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CUSIP NO. 876067-10-9 Page 1 of 9 Pages
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)*
TAPPAN ZEE FINANCIAL, INC.
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(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
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(TITLE OF CLASS OF SECURITIES)
876067-10-9
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(CUSIP NUMBER)
Daniel P. Weitzel, Esq.
Fiorello J. Vicencio, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
(202) 347-0300
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(NAME, ADDRESS, TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS)
March 6, 1998
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(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
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CUSIP NO. 876067-10-9 Page 2 of 9 Pages
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
U.S.B. HOLDING CO., INC.
IRS IDENTIFICATION NO. 36-3197969
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC, AF
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS PURSUANT TO ITEMS 2(d)
or 2(e)
[ ]
Not Applicable
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
STATE OF DELAWARE
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7. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE
VOTING POWER
294,234
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8. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SHARED
VOTING POWER
-0-
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9. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE
DISPOSITIVE POWER
294,234
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10. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SHARED
DISPOSITIVE POWER
-0-
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
294,234
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
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14. TYPE OF REPORTING PERSON
CO
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CUSIP NO. 876067-10-9 Page 3 of 9 Pages
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ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the shares of common stock, par value $0.01
per share ("Common Stock"), of Tappan Zee Financial, Inc., a company organized
under the laws of the State of Delaware (the "Issuer"). The address of the
Issuer's principal executive office is 75 North Broadway, Tarrytown, New York
10591.
ITEM 2. IDENTITY AND BACKGROUND
(a), (b) and (c). This Schedule 13D is filed by U.S.B. Holding Co., Inc.
("USB"), a corporation incorporated under the laws of the State of Delaware. USB
is a holding company that owns all of the outstanding capital stock of Union
State Bank, a New York chartered commercial bank. The principal executive
offices of USB and Union State Bank are located at 100 Dutch Hill Road,
Orangeburg, New York 10962.
The name, business address and principal occupation or employment
(including the name, principal business and address of any corporation or
organization in which such employment is conducted) of each executive officer,
director and controlling person of USB are as follows:
<TABLE>
<CAPTION>
Present Principal
Occupation
Name Business Address or Employment
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<S> <C> <C>
Thomas E. Hales U.S.B. Holding Co., Inc. Chairman of the Board,
100 Dutch Hill Road President and Chief
Orangeburg, NY 10962 Executive Officer of USB
and Union State Bank
Raymond J. Crotty U.S.B. Holding Co., Inc. Senior Executive Vice
100 Dutch Hill Road President and Chief
Orangeburg, NY 10962 Credit Officer of USB and
Union State Bank
Michael H. Fury Fury and Kennedy Partner, Fury & Kennedy
5 East Central Avenue Attorneys at Law
Peal River, New York 10965
Herbert Peckman Peckman's Liquor Store Proprietor, Peckman's
9 North William Street Liquor Store
Peal River, New York 10965
Howard V. Ruderman 6 Aspen Court Retired
Pomona, New York 10970
</TABLE>
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CUSIP NO. 876067-10-9 Page 4 of 9 Pages
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<TABLE>
<CAPTION>
Present Principal
Occupation
Name Business Address or Employment
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<S> <C> <C>
Fred F. Graziano 36 College Avenue Licensed physician in the
Nanuet, New York 10954 State of New York
Kenneth J. Torsoe Torsoe Brothers President, Torsoe Brothers
Construction Corp. Construction Corp.
Normandy Village
Nanuet, New York 10954
Steven T. Sabatini U.S.B. Holding Co., Inc. Senior Executive Vice
100 Dutch Hill Road President and Chief
Orangeburg, NY 10962 Financial Officer of USB
and Union State Bank
Robert F. Picarelli U.S.B. Holding Co., Inc. Senior Executive Vice
100 Dutch Hill Road President of USB and
Orangeburg, NY 10962 Union State Bank
</TABLE>
(d) and (e). Neither USB nor any person identified in Item 2(a), (b) and
(c) hereof has ever been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or has been a party to any civil proceeding
of any judicial or administrative body which resulted in a judgment, decree or
final order against USB or such person enjoining USB or him against future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
(f). Each natural person identified in Item 2(a), (b) and (c) is a citizen
of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The source of funds to be used by USB in making a purchase of shares of
Common Stock, upon exercise of the Option (defined in Item 4 hereof), if and to
the extent the Option is exercised, will be either cash on hand at USB,
dividends from Union State Bank, a loan from an unaffiliated bank or other
financial service company, or other borrowings. USB has not made, as of the date
hereof, any definite plans or arrangements regarding the source of such funds.
Assuming the number of shares of Common Stock outstanding remains
unchanged from the number issued and outstanding on March 6, 1998 (i.e.,
1,478,062 shares), the exercise of the Option in full, at an Option Price
(defined in Item 4 hereof) of $18.50 per share, will result in the purchase of
294,134 shares for an aggregate purchase price of $5,441,479.
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CUSIP NO. 876067-10-9 Page 5 of 9 Pages
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ITEM 4. PURPOSE OF TRANSACTION
On March 6, 1998, USB and the Issuer entered into a Stock Option Agreement
(the "Stock Option Agreement") in which the Issuer granted to USB the option
(the "Option") to purchase, under certain circumstances described in this Item
4, up to 294,134 shares of Common Stock at an exercise price per share (the
"Option Price") equal to $18.50, subject to adjustment as set forth in the Stock
Option Agreement. The Option was granted in connection with the execution by USB
and the Issuer of a definitive Agreement and Plan of Merger dated March 6, 1998
(the "Merger Agreement"), a copy of which is attached hereto as Exhibit 2.0 and
incorporated by reference herein. The Merger Agreement provides for USB's
acquisition of the Issuer through the merger of the Issuer with and into USB
(the "Merger"). Upon consummation of the Merger, the registration of the
Issuer's Common Stock under Section 12(g) of the Securities Exchange Act of 1934
will be terminated.
USB required the Issuer to grant the Option as a condition to USB entering
into the Merger Agreement for the purpose of (i) providing some measure of
compensation to USB for loss of the benefits expected from the Merger and/or
loss of the opportunity to explore other transactions while the Merger is
pending, in the event that a third party acquires control of the Issuer and (ii)
increasing the likelihood that the Merger will be completed.
Provided that (i) USB shall not be, on the date of exercise, in material
breach of the agreements or covenants contained in the Merger Agreement or the
Stock Option 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 on the date of
exercise, upon or after the occurrence of a Purchase Event (as such term is
hereinafter defined) USB may exercise the Option, in whole or in part, at any
time and from time to time; provided that the Option shall terminate and be of
no further force and effect upon the earliest to occur of (A) the Effective Time
of the Merger, as provided in the Merger Agreement, (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 (as such term is hereinafter
defined), other than a termination of the Merger Agreement by USB pursuant to
Section 7.1(b) thereof (a "Default Termination"), (C) 12 months after the
termination of the Merger Agreement by USB pursuant to a Default Termination,
and (D) 12 months after termination of the Merger Agreement (other than pursuant
to a Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event; and provided, further, that any purchase of shares
upon exercise of the Option shall be subject to compliance with applicable
securities and banking laws, including without limitation the Bank Holding
Company Act of 1956, as amended (the "BHCA"), and the Home Owners' Loan Act, as
amended ("HOLA").
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CUSIP NO. 876067-10-9 Page 6 of 9 Pages
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The term "Purchase Event" means the occurrence of any of the following
events:
(i) Without USB's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than USB or any subsidiary of USB) to effect (A) a
merger, consolidation or similar transaction involving Issuer or any of
its subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its subsidiaries representing in
either case 25% or more of the consolidated assets of Issuer and its
subsidiaries, or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar
transaction) securities representing 20% or more of the voting power of
Issuer or any of its subsidiaries (any of the foregoing an "Acquisition
Transaction"); or
(ii) any person (other than USB or any subsidiary of USB) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated 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) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 20% or more of the then outstanding
shares of Issuer Common Stock.
The term "Preliminary Purchase Event" means the occurrence of any of the
following events:
(i) any person (other than USB or any subsidiary of USB) 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 15% or
more of the then outstanding shares of Issuer Common Stock (such an offer
being referred to herein as a "Tender Offer" and an "Exchange Offer,"
respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such stockholders held for the
purpose of voting on the Merger Agreement, (B) such meeting shall not have
been held or shall have been canceled prior to termination of the Merger
Agreement or (C) Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to USB 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 USB or any
subsidiary of USB) shall have (x) made, or disclosed an intention to make,
a proposal to engage in an Acquisition Transaction, (y) commenced a Tender
Offer or
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CUSIP NO. 876067-10-9 Page 7 of 9 Pages
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filed a registration statement under the Securities Act with respect to an
Exchange Offer, or (z) filed an application (or given notice), whether in
draft or final form, under the BHCA, the HOLA, the Bank Merger Act, as
amended, or the Change in Bank Control Act of 1978, as amended, for
approval to engage in an Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Merger Agreement and such breach
would entitle USB to terminate the Merger Agreement under Section 7.1(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) after (x) a bona
fide proposal is made by any person (other than USB or any subsidiary of
USB) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than USB or any subsidiary of USB)
states its intention to Issuer or its stockholders to make a proposal to
engage in an Acquisition Transaction if the Merger Agreement terminates or
(z) any person (other than USB or any subsidiary of USB) shall have filed
an application or notice with any Governmental Entity to engage in an
Acquisition Transaction.
The Stock Option Agreement provides that USB may require, under certain
circumstances, the Issuer to repurchase the Option and all shares of common
stock of the Issuer purchased by USB pursuant to the Option on the terms and
conditions set forth in the Stock Option Agreement.
The Stock Option Agreement provides that it will terminate upon completion
of the transactions contemplated by the Merger Agreement.
The foregoing description of the Stock Option Agreement does not purport
to be complete and is qualified in its entirety by the text of such Stock Option
Agreement which is incorporated herein by reference and attached hereto as
Exhibit 10.1.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a). Based on 1,478,062 shares of the Issuer's Common Stock outstanding on
March 6, 1998, USB may be deemed the beneficial owner, in the aggregate, of
294,234 shares of Common Stock, 294,134 being shares which, though presently
unissued, are issuable in accordance with the terms and conditions of the
Option. These 294,134 shares would represent approximately 19.9% of shares of
the Issuer's Common Stock outstanding upon issuance, assuming that no other
shares are issued by the Issuer, including shares issuable upon exercise of
options outstanding for the Issuer's Common Stock. No other person identified
in Item 2(a), (b) or (c) hereof is the beneficial owner of any shares of
Common Stock of the Issuer.
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CUSIP NO. 876067-10-9 Page 8 of 9 Pages
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(b). USB will have sole power to vote or to direct the vote and sole power
to dispose or to direct the disposition of any shares of Common Stock that USB
may acquire upon exercise of the Option.
(c). There were no transactions in the Common Stock of the Issuer effected
by USB or by any person identified in Item 2(a), (b) or (c) hereof during the
sixty days preceding the date of this Schedule 13D.
(d). No person other than USB has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, any
shares of Common Stock of the Issuer that may be deemed beneficially owned by
USB on account of the Option.
(e). Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Except for the Merger Agreement, the Stock Option Agreement and the
Affiliate Agreement described below, neither USB nor any person identified in
Item 2(a), (b) or (c) hereof is a party to any contract, arrangement,
understanding or relationship (legal or otherwise) with any person with respect
to any securities of the Issuer, including, but not limited to, transfer or
voting of any of the securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
In connection with the Merger Agreement, the directors and executive
officers of the Issuer (Martin Levy, Stephen C. Byelick, John T. Cooney, Gerald
L. Logan, Harry G. Murphy, Kevin J. Plunkett and Paul R. Wheatley) entered into
an affiliate agreement (the "Affiliate Agreement") with USB pursuant to which
each such person agreed in his personal capacity to vote the shares of Common
Stock beneficially owned by him in favor of the Merger Agreement at the meeting
of the Issuer's shareholders called for the purpose of considering the same, to
not transfer such shares of Common Stock or shares of USB Common Stock acquired
upon consummation of the Merger or otherwise during specified periods, and not
to enter into any transactions with respect to any shares of USB Common Stock
during specified periods. The Affiliate Agreement is attached hereto as Exhibit
10.2 and is incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
2.0 Agreement and Plan of Merger, dated March 6, 1998, between U.S.B.
Holding Co., Inc. and Tappan Zee Financial, Inc.
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CUSIP NO. 876067-10-9 Page 9 of 9 Pages
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10.1 Stock Option Agreement, dated March 6, 1998, between U.S.B. Holding
Co., Inc. and Tappan Zee Financial, Inc.
10.2 Tappan Zee Financial, Inc. Affiliate Agreement, dated March 6, 1998,
between the directors and executive officers of Tappan Zee
Financial, Inc. and U.S.B. Holding Co., Inc.
SIGNATURES
After reasonable inquiry and to the best of the knowledge and belief of
the undersigned, the undersigned certifies that the information set forth in
this Statement on Schedule 13D is true, complete and correct.
U.S.B. HOLDING CO., INC.
By: /s/ Steven T. Sabatini
--------------------------
Steven T. Sabatini
Senior Executive Vice President
and Chief Financial Officer
Date: March 16, 1998
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Exhibit 2.0
AGREEMENT AND PLAN OF MERGER
BETWEEN
U.S.B. HOLDING CO., INC.
AND
TAPPAN ZEE FINANCIAL, INC.
DATED AS OF MARCH 6, 1998
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Effective Time; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Treatment of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Shareholder Rights; Stock Transfers . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Company Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Additional Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Organization, Standing and Authority of the Company . . . . . . . . . . . . . . . . 14
3.3 Ownership of the Company Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Organization, Standing and Authority of
the Company Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Authorized and Effective Agreement . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Securities Documents and Regulatory Reports . . . . . . . . . . . . . . . . . . . . 16
3.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.11 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.13 Certain Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.15 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.18 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
i
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<TABLE>
<S> <C> <C>
3.19 Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.20 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.21 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22 Accounting for the Merger; Reorganization . . . . . . . . . . . . . . . . . . . . . 25
3.23 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.24 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.25 Required Vote; Inapplicability of Antitakover States . . . . . . . . . . . . . . . 25
3.26 Ownership of Acquiror Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 26
3.27 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Organization, Standing and Authority of the Acquiror . . . . . . . . . . . . . . . 27
4.3 Ownership of the Acquiror Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 27
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 Authorized and Effective Agreement . . . . . . . . . . . . . . . . . . . . . . . . 28
4.6 Securities Documents and Regulatory Reports . . . . . . . . . . . . . . . . . . . . 29
4.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.11 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.13 Certain Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.15 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.18 Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.19 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.20 Accounting for the Merger; Reorganization . . . . . . . . . . . . . . . . . . . . . 35
4.21 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.22 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.23 Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.24 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.1 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.2 Shareholder Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.3 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
5.4 Investigation and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.5 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.6 Business of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.7 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.8 Current Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.9 Indemnification; Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.11 Benefit Plans and Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.12 Reserves and Merger - Related Costs . . . . . . . . . . . . . . . . . . . . . . . . 47
5.13 Disclosure Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.14 Failure to Fulfill Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.15 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.1 Conditions Precedent - The Acquiror
and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.2 Conditions Precedent - The Company . . . . . . . . . . . . . . . . . . . . . . . . 50
6.3 Conditions Precedent - The Acquiror . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.3 Survival of Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.5 Amendment or Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.1 Expenses; Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.3 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.5 Alternative Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Company Affiliate Agreement
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
Exhibit C Form of Letter Agreement with Mr. Byelick
Exhibit D Form of Letter Agreement with Mr. Murphy
Exhibit E Form of Acquiror Affiliate Agreement
Exhibit F Form of Agreement with Mr. Byelick
Exhibit G Form of Agreement with Mr. Murphy
Exhibit H Form of Opinion of the Acquiror's Counsel
Exhibit I Form of Opinion of the Company's Counsel
</TABLE>
iv
<PAGE> 6
DISCLOSURE SCHEDULES
<TABLE>
<CAPTION>
Tappan Zee Financial, Inc.
- --------------------------
<S> <C>
Section 3.1 Capital Structure
Section 3.3 Ownership of the Company Subsidiaries
Section 3.5(b) Authorized and Effective Agreement - Governing Documents of
Company Subsidiaries
Section 3.5(c) Authorized and Effective Agreement - Third Party Consents
Section 3.9(d) Environmental Matters - Environmental Studies
Section 3.10(b) Tax Matters - Delinquencies and Deficiencies
Section 3.10(c) Tax Matters - Agreements, Adjustments and Consents
Section 3.11 Legal Proceedings
Section 3.14(a) Employee Benefit Plans
Section 3.14(c) Employee Benefit Plans - Section 4201 of ERISA
Section 3.15(a) Certain Contracts
Section 3.16 Brokers and Finders
Section 3.20 Related Party Transactions
Section 5.6(a)(iv) Business of the Parties - Change in Benefits or Compensation to
Directors, Officers or Employees
Section 5.6(a)(v) Business of the Parties - Employee Benefit Plans to be Entered Into
or Modified
Section 5.9(a) Indemnification; Insurance
Section 5.11(b) Benefit Plans and Arrangements - Severance Policy
Section 5.11(c) Benefit Plans and Arrangements - Employment Agreements and
Severance Agreements
U.S.B. Holding Co., Inc.
- ------------------------
Section 4.1 Capital Structure
Section 4.3 Ownership of the Acquiror Subsidiaries
Section 4.5(c) Authorized and Effective Agreement - Third Party Consents
Section 4.9 Environmental Matters - Environmental Studies
Section 4.10(b) Tax Matters - Delinquencies and Deficiencies
Section 4.10(c) Tax Matters - Agreements, Adjustments and Consents
Section 4.14(a) Employee Benefit Plans
Section 4.15 Certain Contracts
Section 4.16 Brokers and Finders
</TABLE>
v
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of March 6,
1998, by and between U.S.B. Holding Co., Inc. (the "Acquiror"), a Delaware
corporation, and Tappan Zee Financial, Inc. (the "Company"), a Delaware
corporation.
W I T N E S S E T H:
WHEREAS, the Board of Directors of each of the Acquiror and the
Company have determined that it is in the best interests of their respective
companies and their shareholders to consummate the business combination
transaction provided for herein, including the merger of the Company with and
into the Acquiror, subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness
to enter into this Agreement, (i) the Company is concurrently entering into a
Stock Option Agreement with the Acquiror (the "Company Stock Option
Agreement"), in substantially the form attached hereto as Exhibit A, pursuant
to which the Company is granting to the Acquiror the option to purchase shares
of Company Common Stock (as defined herein) under certain circumstances, (ii)
the directors and certain officers of the Company are concurrently entering
into an agreement with the Acquiror (the "Company Affiliate Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which, among
other things, each such stockholder agrees to vote his or her shares of
Company Common Stock in favor of this Agreement and the transactions
contemplated hereby and (iii) Messrs. Stephen C. Byelick and Harry G. Murphy
are concurrently entering into letter agreements, in substantially the forms
attached hereto as Exhibits C and D, respectively; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement, the directors and certain officers of the Acquiror
are concurrently entering into an agreement with the Company (the "Acquiror
Affiliate Agreement"), in substantially the form attached hereto as Exhibit E;
and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree
as follows:
<PAGE> 8
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock, par value $5.00
per share, of the Acquiror.
"Acquiror Employee Stock Benefit Plans" shall mean the following
employee benefit plans of the Acquiror, as amended and in effect from time to
time: 1984 Incentive Stock Option Plan, 1993 Incentive Stock Option Plan, 1997
Employee Stock Option Plan, U.S.B. Holding Co., Inc. Employee Stock Ownership
Plan (with 401(k) Provision), Dividend Reinvestment and Stock Purchase Plan,
Director Stock Option Plan and Key Employees' Supplemental Investment Plan for
Salaried Employees.
"Acquiror Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of the
Acquiror as of December 31, 1996, 1995 and 1994 and the consolidated statements
of income, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Acquiror for each of the three years ended December
31, 1996, 1995 and 1994 as filed by the Acquiror in its Securities Documents,
and (ii) the consolidated statements of condition of the Acquiror (including
related notes and schedules, if any) and the consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) of the Acquiror included in the Securities Documents filed by the Acquiror
with respect to the quarterly and annual periods ended subsequent to December
31, 1996.
"Acquiror Bank" shall mean Union State Bank, a New York chartered bank
and a wholly-owned subsidiary of the Acquiror.
"Acquiror Preferred Stock" shall mean the shares of preferred stock,
no par value per share, of the Acquiror.
"Affiliate" means, with respect to any Person, any Person who
directly, or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person and, without
limiting the generality of the foregoing, includes any executive officer or
director of such Person and any Affiliate of such executive officer or
director.
"Average Closing Price" shall mean the average of the last reported
sale prices for the Acquiror Common Stock for the 20 consecutive AMEX Trading
Days ending with (and including) the date on which the last of the regulatory
approvals discussed in Section 6.1(b) required for consummation of the Merger
is obtained. "AMEX Trading Day" shall mean a full trading day for the American
Stock Exchange.
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<PAGE> 9
"Bank" shall mean Tarrytowns Bank, FSB, a federally-chartered savings
bank and a wholly-owned subsidiary of the Company.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Certificate of Merger" shall have the meaning set forth in Section
2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $0.01
per share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof and shall include the Company ESOP.
"Company ESOP" shall mean the Employee Stock Ownership Plan of Tappan
Zee Financial, Inc. and Affiliates.
"Company Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Company as of March 31, 1997, 1996 and 1995 and the consolidated
statements of operations, shareholders' equity and cash flows (including
related notes and schedules, if any) of the Company for each of the three years
ended March 31, 1997, 1996 and 1995 as filed by the Company in its Securities
Documents, and (ii) the consolidated statements of financial condition of the
Company (including related notes and schedules, if any) and the consolidated
statements of operations, shareholders' equity and cash flows (including
related notes and schedules, if any) of the Company included in the Securities
Documents filed by the Company with respect to the quarterly and annual periods
ended subsequent to March 31, 1997.
"Company Options" shall mean options to purchase shares of Company
Common Stock granted pursuant to the Company Stock Option Plans.
"Company Preferred Stock" shall mean the shares of preferred stock,
par value $0.01 per share, of the Company.
3
<PAGE> 10
"Company Stock Option Plans" shall mean the Company's 1996 Stock
Option Plan for Officers and Employees, as amended, and the Company's 1996
Stock Option Plan for Outside Directors, as amended, each as in effect as of
the date hereof.
"DGCL" shall mean the General Corporation Law of the State of
Delaware, as amended.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601, et seq; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. Section 6901, et seq; the Clean Air Act, as amended, 42 U.S.C.
Section 7401, et seq; the Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1251, et seq; the Toxic Substances Control Act, as amended, 15
U.S.C. Section 9601, et seq; the Emergency Planning and Community Right to Know
Act, 42 U.S.C. Section 1101, et seq; the Safe Drinking Water Act, 42 U.S.C.
Section 300f, et seq; and all comparable state and local laws, and (2) any
common law (including without limitation common law that may impose strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of or exposure to any Materials
of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3(b)
hereof.
4
<PAGE> 11
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on
any successor or other appropriate form) to be filed by the Acquiror in
connection with the issuance of shares of Acquiror Common Stock pursuant to the
Merger, including the Proxy Statement which forms a part thereof, as amended
and supplemented.
"FRB" means the Board of Governors of the Federal Reserve System or
any successor thereto.
"GAAP" means generally accepted accounting principles.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Material Adverse Effect" shall mean, with respect to the Acquiror or
the Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of the Company, on
the one hand, or the Acquiror, on the other hand, to consummate the
transactions contemplated by this Agreement, provided, however, that Material
Adverse Effect shall not be deemed to include the impact of (a) changes in laws
and regulations or interpretations thereof that are generally applicable to the
banking or savings industries, (b) changes in GAAP that are generally
applicable to the banking or savings industries, (c) expenses incurred in
connection with the transactions contemplated hereby or (d) actions or
omissions of a party (or any of its Subsidiaries) taken with the prior informed
written consent of the other party or parties in contemplation of the
transactions contemplated hereby.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the
Acquiror pursuant to the terms hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
5
<PAGE> 12
"NYSBD" shall mean the New York State Banking Department.
"OTS" shall mean the Office of Thrift Supervision of the U.S.
Department of the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Person" means any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined in Section
13(d)(3) of the Exchange Act).
"Previously Disclosed" shall mean disclosed (i) in a letter dated the
date hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.13 hereof.
"Proxy Statement" shall mean the prospectus/proxy statement contained
in the Form S-4, as amended or supplemented, and to be delivered to
shareholders of the Company in connection with the solicitation of their
approval of this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" means the Savings Association Insurance Fund administered by
the FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Severance Plan" shall mean the Severance Plan of Tarrytowns Bank,
FSB.
6
<PAGE> 13
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the Commission.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquiror (the "Merger") in accordance with the provisions of
Section 251 of the DGCL. The Acquiror shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") of 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 "U.S.B. Holding Co.,
Inc." Upon consummation of the Merger, the separate corporate existence of the
Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL.
(c) The Certificate of Incorporation and Bylaws of the Acquiror, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, respectively, until
altered, amended or repealed in accordance with their terms and applicable law.
(d) The authorized capital stock of the Surviving Corporation
shall be as stated in the Certificate of Incorporation of the Acquiror
immediately prior to the Effective Time.
(e) The directors and officers of the Acquiror immediately prior
to the Effective Time shall be the directors and officers of the Surviving
Corporation, subject to the provisions of Section 5.10 hereof, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation.
2.2 Effective Time; Closing
The Merger shall become effective upon the occurrence of the filing of
a Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL, unless a later date and time is specified as the
effective time in such Certificate of Merger
7
<PAGE> 14
(the "Effective Time"). A closing (the "Closing") shall take place immediately
prior to the Effective Time at 10:00 a.m., Eastern Time, on the fifth business
day following the satisfaction or waiver, to the extent permitted hereunder, of
the conditions to the consummation of the Merger specified in Article VI of
this Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing) (the "Closing Date"),
at the principal executive offices of the Acquiror in Orangeburg, New York, or
at such other place, at such other time, or on such other date as the parties
may mutually agree upon. At the Closing, there shall be delivered to the
Acquiror and the Company the opinions, certificates and other documents
required to be delivered under Article VI hereof. Subject to the fulfillment
or waiver at or prior to the Closing of the conditions to its obligations set
forth in Article VI, at the Closing each party shall execute and deliver a
Certificate of Merger for filing with the Secretary of State of the State of
Delaware.
2.3 Treatment of Capital Stock
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(a) each share of Acquiror Common Stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding; and
(b) subject to Section 2.6 hereof, each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
shares held, otherwise than in a fiduciary capacity for the benefit of third
parties or as a result of debts previously contracted, by the Acquiror or any
of its Subsidiaries, which shares shall be cancelled and retired) shall become
and be converted into the right to receive that number of shares of Acquiror
Common Stock equal to (i) if the Average Closing Price is greater than or equal
to $17.75 and less than or equal to $25.00, the quotient (rounded to the
nearest hundredth) determined by dividing (A) $22.00 by (B) the Average Closing
Price, (ii) if the Average Closing Price is less than $17.75, 1.24 shares or
(iii) if the Average Closing Price is greater than $25.00, 0.88 shares (subject
to possible adjustment as set forth in Sections 2.8 and 7.1(f) hereof, the
"Exchange Ratio").
2.4 Shareholder Rights; Stock Transfers
At the Effective Time, holders of Company Common Stock shall cease to
be and shall have no rights as shareholders of the Company, other than to
receive the consideration provided under this Article II. After the Effective
Time, there shall be no transfers on the stock transfer books of the Company or
the Surviving Corporation of shares of Company Common Stock and if certificates
evidencing such shares are presented for transfer after the Effective Time,
they shall be cancelled against delivery of certificates for whole shares of
Acquiror Common Stock (plus cash in lieu of any fractional share interest) as
herein provided.
8
<PAGE> 15
2.5 Dissenting Shares
Holders of shares of Company Common Stock will not have the right to
dissent under the DGCL and demand payment of the fair market value of such
shares of Company Common Stock.
2.6 Fractional Shares
Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Acquiror Common Stock shall, at the time of surrender of
the certificate or certificates representing such holder's shares, receive an
amount of cash (without interest) equal to the product arrived at by
multiplying such fraction of a share of Acquiror Common Stock by $22.00. No
such holder shall be entitled to dividends, voting rights or any other rights
in respect of any fractional share interest.
2.7 Exchange Procedures
(a) On the Closing Date, the Acquiror shall issue to an agent, duly
appointed by the Acquiror and reasonably acceptable to the Company (the
"Exchange Agent"), the number of shares of Acquiror Common Stock issuable and
the amount of cash payable to holders of Company Common Stock pursuant to
Section 2.6 hereof (which shall be held by the Exchange Agent in trust for such
holders of Company Common Stock). Promptly after the Effective Time, the
Exchange Agent shall distribute Acquiror 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 Acquiror Common Stock held by
it from time to time hereunder.
(b) At or after the Effective Time, each holder of a certificate
or certificates theretofore evidencing issued and outstanding shares of Company
Common Stock (except as provided in Section 2.3(b) hereof), upon surrender of
the same to the Exchange Agent, shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of whole shares
of Acquiror Common Stock into which the shares of Company Common Stock
theretofore represented by the certificate or certificates so surrendered shall
have been converted (plus cash in lieu of any fractional share interest), as
provided in Section 2.3 hereof. As promptly as practicable after the Effective
Time, and in no event later than ten days thereafter, the Exchange Agent shall
mail to each holder of record of an outstanding certificate which immediately
prior to the Effective Time evidenced shares of Company Common Stock, and which
is to be exchanged for Acquiror Common Stock (plus cash in lieu of any
fractional share interest), as provided in Section 2.3 hereof, a form of letter
of transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to such certificate shall pass, only upon delivery of such
certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Merger and of the
9
<PAGE> 16
procedure for surrendering to the Exchange Agent such certificate in exchange
for a certificate or certificates evidencing Acquiror Common Stock (plus cash
in lieu of any fractional share interest). The Exchange Agent shall accept
such certificates upon compliance with such reasonable terms and conditions as
the Exchange Agent may impose to effect an orderly exchange thereof in
accordance with customary exchange practices.
(c) Each outstanding certificate which prior to the Effective Time
represented Company Common Stock and which is not surrendered to the Exchange
Agent in accordance with the procedures provided for herein shall, except as
otherwise herein provided, until duly surrendered to the Exchange Agent be
deemed to evidence ownership of the number of whole shares of Acquiror Common
Stock (plus cash in lieu of any fractional share interest) into which such
Company Common Stock shall have been converted by virtue of the Merger.
(d) No holder of a certificate theretofore representing shares of
Company Common Stock shall be entitled to receive any dividends in respect of
the Acquiror Common Stock into which such shares shall have been converted by
virtue of the Merger until the certificate representing such shares is
surrendered in exchange for a certificate or certificates representing whole
shares of Acquiror Common Stock (plus cash in lieu of any fractional share
interest). In the event that dividends are declared and paid by the Acquiror
in respect of Acquiror Common Stock after the Effective Time but prior to any
holder's surrender of certificates representing shares of Company Common Stock,
dividends payable to such holder in respect of whole shares of Acquiror Common
Stock not then issued shall accrue (without interest). Any such dividends
shall be paid (without interest) upon surrender of the certificates
representing such shares of Company Common Stock.
(e) The Acquiror shall not be obligated to deliver a certificate
or certificates representing whole shares of Acquiror Common Stock (plus cash
in lieu of any fractional share interest) to which a holder of Company Common
Stock would otherwise be entitled as a result of the Merger until such holder
surrenders the certificate or certificates representing the shares of Company
Common Stock for exchange as provided in this Section 2.7, or, in default
thereof, an appropriate affidavit of loss and indemnity agreement and/or a bond
in an amount as may be reasonably required in each case by the Acquiror. If
any certificate evidencing shares of Acquiror Common Stock is to be issued in a
name other than that in which the certificate evidencing Company Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Acquiror Common Stock in any
name other than that of the registered holder of the certificate surrendered or
otherwise establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
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(f) Any portion of the shares of Acquiror Common Stock and cash
delivered to the Exchange Agent by the Acquiror pursuant to Section 2.7(a)
hereof that remains unclaimed by the shareholders of the Company by the second
anniversary of the Effective Time shall be delivered by the Exchange Agent to
the Acquiror. Any shareholders of the Company who have not theretofore
complied with Section 2.7(b) hereof shall thereafter look only to the Acquiror
for the consideration deliverable in respect of each share of Company Common
Stock such shareholder holds as determined pursuant to this Agreement without
any interest thereon. If outstanding certificates for shares of Company Common
Stock are not surrendered or the payment for them is not claimed prior to the
second anniversary of the Effective Time (the "Old Certificates"), the Acquiror
may at any time thereafter, with or without notice to the holders of record of
the Old Certificates which were converted into whole shares of Acquiror Common
Stock (plus cash in lieu of any fractional share interest) pursuant to the
terms of this Agreement, sell for the accounts of such holders any or all of
the shares of Acquiror Common Stock which such holders are entitled to receive
under Section 2.3(b) hereof (the "Unclaimed Shares"), provided, however, that
the Acquiror shall not be obligated to make any sale of Unclaimed Shares (even
if notice of sale of the Unclaimed Shares has been given) and instead may issue
to the holder of any Old Certificates properly delivered to the Acquiror in
accordance with the terms thereof a certificate evidencing the number of whole
shares of Acquiror Common Stock (plus cash in lieu of any fractional share
interest) to which such holder is entitled by virtue of Section 2.3(b) hereof.
In the event that the Acquiror elects to sell Unclaimed Shares, it may do so in
a registered public offering under the Securities Act and applicable state
securities laws, by private sale or by sale at any broker's board or in any
securities exchange, in each case in such manner and at such times as the
Acquiror shall determine. The net proceeds of any such sale of Unclaimed
Shares shall be held for the holders of the unsurrendered Old Certificates
whose Unclaimed Shares have been sold, to be paid to them upon surrender of
their Old Certificates. From and after any such sale, the sole right of the
holders of the unsurrendered Old Certificates whose Unclaimed Shares have been
sold shall be the right to collect the net sale proceeds held by the Acquiror
for their respective accounts, and such holders shall not be entitled to
receive any interest on such net sale proceeds held by the Acquiror.
(g) The Acquiror and the Exchange Agent shall be entitled to rely
upon the stock transfer books of the Company to establish the identity of those
persons entitled to receive the consideration specified in this Agreement,
which books shall be conclusive with respect thereto. In the event of a
dispute with respect to ownership of stock represented by any certificate, the
Acquiror and the Exchange Agent shall be entitled to deposit any consideration
represented thereby in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
2.8 Anti-Dilution Provisions
If after the date of this Agreement and prior to the Effective Time
the number of outstanding shares of Acquiror Common Stock or Company Common
Stock shall have been
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increased or decreased by reason of a dividend payable in shares of common
stock or a split or combination of outstanding shares, then (a) in the case of
any such event involving the Acquiror Common Stock the number of shares of
Acquiror Common Stock to be delivered to Company shareholders who are entitled
to receive shares of Acquiror Common Stock in exchange for shares of Company
Common Stock shall be adjusted so that each Company shareholder shall be
entitled to receive such number of shares of Acquiror Common Stock as such
shareholder would have been entitled to receive if the Effective Time had
occurred prior to the happening of such event and (b) in the case of any such
event involving the Company Common Stock the Exchange Ratio shall be adjusted
by multiplying the Exchange Ratio by a fraction the numerator of which shall be
the number of shares of Company Common Stock issued and outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Company Common Stock issued and outstanding immediately after such event.
The Exchange Ratio also shall be appropriately adjusted to reflect any capital
reorganization involving the reclassification of the Acquiror Common Stock or
the Company Common Stock subsequent to the date of this Agreement and prior to
the Effective Time. Similar adjustments shall be made to the amount payable in
lieu of fractional share interests.
2.9 Company Options
(a) At the Effective Time, and except as may be contemplated by
Section 5.11 hereof, each Company Option which is then outstanding, whether or
not exercisable, 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 Acquiror Common Stock, and the Acquiror shall assume each Company
Option, in accordance with the terms of the Company Stock Option Plans and
stock option agreement by which it is evidenced, except that from and after the
Effective Time, (i) the Acquiror and its Board of Directors or a duly
authorized committee thereof shall be substituted for the Company and the
Company's Board of Directors or duly authorized committee thereof administering
the Company Stock Option Plan, (ii) each Company Option assumed by the Acquiror
may be exercised solely for shares of Acquiror Common Stock, (iii) the number
of shares of Acquiror Common Stock subject to such Company Options shall be
equal to the number of shares of Company Common Stock subject to such Company
Options immediately prior to the Effective Time multiplied by the Exchange
Ratio, provided that any fractional shares of Acquiror Common Stock resulting
from such multiplication shall be rounded down to the nearest share, and (iv)
the per share exercise price under each such Company Option shall be adjusted
by dividing the per share exercise price under each such Company Option by the
Exchange Ratio, provided that such exercise price shall be rounded up to the
nearest cent. Notwithstanding the preceding sentence, each Company Option
which is an "incentive stock option" shall be adjusted as required by Section
424 of the Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option within the
meaning of Section 424(h) of the Code, and all Company Options shall be
adjusted, if necessary, so as not to impair the eligibility of the Merger for
pooling of
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interests accounting treatment. The Acquiror and the Company agree to take all
necessary steps to effect the foregoing provisions of this Section 2.9(a).
(b) As soon as practicable after the Effective Time, the Acquiror
shall deliver to each participant in the Company Stock Option Plans an
appropriate notice setting forth such participant's rights pursuant thereto and
the grants subject to the Company Stock Option Plans shall continue in effect
on the same terms and conditions, including without limitation the duration
thereof, subject to the adjustments required by Section 2.9(a)(iii) hereof
after giving effect to the Merger. Within 30 days after the Effective Time,
the Acquiror shall file a registration statement on Form S-3 or Form S-8, as
the case may be (or any successor or other appropriate forms), with respect to
the shares of Acquiror Common Stock subject to such Options and shall use its
reasonable best efforts to maintain the current status of the prospectus or
prospectuses contained therein for so long as such Options remain outstanding.
2.10 Additional Actions
If, at any time after the Effective Time, the Surviving Corporation
shall consider that any further assignments or assurances in law or any other
acts are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger, or (ii) otherwise carry out the purposes of this Agreement, the
Company and its proper officers and directors shall be deemed to have granted
to the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such proper deeds, assignments and assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Corporation and otherwise to
carry out the purposes of this Agreement; and the proper officers and directors
of the Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 Capital Structure
The authorized capital stock of the Company consists of 5,000,000
shares of Company Common Stock and 1,000,000 shares of Company Preferred Stock.
As of the date hereof, 1,478,062 shares of Company Common Stock are issued and
outstanding, 142,000 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock
have been duly authorized and validly issued and are
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fully paid and nonassessable, and none of the outstanding shares of Company
Common Stock has been issued in violation of the preemptive rights of any
person, firm or entity. Except for the Company Stock Option Agreement and for
Company Options to acquire not more than 121,500 shares of Company Common Stock
as of the date hereof, a schedule of which has been Previously Disclosed, there
are no Rights authorized, issued or outstanding with respect to the capital
stock of the Company.
3.2 Organization, Standing and Authority of the Company
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The Company
is duly registered as a unitary savings and loan holding company under the HOLA
and the regulations of the OTS thereunder. The Company has heretofore
delivered to the Acquiror true and complete copies of the Certificate of
Incorporation and Bylaws of the Company as in effect as of the date hereof.
3.3 Ownership of the Company Subsidiaries
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified the Bank as its only Significant Subsidiary. Except
for (x) capital stock of the Company Subsidiaries, (y) securities and other
interests held in a fiduciary capacity and beneficially owned by third parties
or taken in consideration of debts previously contracted and (z) securities and
other interests which are Previously Disclosed, the Company does not own or
have the right to acquire, directly or indirectly, any outstanding capital
stock or other voting securities or ownership interests of any corporation,
bank, savings association, partnership, joint venture or other organization.
The outstanding shares of capital stock or other ownership interests of each
Company Subsidiary have been duly authorized and validly issued, are fully paid
and nonassessable, and are directly owned by the Company free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No Rights are authorized, issued or
outstanding with respect to the capital stock or other ownership interests of
the Company Subsidiaries and there are no agreements, understandings or
commitments relating to the right of the Company to vote or to dispose of such
capital stock or other ownership interests.
3.4 Organization, Standing and Authority of the Company Subsidiaries
Each of the Company Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the United
States or the jurisdiction in which it is organized. Each of the Company
Subsidiaries (i) has full power and authority
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to own or lease all of its properties and assets and to carry on its business
as now conducted, and (ii) is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such qualification, except
where the failure to be so licensed, qualified or in good standing would not
have a Material Adverse Effect on the Company. The deposit accounts of the
Bank are insured by the SAIF to the maximum extent permitted by the FDIA. The
Bank has paid all deposit insurance premiums and assessments required by the
FDIA and the regulations thereunder. The Company has heretofore delivered or
made available to the Acquiror true and complete copies of the Articles of
Incorporation, Charter, Bylaws and other governing documents of each Company
Subsidiary as in effect as of the date hereof.
3.5 Authorized and Effective Agreement
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of the Company, except for the
approval of this Agreement by the Company's shareholders. This Agreement has
been duly and validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Acquiror, constitutes a legal,
valid and binding obligation of the Company which is enforceable against the
Company in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger),
nor compliance by the Company with any of the provisions hereof (i) does or
will conflict with or result in a breach of any provisions of the Certificate
of Incorporation or Bylaws of the Company or, except as Previously Disclosed,
the equivalent documents of any Company Subsidiary, (ii) violate, conflict with
or result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the Company or a
Company Subsidiary pursuant to, any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or a Company Subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental and shareholder approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or a Company Subsidiary.
(c) Except for (i) the filing of applications and notices with,
and the consents and approvals of, as applicable, the FRB and the OTS, (ii) the
filing and effectiveness of the Form S-4 with the Commission, (iii) the
approval of this Agreement by the requisite vote
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of the shareholders of the Company, (iv) the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware pursuant to the DGCL in
connection with the Merger and (v) review of the Merger by the DOJ under
federal antitrust laws, and except for such filings, registrations, consents or
approvals which are Previously Disclosed, no consents or approvals of or
filings or registrations with any Governmental Entity or with any third party
are necessary on the part of the Company or the Bank in connection with the
execution and delivery by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby.
(d) As of the date hereof, the Company is not aware of any facts
or circumstances relating to the Company or the Bank (including without
limitation Community Reinvestment Act compliance) why all consents and
approvals shall not be procured from all regulatory agencies having
jurisdiction over the transactions contemplated by this Agreement as shall be
necessary for consummation of the transactions contemplated by this Agreement.
3.6 Securities Documents and Regulatory Reports
(a) Since June 30, 1995, the Company has timely filed with the
Commission (and the NASD to the extent specifically required by the rules and
regulations thereof) all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since June 30, 1995, each of the Company and the Bank has duly
filed with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be filed
under applicable laws and regulations and such reports were in all material
respects complete, accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent
examinations of the Company or the Bank by the OTS or the FDIC, neither the
Company nor the Bank was required to correct or change any action, procedure or
proceeding which the Company or the Bank believes has not been corrected or
changed as required as of the date hereof and which could have a Material
Adverse Effect on the Company.
3.7 Financial Statements
(a) The Company has previously delivered or made available to the
Acquiror accurate and complete copies of the Company Financial Statements
which, in the case of the consolidated statements of financial condition of the
Company as of March 31, 1997, 1996 and 1995 and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
ended March 31, 1997, 1996 and 1995, are accompanied by the audit reports of
KPMG Peat Marwick LLP, independent public accountants with respect to the
Company. The Company Financial Statements referred to herein, as well as
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the Company Financial Statements to be delivered pursuant to Section 5.8
hereof, fairly present or will fairly present, as the case may be, the
consolidated financial condition of the Company as of the respective dates set
forth therein, and the consolidated results of operations, shareholders' equity
and cash flows of the Company for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Company Financial Statements referred to in
Section 3.7(a) has been or will be, as the case may be, prepared in accordance
with GAAP consistently applied during the periods involved, except as stated
therein. The audits of the Company and the Company Subsidiaries have been
conducted in all material respects in accordance with generally accepted
auditing standards. The books and records of the Company and the Company
Subsidiaries are being maintained in material compliance with applicable legal
and accounting requirements, and such books and records accurately reflect in
all material respects all dealings and transactions in respect of the business,
assets, liabilities and affairs of the Company and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided
for in the consolidated statement of financial condition of the Company as of
December 31, 1997 (including related notes) and (ii) of liabilities incurred
since December 31, 1997 in the ordinary course of business (including without
limitation liabilities assumed or incurred in connection with actions by the
Company consistent with the terms of Section 5.6(a) hereof), neither the
Company nor any Company Subsidiary has any liabilities, whether absolute,
accrued, contingent or otherwise, material to the financial condition, results
of operations or business of the Company on a consolidated basis.
3.8 Material Adverse Change
Since December 31, 1997, (i) the Company and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on the Company.
3.9 Environmental Matters
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws except to the extent
any non-compliance would not have a Material Adverse Effect on the Company.
Neither the Company nor a Company Subsidiary has received any communication
alleging that the Company or a Company Subsidiary is not in such compliance
and, to the best knowledge of the Company, there are no present circumstances
that would prevent or interfere with the continuation of such compliance.
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(b) To the best of the Company's knowledge, none of the properties
owned, leased or operated by the Company or a Company Subsidiary or properties
which secure or otherwise act as collateral for loans or other extensions of
credit made by the Company or any Company Subsidiary has been or is in
violation of or liable under any Environmental Law except to the extent any
violation or liability would not have a Material Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents
that could reasonably form the basis of any Environmental Claim or other claim
or action or governmental investigation that could result in the imposition of
any material liability arising under any Environmental Law against the Company
or a Company Subsidiary or against any person or entity whose liability for any
Environmental Claim the Company or a Company Subsidiary has or may have
retained or assumed either contractually or by operation of law or with respect
to any of the properties owned, leased or operated by the Company or a Company
Subsidiary or properties which secure or otherwise act as collateral for loans
or other extensions of credit made by the Company or any Company Subsidiary.
(d) Except as Previously Disclosed, the Company has not conducted
any environmental studies during the past five years with respect to any
properties owned or leased by it or a Company Subsidiary or which secures or
otherwise acts as collateral for a loan or other extension of credit held by
the Company or a Company Subsidiary as of the date hereof.
3.10 Tax Matters
(a) The Company and its Subsidiaries have timely filed all
federal, state and local (and, if applicable, foreign) income, franchise, bank,
excise, real property, personal property and other tax returns required by
applicable law to be filed by them (including, without limitation, estimated
tax returns, income tax returns, information returns and withholding and
employment tax returns) and have paid, or where payment is not required to have
been made, have set up an adequate reserve or accrual for the payment of, all
material taxes required to be paid in respect of the periods covered by such
returns and, as of the Effective Time, will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual for
the payment of, all material taxes for any subsequent periods ending on or
prior to the Effective Time. Neither the Company nor a Company Subsidiary will
have any material liability for any such taxes in excess of the amounts so paid
or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other tax
returns filed by the Company and its Subsidiaries are complete and accurate in
all material respects. Neither the Company nor a Company Subsidiary is
delinquent in the payment of any tax, assessment or governmental charge or,
except as Previously Disclosed, has requested any extension of time
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within which to file any tax returns in respect of any fiscal year or portion
thereof which have not since been filed. Except as Previously Disclosed, the
federal, state and local income tax returns of the Company and its Subsidiaries
have been examined by the applicable tax authorities (or are closed to
examination due to the expiration of the applicable statute of limitations) and
no deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against the Company
or a Company Subsidiary as a result of such examinations or otherwise which
have not been settled and paid. There are currently no agreements in effect
with respect to the Company or a Company Subsidiary to extend the period of
limitations for the assessment or collection of any tax. As of the date
hereof, no audit, examination or deficiency or refund litigation with respect
to such return is pending or, to the best of the Company's knowledge,
threatened.
(c) Except as Previously Disclosed, neither the Company nor any
Company Subsidiary (i) is a party to any agreement providing for the allocation
or sharing of taxes, (ii) is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by the Company or a Company Subsidiary (nor does
the Company have any knowledge that the Internal Revenue Service has proposed
any such adjustment or change of accounting method) or (iii) has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
3.11 Legal Proceedings
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of the Company, threatened against the Company or a Company
Subsidiary or against any asset, interest or right of the Company or a Company
Subsidiary, or against any officer, director or employee of any of them that
individually or in the aggregate, if decided adversely, would have a Material
Adverse Effect on the Company. Except as Previously Disclosed, neither the
Company nor a Company Subsidiary is a party to any order, judgment or decree
which has or could reasonably be expected to have a Material Adverse Effect on
the Company.
3.12 Compliance with Laws
(a) Each of the Company and the Company Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local
and foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently being conducted and the
absence of which could reasonably be expected to have a Material Adverse Effect
on the Company; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
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(b) Neither the Company nor a Company Subsidiary is in violation
of its respective Certificate of Incorporation, Charter or other organizational
document or Bylaws, or of any applicable federal, state or local law or
ordinance or any order, rule or regulation of any federal, state, local or
other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on the Company; and neither the Company nor a
Company Subsidiary has received any notice or communication from any federal,
state or local governmental authority asserting that the Company or a Company
Subsidiary is in violation of any of the foregoing which could reasonably be
expected to have a Material Adverse Effect on the Company. Neither the Company
nor a Company Subsidiary is subject to any regulatory or supervisory cease and
desist order, agreement, written directive, memorandum of understanding or
written commitment (other than those of general applicability to all savings
associations or savings and loan holding companies issued by governmental
authorities), and none of them has received any written communication
requesting that it enter into any of the foregoing.
3.13 Certain Information
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied in writing by the Company or representatives or
agents thereof for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and (ii)
the Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of the Company and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Company to its shareholders in connection with the meeting of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
3.14 Employee Benefit Plans
(a) The Company has Previously Disclosed all stock option, stock
grant, employee stock purchase and stock bonus plans, qualified pension or
profit-sharing plans, any deferred
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compensation, consultant, bonus or group insurance contract or any other
incentive, health and welfare or employee benefit plan or agreement maintained
for the benefit of employees or former employees of the Company or any Company
Subsidiary (the "Company Employee Plans"), whether written or oral, and the
Company has previously furnished or made available to the Acquiror accurate and
complete copies of the same together with (i) the most recent actuarial and
financial reports prepared with respect to any plans, (ii) the most recent
annual reports filed with any governmental agency, and (iii) all rulings and
determination letters and any open requests for rulings or letters that pertain
to any qualified plan.
(b) None of the Company, any Company Subsidiary, any Company
Employee Plan constituting an "employee benefit plan" within the meaning of
Section 3(2) of ERISA ("Company Pension Plan") or, to the best of the Company's
knowledge, any fiduciary of such Company Pension Plan, has incurred any direct
or indirect material liability to the PBGC, the Internal Revenue Service or any
present or former employees of the Company or a Company Subsidiary with respect
to any such Company Pension Plan. To the best of the Company's knowledge, no
reportable event under Section 4043(b) of ERISA has occurred with respect to
any such Company Pension Plan.
(c) Except as Previously Disclosed, neither the Company nor any
Company Subsidiary participates in or has incurred any liability under Section
4201 of ERISA for a complete or partial withdrawal from a multi-employer plan
(as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the
Internal Revenue Service with respect to each Company Pension Plan which is
intended to qualify under Section 401 of the Code to the effect that such plan
is qualified under Section 401 of the Code and the trust associated with such
Company Pension Plan is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of the Company's knowledge, is
threatened to be revoked and the Company does not know of any ground on which
such revocation may be based. Neither the Company nor any Company Subsidiary
has any liability under any such Company Pension Plan that is not reflected on
the consolidated statement of financial condition of the Company at December
31, 1997 included in the Company Financial Statements, other than liabilities
incurred in the ordinary course of business in connection therewith subsequent
to the date thereof.
(e) To the best of the Company's knowledge, no prohibited
transaction (which shall mean any transaction prohibited by Section 406 of
ERISA and not exempt under Section 408 of ERISA or Section 4975 of the Code)
has occurred with respect to any Company Employee Plan which would result in
the imposition, directly or indirectly, of a material excise tax under Section
4975 of the Code or otherwise have a Material Adverse Effect on the Company.
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(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Company
Employee Plan or ERISA; no accumulated funding deficiency (as defined in
Section 302 of ERISA or Section 412 of the Code), whether or not waived, exists
with respect to any Company Pension Plan, and there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any Company
Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee
Plans have been operated in compliance in all material respects with the terms
of the operative plan documents and the applicable provisions of ERISA, the
Code, all regulations, rulings and announcements promulgated or issued
thereunder and all other applicable governmental laws and regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.15 Certain Contracts
(a) Except as Previously Disclosed, neither the Company nor a
Company Subsidiary is a party to, is bound or affected by, receives, or is
obligated to pay, benefits under (i) any agreement, arrangement or commitment,
including without limitation any agreement, indenture or other instrument,
relating to the borrowing of money by the Company or a Company Subsidiary
(other than in the case of the Bank deposits, FHLB advances, federal funds
purchased and securities sold under agreements to repurchase in the ordinary
course of business) or the guarantee by the Company or a Company Subsidiary of
any obligation, other than by the Bank in the ordinary course of its banking
business, (ii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election or retention in office
of any present or former director, officer or employee of the Company or a
Company Subsidiary, (iii) any agreement, arrangement or understanding pursuant
to which any payment (whether of severance pay or otherwise) became or may
become due to any director, officer or employee of the Company or a Company
Subsidiary upon execution of this Agreement or upon or following consummation
of the transactions contemplated by this Agreement (either alone or in
connection with the occurrence of any additional acts or events); (iv) any
agreement, arrangement or understanding pursuant to which the Company or a
Company Subsidiary is obligated to indemnify any director, officer, employee or
agent of the Company or a Company Subsidiary; (v) any agreement, arrangement or
understanding to which the Company or a Company Subsidiary is a party or by
which any of the same is bound which limits the freedom of the Company or a
Company Subsidiary to compete in any line of business or with any person, (vi)
any assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order
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or decree with or by the OTS, the FDIC or any other regulatory agency, (vii)
any other agreement, arrangement or understanding which would be required to be
filed as an exhibit to the Company's Annual Report on Form 10-K under the
Exchange Act and which has not been so filed or (viii) any other agreement,
arrangement or understanding which, if entered into after the date hereof,
would require the consent of the Acquiror under Section 5.6(a) hereof.
(b) Neither the Company nor any Company Subsidiary is in default
or in non-compliance, which default or non-compliance could reasonably be
expected to have a Material Adverse Effect on the Company, under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party or by which its assets, business or operations may be
bound or affected, whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not occurred any event
that with the lapse of time or the giving of notice, or both, would constitute
such a default or non-compliance.
3.16 Brokers and Finders
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or
finder fees or commissions in connection with the transactions contemplated
hereby.
3.17 Insurance
Each of the Company and its Subsidiaries is 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
commercially reasonable business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations.
3.18 Properties
All real and personal property owned by the Company or its
Subsidiaries or presently used by any of them in its respective business is in
an adequate condition (ordinary wear and tear excepted) and is sufficient to
carry on the business of the Company and its Subsidiaries in the ordinary
course of business consistent with their past practices. The Company has good
and marketable title free and clear of all liens, encumbrances, charges,
defaults or equities (other than equities of redemption under applicable
foreclosure laws) to all of the material properties, real and personal,
reflected on the consolidated statement of financial condition of the Company
as of December 31, 1997 included in the Company Financial Statements or
acquired after such date, except (i) liens for current taxes not yet due or
payable (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any,
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as are not material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Company as of December 31,
1997 included in the Company Financial Statements. All real and personal
property which is material to the Company's business on a consolidated basis
and leased or licensed by the Company or a Company Subsidiary is held pursuant
to leases or licenses which are valid and enforceable in accordance with their
respective terms and such leases will not terminate or lapse prior to the
Effective Time.
3.19 Allowance for Loan Losses
The allowance for loan losses reflected, and to be reflected, in the
Company's reports referred to in Section 3.6(b) hereof, and shown, and to be
shown, on the balance sheets contained in the Company Financial Statements have
been, and will be, established in accordance with the requirements of, and was
and will be adequate under, GAAP and all applicable regulatory criteria.
3.20 Related Party Transactions
Except as (i) Previously Disclosed, (ii) disclosed in the Company's
proxy statement dated June 30, 1997 or (iii) disclosed in the footnotes to the
Company Financial Statements, the Company is not a party to any transaction
(including any loan or other credit accommodation but excluding deposits in the
ordinary course of business) with any Affiliate of the Company (except a
Company Subsidiary); and all such transactions (a) were made in the ordinary
course of business, (b) were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. Except as
Previously Disclosed, no loan or credit accommodation to any Affiliate of the
Company is presently in default or, during the three year period prior to the
date of this Agreement, has been in default or has been restructured, modified
or extended. Neither the Company nor the Bank has been notified that principal
and interest with respect to any such loan or other credit accommodation will
not be paid when due or that the loan grade classification accorded such loan
or credit accommodation by the Bank is inappropriate.
3.21 Loans
Each loan reflected as an asset in the Company Financial Statements
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and correct (ii) to the extent secured, has been secured by
valid liens and security interests which have been perfected, and (ii) 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, in each case other than
loans as to which
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the failure to satisfy the foregoing standards would not have a Material
Adverse Effect on the Company.
3.22 Accounting for the Merger; Reorganization
As of the date hereof, the Company, after consultation with KPMG Peat
Marwick LLP, does not have any reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests accounting treatment under GAAP, or (ii)
as a reorganization under Section 368(a) of the Code.
3.23 Fairness Opinion
The Company has received a written opinion from Sandler O'Neill &
Partners L.P. to the effect that, as of the date hereof, the consideration to
be received by shareholders of the Company pursuant to this Agreement is fair,
from a financial point of view, to such shareholders.
3.24 Labor
No work stoppage involving the Company or a Company Subsidiary is
pending or, to the best knowledge of the Company, threatened. Neither the
Company nor a Company Subsidiary is involved in, or threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding
involving the employees of the Company or a Company Subsidiary which could have
a Material Adverse Effect on the Company. Employees of the Company and the
Company Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Company's knowledge, there have been no
efforts to unionize or organize any employees of the Company or any of the
Company Subsidiaries during the past five years.
3.25 Required Vote; Inapplicability of Antitakover Statutes
(a) Assuming the accuracy of the representation and warranty of
the Acquiror contained in Section 4.18 hereof, the affirmative vote of the
holders of a majority of the issued and outstanding shares of Company Common
Stock is necessary to approve this Agreement and the transactions contemplated
hereby on behalf of the Company.
(b) A majority of the Disinterested Directors of the Company (as
defined in Section 3(g) of Article VIII of the Certificate of Incorporation of
the Company) have approved the Merger and this Agreement such that the
provisions of Section 1 of Article VIII of the Certificate of Incorporation of
the Company are inapplicable to this Agreement and the transactions
contemplated hereby.
(c) Assuming the accuracy of the representation and warranty of
the Acquiror contained in Section 4.18 hereof, the Acquiror is not an
"interested stockholder," as defined
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in Section 203(c)(5) of the DGCL and, as a result, the provisions of Section
203 of the DGCL do not apply to the Merger and the other transactions
contemplated hereby.
3.26 Ownership of Acquiror Common Stock
As of the date hereof, neither the Company nor, to its best knowledge,
any of its Affiliates or associates, (i) beneficially own, directly or
indirectly, or (ii) are parties to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case,
shares of Acquiror Common Stock which in the aggregate represent 5% or more of
the outstanding shares of Acquiror Common Stock (other than shares held in a
fiduciary capacity and beneficially owned by third parties and shares taken in
consideration of debts previously contracted).
3.27 Disclosures
The representations and warranties of the Company made pursuant to
this Agreement are true, correct and complete in all material respects, and do
not omit statements necessary to make them not misleading under all facts and
circumstances.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 Capital Structure
The authorized capital stock of the Acquiror consists of 20,000,000
shares of Acquiror Common Stock and 100,000 shares of Acquiror Preferred Stock.
As of the date hereof, there were 12,441,000 shares of Acquiror Common Stock
issued and outstanding, 128,122 shares of Acquiror Common Stock were held as
treasury stock and not outstanding and there were no shares of Acquiror
Preferred Stock issued and outstanding. All outstanding shares of Acquiror
Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable, and none of the outstanding shares of Acquiror Common Stock
has been issued in violation of the preemptive rights of any person, firm or
entity. As of the date hereof, there are no Rights authorized, issued or
outstanding with respect to the capital stock of the Acquiror, except for (i)
shares of Acquiror Common Stock issuable pursuant to the Acquiror Employee
Stock Benefit Plans, a schedule of which has been Previously Disclosed, and
(ii) by virtue of this Agreement.
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4.2 Organization, Standing and Authority of the Acquiror
The Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Acquiror. The
Acquiror is duly registered as a bank holding company under the BHCA and the
regulations of the FRB thereunder. The Acquiror has heretofore delivered to
the Company true and complete copies of the Certificate of Incorporation and
Bylaws of the Acquiror as in effect as of the date hereof.
4.3 Ownership of the Acquiror Subsidiaries
The Acquiror has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Acquiror
Subsidiary and identified the Acquiror Bank as its only Significant Subsidiary.
The outstanding shares of capital stock or other ownership interest of each of
the Acquiror Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and, except as Previously Disclosed, are directly
or indirectly owned by the Acquiror free and clear of all liens, claims,
encumbrances, charges, pledges, restrictions or rights of third parties of any
kind whatsoever. No Rights are authorized, issued or outstanding with respect
to the capital stock or other ownership interests of any Acquiror Subsidiary
and there are no agreements, understandings or commitments relating to the
right of the Acquiror to vote or to dispose of such capital stock or other
ownership interests.
4.4 Organization, Standing and Authority of the Acquiror Subsidiaries
Each Acquiror Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized. Each of the Acquiror Subsidiaries (i) has full power and authority
to own or lease all of its properties and assets and to carry on its business
as now conducted, and (ii) is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such qualification, except
where the failure to be so licensed, qualified or in good standing would not
have a Material Adverse Effect on the Acquiror. The deposit accounts of the
Acquiror Bank are insured by the BIF to the maximum extent permitted by the
FDIA, and the Acquiror Bank has paid all premiums and assessments required by
the FDIA and the regulations thereunder. The Acquiror has heretofore delivered
or made available to the Company true and complete copies of the Articles of
Incorporation, Charter, Bylaws and other governing documents of each Acquiror
Subsidiary as in effect as of the date hereof.
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4.5 Authorized and Effective Agreement
(a) The Acquiror has all requisite corporate power and authority
to enter into this Agreement and (subject to receipt of all necessary
governmental approvals) to perform all of its obligations under this Agreement.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the Acquiror. This
Agreement has been duly and validly executed and delivered by the Acquiror and,
assuming due authorization, execution and delivery by the Company, constitutes
a legal, valid and binding obligation of the Acquiror which is enforceable
against the Acquiror in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger) nor
compliance by the Acquiror with any of the provisions hereof (i) does or will
conflict with or result in a breach of any provisions of the Certificate of
Incorporation or Bylaws of the Acquiror or the equivalent documents of any
Acquiror Subsidiary, (ii) violate, conflict with or result in a breach of any
term, condition or provision of, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance upon
any property or asset of the Acquiror or any Acquiror Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Acquiror or any
Acquiror Subsidiary is a party, or by which any of their respective properties
or assets may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Acquiror or any Acquiror
Subsidiary.
(c) Except for (i) the filing of applications and notices with,
and the consents and approvals of, as applicable, the FRB and the OTS (ii) the
filing and effectiveness of the Form S-4 with the Commission, (iii) compliance
with applicable state securities or "blue sky" laws in connection with the
issuance of Acquiror Common Stock pursuant to this Agreement, (iv) the filing
of a Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL in connection with the Merger and (v) review of the Merger
by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals as are Previously Disclosed, no consents
or approvals of or filings or registrations with any Governmental Entity or
with any third party are necessary on the part of the Acquiror or Acquiror Bank
in connection with the execution and delivery by the Acquiror of this Agreement
and the consummation by the Acquiror of the transactions contemplated hereby.
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(d) As of the date hereof, the Acquiror is not aware of any
reasons relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and
approvals shall not be procured from all regulatory agencies having
jurisdiction over the transactions contemplated by this Agreement as shall be
necessary for consummation of the transactions contemplated by this Agreement.
4.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1995, the Acquiror has timely filed with the
Commission (and since April 1997 the AMEX to the extent specifically required
by the rules and regulations thereof) all Securities Documents required by the
Securities Laws and such Securities Documents complied in all material respect
with the Securities Laws and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Since January 1, 1995, the Acquiror and the Acquiror Bank has
duly filed with the FRB, the FDIC, the NYSBD and any other applicable federal
or state banking authority, as the case may be, in correct form the reports
required to be filed under applicable laws and regulations and such reports
were in all material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations. In connection with the most
recent examinations of the Acquiror or the Acquiror Bank by the FRB, the FDIC
or the NYSBD, as the case may be, neither the Acquiror nor the Acquiror Bank
was required to correct or change any action, procedure or proceeding which the
Acquiror or the Acquiror Bank believes has not been corrected or changed as
required as of the date hereof and which could have a Material Adverse Effect
on the Acquiror.
4.7 Financial Statements
(a) The Acquiror has previously delivered or made available to the
Company accurate and complete copies of the Acquiror Financial Statements
which, in the case of the consolidated statements of condition of the Acquiror
as of December 31, 1996, 1995 and 1994 and the consolidated statements of
income, shareholders' equity and cash flows for each of the three years ended
December 31, 1996, 1995 and 1994, are accompanied by the audit reports of
Deloitte & Touche, LLP, independent public accountants with respect to the
Acquiror. The Acquiror Financial Statements referred to herein, as well as the
Acquiror Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present or will fairly present, as the case may be, the consolidated
condition of the Acquiror as of the respective dates set forth therein, and the
consolidated income, shareholders' equity and cash flows of the Acquiror for
the respective periods or as of the respective dates set forth therein.
(b) Each of the Acquiror Financial Statements referred to in
Section 4.7(a) has been or will be, as the case may be, prepared in accordance
with GAAP consistently applied
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during the periods involved, except as stated therein. The audits of the
Acquiror and the Acquiror Subsidiaries have been conducted in all material
respects in accordance with generally accepted auditing standards. The books
and records of the Acquiror and the Acquiror Subsidiaries are being maintained
in material compliance with applicable legal and accounting requirements, and
all such books and records accurately reflect in all material respects all
dealings and transactions in respect of the business, assets, liabilities and
affairs of the Acquiror and the Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided
for in the consolidated statement of financial condition of the Acquiror as of
September 30, 1997 (including related notes) and (ii) of liabilities incurred
since September 30, 1997 in the ordinary course of business (including without
limitation liabilities assumed or incurred in connection with actions by the
Acquiror consistent with the terms of Section 5.6(b) hereof), neither the
Acquiror nor any Acquiror Subsidiary has any liabilities, whether absolute,
accrued, contingent or otherwise, material to the financial condition, results
of operations or business of the Acquiror on a consolidated basis.
4.8 Material Adverse Change
Since September 30, 1997, (i) the Acquiror and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on the Acquiror.
4.9 Environmental Matters
(a) To the best of the Acquiror's knowledge, the Acquiror and its
Subsidiaries are in compliance with all Environmental Laws except to the extent
any non-compliance would not have a Material Adverse Effect on the Acquiror.
Neither the Acquiror nor an Acquiror Subsidiary has received any communication
alleging that the Acquiror or an Acquiror Subsidiary is not in such compliance
and, to the best knowledge of the Acquiror, there are no present circumstances
that would prevent or interfere with the continuation of such compliance.
(b) To the best of the Acquiror's knowledge, none of the
properties owned, leased or operated by the Acquiror or an Acquiror Subsidiary
or properties which secure or otherwise act as collateral for loans or other
extensions of credit made by the Acquiror or any Acquiror Subsidiary has been
or is in violation of or liable under any Environmental Law except to the
extent any violation or liability would not have a Material Adverse Effect on
the Acquiror.
(c) To the best of the Acquiror's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents
that could reasonably form the basis
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of any Environmental Claim or other claim or action or governmental
investigation that could result in the imposition of any material liability
arising under any Environmental Law against the Acquiror or an Acquiror
Subsidiary or against any person or entity whose liability for any
Environmental Claim the Acquiror or an Acquiror Subsidiary has or may have
retained or assumed either contractually or by operation of law or with respect
to any of the properties owned, leased or operated by the Acquiror or an
Acquiror Subsidiary or properties which secure or otherwise act as collateral
for loans or other extensions of credit made by the Acquiror or any Acquiror
Subsidiary.
(d) Except as Previously Disclosed, the Acquiror has not conducted
any environmental studies during the past five years with respect to any
properties owned or leased by it or an Acquiror Subsidiary or which secures or
otherwise acts as collateral for a loan or other extension of credit held by
the Acquiror or an Acquiror Subsidiary as of the date hereof.
4.10 Tax Matters
(a) The Acquiror and the Acquiror Subsidiaries have timely filed
all federal, state and local (and, if applicable, foreign) income, franchise,
bank, excise, real property, personal property and other tax returns required
by applicable law to be filed by them (including, without limitation, estimated
tax returns, income tax returns, information returns and withholding and
employment tax returns) and have paid, or where payment is not required to have
been made, have set up an adequate reserve or accrual for the payment of, all
material taxes required to be paid in respect of the periods covered by such
returns and, as of the Effective Time, will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual for
the payment of, all material taxes for any subsequent periods ending on or
prior to the Effective Time. Neither the Acquiror nor any of the Acquiror
Subsidiaries will have any material liability for any such taxes in excess of
the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other tax
returns filed by the Acquiror and its Subsidiaries are complete and accurate in
all material respects. Neither the Acquiror nor an Acquiror Subsidiary is
delinquent in the payment of any tax, assessment or governmental charge or,
except as Previously Disclosed, has requested any extension of time within
which to file any tax returns in respect of any fiscal year or portion thereof
which have not since been filed. Except as Previously Disclosed, the federal,
state and local income tax returns of the Acquiror and its Subsidiaries have
been examined by the applicable tax authorities (or are closed to examination
due to the expiration of the applicable statute of limitations) and no
deficiencies for any tax, assessment or governmental charge have been proposed,
asserted or assessed (tentatively or otherwise) against the Acquiror or any
Acquiror Subsidiary as a result of such examinations or otherwise which have
not been settled and paid. Except as Previously Disclosed, there are currently
no agreements in effect with respect to the Acquiror or an Acquiror Subsidiary
to extend the period of limitations for the
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assessment or collection of any tax. Except as Previously Disclosed, as of the
date hereof, no audit, examination or deficiency or refund litigation with
respect to such return is pending or, to the best of the Acquiror's knowledge,
threatened.
(c) Except as Previously Disclosed, neither the Acquiror nor any
Acquiror Subsidiary (i) is a party to any agreement providing for the
allocation or sharing of taxes, (ii) is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by the Acquiror or an Acquiror Subsidiary
(nor does the Acquiror have any knowledge that the Internal Revenue Service has
proposed any such adjustment or change of accounting method) or (iii) has filed
a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
4.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror
threatened against the Acquiror or any Acquiror Subsidiary or against any
asset, interest or right of the Acquiror or any Acquiror Subsidiary, or against
any officer, director or employee of any of them that individually or in the
aggregate, if decided adversely, would have a Material Adverse Effect on the
Acquiror. Neither the Acquiror nor any of the Acquiror Subsidiaries is a party
to any order, judgment or decree which has or could reasonably be expected to
have a Material Adverse Effect on the Acquiror.
4.12 Compliance with Laws
(a) The Acquiror and each of the Acquiror Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local
and foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently being conducted and the
absence of which could reasonably be expected to have a Material Adverse Effect
on the Acquiror; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect; and to the best knowledge of the
Acquiror, no suspension or cancellation of any of the same is threatened.
(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is
in violation of its respective Certificate of Incorporation, Charter or other
organizational document or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all
banking (including without limitation all regulatory capital requirements),
securities, municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which
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violations or defaults, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Acquiror; and neither the
Acquiror nor any Acquiror Subsidiary has received any notice or communication
from any federal, state or local governmental authority asserting that the
Acquiror or any Acquiror Subsidiary is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on the
Acquiror. Neither the Acquiror nor any Acquiror Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all banks or holding companies thereof, as applicable, issued
by governmental authorities), and none of them has received any written
communication requesting that it enter into any of the foregoing.
4.13 Certain Information
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and (ii)
the Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of the Company and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Company to its shareholders in connection with the meeting of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
4.14 Employee Benefit Plans
(a) The Acquiror has Previously Disclosed all stock option, stock
grant, employee stock purchase and stock bonus plans, qualified pension or
profit-sharing plans, any deferred compensation, consultant, bonus or group
insurance contract or any other incentive, health and welfare or employee
benefit plan or agreement maintained for the benefit of employees or former
employees of the Acquiror or any Acquiror Subsidiary (the "Acquiror Employee
Plans"), whether written or oral, and the Acquiror has previously furnished or
made available to the Company accurate and complete copies of the same together
with (i) the most recent actuarial and financial reports prepared with respect
to any plans, (ii) the most recent annual reports filed with any governmental
agency, and (iii) all rulings and determination letters and any open requests
for rulings or letters that pertain to any qualified plan.
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(b) To the best of the Acquiror's knowledge, the Acquiror Employee
Plans have been operated in compliance in all material respects with the terms
of the operative plan documents and the applicable provisions of ERISA, the
Code, all regulations, rulings and announcements promulgated or issued
thereunder and all other applicable governmental laws and regulations.
4.15 Certain Contracts
(a) Except as Previously Disclosed, neither the Acquiror nor an
Acquiror Subsidiary is a party to, is bound or affected by, receives, or is
obligated to pay, benefits under (i) any agreement, arrangement or
understanding pursuant to which any payment (whether of severance pay or
otherwise) became or may become due to any director, officer or employee of the
Acquiror or an Acquiror Subsidiary upon execution of this Agreement or upon or
following consummation of the transactions contemplated by this Agreement
(either alone or in connection with the occurrence of any additional acts or
events); (ii) any agreement, arrangement or understanding pursuant to which the
Acquiror or an Acquiror Subsidiary is obligated to indemnify any director,
officer, employee or agent of the Acquiror or an Acquiror Subsidiary, (iii) any
agreement, arrangement or understanding to which the Acquiror or an Acquiror
Subsidiary is a party or by which any of the same is bound which limits the
freedom of the Acquiror or an Acquiror Subsidiary to compete in any line of
business or with any person, (iv) any assistance agreement, supervisory
agreement, memorandum of understanding, consent order, cease and desist order
or condition of any regulatory order or decree with or by the FRB, the FDIC,
the NYSBD or any other regulatory agency, (v) any other agreement, arrangement
or understanding which would be required to be filed as an exhibit to the
Acquiror's Annual Report on Form 10-K under the Exchange Act and which has not
been so filed or (vi) any other agreement, arrangement or understanding which,
if entered into after the date hereof, would require the consent of the Company
under Section 5.6(b) hereof.
(b) Neither the Acquiror nor any Acquiror Subsidiary is in
default or in non-compliance, which default or non-compliance could reasonably
be expected to have a Material Adverse Effect on the Acquiror, under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party or by which its assets, business or
operations may be bound or affected, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has not
occurred any event that with the lapse of time or the giving of notice, or
both, would constitute such a default or non-compliance.
4.16 Brokers and Finders
Except as Previously Disclosed, neither the Acquiror nor any Acquiror
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or
finder fees or commissions in connection with the transactions contemplated
hereby.
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4.17 Insurance
The Acquiror and each Acquiror Subsidiary is 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
commercially reasonable business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations.
4.18 Allowance for Loan Losses
The allowance for loan losses reflected, and to be reflected, in the
Acquiror's reports referred to in Section 4.6(b) hereof, and shown, and to be
shown, on the balance sheets contained in the Acquiror Financial Statements
have been, and will be, established in accordance with the requirements of, and
was and will be adequate under, GAAP and all applicable regulatory criteria.
4.19 Loans
Each loan reflected as an asset in the Acquiror Financial Statements
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and correct (ii) to the extent secured, has been secured by
valid liens and security interests which have been perfected, and (ii) 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, in each case other than
loans as to which the failure to satisfy the foregoing standards would not have
a Material Adverse Effect on the Acquiror.
4.20 Accounting for the Merger; Reorganization
As of the date hereof, the Acquiror, after consultation with Deloitte
& Touche LLP, does not have any reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests treatment under GAAP, or (ii) as a
reorganization under Section 368(a) of the Code.
4.21 Fairness Opinion
The Acquiror has received a written opinion from Keefe, Bruyette &
Woods, Inc. to the effect that, as of the date hereof, the consideration to be
paid pursaunt to Article II hereof is fair, from a financial point of view, to
the shareholders of the Acquiror.
4.22 Labor
No work stoppage involving the Acquiror or an Acquiror Subsidiary is
pending or, to the best knowledge of the Acquiror, threatened. Neither the
Acquiror nor an Acquiror
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Subsidiary is involved in, or threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding involving the
employees of the Acquiror or an Acquiror Subsidiary which could have a Material
Adverse Effect on the Acquiror. Employees of the Acquiror and the Acquiror
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and
to the best of the Acquiror's knowledge, there have been no efforts to unionize
or organize any employees of the Acquiror or any of the Acquiror Subsidiaries
during the past five years.
4.23 Ownership of Company Common Stock
As of the date hereof, neither the Acquiror nor, to its best
knowledge, any of its Affiliates or associates, (i) beneficially own, directly
or indirectly, or (ii) are parties to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of Company Common Stock which in the aggregate represent 5%
or more of the outstanding shares of Company Common Stock (other than shares
held in a fiduciary capacity and beneficially owned by third parties, shares
taken in consideration of debts previously contracted or in the case of the
Acquiror shares which may be acquired pursuant to the Company Stock Option
Agreement).
4.24 Disclosures
The representations and warranties of the Acquiror made pursuant to
this Agreement are true, correct and complete in all material respects, and do
not omit statements necessary to make them not misleading under all facts and
circumstances.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each of the
Company and the Acquiror shall use its reasonable best efforts in good faith to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary or advisable under applicable laws and regulations so as to
permit consummation of the Merger as promptly as reasonably practicable, and to
otherwise enable consummation of the transactions contemplated hereby, and
shall cooperate fully with the other party hereto to that end.
5.2 Shareholder Meeting
The Company shall take all action necessary to properly call and
convene a meeting of its shareholders as soon as practicable after the date
hereof to consider and vote upon this Agreement and the transactions
contemplated hereby. The Board of Directors of the Company will recommend
that the shareholders of the Company approve this Agreement
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and the transactions contemplated hereby, provided that the Board of Directors
of the Company may fail to make such recommendation, or withdraw, modify or
change any such recommendation, if such Board of Directors, after having
consulted with and considered the advice of outside counsel, has determined
that the making of such recommendation, or the failure to withdraw, modify or
change such recommendation, would constitute a breach of the fiduciary duties
of such directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall cooperate with each other in the
preparation of, and the prompt filing of the Form S-4, including the Proxy
Statement. Each of the Acquiror and the Company shall use its reasonable best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing, and the Company shall thereafter
promptly mail the Proxy Statement to its shareholders. The Acquiror also shall
use its reasonable best efforts to obtain all necessary state securities law or
"blue sky" permits and approvals required to carry out the issuance of Acquiror
Common Stock pursuant to the Merger and all other transactions contemplated by
this Agreement, and the Company shall furnish all information concerning the
Company and the holders of the 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 prepare and, within 60 days of the date
hereof, 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 Governmental Entities and third
parties which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including without limitation the Merger). The
Acquiror and the Company shall have the right to review in advance, and to the
extent practicable each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
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) The Acquiror and the Company shall, upon request, furnish each
other with all information concerning themselves, their respective
Subsidiaries, directors, officers and shareholders and such other matters as
may be reasonably necessary or advisable in connection with the Proxy
Statement, the Form S-4 or any other statement, filing, notice or application
made by or on behalf of the Acquiror, the Company or any of their respective
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Subsidiaries to any Governmental Entity in connection with the Merger and the
other transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other
with copies of written communications received by the Acquiror or the Company,
as the case may be, or any of their respective Subsidiaries from, or delivered
by any of the foregoing to, any Governmental Entity in respect of the
transactions contemplated hereby.
5.4 Investigation and Confidentiality
(a) Each party shall permit the other party and its
representatives reasonable access to its properties and personnel, and shall
disclose and make available to such other party all books, papers and records
relating to the assets, stock ownership, properties, operations, obligations
and liabilities of it and its Subsidiaries, including, but not limited to, all
books of account (including the general ledger), tax records, minute books of
meetings of boards of directors (and any committees thereof) and shareholders,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files, loan
files, plans affecting employees, and any other business activities or
prospects in which the other party may have a reasonable interest, provided
that such access shall be reasonably related to the transactions contemplated
hereby and, in the reasonable opinion of the respective parties providing such
access, not unduly interfere with normal operations. Each party and its
Subsidiaries shall make their respective directors, officers, employees and
agents and authorized representatives (including counsel and independent public
accountants) available to confer with the other party and its representatives,
provided that such access shall be reasonably related to the transactions
contemplated hereby and shall not unduly interfere with normal operations.
(b) The Acquiror may request, within 45 days from the date hereof,
the Company to conduct at the Acquiror's expense environmental audits by an
independent qualified environmental engineer or consultant (the "Environmental
Consultant") of any parcel or parcels of real property owned by the Company.
The Environmental Consultant shall conduct any audits or other investigations
pursuant to this Section 5.4(b) with reasonable care and subject to customary
practices among environmental consultants and engineers, including without
limitation, following completion thereof the restoration of any site to the
extent practicable to its condition prior to such audit or investigation and
the removal of all monitoring wells.
(c) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to
the party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such
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information confidential shall continue for five years from the date the
proposed transactions are abandoned but shall not apply to (i) any information
which (x) the party receiving the information can establish was already in its
possession prior to the disclosure thereof by the party furnishing the
information; (y) was then generally known to the public; or (z) became known to
the public through no fault of the party receiving the information; or (ii)
disclosures pursuant to a legal requirement or in accordance with an order of a
court of competent jurisdiction, provided that the party which is the subject
of any such legal requirement or order shall use its best efforts to give the
other party at least ten business days prior notice thereof and shall cooperate
with the other party so that the other party may seek an appropriate protective
order.
5.5 Press Releases
The Acquiror and the Company shall agree with each other as to the
form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and consult with each other as to the form
and substance of other public disclosures which may relate to the transactions
contemplated by this Agreement, provided, however, that nothing contained
herein shall prohibit either party, following notification to the other party,
from making any disclosure which is required by law or regulation.
5.6 Business of the Parties
(a) 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 with the prior written consent of the Acquiror,
the Company and its Subsidiaries shall carry on their respective businesses in
the ordinary course consistent with past practice. During such period, the
Company also will use all commercially reasonable efforts to (x) preserve its
business organization and that of the Bank intact, (y) keep available to itself
and the Acquiror the present services of the employees of the Company and the
Bank and (z) preserve for itself and the Acquiror the goodwill of the customers
of the Company and the Bank and others with whom business relationships exist.
Without limiting the generality of the foregoing, except with the prior written
consent of the Acquiror or as expressly contemplated hereby, between the date
hereof and the Effective Time, the Company shall not, and shall cause each
Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, except for regular
quarterly cash dividends at a rate per share of Company Common Stock
not in excess of $0.07 per share, which shall be declared and paid at
approximately the same time as dividends on the Acquiror Common Stock,
it being the intention of the parties that the shareholders of the
Company receive dividends for any particular calendar quarter on
either the Company Common Stock or the Acquiror Common Stock acquired
in exchange therefor pursuant to the terms of this Agreement but not
both, provided, however,
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that nothing contained herein shall be deemed to affect the ability of
a Company Subsidiary to pay dividends on its capital stock to the
Company;
(ii) issue any shares of its capital stock, other than in
the case of the Company pursuant to the Company Stock Option Agreement
and upon exercise of the Company Options referred to in Section 3.1
hereof, or issue, grant, modify or authorize any Rights, other than
the Company Stock Option Agreement; purchase any shares of Company
Common Stock; or effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(iii) amend its Certificate of Incorporation, Charter,
Bylaws or similar organizational documents; impose, or knowingly
suffer the imposition, on any share of stock or other ownership
interest held by the Company in a Company Subsidiary of any lien,
charge or encumbrance or permit any such lien, charge or encumbrance
to exist; or waive or release any material right or cancel or
compromise any material debt or claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive
to, any of its directors, officers or employees, except (i) as
Previously Disclosed, (ii) as may be required pursuant to binding
commitments existing on the date hereof, (iii) as may be required by
law and (iv) merit increases in accordance with past practices, normal
cost-of-living increases and normal increases related to promotions or
increased job responsibilities;
(v) except as Previously Disclosed, enter into or, except
as may be required by law, modify any pension, retirement, stock
option, restricted stock, stock purchase, stock appreciation right,
savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement related thereto, in respect of any of its directors,
officers or employees; make any contributions to the Company Pension
Plan, except as required by the presently existing terms of the
Company Pension Plan or the policies under which it is operated as of
the date hereof; or make any contributions to the Company ESOP, other
than necessary to enable the Company ESOP to make required payments on
its indebtedness as of the date hereof;
(vi) enter into (w) any transaction, agreement,
arrangement or commitment not made in the ordinary course of business,
(x) any agreement, indenture or other instrument relating to the
borrowing of money by the Company or a Company Subsidiary or guarantee
by the Company or any Company Subsidiary of any such obligation,
except in the case of the Bank for deposits, FHLB advances, federal
funds purchased and securities sold under agreements to repurchase in
the ordinary course of business consistent with past practice, (y) any
agreement, arrangement or
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commitment relating to the employment of an employee or consultant, or
amend any such existing agreement, arrangement or commitment, provided
that the Company and the Bank may employ an employee or consultant in
the ordinary course of business if the employment of such employee or
consultant is terminable by the Company or the Bank at will without
liability, other than as required by law; or (z) any contract,
agreement or understanding with a labor union;
(vii) change its method of accounting in effect for the
fiscal year ended March 31, 1997, except as required by changes in
laws or regulations or GAAP, or change any of its methods of reporting
income and deductions for federal income tax purposes from those
employed in the preparation of its federal income tax return for the
fiscal year ended March 31, 1997, except as required by changes in
laws or regulations;
(viii) make any capital expenditures in excess of $10,000
individually or $50,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair; or
enter into as lessee any new lease of real property or any new lease
of personal property providing for annual payments in excess of
$5,000;
(ix) file any applications or make any contract with
respect to branching or site location or relocation;
(x) acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) control over or any
equity interest in any business or entity, except for investments in
marketable equity securities in the ordinary course of business and
not exceeding 2% of the outstanding shares of any class;
(xi) enter into any futures contract, option contract,
interest rate caps, interest rate floors, interest rate exchange
agreement or other agreement for purposes of hedging the exposure of
its interest-earning assets and interest-bearing liabilities to
changes in market rates of interest (other than forward commitments to
sell loans in the ordinary course of business);
(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer
and assignment of any such assets or rights;
(xiii) change or modify in any material respect any of its
lending or investment policies, except to the extent required by law
or an applicable regulatory authority;
(xiv) take any action that would prevent or impede the
Merger from qualifying (A) for pooling-of-interests accounting
treatment under GAAP or (B) as
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a reorganization within the meaning of Section 368 of the Code,
provided, however, that nothing contained herein shall limit the
ability of the Company to comply with its obligations under the
Company Stock Option Agreement;
(xv) take any action that would result in any of the
representations and warranties of the Company contained in this
Agreement not to be true and correct in any material respect at the
Effective Time;
(xvi) terminate the employment of Mr. Byelick or Mr. Murphy
without cause; or
(xvii) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and
continuing until the Effective Time, the Acquiror shall continue to conduct its
business and the business of the Acquiror Subsidiaries in the ordinary course
consistent with past practice. During such period, the Acquiror also will use
all commercially reasonable efforts to (x) preserve its business organization
and that of the Acquiror Bank intact, (y) keep available to itself the present
services of the employees of the Acquiror and the Acquiror Bank and (z)
preserve for itself the goodwill of the customers of the Acquiror and the
Acquiror Bank and others with whom business relationships exist. Without
limiting the generality of the foregoing, except with the prior written consent
of the Company or as expressly contemplated hereby, between the date hereof and
the Effective Time, the Acquiror shall not, and shall cause each Acquiror
Subsidiary not to:
(i) amend its Certificate of Incorporation or Bylaws in a
manner which would adversely affect in any manner the terms of the
Acquiror Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby; or impose, or knowingly suffer the
imposition, on any share of stock or other ownership interest held by
the Acquiror in an Acquiror Subsidiary of any lien, charge or
encumbrance or permit any such lien, charge or encumbrance to exist;
(ii) make any acquisition or take any other action that
individually or in the aggregate could materially adversely affect the
ability of the Acquiror 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 the Acquiror 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;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends in an amount determined by the Board of
Directors in the ordinary course of business and consistent with past
practice, provided, however, that nothing contained herein shall be
deemed to affect the ability of (x) an Acquiror Subsidiary to pay
dividends on its
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capital stock to the Acquiror or (y) the Acquiror to repurchase shares
of Acquiror Common Stock, unless otherwise prohibited by clause (iv)
below;
(iv) take any action that would prevent or impede the
Merger from qualifying (A) for pooling-of-interests accounting
treatment under GAAP or (B) as a reorganization within the meaning of
Section 368 of the Code; provided, however, that nothing contained
herein shall limit the ability of the Acquiror to exercise its rights
under the Company Stock Option Agreement;
(v) take any action that would result in any of the
representations and warranties of the Acquiror contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or
(vi) enter into an agreement with respect to an
Acquisition Transaction with a third party which is conditioned
(explicitly or implicitly) on the Acquiror not completing the Merger;
provided, that the foregoing shall not prevent the Acquiror or any
Acquiror Subsidiary from acquiring any other assets or businesses or
from discontinuing or disposing of any of its assets or business if
such action is, in the reasonable judgment of the Acquiror, desirable
in the conduct of the business of the Acquiror and the Acquiror
Subsidiaries and would not, in the reasonable judgment of the
Acquiror, likely delay the Effective Time to a date subsequent to the
date set forth in Section 7.1(e) of this Agreement. For purposes of
this Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving the Acquiror, (y)
a purchase, lease or other acquisition of all or substantially all of
the assets of the Acquiror or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 20% or more of the voting power
of the Acquiror.
(vii) agree to do any of the foregoing.
5.7 Certain Actions
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company
Subsidiary (other than with the Acquiror or an Affiliate thereof), provided,
however, that the Board of Directors of the Company may furnish such
information or participate in such negotiations or discussions if such Board of
Directors, after having consulted with and considered the advice of outside
counsel, has determined that the failure to do the same would cause the members
of such Board of Directors to breach their fiduciary duties under applicable
law. The Company will promptly inform the Acquiror orally and in writing of
any such request for information or of any such negotiations or discussions, as
well as instruct its and its Subsidiaries' directors, officers, representatives
and
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agents to refrain from taking any action prohibited by this Section 5.7. The
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations previously conducted with any parties
other than the Acquiror with respect to any of the foregoing.
5.8 Current Information
During the period from the date of this Agreement to the Effective
Time, each party shall, upon the request of the other party, cause one or more
of its designated representatives to confer on a monthly or more frequent basis
with representatives of the other party regarding its financial condition,
operations and business and matters relating to the completion of the
transactions contemplated hereby. As soon as reasonably available, but in no
event more than 45 days after the end of each calendar quarter ending after the
date of this Agreement (other than the last quarter of each fiscal year ending
December 31 in the case of the Acquiror and March 31 in the case of the
Company), the Company and the Acquiror will deliver to the other party its
quarterly report on Form 10-Q under the Exchange Act, and, as soon as
reasonably available, but in no event more than 90 days after the end of each
fiscal year ending December 31 in the case of the Acquiror and March 31 in the
case of the Company, the Company and the Acquiror will deliver to the other
party its Annual Report on Form 10-K. Within 35 days after the end of each
month, the Company and the Acquiror will deliver to the other party a
consolidated balance sheet and a consolidated statement of operations, without
related notes, for such month prepared in accordance with GAAP.
5.9 Indemnification; Insurance
(a) From and after the Effective Time through the sixth
anniversary of the Effective Time, the Acquiror, in the case of an
indemnification obligation of the Company, or the applicable Company Subsidiary
or its successor by merger, in the case of an indemnification obligation of a
Company Subsidiary (the Acquiror or such Company Subsidiary, as applicable,
being referred to herein as the "Indemnifying Party") shall provide
indemnification (including advancement of expenses, if applicable) to each
present and former director, officer or employee of the Company or a Company
Subsidiary and each officer or employee of the Company or its Subsidiaries that
is serving or has served as a director or trustee of another entity expressly
at the Company's request or direction, in each case determined as of the
Effective Time (the "Indemnified Parties"), with respect to any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities 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 Company Stock Option Agreement), if first
asserted or claimed prior to the date hereof and Previously Disclosed, if first
asserted or claimed between the date hereof and the Effective Time and
disclosed pursuant to Section 5.13 hereof or if first asserted or claimed after
the Effective Time, to
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the fullest extent, if any, that such Indemnified Party, would have been
entitled to indemnification or the advancement of expenses by the Company under
Article X of its Certificate of Incorporation on the one hand or by the Bank
under Article XII of its Bylaws on the other hand ("the Indemnification
Rights"), as in effect on the date hereof and Previously Disclosed, provided,
however, that all rights to indemnification in respect of any claim asserted or
made within such period shall continue until the final disposition of such
claim, and provided, further, that nothing contained herein shall enlarge the
rights to indemnification contained in the Indemnification Rights or extend or
be deemed a waiver of any applicable statute of limitations in respect of any
claim or claim for indemnification. Without limiting the foregoing, the
Acquiror also agrees that all limitations of liability existing in favor of the
Indemnified Parties in Article IX of the Certificate of Incorporation of the
Company, as in effect on the date hereof and Previously Disclosed, arising out
of matters existing or occurring at or prior to the Effective Time shall
survive the Merger and shall continue in full force and effect.
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
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 (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except that if
the Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as
statements therefor are received, the reasonable fees and expenses of such
counsel for the Indemnified Parties (which may not exceed one firm in any
jurisdiction unless the use of one counsel for such Indemnified Parties would
present such counsel with a conflict of interest) in accordance with the
obligations set forth in Section 5.9(a) hereof, (ii) the Indemnified Parties
will cooperate in the defense of any such matter, (iii) the Indemnifying Party
shall not be liable for any settlement effected without its prior written
consent and (iv) the Indemnifying Party shall have no obligation hereunder in
the event a federal banking agency or a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of an Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(c) The Acquiror shall maintain the Company's existing directors'
and officers' liability insurance policy (or purchase an insurance policy
providing coverage on substantially the same terms and conditions) for acts or
omissions occurring prior to the Effective Time by persons who are currently
covered by such insurance policy maintained by the Company
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for a period of six years following the Effective Time, provided, however, that
in no event shall the Acquiror be required to expend on an annual basis more
than 125% of the amount paid by the Company as of the date hereof for such
insurance coverage (the "Insurance Amount") to maintain or procure such
insurance coverage, and further provided that if the Acquiror is unable to
maintain or obtain the insurance called for hereby, the Acquiror shall use all
reasonable efforts to obtain as much comparable insurance as is available for
the Insurance Amount. At the request of the Acquiror, the Company shall use
reasonable efforts to procure the insurance coverage referred to in the
preceding sentence prior to the Effective Time on the terms set forth in such
sentence.
(d) In the event that the Acquiror or any of its respective
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 all or substantially all of its
properties and assets to any Person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 5.9, which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each director and officer covered
hereby.
5.10 Directors
The Acquiror agrees to take all action necessary to appoint or elect,
effective as of the Effective Time, one director of the Company as of the date
hereof selected by the Acquiror as a director of the Acquiror, to serve as a
Class II director (as described in the Acquiror's most recent proxy statement)
and until his successor is elected and qualified. Further, the Acquiror agrees
to take all action necessary to appoint or elect, effective as of the Effective
Time, those directors of the Company as of the date hereof who so desire, other
than the director who becomes a member of the Acquiror's Board of Directors, to
serve on the Acquiror's Chairman's Council. Each such person shall serve at
the discretion of the Chairman of the Board of the Acquiror.
5.11 Benefit Plans and Arrangements
(a) As soon as administratively practicable after the Effective
Time, and at the discretion of the Acquiror, the Acquiror will take all
reasonable action so that employees of the Company and its Subsidiaries will be
entitled to participate in the Acquiror Employee Plans of general
applicability, and until such time the Company Employee Plans shall remain in
effect, provided that no employee of the Company or a Company Subsidiary who
becomes an employee of the Acquiror and subject to the Acquiror's medical
insurance plans shall be excluded from coverage thereunder on the basis of a
preexisting condition that was not also excluded under the Company's medical
insurance plans, except to the extent such preexisting condition was excluded
from coverage under the Company's medical insurance plans, in which case this
Section 5.11(a) shall not require coverage for such preexisting condition. For
purposes of determining eligibility to participate in and the vesting of
benefits (but not for purposes of benefit accrual) under the Acquiror Employee
Plans, the
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Acquiror shall recognize years of service with the Company and a Company
Subsidiary prior to the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror Subsidiary
as of the Effective Time, provided that the Acquiror or an Acquiror Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of the Company or
any Company Subsidiary a right to continuing employment with the Acquiror or an
Acquiror Subsidiary after the Effective Time. To the extent that the
employment of any employee of the Company or any Company Subsidiary (other than
any employee who is party to an employment agreement, employee retention
agreement as Previously Disclosed) is involuntarily terminated within one year
of the Effective Time, such employee will be entitled to receive severance and
other benefits, in accordance with, and to the extent provided by the Company's
Severance Plan, which has been Previously Disclosed. For purposes of
determining benefits under the Company's Severance Plan, the Acquiror shall
recognize years of service and unused vacation with the Company and a Company
Subsidiary prior to the Effective Time.
(c) Following the Merger, the Surviving Corporation and the Bank
shall honor in accordance with their terms the agreements to be entered into,
as of the Effective Time, by Mr. Byelick and Mr. Murphy and the Bank, in the
forms as attached hereto as Exhibits F and G, respectively. These agreements
will replace and supersede the employment agreements entered into by Mr.
Byelick and the Company and the Bank and Mr. Murphy and the Company and the
Bank, all as Previously Disclosed. Following the Merger, the Surviving
Corporation shall, or shall cause the Bank to, honor in accordance with their
terms the Company or Bank employee retention agreements which have been
Previously Disclosed. The provisions of this Section 5.11(c) are intended to
be for the benefit of, and shall be enforceable by, each party to, or
beneficiary of, the foregoing agreements or arrangements, and his or her
representatives.
5.12 Reserves and Merger-Related Costs
On or before the Closing Date, and at the written request of the
Acquiror, the Company shall establish such additional accruals and reserves as
may be necessary to conform the accounting reserve practices and methods
(including credit loss practices and methods) of the Company to those of the
Acquiror (as such practices and methods are to be applied to the Company from
and after the Effective Time) and Acquiror's plans with respect to the conduct
of the business of the Company following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by the Company, provided, however,
that the Company shall not be required to take such action (A) more than five
business days prior to the Closing Date; and (B) unless the Acquiror agrees in
advance in writing that all conditions to closing set forth in Sections 6.1 and
6.3 have been satisfied or waived (except for the expiration of any applicable
waiting periods). No accrual or reserve made by the Company or any Company
Subsidiary pursuant to this subsection, or any litigation or
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regulatory proceeding arising out of any such accrual or reserve, shall
constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or to
constitute a termination event within the meaning of Section 7.1(b) hereof.
5.13 Disclosure Supplements
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered
to the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would
have been required to be set forth or described in materials Previously
Disclosed to the other party or which is necessary to correct any information
in such materials which has been rendered materially inaccurate thereby; no
such supplement or amendment to such materials shall be deemed to have modified
the representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.14 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party. Each party will promptly
inform the other party of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger by any Governmental Entity
or third party or which would otherwise prevent or materially delay completion
of the Merger.
5.15 Affiliates
Promptly, but in any event within two weeks, after the execution and
delivery of this Agreement, the Company shall deliver to the Acquiror (a) a
letter identifying all persons who, to the knowledge of the Company, may be
deemed to be affiliates of the Company under Rule 145 of the Securities Act and
the pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of the Company and (b) copies of letter
agreements, each substantially in the form of Exhibit B, executed by each such
person so identified as an affiliate of the Company agreeing to comply with
Rule 145 and to refrain from transferring shares of either Company Common Stock
or Acquiror Common Stock, as the case may be, as required by the
pooling-of-interests accounting rules. The Acquiror agrees to publish as soon
as possible, but in no event later than 60 days following the consummation of
the Merger, combined revenues and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - The Acquiror and the Company
The respective obligations of the Acquiror and the Company to effect
the Merger shall be subject to satisfaction of the following conditions at or
prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the Merger shall have been duly
and validly taken by the Acquiror and the Company, including approval by the
requisite vote of the shareholders of the Company of this Agreement.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the consummation of the Merger
shall have been received, without the imposition of any term or condition that
could have a Material Adverse Effect on the Acquiror upon completion of the
Merger, and all statutory waiting periods in respect thereof shall have
expired; and the Acquiror and the Company shall have procured all other
approvals, consents and waivers of each person (other than the Governmental
Entities referred to above) whose approval, consent or waiver is necessary to
the consummation of the Merger.
(c) None of the Acquiror, the Company or their respective
Subsidiaries shall be subject to any statute, rule, regulation, injunction or
other order or decree which shall have been enacted, entered, promulgated or
enforced by any governmental or judicial authority which prohibits, restricts
or makes illegal consummation of the Merger.
(d) The Form S-4 shall have become effective under the Securities
Act, and the Acquiror shall have received all state securities laws or "blue
sky" permits and other authorizations or there shall be exemptions from
registration requirements necessary to issue the Acquiror Common Stock in
connection with the Merger, and neither the Form S-4 nor any such permit,
authorization or exemption shall be subject to a stop order or threatened stop
order by the Commission or any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection
with the Merger shall have been approved for listing on the American Stock
Exchange.
(f) The Acquiror and the Company shall have received the written
opinion of either the Acquiror's independent public accountants or counsel to
the Acquiror which is reasonably satisfactory to the Company, which opinion
shall be addressed to each of the Acquiror and the Company and reasonably
satisfactory to it, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code and that (i)
except for cash received in lieu of fractional share interests, holders of
Company Common Stock who exchange such stock for Acquiror Common Stock in the
Merger will not recognize income, gain or loss for federal income tax purposes,
(ii) the basis of such Acquiror Common Stock will equal the basis of the
Company Common Stock for which it is exchanged and (iii) the holding period of
such Acquiror Common Stock will include the
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holding period of the Company Common Stock for which it is exchanged, assuming
that such stock is a capital asset in the hands of the holder thereof at the
Effective Time. Such opinion shall be based on such written representations
from the Acquiror, the Company and others as such independent public
accountants or counsel shall reasonably request as to factual matters.
(g) KPMG Peat Marwick LLP shall have issued a letter dated as of
the Effective Time to the Company and Deloitte & Touche LLP shall have issued a
letter dated as of the Effective Time to the Acquiror, to the effect that,
based on a review of this Agreement and related agreements and the facts and
circumstances then known to it, the Merger shall be accounted for as a
pooling-of-interests under GAAP, and the Acquiror and the Company shall have
received from the Affiliates of the Company and the Acquiror the agreements
attached hereto as Exhibits B and E, respectively, to the extent necessary to
ensure in the reasonable judgment of the Acquiror and the Company that the
Merger shall be accounted for in such manner.
6.2 Conditions Precedent - The Company
The obligations of the Company to effect the Merger shall be subject
to satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Acquiror set forth in
Article IV hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except to the extent that a representation and warranty
specifically relates to an earlier date, in which case it shall be true and
correct in all material respects as of such earlier date.
(b) The Acquiror shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) The Acquiror shall have delivered to the Company a
certificate, dated the date of the Closing and signed by its President and
Chief Executive Officer and by its Chief Financial Officer, to the effect that
the conditions set forth in Sections 6.2(a) and 6.2(b) have been satisfied.
(d) No order, injunction or decree shall have been issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(e) The Company shall have received an opinion of Elias, Matz,
Tiernan & Herrick LLP, counsel to the Acquiror, dated the Closing Date, in form
and substance reasonably satisfactory to the Company and its counsel to the
effect set forth in Exhibit H attached hereto.
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(f) The Acquiror shall have furnished the Company with such
certificates of its respective officers or others and such other documents to
evidence fulfillment of the conditions set forth in Sections 6.1 and 6.2 as
such conditions relate to the Acquiror as the Company may reasonably request.
6.3 Conditions Precedent - The Acquiror
The obligations of the Acquiror to effect the Merger shall be subject
to satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Acquiror pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except to the extent that a representation and warranty
specifically relates to an earlier date, in which case it shall be true and
correct in all material respects as of such earlier date.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to the Acquiror a
certificate, dated the date of the Closing and signed by its President and
Chief Executive Officer and by its Chief Financial Officer, to the effect that
the conditions set forth in Sections 6.3(a) and 6.3(b) have been satisfied.
(d) No order, injunction or decree shall have been issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(e) The Acquiror shall have received an opinion of Thacher
Proffitt & Wood, counsel to the Company, dated the Closing Date, in form and
substance reasonably satisfactory to the Acquiror and its counsel to the effect
set forth on Exhibit I attached hereto.
(f) The Company shall have furnished the Acquiror with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.3 as such
conditions relate to the Company as the Acquiror may reasonably request.
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ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto, if the Board of Directors of each so
determines by vote of a majority thereof;
(b) at any time on or prior to the Effective Time, by the Acquiror
or the Company in writing, if its Board of Directors so determine by vote of a
majority thereof, if the other party has, in any material respect, breached (i)
any material covenant or undertaking contained herein or (ii) any
representation or warranty contained herein, in any case if such breach would
have a Material Adverse Effect on the party and has not been cured by the
earlier of 30 days after the date on which written notice of such breach is
given to the party committing such breach or the Effective Time;
(c) at any time, by either party hereto in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary to
consummate the Merger is denied or withdrawn at the request or recommendation
of the Governmental Entity which must grant such approval, unless within the
twenty-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 7(c)(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 consummation of any of the transactions contemplated
by this Agreement;
(d) at any time, by either party hereto in writing, if the
shareholders of the Company do not approve this Agreement after a vote taken
thereon at a meeting duly called for such purpose (or at any adjournment
thereof), unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate to perform or observe in any material respect
its agreements set forth herein to be performed or observed by such party at or
before the Effective Time;
(e) by either the Company or the Acquiror in writing if the
Effective Time has not occurred by the close of business on December 31, 1998,
provided that this right to terminate shall not be available to any party whose
failure to perform an obligation in breach of such party's obligations under
this Agreement has been the cause of, or resulted in, the failure of the Merger
and the other transactions contemplated hereby to be consummated by such date;
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(f) by the Company if the Average Closing Price is less than
$15.00, subject to the next three sentences. If the Company elects to exercise
its termination right pursuant to this Section 7.1(f), it shall give written
notice to the Acquiror (provided that such notice of election to terminate may
be withdrawn at any time). During the five-day period commencing with its
receipt of such notice, the Acquiror shall have the option to increase the
consideration to be received by the holders of the Company Common Stock
hereunder by adjusting the Exchange Ratio to equal a number (calculated to the
nearest one-hundredth) obtained by dividing (A) $18.60 by (B) the Average
Closing Price. If the Acquiror so elects within such five-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 7.1(f) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified).
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i)
the provisions relating to confidentiality, expenses and termination fee set
forth in Section 5.4(c) and Section 8.1, respectively, and this Section 7.2
shall survive any such termination and (ii) a termination pursuant to Section
7.1(b), (c), (d) or (e) shall not relieve the breaching party from liability
for willful breach of any covenant, undertaking, representation or warranty
giving rise to such termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto shall expire on, and be terminated and
extinguished at, the Effective Time other than covenants that by their terms
are to be performed after the Effective Time (including without limitation the
covenants set forth in Sections 5.9, 5.10 and 5.11 hereof), provided that the
covenant of the Acquiror contained in Section 5.6(b)(iv) hereof shall survive
and be applicable following the Effective Time, and further provided that no
such representations, warranties or covenants shall be deemed to be terminated
or extinguished so as to deprive the Acquiror or the Company (or any director,
officer or controlling person thereof) of any defense at law or in equity which
otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either the
Acquiror or the Company.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of the Company) extend the time for the
performance of any of the obligations or other acts of the other party hereto
and may waive (i) any inaccuracies of the other party in the representations or
warranties contained in this Agreement or any document delivered pursuant
hereto, (ii) compliance with any of the covenants, undertakings or agreements
of the other party, (iii) to the extent permitted by law, satisfaction of any
of the conditions precedent to its obligations contained herein or (iv) the
performance by the other party of
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any of its obligations set forth herein, provided that any such waiver granted,
or any amendment or supplement pursuant to Section 7.5 hereof executed after
shareholders of the Company have approved this Agreement shall not modify
either the amount or form of the consideration to be provided hereby to the
holders of Company Common Stock upon consummation of the Merger or otherwise
materially adversely affect such shareholders without the approval of the
shareholders who would be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror and the Company, subject to the proviso to Section
7.4 hereof. Any such amendment or supplement must be in writing and authorized
by or under the direction of their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses; Termination Fee
(a) Each party hereto shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by this
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel, provided that (i) expenses of printing the Form S-4
and the registration fee to be paid to the Commission in connection therewith
shall be shared equally between the Company and the Acquiror and (ii)
notwithstanding anything to the contrary contained in this Agreement, neither
the Acquiror nor the Company shall be released from any liabilities or damages
arising out of its willful breach of any provision of this Agreement.
(b) In the event that this Agreement is terminated by the Acquiror
pursuant to Section 7.1(b), and no Purchase Event or Preliminary Purchase
Event, as defined in the Company Stock Option Agreement, shall have occurred,
the Company shall pay to the Acquiror within five business days of any such
termination by the Acquiror, in immediately available funds, the sum of
$500,000. In the event that a Purchase Event, as defined in the Company Stock
Option Agreement, shall have occurred during the 12 month period referred to in
Section 3(a)(C) of the Company Stock Option Agreement and the Acquiror shall
elect to exercise its right to exercise the Option granted to it pursuant to
the Company Stock Option Agreement, then the Acquiror shall, concurrently with
such Option exercise return to the Company the $500,000 received pursuant to
the prior sentence, together with interest earned thereon at the federal funds
rate from the date of receipt to the date of repayment. In the event that this
Agreement is terminated by the Company pursuant to Section 7.1(b), the Acquiror
shall pay to the Company within five business days of any such termination by
the Company, in immediately available funds, the sum of $250,000.
8.2 Entire Agreement
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This Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other
than documents referred to herein. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors, any rights, remedies, obligations or liabilities other
than as set forth in Sections 5.9, 5.10 and 5.11(b) and (c) hereof.
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally,
telecopied (with confirmation) or sent by overnight mail service or by
registered or certified mail (return receipt requested), postage prepaid,
addressed as follows:
If to the Acquiror:
U.S.B. Holding Co., Inc.
100 Dutch Hill Road
Orangeburg, New York 10962
Attn: Steven T. Sabatini
Senior Executive Vice President and Chief Financial
Officer
Fax: (914) 365-4695
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Daniel P. Weitzel, Esq.
Fax: (202) 347-2172
If to the Company:
Tappan Zee Financial, Inc.
75 North Broadway
Tarrytown, New York 10591
Attn: Stephen C. Byelick
President and Chief Executive Officer
Fax: (914) 631-0344
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<PAGE> 62
With a required copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attn: Robert C. Azarow, Esq.
Fax: (212) 432-2898
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify
the structure of the acquisition of the Company set forth herein, provided that
(i) the federal income tax consequences of any transactions created by such
modification shall not be other than those set forth in Section 6.1(f) hereof,
(ii) the transaction will still be accounted for as a pooling-of-interests
under GAAP, (iii) consideration to be paid to the holders of the Company Common
Stock is not thereby changed in kind or reduced in amount as a result of such
modification and (iv) such modification will not materially delay or jeopardize
receipt of any required regulatory approvals or any other condition to the
obligations of the Acquiror set forth in Sections 6.1 and 6.3 hereof.
8.6 Interpretation
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and entirely to
be performed within such jurisdiction.
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<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in counterparts by their duly authorized officers and their
corporate seal to be hereunto affixed and attested by their officers thereunto
duly authorized, all as of the day and year first above written.
U.S.B. HOLDING CO., INC.
Attest:
/s/ Michael H. Fury By: /s/ Thomas E. Hales
- ------------------------------- --------------------------
Name: Michael H. Fury Name: Thomas E. Hales
Title: Secretary Title: President and Chief
Executive Officer
TAPPAN ZEE FINANCIAL, INC.
Attest:
/s/ Harry G. Murphy By: /s/ Stephen C. Byelick
- ------------------------------- --------------------------
Name: Harry G. Murphy Name: Stephen C. Byelick
Title: Vice President and Secretary Title: President and Chief Executive
Officer
57
<PAGE> 1
Exhibit 10.1
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER
RESTRICTIONS UNDER
FEDERAL AND STATE LAW
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of March 6, 1998 (the "Agreement"),
between Tappan Zee Financial, Inc., a Delaware corporation ("Issuer"), and
U.S.B. Holding Co., Inc., a Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of March 6, 1998 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee (the "Merger"), with Grantee
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan, Grantee has required that Issuer agree, and Issuer has agreed, to grant
to 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 Plan, 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 Plan.
2. Grant of Option. Subject to the terms and conditions
set forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 294,134 shares (as adjusted as set forth herein)
(the "Option Shares," which shall include the Option Shares before and after
any transfer of such Option Shares) of Common Stock, par value $0.01 per share
("Issuer Common Stock"), of Issuer at a purchase price per Option Share (as
adjusted as set forth herein, the "Purchase Price") of $18.50, provided,
however, that in no event shall the number of Option Shares for which the
Option is exercisable exceed 19.9% of the issued and outstanding shares of
Issuer Common Stock without giving effect to any shares subject to or issued
pursuant to the Option.
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 Plan, 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
<PAGE> 2
United States shall be in effect, 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 and effect upon the earliest to occur of
(A) the Effective Time of the Merger, (B) termination of the Plan in accordance
with the terms thereof prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event, other than a termination of the Plan by Grantee
pursuant to Section 7.1(b) thereof (a "Default Termination"), (C) 12 months
after the termination of the Plan by Grantee pursuant to a Default Termination,
and (D) 12 months after termination of the Plan (other than pursuant to a
Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event; and provided, further, that any purchase of shares
upon exercise of the Option shall be subject to compliance with applicable
laws, including without limitation the Bank Holding Company Act of 1956, as
amended (the "BHCA"), and the Home Owners' Loan Act, as amended ("HOLA"). The
term "Holder" shall mean the holder or holders of the Option from time to time,
and which is initially Grantee. The rights set forth in Section 8 hereof shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth above.
(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 or publicly-proposed, or publicly
announced an intention to authorize, recommend or propose, or 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 subsidiaries, (B)
the disposition, by sale, lease, exchange or otherwise, of assets of
Issuer or any of its subsidiaries representing in either case 25% or
more of the consolidated assets of Issuer and its subsidiaries, or (C)
the issuance, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 20% or more of the voting power of Issuer or
any of its subsidiaries (any of the foregoing 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 promulgated under the 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) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the then outstanding shares of Issuer
Common Stock.
(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 with respect to,
2
<PAGE> 3
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 15% or more of the then outstanding shares of
Issuer Common Stock (such an offer being referred to herein as a
"Tender Offer" and an "Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) 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 Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the BHCA, the HOLA, the Bank Merger Act, as amended, or the Change in
Bank Control Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation,
warranty, covenant or obligation contained in the Plan and such breach
would entitle Grantee to terminate the Plan under Section 7.1(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 Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary
of Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan
terminates or (z) any person (other than Grantee or any subsidiary of
Grantee) shall have filed an application or notice with any
Governmental Entity to engage in an Acquisition Transaction.
As used in this Agreement, "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, 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 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 date not earlier than three
business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"), provided
3
<PAGE> 4
that the first notice of exercise shall be sent to Issuer within 180 days after
the first Purchase Event of which Grantee has been notified and, provided
further, that if prior notification to or approval of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"), the Office of Thrift
Supervision ("OTS") or any other Governmental Entity is required in connection
with such purchase, Holder shall promptly file the required notice or
application for approval and shall expeditiously process the same and the three
business day and 15 business day 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.
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 Issuer at the address of Issuer specified in
Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (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, claims, charges and
encumbrances of any kind whatsoever 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 MARCH __, 1998. A
COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy
4
<PAGE> 5
of a letter from the staff of the Commission, 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 the written notice of
exercise of the Option provided for under Section 3(e), 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.
(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) Due Authorization. Issuer has all requisite corporate power
and authority to enter into this Agreement, and subject to any approvals
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 Issuer, and this Agreement has been duly
executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and compliance by
Issuer with any of the provisions hereof will not (i) conflict with or result
in a breach of any provision of its Certificate of Incorporation or Bylaws or a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Issuer is a party, or by which it or
any of its properties or
5
<PAGE> 6
assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(c) Authorized Stock. Issuer has taken all necessary
corporate and other action to authorize and reserve and to permit it to issue,
and at all times from the date hereof until the obligation to deliver Issuer
Common Stock upon the exercise of the Option terminates, will have reserved for
issuance upon 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 and validly issued,
fully paid and nonassessable, and will be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature whatsoever and
not subject to any preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer as follows:
(a) Due Authorization. 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, and this Agreement has been duly
executed and delivered by Grantee.
(b) No Violations. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and compliance by
Grantee with any of the provisions hereof will not (i) conflict with or result
in a breach of any provision of its Certificate of Incorporation or Bylaws or a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Grantee is a party, or by which it
or any of its properties or assets may be bound, or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Grantee or
any of its properties or assets.
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 such transactions 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)), the number of
6
<PAGE> 7
shares of Issuer Common Stock subject to the Option shall be adjusted so that,
after such issuance, it, 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.
(b) In the event that Issuer shall enter in 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 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 assets representing more than 50% of the
consolidated assets of Issuer and its subsidiaries to any person, other than
Grantee or one of its subsidiaries, then, and in each such case (but at the
election of the Holder in the case of clause (iii)), 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 (the "Substitute
Option"), at the election of Holder, of any of (x) the Acquiring Corporation
(as hereinafter defined), (y) any person that controls the Acquiring
Corporation or (z) 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. Substitute Option Issuer also shall 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 (the "Substitute Option
Price") shall then be equal to the Purchase Price multiplied by a fraction of
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:
(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, or (iii) the
7
<PAGE> 8
transferee of assets representing more than 50% of the consolidated
assets of Issuer and its subsidiaries.
(2) "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.
(3) "Assigned Value" shall mean the highest of (w) the
price per share of Issuer Common Stock at which a Tender Offer or an
Exchange Offer therefor has been made, (x) the price per share of
Issuer Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (y) the highest closing price for shares of
Issuer Common Stock within the six-month period immediately preceding
the consolidation, merger or sale in question and (z) in the event of
a sale of assets representing more than 50% of the consolidated assets
of Issuer and its subsidiaries or deposits, an amount equal to (i) 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 (ii) 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.
(4) "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 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.
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<PAGE> 9
(g) Issuer shall not enter into any transaction described in
Section 7(b) 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 of Substitute Common Stock are restricted
securities, as defined in Rule 144 under the Securities Act 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), at the request
of Holder at any time commencing upon the first occurrence of a Repurchase
Event (as defined in Section 8(d)) 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 (the "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 (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
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) 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
shall warrant that it has sole record and beneficial ownership of such shares
9
<PAGE> 10
and that the same are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or approval of the Federal Reserve Board, the
OTS or any other 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
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), in which case the ten-day period referred to
in the first sentence of this Section 8(b) 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. If the Federal Reserve Board, the OTS or any other 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. If the
Federal Reserve Board, the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the Federal
Reserve Board, the OTS or other 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 sum of the number of shares covered by the Option in respect of
which payment has been made pursuant to Section 8(a)(ii) and the number of
shares covered by the portion of the Option (if any) that has been repurchased.
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, all of Grantee's
rights under this Section 8 shall terminate on the date of termination of the
Option pursuant to Section 3(a).
(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), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq Stock
Market's National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not
quoted on NASDAQ/NMS, 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 60
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
10
<PAGE> 11
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, a "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 in Section 13(d)(3) of the Exchange Act)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 50% or more of the then outstanding shares of Issuer
Common Stock, or (ii) any of the transactions described in Section 7(b)(i),
Section 7(b)(ii) or Section 7(b)(iii) shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the
conditions of Section 9(c), if requested by any Holder, as expeditiously as
possible prepare and file 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 Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation a "shelf" registration statement under
Rule 415 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 Holder of its intention to do so and, upon the written request of Holder
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 Holder), Issuer will cause all such shares
for which a Holder shall have requested participation in such registration to
be so registered and included in such underwritten public offering; provided,
however, that Issuer may elect to not cause any such shares to be so registered
(i) if the underwriters in good faith object for valid business reasons, or
(ii) in the case of a registration solely to implement an employee benefit plan
or a registration filed on Form S-4 under the Securities Act or any successor
form; provided, further, however, that such election pursuant to clause (i) may
only be made one time. 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 9(b) shall be excluded from such registration, Issuer
shall make appropriate allocation of shares to be registered among Holders
permitted to register their shares of Issuer Common Stock in connection with
such registration pro rata in the proportion that the number of shares
requested to be registered
11
<PAGE> 12
by each such Holder bears to the total number of shares requested to be
registered by all such Holders 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
9(a) 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 9(a) for a period not exceeding 90 days if 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 9(a):
(i) prior to the earliest of (A) termination of the Plan
pursuant to Article VII thereof, and (B) a Purchase Event or a
Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year
and on more than two occasions in total;
(iii) within 90 days after the effective date of a
registration referred to in Section 9(b) pursuant to which the Holder
or Holders 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 the
Holder or Holders of 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 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 to qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b);
provided, however, that underwriting discounts and commissions relating to
Option Shares, fees and disbursements of counsel to the Holder(s) of Option
Shares being registered and any other expenses incurred by such Holder(s) in
connection with any such registration shall be borne by such Holder(s).
12
<PAGE> 13
(e) Indemnification. In connection with any registration under
Section 9(a) or (b), Issuer hereby indemnifies each Holder, 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 Holder, 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.
Promptly upon receipt by a party indemnified under this Section 9(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 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, 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 9(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 reasonably
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 (i) the indemnifying party agrees to pay the same, (ii) the indemnifying
party fails to assume the defense of such action with counsel reasonably
satisfactory to the indemnified party, or (iii) 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.
13
<PAGE> 14
If the indemnification provided for in this Section 9(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 fault
of Issuer, the selling Holders and the underwriters in connection with the
statement or omissions which results 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 the selling Holders 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(g) 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.
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(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 Holder(s)
in accordance with and to the extent permitted by any rule or regulation
permitting nonregistered sales of securities promulgated by the Commission from
time to time, including, without limitation, Rule 144A. Issuer shall at its
expense provide the Holder 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 any Holder harmless, without limitation
as to time, against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized for
quotation or trading or listing on NASDAQ/NMS or any 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
NASDAQ/NMS 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.
14
<PAGE> 15
11. Division of Option. Upon the occurrence of a Purchase Event
or a Preliminary Purchase Event, 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 the 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.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, 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 by written instrument signed by a duly authorized executive officer
of such party. 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 Plan 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 9(e) and any
transferee of the Option Shares or any permitted transferee of this Agreement
pursuant to Section 12(h)) any rights or remedies hereunder. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency 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 regulatory agency 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 Sections 3 and 8 (as adjusted pursuant to
Section 7), it is the express intention
15
<PAGE> 16
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 sent by overnight mail service or mailed by registered
or certified mail (return receipt requested) postage prepaid, to the parties at
the following address (or at such other address for a party as shall be
specified by like notice):
If to Grantee:
U.S.B. Holding Co., Inc.
100 Dutch Hill Road
Orangeburg, New York 10962
Attn: Steven T. Sabatini
Senior Executive Vice President and
Chief Financial Officer
Fax: (914) 365-4695
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W., 11th Floor
Washington, D.C. 20005
Attn: Daniel P. Weitzel, Esq.
Fax: (202) 347-2172
If to Issuer:
Tappan Zee Financial, Inc.
75 North Broadway
Tarrytown, New York 10591-0187
Attn: Stephen C. Byelick
President and Chief Executive Officer
Fax: (914) 631-0344
16
<PAGE> 17
With a required copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attn: Robert C. Azarow, Esq.
Fax: (212) 432-2898
(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 Holder, Issuer and 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.
17
<PAGE> 18
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.
U.S.B. HOLDING CO., INC.
Attest:
/s/ Michael H. Fury By: /s/ Thomas E. Hales
- ----------------------------- ---------------------------
Name: Michael H. Fury Name: Thomas E. Hales
Title: Secretary Title: President and Chief
Executive Officer
TAPPAN ZEE FINANCIAL, INC.
Attest:
/s/ Harry G. Murphy By: /s/ Stephen C. Byelick
- ----------------------------- ---------------------------
Name: Harry G. Murphy Name: Stephen C. Byelick
Title: Vice President and Secretary Title: President and Chief
Executive Officer
18
<PAGE> 1
Exhibit 10.2
March 6, 1998
U.S.B. Holding Co., Inc.
100 Dutch Hill Road
Orangeburg, New York 10962
Ladies and Gentlemen:
U.S.B. Holding Co., Inc. ("USB") and Tappan Zee Financial, Inc.
("Tappan Zee") desire to enter into an agreement dated March 6, 1998
("Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) Tappan Zee will merge with and into USB with USB surviving the
merger, and (b) shareholders of Tappan Zee will receive common stock of USB in
exchange for common stock of Tappan Zee outstanding on the closing date (the
foregoing, collectively, referred to herein as the "Merger").
The undersigned have been advised that as of the date of this letter
each may be deemed to be an "affiliate" of Tappan Zee, as the term "affiliate"
is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations promulgated under the Securities Act of 1993, as amended (the
"Securities Act") by the Securities and Exchange Commission (the "Commission")
and as the term "affiliate" is used for purposes of the Commission's rules and
regulations applicable to the determination of whether a merger can be
accounted for as a "pooling-of-interests" as specified in the Commission's
Accounting Series Release 135, as amended by Staff Accounting Bulletins Nos. 65
and 76 ("ASR 135").
USB has required, as a condition to its execution and delivery to
Tappan Zee of the Agreement, that the undersigned, being directors and
executive officers of Tappan Zee, execute and deliver to USB this Letter
Agreement.
In consideration of the foregoing, each of the undersigned hereby
irrevocably:
(a) Agrees to be present (in person or by proxy) at all
meetings of shareholders of Tappan Zee called to vote for approval of the
Agreement and the Merger so that all shares of common stock of Tappan Zee then
owned by the undersigned will be counted for the purpose of determining the
presence of a quorum at such meetings and to vote or cause to be voted all such
shares other than any such shares owned through a Company Employee Plan (as
defined in the Agreement) (i) in favor of approval and adoption of the
Agreement and the transactions contemplated thereby (including any amendments
or modifications of the terms thereof approved by the Board of Directors of
Tappan Zee) and (ii) against approval or adoption of any other merger, business
combination, recapitalization, partial liquidation or similar transaction
involving Tappan Zee. Agrees to use reasonable best efforts to cause the
Merger to be consummated and, except as permitted by Section 5.7 of the
Agreement, not to solicit, initiate or engage in any
<PAGE> 2
U.S.B. Holding Co., Inc.
March 6, 1998
Page 2
negotiations or discussions with any party other than USB with respect to any
offer, sale, transfer or other disposition of, any shares of common stock of
Tappan Zee now or hereafter owned by the undersigned;
(b) Agrees not to vote or execute any written consent to
rescind or amend in any manner any prior vote or written consent, as a
shareholder of Tappan Zee, to approve or adopt the Agreement;
(c) Agrees not to offer, sell, transfer or otherwise
dispose of any shares of common stock of USB received in the Merger, except (i)
at such time as a registration statement under the Securities Act covering
sales of such USB common stock is effective and a prospectus is made available
under the Securities Act, (ii) within the limits, and in accordance with the
applicable provisions of, Rule 145(d) under the Securities Act, or (iii) in a
transaction which, in the opinion of counsel satisfactory to USB or as
described in a "no-action" or interpretive letter from the staff of the
Commission , is not required to be registered under the Securities Act; and
acknowledges and agrees that USB is under no obligation to register the sale,
transfer or other disposition of USB common stock by the undersigned or on
behalf of the undersigned, or to take any other action necessary to make an
exemption from registration available;
(d) Agrees that during the period beginning on the date
hereof and ending 30 days prior to the consummation of the Merger, shall not
sell, transfer, reduce the risk of the undersigned with respect to or otherwise
dispose of any shares of common stock of Tappan Zee without notifying USB in
advance of the proposed transfer and giving USB a reasonable opportunity to
review the transfer before it is consummated. USB, if advised to do so by its
independent public accountants, may instruct the undersigned not to make or
permit the transfer because it may interfere with the "pooling-of-interests"
treatment of the Merger. The undersigned shall abide by any such instructions.
(e) Agrees not to enter into any transactions with
respect to any shares of USB common stock during the 20 consecutive AMEX
Trading Days (as defined in the Agreement) ending with and including the date
on which the last of the regulatory approvals (as discussed in Section 6.1(b)
of the Agreement) required for consummation of the Merger is obtained.
(f) Notwithstanding the foregoing, agrees not to sell, or
in any other way reduce the risk of the undersigned relative to, any shares of
common stock of Tappan Zee or of common stock of USB, during the period
commencing thirty days prior to the effective date of the Merger and ending on
the date on which financial results covering at least thirty days of
post-Merger combined operations of USB and Tappan Zee have been published
within the meaning of Section 201.01 of the Commission's Codification of
Financial Reporting Policies, provided, however, that excluded from the
foregoing undertaking shall be such sales, pledges, transfers or other
dispositions of shares of Tappan Zee common stock or shares of USB common stock
which, in USB's sole judgment, are individually and in the aggregate de minimis
within the meaning of Topic 2-E of the Staff Accounting Bulletin Series of the
SEC;
<PAGE> 3
U.S.B. Holding Co., Inc.
March 6, 1998
Page 3
(g) Agrees that neither Tappan Zee nor USB shall be bound
by any attempted sale of any shares of Tappan Zee common stock or USB common
stock, respectively, and Tappan Zee's and USB's transfer agents shall be given
appropriate stop transfer orders and shall not be required to register any such
attempted sale, unless the sale has been effected in compliance with the terms
of this Letter Agreement; and further agrees that the certificate representing
shares of USB common stock owned by the undersigned will be endorsed with a
restrictive legend consistent with the terms of this Letter Agreement;
(h) Acknowledges and agrees that the provisions of
subparagraphs (c), (d), (e), (f) and (g) hereof also apply to shares of USB
common stock and Tappan Zee common stock owned by (i) his or her spouse, (ii)
any of his or her relatives or relatives of his or her spouse occupying his or
her home, (iii) any trust or estate in which he or she, his or her spouse, or
any such relative owns at least a 10% beneficial interest or of which any of
them serves as trustee, executor or in any similar capacity, and (iv) any
corporation or other organization in which the undersigned, any Affiliate of
the undersigned, his or her spouse, or any such relative owns at least 10% of
any class of equity securities or of the equity interest;
(i) Represents that the undersigned has no plan or
intention to sell, exchange, or otherwise dispose of any shares of common stock
of USB prior to expiration of the time period referred to in subparagraph (f)
hereof; and
(j) Represents that the undersigned has the capacity to
enter into this Letter Agreement and that it is a valid and binding obligation
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights and general
equitable principles.
--------------------------
It is understood and agreed that the provisions of subparagraphs (a)
and (b) of this Letter Agreement relate solely to the capacity of the
undersigned as a shareholder or other beneficial owner of shares of Tappan Zee
common stock and is not in any way intended to affect the exercise by the
undersigned of the undersigned's responsibilities as a director or officer of
Tappan Zee. It is further understood and agreed that such subparagraphs of
this Letter Agreement are not in any way intended to affect the exercise by the
undersigned of any fiduciary responsibility which the undersigned may have in
respect of any shares of Tappan Zee common stock held by the undersigned as of
the date hereof.
-------------------------
The undersigned have carefully read this Letter Agreement and the
Agreement and discussed the requirements of such documents and other
applicable limitations upon transfer of shares of Tappan Zee common stock or
USB common stock to the extent that the undersigned deems necessary with
counsel of the undersigned's choice or counsel for Tappan Zee.
<PAGE> 4
U.S.B. Holding Co., Inc.
March 6, 1998
Page 4
-------------------------
This Letter Agreement may be executed in two or more counterparts,
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the same Letter Agreement.
-------------------------
This Letter Agreement shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
-------------------------
<PAGE> 5
U.S.B. Holding Co., Inc.
March 6, 1998
Page 5
The undersigned intend to be legally bound hereby.
Sincerely,
Number of Shares of
Tappan Zee
Common Stock Owned*
------------------
/s/ Marvin Levy 7,592
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Marvin Levy
/s/ Stephen C. Byelick 33,745
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Stephen C. Byelick
/s/ John T. Cooney 10,240
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John T. Cooney
/s/ Gerald L. Logan 7,740
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Gerald L. Logan
/s/ Harry G. Murphy 24,723
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Harry G. Murphy
/s/ Kevin J. Plunkett 9,340
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Kevin J. Plunkett
/s/ Paul R. Wheatley 6,740
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Paul R. Wheatley
* Represents shares owned directly or indirectly and shares allocated to the
affiliates' ESOP and RRP accounts as of March 6, 1998. Does not include
shares underlying stock options that were not vested as of March 6, 1998.
