(E) there is no pending or threatened condemnation
proceeding or similar proceeding affecting the property that
serves as security for a Loan, except as otherwise
referenced on the books and records of NFB;
(F) there is no litigation or proceeding pending or
threatened, relating to the property that serves as security
for a Loan that would have a material adverse effect upon
the related Loan; and
(G) with respect to a Loan held in the form of a
participation, the participation documentation is legal,
valid, binding and enforceable.
(ii) The allowance for possible losses reflected in
NFB's audited statement of condition at December 31, 1998 was, and the
allowance for possible losses shown on the balance sheets in NFB's Reports
for periods ending after December 31, 1998 will be, adequate, as of the
dates thereof, under GAAP.
(iii) NFB's Disclosure Letter sets forth by category
the amounts of all loans, leases, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets of NFB and
its Subsidiaries that have been classified by any bank examiner (whether
regulatory or internal) as "Special Mention," "Substandard," "Doubtful,"
"Loss" or words of similar import, and NFB and its Subsidiaries shall
promptly after the end of any month inform JSB of any such classification
arrived at any time after the date hereof. The OREO included in any
non-performing assets of NFB or any of its Subsidiaries is carried net of
reserves at the lower of cost or fair value, less estimated selling costs,
based on current independent appraisals or evaluations or current
management appraisals or evaluations; provided, however, that "current"
shall mean within the past 12 months.
(t) Accounting Matters. Except as disclosed in NFB's
Disclosure Letter, neither NFB nor any of its Subsidiaries or, to the best
of its knowledge, any of its other affiliates has, through the date hereof,
taken or agreed to take any action that would prevent NFB from accounting
for the business combination to be effected by the Merger as a
pooling-of-interests, and NFB has no knowledge of any fact or circumstance
that would prevent such accounting treatment.
(u) Insurance. NFB and its Subsidiaries are presently
insured, and since December 31, 1996, have been insured, for reasonable
amounts with financially sound and reputable insurance companies, against
such risks as companies engaged in a similar business would, in accordance
with good business practice, customarily be insured. All of the insurance
policies and bonds maintained by NFB and its Subsidiaries are in full force
and effect, NFB and its Subsidiaries are not in default thereunder and all
material claims thereunder have been filed in due and timely fashion.
(v) Investment Securities; Borrowings. (i) Except for
investments in FHLB Stock and pledges to secure FHLB borrowings and reverse
repurchase agreements entered into in arms-length transactions pursuant to
normal commercial terms and conditions and entered into in the ordinary
course of business and restrictions that exist for securities to be
classified as "held to maturity," none of the investments reflected in the
consolidated balance sheet of NFB included in NFB's Report on Form 10-K for
the year ended December 31, 1998, and none of the investment securities
held by it or any of its Subsidiaries since December 31, 1998 is subject to
any restriction (contractual or statutory) that would materially impair the
ability of the entity holding such investment freely to dispose of such
investment at any time.
(ii) Neither NFB nor any Subsidiary is a party to or
has agreed to enter into any Derivatives Contract or owns securities that
(A) are referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes" or "capped floating rate
mortgage derivatives" or (B) are likely to have changes in value as a
result of interest or exchange rate changes that significantly exceed
normal changes in value attributable to interest or exchange rate changes,
except for those Derivatives Contracts and other instruments legally
purchased or entered into in the ordinary course of business, consistent
with safe and sound banking practices and regulatory guidance, and listed
(as of the date hereof) in NFB's Disclosure Letter or disclosed in NFB's
Reports filed on or prior to the date hereof.
(iii) Set forth in NFB's Disclosure Letter is a true
and complete list of NFB's borrowed funds (excluding deposit accounts) as
of the date hereof.
(w) Corporate Documents. NFB has made available to JSB true
and complete copies of its certificate of incorporation and bylaws and of
NFB Bank's organization certificate and bylaws. The minute books of NFB and
NFB Bank constitute a complete and correct record of all actions taken by
their respective boards of directors (and each committee thereof) and their
stockholders. The minute books of each of NFB's Subsidiaries constitutes a
complete and correct record of all actions taken by the respective boards
of directors (and each committee thereof) and the stockholders of each such
Subsidiary.
(x) Tax Treatment of the Merger. As of the date hereof, NFB
has no knowledge of any fact or circumstance that would prevent the Merger
or the Bank Merger, if effected, from qualifying as a reorganization under
Section 368(a) of the Code.
(y) Beneficial Ownership of JSB Common Stock. As of the date
hereof, NFB does not beneficially own any shares of JSB Common Stock and,
other than as contemplated by the JSB Option Agreement, does not have any
option, warrant or right of any kind to acquire the beneficial ownership of
any shares of JSB Common Stock.
(z) Year 2000 Matters. NFB's Disclosure Letter sets forth a
true and complete copy of NFB's plan to cause all of the Date-Sensitive
Systems owned, leased or used by NFB or any of its Subsidiaries intended
and necessary for use after December 31, 1999, or licensed to NFB or any of
its Subsidiaries for use by NFB or any of its Subsidiaries, and all of the
Date Data of NFB or any of its Subsidiaries to be Year 2000 Compliant (the
"NFB Y2K Plan"). NFB believes that the NFB Y2K Plan can be substantially
achieved on or before September 30, 1999, with aggregate expenditures under
the NFB Y2K Plan not materially in excess of $2 million.
(aa) Registration Statement. The information to be supplied
by NFB for inclusion in (i) the Registration Statement or (ii) the Joint
Proxy Statement-Prospectus will not, at the time such Registration
Statement becomes effective, 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 therein, in light of the
circumstances under which they are made, not misleading.
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.1. Conduct of JSB's Business Prior to the
Effective Time. Except as expressly provided in this Agreement, during the
period from the date of this Agreement to the Effective Time, JSB shall,
and shall cause its Subsidiaries to, use commercially reasonable efforts to
(i) conduct its business in the regular, ordinary and usual course
consistent with past practice; (ii) maintain and preserve intact its
business organization, properties, leases, employees and advantageous
business relationships and retain the services of its officers and key
employees, (iii) take no action which would materially adversely affect or
delay the ability of JSB or NFB to perform their respective covenants and
agreements on a timely basis under this Agreement, (iv) take no action
which would adversely affect or delay the ability of JSB, JSB Bank, NFB or
NFB Bank to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated hereby or
which would reasonably be expected to result in any such approvals,
consents or waivers containing any material condition or restriction, and
(v) take no action that results in or is reasonably likely to have a
Material Adverse Effect on JSB or JSB Bank.
Section 3.2. Forbearance by JSB. Without limiting the
covenants set forth in Section 3.1 hereof, except as otherwise provided in
this Agreement and except to the extent required by law or regulation or
any Bank Regulators, during the period from the date of this Agreement to
the Effective Time, JSB shall not, and shall not permit any of its
Subsidiaries to, without the prior consent of NFB, which consent shall not
be unreasonably withheld:
(a) change any provisions of the certificate of
incorporation or bylaws of JSB or the similar governing documents of its
Subsidiaries;
(b) issue any shares of capital stock or change the terms of
any outstanding stock options or warrants or issue, grant or sell any
option, warrant, call, commitment, stock appreciation right, right to
purchase or agreement of any character relating to the authorized or issued
capital stock of JSB, except pursuant to (i) the exercise of stock options
or warrants outstanding as of the date of this Agreement, (ii) the
automatic grant of 142,000 stock options under the JSB 1996 Stock Option
Plan as a result of the execution of this Agreement or (iii) the JSB Option
Agreement; adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend (except for JSB's regular quarterly dividend,
which shall not be increased by more than $.05 per share from the current
level) or make any other distribution on, or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares
of its capital stock. As promptly as practicable following the date of this
Agreement, the Board of Directors of JSB shall cause its regular quarterly
dividend record dates and payment dates to be the same as NFB's regular
quarterly dividend record dates and payments dates for NFB Common Stock,
and JSB shall not thereafter change its regular dividend payment dates and
record dates. Nothing contained in this Section 3.2(b) or in any other
Section of this Agreement shall be construed to permit holders of shares of
JSB Common Stock to receive two dividends from either JSB or from JSB and
NFB in any one quarter or to deny or prohibit such holders from receiving
one dividend from either JSB or NFB in any quarter. Subject to applicable
regulatory restrictions, if any, JSB Bank may pay a cash dividend that is,
in the aggregate, sufficient to fund any dividend by JSB permitted
hereunder and to allow JSB to make the payments required under Section
4.13(d) of this Agreement;
(c) other than in the ordinary course of business consistent
with past practice and pursuant to policies currently in effect, sell,
transfer, mortgage, encumber or otherwise dispose of any of its material
properties, leases or assets to any individual, corporation or other entity
other than a direct or indirect wholly owned Subsidiary of JSB or cancel,
release or assign any indebtedness of any such individual, corporation or
other entity, except pursuant to contracts or agreements in force at the
date of this Agreement and which have been disclosed to NFB and except for
the sale of unsold cooperative shares owned by JSB or its Subsidiaries, as
disclosed in JSB's Disclosure Letter;
(d) except to the extent required by law or as disclosed in
JSB's Disclosure Letter or specifically provided for elsewhere herein, (i)
increase the compensation or fringe benefits of any of its employees or
directors, other than general increases in compensation in the ordinary
course of business consistent with past practice and, upon consultation
with NFB, the payment of reasonable "stay in place" pay where necessary or
appropriate to retain key employees in an amount not to exceed $500,000 in
the aggregate; (ii) pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or directors, or
become a party to, amend or commit itself to fund or otherwise establish
any trust or account related to any JSB Employee Plan (as defined in
Section 2.3(m)) with or for the benefit of any employee or director; or
(iii) voluntarily accelerate the vesting of any stock options or other
compensation or benefit;
(e) except as contemplated by Section 4.2, change its method
of accounting as in effect at December 31, 1998, except as required by
changes in GAAP as concurred in by JSB's independent auditors;
(f) settle any claim, action or proceeding involving any
liability of JSB or any of its Subsidiaries for money damages in excess of
$500,000 or impose material restrictions upon the operations
of JSB or any of its Subsidiaries;
(g) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, in
each case which are material, individually or in the aggregate, to JSB,
except in satisfaction of debts previously contracted;
(h) except pursuant to commitments existing at the date
hereof which have previously been disclosed to NFB, make any real estate
loans secured by undeveloped land or real estate located outside the States
of New York, New Jersey or Connecticut (other than real estate secured by
one-to-four family homes) or make any construction loan (other than
construction loans secured by one-to-four family homes) outside the States
of New York, New Jersey or Connecticut;
(i) establish or commit to the establishment of any new
branch or other office facilities other than those for which all regulatory
approvals have been obtained;
(j) take, fail to take, or cause to be taken or not taken
any action that would prevent or impede the Merger from qualifying (A) for
pooling-of-interests accounting treatment or (B) as a reorganization within
the meaning of Section 368(a) of the Code; or
(k) make any capital expenditures other than those which (i)
are made in the ordinary course of business or are necessary to maintain
existing assets in good repair and (ii) in any event are in an amount of no
more than $500,000 in the aggregate;
(l) enter into any new line of business;
(m) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth
in this Agreement being or becoming untrue in any material respect, or any
of the conditions to the Merger set forth in Article V not being satisfied;
(n) other than in the ordinary course of business consistent
with prudent banking practices, incur any indebtedness for borrowed money
or assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or
other entity;
(o) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with prudent banking practices;
(p) other than in prior consultation with NFB, restructure
or materially change its investment securities portfolio, through
purchases, sales or otherwise, or the manner in which the portfolio is
classified or reported; or
(q) agree or commit to take any action that is prohibited by
this Section 3.2.
In the event that NFB does not respond in writing to JSB within five
business days of receipt by NFB of a written request for JSB to engage in
any of the actions for which NFB's prior written consent is required
pursuant to this Section 3.2, NFB shall be deemed to have consented to such
action. Any request by JSB or response thereto by NFB shall be made in
accordance with the notice provisions of Section 8.7, shall note that it is
a request pursuant to this Section 3.2 and shall state that a failure to
respond within five business days shall constitute consent.
Section 3.3. Conduct of NFB's Business Prior to the
Effective Time. Except as expressly provided in this Agreement, during the
period from the date of this Agreement to the Effective Time, NFB shall,
and shall cause its Subsidiaries to, use commercially reasonable efforts to
(i) conduct its business in the regular, ordinary and usual course
consistent with past practice; (ii) maintain and preserve intact its
business organization, properties, leases, employees and advantageous
business relationships and retain the services of its officers and key
employees, (iii) take no action which would materially adversely affect or
delay the ability of JSB or NFB to perform their respective covenants and
agreements on a timely basis under this Agreement, (iv) take no action
which would adversely affect or delay the ability of JSB, NFB, JSB Bank or
NFB Bank to obtain any necessary approvals, consents or waivers of any
Governmental Entity required for the transactions contemplated hereby and
(v) take no action that results in or is reasonably likely to have a
Material Adverse Effect on NFB.
Section 3.4. Forbearance by NFB. Without limiting the
covenants set forth in Section 3.3 hereof, except as otherwise provided in
this Agreement and except to the extent required by law or regulation or
any Bank Regulators, during the period from the date of this Agreement to
the Effective Time, NFB shall not, and shall not permit any of its
Subsidiaries to, without the prior consent of JSB, which consent shall not
be unreasonably withheld:
(a) change any provisions of the certificate of
incorporation of NFB or the organization certificate of NFB Bank, other
than to increase the authorized capital stock of NFB or to change the par
value of NFB Common Stock;
(b) issue any shares of capital stock or change the terms of
any outstanding stock options or warrants or issue, grant or sell any
option, warrant, call, commitment, stock appreciation right, right to
purchase or agreement of any character relating to the authorized or issued
capital stock of NFB except (i) in transactions permitted under Section
3.4(e), (ii) pursuant to the exercise of stock options or warrants
outstanding as of the date of this Agreement or granted in accordance with
this Section 3.4(b), (iii) for the grant of options under the NFB Stock
Plans consistent with NFB's past practice or (iv) for the issuance of such
number of shares of NFB Common Stock as is necessary to permit the Merger
to be accounted for as a pooling-of-interests; adjust, split, combine or
reclassify any capital stock; or, solely in the case of NFB, make, declare
or pay any dividend (except for NFB's regular quarterly cash dividend) or
make any other distribution on any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares
of its capital stock; provided, however, that nothing contained herein
shall prohibit NFB from increasing the quarterly cash dividend on NFB
Common Stock;
(c) make any acquisition or take any other action that
individually or in the aggregate could materially adversely affect the
ability of NFB to consummate the transactions contemplated hereby, or enter
into any agreement providing for, or otherwise participate in, any merger,
consolidation or other transaction in which NFB or any surviving
corporation may be required not to consummate the Merger or any of the
other transactions contemplated hereby in accordance with the terms of this
Agreement;
(d) take, fail to take, or cause to be taken or not taken
any action that would prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code; provided,
however, that nothing contained herein shall limit the ability of NFB to
exercise its rights under the JSB Option Agreement;
(e) enter into an agreement with respect to an Acquisition
Transaction (as defined below) with a third party; provided, that the
foregoing shall not prevent NFB or any of its Subsidiaries from entering
into any agreement with respect to an Acquisition Transaction if such
action is, in the reasonable judgment of NFB, desirable in the conduct of
the business of NFB and its Subsidiaries and would not, in the reasonable
judgment of NFB, likely delay the Effective Time to a date subsequent to
the date set forth in Section 6.1(d) of this Agreement or adversely affect
the Merger Consideration to be received by JSB's stockholders pursuant to
this Agreement. For purposes of this Agreement, "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving NFB, (y) a purchase, lease or other acquisition of all or
substantially all of the assets of NFB or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
NFB; provided, that the term "Acquisition Transaction" does not include (i)
any internal merger or consolidation involving only NFB and its
Subsidiaries or (ii) any acquisition or acquisitions by NFB subsequent to
August 15, 1999 involving in the aggregate, for all such acquisitions, the
issuance of up to the difference between (1) 10% of the shares of NFB
Common Stock outstanding as of the date hereof and (2) the number of
shares, if any, issued pursuant to Section 3.4(b)(iv), or cash
consideration equal to such number of shares multiplied by $20.44 per
share;
(f) change its method of accounting as in effect at December
31, 1998, except as required by changes in GAAP as concurred in by JSB's
independent auditors;
(g) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth
in this Agreement being or becoming untrue in any material respect, or any
of the conditions to the Merger set forth in Article V not being satisfied;
or
(h) agree or commit to take any action that is prohibited by
this Section 3.4.
ARTICLE IV
COVENANTS
Section 4.1. Acquisition Proposals. JSB agrees that neither
it nor any of its Subsidiaries, nor any of the respective officers and
directors of JSB or any of its Subsidiaries, shall, and JSB shall not
authorize or permit any of its employees, agents or representatives
(including, without limitation, any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) to, (a) initiate,
solicit or encourage, directly or indirectly, any inquiries or the making
of any proposal or offer (including, without limitation, any proposal or
offer to JSB's stockholders) with respect to a merger, consolidation or
similar transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, JSB or any of its
material Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or (b) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent JSB or its Board of Directors from (i) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal or (ii) (A) providing information in response to a
request therefor by a person who has made an unsolicited bona fide written
Acquisition Proposal (an "Unsolicited Acquisition Proposal") if the Board
of Directors receives from the person so requesting such information an
executed confidentiality agreement on terms substantially equivalent to
those contained in the confidentiality agreement between NFB and JSB, dated
as of July 13, 1999; or (B) engaging in any negotiations or discussions
with any person who has made an Unsolicited Acquisition Proposal, if and
only to the extent that, in each such case referred to in clause (A) or (B)
above, (x) the Board of Directors of JSB, after consultation with and based
upon the written opinion of outside legal counsel, in good faith deems such
action to be legally necessary for the proper discharge of its fiduciary
duties under applicable law and (y) the Board of Directors of JSB, after
consultation with its financial advisor, determines in good faith that such
Unsolicited Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory
aspects of the proposal and the person making the proposal and would, if
consummated, result in a more favorable transaction than the transaction
contemplated by this Agreement, taking into account the prospects and
interests of JSB and its stockholders. JSB will notify NFB immediately
orally (within one day) and in writing (within three days) if any such
Unsolicited Acquisition Proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with JSB after the date hereof, the identity of the
person making such inquiry, proposal or offer and the substance thereof and
will keep NFB informed of any developments with respect thereto immediately
upon the occurrence thereof. Subject to the foregoing, JSB will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of
the foregoing. JSB will take the necessary steps to inform the appropriate
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 4.1. JSB will promptly request each
person (other than NFB) that has executed a confidentiality agreement prior
to the date hereof in connection with its consideration of a business
combination with JSB or any of its Subsidiaries to return or destroy all
confidential information previously furnished to such person by or on
behalf of JSB or any of its Subsidiaries. JSB shall take all steps
necessary to enforce all such confidentiality agreements.
Section 4.2. Certain Policies of JSB.
(a) At the request of NFB, JSB shall cause JSB Bank to
modify and change its loan, litigation and real estate valuation policies
and practices (including loan classifications and levels of reserves) and
investment and asset/liability management policies and practices after the
date on which all Requisite Regulatory Approvals and stockholder approvals
are received, and after receipt of written confirmation from NFB that it is
not aware of any fact or circumstance that would prevent completion of the
Merger, and prior to the Effective Time so as to be consistent on a
mutually satisfactory basis with those of NFB Bank; provided, however, that
JSB shall not be required to take such action more than 30 days prior to
the Effective Date; and provided, further, that such policies and
procedures are not prohibited by GAAP or any applicable laws and
regulations.
(b) JSB's representations, warranties and covenants
contained in this Agreement shall not be deemed to be untrue or breached in
any respect for any purpose as a consequence of any modifications or
changes undertaken solely on account of this Section 4.2. NFB agrees to
hold harmless, indemnify and defend JSB and its Subsidiaries, and their
respective directors, officers and employees, for any loss, claim,
liability or other damage caused by or resulting from compliance with this
Section 4.2.
Section 4.3. Access and Information.
(a) Upon reasonable notice, JSB and NFB shall (and shall
cause their respective Subsidiaries to) afford to the other and their
respective representatives (including, without limitation, directors,
officers and employees of such party and its affiliates and counsel,
accountants and other professionals retained by such party) such reasonable
access during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), properties, personnel and
to such other information as either party may reasonably request; provided,
however, that no investigation pursuant to this Section 4.3 shall affect or
be deemed to modify any representation or warranty made herein. In
furtherance, and not in limitation of the foregoing, JSB shall make
available to NFB all information necessary or appropriate for the
preparation and filing of all real property and real estate transfer tax
returns and reports required by reason of the Merger or the Bank Merger.
NFB and JSB will not, and will cause their respective representatives not
to, use any information obtained pursuant to this Section 4.3 for any
purpose unrelated to the consummation of the transactions contemplated by
this Agreement. Subject to the requirements of applicable law, each of NFB
and JSB will keep confidential, and will cause their respective
representatives to keep confidential, all information and documents
obtained pursuant to this Section 4.3 unless such information (i) was
already known to such party or an affiliate of such party, other than
pursuant to a confidentiality agreement or other confidential relationship,
(ii) becomes available to such party or an affiliate of such party from
other sources not known by such party to be bound by a confidentiality
agreement or other obligation of secrecy, (iii) is disclosed with the prior
written approval of the other party or (iv) is or becomes readily
ascertainable from published information or trade sources. In the event
that this Agreement is terminated or the transactions contemplated by this
Agreement shall otherwise fail to be consummated, each party shall promptly
cause all copies of documents or extracts thereof containing information
and data as to another party hereto (or an affiliate of any party hereto)
to be returned to the party that furnished the same.
(b) During the period of time beginning on the day
application materials to obtain the Requisite Regulatory Approvals for the
Merger are initially filed and continuing to the Effective Time, including
weekends and holidays, JSB shall cause JSB Bank to provide NFB, NFB Bank
and their authorized agents and representatives full access to JSB Bank's
offices after normal business hours for the purpose of installing necessary
wiring and equipment to be utilized by NFB Bank after the Effective Time;
provided, that:
(i) reasonable advance notice of each entry shall be
given to JSB Bank and JSB Bank approves of each entry, which
approval shall not be unreasonably withheld;
(ii) JSB Bank shall have the right to have its
employees or contractors present to inspect the work being done;
(iii) to the extent practicable, such work shall be
done in a manner that will not interfere with JSB Bank's business
conducted at any affected branch offices;
(iv) all such work shall be done in compliance with
all applicable laws and government regulations, and NFB Bank shall
be responsible for the procurement, at NFB Bank's expense, of all
required governmental or administrative permits and approvals;
(v) NFB Bank shall maintain appropriate insurance
satisfactory to JSB Bank in connection with any work done by NFB
Bank's agents and representatives pursuant to this Section
4.3;
(vi) NFB Bank shall reimburse JSB Bank for any
material out-of-pocket costs or expenses incurred by JSB Bank in
connection with this undertaking; and
(vii) in the event this Agreement is terminated in
accordance with Article VI hereof, NFB Bank, within a reasonable
time period and at its sole cost and expense, will restore such
offices to their condition prior to the commencement of any such
installation.
Section 4.4. Certain Filings, Consents and Arrangements. NFB
and JSB shall (a) as soon as practicable (and in any event within 45 days
after the date hereof) make, or cause to be made, any filings and
applications and provide any notices required to be filed or provided in
order to obtain all approvals, consents and waivers of Governmental
Entities and third parties necessary or appropriate for the consummation of
the transactions contemplated hereby or by the JSB Option Agreement; (b)
cooperate with one another in promptly (i) determining what filings and
notices are required to be made or approvals, consents or waivers are
required to be obtained under any relevant federal or state law or
regulation or under any relevant agreement or other document and (ii)
making any such filings and notices, furnishing information required in
connection therewith and seeking timely to obtain any such approvals,
consents or waivers; and (c) deliver to the other copies of the publicly
available portions of all such filings, notices and applications promptly
after they are filed.
Section 4.5. Antitakeover Provisions. JSB and its
Subsidiaries shall take all steps required by any relevant federal or state
law or regulation or under any relevant agreement or other document to
exempt or continue to exempt NFB, the Agreement, the Plan of Bank Merger,
the Merger, the Bank Merger and the JSB Option Agreement from any
provisions of an antitakeover nature in JSB's or its Subsidiaries'
organization certificates and bylaws and the provisions of any federal or
state antitakeover laws.
Section 4.6. Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all
actions and to do promptly, or cause to be done promptly, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement (including, if the Plan of Bank Merger is executed, the Bank
Merger) as expeditiously as possible, including using efforts to obtain all
necessary actions or non-actions, extensions, waivers, consents and
approvals from all applicable Governmental Entities, effecting all
necessary registrations, applications and filings (including, without
limitation, filings under any applicable state securities laws) and
obtaining any required contractual consents and regulatory approvals.
Section 4.7. Publicity. The initial press release announcing
this Agreement shall be a joint press release and thereafter JSB and NFB
shall consult with each other in issuing any press releases or otherwise
making public statements with respect to the Merger and any other
transaction contemplated hereby and in making any filings with any
Governmental Entity or with any national securities exchange with respect
thereto.
Section 4.8. Stockholders Meetings. JSB and NFB each shall
take all action necessary, in accordance with applicable law and its
respective corporate documents, to convene a meeting of its respective
stockholders (each, a "Stockholder Meeting") as promptly as practicable for
the purpose of considering and voting on approval and adoption of the
transactions provided for in this Agreement. Except to the extent legally
required for the discharge by the Board of Directors of its fiduciary
duties as advised by such Board's counsel in writing, the Board of
Directors of each of JSB and NFB shall (a) recommend at its Stockholder
Meeting that the stockholders vote in favor of and approve the transactions
provided for in this Agreement and (b) use its best efforts to solicit such
approvals. JSB and NFB, in consultation with the other, shall each employ
professional proxy solicitors to assist in contacting stockholders in
connection with soliciting favorable votes on the Merger. JSB and NFB shall
coordinate and cooperate with respect to the timing of their respective
Stockholder Meetings.
Section 4.9. Proxy Statements; Comfort Letters. (i) As soon
as practicable after the date hereof, NFB and JSB shall cooperate with
respect to the preparation of a Joint Proxy Statement-Prospectus for the
purpose of taking stockholder action on the Merger and this Agreement and
file the Joint Proxy Statement-Prospectus with the SEC, respond to comments
of the staff of the SEC and, promptly after the Registration Statement is
declared effective by the SEC, mail the Joint Proxy Statement-Prospectus to
the respective holders of record (as of the applicable record date) of
shares of voting stock of each of JSB and NFB. NFB and JSB each represents
and covenants to the other that the Joint Proxy Statement-Prospectus, and
any amendment or supplement thereto, with respect to the information
pertaining to it or its Subsidiaries at the date of mailing to its
stockholders and the date of its Stockholder Meeting will be in compliance
with the Exchange Act and all relevant rules and regulations of the SEC and
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(ii) NFB shall cause KPMG LLP, its independent public
accounting firm, to deliver to JSB, and JSB shall cause KPMG LLP, its
independent public accounting firm, to deliver to NFB and to its officers
and directors who sign the Registration Statement for this transaction, a
"comfort letter" or "agreed upon procedures" letter, in the form
customarily issued by such accountants at such time in transactions of this
type, dated (a) the date of the mailing of the Joint Proxy
Statement-Prospectus for the Stockholders Meeting of JSB and the date of
mailing of the Joint Proxy Statement-Prospectus for the Stockholders
meeting of NFB, respectively, and (b) a date not earlier than five business
days preceding the date of the Closing (as defined in Section 7.1).
Section 4.10. Registration of NFB Common Stock.
(a) NFB shall, as promptly as practicable following the
preparation thereof, file the Registration Statement (including any
pre-effective or post-effective amendments or supplements thereto) with the
SEC under the Securities Act in connection with the transactions
contemplated by this Agreement, and NFB and JSB shall use all reasonable
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. NFB will
advise JSB promptly after NFB receives notice of the time when the
Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order or the suspension of the
qualification of the shares of capital stock issuable pursuant to the
Registration Statement, or the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or
supplement of the Registration Statement or for additional information. NFB
will provide JSB with as many copies of such Registration Statement and all
amendments thereto promptly upon the filing thereof as JSB may reasonably
request.
(b) NFB shall use its reasonable best efforts to obtain,
prior to the effective date of the Registration Statement, all necessary
state securities laws or "blue sky" permits and approvals required to carry
out the transactions contemplated by this Agreement.
(c) NFB shall use its reasonable best efforts to list, prior
to the Effective Time, on the NYSE, or on such other exchange as NFB Common
Stock shall then be trading, subject only to official notice of issuance,
the shares of NFB Common Stock to be issued by NFB in exchange for the
shares of JSB Common Stock.
Section 4.11. Affiliate Letters. Promptly, but in any event
within two weeks after the execution and delivery of this Agreement, JSB
shall deliver to NFB a letter identifying all persons who, to the knowledge
of JSB, may be deemed to be "affiliates" of JSB under Rule 145 of the
Securities Act and the pooling-of-interests accounting rules, including,
without limitation, all directors and executive officers of JSB. Within two
weeks after delivery of such letter, JSB shall deliver executed letter
agreements, each substantially in the form attached hereto as Exhibit B,
executed by each such person so identified as an affiliate of JSB agreeing
(i) to comply with Rule 145, (ii) to refrain from transferring shares as
required by the pooling-of-interests accounting rules and (iii) to be
present in person or by proxy and vote in favor of the Merger at the JSB
Stockholders Meeting. Within four weeks after the date hereof, NFB shall
cause its directors and executive officers to enter into letter agreements,
in the form attached hereto as Exhibit C, with NFB concerning the
pooling-of-interests accounting rules. NFB hereby agrees to publish, or
file a Form 8-K, Form 10-K or Form 10-Q containing, financial results
covering at least 30 days of post-Merger combined operations of NFB and JSB
as soon as practicable, but in no event later than 30 days following the
end of the first calendar month ending at least 30 days after the Effective
Time, in form and substance sufficient to remove the restrictions in
connection with the pooling-of-interests accounting rules contained
therein.
Section 4.12. Notification of Certain Matters. Each party
shall give prompt notice to the others of: (a) any event or notice of, or
other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by it or any of its
Subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract material to the financial condition,
properties, businesses or results of operations of each party and its
Subsidiaries taken as a whole to which each party or any Subsidiary is a
party or is subject; and (b) any event, condition, change or occurrence
which individually or in the aggregate has, or which, so far as reasonably
can be foreseen at the time of its occurrence, is reasonably likely to
result in a Material Adverse Effect. Each of JSB and NFB shall give prompt
notice to the other party of any notice or other communication from any
third party alleging that the consent of such third party is or may be
required in connection with any of the transactions contemplated by this
Agreement.
Section 4.13. Directors and Officers.
(a) NFB agrees to cause Park T. Adikes (the "New NFB
Director") to be elected or appointed as a director of NFB and NFB Bank at,
or as promptly as practicable after, the Effective Time; provided, however,
that if Mr. Adikes does not become a director of NFB or NFB Bank because of
death, disability or otherwise, or if Mr. Adikes shall cease to be a
director of NFB or NFB Bank at any time before the third anniversary of the
Effective Time, NFB agrees to cause a person who is a member of the Board
of Directors of JSB as of the date hereof to be elected or appointed as the
New NFB Director.
(b) At the Effective Time, NFB shall cause NFB Bank, or, if
the Bank Merger is not effected, JSB Bank, to assume and honor the JSB Bank
Outside Directors' Consultation and Retirement Plan ("JSB Bank Outside
Directors' Plan") in accordance with the terms and conditions of such plan
as of the date hereof; provided, however, that, notwithstanding any
provision of such plan to the contrary, (i) effective immediately prior to
the Effective Time, the references to "fifteen (15) years" in Section 3 of
the JSB Bank Outside Directors' Plan regarding eligibility shall be amended
so as to refer to "one (1) year" for the purpose of making all eight
outside directors of JSB Bank participants under such plan and (ii) any
outside member of the JSB Bank Board of Directors who does not become a
member of the Board of Directors of NFB Bank from and after the Effective
Time shall have the right to commence receiving benefits under the JSB Bank
Outside Directors' Plan effective as of the Effective Time and shall not be
required to provide consulting services in order to receive such benefits;
provided, further, that in no event shall any amendment or termination of
the JSB Bank Outside Directors' Plan on or after the Effective Time
adversely affect the right of any plan participant, former participant or
beneficiary thereof to receive any benefits under such plan in respect of
participation for any period ending on or before the date on which such
amendment or termination is adopted or, if later, the date on which it is
made effective. NFB Bank and JSB Bank also agree that all individuals who,
prior to the Effective Time, were receiving benefits under the JSB Bank
Outside Directors' Plan shall continue to receive all such benefits from
this plan on the same terms and conditions from and after the Effective
Time.
(c) NFB shall use all reasonable efforts to identify and
offer employment opportunities to qualified, satisfactorily performing
officers and employees of JSB and its Subsidiaries in positions within the
business operations of NFB and its Subsidiaries for which such officers and
employees are qualified. NFB shall give, and shall cause its Subsidiaries
to give, priority consideration to all such officers and employees of JSB
and its Subsidiaries vis-a-vis all individuals other than current officers
and employees of NFB; provided, however, that officers and employees of JSB
and its Subsidiaries who become employed by NFB or its Subsidiaries shall
then be treated on an equal basis with the officers and employees of NFB
and its Subsidiaries.
(d) NFB shall honor (i) the Employment Agreements between
JSB and, respectively, Park T. Adikes, Edward P. Henson, Joanne Corrigan,
Thomas R. Lehmann, Lawrence J. Kane, John F. Bennett, Jack Connors, John J.
Conroy, Bernice Glaz, Teresa D. Covello, Joseph J. Hennessy, Philip Pepe,
Daniel J. Huber and Laurel M. Romito, each as amended and restated as of
June 22, 1999 and (ii) the Employment Agreements between JSB Bank and,
respectively, Park T. Adikes, Edward P. Henson, Joanne Corrigan, Thomas R.
Lehmann, Lawrence J. Kane, John F. Bennett, Jack Connors, John J. Conroy,
Bernice Glaz, Teresa D. Covello, Joseph J. Hennessy, Philip Pepe, Daniel J.
Huber and Laurel M. Romito, each as amended and restated as of June 22,
1999, by permitting JSB to pay to each such individual on the Closing Date
the lump sum amounts that are due under each agreement and by providing any
additional payments or benefits in accordance with the terms of such
Employment Agreements, regardless of whether or not the individual officer
continues employment with NFB or NFB Bank. NFB and JSB have delivered to
each other a good faith reasonable estimate of the amounts payable on the
Closing Date under the Employment Agreements, based upon procedures and
information available at the date of this Agreement, and the procedures
used in preparing such estimates shall be followed in determining the
actual amounts payable under the Employment Agreements on the Closing Date,
which estimate is attached hereto as Schedule 4.13(d).
Section 4.14. Indemnification; Directors' and Officers'
Insurance.
(a) From and after the Effective Time through the sixth
anniversary of the Effective Date, NFB agrees to indemnify and hold
harmless each present and former director and officer of JSB and its
Subsidiaries and each officer or employee of JSB and its Subsidiaries that
is serving or has served as a director or trustee of another entity
expressly at JSB's request or direction (each, an "Indemnified Party"),
against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of matters existing or occurring at or prior to the Effective
Time (including the transactions contemplated by this Agreement, including
the entering into of the JSB Option Agreement), whether asserted or claimed
prior to, at or after the Effective Time, and to advance any such Costs to
each Indemnified Party as they are from time to time incurred, in each case
to the fullest extent such Indemnified Party would have been indemnified as
a director, officer or employee of JSB and its Subsidiaries and as then
permitted under applicable law.
(b) Any Indemnified Party wishing to claim indemnification
under Section 4.14(a), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify NFB thereof, but the
failure to so notify shall not relieve NFB of any liability it may have
hereunder to such Indemnified Party if such failure does not materially
prejudice the indemnifying party. In the event of any such claim, action,
suit, proceeding or investigation, (i) NFB shall have the right to assume
the defense thereof with counsel reasonably acceptable to the Indemnified
Party and NFB shall not be liable to such Indemnified Party for any legal
expenses of other counsel subsequently incurred by such Indemnified Party
in connection with the defense thereof, except that if NFB does not elect
to assume such defense within a reasonable time or counsel for the
Indemnified Party at any time advises that there are issues which raise
conflicts of interest between NFB and the Indemnified Party (and counsel
for NFB does not disagree), the Indemnified Party may retain counsel
satisfactory to such Indemnified Party, and NFB shall remain responsible
for the reasonable fees and expenses of such counsel as set forth above, to
be paid promptly as statements therefor are received; provided, however,
that NFB shall be obligated pursuant to this paragraph (b) to pay for only
one firm of counsel for all Indemnified Parties in any one jurisdiction
with respect to any given claim, action, suit, proceeding or investigation
unless the use of one counsel for such Indemnified Parties would present
such counsel with a conflict of interest; (ii) the Indemnified Party will
reasonably cooperate in the defense of any such matter; and (iii) NFB shall
not be liable for any settlement effected by an Indemnified Party without
its prior written consent, which consent may not be withheld unless such
settlement is unreasonable in light of such claims, actions, suits,
proceedings or investigations against, or defenses available to, such
Indemnified Party.
(c) NFB shall pay all reasonable Costs, including attorneys'
fees, that may be incurred by any Indemnified Party in successfully
enforcing the indemnity and other obligations provided for in this Section
4.14 to the fullest extent permitted under applicable law. The rights of
each Indemnified Party hereunder shall be in addition to any other rights
such Indemnified Party may have under applicable law.
(d) For a period of six years after the Effective Time, NFB
shall cause the former directors and officers of JSB to be covered by the
policy of directors and officers liability insurance currently maintained
by JSB; provided, however, that NFB may substitute therefor a policy of at
least the same coverage and containing terms no less advantageous to the
beneficiaries thereof than such policies (including, without limitation, by
providing coverage under its existing policy); provided, however, that in
no event shall NFB be obligated to expend, in order to maintain or provide
insurance coverage pursuant to this Section 4.14(d), any premium per annum
in excess of 175% of the amount of the annual premiums paid as of the date
hereof by JSB for such insurance ("Maximum Agreement"); provided, further,
that if the amount of the annual premiums necessary to maintain or procure
such insurance coverage exceeds the Maximum Amount, NFB shall obtain the
most advantageous coverage of directors' and officers' insurance obtainable
for an annual premium equal to the Maximum Amount; and provided, further,
that officers and directors of JSB may be required to make application and
provide customary representations and warranties to NFB's insurance carrier
for the purpose of obtaining such insurance.
Section 4.15. Employees; Benefit Plans and Programs.
(a) Each person who is employed by JSB or JSB Bank
immediately prior to the Effective Time (a "JSB Employee") shall, at the
Effective Time, become an employee of NFB or NFB Bank (unless the Bank
Merger is not effected, in which case the references in this Section 4.15
to NFB Bank shall mean JSB Bank). Beginning at the Effective Time, each of
the JSB Employees shall serve NFB or NFB Bank in the same capacity in which
he or she served immediately prior to the Effective Time and upon the same
terms and conditions generally applicable to other employees of NFB or NFB
Bank with comparable positions, with the following special provisions:
(i) No JSB Employee shall be, or have or exercise the
authority of, an officer of NFB or NFB Bank unless and until
elected or appointed an officer of NFB or NFB Bank in
accordance with NFB's or NFB Bank's bylaws.
(ii) At or as soon as practicable following the
Effective Time, NFB and NFB Bank shall establish and implement a
program of compensation and benefits designed to cover all
similarly situated employees on a uniform basis ("New Compensation
and Benefits Program"). The New Compensation and Benefits Program
may contain any combination of new plans, continuations of plans
maintained by NFB or NFB Bank immediately prior to the Effective
Time and continuation of plans maintained by JSB or JSB Bank
immediately prior to the Effective Time as NFB, in its discretion,
may determine. To the extent that it is not practicable to
implement any constituent part of the New Compensation and Benefits
Program at the Effective Time, NFB and NFB Bank shall continue in
effect any comparable plan maintained immediately prior to the
Effective Time for the respective employees of NFB, JSB, NFB Bank
and JSB Bank for a transition period. During the transition period,
the persons who were employees of JSB or JSB Bank immediately prior
to the Effective Time who become employees of NFB or NFB Bank at
the Effective Time shall continue to participate in the plans of
JSB and JSB Bank that are continued for transitional purposes, and
all other employees of NFB or NFB Bank will participate only in the
comparable plans of NFB and NFB Bank that are continued for
transitional purposes.
(iii) Each constituent part of the New Compensation
and Benefits Program shall recognize, in the case of persons
employed by NFB, NFB Bank, JSB or JSB Bank immediately prior to the
Effective Time who are also employed by NFB or NFB Bank immediately
after the Effective Time, all service with NFB, NFB Bank, JSB or
JSB Bank as service with NFB and NFB Bank for all purposes,
including eligibility, vesting, benefit accrual and level of
matching contributions; provided, however, that such service shall
not be recognized to the extent that such recognition would result
in a duplication of benefit; provided further, however, that in no
event will such recognition result in any current or former
employees of JSB or any of its Subsidiaries being covered under the
post-retirement medical benefits plan of NFB or any of its
Subsidiaries to the extent such coverage is provided at the expense
of NFB or any of its Subsidiaries.
(iv) In the case of any constituent part of the New
Compensation and Benefits Program which is a life or health
insurance plan: (A) such plan shall not apply any preexisting
condition limitations for conditions covered under the applicable
life or health insurance plans maintained by NFB, NFB Bank, JSB and
JSB Bank as of the Effective Time, (B) each such plan which is a
life or health insurance plan shall honor any deductible and out of
pocket expenses incurred under the applicable life or health
insurance plans maintained by NFB, NFB Bank, JSB and JSB Bank as of
the Effective Time and (C) each such plan which is a life insurance
plan shall waive any medical certification otherwise required in
order to assure the continuation of coverage at a level not less
than that in effect immediately prior to the implementation of such
plan (but subject to any overall limit on the maximum amount of
coverage under such plans).
(b) NFB shall assume the obligations of JSB and JSB Bank
with respect to any severance plans or agreements identified in JSB's
Disclosure Letter, as they may be in effect at the Effective Time, and
shall pay amounts thereunder when due; provided, however, that in the event
of the termination of employment of officers and employees of JSB or JSB
Bank within 15 months following the Effective Time, such persons shall be
provided severance benefits equal to the greater of those provided under
the JSB Bank Severance Plan or those provided by NFB or NFB Bank under any
severance plan maintained by NFB or NFB Bank.
(c) Notwithstanding any other provision in this Agreement to
the contrary, officers and employees of JSB and its Subsidiaries who are
covered under the JSB Pension Plan immediately prior to the Effective Time
and who continue to be employed by NFB or its Subsidiaries on and after the
Effective Time shall, if, as of the Effective Time, they either:
(i) are within 10 years of their normal retirement
age (as defined in the JSB Pension Plan) and have a period of
service (as defined in the JSB Pension Plan) of at least 10 years
with JSB or its Subsidiaries, or
(ii) have a period of service (as defined in the JSB
Pension Plan) of at least 25 years with JSB or its Subsidiaries,
have the right to elect to continue to accrue benefits under the benefit
accrual formula under the JSB Pension Plan rather than having their
benefits be determined under the NFB Cash Balance Retirement Plan.
(d) Notwithstanding any other provision in this Agreement to
the contrary, if the Closing Date occurs after December 31, 1999, the
amounts payable to any officer or employee of JSB under the Benefit
Restoration Plan of Jamaica Savings Bank FSB ("JSB Bank BRP") shall be
determined under the actuarial factors and interest rate assumptions in
effect on December 31, 1999 even if such factors and assumptions would
otherwise have changed by the express terms of the JSB Bank BRP, the JSB
Pension Plan, by changes in the law (such as the pension and benefit
provisions of the Uruguay Round Agreements Act of the General Agreement on
Tariffs and Trade ("GATT")), or otherwise, the purpose of this Section
4.15(d) being that any benefits payable under the JSB Bank BRP shall be
determined under the actuarial factors and interest rate assumptions in
effect on December 31, 1999. JSB shall, and shall cause JSB Bank to, take
all actions as shall be necessary to provide that no change-in-control,
termination or severance payments or benefits (including without limitation
any amounts paid under the agreements listed in Section 4.13(d)) will be
taken into account for purposes of determining any amounts payable under
the JSB Bank BRP.
(e) In the event that the Closing Date occurs on or before
December 31, 1999, the employees of JSB Bank shall receive bonuses in
accordance with JSB Bank's past practices (and the amount of such bonuses
shall be based upon such employees' compensation for the entire year of
1999), and such bonuses shall be paid at least five business days prior to
the Closing Date. In the event that the Closing Date occurs on or after
January 1, 2000, (i) the employees of JSB Bank shall be paid bonuses in
accordance with JSB Bank's past practices (and the amount of such bonuses
shall be based upon such employees' compensation for the entire year of
1999) for 1999, which shall be paid in December 1999 in accordance with JSB
Bank's past practices, and (ii) the employees of JSB Bank shall be paid
additional bonuses equal to the amounts payable to each such employee as a
bonus for 1999 multiplied by a fraction, the numerator of which is the
number of days in 2000 through and including the Closing Date and the
denominator of which is 366, and such additional bonuses shall be paid at
least five business days prior to the Closing Date. A schedule showing the
aggregate bonus estimates for 1999 is attached hereto as Schedule 4.15(e).
(f) Employees of JSB Bank who have obtained or who have
received approval to obtain, at any time prior to the Closing Date, a loan
or a mortgage loan under the existing JSB Bank employee loan program shall
continue to receive the benefits of such employee loan program, subject to
the terms and conditions of such program; provided, however, that if the
employment of any such employee with JSB Bank or, after the Closing Date,
NFB Bank, shall terminate for any reason other than cause, the interest
rate reduction under the employee loan shall continue in effect
notwithstanding such termination of employment.
(g) Employees of JSB Bank (other than officers) shall be
entitled to receive attendance bonuses in accordance with JSB Bank's past
practices for 1999, and, if the Closing Date occurs after December 31,
1999, such persons shall be entitled to attendance bonuses in accordance
with JSB Bank's past practices for 2000, pro-rated through the Closing Date
in the manner described in Section 4.15(e).
(h) Employees of JSB Bank shall be entitled to receive
payment for accrued but unused vacation days in accordance with JSB Bank's
past practices, and any accrued but unused vacation days of employees of
JSB Bank as of the Closing Date shall, at the employee's option, either be
paid immediately prior to the Closing Date or taken as vacation time as
soon as practicable following the Closing Date; provided, however, that JSB
shall deliver to NFB, not later than 15 business days after the date of
this Agreement, a schedule of employees indicating their accrued but unused
vacation days as of the most recent date practicable. Life insurance and
continued health insurance for retirees of JSB Bank shall be continued in
accordance with JSB Bank's past practices, to the extent that such
continued coverage does not result in a material increase in the costs of
such continued coverage to NFB Bank over the costs of such coverage to JSB
Bank. JSB and NFB agree to use all reasonable efforts to review the
tax-qualified defined benefit plans of both banks with a view towards,
effective as of the Closing Date, continuing, to the extent practicable,
the types and forms of benefits under the JSB Pension Plan for participants
in such JSB Pension Plan whose employment is terminated upon or within
one-year following the Closing Date, particularly with respect to the 100%
joint and survivor form of benefits provided in the event that the
participant dies prior to the commencement of the participant's benefit
payments. JSB Bank shall make a contribution to the JSB Bank Employee Stock
Ownership Plan ("JSB Bank ESOP") for 1999 in accordance with its past
practices and such contribution shall be allocated in accordance with the
terms of the JSB Bank ESOP. A pro-rated JSB Bank contribution shall be made
to the JSB Bank ESOP for the portion of the year 2000 through the Closing
Date.
Section 4.16. Advisory Board. NFB shall, promptly following
the Effective Time, cause all of the members of JSB's Board of Directors as
of the date of this Agreement, other than the New NFB Director, who are
willing to so serve to be elected or appointed as members of NFB's advisory
board ("Advisory Board"), the function of which shall be to advise NFB with
respect to deposit and lending activities in JSB's former market area and
to maintain and develop customer relationships. The members of the Advisory
Board who are willing to so serve shall be elected to serve an initial term
of three years beginning on the Effective Date. Each member of the Advisory
Board shall receive an annual retainer fee for such service of $25,000,
payable in monthly installments or in one lump sum at any time in advance
at the option of NFB, notwithstanding that such Advisory Board members are
receiving benefits under the JSB Bank Outside Directors' Plan. Service on
the Advisory Board shall be considered service as a director of NFB for
purposes of any stock option plan of JSB or NFB.
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.1. Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Merger , the Bank Merger
and any other transactions contemplated by this Agreement shall be subject
to the satisfaction of the following conditions:
(a) this Agreement shall have been approved by (i) the
requisite vote of JSB's stockholders in accordance with applicable law and
regulations and (ii) the requisite vote of NFB's stockholders in accordance
with applicable law and regulations;
(b) the Requisite Regulatory Approvals and any necessary
regulatory consents and waivers with respect to this Agreement and the
transactions contemplated hereby shall have been obtained and shall remain
in full force and effect, and all statutory waiting periods shall have
expired;
(c) no party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger or the Bank
Merger;
(d) no statute, rule or regulation shall have been enacted,
entered, promulgated, interpreted, applied or enforced by any Governmental
Entity which prohibits, restricts or makes illegal consummation of the
Merger or the Bank Merger;
(e) the Registration Statement shall have been declared
effective by the SEC and no proceedings shall be pending or threatened by
the SEC to suspend the effectiveness of the Registration Statement; all
required approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement shall have been
obtained; and
(f) NFB shall have caused to be listed on the NYSE, or on
such other market on which shares of NFB Common Stock shall then be
trading, subject only to official notice of issuance, the shares of NFB
Common Stock to be issued by NFB in exchange for the shares of JSB Common
Stock.
Section 5.2. Conditions to the Obligations of NFB and NFB
Bank. The obligations of NFB and NFB Bank to effect the Merger, the Bank
Merger and any other transactions contemplated by this Agreement shall be
further subject to the satisfaction of the following additional conditions,
any one or more of which may be waived by NFB:
(a) each of the obligations of JSB and JSB Bank,
respectively, required to be performed by it at or prior to the Closing
pursuant to the terms of this Agreement shall have been duly performed and
complied with in all material respects and the representations and
warranties of JSB and JSB Bank contained in this Agreement shall be true
and correct, subject to Sections 2.1 and 2.2, as of the date of this
Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as to any representation or warranty which
specifically relates to an earlier date). NFB shall have received a
certificate to the foregoing effect signed by the chief executive officer
and the chief financial or principal accounting officer of JSB;
(b) all action required to be taken by, or on the part of,
JSB and JSB Bank to authorize the execution, delivery and performance of
this Agreement and the consummation by JSB and JSB Bank of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors and stockholders of JSB or JSB Bank, as the case may be, and NFB
shall have received certified copies of the resolutions evidencing such
authorization;
(c) JSB shall have obtained the consent, waiver or approval
of each person (other than the regulatory approvals or consents referred to
in Section 5.1(b)) whose consent, waiver or approval shall be required in
order to consummate the Merger or the Bank Merger or to permit the
succession by the surviving corporation pursuant to the Merger to any
obligation, right or interest of JSB or its Subsidiaries under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which JSB or its Subsidiaries is a party or is
otherwise bound, except those for which failure to obtain such consents,
waivers and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on NFB (after giving effect to the consummation of
the transactions contemplated hereby) or upon the consummation of the
transactions contemplated hereby;
(d) NFB shall have received certificates (such certificates
to be dated as of a day as close as practicable to the Closing Date) from
appropriate authorities as to the corporate existence and good standing of
JSB and JSB Bank; and
(e) NFB shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP ("Skadden"), counsel to NFB, dated as of the
Effective Date, in form and substance reasonably satisfactory to NFB,
substantially to the effect that on the basis of the facts, representations
and assumptions set forth in such opinion which are consistent with the
state of facts existing at the Effective Time, the Merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. In rendering its opinion, Skadden
may require and rely upon, in addition to the review of such matters of
fact and law as Skadden considers appropriate, representations and
covenants, including those contained in certificates of officers of NFB,
NFB Bank, JSB, JSB Bank and others, reasonably satisfactory in form and
substance to Skadden.
Section 5.3. Conditions to the Obligations of JSB and JSB
Bank. The obligations of JSB and JSB Bank to effect the Merger, the Bank
Merger and any other transactions contemplated by this Agreement shall be
further subject to the satisfaction of the following additional conditions,
any one or more of which may be waived by JSB:
(a) each of the obligations of NFB and NFB Bank,
respectively, required to be performed by it at or prior to the Closing
pursuant to the terms of this Agreement shall have been duly performed and
complied with in all material respects and the representations and
warranties of NFB and NFB Bank contained in this Agreement shall be true
and correct, subject to Sections 2.1 and 2.2, as of the date of this
Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as to any representation or warranty which
specifically relates to an earlier date). JSB shall have received a
certificate to the foregoing effect signed by the chief executive officer
and the chief financial or principal accounting officer of NFB;
(b) all action required to be taken by, or on the part of,
NFB and NFB Bank to authorize the execution, delivery and performance of
this Agreement and the consummation by NFB and NFB Bank of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors and stockholders of NFB or NFB Bank, as the case may be, and JSB
shall have received certified copies of the resolutions evidencing such
authorization;
(c) NFB shall have obtained the consent, waiver or approval
of each person (other than the governmental approvals or consents referred
to in Section 5.1(b)) whose consent, waiver or approval shall be required
in connection with the transactions contemplated hereby under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which NFB or its Subsidiaries is a party or is
otherwise bound, except those for which failure to obtain such consents,
waivers and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on NFB (after giving effect to the transactions
contemplated hereby) or upon the consummation of the transactions
contemplated hereby;
(d) JSB shall have received certificates (such certificates
to be dated as of a day as close as practicable to the Closing Date) from
appropriate authorities as to the corporate existence and good standing of
NFB and NFB Bank; and
(e) JSB shall have received an opinion of Thacher Proffitt &
Wood ("Thacher Proffitt"), counsel to JSB, dated as of the Effective Date,
in form and substance reasonably satisfactory to JSB, substantially to the
effect that on the basis of the facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
at the Effective Time, the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code. In rendering its opinion, Thacher Proffitt may require and rely upon,
in addition to the review of such matters of fact and law as Thacher
Proffitt considers appropriate, representations and covenants, including
those contained in certificates of officers of NFB, NFB Bank, JSB, JSB Bank
and others, reasonably satisfactory in form and substance to Thacher
Proffitt.
ARTICLE VI
TERMINATION
Section 6.1. Termination. This Agreement may be terminated,
and the Merger abandoned, at or prior to the Effective Date, either before
or after its approval by the stockholders of JSB and NFB:
(a) by the mutual consent of NFB and JSB, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board;
(b) by NFB or JSB, if its Board of Directors so determines
by vote of a majority of the members of its entire Board, in the event of
(i) the failure of the stockholders of JSB or NFB to approve the Agreement
at its Stockholder Meeting called to consider such approval; provided,
however, that JSB or NFB, as the case may be, shall only be entitled to
terminate the Agreement pursuant to this clause (i) if it has complied in
all material respects with its obligations under Sections 4.8 and 4.9, or
(ii) a material breach by the other party hereto of any representation,
warranty, covenant or agreement contained herein which causes the
conditions set forth in Section 5.2(a) (in the case of termination by NFB)
and Section 5.3(a) (in the case of the termination by JSB) not to be
satisfied and such breach is not cured within 25 business days after
written notice of such breach is given to the party committing such breach
by the other party or which breach is not capable of being cured by the
date set forth in Section 6.1(d) or any extension thereof;
(c) by NFB or JSB, by written notice to the other party, if
either (i) any approval, consent or waiver of a Governmental Entity
required to permit consummation of the transactions contemplated hereby
shall have been denied or (ii) any governmental authority of competent
jurisdiction shall have issued a final, unappealable order enjoining or
otherwise prohibiting consummation of the transactions contemplated by this
Agreement;
(d) by NFB or JSB, if its Board of Directors so determines
by vote of a majority of the members of its entire Board, in the event that
the Merger is not consummated by February 29, 2000 ("Initial Termination
Date"), unless the failure to so consummate by such time is due to the
breach of any representation, warranty or covenant contained in this
Agreement by the party seeking to terminate; provided, that if, as of such
date, all necessary regulatory or governmental approvals, consents or
waivers required to consummate the transactions contemplated hereby shall
not have been obtained but all other conditions to the consummation of the
Merger (other than the delivery of executed documents at the Closing) shall
be fulfilled, the Initial Termination Date shall be extended to April 30,
2000;
(e) by NFB or JSB, if the Board of Directors of the other
party does not publicly recommend in the Joint Proxy Statement-Prospectus
that its stockholders approve and adopt this Agreement or if, after
recommending in the Joint Proxy Statement-Prospectus that its stockholders
approve and adopt this Agreement, the Board of Directors of the other party
shall have withdrawn, qualified or revised such recommendation in any
respect materially adverse to the party seeking to terminate this
Agreement; or
(f) by JSB, if its Board of Directors so determines by a
majority vote of the members of its entire Board, if both of the following
conditions are satisfied:
(i) the NFB Market Value on the Valuation Date is
less than $16.35; and
(ii) (A) the number obtained by dividing the NFB
Market Value as of the Valuation Date by the Initial NFB Market
Value ("NFB Ratio") shall be less than (B) the number obtained by
dividing the Final Index Price by the Initial Index Price and
subtracting 0.10 from the quotient in this clause (ii)(B) ("Index
Ratio");
subject, however, to the following three sentences. If JSB elects to
exercise its termination right pursuant to this Section 6.1(f), it shall
give written notice thereof to NFB at any time during the five business day
period commencing on the day following the Valuation Date; provided, that
such notice of election to terminate may be withdrawn at any time during
the 15 business day period commencing on the day such notice is received by
NFB. During the five business day period commencing with its receipt of
such notice, NFB shall have the option to increase the consideration to be
received by the holders of JSB Common Stock hereunder by increasing the
Exchange Ratio from 3.0 to a number equal to the lesser of (1) the product
of (x) the Index Ratio plus 0.10 and (y) 3.0, divided by the NFB Ratio or
(2) the quotient obtained by dividing $61.31 by the NFB Market Value. If
NFB so elects, it shall give, within such five business day period, written
notice to JSB of such election and the revised Exchange Ratio, whereupon no
termination shall be deemed to have occurred pursuant to this Section
6.1(f) and this Agreement shall remain in full force and effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified).
For purposes of this Section 6.1(f), the following terms shall have the
meanings indicated below:
"Acquisition Transaction" shall have the meaning set forth
in Section 3.4(e), without regard to subsection (ii) of the proviso set
forth therein.
"Final Index Price" means the sum of the Final Prices for
each company comprising the Index Group multiplied by the weighting set
forth opposite such company's name in the definition of Index
Group below.
"Final Price," with respect to any company belonging to the
Index Group, means the average of the daily closing sales prices of a share
of common stock of such company (and if there is no closing sales price on
any such day, then the mean between the closing bid and the closing asked
prices on that day), as reported on the consolidated transaction reporting
system for the market or exchange on which such common stock is principally
traded, for the 15 consecutive trading days immediately preceding the
Valuation Date.
"Index Group" means the 25 financial institution holding
companies listed below, the common stock of all of which shall be publicly
traded and as to which there shall not have been an Acquisition Transaction
involving any of such companies publicly announced at any time during the
period beginning on the date of this Agreement and ending on the day
immediately preceding the Valuation Date. In the event that:
(i) the common stock of any of such companies ceases to be
publicly traded, or
(ii) an Acquisition Transaction involving any of such
companies is announced at any time during the period beginning on
the date of this Agreement and ending on the day immediately
preceding the Valuation Date, or
(iii) any such company shall announce at any time during the
period beginning on the date of this Agreement and ending on the
day immediately preceding the Valuation Date that it has entered
into a definitive agreement to acquire insured deposits from
another financial institution in excess of 20% of its deposit base
as of the most recent quarter end for which information is
available or intends to issue additional capital securities in
excess of 10% of the total value of its Tier 1 capital securities
outstanding as of the most recent quarter end for which information
is available,
then such company or companies will be removed from the Index Group, and
the weights attributed to the remaining companies will be adjusted
proportionately for purposes of determining the Final Index Price and the
Initial Index Price; provided, however, that, in the event an Acquisition
Transaction is publicly announced which involves only companies that are
listed below, none of such companies shall be removed from the Index Group.
The 25 financial institution holding companies and the weights attributed
to them are as follows:
Holding Company Symbol Weighting
- --------------- ------ ---------
Astoria Financial Corporation ASFC 4.71%
CCB Financial Corporation CCB 4.90%
Charter One Financial, Inc. COFI 10.43%
Chittenden Corporation CHZ 1.96%
City National Corporation CYN 3.73%
Dime Bancorp, Inc. DME 5.57%
Dime Community Bancshares, Inc. DCOM 0.73%
First Commonwealth Financial Corporation FCF 1.77%
FirstMerit Corporation FMER 6.07%
Fulton Financial Corporation FULT 3.38%
GreenPoint Financial Corp. GPT 8.19%
Independence Community Bank Corp. ICBC 2.06%
Keystone Financial, Inc. KSTN 3.31%
M & T Bank Corporation MTB 9.24%
Peoples Heritage Financial Group, Inc. PHBK 4.58%
Queens County Bancorp, Inc. QCSB 1.53%
Reliance Bancorp, Inc. RELY 0.60%
Richmond County Financial Corp. RCBK 1.50%
State Bancorp, Inc. STB 0.29%
Staten Island Bancorp, Inc. SIB 1.81%
Suffolk Bancorp SUBK 0.41%
Summit Bancorp SUB 15.22%
Susquehanna Bancshares, Inc. SUSQ 1.52%
Valley National Bancorp VLY 4.01%
Webster Financial Corporation WBST 2.48%
-------
100.00%
"Initial Index Price" means the sum of the per share closing
sales price of the common stock of each company comprising the Index Group
multiplied by the applicable weighting, as such prices are reported on the
consolidated transaction reporting system for the market or exchange on
which such common stock is principally traded on the trading day
immediately preceding the public announcement of this Agreement.
"Initial NFB Market Value" means the closing sales price of
a share of NFB Common Stock, as reported on the NYSE, on the trading day
immediately preceding the public announcement of this Agreement, adjusted
as indicated in the last sentence of this Section 6.1(f).
"NFB Market Value" shall have the meaning set forth in
Section 1.2(b) hereof.
"Valuation Date" shall have the meaning set forth in Section
1.2(c) hereof.
If NFB or any company belonging to the Index Group declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the date of this
Agreement and the Valuation Date, the prices for the common stock of such
company shall be appropriately adjusted for the purposes of applying this
Section 6.1(f).
Section 6.2. Effect of Termination. In the event of the
termination of this Agreement by either NFB or JSB, as provided above, this
Agreement shall thereafter become void and, subject to Section 6.3, there
shall be no liability on the part of any party hereto or their respective
officers or directors, except that (a) any such termination shall be
without prejudice to the rights of any party hereto arising out of the
breach by any other party of any covenant, representation or obligation
contained in this Agreement and (b) the obligations of the parties under
the last three sentences in Section 4.3(a) and under Section 8.6 shall
survive.
Section 6.3 Termination Fee. In recognition of the efforts,
expenses and other opportunities foregone by NFB and JSB, respectively,
while structuring the Merger, the parties hereto agree that:
(a) NFB shall pay to JSB a termination fee of Twelve
Million, Five Hundred Thousand Dollars ($12,500,000) plus JSB's documented,
reasonable out-of-pocket expenses (including fees and expenses of legal,
financial and accounting advisors) in cash on demand if, within 12 months
after the date of this Agreement, after a written bona fide proposal is
made after the date of this Agreement by a third party to NFB or its
stockholders to engage in an Acquisition Transaction (as defined in Section
3.4(e)), other than any Acquisition Transaction permitted pursuant to the
terms of this Agreement, including without limitation Section 3.4(e) (a
"Permitted Transaction"), any of the following occur:
(i) NFB shall have willfully breached any covenant or
obligation contained in this Agreement and such breach would
entitle JSB to terminate the Agreement;
(ii) the stockholders of NFB shall not have approved
the Agreement at the meeting of such stockholders held for the
purpose of voting on the Agreement, such meeting shall not have
been held or shall have been canceled prior to termination of the
Agreement; or
(iii) NFB's Board of Directors shall have withdrawn
or modified in a manner adverse to JSB the recommendation of NFB's
Board of Directors with respect to the Agreement; and
(b) NFB shall pay to JSB a termination fee of Twenty-Five
Million Dollars ($25,000,000) plus JSB's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) in cash on demand if, during a period of 18 months
after the date hereof, NFB or any of its Subsidiaries, without having
received JSB's prior written consent, shall have entered into an agreement
to engage in an Acquisition Transaction (as defined in Section 3.4(e)),
other than a Permitted Transaction, with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Exchange Act and the rules and regulations
thereunder) other than JSB or any of its Subsidiaries or the Board of
Directors of NFB shall have recommended that the stockholders of NFB
approve or accept an Acquisition Transaction other than a Permitted
Transaction with any person other than JSB or any of its Subsidiaries. Any
fee payable to JSB pursuant to Section 6.3(b) shall be reduced dollar for
dollar to the extent that any fee is actually paid pursuant to Section
6.3(a). Notwithstanding the foregoing, NFB shall not be obligated to pay to
JSB the termination fee described in Section 6.3(a) or Section 6.3(b) in
the event that at or prior to such time as such fee becomes payable (i) NFB
and JSB validly terminate this Agreement pursuant to Section 6.1(a), (ii)
NFB or JSB validly terminates this Agreement pursuant to Sections 6.1(c) or
6.1(d), (iii) NFB validly terminates this Agreement pursuant to Section
6.1(b) or Section 6.1(e) or (iv) JSB validly terminates this Agreement
pursuant to Section 6.1(f).
(c) JSB shall pay to NFB a termination fee of Twelve
Million, Five Hundred Thousand Dollars ($12,500,000) plus NFB's documented,
reasonable out-of-pocket expenses (including fees and expenses of legal,
financial and accounting advisors) in cash on demand if, within 12 months
after the date of this Agreement, after a bona fide proposal is made after
the date of this Agreement by a third party to JSB or its stockholders to
engage in an Acquisition Transaction (as defined in the JSB Option
Agreement), any of the following occur:
(i) JSB shall have willfully breached any covenant or
obligation contained in this Agreement and such breach would
entitle NFB to terminate the Agreement;
(ii) the stockholders of JSB shall not have approved
the Agreement at the meeting of such stockholders held for the
purpose of voting on the Agreement, such meeting shall not have
been held or shall have been canceled prior to termination of the
Agreement; or
(iii) JSB's Board of Directors shall have withdrawn
or modified in a manner adverse to NFB the recommendation of JSB's
Board of Directors with respect to the Agreement; and
(d) JSB shall pay to NFB a termination fee of Twenty-Five
Million Dollars ($25,000,000) plus NFB's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) in cash on demand if, during a period of 18 months
after the date hereof, JSB or any of its Subsidiaries, without having
received NFB's prior written consent, shall have entered into an agreement
to engage in an Acquisition Transaction (as defined in the JSB Option
Agreement) with any person other than NFB or any of its Subsidiaries or the
Board of Directors of JSB shall have recommended that the stockholders of
JSB approve or accept an Acquisition Transaction (as defined in the JSB
Option Agreement) with any person other than NFB or any of its
Subsidiaries. Any fee payable to NFB pursuant to this Section 6.3(d) shall
be reduced dollar for dollar to the extent that any fee is actually paid
pursuant to Section 6.3(c). Notwithstanding the foregoing, JSB shall not be
obligated to pay to NFB the termination fee described in Section 6.3(c) or
Section 6.3(d) in the event that at or prior to such time as such fee
becomes payable (i) NFB and JSB validly terminate this Agreement pursuant
to Section 6.1(a), (ii) NFB or JSB validly terminates this Agreement
pursuant to Sections 6.1(c) or 6.1(d) or (iii) JSB validly terminates this
Agreement pursuant to Section 6.1(b), Section 6.1(e) or Section 6.1(f).
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time. The closing
of the transactions contemplated hereby ("Closing") shall take place at the
offices of Thacher Proffitt & Wood, Two World Trade Center, New York, New
York 10048, on a date ("Closing Date") that is no later than five business
days following the date on which the expiration of the last applicable
waiting period in connection with notices to and approvals of regulatory
and governmental authorities shall occur and all conditions to the
consummation of this Agreement are satisfied or waived, or on such other
date as may be agreed to by the parties. Prior to the Closing Date, NFB and
JSB shall execute a Certificate of Merger in accordance with all
appropriate legal requirements, which shall be filed as required by law on
the Closing Date, and the Merger provided for therein shall become
effective upon such filing or on such date as may be specified in such
Certificate of Merger. The date of such filing or such later effective date
as specified in the Certificate of Merger is herein referred to as the
"Effective Date." The "Effective Time" of the Merger shall be as set forth
in the Certificate of Merger.
Section 7.2. Deliveries at the Closing. Subject to the
provisions of Articles V and VI, on the Closing Date there shall be
delivered to NFB and JSB the documents and instruments required to be
delivered under Article V.
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation. As used in
this Agreement, the following terms shall have the meanings indicated:
"material" means material to NFB or JSB (as the case may be)
and its respective Subsidiaries, taken as a whole.
"person" includes an individual, corporation, limited
liability company, partnership, association, trust or
unincorporated organization.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of, Exhibit or Schedule to,
this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for ease of reference only and
shall not affect the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement,
they shall be deemed followed by the words "without limitation." Any
singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Any reference to gender in this Agreement
shall be deemed to include any other gender.
Section 8.2. Survival. Only those agreements and covenants
of the parties that are by their terms applicable in whole or in part after
the Effective Time, including Sections 4.3(a), 4.13, 4.14, 4.15, 4.16, 4.17
and 8.6 of this Agreement, shall survive the Effective Time. All other
representations, warranties, agreements and covenants shall not survive the
Effective Time. If the Agreement shall be terminated, the agreements of the
parties in the last three sentences of Section 4.3(a) and in Section 8.6
shall survive such termination.
Section 8.3. Waiver; Amendment. Prior to the Effective Time,
any provision of this Agreement may be: (i) waived in writing by the party
benefitted by the provision or (ii) amended or modified at any time
(including the structure of the transaction) by an agreement in writing
between the parties hereto except that, after the vote by the stockholders
of JSB or NFB, no amendment or modification may be made that would reduce
the Merger Consideration or contravene any provision of the Delaware
General Corporation Law or the federal banking laws, rules and regulations.
Section 8.4. Counterparts. This Agreement may be executed in
counterparts each of which shall be deemed to constitute an original, but
all of which together shall constitute one and the same instrument.
Section 8.5. Governing Law. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of New York,
without regard to conflicts of laws principles.
Section 8.6. Expenses. Each party hereto will bear all
expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby.
Section 8.7. Notices. All notices, requests, acknowledgments
and other communications hereunder to a party shall be in writing and shall
be deemed to have been duly given when delivered by hand, overnight courier
or facsimile transmission (confirmed in writing) to such party at its
address or facsimile number set forth below or such other address or
facsimile transmission as such party may specify by notice to the other
party hereto.
If to JSB, to:
JSB Financial, Inc.
303 Merrick Road
Lynbrook, New York 11563
Facsimile: (516) 887-6007
Attention: Mr. Park T. Adikes
Chairman of the Board
and
With copies to:
JSB Financial, Inc.
303 Merrick Road
Lynbrook, New York 11563
Facsimile: (516) 887-6007
Attention: Mr. Lawrence J. Kane
Executive Vice President
and
Douglas J. McClintock, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Facsimile: 212-432-2898
If to NFB, to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Facsimile: (516) 844-1471
Attention: Mr. John Adam Kanas
Chairman, President and
Chief Executive Officer
With copies to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Facsimile: (516) 844-1471
Attention: Mr. Daniel M. Healy
Executive Vice President and
Chief Financial Officer
and
William S. Rubenstein, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2000
Section 8.8. Entire Agreement; etc. This Agreement, together
with the Plan of Bank Merger, the JSB Option Agreement and the Disclosure
Letters, represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made. All terms and
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Except for Section 4.13 (other than Section 4.13(c)) and Section 4.14,
which confer rights on the parties described therein, nothing in this
Agreement is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 8.9. Assignment. This Agreement may not be assigned
by either party hereto without the written consent of the other party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the 16th
day of August, 1999.
NORTH FORK BANCORPORATION, INC.
/s/ John Adam Kanas
------------------------------------
John Adam Kanas
Chairman of the Board, President and
Chief Executive Officer
JSB FINANCIAL, INC.
By: /s/ Park T. Adikes
--------------------------------
Park T. Adikes
Chairman of the Board and
Chief Executive Officer
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated August 30, 1999, between Reliance
Bancorp, Inc., a Delaware corporation ("Issuer"), and North Fork
Bancorporation, Inc., a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which
agreement has been executed by the parties hereto immediately prior to this
Stock Option Agreement (this "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
up to 1,708,297 fully paid and nonassessable shares of Issuer's Common
Stock, par value $0.01 per share ("Common Stock"), at a price of $29.00 per
share (the "Option Price"); provided, however, that in no event shall the
number of shares of Common Stock for which this Option is exercisable
exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock
without giving effect to any shares subject to or issued pursuant to the
Option. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of
this Agreement, the number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such
issuance, such number equals 19.9% of the number of shares of Common Stock
then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent
Triggering Event (as hereinafter defined) shall have occurred prior to the
occurrence of an Exercise Termination Event (as hereinafter defined) and
the Holder is not in material beach of the agreements or covenants
contained in this Agreement or the Merger Agreement, provided that the
Holder shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within six months following such
Subsequent Triggering Event (or such longer period as provided in Section
10), provided further, however, that if the Option cannot be exercised on
any day because of any injunction, order or similar restraint issued by a
court of competent jurisdiction, the period during which the Option may be
exercised shall be extended so that the Option shall expire no earlier than
on the tenth business day after such injunction, order or restraint shall
have been dissolved or when such injunction, order or restraint shall have
become permanent and no longer subject to appeal, as the case may be. Each
of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement) of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of an Initial
Triggering Event except a termination by Grantee pursuant to Section 9.1(f)
of the Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional); or (iii) the passage of 15 months
after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 9.1(f) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional).
Notwithstanding any other provision of this Agreement, in no event shall
any of Issuer's obligations under this Agreement continue six months beyond
an Exercise Termination Event. The term "Holder" shall mean the holder or
holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer
shall have recommended that the stockholders of Issuer approve or
accept any Acquisition Transaction with any person other than Grantee
or a Subsidiary of Grantee. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or any Significant
Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a
purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power
of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the
Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize, recommend or propose, an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary, or the Board of
Directors of Issuer shall have publicly withdrawn or modified, or
publicly announced its intent to withdraw or modify, in any manner
adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement;
(iii) Any person, other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of its business, shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the
subject of public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Issuer or
its stockholders to engage in an Acquisition Transaction, Issuer shall
have breached any covenant or obligation contained in the Merger
Agreement and such breach (x) would entitle Grantee to terminate the
Merger Agreement and (y) shall not have been cured prior to the Notice
Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board, the Office of
Thrift Supervision or any other federal or state bank regulatory
authority for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of
20% or more of the then outstanding shares of Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
of which it has notice (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii)
a place and date not earlier than three business days nor later than 60
business days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided that if prior notification to or approval of the
Federal Reserve Board, the Office of Thrift Supervision (the "OTS") or any
other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval
and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the
date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
by Issuer, provided that failure or refusal of Issuer to designate such a
bank account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section
2, Issuer shall deliver to the Holder a certificate or certificates
representing the number of shares of Common Stock purchased by the Holder
and, if the Option should be exercised in part only, a new Option
evidencing the rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder, and the Holder shall deliver to Issuer this
Agreement and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy
of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect that such
legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions to this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required
by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of
the shares of Common Stock issuable upon such exercise, notwithstanding
that the stock transfer books of Issuer shall then be closed or that
certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and delivery
of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase
Common Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (iii) promptly to take all
action as may from time to time be required (including (x) complying with
all premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. section 18a and regulations promulgated thereunder
and (y) in the event, under the Bank Holding Company Act of 1956, as
amended, the Change in Bank Control Act of 1978, as amended, or any other
federal or state banking law, prior approval of or notice to the Federal
Reserve Board, the OTS or to any state regulatory authority is necessary
before the Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such information to
the Federal Reserve Board, the OTS or such state regulatory authority as
they may require) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) promptly to take all action provided herein to protect
the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of
Issuer, for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase, on the same terms
and subject to the same conditions as are set forth herein, in the
aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement
so lost, stolen, destroyed or mutilated shall at any time be enforceable
by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5. In
the event of any change in, or distributions in respect of, the Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares,
distributions on or in respect of the Common Stock that would be
prohibited under the terms of the Merger Agreement, or the like, the type
and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall
fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the
Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto) delivered within six months of such
Subsequent Triggering Event (or such longer period as provided in Section
10), promptly prepare, file and keep current a shelf registration
statement under the 1933 Act covering this Option and any shares issued
and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and
remain current in order to permit the sale or other disposition of this
Option and any shares of Common Stock issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement first to become effective and
then to remain effective for such period not in excess of 180 days from
the day such registration statement first becomes effective or such
shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such
registrations. The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the inclusion
of the Holder's Option or Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the
number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however, that
after any such required reduction the number of Option Shares to be
included in such offering for the account of the Holder shall constitute
at least 25% of the total number of shares to be sold by the Holder and
Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for
the balance as promptly as practicable and no reduction shall thereafter
occur. Each such Holder shall provide all information reasonably requested
by Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and other
agreements customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this Section 6
from any Holder, Issuer agrees to send a copy thereof to any other person
known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event
shall Issuer be obligated to effect more than two registrations pursuant
to this Section 6 by reason of the fact that there shall be more than one
Grantee as a result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event
(as defined below) and prior to twelve months thereafter, (i) following a
request of the Holder, delivered prior to an Exercise Termination Event,
Issuer (or any successor thereto) shall repurchase the Option from the
Holder at a price (the "Option Repurchase Price") equal to the amount by
which (A) the Market/Offer Price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option may then
be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence
(or such longer period as provided in Section 10), Issuer shall repurchase
such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so
designated. The term "Market/Offer Price" shall mean the highest of (i)
the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets, the
sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as
the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the Market/Offer Price, the value of consideration
other than cash shall be determined by a nationally recognized investment
banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. Within the latter to occur of (x) five
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices
relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner
the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law
or regulation from repurchasing the Option and/or the Option Shares in
full, Issuer shall immediately so notify the Holder and/or the Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within five business days
after the date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to
use its best efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase
Price that Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock
for which the surrendered Stock Option Agreement was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the
Option Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase,
lease or other acquisition of all or a substantial portion of the assets
of Issuer, other than any such transaction which would not constitute an
Acquisition Transaction pursuant to the provisos to Section 2(b)(i) hereof
or (ii) upon the acquisition by any person of beneficial ownership of 50%
or more of the then outstanding shares of Common Stock, provided that no
such event shall constitute a Repurchase Event unless a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase
the Option or Option Shares under this Section 7 shall not terminate upon
the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into
any person, other than Grantee or one of its Subsidiaries, and shall not
be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one of its
Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other person or cash or any other
property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting
share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that
the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged
for, an option (the "Substitute Option"), at the election of the Holder,
of either (x) the Acquiring Corporation (as hereinafter defined) or (y)
any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the Market/ Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of
a share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger or sale;
provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any company
which controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar
as possible and in no event less advantageous to the Holder. The issuer of
the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form
as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is
then exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the shares of Substitute Common Stock
outstanding prior to exercise but for this clause (e), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (e) over
(ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
the Holder or the Owner, as the case may be, and reasonably acceptable to
the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Issuer shall
repurchase the Substitute Option from the Substitute Option Holder at a
price (the "Substitute Option Repurchase Price") equal to the amount by
which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii)
the exercise price of the Substitute Option, multiplied by the number of
shares of Substitute Common Stock for which the Substitute Option may then
be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a
price (the "Substitute Share Repurchase Price") equal to the Highest
Closing Price multiplied by the number of Substitute Shares so designated.
The term "Highest Closing Price" shall mean the highest closing price for
shares of Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner
gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and certificates for Substitute
Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may
be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in any event
within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the
Substitute Option Repurchase Price and/or to the Substitute Share Owner
the Substitute Share Repurchase Price therefor or, in either case, the
portion thereof which the Substitute Option Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the
Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Issuer following a request for repurchase pursuant to
this Section 9 shall immediately so notify the Substitute Option Holder
and/ or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute
Share Repurchase Price, respectively, which it is no longer prohibited
from delivering, within five business days after the date on which the
Substitute Option Issuer is no longer so prohibited; provided, however,
that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the Substitute
Share Repurchase Price, respectively, in full (and the Substitute Option
Issuer shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver
to the Substitute Option Holder or Substitute Share Owner, as appropriate,
that portion of the Substitute Option Repurchase Price or the Substitute
Share Repurchase Price that the Substitute Option Issuer is not prohibited
from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of
the Substitute Option Holder to purchase that number of shares of the
Substitute Common Stock obtained by multiplying the number of shares of
the Substitute Common Stock for which the surrendered Substitute Option
was exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Substitute Option Repurchase Price
less the portion thereof theretofore delivered to the Substitute Option
Holder and the denominator of which is the Substitute Option Repurchase
Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Common Shares it is then so prohibited from repurchasing.
10. The 90-day or six-month period for exercise of certain
rights under Sections 2, 6, 7 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such
rights, and for the expiration of all statutory waiting periods; and (ii)
to the extent necessary to avoid liability under Section 16(b) of the 1934
Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming
all of the Rights or amending or terminating the Rights Agreement) so that
the entering into of this Option Agreement, the acquisition of shares of
Common Stock hereunder and the other transactions contemplated hereby do
not and will not result in the grant of any rights to any person under the
Rights Agreement or enable or require the Rights to be exercised,
distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has been
duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will not
be, acquired with a view to the public distribution thereof and will not
be transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the 1933 Act.
13. (a) Grantee may, at any time following a Repurchase Event
and prior to the occurrence of an Exercise Termination Event (or such
later period as provided in Section 10), relinquish the Option (together
with any Option Shares issued to and then owned by Grantee) to Issuer in
exchange for a cash fee equal to the Surrender Price (as defined below);
provided, however, that Grantee may not exercise its rights pursuant to
this Section 13 if Issuer has repurchased the Option (or any portion
thereof) or any Option Shares pursuant to Section 7. The "Surrender Price"
shall be equal to $13,880,000 (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares and (ii) minus, if applicable, the
sum of (A) the excess of (1) the net cash amounts, if any, received by
Grantee pursuant to the arms' length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (2) Grantee's purchase price of such Option
Shares and (B) the net cash amounts, if any, received by Grantee pursuant
to an arms' length sale of a portion of the Option to any unaffiliated
party.
(b) Grantee may exercise its right to relinquish the Option and
any Option Shares pursuant to this Section 13 by surrendering to Issuer,
at its principal office, this Agreement together with certificates for
Option Shares, if any, accompanied by a written notice stating (i) that
Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 13 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available funds
on or before the second business day following receipt of such notice by
Issuer.
(c) To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from paying
the Surrender Price to Grantee in full, Issuer shall immediately so notify
Grantee and thereafter deliver or cause to be delivered, from time to
time, to Grantee, the portion of the Surrender Price that it is no longer
prohibited from paying, within five business days after the date on which
Issuer is no longer so prohibited, provided, however, that if Issuer at
any time after delivery of a notice of surrender pursuant to paragraph (b)
of this Section 13 is prohibited under applicable law or regulation, or as
a consequence of administrative policy, from paying to Grantee the
Surrender Price in full, (i) Issuer shall (A) use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to make such
payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide
Grantee with copies of the same, and (c) keep Grantee advised of both the
status of any such request for regulatory and legal approvals, as well as
any discussions with any relevant regulatory or other third party
reasonably related to the same and (ii) Grantee may revoke such notice of
surrender by delivery of a notice of revocation to Issuer and, upon
delivery of such notice of revocation, the Exercise Termination Date shall
be extended to a date six months from the date on which the Exercise
Termination Date would have occurred if not for the provisions of this
Section 13(c) (during which period Grantee may exercise any of its rights
hereunder, including any and all rights pursuant to this Section 13).
14. Neither of the parties hereto may assign any of its rights
or obligations under this Agreement or the Option created hereunder to any
other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Subsequent Triggering
Event (or such longer period as provided in Section 10); provided,
however, that until the date 15 days following the date on which the
Federal Reserve Board or the OTS, as applicable, approves an application
by Grantee to acquire the shares of Common Stock subject to the Option,
Grantee may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf, or (iv) any other manner approved by the
Federal Reserve Board or the OTS, as applicable.
15. Each of Grantee and Issuer will use its best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making
application to list the shares of Common Stock issuable hereunder on the
National Association of Securities Dealers Automated Quotation/National
Market Securities (NASDAQ/NMS) upon official notice of issuance and
applying to the Federal Reserve Board and/or the OTS, as applicable, for
approval to acquire the shares issuable hereunder, but Grantee shall not
be obligated to apply to state banking authorities for approval to acquire
the shares of Common Stock issuable hereunder until such time, if ever, as
it deems appropriate to do so.
16. (a) Notwithstanding any other provision of this Agreement,
in no event shall the Grantee's Total Profit (as hereinafter defined)
exceed $17,350,000 and, if it otherwise would exceed such amount, the
Grantee, at its sole election, shall either (i) reduce the number of
shares of Common Stock subject to this Option, (ii) deliver to the Issuer
for cancellation Option Shares previously purchased by Grantee, (iii) pay
cash to the Issuer, or (iv) any combination thereof, so that Grantee's
actually realized Total Profit shall not exceed $17,350,000 after taking
into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of shares as would, as of the
date of exercise, result in a Notional Total Profit (as defined below) of
more than $17,350,000; provided, that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any subsequent
date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 7 of this Agreement, (ii)(x) the amount
received by Grantee pursuant to Issuer's repurchase of Option Shares
pursuant to Section 7, less (y) the Grantee's purchase price for such
Option Shares, (iii)(x) the net cash amounts received by Grantee pursuant
to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party, less
(y) the Grantee's purchase price of such Option Shares, (iv) any amounts
received by Grantee on the transfer of the Option (or any portion thereof)
to any unaffiliated party, and (v) any equivalent amount with respect to
the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to
exercise this Option shall be the Total Profit determined as of the date
of such proposed exercise assuming that this Option were exercised on such
date for such number of shares and assuming that such shares, together
with all other Option Shares held by Grantee and its affiliates as of such
date, were sold for cash at the closing market price for the Common Stock
as of the close of business on the preceding trading day (less customary
brokerage commissions).
17. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief.
18. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency
of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions
contained in this Agreement shall remain in full force and effect, and
shall in no way be affected, impaired or invalidated. If for any reason
such court or regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in Section
1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the
express intention of Issuer to allow the Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof.
19. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by cable, telegram, telecopy or telex, or by
registered or certified mail (postage prepaid, return receipt requested)
at the respective addresses of the parties set forth in the Merger
Agreement.
20. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of
laws thereof.
21. This Agreement may be executed in two counterparts, each of
which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
22. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
23. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties
hereto, and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
24. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
RELIANCE BANCORP, INC.
By: /s/ Raymond A. Nielsen
--------------------------------
Raymond A. Nielsen
President and Chief Executive
Officer
NORTH FORK BANCORPORATION, INC.
By: /s/ John Adam Kanas
--------------------------------
John Adam Kanas
Chairman of the Board, President
and Chief Executive Officer
NORTH FORK BANCORP
275 BROAD HOLLOW RD., MELVILLE, NY 11747
(516) 844-1004 FAX (516) 694-1536
PRESS RELEASE
FOR IMMEDIATE RELEASE
NORTH FORK BANCORPORATION, INC. TO PURCHASE
RELIANCE BANCORP, INC.
IN A COMMON STOCK TRANSACTION VALUED AT APPROXIMATELY
$352 MILLION
MELVILLE, N.Y. - AUGUST 30, 1999 - NORTH FORK BANCORPORATION, INC.
(NYSE: NFB) AND RELIANCE BANCORP, INC. (NASDAQ/NMS: RELY) jointly
announced today that they have signed a definitive merger agreement
whereby North Fork Bancorporation, Inc. ("North Fork") would acquire
Reliance Bancorp, Inc. ("Reliance") in a stock-for-stock merger valued at
approximately $352 million. Reliance is the holding company for Reliance
Federal Savings Bank, a savings institution with banking locations in
Queens, Nassau and Suffolk, all of which are located within North Fork's
existing marketplace. Under the terms of the agreement, each share of
Reliance will be converted into North Fork common stock at a fixed
exchange ratio of 2 shares of North Fork for each share of Reliance. In
connection with this transaction, North Fork simultaneously announced that
its Board of Directors approved the repurchase of up to fifty percent
(50%) of the common shares issuable in the acquisition or 8.5 million
North Fork shares. Purchases will be made from time to time in open market
or in privately negotiated transactions preceding the closing of the
Reliance transaction, which is expected to occur in the first quarter of
2000. The acquisition will be treated as a purchase for financial
reporting purposes and will be a tax-free reorganization for Reliance
shareholders. Approximately 17 million common shares of North Fork will be
issued. The exchange ratio was based upon the price of North Fork's stock
utilizing its closing price on August 27, 1999 of $19.06 for a total value
to Reliance shareholders of $38.12 per share. The closing price of
Reliance stock on that date was $33.88. The merger is subject to customary
regulatory approvals, the approval from Reliance shareholders and will
close immediately preceding North Fork's pending acquisition of JSB
Financial, Inc. (NYSE: JSB), the parent of Jamaica Savings Bank, FSB, that
was announced on August 16, 1999. Due diligence by both companies has been
completed. The agreement provides that North Fork receives an option to
acquire up to 19.9% of Reliance's outstanding shares at $29.00 per share
should certain events occur. Also, Reliance has a right to terminate the
agreement should the closing price of North Fork's shares decline beyond a
specified price and index, unless North Fork elects to increase the
exchange ratio. At June 30, 1999, Reliance, with 29 banking offices, had
total assets of $2.5 billion, deposits of $1.6 billion and shareholders'
equity of $172 million.
In the pending JSB transaction, North Fork indicated that it expected
that it would account for that acquisition as a pooling-of-interests. The
Reliance purchase allows North Fork to utilize the pooling-of-interests
method of accounting in the JSB transaction. At June 30, 1999, JSB, with
locations in Metropolitan New York, had total assets of $1.6 billion,
deposits of $1.2 billion and shareholders' equity of $375 million. The JSB
acquisition is expected to close in the first quarter of 2000 immediately
following Reliance. "The excess capital created with the JSB merger
allowed us to formulate a capital efficient Reliance transaction
immediately accretive to North Fork's earnings," stated John Adam Kanas,
Chairman, President and Chief Executive Officer of North Fork. Raymond A.
Nielsen, President and Chief Executive Officer of Reliance will join North
Fork's Board of Directors. "Our primary motivation has always been
directed toward building shareholder value. The opportunity to merge with
North Fork, a company dedicated to creating and building shareholder
value, was a compelling reason for our decision to merge with North Fork.
We see nothing but greater opportunities for our shareholders, customers
and the communities we serve," said Mr. Nielsen.
On a pro forma basis, North Fork will have total assets of $15.5
billion, deposits of $9.2 billion and shareholders' equity of $1.2
billion. The pro forma stated and tangible book value will be
approximately $7.21 and $5.16, respectively which assumes the
aforementioned 50% share repurchase in the Reliance transaction. The pro
forma leverage ratio will be approximately 7.47%. At June 30, 1999 North
Fork, on a separate company basis, had total assets of $11.5 billion,
deposits of $6.5 billion and shareholders' equity of $804 million. On that
date, its stated and tangible book value and leverage ratio were $5.79,
$5.20 and 8.50%, respectively. The Reliance transaction is expected to be
earnings per share ("EPS") accretive for North Fork in excess of the
previously announced estimates of accretion in the JSB acquisition from
both a generally accepted accounting principal (GAAP) basis and from a
cash basis of reporting EPS. North Fork anticipates a 5% rise in GAAP EPS
and 9% rise in cash EPS over year 2000 estimates from the combined NFB and
JSB merger. The accretion from the Reliance merger will come from
anticipated cost savings and revenue enhancements. "In combination, JSB
and Reliance bring us nearly 300,000 new customers within our existing
marketplace with unsurpassed opportunities for revenue growth," said Mr.
Kanas.
NORTH FORK PLANS AN ANALYST CONFERENCE CALL FOR TUESDAY, AUGUST 31,
1999 AT 2:00 P.M. EDT, to elaborate on the strategic rational and
financial implications of the acquisition. THE TELEPHONE NUMBER TO CALL IN
THE UNITED STATES IS 800-288-8967. An international telephone number is
also available for this conference. THE INTERNATIONAL TELEPHONE NUMBER IS
612-288-0337. The presentation that will be used during the conference
call may be obtained on Tuesday, August 31, 1999 by logging on to
WWW.NORTHFORKBANK.COM.
This press release contains certain forward looking statements with
respect to the financial condition, results of operations and business of
North Fork following the consummation of the merger that are subject to
various factors, which could cause actual results to differ materially
from such projections or estimates. Such factors include, but are not
limited to, the possibility that anticipated cost savings and revenue
enhancements might not be realized and that adverse general economic
conditions or an adverse interest rate environment could develop. North
Fork's current report on Form 8K to be filed August 31, 1999 with the
Securities and Exchange Commission discloses more fully these factors.
North Fork, with total assets of approximately $11.5 billion,
operates over 110 branch locations throughout the New York Metropolitan
area and Connecticut. It is ranked among the Top 50 Commercial Bank
Holding Companies in the United States, and its profitability and
efficiency are routinely ranked among the industry's best.
CONTACTS: NORTH FORK BANCORP
DANIEL M. HEALY
EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER
(516) 844-1258
RELIANCE BANCORP, INC.
PAUL D. HAGAN
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
(516) 222-9300 EXT. 215
North Fork Bancorporation, Inc. (NYSE: NFB) [NFB LOGO]
Acquisition of
Reliance Bancorp, Inc.
- Parent Company of -
Reliance Federal Savings Bank
August 30, 1999
Conference Call Logistics
North Fork Bancorporation, Inc. will host a conference call at 2:00 p.m.
E.D.T. tomorrow, Tuesday, August 31. The number to call in the United
States is 800-288-8967 and Internationally (612) 288-0337. Persons who find
this time inconvenient can call after 6:00 p.m. E.D.T. at 800-475-6701 for
the USA, or Internationally at (320) 365-3844 Access Code#468397 for a
taped rebroadcast that will be continuously played for 30 hours. A copy of
this presentation can be accessed on the Internet at www.northforkbank.com,
RELY ACQUISITION icon.
North Fork Bancorp
This presentation contains certain forward looking statements with respect
to the financial condition, results of operations and business of North
Fork following the consummation of the merger with Reliance Bancorp, Inc.
that are subject to various factors which could cause actual results to
differ materially from such projections or estimates. Such factors include,
but are not limited to, the possibility that the anticipated cost savings,
revenue enhancements and timing might not be realized. Additionally, a
deterioration in economic conditions adversely effecting the interest rate
environment could develop that may effect these forward looking statements.
North Fork's current report on Form 8-K filed on August 31, 1999 discloses
more fully these factors.
For more information regarding North Fork's pending acquisition of JSB
Financial, Inc. the parent of Jamaica Savings Bank. The August 17, 1999
investor presentation can be accessed on the Internet at
www.NorthForkBank.com, JSB ACQUISITION icon, and a Form 8-K was filed on
August 16, 1999 discussing the acquisition.
DESCRIPTION OF RELIANCE BANCORP [NFB LOGO]
Principal subsidiary is Reliance Federal Savings Bank with 29 locations in
Queens (7), Nassau (13), and Suffolk (9) counties of New York.
RELY Summary Financial Highlights as of June 30, 1999
Total Assets $2.5 billion
Loans, net $1.0 billion
Securities $1.3 billion
Deposits $1.6 billion
Shareholders' Equity $172 million
Equity to Assets 7.0%
THE MERGER TRANSACTION [NFB LOGO]
Fixed Exchange Ratio 2.0 shares of NFB for each share of RELY
Acquisition Price Per Share $38.12 (based on the 8/27/99 closing price
of NFB)
Aggregate Price $352 million, including options
Price to RELY Book Value 190%
Price to RELY 2000 EPS Multiple 15.2 x
Premium to Market 12%
Pro forma Ownership NFB: 74%, JSB: 16%, RELY: 10%
Anticipated Closing First Quarter 2000, prior to pending JSB
acquisition
Accounting Treatment Purchase, 100% stock, tax free exchange,
NFB share repurchase up to 50% of
consideration
Approvals Regulatory and Reliance Shareholders'
Lockup Option 19.9% of RELY
Walk away Double trigger walk away - 15% absolute
price decline for NFB and a 15% relative
price decline from the selected index.
NFB has option to top-up.
Due Diligence Completed, including Y2K
RATIONALE FOR TRANSACTION [NFB LOGO]
Immediately accretive to GAAP and cash earnings per share.
o In-market transaction that leverages off the JSB Financial acquisition
both in terms of capital utilization and branch redundancies.
o Provides $1.6 billion of additional core deposits.
o Provides significant cost savings and exceptional returns to shareholders.
o Adds 160,000 retail customers with new markets for commercial banking
products.
o Significantly enhances our Long Island market penetration.
o Very low execution risk.
MARKETSHARE PENETRATION [NFB LOGO]
Nassau County
Rank Institution Deposits (millions) %County
- -------------------------------------------------------------------------------
1 Chase Manhattan $3,821 11.61%
2 ABN Ambro 3,374 10.25%
3 Astoria Financial 3,095 9.40%
4 Greenpoint Financial 3,933 11.95%
5 Dime Bancorp 2,702 8.21%
6 Fleet Boston 2,692 8.18%
7 Roslyn Bancorp 2,674 8.12%
8 Citigroup 2,230 6.77%
NFB / RELY 2,003 6.08%
9 Bank of New York 1,634 4.96%
10 HSBC Holdings 1,612 4.90%
11 North Fork Bancorp 1,246 3.79%
12 Reliance Bancorp 757 2.30%
13 Apple Bank 599 1.82%
14 Emigrant Bancorp 580 1.76%
15 Ridgewood Savings 536 1.63%
30 Institutions - Total Nassau $32,915
Suffolk County
Rank Institution Deposits (millions) %County
- ------------------------------------------------------------------------------
1 Fleet Boston $4,612 19.74%
2 Chase Manhattan 3,724 15.94%
NFB / RELY 2,937 12.57%
3 North Fork Bancorp 2,505 10.72%
4 Astoria Financial 1,963 8.40%
5 Dime Bancorp 1,669 7.14%
6 ABN Amro 1,542 6.60%
7 Bank of New York 1,298 5.56%
8 HSBC Holdings 1,058 4.53%
9 Greenpoint Financial 805 3.45%
10 Suffolk Bancorp 790 3.38%
11 Apple Bank 715 3.06%
12 Citigroup 566 2.42%
13 Roslyn Bancorp 440 1.88%
14 Reliance Bancorp 432 1.85%
15 Haven Bancorp 282 1.21%
23 Institutions - Total Suffolk $23,364
Queens County
Rank Institution Deposits (millions) %County
- ------------------------------------------------------------------------------
1 Chase Manhattan $4,102 14.54%
2 Citigroup 3,044 10.78%
3 Astoria Financial 2,977 10.55%
NFB / RELY 2,685 9.51%
4 North Fork Bankcorp 2,245 7.96%
5 Greenpoint Financial 2,062 7.30%
6 HSBC Holdings 2,009 7.12%
7 Haven Bankcorp 1,132 4.01%
8 Ridgewood Savings 1,125 3.98%
9 Queens County Bancorp 1,033 3.66%
10 Independence Community 830 2.94%
11 Maspeth Federal S&L 735 2.61%
12 Roslyn Bancorp 692 2.45%
13 Dime Bancorp 646 2.29%
14 Fleet Boston 567 2.01%
15 Emigrant Bancorp 527 1.87%
18 Reliance Bancorp 440 1.56%
46 Institutions - Total Queens $28,222
Significantly enhances marketshare on Long Island.
Source: SNL Branch Migration DataSource
North Fork Bancorp includes the effect of the pending acquisition of JSB
Financial.
ACCRETIVE TO NFB EARNINGS [NFB LOGO]
<TABLE>
<CAPTION>
2000 After 2000 GAAP EPS 2000 Cash EPS
Tax Earnings
<S> <C> <C> <C>
NFB/JSB Pro Forma Pooling Transaction $304,672 $1.78 $1.82
LESS: Share Issuance Proceeds (1) ($7,118)
Earnings on Cash Proceeds for Deal (2) ($8,904)
RELIANCE BANCORP $21,586
Estimated Benefits of Merger:
Cost Savings $ 14,860
Revenue Enhancements $ 3,250
Tax Efficiencies (3) $ 2,070
Goodwill Amortization ($8,974)
Pro Forma Combined $321,442 $1.86 $1.99
%Accretion 5% 9%
</TABLE>
This earnings model assumes no leverage on the balance sheet. If leverage
were added in the future, add $0.06 per share for every $1 billion at 150
basis points.
(1) Earnings on cash proceeds from tainted shares reissuance for JSB
transaction no longer necessary.
(2) Foregone earnings on cash proceeds for share repurchase, options and
restructure charge for Reliance transaction.
(3) Benefit derived from NFB's lower effective tax rate.
PRO FORMA BALANCE SHEET [NFB LOGO]
<TABLE>
<CAPTION>
June 30, 1999, in NFB NFB / JSB Reliance Pro Forma
millions, except per Stand Alone Pro Forma Bancorp Combined*
share amounts
<S> <C> <C> <C> <C>
Assets $11,522 $13,189 $2,452 $15,574
Investments $4,856 $5,222 $1,342 $6,284
Loans, net $6,064 $7,248 $983 $8,237
Total Deposits $6,489 $7,599 $1,556 $9,198
Total Borrowings $3,850 $3,900 $652 $4,552
Capital Securities $199 $199 $50 $244
Stockholders' Equity $804 $1,226 $172 $1,242
Intangibles $82 $82 $54 $353
Stated Book Value $5.79 $7.18 $19.99 $7.21
Tangible Book Value $5.20 $6.70 $13.66 $5.16
Estimated EPS 2000 $1.75 $1.78 $1.86
Cash EPS 2000 $1.79 $1.82 $1.99
* Includes the effect of the share repurchase and restructure charge.
MERGER AND RESTRUCTURE CHARGE [NFB LOGO]
</TABLE>
($ in millions) Pre tax After tax
Merger Expense $6.2 $6.0
Restructure Charges:
Contracts and Severance $37.4 $29.1
Facility and Equipment 6.7 3.8
Other 0.9 0.5
----- -----
Total Restructure Charge $45.0 $33.4
Tax Bad Debt Recapture $3.0 $2.0
Total Merger and Restructure Charge $54.2 $41.4
The charge is included in goodwill for financial reporting purposes.
COMPARABLE M&A TRANSACTION PRICING [NFB LOGO]
<TABLE>
<CAPTION>
($ in millions)
Price as a Multiple of:
-----------------------
Announce Acquiror Target Announced Premium Book Tang
Date Value to Value Book Forward
Market Value EPS
<S> <C> <C> <C> <C> <C> <C> <C>
8/16/99 North Fork Bancorp JSB Financial $569.4 4.4% 1.52 x 1.52 x 18.0 x
1999 YTD
07/28/99 BB&T Corporation Premier $597.7 (3.3%) 3.27 x 3.35 x 21.5 x
Bancshares
06/29/99 Hudson United Bncp JeffBanks Inc. 386.9 18.5 2.74 2.85 19.9
06/07/99 Sky Financial Group Mahoning Natl 306.6 54.5 3.16 3.16 18.6
Bncp
06/02/99 Peoples Heritage Banknorth 776.9 22.8 2.35 3.06 14.2
Group Inc.
05/07/99 Zions Bancorp Pioneer 346.5 NM 5.13 5.13 22.7
Bankcorp.
05/19/99 U.S. Bancorp Western 958.0 13.8 2.61 4.37 22.1
Bankcorp
04/19/99 Citizens Bkng Corp. F&M Bncp 822.5 27.8 3.27 3.42 21.1
Inc.
02/22/99 Union Planters Corp. Republic Bkng 412.0 10.8 2.42 2.60 19.3
Corp.
02/18/99 U.S. Bancorp Bank of 306.3 15.9 4.55 4.55 19.6
Commerce
02/18/99 Summit Bancorp Prime Bancorp 302.5 0.5 3.25 3.35 21.4
Inc.
1999
Median: 15.9% 3.20 x 3.35 x 20.5 x
8/30/99 North Fork Bancorp Reliance $352.1 12.5% 1.90 x 2.79 x 15.2 x
Bancorp
</TABLE>
IN SHORT THIS TRANSACTION...
...adds to GAAP and cash earnings immediately.
...adds over $1.6 billion in core deposits.
...adds 160,000 more customers.
...is capital efficient.
...is simple to execute.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma condensed combined financial
statements are based on the historical financial statements of North Fork
Bancorporation, Inc. ("North Fork"), Reliance Bancorp, Inc. ("Reliance"),
and JSB Financial, Inc. ("JSB"), under the assumptions and adjustments set
forth in the accompanying notes to the unaudited pro forma condensed
combined financial statements. The Pro Forma Condensed Combined Balance
Sheets give effect to the pending mergers of Reliance and JSB as if such
transactions had become effective as of June 30, 1999. The Pro Forma
Condensed Combined Statements of Income give effect to the Reliance
transaction as if the pending merger had become effective as of January 1,
1998 and to the JSB transaction as if the pending merger had become
effective as of the beginning of each of the periods for which information
is presented. The pro forma information assumes that the pending Reliance
merger is accounted for under the purchase method of accounting and the
pending JSB merger is accounted for using the pooling-of-interests method
of accounting.
Reliance's annual reporting periods are as of and for the year ended
June 30, whereas North Fork and JSB utilize a calendar year basis.
Reliance's financial results for the six months ended June 30, 1999 and the
twelve months ended December 31, 1998 have been conformed to the calendar
year reporting period of North Fork.
The pro forma condensed combined financial statements should be read
in conjunction with, and are qualified in their entirety by, the historical
financial statements, including the notes thereto, of North Fork, Reliance
and JSB. Certain Reliance and JSB financial information has been
reclassified to conform with North Fork. The pro forma condensed combined
financial statements do not give effect to the anticipated cost savings and
revenue enhancement opportunities that could result from the mergers. The
pro forma information is not necessarily indicative of the combined
financial position or the results of operations in the future or of the
combined financial position or the results of operations which would have
been realized had the mergers been consummated during the periods or as of
the dates for which the pro forma information is presented.
Pro forma per share amounts for the combined pro forma North Fork,
Reliance, and JSB entity are based on the respective exchange ratios and the
assumed share repurchase.
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
(UNAUDITED)
JUNE 30, 1999
(DOLLARS IN THOUSANDS)
{PRIVATE}
North Fork/ All Combined
Pro Forma Reliance Pro Forma Transactions
North Fork Reliance Adjustments Pro Forma JSB Adjustments Pro Forma
------------------------------------- ------------------------------------- ------------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash & Due from Banks $155,247 $33,255 ($25,369) 3 $163,133 $14,393 $177,526
Money Market Investments 177,372 - 177,372 64,500 241,872
Securities:
Available-for-Sale 3,515,280 1,057,206 (232,339) 5,6 4,340,147 97,530 4,437,677
Held-to-Maturity 1,340,653 284,752 1,625,405 221,364 1,846,769
------------------------------------- -------------------------------------- ------------
Total Securities 4,855,933 1,341,958 (232,339) 5,965,552 318,894 - 6,284,446
------------------------------------- -------------------------------------- ------------
Loans, net of Unearned Income
& Fees 6,063,611 983,193 7,046,804 1,190,131 8,236,935
Allowance for Loan Losses 69,390 9,120 78,510 5,943 84,453
------------------------------------- -------------------------------------- ------------
Net Loans 5,994,221 974,073 - 6,968,294 1,184,188 - 8,152,482
------------------------------------- -------------------------------------- ------------
Premises & Equipment, Net 74,324 16,368 90,692 18,702 109,394
Accrued Interest Receivable 68,094 13,095 81,189 9,005 90,194
Intangible Assets 82,109 54,373 216,891 2,4 353,373 - 353,373
Other Assets 114,985 18,651 14,777 3,4 148,413 10,339 6,357 8 165,109
------------------------------------- -------------------------------------- ------------
Total Assets $11,522,285 $2,451,773 ($26,040) $13,948,018 $1,620,021 $6,357 $15,574,396
------------------------------------- -------------------------------------- ------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Demand Deposits $1,437,155 $70,829 $1,507,984 $80,515 $1,588,499
Savings N.O.W. & Money Market
Deposits 2,864,959 642,211 3,507,170 635,275 4,142,445
Time Deposits 2,187,353 842,778 3,030,131 436,873 3,467,004
------------------------------------- -------------------------------------- ------------
Total Deposits 6,489,467 1,555,818 - 8,045,285 1,152,663 - 9,197,948
------------------------------------- -------------------------------------- ------------
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase 3,014,796 313,716 3,328,512 - 3,328,512
Other Borrowings 835,000 338,718 1,173,718 50,000 1,223,718
Accrued Expenses & Other
Liabilities 179,443 21,854 51,150 4 252,447 42,443 43,223 8 338,113
------------------------------------- -------------------------------------- ------------
Total Liabilities $10,518,706 $2,230,106 $51,150 $12,799,962 $1,245,106 $43,223 $14,088,291
------------------------------------- -------------------------------------- ------------
Capital Securities 199,301 50,000 (5,000) 5 244,301 - - 244,301
STOCKHOLDERS' EQUITY
Preferred Stock - - - - - - -
Common Stock 362,730 108 (108) 3 362,730 160 69,394 7 432,284
Additional Paid in Capital 34,468 121,037 (146,961) 3 8,544 170,072 (178,616) 7 -
Retained Earnings 611,960 115,976 (115,976) 3 611,960 342,633 (108,211) 7 846,382
Accumulated Other
Comprehensive Income-
Unrealized (Losses)/Gains on
Securities
Available-for-Sale, net of
taxes (40,902) (10,546) 11,120 3 (40,328) 42,617 2,289
Deferred Compensation (22,771) (4,342) 4,342 3 (22,771) (4,758) 4,758 7 (22,771)
Treasury Stock (141,207) (50,566) 175,393 3,6 (16,380) (175,809) 175,809 7 (16,380)
------------------------------------- -------------------------------------- ------------
Total Stockholders'
Equity 804,278 171,667 (72,190) 903,755 374,915 (36,866) 1,241,804
------------------------------------- -------------------------------------- ------------
Total Liabilities and
Stockholders' Equity $11,522,285 $2,451,773 ($26,040) $13,948,018 $1,620,021 $6,357 $15,574,396
------------------------------------- -------------------------------------- ------------
All Combined
Transactions
SELECTED CAPITAL RATIOS: North Fork Pro Forma
---------- ------------
Tier 1 Capital Ratio 14.52% 12.42%
Risk Adjusted Capital Ratio 15.57% 13.35%
Leverage Ratio 8.50% 7.47%
</TABLE>
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
{PRIVATE}
North Fork/ All Combined
Pro Forma Reliance Transactions
North Fork Reliance Adjustments Pro Forma JSB Pro Forma
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $396,224 $82,512 ($7,978) 6 $470,758 $56,324 $527,082
Interest Expense 172,735 47,567 220,302 18,741 239,043
----------------------------------------------------------------------------------
Net Interest Income 223,489 34,945 (7,978) 250,456 37,583 288,039
Provision for Loan Losses 2,500 150 2,650 12 2,662
----------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses 220,989 34,795 (7,978) 247,806 37,571 285,377
Non-Interest Income 28,976 4,036 33,012 1,904 34,916
Net Securities Gains 9,720 112 9,832 - 9,832
Non-Interest Expense 87,489 20,692 4,501 2 112,682 14,312 126,994
----------------------------------------------------------------------------------
Income before Income Taxes 172,196 18,251 (12,479) 177,968 25,163 203,131
Provision for Income Taxes 60,268 8,090 (2,792) 6 65,566 10,791 76,357
----------------------------------------------------------------------------------
Net Income $111,928 $10,161 ($9,687) $112,402 $14,372 $126,774
----------------------------------------------------------------------------------
Earnings Per Share-Basic $0.81 $0.79 $0.75
Earnings Per Share-Diluted $0.80 $0.78 $0.74
Weighted Average Shares
Outstanding-Basic 138,794 141,952 169,963
Weighted Average Shares
Outstanding-Diluted 139,690 143,750 172,370
</TABLE>
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
{PRIVATE}
North Fork/ All Combined
Pro Forma Reliance Transactions
North Fork Reliance Adjustments Pro Forma JSB Pro Forma
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $753,100 $163,762 ($19,718) 6 $897,144 $117,813 $1,014,957
Interest Expense 328,456 95,020 423,476 38,476 461,952
----------------------------------------------------------------------------------
Net Interest Income 424,644 68,742 (19,718) 473,688 79,337 553,005
Provision for Loan Losses 15,500 950 16,450 51 16,501
----------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses 409,144 67,792 (19,718) 457,218 79,286 536,504
Non-Interest Income 54,885 7,563 62,448 5,848 68,296
Net Securities Gains 9,433 (1) 9,432 - 9,432
Non-Interest Expense 230,381 40,975 9,001 2 280,357 27,458 307,815
----------------------------------------------------------------------------------
Income before Income Taxes 243,081 34,379 (28,719) 248,741 57,676 306,417
Provision for Income Taxes 75,106 15,288 6,901 6 83,493 13,288 96,781
----------------------------------------------------------------------------------
Net Income $167,975 $19,091 ($21,818) $165,248 $44,388 $209,636
----------------------------------------------------------------------------------
Earnings Per Share-Basic $1.19 $1.16 $1.22
Earnings Per Share-Diluted $1.18 $1.15 $1.20
Weighted Average Shares
Outstanding-Basic 140,706 141,972 171,351
Weighted Average Shares
Outstanding-Diluted 141,766 144,066 174,288
</TABLE>
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
{PRIVATE}
North Fork/
Pro Forma JSB
North Fork JSB Adjustments Pro Forma
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income $724,424 $109,611 $834,035
Interest Expense 326,803 39,874 366,677
-----------------------------------------------------------
Net Interest Income 397,621 69,737 - 467,358
Provision for Loan Losses 8,100 648 8,748
-----------------------------------------------------------
Net Interest Income after
Provision for Loan Losses 389,521 69,089 - 458,610
Non-Interest Income 50,915 13,069 63,984
Net Securities Gains 8,407 6,991 15,398
Non-Interest Expense 173,709 27,434 201,143
-----------------------------------------------------------
Income before Income Taxes 275,134 61,715 - 336,849
Provision for Income Taxes 104,613 24,625 129,238
-----------------------------------------------------------
Net Income $170,521 $37,090 - $207,611
-----------------------------------------------------------
Earnings Per Share-Basic $1.24 $1.25
Earnings Per Share-Diluted $1.22 $1.22
Weighted Average Shares
Outstanding-Basic 136,761 166,335
Weighted Average Shares
Outstanding-Diluted 139,333 169,903
</TABLE>
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
{PRIVATE}
North Fork/
Pro Forma JSB
North Fork JSB Adjustments Pro Forma
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income $613,762 $108,345 $722,107
Interest Expense 281,107 40,217 321,324
-----------------------------------------------------------
Net Interest Income 332,655 68,128 - 400,783
Provision for Loan Losses 8,000 (1,400) 6,600
-----------------------------------------------------------
Net Interest Income after
Provision for Loan Losses 324,655 69,528 - 394,183
Non-Interest Income 38,602 4,345 42,947
Net Securities Gains 6,224 2 6,226
Non-Interest Expense 200,427 27,598 228,025
Income before Income Taxes 169,054 46,277 - 215,331
Provision for Income Taxes 74,606 19,552 94,158
-----------------------------------------------------------
Net Income $94,448 $26,725 - $121,173
-----------------------------------------------------------
Earnings Per Share-Basic $0.69 $0.73
Earnings Per Share-Diluted $0.68 $0.71
Weighted Average Shares
Outstanding-Basic 136,504 166,690
Weighted Average Shares
Outstanding-Diluted 138,707 170,015
</TABLE>
SEE "NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS"
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Note (1) Basis of Presentation
The pro forma information presented is not necessarily indicative
of the results of operations or the combined financial position that would
have resulted had the pending merger with Reliance become effective as of
January 1, 1998 and the pending merger with JSB become effective at the
beginning of each of the periods indicated. The pro forma information
presented is not necessarily indicative of the results of operations in
future periods or the future financial position of the combined entities.
It is anticipated that the mergers will be completed during the first
quarter of 2000.
The Reliance transaction will be accounted for under the purchase
method of accounting, and the assets and liabilities of Reliance will be
recorded at their estimated fair values. However, for purposes of the
pro forma financial statements these adjustments have not been made as
management is still in the process of quantifying the required adjustments.
The JSB transaction will be accounted for as a pooling-of-interests
and, as such, the assets and liabilities of JSB will be combined with those
of North Fork at their historical values, accordingly, the financial
statements of JSB will be combined with the financial statements of North
Fork as of the earliest period presented.
The Pro Forma Condensed Combined Balance Sheet gives effect to the
pending mergers of Reliance and JSB as if such transactions had become
effective as of June 30, 1999. The Pro Forma Condensed Combined Statements
of Income give effect to the Reliance transaction as if the pending merger
had become effective as of January 1, 1998 and to the JSB transaction as if
the pending merger had become effective as of the beginning of each of the
periods for which information is presented.
Reliance's annual reporting periods are as of and for the year
ended June 30, whereas North Fork and JSB utilize a calendar year basis.
Reliance's financial results for the six months ended June 30, 1999 and the
twelve months ended December 31, 1998 have been conformed to the calendar
year reporting period of North Fork and JSB.
RELIANCE PRO FORMA ADJUSTMENTS
------------------------------
Note (2)
The excess consideration paid for Reliance by North Fork over of
the net assets acquired, is as follows:
North Fork Common Stock
(17,061,420 shares at $19.0625 per share) $325,233
North Fork investment in
Reliance, at cost (55,500 shares at $36.21 per share) 2,010
Cash payments for exercise of options,
net of tax benefit 19,849
Transaction Costs, net of taxes 41,466
--------
Total Consideration Paid $388,558
Less: Reliance Tangible Value at June 30, 1999 117,294
--------
Intangible Asset $271,264
Less: Reliance Historical Intangible Asset 54,373
--------
Net Intangible Asset Recognized $ 216,891
========
The intangible asset of $271.3 million will be amortized on a
straight-line basis over a 20 year period. Included as a pro forma
adjustment to non-interest expense for the six month period ended June 30,
1999 and for the year ended December 31, 1998 is $4.5 million and $9.0
million, respectively, of intangible amortization expense.
Note (3)
Pro forma adjustments to stockholders' equity at June 30, 1999
reflect the merger accounted for as a purchase transaction through: (a) the
assumed repurchase of an additional 8,500,000 shares of North Fork common
stock at $19.0625 per share, (North Fork's market price as of August 27,
1999) and purchases completed subsequent to June 30, 1999 of 3,085,000
shares at $20.84 per share. (b) the issuance of 17,061,420 shares of North
Fork's treasury stock at $19.0625 (held at an average per share cost of
$20.58) , for 8,530,710 outstanding common shares of Reliance based on the
Exchange Ratio of 2.0 (which excludes 55,500 shares of Reliance common
stock held by North Fork at an average per share cost of $36.21, which are
assumed to be retired at cost), (c) a cash payment of $25,368,850, offset by
$5,521,130 in related tax benefits for the satisfaction of all Reliance
stock options outstanding at June 30, 1999.
Note (4)
An adjustment to the intangible asset of $41.5 million net of
taxes has been recorded in the Pro Forma Condensed Combined Balance Sheet
to reflect North Fork's and Reliance's best estimate of the transaction
costs to be incurred upon consummation of the transaction and reflected as
part of the purchase price for financial reporting purposes. A summary of
the estimated transaction costs are as follows:
Type of Cost Expected Costs
------------ --------------
(in thousands)
Transaction Costs $ 6,226
Merger Related Compensation and Severance Costs 37,360
Facilities and System Costs 6,689
Other Merger Related Costs 875
---------------
Total Pre-Tax Transaction Costs 51,150
Less: Related Tax Benefit (11,634)
Add: State and Local Tax Bad Debt Recapture,
Net of Federal Benefit 1,950
---------------
Total Transaction Costs, Net of Taxes $ 41,466
===============
Transaction costs consist primarily of investment banking, legal
fees, other professional fees and expenses associated with shareholder and
customer notifications. Merger related compensation and severance costs
consist primarily of employee severance, compensation arrangements,
transitional staffing and related employee benefit expenses. Facility and
system costs consist primarily of lease termination charges and equipment
write-offs resulting from the consolidation of overlapping branch
locations, duplicate headquarters and operational facilities. Also
reflected are the costs associated with the cancellation of certain data
and item processing contracts and the deconversion of Reliance's computer
systems. Other merger related costs arise primarily from the application of
North Fork's accounting practices to the accounts of Reliance and other
expenses associated with the integration of operations.
Refinements to the foregoing estimates may occur subsequent
to the completion of the Reliance merger.
Although no assurance can be given, North Fork expects that cost
savings will be achieved at an annual rate of approximately $14.9 million
on an after tax basis by the end of 2000 as a result of steps to be taken
to integrate operations and to achieve efficiencies in certain combined
lines of businesses. These anticipated merger cost savings were determined
based upon preliminary estimates. The pro forma financial information does
not give effect to these expected cost savings, nor does it include any
estimates of revenue enhancements that could be realized with the Reliance
merger.
Note (5)
Reflects the elimination of $5.0 million of Reliance Capital
Securities which were held by North Fork in its securities
available-for-sale portfolio.
Note (6)
Treasury shares previously acquired and reissued in order
to fund the Reliance transaction are assumed to have been acquired as of
January 1, 1999 and January 1, 1998, with the cash outlays for such
purposes being obtained from the liquidation of securities held in the
available-for-sale portfolio, yielding 6.25%, at par.
JSB FINANCIAL, INC. PRO FORMA ADJUSTMENTS
-----------------------------------------
Note (7)
Pro forma adjustments to stockholders equity, at June 30, 1999,
reflect the JSB merger accounted for as a pooling-of-interest through the
exchange of 27,821,526 shares of North Fork common stock (using an Exchange
Ratio of 3.0) for 9,273,842 actual outstanding shares of JSB, (reflecting
the retirement of 6,726,158 shares of JSB treasury stock, at an average
cost of $26.14 per share). Pro forma adjustments do not include any shares
of North Fork Common Stock to be received upon consummation of the JSB
merger by holders of JSB Options.
Note (8)
The pro forma condensed combined balance sheet reflects a
non-recurring merger and restructuring charge of $36.9 million, net of
taxes, which will be recognized upon consummation of the JSB merger. Such
charge will reduce diluted earnings per share for the period in which such
charge is recognized by approximately $.20 (based on pro forma weighted
average shares outstanding of 185,762,000 as of June 30,1999). A summary of
the estimated merger and restructuring charges are as follows:
Type of Cost Expected Costs
------------ --------------
(in thousands)
Merger Expense $ 4,148
Restructuring Charge:
Merger Related Compensation and Severance Costs 32,566
Facility and System Costs 5,635
Other Merger Related Costs 875
--------------
Total Pre-Tax Merger and Restructuring Charge 43,224
Less: Related Tax Benefit (13,858)
Add: State and Local Tax Bad Debt Recapture,
Net of Federal Benefit 7,500
--------------
Total After-Tax Merger and Restructuring Charge $ 36,866
==============
Merger expenses consist primarily of investment banking, legal
and other professional fees and expenses associated with shareholder
notification. Restructure related compensation and severance costs consist
primarily of employee severance, compensation arrangements, transitional
staffing and the related employee benefits expenses. Facility and system
costs consist primarily of lease termination charges and equipment
write-offs resulting from the consolidation of overlapping branch locations
and duplicate headquarters and operational facilities. Also reflected are
the costs associated with the cancellation of certain data and item
processing contracts and the deconversion of existing JSB computer systems.
Refinements to the foregoing estimates may occur subsequent to
the completion of the JSB merger.
The effect of the proposed charge has been reflected in the pro
forma condensed combined balance sheet as of June 30, 1999; however, it has
not been reflected in the pro forma combined statements of income. Although
no assurance can be given, North Fork expects that cost savings will be
achieved at an annual rate of approximately $13.2 million on a net of taxes
basis by the end of 2000 as a result of steps to be taken to integrate
operations and to achieve efficiencies in certain combined lines of
business. These anticipated cost savings were determined based upon
preliminary estimates. The pro forma financial information does not give
effect to these expected cost savings, nor does it include any estimates of
revenue enhancements that could be realized with the JSB merger.
Note (9). Pro Forma Weighted Average Shares Outstanding
The pro forma weighted average shares outstanding for the six month
period ended June 30, 1999 and for the year ended 1998 reflect the assumed
issuance of 2.0 shares of North Fork Common Stock for each average
equivalent share of Reliance Common Stock outstanding during such periods
(all Reliance options are assumed to have been settled for cash in
accordance with the provisions of the Limited Rights), and the pro forma
weighted average shares outstanding for all periods presented reflect the
assumed issuance of 3.0 shares of North Fork Common Stock for each average
equivalent share of JSB Common Stock outstanding during such periods.
JSB FINANCIAL, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 16, 1999
("Agreement"), by and between JSB Financial, Inc., a Delaware corporation
("Issuer"), and North Fork Bancorporation, Inc., a Delaware
corporation ("Grantee").
RECITALS
A. The Agreement and Plan of Merger. Grantee and Issuer have
entered into an Agreement and Plan of Merger, dated as of August 16, 1999
("Merger Agreement"), providing for, among other things, the merger of
Issuer with and into Grantee, with Grantee being the surviving
corporation.
B. Condition to Agreement and Plan of Merger. As a condition
and an inducement to Grantee's execution and delivery of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein and in the Merger Agreement, and intending to be legally bound
hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in the Merger
Agreement.
2. Grant of Option. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option
("Option") to purchase up to 1,848,092 shares of common stock, par value
$.01 per share ("Issuer Common Stock"), of Issuer (as adjusted as set forth
herein, the "Option Shares," which shall include the Option Shares before
and after any transfer of such Option Shares, but in no event shall the
number of Option Shares for which this Option is exercisable exceed 19.9%
of the issued and outstanding shares of Issuer Common Stock), at a purchase
price per Option Share (as adjusted as set forth herein, the "Purchase
Price") equal to $58.75.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the agreements
or covenants contained in this Agreement or the Merger Agreement, and (ii)
no preliminary or permanent injunction or other order against the delivery
of shares covered by the Option issued by any court of competent
jurisdiction in the United States shall be in effect, the Holder may
exercise the Option, in whole or in part, at any time and from time to
time, following the occurrence of a Purchase Event (as hereinafter
defined); provided, that, the Option shall terminate and be of no further
force or effect upon the earliest to occur of (A) the Effective Time, (B)
termination of the Merger Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
other than a termination thereof by Grantee pursuant to Section 6.1(b)(ii)
of the Merger Agreement (a termination of the Merger Agreement by Grantee
pursuant to Section 6.1(b)(ii) of the Merger Agreement, being referred to
herein as a "Default Termination"), (C) 18 months after a Default
Termination or (D) 18 months after termination of the Merger Agreement
(other than a Default Termination) following the occurrence of a Purchase
Event or a Preliminary Purchase Event; provided, however, that any purchase
of shares upon exercise of the Option shall be subject to compliance with
applicable law; provided further, however, that if the Option cannot be
exercised on any day because of an injunction, order or similar restraint
issued by a court of competent jurisdiction, the period during which the
Option may be exercised shall be extended so that the Option shall expire
no earlier than the tenth business day after such injunction, order or
restraint shall have been dissolved or when such injunction, order or
restraint shall have become permanent and no longer subject to appeal, as
the case may be. The term "Holder" shall mean the holder or holders of the
Option from time to time, and which initially is Grantee. The rights set
forth in Sections 8 and 9 of this Agreement shall terminate when the right
to exercise the Option and Substitute Option terminate (other than as a
result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent, Issuer
shall have authorized, recommended, publicly proposed or publicly
announced an intention to authorize, recommend or propose, or
Issuer shall have entered into an agreement with any person (other
than Grantee or any subsidiary of Grantee) to effect (A) a merger,
consolidation or similar transaction involving Issuer or any of its
significant subsidiaries, (B) the disposition, by sale, lease,
exchange or otherwise, of assets or deposits of Issuer or any of
its significant subsidiaries representing in either case 10% or
more of the consolidated assets or deposits of Issuer and its
subsidiaries, other than in the ordinary course of business, or (C)
the issuance, sale or other disposition by Issuer of (including by
way of merger, consolidation, share exchange or any similar
transaction) securities representing 10% or more of the voting
power of Issuer or any of its significant subsidiaries (each of
(A), (B) or (C), an "Acquisition Transaction"); or
(ii) Any person (other than Grantee or any subsidiary
of Grantee) shall have acquired beneficial ownership (as such term
is defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended ("Exchange Act")) of, or the right to acquire beneficial
ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act), other than a group of which Grantee
or any subsidiary of Grantee is a member, shall have been formed
which beneficially owns, or has the right to acquire beneficial
ownership of, 10% or more of the voting power of Issuer or any of
its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any
of the following events:
(i) Any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined in Rule
14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securities Act of 1933, as amended,
("Securities Act"), with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 10% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) The stockholders of Issuer shall not have
approved the Merger Agreement by the requisite vote at the meeting
of the stockholders of the Issuer required to be called to approve
the Merger Agreement ("Issuer Meeting"), the Issuer Meeting shall
not have been held or shall have been canceled prior to termination
of the Merger Agreement or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after it shall have been publicly
announced that any person (other than Grantee or any subsidiary of
Grantee) shall have (A) made, or disclosed an intention to make, a
bona fide proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement under
the Securities Act with respect to an Exchange Offer or (C) filed
an application (or given a notice), whether in draft or final form,
under the Bank Holding Company Act of 1956, as amended ("BHC Act"),
the Home Owners' Loan Act of 1933, as amended ("HOLA"), the Bank
Merger Act, as amended ("BMA") or the Change in Bank Control Act of
1978, as amended ("CBCA"), for approval to engage in an Acquisition
Transaction; or
(iii) Any person (other than Grantee or any
subsidiary of Grantee) shall have made a bona fide proposal to
Issuer or its stockholders by public announcement, or written
communication that is or becomes the subject of public disclosure,
to engage in an Acquisition Transaction; or
(iv) After a proposal is made by a third party to
Issuer or its stockholders to engage in an Acquisition Transaction,
or such third party states its intention to the Issuer to make such
a proposal if the Merger Agreement terminates, and thereafter
Issuer shall have breached any representation, warranty, covenant
or agreement contained in the Merger Agreement and such breach
would entitle Grantee to terminate the Merger Agreement under
Section 6.1(b) thereof (without regard to the cure period provided
for therein unless such cure is promptly effected without
jeopardizing consummation of the Merger pursuant to the terms of
the Merger Agreement).
As used in this Agreement, the term "person" shall have the
meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event of which it
has knowledge, it being understood that the giving of such notice by Issuer
shall not be a condition to the right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it
shall send to Issuer a written notice (the "Option Notice," the date of
which being herein referred to as the "Notice Date") specifying (i) the
total number of Option Shares it intends to purchase pursuant to such
exercise and (ii) a place and date not earlier than three business days nor
later than 15 business days from the Notice Date for the closing
("Closing") of such purchase ("Closing Date"); provided, that the first
Option Notice shall be sent to Issuer within 180 days after the first
Purchase Event of which Grantee has been notified. If prior notification to
or approval of any Governmental Entity is required in connection with any
such purchase, Issuer shall cooperate with the Holder in the filing of the
required notice of application for approval and the obtaining of such
approval, and the Closing shall occur promptly following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated
by Issuer, an amount equal to the Purchase Price multiplied by the number
of Option Shares to be purchased on such Closing Date and (ii) present and
surrender this Agreement to the Issuer at the address of the Issuer
specified in Section 13(f) of this Agreement.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a) of this Agreement, (i) Issuer shall deliver to Holder (A) a
certificate or certificates representing the Option Shares to be purchased
at such Closing, which Option Shares shall be free and clear of all liens
(as defined in the Merger Agreement) and subject to no preemptive rights,
and (B) if the Option is exercised in part only, an executed new agreement
with the same terms as this Agreement evidencing the right to purchase the
balance of the shares of Issuer Common Stock purchasable hereunder, and
(ii) Holder shall deliver to Issuer a letter agreeing that Holder shall not
offer to sell or otherwise dispose of such Option Shares in violation of
applicable federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend which shall read
substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT
DATED AS OF AUGUST 16, 1999. A COPY OF SUCH AGREEMENT WILL BE
PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE
ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating
to the Securities Act shall be removed by delivery of substitute
certificate(s) without such legend if Holder shall have delivered to Issuer
a copy of a letter from the staff of the Securities and Exchange Commission
("SEC"), or an opinion of counsel in form and substance reasonably
satisfactory to Issuer and its counsel, to the effect that such legend is
not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of an Option Notice,
the tender of the applicable purchase price in immediately available funds
and the tender of this Agreement to Issuer, Holder shall be deemed to be
the holder of record of the shares of Issuer Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of
Issuer Common Stock shall not then be actually delivered to Holder. Issuer
shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section
4 in the name of Holder or its assignee, transferee or designee.
(e) Issuer agrees (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Issuer Common Stock so that the Option may be exercised without
additional authorization of Issuer Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to
purchase Issuer Common Stock, (ii) that it will not, by charter amendment
or through reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer, (iii) promptly
to take all action as may from time to time be required (including (A)
complying with all premerger notification, reporting and waiting period
requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Governmental Entity as it may require)
in order to permit Holder to exercise the Option and Issuer duly and
effectively to issue shares of Issuer Common Stock pursuant hereto and (iv)
promptly to take all action provided herein to protect the rights of Holder
against dilution.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee (and Holder, if different than Grantee)
as follows:
(a) Corporate Authority. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby; the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer, and no other corporate proceedings on
the part of Issuer are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This
Agreement has been duly and validly executed and delivered by
Issuer.
(b) Beneficial Ownership. To the best knowledge of Issuer,
as of the date of this Agreement, no person or group has beneficial
ownership of more than 10% of the issued and outstanding shares of
Issuer Common Stock.
(c) Shares Reserved for Issuance; Capital Stock. Issuer has
taken all necessary corporate action to authorize and reserve and
permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms,
will have reserved for issuance upon the exercise of the Option,
that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time
to time purchasable upon exercise of the Option, and all such
shares, upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid and nonassessable, and will
be delivered free and clear of all claims, liens, encumbrances and
security interests (other than those created by this Agreement) and
not subject to any preemptive rights.
(d) No Violations. The execution, delivery and performance
of this Agreement does not and will not, and the consummation by
Issuer of any of the transactions contemplated hereby will not,
constitute or result in (i) a breach or violation of, or a default
under, its Certificate of Incorporation or By-Laws, or the
comparable governing instruments of any of its subsidiaries, or
(ii) a breach or violation of, or a default under, any agreement,
lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the
giving of notice, the lapse of time or both) or under any law,
rule, ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which it or
any of its subsidiaries is subject, that would, in any case, give
any other person the ability to prevent or enjoin Issuer's
performance under this Agreement in any material respect.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has full corporate power and
authority to enter into this Agreement and, subject to obtaining the
approvals referred to in this Agreement, to consummate the transactions
contemplated by this Agreement; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Grantee; and this Agreement has been duly executed and delivered by
Grantee.
7. Adjustment upon Changes in Issuer Capitalization, Etc.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number
of shares or securities subject to the Option, and the Purchase Price
therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing any such transaction so that Holder shall
receive, upon exercise of the Option, the number and class of shares or
other securities or property that Holder would have received in respect of
Issuer Common Stock if the Option had been exercised immediately prior to
such event, or the record date therefor, as applicable. If any additional
shares of Issuer Common Stock are issued after the date of this Agreement
(other than pursuant to an event described in the first sentence of this
Section 7(a), upon exercise of any option to purchase Issuer Common Stock
outstanding on the date hereof or upon conversion into Issuer Common Stock
of any convertible security of Issuer outstanding on the date hereof), the
number of shares of Issuer Common Stock subject to the Option shall be
adjusted so that, after such issuance, the Option, together with any shares
of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding,
without giving effect to any shares subject to or issued pursuant to the
Option. No provision of this Section 7 shall be deemed to affect or change,
or constitute authorization for any violation of, any of the covenants or
representations in the Merger Agreement.
(b) In the event that Issuer shall enter into an agreement
(i) to consolidate with or merge into any person, other than Grantee or one
of its subsidiaries, and Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person,
other than Grantee or one of its subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Issuer Common Stock shall
be changed into or exchanged for stock or other securities of Issuer or any
other person or cash or any other property, or the outstanding shares of
Issuer Common Stock immediately prior to such merger shall, after such
merger, represent less than 50% of the outstanding shares and share
equivalents of the merged company or (iii) to sell or otherwise transfer
all or substantially all of its assets or deposits to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that
the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged
for, an option ("Substitute Option"), at the election of Holder, to
purchase shares of either (A) the Acquiring Corporation (as hereinafter
defined), (B) any person that controls the Acquiring Corporation or (C) in
the case of a merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided, that, if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Holder. The Substitute Option
Issuer shall also enter into an agreement with Holder in substantially the
same form as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock (as hereinafter defined) as is
equal to the Assigned Value (as hereinafter defined) multiplied by the
number of shares of Issuer Common Stock for which the Option was
theretofore exercisable, divided by the Average Price (as hereinafter
defined). The exercise price of the Substitute Option per share of
Substitute Common Stock ("Substitute Option Price") shall then be equal to
the Purchase Price multiplied by a fraction in which the numerator is the
number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or merger
with Issuer (if other than Issuer), (B) Issuer in a merger in which
Issuer is the continuing or surviving person, or (C) the transferee
of all or substantially all of Issuer's assets (or a substantial
part of the assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares
of capital stock (or similar equity interest) with the greatest
voting power in respect of the election of directors (or persons
similarly responsible for the direction of the business and
affairs) of the Substitute Option Issuer.
(iii) "Assigned Value" shall mean the highest of (A)
the price per share of Issuer Common Stock at which a Tender Offer
or an Exchange Offer therefor has been made, (B) the price per
share of Issuer Common Stock to be paid by any third party pursuant
to an agreement with Issuer, (C) the highest closing price for
shares of Issuer Common Stock within the 60-day period immediately
preceding the consolidation, merger or sale in question and (D) in
the event of a sale of all or substantially all of Issuer's assets
or deposits, an amount equal to (x) the sum of the price paid in
such sale for such assets (and/or deposits) and the current market
value of the remaining assets of Issuer, as determined by a
nationally recognized investment banking firm selected by Holder,
divided by (y) the number of shares of Issuer Common Stock
outstanding at such time. In the event that a Tender Offer or an
Exchange Offer is made for Issuer Common Stock or an agreement is
entered into for a merger or consolidation involving consideration
other than cash, the value of the securities or other property
issuable or deliverable in exchange for Issuer Common Stock shall
be determined by a nationally recognized investment banking firm
selected by Holder.
(iv) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the
shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided, that, if Issuer is the
issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by Issuer,
the person merging into Issuer or by any company which controls
such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 19.9%
of the aggregate of the shares of Substitute Common Stock outstanding prior
to exercise of the Substitute Option. In the event that the Substitute
Option would be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding but for the limitation in the
first sentence of this Section 7(f), Substitute Option Issuer shall make a
cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in
Section 7(b) of this Agreement unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be
necessary so that the provisions of this Section 7 are given full force and
effect (including, without limitation, any action that may be necessary so
that the holders of the other shares of common stock issued by Substitute
Option Issuer are not entitled to exercise any rights by reason of the
issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact
that the shares Substitute Common Stock are restricted securities, as
defined in Rule 144, promulgated under the Securities Act ("Rule 144"), or
any successor provision) than other shares of common stock issued by
Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a) of this
Agreement, at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and
ending 12 months immediately thereafter, Issuer shall repurchase from
Holder (i) the Option and (ii) all shares of Issuer Common Stock purchased
by Holder pursuant hereto with respect to which Holder then has beneficial
ownership. The date on which Holder exercises its rights under this Section
8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price ("Section 8 Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for
any shares of Issuer Common Stock acquired pursuant to the Option
with respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable Price
(as defined below) for each share of Issuer Common Stock over (B)
the Purchase Price (subject to adjustment pursuant to Section 7 of
this Agreement), multiplied by the number of shares of Issuer
Common Stock with respect to which the Option has not been
exercised; and
(iii) The excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to Section
7 of this Agreement) paid (or, in the case of Option Shares with
respect to which the Option has been exercised but the Closing Date
has not occurred, payable) by Holder for each share of Issuer
Common Stock with respect to which the Option has been exercised
and with respect to which Holder then has beneficial ownership,
multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within 10 business days after the Request Date, pay the
Section 8 Repurchase Consideration to Holder in immediately available
funds, and contemporaneously with such payment, Holder shall surrender to
Issuer the Option and the certificates evidencing the shares of Issuer
Common Stock purchased thereunder with respect to which Holder then has
beneficial ownership, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and
clear of all Liens. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any Governmental Entity is required in
connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke
its request for repurchase pursuant to this Section 8, in whole or in part,
or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for approval
and expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of
any such approval). If any Governmental Entity disapproves of any part of
Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Holder and Holder shall have the right
(i) to revoke the repurchase request or (ii) to the extent permitted by
such Governmental Entity, determine whether the repurchase should apply to
the Option and/or Option Shares and to what extent to each, and Holder
shall thereupon have the right to exercise the Option as to the number of
Option Shares for which the Option was exercisable at the Request Date less
the number of shares covered by the Option in respect of which payment has
been made pursuant to Section 8(a)(ii) of this Agreement. Holder shall
notify Issuer of its determination under the preceding sentence within five
business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, in the event that Issuer
delivers to the Holder written notice accompanied by a certification of
Issuer's independent auditor each stating that a requested repurchase of
Issuer Common Stock would result in the recapture of Issuer's bad debt
reserves under the Internal Revenue Code of 1986, as amended ("Code"),
Holder's repurchase request shall be deemed to be automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock
paid for any such share by the person or groups described in Section
8(d)(i) hereof, (ii) the price per share of Issuer Common Stock received by
holders of Issuer Common Stock in connection with any merger, sale or other
business combination transaction described in Section 7(b)(i), 7(b)(ii) or
7(b)(iii) of this Agreement, or (iii) the highest closing sales price per
share of Issuer Common Stock as quoted on the New York Stock Exchange
("NYSE"), the American Stock Exchange ("AMEX") or the National Market
System of The Nasdaq Stock Market ("Nasdaq") (or if Issuer Common Stock is
not quoted on the NYSE, AMEX or Nasdaq, the highest bid price per share as
quoted on the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source chosen by Holder)
during the 40 business days preceding the Request Date; provided, however,
that in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of Issuer Common Stock outstanding
at the time of such sale. If the consideration to be offered, paid or
received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in
good faith by an independent nationally recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i)
any person (other than Grantee or any subsidiary of Grantee) shall have
acquired beneficial ownership of (as such term is defined in Rule 13d-3,
promulgated under the Exchange Act), or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, more than 25% of the then outstanding
shares of Issuer Common Stock, or (ii) any of the transactions described in
Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement shall be
consummated.
9. Repurchase of Substitute Option.
(a) Subject to the last sentence of Section 3(a) of this
Agreement, at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and
ending 12 months immediately thereafter, Substitute Option Issuer (or any
successor entity thereof) shall repurchase from Holder (i) the Substitute
Option and (ii) all shares of Substitute Common Stock purchased by Holder
pursuant hereto with respect to which Holder then has beneficial ownership.
The date on which Holder exercises its rights under this Section 9 is
referred to as the "Section 9 Request Date." Such repurchase shall be at an
aggregate price ("Section 9 Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for
any shares of Substitute Common Stock acquired pursuant to the
Substitute Option with respect to which Holder then has beneficial
ownership;
(ii) The excess, if any, of (A) the Highest Closing
Price (as defined below) for each share of Substitute Common Stock
over (B) the Purchase Price (subject to adjustment pursuant to
Section 7 of this Agreement), multiplied by the number of shares of
Substitute Common Stock with respect to which the Substitute Option
has not been exercised; and
(iii) The excess, if any, of the Highest Closing
Price over the Purchase Price (subject to adjustment pursuant to
Section 7 of this Agreement) paid (or, in the case of Substitute
Option Shares with respect to which the Substitute Option has been
exercised but the Closing Date has not occurred, payable) by Holder
for each share of Substitute Common Stock with respect to
which the Substitute Option has been exercised and with respect to
which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 9,
Substitute Option Issuer shall, within 10 business days after the Section 9
Request Date, pay the Section 9 Repurchase Consideration to Holder in
immediately available funds, and contemporaneously with such payment,
Holder shall surrender to Substitute Option Issuer the Substitute Option
and the certificates evidencing the shares of Substitute Common Stock
purchased thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all
Liens. Notwithstanding the foregoing, to the extent that prior notification
to or approval of any Governmental Entity is required in connection with
the payment of all or any portion of the Section 9 Repurchase
Consideration, Holder shall have the ongoing option to revoke its request
for repurchase pursuant to this Section 9, in whole or in part, or to
require that Substitute Option Issuer deliver from time to time that
portion of the Section 9 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application
for approval and expeditiously process the same (and each party shall
cooperate with the other in the filing of any such notice or application
and the obtaining of any such approval). If any Governmental Entity
disapproves of any part of Substitute Option Issuer's proposed repurchase
pursuant to this Section 9, Substitute Option Issuer shall promptly give
notice of such fact to Holder and Holder shall have the right (i) to revoke
the repurchase request or (ii) to the extent permitted by such Governmental
Entity, determine whether the repurchase should apply to the Substitute
Option and/or Substitute Option Shares and to what extent to each, and
Holder shall thereupon have the right to exercise the Substitute Option as
to the number of Substitute Option Shares for which the Substitute Option
was exercisable at the Section 9 Request Date less the number of shares
covered by the Substitute Option in respect of which payment has been made
pursuant to Section 9(a)(ii) of this Agreement. Holder shall notify
Substitute Option Issuer of its determination under the preceding sentence
within five business days of receipt of notice of disapproval of the
repurchase. Notwithstanding anything herein to the contrary, in the event
that Substitute Option Issuer delivers to the Holder written notice
accompanied by a certification of Substitute Option Issuer's independent
auditor each stating that a requested repurchase of Substitute Common Stock
would result in the recapture of Substitute Option Issuer's bad debt
reserves under the Code, Holder's repurchase request shall be deemed to be
automatically revoked. Notwithstanding anything herein to the contrary, all
of Holder's rights under this Section 9 shall terminate on the date of
termination of this Substitute Option pursuant to Section 3(a) of this
Agreement.
(c) For purposes of this Agreement, the "Highest Closing
Price" means the highest of the closing sales price per share of Substitute
Common Stock, as quoted on the NYSE, AMEX or Nasdaq (or if the Substitute
Common Stock is not quoted on the NYSE, AMEX or Nasdaq, the highest bid
price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized
source) during the six-month period preceding the Section 9 Request Date.
10. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the
conditions of Section 10(c) of this Agreement, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Shareholder"), as
expeditiously as possible, prepare and file and keep current a registration
statement under the Securities Act if such registration is necessary in
order to permit the sale or other disposition of any or all shares of
Issuer Common Stock or other securities that have been acquired by or are
issuable to the Selling Shareholder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
the Selling Shareholder in such request, including without limitation a
"shelf" registration statement under Rule 415, promulgated under the
Securities Act, or any successor provision, and Issuer shall use its best
efforts to qualify such shares or other securities for sale under any
applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time
after the exercise of the Option proposes to register any shares of Issuer
Common Stock under the Securities Act in connection with an underwritten
public offering of such Issuer Common Stock, Issuer will promptly give
written notice to the Selling Shareholders of its intention to do so and,
upon the written request of any Selling Shareholder given within 30 days
after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by the Selling Shareholder), Issuer will cause all such
shares for which a Selling Shareholder requests participation in such
registration, to be so registered and included in such underwritten public
offering; provided, however, that Issuer may elect to not cause some or all
of such shares to be so registered (i) if the underwriters in the Public
Offering in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit agreement or
a registration filed on Form S-4 of the Securities Act or any equivalent or
successor Form. If some, but not all the shares of Issuer Common Stock,
with respect to which Issuer shall have received requests for registration
pursuant to this Section 10(b), shall be excluded from such registration,
Issuer shall make appropriate allocation of shares to be registered among
the Selling Shareholders desiring to register their shares pro rata in the
proportion that the number of shares requested to be registered by each
such Selling Shareholder bears to the total number of shares requested to
be registered by all such Selling Shareholders then desiring to have Issuer
Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall use
all reasonable efforts to cause each registration statement referred to in
Section 10(a) of this Agreement to become effective and to obtain all
consents or waivers of other parties which are required therefor and to
keep such registration statement effective, provided, however, that Issuer
may delay any registration of Option Shares required pursuant to Section
10(a) of this Agreement for a period not exceeding 90 days provided Issuer
shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer,
and Issuer shall not be required to register Option Shares under the
Securities Act pursuant to Section 10(a) hereof:
(i) Prior to the earliest of (A) termination of the
Merger Agreement pursuant to Article VI thereof, (B) failure to
obtain the requisite stockholder approval pursuant to Section
6.1(b) of the Merger Agreement, and (C) a Purchase Event or a
Preliminary Purchase Event;
(ii) On more than one occasion during any calendar
year;
(iii) Within 90 days after the effective date of a
registration referred to in Section 10(b) of this Agreement
pursuant to which the Selling Shareholder or Selling Shareholders
concerned were afforded the opportunity to register such shares
under the Securities Act and such shares were registered as
requested; and
(iv) Unless a request therefor is made to Issuer by
Selling Shareholders that hold at least 25% or more of the
aggregate number of Option Shares (including shares of Issuer
Common Stock issuable upon exercise of the Option) then
outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under
all applicable state or local securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares;
provided, however, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state or locality where it is
not otherwise required to so consent to such jurisdiction or to so qualify
to do business.
(d) Expenses. Except where applicable state law prohibits
such payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses
(including the fees and expenses of counsel), legal expenses, including the
reasonable fees and expenses of one counsel to the holders whose Option
Shares are being registered, printing expenses and the costs of special
audits or "cold comfort" letters, expenses of underwriters, excluding
discounts and commissions but including liability insurance if Issuer so
desires or the underwriters so require, and the reasonable fees and
expenses of any necessary special experts) in connection with each
registration pursuant to Section 10(a) or 10(b) of this Agreement
(including the related offerings and sales by holders of Option Shares) and
all other qualifications, notifications or exemptions pursuant to Section
10(a) or 10(b) of this Agreement.
(e) Indemnification. (i) In connection with any registration
under Section 10(a) or 10(b) of this Agreement, Issuer hereby indemnifies
the Selling Shareholders, and each underwriter thereof, including each
person, if any, who controls such holder or underwriter within the meaning
of Section 15 of the Securities Act, against all expenses, losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement
of a material fact contained in any registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission, or
alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments
or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to Issuer by such indemnified party
expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling
Shareholders, or by such underwriter, as the case may be, for all such
expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement, that was included by Issuer in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such holder
or such underwriter, as the case may be, expressly for such use.
(ii) Promptly upon receipt by a party indemnified under this
Section 10(e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be
sought against any indemnifying party under this Section 10(e), such
indemnified party shall notify the indemnifying party in writing of the
commencement of such action, but the failure so to notify the indemnifying
party shall not relieve it of any liability which it may otherwise have to
any indemnified party under this Section 10(e). In case notice of
commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in
and, to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense of such action at its own
expense, with counsel chosen by it and satisfactory to such indemnified
party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (x) the
indemnifying party either agrees to pay the same, (y) the indemnifying
party fails to assume the defense of such action with counsel satisfactory
to the indemnified party, or (z) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the
indemnifying party that may be contrary to the interest of the indemnified
party, in which case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligation to bear fees and
expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
(iii) If the indemnification provided for in this Section
10(e) is unavailable to a party otherwise entitled to be indemnified in
respect of any expenses, losses, claims, damages or liabilities referred
to herein, then the indemnifying party, in lieu of indemnifying such party
otherwise entitled to be indemnified, shall contribute to the amount paid
or payable by such party to be indemnified as a result of such expenses,
losses, claims, damages or liabilities in such proportion as is appropriate
to reflect the relative benefits received by Issuer, the Selling
Shareholders and the underwriters from the offering of the securities and
also the relative fault of Issuer, the Selling Shareholders and the
underwriters in connection with the statements or omissions which resulted
in such expenses, losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The amount paid or payable by a
party as a result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with investigating
or defending any action or claim; provided, however, that in no case shall
any Selling Shareholder be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Any obligation by any holder to indemnify
shall be several and not joint with other holders.
(iv) In connection with any registration pursuant to Section
10(a) or 10(b) of this Agreement, Issuer and each Selling Shareholder
(other than Grantee) shall enter into an agreement containing the
indemnification provisions of Section 10(e) of this Agreement.
(f) Miscellaneous Reporting. Issuer shall comply with all
reporting requirements and will do all such other things as may be
necessary to permit the expeditious sale at any time of any Option Shares
by the Selling Shareholders thereof in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to
time, including, without limitation, Rule 144. Issuer shall at its expense
provide the Selling Shareholders with any information necessary in
connection with the completion and filing of any reports or forms required
to be filed by them under the Securities Act or the Exchange Act, or
required pursuant to any state securities laws or the rules of any stock
exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in
connection with the issuance and the sale of the Option Shares and in
connection with the exercise of the Option, and will save the Selling
Shareholders harmless, without limitation as to time, against any and all
liabilities, with respect to all such taxes.
11. Quotation; Listing. If Issuer Common Stock or any other
securities to be acquired in connection with the exercise of the Option are
then authorized for quotation or trading or listing on the NYSE, AMEX,
Nasdaq or any other securities exchange, Issuer, upon the request of
Holder, will promptly file an application, if required, to authorize for
quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on the NYSE, AMEX,
Nasdaq or such other securities exchange and will use its best efforts to
obtain approval, if required, of such quotation or listing as soon as
practicable.
12. Division of Option. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of Holder,
upon presentation and surrender of this Agreement at the principal office
of Issuer for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the
same number of shares of Issuer Common Stock purchasable hereunder. The
terms "Agreement" and "Option" as used herein include any other Agreements
and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
13. Profit Limitation.
(a) Notwithstanding any other provision of this agreement,
in no event shall Grantee's Total Profit (as hereinafter defined) exceed
$30 million, plus Grantee's documented, reasonable out-of-pocket expenses
(including fees and expenses of legal, financial and accounting advisors)
incurred in connection with the transactions contemplated by the Merger
Agreement, and, if it otherwise would exceed such amount, Grantee, at its
sole election, shall either (i) deliver to Issuer for cancellation Shares
previously purchased by Grantee, (ii) pay cash or other consideration to
Issuer or (iii) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed $30 million, plus Grantee's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) incurred in connection with the transactions
contemplated by the Merger Agreement, after taking into account the
foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of Shares as would, as of the
Notice Date, result in a Notional Total Profit (as defined below) of more
than $30 million, plus Grantee's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) incurred in connection with the transactions contemplated by the
Merger Agreement, and, if exercise of the Option otherwise would exceed
such amount, Grantee, at its discretion, may increase the Purchase Price
for that number of Shares set forth in the Option Notice so that the
Notional Total Profit shall not exceed $30 million, plus Grantee's
documented, reasonable out-of-pocket expenses (including fees and expenses
of legal, financial and accounting advisors) incurred in connection with
the transactions contemplated by the Merger Agreement; provided, that
nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date at the Purchase Price set forth in
Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount of cash
received by Grantee pursuant to Section 6.3 of the Merger Agreement and
Section 8(a)(ii) hereof, (ii) (x) the amount received by Grantee pursuant
to the repurchase of Option Shares pursuant to Section 8 or Section 9
hereof, less Grantee's purchase price for such Option Shares, and (iii) the
net cash amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less Grantee's purchase price for
such Option Shares.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of Option Shares as to which Grantee may propose to
exercise this Option shall be the Total Profit determined as of the date of
the Option Notice assuming that this Option were exercised on such date for
such number of Shares and assuming that such Option Shares, together with
all other Option Shares held by Grantee and its affiliates as of such date,
were sold for cash at the closing market price for the Common Stock as of
the close of business on the preceding trading day (less customary
brokerage commissions).
14. Miscellaneous.
(a) Expenses. Except to the extent expressly provided for
herein, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement
may be waived at any time by the party that is entitled to the benefits of
such provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiaries;
Severability. This Agreement, together with the Merger Agreement and the
other documents and instruments referred to herein and therein, between
Grantee and Issuer (i) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof and (ii) is not intended
to confer upon any person other than the parties hereto (other than the
indemnified parties under Section 10(e) of this Agreement and any
transferees of the Option Shares or any permitted transferee of this
Agreement pursuant to Section 14(h) of this Agreement) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or Governmental
Entity to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated. If for any reason such court or Governmental Entity determines
that the Option does not permit Holder to acquire, or does not require
Issuer to repurchase, the full number of shares of Issuer Common Stock as
provided in Section 3 of this Agreement (as may be adjusted herein), it is
the express intention of Issuer to allow Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York without
regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the addresses set forth in the
Merger Agreement (or at such other address for a party as shall be
specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto
may be executed in two counterparts, each of which shall be considered one
and the same agreement and shall become effective when both counterparts
have been signed, it being understood that both parties need not sign the
same counterpart.
(h) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except
that Holder may assign this Agreement to a wholly-owned subsidiary of
Holder and Holder may assign its rights hereunder in whole or in part after
the occurrence of a Purchase Event. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by the Holder, Issuer, and the Holder shall execute and deliver all
other documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided for
by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for
any failure to perform this Agreement.
(k) Limitation on Resale of Issuer Common Stock. Grantee
agrees that no shares of Issuer Common Stock acquired by it upon exercise
of the Option, if any, shall be sold, transferred or otherwise disposed by
it prior to the termination of the Merger Agreement in accordance with the
terms thereof, except as follows. If the Grantee shall determine to accept
a bona fide offer to purchase the Issuer Common Stock then held by it or to
sell any such Stock on the open market, the Grantee shall give notice
thereof to the Issuer specifying (i) the Issuer Common Stock to be sold and
(ii) the purchase price to be offered therefor (or in the case of open
market sales, that the sales are to be at prices prevailing on the market)
and any other significant terms of the proposed transaction. Upon receipt
of such notice, the Issuer shall, for a period of three business days
immediately following such receipt, have the right of first refusal to
purchase the Issuer Common Stock then held by Grantee that is proposed to
be sold at the purchase price set forth in such notice or, if such shares
are to be sold in open market transaction, at a purchase price equal to the
average of the closing prices therefor (and if there is no such closing
price on any of such days, then the mean of the closing bid and the closing
asked prices on that day) on the principal market on which Issuer Common
Stock is traded for the five trading days immediately prior to the Issuer's
receipt of such notice. Payment for such shares shall be made to the
Grantee in immediately available funds within three business days
immediately following receipt of the notice of the proposed sale.
IN WITNESS WHEREOF, Issuer and Grantee have caused this
Stock Option Agreement to be signed by their respective officers thereunto
duly authorized, all as of the day and year
first written above.
JSB FINANCIAL, INC.
By: /s/ Park T. Adikes
-----------------------------
Park T. Adikes
Chairman of the Board and
Chief Executive Officer
NORTH FORK BANCORPORATION, INC.
By: /s/ John Adam Kanas
-----------------------------
John Adam Kanas
Chairman of the Board,
President and Chief Executive
Officer
