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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):JUNE 15, 1998
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CHARTER ONE FINANCIAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-16311 34-1567092
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
1215 SUPERIOR AVENUE CLEVELAND, OHIO 44114
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (216) 566-5300
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N/A
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
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On June 15, 1998, Charter One Financial, Inc., a Delaware corporation
("Charter One"), Charter Michigan Bancorp, Inc., a Michigan corporation and a
wholly owned subsidiary of Charter One ("Charter Michigan"), and ALBANK
Financial Corporation, a Delaware corporation ("ALBANK"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which ALBANK
will be merged with and into Charter Michigan, with Charter Michigan as the
surviving corporation (the "Merger"). Under the Merger Agreement, each share of
the common stock, par value $.01 per share, of ALBANK ("ALBANK Common Stock")
outstanding immediately prior to the effective time of the Merger will be
converted into the right to receive 2.16 shares of the common stock, par value
$.01 per share, of Charter One ("Charter One Common Stock").
Simultaneous with the Merger, ALBANK Commercial, a New York chartered
commercial bank and a wholly owned subsidiary of ALBANK, and ALBANK, FSB, a
wholly owned subsidiary of ALBANK, will be merged with and into Charter One
Bank, F.S.B., a wholly owned subsidiary of Charter Michigan (the "Bank
Mergers").
The parties intend that the Merger and each of the Bank Mergers will be
treated as "reorganizations" under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended, and that the Merger will be accounted for
under the pooling-of-interests method of accounting.
Consummation of the Merger is subject to various conditions, including:
(i) adoption of the Merger Agreement by the stockholders of ALBANK and approval
by Charter One's stockholders of the issuance of Charter One Common Stock
contemplated by the Merger Agreement; (ii) receipt of requisite regulatory
approvals; (iii) receipt by each of ALBANK and Charter One of an opinion of
counsel as to certain tax consequences of the Merger; (iv) receipt by Charter
One of letters from its independent accountants stating their opinion that the
Merger shall qualify for pooling-of-interests accounting treatment; and (v)
satisfaction of certain other conditions.
The preceding description of the Merger Agreement is qualified in its
entirety by reference to the copy of the Merger Agreement included as Exhibit
2.1 hereto and incorporated by reference herein.
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In connection with the Merger Agreement, ALBANK and Charter One entered
into a Stock Option Agreement, dated June 15, 1998 (the "Stock Option
Agreement") pursuant to which ALBANK granted to Charter One an option (the
"Option") to purchase, under certain circumstances, up to 1,305,819 shares of
ALBANK Common Stock at a price, subject to certain adjustments, of $51.50 per
share. The Stock Option Agreement provides that in no event may the number of
shares for which the Option is exercisable exceed 9.99% of the issued and
outstanding shares of ALBANK Common Stock. The Option was granted by ALBANK as
an inducement to Charter One's willingness to enter into the Merger Agreement.
Under certain circumstances, ALBANK may be required to repurchase the Option or
shares acquired upon exercise of the Option.
The preceding description of the Stock Option Agreement is qualified in
its entirety by reference to the copy of the Stock Option Agreement included as
Exhibit 2.2 hereto and incorporated by reference herein.
A copy of the joint press release issued by Charter One and ALBANK
announcing the execution of the Merger Agreement is attached hereto as Exhibit
99.1 and incorporated by reference herein. Additional information regarding the
Merger is attached hereto as Exhibit 99.2 and incorporated by reference herein.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of June 15, 1998,
by and between Charter One Financial, Inc., Charter
Michigan Bancorp, Inc. and ALBANK Financial Corporation.
2.2 Stock Option Agreement, dated as of June 15, 1998, by and
between Charter One Financial, Inc., as grantee, and ALBANK
Financial Corporation, as issuer.
99.1 Joint Press Release of Charter One and ALBANK.
99.2 Additional Information.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHARTER ONE FINANCIAL, INC.
Date: June 17, 1998 By: /s/ Robert J. Vana
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Robert J. Vana
Chief Corporate Counsel and
Secretary
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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2.1 Agreement and Plan of Merger, dated as of June 15,
1998, by and between Charter One Financial, Inc.,
Charter Michigan Bancorp, Inc. and ALBANK Financial
Corporation.
2.2 Stock Option Agreement, dated as of June 15, 1998, by
and between Charter One Financial, Inc., as grantee,
and ALBANK Financial Corporation, as issuer.
99.1 Joint Press Release of Charter One and ALBANK.
99.2 Additional Information.
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
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dated as of June 15, 1998
by and between
CHARTER ONE FINANCIAL, INC.
CHARTER MICHIGAN BANCORP, INC.
and
ALBANK FINANCIAL CORPORATION
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
CERTAIN DEFINITIONS
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1.01 Certain Definitions.................................................................1
ARTICLE II
THE TRANSACTION
2.01 Formation of National Credit Card Bank; Contribution of Assets and Liabilities......7
2.02 The Company Merger..................................................................8
2.03 Bank Mergers........................................................................9
2.04 Effective Date and Effective Time..................................................10
2.05 Reservation of Right to Revise Transaction.........................................10
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 Merger Consideration...............................................................11
3.02 Rights as Stockholders; Stock Transfers............................................11
3.03 Fractional Shares..................................................................12
3.04 Exchange Procedures................................................................12
3.05 Anti-Dilution Provisions...........................................................14
3.06 Options............................................................................14
ARTICLE IV
ACTIONS PENDING TRANSACTION
4.01 Forbearances of ALBANK.............................................................15
4.02 Forbearances of COFI...............................................................19
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
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5.01 Disclosure Schedules...............................................................20
5.02 Standard...........................................................................20
5.03 Representations and Warranties of ALBANK...........................................21
5.04 Representations and Warranties of COFI.............................................33
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts............................................................39
6.02 Stockholder Approvals..............................................................39
6.03 Registration Statement.............................................................40
6.04 Press Releases.....................................................................41
6.05 Access; Information................................................................41
6.06 ALBANK Proposal....................................................................42
6.07. Affiliate Agreements...............................................................43
6.08 Takeover Laws......................................................................43
6.09 Certain Policies...................................................................43
6.10 NASDAQ Listing.....................................................................43
6.11 Regulatory Applications............................................................44
6.12 Indemnification....................................................................44
6.13 Benefit Plans......................................................................45
6.14 Notification of Certain Matters....................................................47
6.15 Directors..........................................................................47
6.16 Advisory Board Membership..........................................................47
6.17 COFI Fee...........................................................................47
6.18 ALBANK Fee.........................................................................48
6.19. Charitable Contributions...........................................................49
6.20 Consent Decree.....................................................................49
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE COMPANY MERGER
7.01 Conditions to Each Party's Obligation to Effect the Company Merger.................49
7.02 Conditions to Obligation of ALBANK.................................................50
7.03 Conditions to Obligation of COFI...................................................51
ARTICLE VIII
TERMINATION
8.01 Termination........................................................................52
8.02 Effect of Termination and Abandonment..............................................56
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE IX
MISCELLANEOUS
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9.01 Survival...........................................................................56
9.02 Waiver; Amendment..................................................................57
9.03 Counterparts.......................................................................57
9.04 Governing Law......................................................................57
9.05 Expenses...........................................................................57
9.06 Notices............................................................................57
9.07 Entire Understanding; No Third Party Beneficiaries.................................58
9.08 Interpretation; Effect.............................................................58
</TABLE>
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EXHIBIT A Form of Stock Option Agreement
EXHIBIT B Form of Subsidiary Plan of Merger I
EXHIBIT C Form of Subsidiary Plan of Merger II
EXHIBIT D Form of ALBANK Affiliate Agreement
EXHIBIT E Form of COFI Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER, dated as of June 15, 1998 (this
"Agreement"), by and between ALBANK Financial Corporation ("ALBANK"), Charter
One Financial, Inc. ("COFI") and Charter Michigan Bancorp, Inc., a wholly-owned
first-tier Subsidiary of COFI ("Charter Michigan").
RECITALS
A. ALBANK. ALBANK is a Delaware corporation, having its principal place
of business in Albany, New York.
B. COFI. COFI is a Delaware corporation, having its principal place of
business in Cleveland, Ohio.
C. Charter Michigan. Charter Michigan is a Michigan corporation, having
its principal place of business in Dearborn, Michigan.
D. Stock Option Agreement. As an inducement to the willingness of COFI
to enter into this Agreement , ALBANK has agreed to grant to COFI on the date
hereof an option pursuant to a stock option agreement ("Stock Option
Agreement"), in substantially the form of Exhibit A.
E. Intentions of the Parties. It is the intention of the parties to
this Agreement that the combination of ALBANK and Charter Michigan be accounted
for under the "pooling-of-interests" accounting method and that each of the
business combinations contemplated hereby be treated as a "reorganization" under
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
F. Board Action. The respective Boards of Directors of each of COFI,
Charter Michigan and ALBANK have determined that it is in the best interests of
their respective companies and their stockholders to consummate a strategic
business alliance between ALBANK and COFI by the merger of ALBANK with and into
Charter Michigan and the other business combinations contemplated herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:
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"Administrator" means the chief officer of the Michigan Department of
Commerce.
"Agreement" means this Agreement, as amended or modified from time to time
in accordance with Section 9.02.
"ALBANK" has the meaning set forth in the preamble to this Agreement.
"ALBANK Acquisition Transaction" has the meaning set forth in Section 6.17.
"ALBANK Affiliate" has the meaning set forth in Section 6.07(a).
"ALBANK Board" means the Board of Directors of ALBANK.
"ALBANK By-Laws" means the Bylaws of ALBANK.
"ALBANK Certificate" means the Certificate of Incorporation of ALBANK.
"ALBANK Common Stock" means the common stock, par value $0.01 per share, of
ALBANK.
"ALBANK Meeting" has the meaning set forth in Section 6.02.
"ALBANK Preferred Stock" means the preferred stock, par value $0.01 per
share, of ALBANK.
"ALBANK Proposal" has the meaning set forth in Section 6.17.
"ALBANK Stock" means, collectively, ALBANK Common Stock and ALBANK
Preferred Stock.
"ALBANK Stock Option" has the meaning set forth in Section 3.06(a).
"ALBANK Stock Plans" means the ALBANK Financial Corporation 1992 Stock
Incentive Plan for Key Employees, as Amended and Restated as of March 25, 1996;
the ALBANK Financial Corporation 1992 Stock Incentive Plan for Outside
Directors; the ALBANK Financial Corporation 1995 Stock Incentive Plan for
Outside Directors; the Marble Financial Corporation 1986 Stock Option Plan; and
the Marble Financial Corporation 1994 Stock Option Plan.
"Average Closing Price" has the meaning set forth in Section 8.01(f).
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"Bank Mergers" has the meaning set forth in Section 2.03.
"BHCA" means the Bank Holding Company Act of 1956, as amended.
"Charter Michigan" has the meaning set forth in the preamble to this
Agreement.
"Charter Michigan Board" means the Board of Directors of Charter Michigan.
"CEBA" means the Competitive Equality Banking Act of 1987.
"Code" has the meaning set forth in the Recitals to this Agreement.
"COFI" has the meaning set forth in the preamble to this Agreement.
"COFI Affiliate" has the meaning set forth in Section 6.07(a).
"COFI Acquisition Transaction" has the meaning set forth in Section 6.18.
"COFI Board" means the Board of Directors of COFI.
"COFI Common Stock" means the common stock, par value $0.01 per share, of
COFI.
"COFI Meeting" has the meaning set forth in Section 6.02.
"COFI Proposal" has the meaning set forth in Section 6.18.
"COFI Ratio" has the meaning set forth in Section 8.01(f).
"Company Merger" has the meaning set forth in Section 2.02(a).
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(m).
"Costs" has the meaning set forth in Section 6.12(a).
"Credit Card Bank" has the meaning set forth in Section 2.01.
"Delaware Secretary" means the Secretary of State of the State of Delaware.
"Determination Date" has the meaning set forth in Section 8.01(f).
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"DGCL" means the Delaware General Corporation Law.
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"DOL" means the Department of Labor.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the effective time of the Company Merger and the
Bank Mergers, as provided for in Section 2.04.
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water Act,
the Clean Air Act, and the Occupational Safety and Health Act, each as amended,
regulations promulgated thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"ERISA Affiliate Plan" has the meaning set forth in Section 5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04(a).
"Exchange Fund" has the meaning set forth in Section 3.04(a).
"Exchange Ratio" has the meaning set forth in Section 3.01(a).
"FDIC" means the Federal Deposit Insurance Corporation
"FFIEC" means the Federal Financial Institutions Examination Council.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Index Group" has the meaning set forth in Section 8.01(f).
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"Index Price" has the meaning set forth in Section 8.01(f).
"Index Ratio" has the meaning set forth in Section 8.01(f).
"Insurance Amount" has the meaning set forth in Section 6.12(b).
"IRS" means the Internal Revenue Service.
"Lien" means any charge, mortgage, pledge, security interest, restriction,
claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to COFI or ALBANK, any effect
that (i) is material and adverse to the financial position, results of
operations or business of COFI and its Subsidiaries taken as a whole or ALBANK
and its Subsidiaries taken as a whole, respectively, or (ii) would materially
impair the ability of COFI, Charter Michigan or ALBANK to perform its
obligations under this Agreement or otherwise materially threaten or materially
impede the consummation of the Company Merger and the other transactions
contemplated by this Agreement; provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes in thrift, banking and
similar laws of general applicability or interpretations thereof by courts or
governmental authorities, or other changes affecting depository institutions
generally, including changes in general economic conditions and changes in
prevailing interest and deposit rates, (b) changes in generally accepted
accounting principles or regulatory accounting requirements applicable to
thrifts, banks and their holding companies generally, (c) any modifications or
changes to valuation policies and practices in connection with the Company
Merger or Bank Mergers or restructuring charges taken in connection with the
Company Merger or Bank Mergers, in each case in accordance with generally
accepted accounting principles, (d) changes resulting from expenses (such as
legal, accounting and investment bankers' fees) incurred in connection with this
Agreement and (e) actions or omissions of COFI or ALBANK taken with the prior
written consent of ALBANK or COFI, as applicable, in contemplation of the
transactions contemplated hereby.
"MBCA" means the Michigan Business Corporation Act.
"Merger Consideration" has the meaning set forth in Section 2.05.
"NASDAQ" means The Nasdaq Stock Market, Inc.'s National Market System.
"New Certificates" has the meaning set forth in Section 3.04(a).
"Old Certificates" has the meaning set forth in Section 3.04(a).
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"OTS" means the Office of Thrift Supervision.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Person" means any individual, bank, corporation, partnership, association,
joint-stock company, business trust or unincorporated organization.
"Previously Disclosed" by a party shall mean information set forth in its
Disclosure Schedule.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statement" has the meaning set forth in Section 6.03.
"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, or any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or value of,
shares of capital stock of such Person.
"RRP Shares" means all awards under the ALBANK, FSB Recognition and
Retention Plan and Trust Agreement for Senior Executive Officers, the ALBANK,
FSB Recognition and Retention Plan and Trust Agreement for Officers and the
ALBANK, FSB Recognition and Retention Plan and Trust Agreement for Outside
Directors.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Section 5.03(g).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Specified Representations" has the meaning set forth in Section 5.02.
"Starting Date" has the meaning set forth in Section 8.01(f).
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"Starting Price" has the meaning set forth in Section 8.01(f).
"Stock Option Agreement" has the meaning set forth in the Recitals to this
Agreement.
"Subsidiary" has the meaning ascribed to it in Rule 1-02 of Regulation S-X
of the SEC.
"Surviving Corporation" has the meaning set forth in Section 2.02.
"Takeover Laws" has the meaning set forth in Section 5.03 (o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts, sales,
use, ad valorem, goods and services, capital, production, transfer, franchise,
windfall profits, license, withholding, payroll, employment, disability,
employer health, excise, estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts, in each case imposed by any taxing or
Governmental Authority whether arising before, on or after the Effective Date.
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with any Governmental Authority with respect to
any Tax.
"Transaction" means the establishment of the Credit Card Bank, the Company
Merger, and the Bank Mergers.
"Treasury Stock" shall mean shares of ALBANK Stock held by ALBANK or any of
its Subsidiaries or by COFI or any of its Subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously contracted in good
faith.
ARTICLE II
THE TRANSACTION
2.01 Formation of National Credit Card Bank; Contribution of Assets and
Liabilities. As soon as practicable after the date of this Agreement, ALBANK
shall cause its wholly-owned Subsidiary, ALBANK Commercial, a New York chartered
commercial bank, to file all necessary applications with state and federal
regulatory authorities to secure approval to establish a CEBA national credit
card bank (the "Credit Card Bank") with federal insurance of accounts up to the
maximum limit permitted by the FDIC. If the Credit Card Bank has been approved
and
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established, ALBANK shall use best efforts to cause the Credit Card Bank to
become a wholly-owned subsidiary of ALBANK Commercial at least five days prior
to the Effective Time. If the Credit Card Bank has been approved and
established, then after satisfaction or waiver of the conditions set forth in
Article VII and prior to the Effective Time, ALBANK shall use best efforts to
cause ALBANK Commercial to contribute or transfer to the Credit Card Bank (i)
all of its municipal deposits held in the State of New York and all other Bank
Insurance Fund deposits at its head office in Albany, at book value, consisting
(ii) the head office in Albany, its fixed assets, credit card assets and cash,
if necessary, with a book value equal to the aggregate of (x) the municipal
deposits (principal plus accrued interest) contributed and (y) any state or
federal net worth requirement.
The parties hereto may agree on an alternative structure to accomplish the
result sought by the foregoing actions, provided, however, that regardless of
the structure employed, the creation of a Credit Card Bank or other mechanism to
receive the municipal deposits will not constitute a condition to the
obligations of either party to consummate the Company Merger, and COFI agrees to
use its reasonable best efforts to prepare all documentation, to effect all
filings and to obtain all permits, consents, aprovals and authorizations of all
third parties and Governmental Authorities necessary to consummate the Company
Merger prior to the consummation of the establishment of the Credit Card Bank
and the contribution or transfer of assets and liabilities described in this
Section 2.01.
2.02 The Company Merger.
(a) Merger. At the Effective Time, ALBANK shall merge with and
into Charter Michigan (the "Company Merger"), the separate corporate
existence of ALBANK shall cease and Charter Michigan shall survive and
continue to exist as a Michigan corporation (Charter Michigan, as the
surviving corporation in the Company Merger, sometimes being referred
to herein as the "Surviving Corporation").
(b) Corporate Law Filings. Subject to the satisfaction or waiver
of the conditions set forth in Article VII, the Company Merger shall
become effective upon the occurrence of the filing in the office of
the Delaware Secretary of a certificate of merger in accordance with
Section 252 of the DGCL and the filing in the office of and
endorsement by the Administrator of a certificate of merger in
accordance with Section 735 of the MBCA or such later date and time as
may be set forth in such certificates of merger.
(c) Effects of Company Merger. The Company Merger shall have the
effects prescribed in the DGCL and the MBCA, including but not limited
to, Charter Michigan, as the Surviving Corporation, thereupon and
thereafter possessing all of the rights, privileges, immunities and
franchises, of a public as well as of a private nature, of each of
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the corporations so merged and Charter Michigan, as the Surviving
Corporation, becoming responsible and liable for all the liabilities,
obligations and penalties of each of the corporations so merged. All
rights of creditors and obligors and all liens on the property of each
of ALBANK and Charter Michigan shall be preserved unimpaired.
(d) Articles of Incorporation and By-Laws of Surviving
Corporation. The Articles of Incorporation and Bylaws of Charter
Michigan immediately after the Company Merger shall be those of
Charter Michigan as in effect immediately prior to the Effective Time.
(e) Directors and Officers of the Surviving Corporation. The
directors and officers of Charter Michigan immediately after the
Company Merger shall be the directors and officers of Charter Michigan
immediately prior to the Effective Time, until such time as their
successors shall be duly elected and qualified.
(f) Service of Process. At the Effective Time, Charter Michigan,
as the Surviving Corporation, consents to be sued and served with
process in the State of Delaware and irrevocably appoints the Delaware
Secretary as its agent to accept service of process in any proceeding
in the State of Delaware to enforce against it any obligation of
ALBANK.
(g) Principal Office. The location of the principal office of
Charter Michigan, as the Surviving Corporation, in the State of
Michigan is 13606 Michigan Avenue, 2nd Floor, Dearborn, Michigan
48126.
(h) Plan of Merger. At the reasonable request of any party,
ALBANK, COFI and Charter Michigan shall enter into a separate plan of
merger reflecting the terms of the Company Merger for purposes of any
state law filing requirement.
2.03 Bank Mergers. At the Effective Time and simultaneously with the
Company Merger, each of ALBANK Commercial and ALBANK, FSB, a federally chartered
savings bank and wholly owned Subsidiary of ALBANK, shall be merged with and
into Charter One Bank F.S.B., a federally chartered savings bank and
wholly-owned Subsidiary of Charter Michigan ("Charter One Bank"). Such mergers
are hereinafter sometimes referred to as the "Bank Mergers". The Bank Mergers
shall be implemented pursuant to Subsidiary Plan of Merger I and Subsidiary Plan
of Merger II, in substantially the form of Exhibits B and C. In order to obtain
the necessary state and federal regulatory approvals for the Bank Mergers, the
parties hereto shall cause the following to be accomplished prior to the filing
of applications for regulatory approval: (a) ALBANK shall cause the Board of
Directors of ALBANK Commercial to approve Subsidiary Plan of Merger I, ALBANK as
the sole stockholder of ALBANK Commercial shall approve Subsidiary Plan of
Merger I, and ALBANK shall cause Subsidiary Plan of Merger I to
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be duly executed by ALBANK Commercial and delivered to COFI; (b) ALBANK shall
cause the Board of Directors of ALBANK, FSB to approve Subsidiary Plan of Merger
II, ALBANK as the sole stockholder of ALBANK, FSB shall approve Subsidiary Plan
of Merger II, and ALBANK shall cause Subsidiary Plan of Merger II to be duly
executed by ALBANK, FSB and delivered to COFI; and (c) Charter Michigan shall
cause the Board of Directors of Charter One Bank to approve Subsidiary Plan of
Merger I and Subsidiary Plan of Merger II, Charter Michigan as the sole
stockholder of Charter One Bank shall approve Subsidiary Plan of Merger I and
Subsidiary Plan of Merger II, and Charter Michigan shall cause Subsidiary Plan
of Merger I and Subsidiary Plan of Merger II to be duly executed by Charter One
Bank and delivered to ALBANK. Prior to the Effective Time, ALBANK shall cause
ALBANK Commercial and ALBANK, FSB, and Charter Michigan shall cause Charter One
Bank to execute such certificate of merger and articles of combination as are
necessary to make effective the Bank Mergers and cause such documents to be
timely and appropriately filed and endorsed, where required, by the New York
State Banking Department and the OTS so that the Bank Mergers shall become
effective at the Effective Time. If necessary to prevent COFI from being deemed
subject to the BHCA for a moment in time, the Bank Mergers shall become
effective immediately prior to the Company Merger.
2.04 Effective Date and Effective Time. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Company Merger and the Bank Mergers (the "Effective Date")
to occur on (i) the fifth business day to occur after the last of the conditions
set forth in Article VII to be satisfied prior to the Effective Date shall have
been satisfied or waived in accordance with the terms of this Agreement (or, at
the election of COFI by written notice to ALBANK not later than two business
days after the last such condition in Article VII is satisfied, on the last
business day of the month in which such fifth business day occurs) or (ii) such
other date to which the parties may agree in writing. Except as provided in the
last sentence of Section 2.03, the time on the Effective Date when the Company
Merger and the Bank Mergers shall become effective is referred to as the
"Effective Time."
2.05 Reservation of Right to Revise Transaction. COFI may at any time
prior to the Effective Time, with the prior consent of ALBANK (such consent not
to be unreasonably withheld or delayed), change the method of effecting the
Transaction or any part thereof if and to the extent it deems such change to be
necessary, appropriate or desirable; provided, however, that no such change
shall (i) alter or change the amount or kind of consideration to be issued to
holders of ALBANK Common Stock as provided for in this Agreement (the "Merger
Consideration"), (ii) adversely affect the tax treatment of ALBANK's
stockholders as a result of receiving the Merger Consideration or the Company
Merger qualifying for "pooling-of-interests" accounting treatment, (iii)
materially impede or delay consummation of the Transaction, (iv) result in any
representation or warranty of any party set forth in this Agreement becoming
incorrect in any material respect, or (v) diminish the benefits, including
membership on the COFI
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Board or COFI Advisory Board, to be received by the directors, officers or
employees of ALBANK and its Subsidiaries as set forth in this Agreement or in
any other agreements between the parties made in connection with this Agreement.
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 Merger Consideration. Subject to the provisions of this Agreement, at
the Effective Time, automatically by virtue of the Company Merger and without
any action on the part of any Person:
(a) Outstanding ALBANK Common Stock. Each share, excluding Treasury
Stock, of ALBANK Common Stock issued and outstanding immediately prior to
the Effective Time shall become and be converted into, subject to Sections
2.03, 2.05 and 8.01(f) hereof, 2.16 shares of COFI Common Stock (the
"Exchange Ratio"), including the corresponding number of Rights associated
with the COFI Common Stock pursuant to the Rights Agreement dated November
20, 1989, as amended on May 26, 1995, between COFI and The First National
Bank of Boston as Rights Agent. The Exchange Ratio shall be subject to
adjustment as set forth in Sections 2.05 and 8.01(f).
(b) Charter Michigan Common Stock. Each share of Charter Michigan
common stock issued and outstanding or held in treasury immediately prior
to the Effective Time shall remain issued and outstanding or held in
treasury and continue to be an identical issued and outstanding or treasury
share of Charter Michigan common stock after the Effective Time.
(c) Outstanding COFI Common Stock. Each share of COFI Common Stock
issued and outstanding or held in treasury immediately prior to the
Effective Time shall remain issued and outstanding or held in treasury and
shall be unaffected by the Company Merger.
(d) Treasury Shares. Each share of ALBANK Common Stock held as
Treasury Stock immediately prior to the Effective Time shall be canceled
and retired at the Effective Time, and no consideration shall be issued in
exchange therefor.
3.02 Rights as Stockholders; Stock Transfers. At the Effective Time,
holders of ALBANK Stock shall cease to be, and shall have no rights as,
stockholders of ALBANK, other than to receive any dividend or other distribution
with respect to such ALBANK Stock permitted under this Agreement with a record
date occurring prior to the Effective Time and the consideration provided under
this Article III. After the Effective Time, there shall be no transfers
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on the stock transfer books of ALBANK or the Surviving Corporation of shares of
ALBANK Stock.
3.03 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of COFI Common Stock and no certificates or scrip therefor, or
other evidence of ownership thereof, will be issued in the Company Merger;
instead, COFI shall pay to each holder of ALBANK Common Stock who would
otherwise be entitled to a fractional share of COFI Common Stock (after taking
into account all Old Certificates delivered by such holder) an amount in cash
(without interest) determined by multiplying such fraction by the closing sale
price of COFI Common Stock, as reported by the NASDAQ reporting system (as
reported in The Wall Street Journal or, if not reported therein, in another
authoritative source), for the last trading day immediately preceding the
Effective Date.
3.04 Exchange Procedures.
(a) Deposit of New Certificates, Etc. At or prior to the Effective
Time, COFI shall deposit, or shall cause to be deposited, with an
independent exchange agent to be selected by COFI and reasonably acceptable
to ALBANK (the "Exchange Agent"), for the benefit of the holders of
certificates formerly representing shares of ALBANK Common Stock ("Old
Certificates"), for exchange in accordance with this Article III,
certificates representing the shares of COFI Common Stock ("New
Certificates") and an estimated amount of cash (such cash and New
Certificates, together with any dividends or distributions with a record
date occurring after the Effective Date with respect thereto (without any
interest on any such cash, dividends or distributions), being hereinafter
referred to as the "Exchange Fund") to be paid pursuant to this Article III
in exchange for outstanding shares of ALBANK Common Stock.
(b) Transmittal and Deliveries. As promptly as practicable after the
Effective Date, COFI shall send or cause to be sent to each former holder
of record of shares of ALBANK Common Stock immediately prior to the
Effective Time transmittal materials (which shall specify that risk of loss
and title to Old Certificates shall pass only upon acceptance of such Old
Certificates by COFI or the Exchange Agent) for use in exchanging such
stockholder's Old Certificates for the consideration set forth in this
Article III. COFI shall cause the New Certificates into which shares of a
stockholder's ALBANK Common Stock are converted on the Effective Date
and/or any check in respect of any fractional share interests or dividends
or distributions which such person shall be entitled to receive to be
delivered to such stockholder upon delivery to the Exchange Agent of Old
Certificates representing such shares of ALBANK Common Stock (or indemnity
reasonably satisfactory to COFI and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such stockholder. No
interest will be paid on any such cash to be paid in lieu of fractional
share interests or in respect
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of dividends or distributions which any such person shall be entitled to
receive pursuant to this Article III upon such delivery. Old Certificates
surrendered for exchange by any person identified by ALBANK pursuant to
Section 6.07 as an ALBANK Affiliate shall not be exchanged for New
Certificates representing COFI Common Stock until COFI has received a
written agreement from such person as specified in Section 6.07. COFI and
the Exchange Agent shall be entitled to rely upon the stock transfer books
of ALBANK to establish the identity of those persons entitled to receive
consideration specified in this Agreement, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership
of stock represented by any Old Certificate, COFI or the Exchange Agent
shall be entitled to deposit any consideration in respect thereof in escrow
with an independent third party and thereafter be relieved with respect to
any claims thereto.
(c) Escheat. Notwithstanding the foregoing, neither the Exchange
Agent, if any, nor any party hereto shall be liable to any former holder of
ALBANK Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(d) Restrictions on the Payment of Dividends and Voting. No dividends
or other distributions with respect to COFI Common Stock with a record date
occurring after the Effective Time shall be paid to the holder of any
unsurrendered Old Certificate representing shares of ALBANK Common Stock
converted in the Company Merger into the right to receive shares of such
COFI Common Stock until the holder thereof shall be entitled to receive New
Certificates in exchange therefor in accordance with the procedures set
forth in this Section 3.04, and, following 180 days after the Effective
Date, no such shares of ALBANK Common Stock shall be eligible to vote until
the holder of Old Certificates is entitled to receive New Certificates in
accordance with the procedures set forth in this Section 3.04. After
becoming so entitled in accordance with this Section 3.04, the record
holder thereof also shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had
become payable with respect to shares of COFI Common Stock such holder had
the right to receive upon surrender of the Old Certificates.
(e) Return of Exchange Fund to COFI. Any portion of the Exchange Fund
that remains unclaimed by the stockholders of ALBANK for twelve months
after the Effective Time shall be paid to COFI. Any stockholders of ALBANK
who have not theretofore complied with this Article III shall thereafter
look only to COFI for payment of the shares of COFI Common Stock, cash in
lieu of any fractional shares and unpaid dividends and distributions on
COFI Common Stock deliverable in respect of each share of ALBANK Common
Stock such stockholder holds as determined pursuant to this Agreement, in
each case, without any interest thereon.
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3.05 Anti-Dilution Provisions. In the event COFI changes (or establishes a
record date for changing) the number of shares of COFI Common Stock issued and
outstanding prior to the Effective Date as a result of a stock split, stock
dividend, recapitalization or similar transaction with respect to the
outstanding COFI Common Stock and the record date therefor shall be prior to the
Effective Date, the Exchange Ratio shall be proportionately adjusted.
3.06 Options.
(a) Conversion. At the Effective Time, each option outstanding on the
date of this Agreement (together with any mandatory grants required to be
made to outside directors on the fourth Monday of December, 1998 pursuant
to Section 6(a)(2) of the 1995 Stock Incentive Plan for Outside Directors,
if and only if the Effective Time has not occurred prior to such date) to
purchase shares of ALBANK Common Stock under the ALBANK Stock Plans (each,
a "ALBANK Stock Option") and remaining outstanding immediately prior to the
Effective Time shall, at the Effective Time, be assumed by COFI and each
such ALBANK Stock Option shall continue to be outstanding, but shall
represent an option to purchase shares of COFI Common Stock in an amount
and at an exercise price determined as provided below (and otherwise
subject to the terms of the applicable ALBANK Stock Plan and ALBANK Stock
Option):
(i) the number of shares of COFI Common Stock to be subject to
the continuing option shall be equal to the product of the number of
shares of ALBANK Common Stock subject to the original option and the
Exchange Ratio, provided that any fractional share of COFI Common
Stock resulting from such multiplication shall be rounded down to the
nearest share; and
(ii) the exercise price per share of COFI Common Stock under the
continuing option shall be equal to the exercise price per share of
ALBANK Common Stock under the original option divided by the Exchange
Ratio, provided that such exercise price shall be rounded down to the
nearest cent.
It is intended that the foregoing assumption shall be undertaken
consistent with and in a manner that will not constitute a "modification"
under Section 424 of the Code as to any ALBANK Stock Option which is an
"incentive stock option".
(b) Reservation of COFI Common Stock and Securities Filings. At all
times after the Effective Time, COFI shall reserve for issuance such number
of shares of COFI Common Stock as necessary so as to permit the exercise of
continuing options in the manner contemplated by this Agreement and the
instruments pursuant to which such options were granted. COFI shall make
all filings required under federal and state
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securities laws promptly after the Effective Time so as to permit the
exercise of such continuing options and the sale of the shares received by
the optionee upon such exercise at and after the Effective Time and COFI
shall continue to make such filings thereafter as may be necessary to
permit the continued exercise of continuing options and sale of such
shares.
ARTICLE IV
ACTIONS PENDING TRANSACTION
4.01 Forbearances of ALBANK. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement or any separate agreement
entered into by ALBANK and COFI on the date hereof, without the prior written
consent of COFI (which consent under subsections (k) and (m) shall not be
unreasonably withheld or delayed), ALBANK will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course. Conduct the business of ALBANK and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to (i) preserve intact in any material respect their
business organizations and assets and (ii) maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates, or take any action reasonably likely to materially
impair ALBANK's ability to perform any of its obligations under this
Agreement.
(b) ALBANK Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof, (i) issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional shares of
ALBANK Stock or any Rights, (ii) enter into any agreement with respect to
the foregoing, or (iii) permit any additional shares of ALBANK Stock to
become subject to new grants of employee or director stock options, other
Rights or similar stock-based employee rights.
(c) Other Securities. Issue any other capital securities, capital
stock of any Subsidiary, debentures, or subordinated notes.
(d) Dividends, Etc. (i) Make, declare, pay or set aside for payment
any dividend (other than (A), quarterly cash dividends on ALBANK Common
Stock in an amount not to exceed $0.21 per share with record and payment
dates consistent with past practice, (provided the declaration of the last
quarterly dividend by ALBANK prior to the Effective Time and the payment
thereof shall be coordinated with, and subject to the approval of COFI, so
as to preclude any duplication of dividend benefit) and (B) dividends from
wholly owned Subsidiaries to ALBANK or another wholly owned Subsidiary of
ALBANK) on or in respect of, or declare or make any distribution on any
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shares of ALBANK Stock or (ii) directly or indirectly adjust, split,
combine, redeem, reclassify, purchase or otherwise acquire, any shares of
its capital stock or Rights.
(e) Compensation; Employment Agreements, Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of ALBANK or its
Subsidiaries, or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments) except (i) for oral at will
employment agreements, (ii) for normal individual increases in compensation
to employees in the ordinary course of business consistent with past
practice, (iii) for other changes that are required by applicable law, or
(iv) to satisfy contractual obligations and planned programs existing as of
the date hereof that are Previously Disclosed
(f) Benefit Plans. Enter into, establish, adopt or amend (except as
may be required by existing contractual obligation or applicable law) any
pension, profit sharing, employee stock ownership, retirement, stock
option, stock appreciation, phantom stock, stock purchase, savings,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement (or similar arrangement) related thereto, in respect of any
director, officer or employee of ALBANK or its Subsidiaries, or take any
action to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits payable thereunder.
(g) Dispositions. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its
assets, deposits, business or properties except in the ordinary course of
business for fair value and in a transaction that is not material to it and
its Subsidiaries taken as a whole.
(h) Acquisitions. Except as Previously Disclosed, acquire (other than
by way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith,
in each case in the ordinary and usual course of business consistent with
past practice) all or any portion of, the assets, business, deposits or
properties of any other entity.
(i) Governing Documents. Amend the ALBANK Certificate, ALBANK Bylaws
or the certificate or articles of incorporation, charter or by-laws (or
similar governing documents) of any of ALBANK's Subsidiaries.
(j) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles.
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(k) Contracts. Except to satisfy Previously Disclosed written
commitments outstanding on the date hereof, enter into or terminate any
material contract (as defined in Section 5.03(k)) or amend or modify in any
material respect or renew any of its existing material contracts.
(l) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any
claim, action or proceeding which does not involve precedent for other
material claims, actions or proceedings and which involves solely money
damages in an amount, individually or in the aggregate for all such
settlements, that is not material to ALBANK and its Subsidiaries, taken as
a whole.
(m) Foreclose. Foreclose upon or otherwise take title to or possession
or control of any real property without first obtaining a phase one
environmental report thereon; provided, however, that ALBANK and its
Subsidiaries shall not be required to obtain such a report with respect to
one-to four-family, non-agricultural residential property of five acres or
less to be foreclosed upon unless it has reason to believe that such
property might be in violation of or require remediation under
Environmental Laws.
(n) Deposit Taking and Branch Activities. In the case of ALBANK
Commercial and ALBANK, FSB (i) voluntarily make any material changes in or
to its deposit mix; (ii) increase or decrease the rate of interest paid on
time deposits or on certificates of deposit, except in a manner and
pursuant to policies consistent with past practice; (iii) except as
Previously Disclosed open any new branch or deposit taking facility; (iv)
except as Previously Disclosed close or relocate any existing branch or
other facility; or (v) incur any liability or obligation relating to retail
banking and branch merchandising, marketing and advertising activities and
initiatives materially in excess of the amounts budgeted in its 1998
business plan as Previously Disclosed;
(o) Investments. Enter into any securities transaction for its own
account or purchase or otherwise acquire any investment security for its
own account except purchases and sales of securities consistent with past
practice in order to maintain investment portfolios at ALBANK and its
Subsidiaries that have risk and asset mix characteristics substantially
similar to those of the respective investment portfolios as of the date
hereof.
(p) Capital Expenditures. Purchase or lease any fixed asset where the
amount paid or committed thereof is in excess of $300,000, except for
Previously Disclosed amounts budgeted in the 1998 budget.
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(q) Lending. (i) Make any material changes in its policies concerning
loan underwriting or which persons may approve loans or fail to comply with
such policies; or (ii) make or commit to make any new loan or letter of
credit, or any new or additional discretionary advance under any existing
loan or line of credit, or restructure any existing loan or line of credit
(other than (A) in the case of a consumer loan or extension of credit, in a
principal amount not in excess of $150,000 or an amount that would increase
the aggregate credit outstanding in this category to any one borrower (or
group of affiliated borrowers) to not more than $250,000, (B) in the case
of a loan secured by a first mortgage on an owner one-to-four single-family
principal residence, in a principal amount not in excess of $350,000, (C)
in the case of a loan secured by a first mortgage on commercial or
industrial real property in a principal amount not in excess of $2,500,000
for any loan with personal recourse to the borrower or $1,000,000 for any
loan without personal recourse to the borrower or that would increase the
aggregate credit outstanding in this category to any one borrower (or group
of affiliated borrowers) to not more than $12,000,000, (D) in the case of
any commercial loan secured by a first lien on accounts receivable,
inventory or other tangible assets, in a principal amount not in excess of
$2,500,000 or that would increase the aggregate credit outstanding in this
category to any one borrower (or group of affiliated borrowers) to not more
than $12,000,000, or (E) in the case of a new unsecured commercial line of
credit (x) to a borrower whose annual gross sales are $25,000,000 or more,
in a principal amount not in excess of $2,500,000 or (y) to a borrower
whose annual gross sales are less than $25,000,000, in a principal amount
not in excess of $1,000,000 and provided an existing unsecured commercial
line of credit may be renewed not in excess of its existing amount) in each
case without the prior written consent of COFI acting through its Chief
Executive Officer or Executive Vice President of Lending in a written
notice to ALBANK, which approval or rejection shall be given within five
business days after delivery by ALBANK to such officer of COFI of the
complete loan package;
(r) Adverse Actions. (i) Take any action or fail to take any action
while knowing that such action or inaction would, or is reasonably likely
to, prevent or impede (A) the Company Merger from qualifying for
"pooling-of-interests" accounting treatment or (B) the Company Merger and
the Bank Mergers from qualifying as reorganizations within the meaning of
Section 368 of the Code; or (ii) knowingly take any action or fail to take
any action that is intended or is reasonably likely to result in (A) any of
its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Company Merger set forth
in Article VII not being satisfied or (C) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable law or regulation.
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(s) Risk Management. Except as required by applicable law or
regulation, (i) implement or adopt any material change in its interest rate
and other risk management policies, procedures or practices; (ii) fail to
follow its existing policies or practices with respect to managing its
exposure to interest rate and other risk; or (iii) fail to use commercially
reasonable means to avoid any material increase in its aggregate exposure
to interest rate risk.
(t) Indebtedness. Incur any indebtedness for borrowed money other than
in the ordinary course of business and with a term of one year or less.
(u) Commitments. Agree or commit to do any of the foregoing.
4.02 Forbearances of COFI. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of ALBANK, (which consent under subsection (e) shall not be unreasonably
withheld or delayed), COFI will not, and will cause each of its Subsidiaries not
to:
(a) Preservation. Fail to use reasonable efforts to (i) preserve
intact in any material respect their business organizations and assets and
(ii) maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any action
reasonably likely to materially impair the ability of COFI or Charter
Michigan to perform any of its obligations under this Agreement.
(b) Extraordinary Dividends. Make, declare, pay or set aside for
payment any extraordinary cash dividend or cash distribution.
(c) Adverse Actions. (i) Take any action or fail to take any action
while knowing that such action or inaction would, or is reasonably likely
to, prevent or impede (A) the Company Merger from qualifying for
"pooling-of-interests" accounting treatment or (B) the Company Merger and
the Bank Mergers from qualifying as reorganizations within the meaning of
Section 368 of the Code; or (ii) knowingly take any action or fail to take
any action that is intended or is reasonably likely to result in (A) any of
its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Company Merger set forth
in Article VII not being satisfied or (C) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable law or regulation; provided, however, that nothing contained
herein shall limit the ability of COFI to exercise its rights under the
Stock Option Agreement.
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(d) Accounting Methods. Implement or adopt any material change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles.
(e) Acquisitions. Except as Previously Disclosed, acquire (other than
by way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith,
in each case in the ordinary and usual course of business consistent with
past practice) all or a significant portion of the assets, business,
deposits or properties of any other entity whose principal business is
conducted in, or who maintains a significant physical presence in, the
Community Reinvestment Act Assessment Areas of ALBANK, FSB or ALBANK
Commercial.
(f) Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, COFI has
delivered to ALBANK a schedule and ALBANK has delivered to COFI a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Section
5.03 or 5.04 or to one or more of its covenants contained in Article IV;
provided, that (a) no such item is required to be set forth in a Disclosure
Schedule as an exception to a Specified Representation if its absence would
not be reasonably likely to result in the Specified Representation being deemed
untrue or incorrect under the standard established by Section 5.02, and (b) the
mere inclusion of an item in a Disclosure Schedule as an exception to a
Specified Representation shall not be deemed an admission by a party that such
item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect on the
party making the representation. ALBANK's representations, warranties and
covenants contained in this Agreement shall not be deemed to be untrue or
breached as a result of effects arising solely from actions taken in compliance
with a written request of COFI.
5.02 Standard. No representation or warranty of ALBANK or COFI contained in
Section 5.03(a), (c)(iii), (d), (e), (f)(i), (h), (n), (o), (q), (r), (s), (t),
(v), (w) and (y) or 5.04(a), (c), (d), (e), (f)(i), (h), (k), (m), (n), (o) (r),
(s) and (t) (collectively, the "Specified Representations") shall be deemed
untrue or incorrect, and no party hereto shall be deemed to have breached a
Specified Representation, as a consequence of the existence of any fact, event
or circumstance unless such fact, circumstance or event, individually or taken
together with all other facts, events
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or circumstances inconsistent with any Specified Representation has had or is
reasonably likely to have a Material Adverse Effect. For purposes of this
Agreement, "knowledge" shall mean, with respect to a party hereto, actual
knowledge of any officer of that party with the title, if any, ranking not less
than senior vice president and that party's in-house counsel, if any.
5.03 Representations and Warranties of ALBANK. Subject to Sections 5.01 and
5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, ALBANK hereby represents
and warrants to COFI:
(a) Organization, Standing and Authority. ALBANK is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. ALBANK is duly qualified to do business and is in good
standing in the states of the United States and any foreign jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified.
(b) ALBANK Stock. The authorized capital stock of ALBANK consists
solely of (i) 50,000,000 shares of ALBANK Common Stock, of which 13,190,091
shares were outstanding as of the day prior to the date hereof (inclusive
of RRP Shares), and (ii) 25,000,000 shares of ALBANK Preferred Stock, of
which no shares are outstanding. The outstanding shares of ALBANK Stock
have been duly authorized and are validly issued and outstanding, fully
paid and nonassessable, and subject to no preemptive rights (and were not
issued in violation of any preemptive rights). As of the date hereof,
except as Previously Disclosed, there are no shares of ALBANK Stock
authorized and reserved for issuance, ALBANK does not have any Rights
issued or outstanding with respect to ALBANK Stock, and ALBANK does not
have any commitment to authorize, issue or sell any ALBANK Stock or Rights,
other than pursuant to this Agreement and the Stock Option Agreement. The
number of shares of ALBANK Common Stock which are issuable upon exercise of
each ALBANK Stock Option outstanding as of the date hereof and the exercise
price per share are Previously Disclosed.
(c) Subsidiaries. (i)(A) ALBANK has Previously Disclosed a list of all
of its Subsidiaries together with the jurisdiction of organization of each
such Subsidiary, (B) it owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Subsidiaries, (C) no equity
securities of any of its Subsidiaries are or may become required to be
issued (other than to it or its wholly-owned Subsidiaries) by reason of any
Right or otherwise, (D) there are no contracts, commitments, understandings
or arrangements by which any of such Subsidiaries is or may be bound to
sell or otherwise transfer any equity securities of any such Subsidiaries
(other than to it or its wholly-owned Subsidiaries), (E) there are no
contracts, commitments, understandings, or arrangements relating to its
rights to vote or to dispose of such securities and (F) all the equity
securities of each Subsidiary held by ALBANK or its Subsidiaries are fully
paid
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and nonassessable (except pursuant to 12 U.S.C. Section 55 and Section 114
of the New York Banking Law) and are owned by ALBANK or its Subsidiaries
free and clear of any Liens.
(ii) Neither ALBANK nor any ALBANK Subsidiary owns beneficially
any equity securities or similar interests of any Person, or any
interest in a partnership or joint venture of any kind, other than a
ALBANK Subsidiary.
(iii) Each of ALBANK's Subsidiaries has been duly organized and
is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business
and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be
so qualified.
(d) Corporate Power. Each of ALBANK and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and ALBANK has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby.
(e) Corporate Authority. Subject in the case of this Agreement to
receipt of the requisite approval of this Agreement (including the
agreement of merger set forth herein) by the holders of a majority of the
outstanding shares of ALBANK Common Stock entitled to vote thereon (which
is the only ALBANK shareholder vote required thereon), this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby
have been authorized by all necessary corporate action of ALBANK and the
ALBANK Board on or prior to the date hereof. This Agreement is a valid and
legally binding obligation of ALBANK, enforceable in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting creditors' rights or
by general equity principles).
(f) Regulatory Filings; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by ALBANK or any of its
Subsidiaries in connection with the execution, delivery or performance by
ALBANK of this Agreement or the Stock Option Agreement or to consummate the
Company Merger or the Bank Mergers except for (A) filings of applications
or notices with federal and New York banking and thrift authorities, (B)
filings with the SEC and state securities authorities, and (C) the filing
of (and endorsement of, if required) certificates of merger and articles of
combination with the Delaware Secretary, the Administrator, the New York
State Banking Department and
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the OTS. As of the date hereof, ALBANK is not aware of any reason why the
approvals set forth in Section 7.01(b) will not be received in a timely
manner without the imposition of a condition, restriction or requirement of
the type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the Stock Option Agreement
and the consummation of the transactions contemplated hereby and thereby do
not and will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies or any right
of termination under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or material agreement, indenture or
instrument of ALBANK or of any of its Subsidiaries or to which ALBANK or
any of its Subsidiaries or properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the ALBANK Certificate or the
ALBANK By-Laws, or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or license,
material agreement, indenture or instrument.
(g) Financial Reports and SEC Documents. (i) ALBANK's Annual Reports
on Form 10-K for the fiscal years ended December 31, 1995, 1996 and 1997,
and all other reports, registration statements, definitive proxy statements
or information statements filed or to be filed by it or any of its
Subsidiaries subsequent to December 31, 1995 under the Securities Act, or
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form
filed or to be filed (collectively, ALBANK's "SEC Documents") with the SEC,
as of the date filed, (A) complied or will comply in all material respects
with the applicable requirements under the Securities Act or the Exchange
Act, as the case may be, and (B) did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and each of
the balance sheets or statements of condition contained in or incorporated
by reference into any such SEC Document (including the related notes and
schedules thereto) fairly presents, or will fairly present, the financial
position of ALBANK and its Subsidiaries as of its date, and each of the
statements of income and changes in stockholders' equity and cash flows or
equivalent statements in such SEC Documents (including any related notes
and schedules thereto) fairly presents, or will fairly present, in all
material respects, the results of operations, changes in stockholders'
equity and cash flows, as the case may be, of ALBANK and its Subsidiaries
for the periods to which they relate, in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except in each case as may be noted therein, subject to
normal year-end audit adjustments and the absence of footnotes in the case
of unaudited statements.
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(ii) Except for liabilities incurred in connection with negotiation of
and compliance with this Agreement and otherwise in connection with the
transactions contemplated hereby, since December 31, 1997, ALBANK and its
Subsidiaries have not incurred any liability other than in the ordinary
course of business consistent with past practice.
(iii) Since December 31, 1997, (A) ALBANK and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding matters related to this Agreement
and the transactions contemplated hereby) and (B) no event has occurred or
circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any paragraph of Section V.3
or otherwise), is reasonably likely to have a Material Adverse Effect with
respect to ALBANK.
(h) Litigation. No material litigation, claim or other proceeding
before any Governmental Authority is pending against ALBANK or any of its
Subsidiaries and, to ALBANK's knowledge, no such litigation, claim or other
proceeding has been threatened.
(i) Regulatory Matters. (i) Neither ALBANK nor any of its Subsidiaries
or properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment
letter or similar submission to, or extraordinary supervisory letter from,
any federal or state governmental agency or authority charged with the
supervision or regulation of financial institutions (or their holding
companies) or issuers of securities or engaged in the insurance of deposits
(including, without limitation, the Office of the Comptroller of the
Currency, the Federal Reserve System, the OTS, the New York Superintendent
of Banks, the New York State Banking Department, and the FDIC) or the
supervision or regulation of it or any of its Subsidiaries (collectively,
the "Regulatory Authorities").
(ii) Neither it nor any of its Subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
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(j) Compliance with Laws. Each of ALBANK and its Subsidiaries:
(i) is in substantial compliance with all applicable federal,
state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act of 1977, the Home Mortgage Disclosure Act and all
other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to
permit them to own or lease their properties and to conduct their
businesses as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and
effect and, to ALBANK's knowledge, no suspension or cancellation of
any of them is threatened or will result from the consummation of the
transactions contemplated by this Agreement; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that
ALBANK or any of its Subsidiaries is not in compliance in any material
respect with any of the statutes, regulations, or ordinances which
such Governmental Authority enforces or (B) threatening to revoke any
material license, franchise, permit, or governmental authorization
(nor, to ALBANK's knowledge, do any grounds for any of the foregoing
exist).
(k) Material Contracts; Defaults. Except for this Agreement, the Stock
Option Agreement and those agreements and other documents filed as exhibits
to its SEC Documents, neither it nor any of its Subsidiaries is a party to,
bound by or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) (i) that is a "material contract"
within the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii)
that restricts or limits in any material way the conduct of business by it
or any of its Subsidiaries (it being understood that any non-compete or
similar provision shall be deemed material). Neither it nor any of its
Subsidiaries is in default in any material respect under any material
contract, agreement, commitment, arrangement, lease, insurance policy or
other instrument to which it is a party, by which its respective assets,
business, or operations may be bound or affected, or under which it or its
respective assets, business, or operations receive benefits, 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.
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<PAGE> 31
(l) Brokers. No action has been taken by ALBANK that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding a Previously Disclosed fee to be
paid to Merrill Lynch.
(m) Employee Benefit Plans. (i) Section 5.03(m)(i) of ALBANK's
Disclosure Schedule contains a complete and accurate list of all existing
bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock, stock option, stock appreciation, phantom
stock, severance, welfare and fringe benefit plans, employment or severance
agreements and all similar practices, policies and arrangements maintained
by ALBANK or any of its Subsidiaries in which any employee or former
employee, consultant or former consultant or director or former director of
ALBANK or any of its Subsidiaries participates or to which any such
employees, consultants or directors are a party other than plans and
programs involving immaterial obligations (the "Compensation and Benefit
Plans"). Except as expressly contemplated by a separate agreement entered
into by ALBANK and COFI on the date hereof, neither ALBANK nor any of its
Subsidiaries has any commitment to create any additional Compensation and
Benefit Plan or to modify or change any existing Compensation and Benefit
Plan.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
or any regulations or rules promulgated thereunder, and all material
filings, disclosures and notices required by ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act
and any other applicable law have been timely made. Each Compensation and
Benefit Plan which is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (a "Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter (including a determination that the related trust
under such Compensation and Benefit Plan is exempt from tax under Section
501(a) of the Code) from the IRS, and ALBANK is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the knowledge of
ALBANK, threatened legal action, suit or claim relating to the Compensation
and Benefit Plans. Neither ALBANK nor any of its Subsidiaries has engaged
in a transaction, or omitted to take any action, with respect to any
Compensation and Benefit Plan that would reasonably be expected to subject
ALBANK or any of its Subsidiaries to a material tax or penalty imposed by
either Section 4975 of the Code or Section 502 of ERISA, assuming for
purposes of Section 4975 of the Code that the taxable period of any such
transaction expired as of the date hereof.
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<PAGE> 32
(iii) No material liability (other than for payment of premiums to the
PBGC which have been made or will be made on a timely basis) under Title IV
of ERISA has been or is expected to be incurred by ALBANK or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or any single-employer
plan of any entity (an "ERISA Affiliate") which is considered one employer
with ALBANK under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of
the Code (an "ERISA Affiliate Plan"). None of ALBANK, any of its
Subsidiaries or any ERISA Affiliate has contributed, or has been obligated
to contribute, to a multiemployer plan under Subtitle E of Title IV of
ERISA at any time since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed
for any Compensation and Benefit Plan or by any ERISA Affiliate Plan within
the 12-month period ending on the date hereof. The PBGC has not instituted
proceedings to terminate any Pension Plan or ERISA Affiliate Plan and, to
ALBANK's knowledge, no condition exists that presents a material risk that
such proceedings will be instituted by the PBGC. To the knowledge of
ALBANK, there is no pending investigation or enforcement action by the
PBGC, DOL or IRS or any other Governmental Authority with respect to any
Compensation and Benefit Plan. Under each Pension Plan and ERISA Affiliate
Plan, as of the date of the most recent actuarial valuation performed prior
to the date of this Agreement, the actuarially determined present value of
all "benefit liabilities", within the meaning of Section 4001(a)(16) of
ERISA (as determined on the basis of the actuarial assumptions contained in
such actuarial valuation of such Pension Plan or ERISA Affiliate Plan), did
not exceed the then current value of the assets of such Pension Plan or
ERISA Affiliate Plan and since such date there has been neither a material
adverse change in the financial condition of such Pension Plan or ERISA
Affiliate Plan nor any amendment or other change to such Pension Plan or
ERISA Affiliate Plan that would increase the amount of benefits thereunder
which reasonably could be expected to change such result.
(iv) All material contributions required to be made under the terms of
any Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which
ALBANK or any of its Subsidiaries is a party have been timely made or have
been reflected on ALBANK's financial statements. Neither any Pension Plan
nor any ERISA Affiliate Plan has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA and all required payments to the PBGC with respect to
each Pension Plan or ERISA Affiliate Plan have been made on or before their
due dates. None of ALBANK, any of its Subsidiaries or any ERISA Affiliate
(x) has provided, or would reasonably be expected to be required to
provide, security to any
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Pension Plan or to any ERISA Affiliate Plan pursuant to Section 401(a)(29)
of the Code, and (y) has taken any action, or omitted to take any action,
that has resulted, or would reasonably be expected to result, in the
imposition of a lien under Section 412(n) of the Code or pursuant to ERISA.
(v) Except as Previously Disclosed, neither ALBANK nor any of its
Subsidiaries has any obligations to provide retiree health and life
insurance or other retiree death benefits under any Compensation and
Benefit Plan, other than benefits mandated by Section 4980B of the Code.
Except as Previously Disclosed, there has been no communication to
employees by ALBANK or any of its Subsidiaries that would reasonably be
expected to promise or guarantee such employees retiree health or life
insurance or other retiree death benefits on a permanent basis.
(vi) ALBANK and its Subsidiaries do not maintain any Compensation and
Benefit Plans covering foreign employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, ALBANK has provided or made available to COFI, true and
complete copies of existing: (A) Compensation and Benefit Plan documents
and amendments thereto; (B) trust instruments and insurance contracts; (C)
two most recent Forms 5500 filed with the IRS; (D) most recent actuarial
report and financial statement; (E) the most recent summary plan
description; (F) forms filed with the PBGC (other than for premium
payments); (G) most recent determination letter issued by the IRS; (H) any
Form 5310 or Form 5330 filed with the IRS; and (I) most recent
nondiscrimination tests performed under ERISA and the Code (including
401(k) and 401(m) tests).
(viii) Except as Previously Disclosed or expressly contemplated by a
separate agreement entered into by ALBANK and COFI on the date hereof, the
consummation of the transactions contemplated by this Agreement would not,
directly or indirectly (including, without limitation, as a result of any
termination of employment prior to or following the Effective Time)
reasonably be expected to (A) entitle any employee, consultant or director
to any payment (including severance pay or similar compensation) or any
increase in compensation, (B) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan or (C) result in any
material increase in benefits payable under any Compensation and Benefit
Plan.
(ix) Neither ALBANK nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be deductible as a result of the limitations
under Section 162(m) of the Code and the regulations issued thereunder.
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<PAGE> 34
(x) To the knowledge of ALBANK, as a result, directly or indirectly,
of the transactions contemplated by this Agreement (including, without
limitation, as a result of any termination of employment prior to or
following the Effective Time), none of COFI, ALBANK or the Surviving
Corporation, or any of their respective Subsidiaries will be obligated to
make a payment that would be characterized as an "excess parachute payment"
to an individual who is a "disqualified individual" (as such terms are
defined in Section 280G of the Code), without regard to whether such
payment is reasonable compensation for personal services performed or to be
performed in the future (provided this representation does not take into
account any payments to be made pursuant to any employment agreement to be
entered into by COFI and the Chief Executive Officer of ALBANK).
(xi) There are no LSAR's, Tandem SARs, Stand-Alone SARs or shares of
Phantom Stock (as such terms are defined in the ALBANK Stock Plans)
outstanding under the ALBANK Stock Plans (other than LSARs outstanding as
of December 31, 1997 and Previously Disclosed including the name of the
holder and the strike prices of each holder's LSARs) and except as
Previously Disclosed neither ALBANK nor any ALBANK Subsidiary has any
commitment or obligation to make any awards thereof.
(xii) There are no phantom stock shares or awards outstanding, except
for those allocated under the ALBANK, FSB Supplemental Deferred
Compensation Plan, which shares or awards are set forth for each
participant in the Disclosure Schedule.
(n) Labor Matters. Neither ALBANK nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization,
nor is ALBANK or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or
seeking to compel ALBANK or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving it or any of its Subsidiaries
pending or, to ALBANK's knowledge, threatened, nor is ALBANK aware of any
activity involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other organizational
activity.
(o) Takeover Laws; Dissenters Rights. Subject to the continuing
accuracy of COFI's representation in Section 5.04(q), this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby
are not subject to the requirements of any "moratorium," "control share",
"fair price", "affiliate transactions", "business combination" or other
antitakeover laws and regulations of any state, including the provisions of
Section 203 of the DGCL ("Takeover Laws") applicable to ALBANK or
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any ALBANK Subsidiary. Subject to the continuing accuracy of COFI's
representation in Section 5.04 (q), the provisions of Article EIGHTH of the
ALBANK Certificate do not apply to the entering into of this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and
thereby, including the Company Merger. Subject to the fulfillment of the
conditions of Section 262(b) of the DGCL, holders of ALBANK Common Stock
will not have dissenters' rights in connection with the Company Merger.
(p) Environmental Matters. To ALBANK's knowledge, neither the conduct
nor operation of ALBANK or its Subsidiaries nor any condition of any
property currently or previously owned or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), or on
which any of them holds a Lien, results or resulted in a material violation
of any Environmental Laws and to ALBANK's knowledge, no condition has
existed or event has occurred with respect to any of them or any such
property that, with notice or the passage of time, or both, is reasonably
likely to result in any material liability to ALBANK or any ALBANK
Subsidiary under Environmental Laws. To ALBANK's knowledge, except for any
notice for which, in ALBANK's reasonable judgment, there is no reasonable
basis, neither ALBANK nor any of its Subsidiaries has received any notice
from any person or entity that ALBANK or its Subsidiaries or the operation
or condition of any property ever owned, operated, or held as collateral or
in a fiduciary capacity by any of them are or were in material violation of
or otherwise are alleged to have material liability under any Environmental
Law, including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on,
beneath, or originating from any such property.
(q) Tax Matters. (i) (a) All Tax Returns that are required to be filed
by or with respect to ALBANK and its Subsidiaries have been duly filed, or
requests for extensions have been timely filed or an extension is
automatic) and any such extension has been granted and has not been
rescinded, (b) all Taxes shown to be due on Tax Returns referred to in
clause (a), if filed, and all Taxes required to be shown on the Tax Returns
for which extensions have been granted have been paid in full or adequate
provision has been made for such Taxes on ALBANK's most recent balance
sheet provided to COFI, (c) the Tax Returns referred to in clause (a) that
have been filed have been examined by the IRS or the appropriate state,
local or foreign taxing authority or the period for assessment of the Taxes
in respect of which such Tax Returns were required to be filed has expired,
(d) all deficiencies asserted or assessments made as a result of such
examinations have been paid in full or non-material amounts are being
contested in good faith, (e) no material issues that have been raised by
the relevant taxing authority in connection with the examination of any of
the Tax Returns referred to in clause (a) are currently pending, and (f) no
waivers of statutes of limitation have been given by or requested with
respect to any Taxes of ALBANK or its Subsidiaries. ALBANK has
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made available to COFI true and correct copies of the United States federal
income Tax Returns filed by ALBANK and its Subsidiaries for each of the
three most recent fiscal years ended on or before December 31, 1997.
Neither ALBANK nor any of its Subsidiaries has any material liability with
respect to income, franchise or similar Taxes that accrued on or before the
end of the most recent period covered by ALBANK's SEC Documents filed prior
to the date hereof in excess of the amounts accrued with respect thereto
that are reflected in the financial statements included in ALBANK's SEC
Documents filed on or prior to the date hereof. As of the date hereof,
neither ALBANK nor any of its Subsidiaries has any reason to believe that
any conditions exist that might prevent or impede the Company Merger and
the Bank Mergers from qualifying as reorganizations within the meaning of
Section 368(a) of the Code.
(ii) No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transfer contemplated by this Agreement.
(iii) ALBANK and its Subsidiaries will not be liable for any taxes as
a result of the Company Merger.
(r) Risk Management Instruments. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other
similar risk management arrangements, whether entered into for ALBANK's own
account, or for the account of one or more of ALBANK's Subsidiaries or
their customers (all of which are Previously Disclosed), were entered into
(i) in accordance with prudent business practices and in all material
respects in compliance with all applicable laws, rules, regulations and
regulatory policies and (ii) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and legally
binding obligation of ALBANK or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles), and is in full force
and effect. Neither ALBANK nor its Subsidiaries, nor to ALBANK's knowledge
any other party thereto, is in breach of any of its obligations under any
such agreement or arrangement in any material respect.
(s) Books and Records. The books and records of ALBANK and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein and they fairly reflect the
substance of events and transactions included therein.
(t) Insurance. ALBANK's Disclosure Schedule sets forth all of the
material insurance policies, binders, or bonds maintained by ALBANK or its
Subsidiaries.
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ALBANK and its Subsidiaries are insured with reputable insurers against
such risks and in such amounts as the management of ALBANK reasonably has
determined to be prudent in accordance with industry practices and in
accordance in all material respects with all contractual obligations. All
such insurance policies are in full force and effect; ALBANK and its
Subsidiaries are not in material default thereunder; and all material
claims thereunder have been filed in due and timely fashion.
(u) Accounting Treatment. As of the date hereof, ALBANK is aware of no
reason why the Company Merger will fail to qualify for
"pooling-of-interests" accounting treatment.
(v) Year 2000. Neither ALBANK nor any of its Subsidiaries has reason
to believe that it will receive a rating of less than "satisfactory" on any
Year 2000 Report of Examination of any Regulatory Authority. ALBANK has
disclosed to COFI a complete and accurate copy of its plan, including an
estimate of the anticipated associated costs, for addressing the issues set
forth in the statements of the FFIEC dated May 5, 1997, entitled "Year 2000
Project Management Awareness," and December 17, 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such
issues affect it and its Subsidiaries, and such plan is in material
compliance with the schedule set forth in the FFIEC statements.
(w) Governmental Reviews. No investigation or review by any
Governmental Authority with respect to ALBANK or any ALBANK Subsidiary is
pending or, to the knowledge of ALBANK, threatened, nor has any
Governmental Authority indicated to ALBANK or any ALBANK Subsidiary an
intention to conduct the same, other than normal or routine regulatory
examinations.
(x) Fairness Opinion. On the date of this Agreement, Merrill Lynch &
Co. has provided to the ALBANK Board a written fairness opinion to the
effect that the Exchange Ratio is fair to the stockholders of ALBANK from a
financial point of view.
(y) Compliance with Servicing Obligations. ALBANK and the ALBANK
Subsidiaries are in compliance in all material respects with all contract,
agency and investor requirements and guidelines, and all applicable laws,
rules and regulations of Governmental Authorities, relating to the
servicing and administration of loans by them, or any of them, including
but not limited to, properly and timely making interest rate adjustments to
adjustable rate loans.
(z) Disclosure. The representations and warranties contained in this
Section 5.03 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.03 not misleading.
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5.04 Representations and Warranties of COFI. Subject to Sections 5.01 and
5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, COFI hereby represents
and warrants to ALBANK as follows:
(a) Organization, Standing and Authority. COFI is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. COFI is duly qualified to do business and is in good
standing in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified.
(b) COFI Stock. (i) As of the date hereof, the authorized capital
stock of COFI consists solely of (i) 180,000,000 shares of COFI Common
Stock, of which no more than 128,164,618 shares were outstanding, and
1,750,592 shares were held in treasury, as of the day prior to the date
hereof and (ii) 20,000,000 shares of preferred stock, $0.01 par value per
share, of which none were issued and outstanding on the date hereof. As of
the date hereof, COFI does not have any Rights issued or outstanding with
respect to COFI Common Stock and COFI does not have any commitment to
authorize, issue or sell any COFI Common Stock or Rights, other than
pursuant to (i) this Agreement, (ii) an Agreement and Plan of Merger and
Reorganization with CS Financial Corporation and The Cuyahoga Savings
Association dated April 23, 1998, (iii) outstanding stock options (and any
mandatory future awards under stock option plans) that have been Previously
Disclosed, (iv) its dividend reinvestment plan on terms Previously
Disclosed, and (v) the Rights Agreement referred to in Section 3.01(a)
hereof. The outstanding shares of COFI Common Stock have been duly
authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights).
(ii) The shares of COFI Common Stock to be issued in exchange for
shares of ALBANK Common Stock in the Company Merger, when issued in
accordance with the terms of this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and subject to no preemptive
rights.
(c) Subsidiaries. Each of COFI's Subsidiaries has been duly organized
and is validly existing in good standing under the laws of the jurisdiction
of its organization, and is duly qualified to do business and is in good
standing in the jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and COFI owns,
directly or indirectly, all the issued and outstanding equity securities of
each of its Subsidiaries.
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(d) Corporate Power. Each of COFI and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and each of COFI and
Charter Michigan has the corporate power and authority to execute, deliver
and perform its obligations under this Agreement and in the case of COFI,
the Stock Option Agreement and to consummate the transactions contemplated
hereby and thereby.
(e) Corporate Authority. Subject to the approval of the issuance of
COFI Common Stock to be issued in the Company Merger by the holders of COFI
Common Stock in accordance with the NASDAQ rules (which is the only COFI
stockholder vote required thereon), this Agreement, the Stock Option
Agreement and the transactions contemplated hereby and thereby have been
authorized by all necessary corporate action of COFI and Charter Michigan
and the COFI Board and the Charter Michigan Board on or prior to the date
hereof. This Agreement is a valid and legally binding agreement of COFI and
Charter Michigan, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles).
(f) Regulatory Approvals; No Defaults. (i) No consents or approvals
of, or filings or registrations with, any Governmental Authority or with
any third party are required to be made or obtained by COFI or any of its
Subsidiaries in connection with the execution, delivery or performance by
COFI or Charter Michigan of this Agreement or to consummate the Company
Merger or the Bank Mergers except for (A) the filings referred to in
Section 5.03(f)(i); (B) such filings as are required to be made or
approvals as are required to be obtained under the securities or "Blue Sky"
laws of various states in connection with the issuance of COFI Common Stock
in the Company Merger; and (C) receipt of the approvals set forth in
Section 7.01(b). As of the date hereof, COFI is not aware of any reason why
the approvals set forth in Section 7.01(b) will not be received in a timely
manner without the imposition of a condition, restriction or requirement of
the type described in Section 7.01(b).
(ii) Subject to the satisfaction of the requirements referred to in
the preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a
breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or material agreement, indenture or instrument of COFI or of any
of its Subsidiaries or to which COFI or any of its Subsidiaries or
properties is subject or bound, (B) constitute a breach or violation of, or
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a default under, the certificate of incorporation or by-laws (or similar
governing documents) of COFI or any of its Subsidiaries, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, material agreement, indenture or
instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect. (i)
COFI's SEC Documents, as of the date filed, (A) complied or will comply in
all material respects with the applicable requirements under the Securities
Act or the Exchange Act, as the case may be, and (B) did not and will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and each of the balance sheets or statements of condition
contained in or incorporated by reference into any such SEC Document
(including the related notes and schedules thereto) fairly presents, or
will fairly present, the financial position of COFI and its Subsidiaries as
of its date, and each of the statements of income or results of operations
and changes in stockholders' equity and cash flows or equivalent statements
in such SEC Documents (including any related notes and schedules thereto)
fairly presents, or will fairly present, in all material respects, the
results of operations, changes in stockholders' equity and cash flows, as
the case may be, of COFI and its Subsidiaries for the periods to which they
relate, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except in each
case as may be noted therein, subject to normal year-end audit adjustments
in the case of unaudited statements.
(ii) Since December 31, 1997, no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with
respect to COFI.
(h) Litigation; Regulatory Action. (i) No material litigation, claim
or other proceeding before any Governmental Authority is pending against
COFI or any of its Subsidiaries and, to COFI's knowledge, no such
litigation, claim or other proceeding has been threatened.
(ii) Neither COFI nor any of its Subsidiaries or properties is a party
to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from a
Regulatory Authority, nor has COFI or any of its Subsidiaries been advised
by a Regulatory Authority that such agency is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, commitment
letter, supervisory letter or similar submission.
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(i) Compliance with Laws. Each of COFI and its Subsidiaries:
(i) is in substantial compliance with all applicable federal,
state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act of 1977, the Home Mortgage Disclosure Act and all
other applicable fair lending laws and other laws relating to
discriminatory business practices; and
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to
permit them to conduct their businesses substantially as presently
conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best of
its knowledge, no suspension or cancellation of any of them is
threatened or will result from the consummation of the transactions
contemplated by this Agreement; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that COFI
or any of its Subsidiaries is not in compliance in any material
respect with any of the statutes, regulations, or ordinances which
such Governmental Authority enforces or (B) threatening to revoke any
material license, franchise, permit, or governmental authorization
(nor, to COFI's knowledge, do any grounds for any of the foregoing
exist).
(j) Brokers. No action has been taken by COFI that would give rise to
any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, except for a fee to be paid to Lehman
Brothers.
(k) Takeover Laws. COFI has taken all action required to be taken by
it in order to exempt this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby from, and this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby
are exempt from, the requirements of any Takeover Laws applicable to COFI
or Charter Michigan or their Subsidiaries.
(l) Environmental Matters. To COFI's knowledge, neither the conduct
nor operation of COFI or its Subsidiaries nor any condition of any property
currently or
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previously owned or operated by any of them (including, without limitation,
in a fiduciary or agency capacity), or on which any of them holds a Lien,
results or resulted in a material violation of any Environmental Laws and
to COFI's knowledge no condition has existed or event has occurred with
respect to any of them or any such property that, with notice or the
passage of time, or both, is reasonably likely to result in any material
liability to COFI or any COFI Subsidiary under Environmental Laws. To
COFI's knowledge, except for any notice for which, in COFI's reasonable
judgment, there is no reasonable basis, neither COFI nor any of its
Subsidiaries has received any notice from any person or entity that COFI or
its Subsidiaries or the operation or condition of any property ever owned,
operated, or held as collateral or in a fiduciary capacity by any of them
are or were in material violation of or otherwise are alleged to have
material liability under any Environmental Law, including, but not limited
to, responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such
property.
(m) Tax Matters. (i) All Tax Returns that are required to be filed by
or with respect to COFI and its Subsidiaries have been duly filed, or
requests for extensions have been timely filed (or an extension is
automatic) and any such extension has been granted and has not been
rescinded, (ii) all Taxes shown to be due on Tax Returns referred to in
clause (i) , if filed, and all Taxes required to be shown on the Tax
Returns for which extensions have been granted have been paid in full or
adequate provision has been made for such Taxes on COFI's most recent
balance sheet provided to ALBANK, (iii) the Tax Returns referred to in
clause (i) that have been filed have been examined by the IRS or the
appropriate state, local or foreign taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were required
to be filed has expired, (iv) all deficiencies asserted or assessments made
as a result of such examinations have been paid in full, or non-material
amounts are being contested in good faith, (v) no material issues that have
been raised by the relevant taxing authority in connection with the
examination of any of the Tax Returns referred to in clause (i) are
currently pending, and (vi) no waivers of statutes of limitation have been
given by or requested with respect to any Taxes of COFI or its
Subsidiaries. Neither COFI nor any of its Subsidiaries has any material
liability with respect to income, franchise or similar Taxes that accrued
on or before the end of the most recent period covered by COFI's SEC
Documents filed prior to the date hereof in excess of the amounts accrued
with respect thereto that are reflected in the financial statements
included in COFI's SEC Documents filed on or prior to the date hereof. As
of the date hereof, neither COFI nor any of its Subsidiaries has any reason
to believe that any conditions exist that might prevent or impede the
Company Merger and the Bank Mergers from qualifying as reorganizations
within the meaning of Section 368(a) of the Code.
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(n) Books and Records. The books and records of COFI and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein, and they fairly present the
substance of events and transactions included therein.
(o) Insurance. COFI's Disclosure Schedule sets forth all of the
material insurance policies, binders, or bonds maintained by COFI or its
Subsidiaries. COFI and its Subsidiaries are insured with reputable insurers
against such risks and in such amounts as the management of COFI reasonably
has determined to be prudent in accordance with industry practices and in
all material respects in accordance with all contractual obligations. All
such insurance policies are in full force and effect; COFI and its
Subsidiaries are not in material default thereunder; and all material
claims thereunder have been filed in due and timely fashion.
(p) Accounting Treatment. As of the date hereof, COFI is aware of no
reason why the Company Merger will fail to qualify for
"pooling-of-interests" accounting treatment.
(q) COFI Ownership of ALBANK Stock. Neither COFI nor any of its
Subsidiaries either beneficially owns any shares of ALBANK Common Stock or,
other than as contemplated by this Agreement and the Stock Option
Agreement, has any option, warrant or right of any kind to acquire the
beneficial ownership of any shares of ALBANK Common Stock.
(r) Year 2000. Neither COFI nor any of its Subsidiaries has reason to
believe that it will receive a rating of less than "satisfactory" on any
OTS Year 2000 Report of Examination. COFI has disclosed to ALBANK a
complete and accurate copy of its plan, including an estimate of the
anticipated associated costs, for addressing the issues set forth in the
statements of the FFIEC dated May 5, 1997, entitled "Year 2000 Project
Management Awareness," and December 17, 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such
issues affect it and its Subsidiaries, and such plan is in material
compliance with the schedule set forth in the FFIEC statements.
(s) Governmental Reviews. No investigation or review by any
Governmental Authority with respect to COFI or any of its Subsidiary is
pending or, to the knowledge of COFI, threatened, nor has any Governmental
Authority indicated to COFI or any of its Subsidiary an intention to
conduct the same, other than normal or routine regulatory examinations.
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(t) Risk Management Instruments. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other
similar risk management arrangements, whether entered into for COFI's own
account, or for the account of one or more of COFI's Subsidiaries or their
customers, were entered into (i) in accordance with prudent business
practices and in all material respects in compliance with all applicable
laws, rules, regulations and regulatory policies and (ii) with
counterparties believed to be financially responsible at the time; and each
of them constitutes the valid and legally binding obligation of COFI or one
of its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect. Neither COFI nor its
Subsidiaries, nor to COFI's knowledge any other party thereto, is in breach
of any of its obligations under any such agreement or arrangement in any
material respect.
(u) Fairness Opinion. On the date of this Agreement, Lehman Brothers
has provided to the COFI Board a written fairness opinion to the effect
that the Exchange Ratio is fair to the stockholders of COFI from a
financial point of view.
(v) Disclosure. The representations and warranties contained in this
Section 5.04 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.04 not misleading.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of ALBANK and COFI agrees to 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, proper or desirable, or advisable under applicable
laws, so as to permit consummation of the Transaction as promptly as practicable
and otherwise to enable consummation of the Transaction and shall cooperate
fully with the other party hereto to that end.
6.02 Stockholder Approvals. COFI and ALBANK agree to take, in accordance
with applicable law or NASDAQ rules and their certificates of incorporation and
by-laws, all action necessary to convene an appropriate meeting of their
stockholders to consider and vote upon, in the case of ALBANK, the approval and
adoption of this Agreement and in the case of COFI to approve the issuance of
COFI Common Stock to be issued in the Company Merger, and in each
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case any other matter required to be approved by such stockholders for
consummation of the Company Merger (including any adjournment or postponement,
the "COFI Meeting" or "ALBANK Meeting", whichever is applicable), in each case
as promptly as practicable after the Registration Statement is declared
effective. The COFI Board and the ALBANK Board shall each recommend such
approval, and COFI and ALBANK shall take all reasonable, lawful action to
solicit such approval by its stockholders; provided if either the ALBANK Board
or COFI Board has received a written opinion from its outside counsel to the
effect that such recommendation would result in violation of its fiduciary
duties to stockholders under applicable law arising by virtue of ALBANK's
receipt of a ALBANK Proposal or COFI's receipt of a COFI Proposal, whichever is
applicable, then such Board will not be required to make such recommendation.
6.03 Registration Statement. (a) COFI agrees to prepare a registration
statement on Form S-4 (the "Registration Statement") to be filed by COFI with
the SEC in connection with the issuance of COFI Common Stock in the Company
Merger (including the joint proxy statement and prospectus and other proxy
solicitation materials of COFI and ALBANK constituting a part thereof (the
"Proxy Statement") and all related documents). ALBANK agrees to cooperate, and
to cause its Subsidiaries to cooperate, with COFI, its counsel and its
accountants, in preparation of the Registration Statement and the Proxy
Statement; and provided that ALBANK and its Subsidiaries have cooperated as
required above, COFI agrees to file the Registration Statement (or the form of
the Proxy Statement) in preliminary form with the SEC as promptly as reasonably
practicable and shall use reasonable efforts to cause such filing to occur
within 70 days after execution of this Agreement. If COFI files the Proxy
Statement in preliminary form, it agrees to file the Registration Statement with
the SEC as soon as reasonably practicable after any SEC comments with respect to
the preliminary Proxy Statement are resolved. Each of ALBANK and COFI agrees to
use all reasonable efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as reasonably practicable after
filing thereof. COFI also agrees to use all reasonable efforts to obtain, prior
to the effective date of the Registration Statement, all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement. ALBANK agrees to furnish to COFI
all information concerning ALBANK, its Subsidiaries, officers, directors and
stockholders as may be reasonably requested in connection with the foregoing.
(b) Each of ALBANK and COFI agrees, as to itself and its Subsidiaries, that
none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to stockholders and at the time of
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the COFI Meeting or the ALBANK Meeting, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or any
statement which, in the light of the circumstances under which such statement is
made, will be false or misleading with respect to any material fact, or which
will omit to state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier statement in the Proxy Statement or any amendment or supplement thereto.
Each of ALBANK and COFI further agrees that if it shall become aware prior to
the Effective Date of any information furnished by it that would cause any of
the statements in the Proxy Statement to be false or misleading with respect to
any material fact, or to omit to state any material fact necessary to make the
statements therein not false or misleading, to promptly inform the other party
thereof and to take the necessary steps to correct the Proxy Statement.
(c) COFI agrees to advise ALBANK, promptly after COFI receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of COFI Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
(d) Each of COFI and ALBANK, in consultation with the other, shall employ
professional proxy solicitors to assist it in contacting stockholders in
connection with soliciting votes on the matters to be considered and voted upon
at the COFI Meeting and ALBANK Meeting.
6.04 Press Releases. Each of ALBANK and COFI agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NASDAQ rules, and then only after making reasonable efforts to
first consult with the other party.
6.05 Access; Information. (a) Each of ALBANK and COFI agrees that upon
reasonable notice and subject to applicable laws relating to the exchange of
information, it shall afford the other party and the other party's
Representatives, such access during normal business hours throughout the period
prior to the Effective Time to the books, records (including, without
limitation, Tax Returns and work papers of independent auditors), properties,
personnel and to such other information as any party may reasonably request and,
during such period, it shall furnish promptly to such other party (i) a copy of
each material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and (ii) all other
information concerning the business, properties and personnel of it as the other
may reasonably request.
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(b) Each of ALBANK and COFI agrees that it will not, and will cause its
Representatives not to, use any information obtained pursuant to this Section
6.05 (as well as any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of law, each party will keep confidential, and will cause
its Representatives to keep confidential, all information and documents obtained
pursuant to this Section 6.05 (as well as any other information obtained prior
to the date hereof in connection with the entering into of this Agreement)
unless such information (i) was already known to such party, (ii) becomes
available to such party from other sources not known by such party to be bound
by a confidentiality obligation, (iii) is disclosed with the prior written
approval of the party to which such information pertains or (iv) is or becomes
readily ascertainable from published information or trade sources. In the event
that this Agreement is terminated or the transactions contemplated by this
Agreement shall otherwise fail to be consummated, each party shall promptly
cause all copies of documents, extracts thereof or notes, analyses,
compilations, studies or other documents containing information and data as to
another party hereto to be returned to the party which furnished the same. No
investigation by either party of the business and affairs of the other shall
affect or be deemed to modify or waive any representation, warranty, covenant or
agreement in this Agreement, or the conditions to either party's obligation to
consummate the transactions contemplated by this Agreement.
(c) During the period from the date of this Agreement to the Effective
Time, each party shall promptly furnish the other with copies of all monthly and
other interim financial statements produced in the ordinary course of business
as the same shall become available.
6.06 ALBANK Proposal. ALBANK agrees that it shall not, and shall cause its
Subsidiaries and its and its Subsidiaries' officers, directors, agents, advisors
and affiliates not to, solicit or encourage inquiries or proposals with respect
to, or engage in any negotiations concerning, or provide any confidential
information to, or have any discussions with, any person relating to, any ALBANK
Proposal. It shall immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this Agreement with
any parties other than COFI with respect to any of the foregoing and shall use
its reasonable best efforts to enforce any confidentiality or similar agreement
relating to a ALBANK Proposal in existence on the date hereof. ALBANK shall
promptly (within 24 hours) advise COFI following the receipt by ALBANK of any
ALBANK Proposal and the substance thereof (including the identity of the person
making such ALBANK Proposal), and advise COFI of any material developments with
respect to such ALBANK Proposal immediately upon the occurrence thereof.
Notwithstanding the foregoing but only after receipt of a ALBANK Proposal and
during the period prior to the ALBANK Meeting, ALBANK may provide information at
the request of or enter into negotiations with a third party with respect
thereto, if the ALBANK Board receives a
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written opinion from its outside counsel to the effect that the failure to do so
would result in a breach of the fiduciary duties of the ALBANK Board to its
stockholders under applicable law.
6.07. Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Proxy Statement, (i) COFI shall deliver to ALBANK a schedule of
each person that, to the best of its knowledge, is or is reasonably likely to
be, as of the date of the COFI Meeting, deemed to be an "affiliate" of COFI
(each, a "COFI Affiliate") as that term is used in SEC Accounting Series
Releases 130 and 135; and (ii) ALBANK shall deliver to COFI a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to be, as
of the date of the ALBANK Meeting, deemed to be an "affiliate" of ALBANK (each,
a "ALBANK Affiliate") as that term is used in Rule 145 under the Securities Act
or SEC Accounting Series Releases 130 and 135.
(b) Each of ALBANK and COFI shall use its respective reasonable best
efforts to cause each person who may be deemed to be a ALBANK Affiliate or a
COFI Affiliate, as the case may be, to execute and deliver to ALBANK and COFI on
or before the date of mailing of the Proxy Statement an agreement in the form
attached hereto as Exhibit D or Exhibit E, respectively.
6.08 Takeover Laws. No party hereto shall take any action that would cause
the transactions contemplated by this Agreement or the Stock Option Agreement to
be subject to requirements imposed by any Takeover Law and each of them shall
take all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect.
6.09 Certain Policies. Prior to the Effective Date, ALBANK shall, and shall
cause its Subsidiaries, but only to the extent consistent with generally
accepted accounting principles and on a basis mutually satisfactory to it and
COFI, modify and change its loan, litigation and real estate valuation policies
and practices (including loan classifications and levels of reserves) so as to
be applied on a basis that is consistent with that of COFI; provided, however,
that ALBANK shall not be obligated to take any such action pursuant to this
Section 6.09 unless and until COFI acknowledges that all conditions to its
obligation to consummate the Transaction have been satisfied and certifies to
ALBANK that COFI's representations and warranties, subject to Section 5.02, are
true and correct as of such date and that COFI is otherwise in material
compliance with this Agreement. ALBANK's representations, warranties and
covenants contained in this Agreement shall not be deemed to be untrue or
breached in any respect for any purpose as a consequence of any modifications or
changes undertaken solely on account of this Section 6.09.
6.10 NASDAQ Listing. COFI agrees to use its best efforts to list, prior to
the Effective Time, on the NASDAQ, subject to official notice of issuance, the
shares of COFI Common Stock to be issued to the holders of ALBANK Common Stock
in the Company Merger.
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6.11 Regulatory Applications. (a) COFI and ALBANK and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts to
prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and Governmental
Authorities necessary to consummate the transactions contemplated by this
Agreement. Each of COFI and ALBANK shall have the right to review in advance,
and to the extent practicable each will consult with the other, in each case
subject to applicable laws relating to the exchange of information, with respect
to, all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party apprised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
6.12 Indemnification. (a) Following the Effective Date and for a period of
six years thereafter, COFI shall indemnify, defend and hold harmless the present
and former directors, officers and employees of ALBANK and its Subsidiaries
(each, an "Indemnified Party") against all costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement) to the fullest extent that ALBANK
is permitted to indemnify (and advance expenses to) its directors and officers
under the laws of the State of Delaware, the ALBANK Certificate and the ALBANK
By-Laws as in effect on the date hereof; provided that any determination
required to be made with respect to whether an officer's, director's or
employee's conduct complies with the standards set forth under Delaware law, the
ALBANK Certificate and the ALBANK By-Laws shall be made by independent counsel
(which shall not be counsel that provides material services to COFI) selected by
COFI and reasonably acceptable to such officer or director.
(b) For a period of three years from the Effective Time, COFI shall use its
best efforts to provide that portion of director's and officer's liability
insurance that serves to reimburse the present and former officers and directors
of ALBANK or any of its Subsidiaries (determined as
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of the Effective Time) (as opposed to ALBANK) with respect to claims against
such directors and officers arising from facts or events which occurred before
the Effective Time, which insurance shall contain at least the same coverage and
amounts, and contain terms and conditions no less advantageous, as that coverage
currently provided by ALBANK; provided, however, that in no event shall COFI be
required to expend in the aggregate during the coverage period more than 300
percent of the current annual amount expended by ALBANK (the "Insurance Amount")
to maintain or procure such directors and officers insurance coverage; provided,
further, that if COFI is unable to maintain or obtain the insurance called for
by this Section 6.12(b), COFI shall use its reasonable best efforts to obtain
as much comparable insurance as is available for the Insurance Amount; provided,
further, that officers and directors of ALBANK or any Subsidiary may be required
to make application and provide customary representations and warranties to
COFI's insurance carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
6.12(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify COFI thereof; provided that the failure
so to notify shall not affect the obligations of COFI under Section 6.12(a)
unless and to the extent that COFI is actually prejudiced as a result of such
failure.
(d) If COFI or any of its successors or assigns shall consolidate with or
merge into any other entity and shall not be the continuing or surviving entity
of such consolidation or merger or shall transfer all or substantially all of
its assets to any entity, then and in each case, proper provision shall be made
so that the successors and assigns of COFI shall assume the obligations set
forth in this Section 6.12.
6.13 Benefit Plans.
(a) At the Effective Time, COFI or a COFI Subsidiary shall be
substituted for ALBANK or a ALBANK Subsidiary as the sponsoring employer
under those benefit and welfare plans with respect to which ALBANK or any
of its Subsidiaries is a sponsoring employer immediately prior to the
Effective Time, and shall assume and be vested with all of the powers,
rights, duties, obligations and liabilities previously vested in ALBANK or
its Subsidiary with respect to each such plan. Except as expressly
contemplated by a separate agreement entered into by ALBANK and COFI on the
date hereof, each such plan shall be continued in effect by COFI or any
applicable COFI Subsidiary after the Effective Time without a termination
or discontinuance thereof as a result of the Company Merger or the Bank
Mergers, subject to the power reserved to COFI or any applicable COFI
Subsidiary under each such plan to subsequently amend or terminate the
plan, which amendments or terminations shall comply with applicable law.
ALBANK, each ALBANK Subsidiary, and COFI will use all reasonable efforts
(i) to effect said substitutions and assumptions, and such other actions
contemplated under this
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Agreement, and (ii) to amend such plans as to the extent necessary to
provide for said substitutions and assumptions, and such other actions
contemplated under this Agreement.
(b) At or as promptly as practicable after the Effective Time as COFI
shall reasonably determine, COFI shall provide, or cause a COFI Subsidiary
to provide, to each full time employee of ALBANK, and its wholly-owned
Subsidiaries as of the Effective Time ("ALBANK Employees") the opportunity
to participate in each employee benefit and welfare plan maintained by COFI
or a COFI Subsidiary, whichever is applicable, for similarly-situated
employees provided that with respect to such plans maintained by COFI or a
COFI Subsidiary, whichever is applicable, ALBANK Employees shall be given
credit for service recognized under the corresponding plan of ALBANK and
its Subsidiaries in determining participation in, eligibility for and
vesting in benefits thereunder, and only with respect to severance and
vacation plans, accrual of benefits; provided further that ALBANK Employees
shall not be subject to any waiting periods or pre-existing condition
exclusions under the group health plan of COFI or any applicable COFI
Subsidiary to the extent that such periods are longer or restrictions
impose a greater limitation than the periods or limitations imposed under
the applicable ALBANK group health plan; and provided further that to the
extent that the initial period of coverage for ALBANK Employees under any
plan of COFI or a COFI Subsidiary, whichever is applicable, that is an
"employee welfare benefit plan" as defined in Section 3(1) of ERISA is not
a full 12-month period of coverage, ALBANK Employees shall be given credit
under the applicable welfare plan for any deductibles and co-insurance
payments made by such ALBANK Employees under the corresponding ALBANK
welfare plan during the balance of such 12-month period of coverage.
Nothing in the preceding sentence shall obligate COFI or any COFI
Subsidiary to provide or cause to be provided any benefits duplicative to
those provided under any ALBANK benefit or welfare plan continued pursuant
to subparagraph (a) above, including, but not limited to, extending
participation in any plan which is an "employee pension benefit plan" under
ERISA relative to any period of time with respect to which allocations are
made to ALBANK Employees under any employee pension benefit plan maintained
or sponsored by ALBANK or a ALBANK Subsidiary. Except as otherwise provided
in this Agreement, the power of COFI or any COFI Subsidiary to amend or
terminate any benefit or welfare plans of ALBANK and its Subsidiaries shall
not be altered or affected. Moreover, this subsection 6.13(b) shall not
confer upon any ALBANK Employee any rights or remedies hereunder and shall
not constitute a contract of employment or create any rights, to be
retained or otherwise, in employment at COFI or any COFI Subsidiary.
(c) Any separate agreement entered into by ALBANK and COFI on the date
hereof relating to employee or director benefits is incorporated herein by
reference and shall be deemed a part of this Agreement.
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6.14 Notification of Certain Matters. Each of ALBANK and COFI shall give
prompt notice to the other of any fact, event or circumstance known to it that
(i) is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in any Material Adverse Effect
with respect to it, (ii) would cause or constitute a breach of any of its
representations, warranties, covenants or agreements contained herein as of the
date of this Agreement or (iii) would require any material amendment to any
information Previously Disclosed arising from events or circumstances after the
date of this Agreement or otherwise would cause a material breach of any of its
representations, warranties, covenants or agreements contained herein.
6.15 Directors. (i) At the Effective Time, COFI agrees to cause Herbert
Chorbajian to be elected to the COFI Board with the title of "Vice-Chairman" for
a term expiring in April 1999, and Karen Hitchcock to be elected to the COFI
Board for a term expiring in April 2000 and (iii) within 12 months of the
Effective Time, COFI agrees, subject to OTS approval, to cause John Nigro to be
elected to the COFI Board..
6.16 Advisory Board Membership. At the Effective Time, each member of the
ALBANK Board (other than Herbert Chorbajian and Karen Hitchcock) shall be
offered the opportunity to become a member of an advisory board to be
established by COFI for a five year term, which advisory board shall advise COFI
with respect to the geographic areas in which ALBANK, FSB and ALBANK Commercial
operate as of the date hereof; provided, however, any person serving on such
advisory board who subsequently becomes a director of COFI or any COFI
Subsidiary shall cease to be a member of the advisory board on the date that he
or she commences serving as a director of COFI or any COFI Subsidiary.
6.17 COFI Fee. If (a) the ALBANK Board shall have failed to unanimously
recommend approval and adoption of this Agreement to the ALBANK stockholders,
withdrawn such recommendation or modified or changed such recommendation in a
manner adverse in any respect to the interests of COFI, (b) ALBANK shall have
provided information to or entered into negotiations with a third party with
respect to a ALBANK Proposal as permitted by Section 6.06, (c) ALBANK shall be
in material and willful breach of any of its covenants contained in this
Agreement such that COFI shall be entitled to terminate this Agreement pursuant
to Section 8.01(b), or (d) the stockholders of ALBANK do not approve and adopt
this Agreement at the ALBANK Meeting, in each case after there has been proposed
by a third party a ALBANK Acquisition Transaction (the "ALBANK Proposal"), then,
in any such event, upon the actual consummation of a ALBANK Acquisition
Transaction with a third party within 15 months after the ALBANK Proposal,
ALBANK shall pay COFI a fee of $40 million. The fee to be paid pursuant to this
Section 6.17 shall be reduced to $15 million if either (a) COFI has acquired any
shares pursuant to the exercise of its Option (as defined in the Stock Option
Agreement), ALBANK has repurchased the Option pursuant to the Stock Option
Agreement or ALBANK has
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paid COFI the Surrender Price (as defined in the Stock Option Agreement)
pursuant to the Stock Option Agreement or (b) COFI refuses to execute and
deliver a written release of all of COFI's rights under the Stock Option
Agreement against delivery and payment of the full fee set forth in the
preceding sentence. Any payment made pursuant to this Section 6.17 shall be
made in immediately available funds.
Notwithstanding anything to the contrary contained herein, the fee provided
for in this Section 6.17 shall not be payable if ALBANK has terminated, or has
or had the right to terminate, this Agreement pursuant to Section 8.01(b),
8.01(d)(i), 8.01(d)(ii) as a result of the COFI stockholders not approving the
issuance of COFI Common Stock to be issued in the Company Merger or Section
8.01(e).
For purposes of the foregoing, "ALBANK Acquisition Transaction" shall have
the same meaning as the term "Acquisition Transaction" in the Stock Option
Agreement except that the percentage referred to in clause (z) of the second
sentence shall be 25%.
6.18 ALBANK Fee. If (a) the COFI Board shall have failed to unanimously
recommend to the COFI stockholders approval of the issuance of COFI Common Stock
to be issued in the Company Merger, withdrawn such recommendation or modified or
changed such recommendation in a manner adverse in any respect to the interests
of ALBANK, (b) COFI shall be in material and willful breach of any of its
covenants contained in this Agreement such that ALBANK shall be entitled to
terminate this Agreement pursuant to Section 8.01(b), or (c) the stockholders of
COFI do not approve the issuance of the COFI Common Stock to be issued in the
Company Merger at the COFI Meeting, in each case after there has been proposed
by a third party a COFI Acquisition Transaction (the "COFI Proposal"), then, in
any such event, upon the actual consummation of a COFI Acquisition Transaction
with a third party within 15 months after the COFI Proposal, COFI shall pay
ALBANK a fee of $15 million, in immediately available funds.
Notwithstanding anything to the contrary contained herein, the fee provided
for in this Section 6.18 shall not be payable if COFI has terminated, or has or
had the right to terminate, this Agreement pursuant to Section 8.01(b),
8.01(d)(i), 8.01(d)(ii) as a result of the ALBANK stockholders not approving and
adopting this Agreement or Section 8.01(e).
For purposes of the foregoing, "COFI Acquisition Transaction" shall have
the same meaning as the term ALBANK Acquisition Transaction as such term is
defined for purposes of Section 6.17, except that COFI shall be substituted for
ALBANK as the target of such acquisition transaction.
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6.19. Charitable Contributions. Following the Effective Date, COFI shall
for a period of five years maintain the aggregate level of charitable
contributions in ALBANK markets equal to the amount that appears in the ALBANK
1998 budget.
6.20 Consent Decree. The parties shall use their reasonable best efforts
to cause the Consent Decree entered by the United States District Court of the
Northern District of New York in the matter of UNITED STATES OF AMERICA V.
ALBANK, FSB ET. AL. to be clarified prior to the Effective Time by amending the
last sentence of Paragraph 1 of Section VII to provide that in the event of the
consummation of the Transaction "All provisions of this Decree except as further
limited in Section III shall only apply to those geographic regions where
ALBANK, FSB or ALBANK Commercial did business during calendar year 1998 through
the day next preceding the Effective Date, directly or through correspondents".
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE COMPANY MERGER
7.01 Conditions to Each Party's Obligation to Effect the Company Merger.
The respective obligation of each of COFI, ALBANK and their respective
Subsidiaries to consummate the Company Merger is subject to the fulfillment or
written waiver by COFI and ALBANK prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approvals. This Agreement shall have been duly adopted
by the requisite vote of the stockholders of ALBANK under the DGCL and the
issuance of COFI Common Stock as contemplated by this Agreement shall have
been approved by the requisite vote of the COFI stockholders under NASDAQ
rules.
(b) Regulatory Approvals. All regulatory approvals required to
consummate the Company Merger shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof
shall have expired and no such approvals shall contain (i) any conditions,
restrictions or requirements which the COFI Board reasonably determines
would either before or after the Effective Time have a Material Adverse
Effect on COFI and its Subsidiaries taken as a whole or (ii) any
conditions, restrictions or requirements that are not customary and usual
for approvals of such type and which the COFI Board reasonably determines
would either before or after the Effective Time be unduly burdensome.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation,
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judgment, decree, injunction or other order (whether temporary, preliminary
or permanent) which is in effect and prohibits consummation of the Company
Merger.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) Blue Sky Approvals. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of COFI Common Stock to be issued in the
Company Merger shall have been received and be in full force and effect.
(f) Listing. The shares of COFI Common Stock to be issued in the
Company Merger shall have been approved for listing on the NASDAQ, subject
to official notice of issuance.
(g) Permits, Authorizations. Each of COFI and ALBANK shall have
obtained all material permits, authorizations, consents, waivers and
approvals required for the lawful consummation of the Company Merger.
7.02 Conditions to Obligation of ALBANK. The obligation of ALBANK and its
Subsidiaries to consummate the Company Merger is also subject to the fulfillment
or written waiver by ALBANK prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of COFI set forth in this Agreement shall be true and correct in all
material respects, subject in the case of Specified Representations to the
standard set forth in Section 5.02, as of the date of this Agreement and as
of the Effective Date as though made on and as of the Effective Date
(except that (i) representations and warranties that by their terms speak
as of the date of this Agreement or some other date shall be true and
correct as of such date and (ii) with respect to any information provided
by COFI pursuant to Section 6.14(iii) relating to Section 5.04(l) on
account of events arising after the date of this Agreement the
representations and warranties in Section 5.04(l) shall be deemed true and
correct as of the Effective Date unless such information individually or
taken together with other facts, events and circumstances has resulted in
or is reasonably likely to result in a Material Adverse Effect on COFI),
and ALBANK shall have received a certificate, dated the Effective Date,
signed on behalf of COFI by the Chief Executive Officer and the Chief
Financial Officer of COFI to such effect.
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(b) Performance of Obligations of COFI. COFI and its Subsidiaries
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Effective
Time, and ALBANK shall have received a certificate, dated the Effective
Date, signed on behalf of COFI by the Chief Executive Officer and the Chief
Financial Officer of COFI to such effect.
(c) Opinion of ALBANK's Counsel. ALBANK shall have received an opinion
of Cleary, Gottlieb, Steen and Hamilton, counsel to ALBANK, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, (i) the Company Merger
constitutes a "reorganization" within the meaning of Section 368 of the
Code and (ii) no gain or loss will be recognized by stockholders of ALBANK
who receive shares of COFI Common Stock in exchange for shares of ALBANK
Common Stock, except that gain or loss may be recognized as to cash
received in lieu of fractional share interests. In rendering its opinion,
Cleary, Gottlieb, Steen & Hamilton may require and rely upon
representations contained in letters from ALBANK, COFI and others.
7.03 Conditions to Obligation of COFI. The obligation of COFI and its
Subsidiaries to consummate the Company Merger is also subject to the fulfillment
or written waiver by COFI prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of ALBANK set forth in this Agreement shall be true and correct in all
material respects, subject in the case of Specified Representations to the
standard set forth in Section 5.02, as of the date of this Agreement and as
of the Effective Date as though made on and as of the Effective Date
(except that (i) representations and warranties that by their terms speak
as of the date of this Agreement or some other date shall be true and
correct as of such date and (ii) with respect to any information provided
by ALBANK pursuant to Section 6.14(iii) relating to Section 5.03(p) on
account of events arising after the date of this Agreement the
representations and warranties in Section 5.03(p) shall be deemed true and
correct as of the Effective Date unless such information individually or
taken together with other facts, events and circumstances has resulted in
or is reasonably likely to result in a Material Adverse Effect on ALBANK)
and COFI shall have received a certificate, dated the Effective Date,
signed on behalf of ALBANK by the Chief Executive Officer and the Chief
Financial Officer of ALBANK to such effect.
(b) Performance of Obligations of ALBANK. ALBANK and its Subsidiaries
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Effective
Time, and COFI shall have received a certificate, dated the Effective Date,
signed on behalf of ALBANK by the Chief Executive Officer and the Chief
Financial Officer of ALBANK to such effect.
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(c) Opinion of COFI's Counsel. COFI shall have received an opinion of
Silver, Freedman & Taff, L.L.P., special counsel to COFI, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, the Company Merger and the Bank
Mergers constitute reorganizations under Section 368 of the Code. In
rendering its opinion, Silver, Freedman & Taff, L.L.P. may require and rely
upon representations contained in letters from COFI, ALBANK and others.
(d) Accounting Treatment. COFI shall have received from Deloitte &
Touche, LLP, COFI's independent auditors, letters, dated the date of or
shortly prior to each of the mailing date of the Proxy Statement and the
Effective Date, stating its opinion that the Company Merger shall qualify
for pooling-of-interests accounting treatment.
(e) Compliance with Consent Decree. ALBANK and the ALBANK Subsidiaries
shall be in compliance in all material respects with the Consent Decree
referred to in Section 6.20, and COFI shall have received a certificate,
dated the Effective Date, signed on behalf of ALBANK by the Chief Executive
Officer and General Counsel of ALBANK to such effect.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the Transactions
may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of COFI and ALBANK, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by COFI or
ALBANK, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event of either: (i) a breach by
the other party of any representation or warranty contained herein (subject
in the case of Specified Representations to the standard set forth in
Section 5.02), which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach;
or (ii) a breach by the other party in any material respect of any of the
covenants or agreements contained herein, which breach cannot be or has not
been cured within 30 days after the giving of written notice to the
breaching party of such breach.
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(c) Delay. At any time prior to the Effective Time, by COFI or ALBANK,
if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Company Merger is not
consummated by February 28, 1999, except to the extent that the failure of
the Company Merger then to be consummated arises out of or results from the
knowing action or inaction of the party seeking to terminate pursuant to
this Section 8.01(c).
(d) No Approval. By ALBANK or COFI, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in
the event (i) the approval of any Governmental Authority required for
consummation of the Company Merger and the Bank Mergers shall have been
denied by final nonappealable action of such Governmental Authority or (ii)
any stockholder approval required by Section 7.01(a) herein is not
obtained at the ALBANK Meeting or the COFI Meeting.
(e) Failure to Recommend, Etc. At any time prior to the ALBANK
Meeting, by COFI if the ALBANK Board shall have failed to unanimously
recommend approval and adoption of this Agreement to the ALBANK
stockholders, withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the interests of COFI;
or at any time prior to the COFI Meeting, by ALBANK, if the COFI Board
shall have failed to unanimously recommend to the COFI stockholders
approval of the issuance of COFI Common Stock to be issued pursuant to the
Company Merger, withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the interests of
ALBANK.
(f) Possible Adjustment. By ALBANK, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, at
any time during the ten-day period commencing two days after the
Determination Date (or such shorter period of time from the Determination
Date to the Effective Date as contemplated by Section 2.04(i)), if both of
the following conditions are satisfied:
(i) the Average Closing Price shall be less than the product
of 0.825 and the Starting Price; and
(ii) (A) the number obtained by dividing the Average Closing
Price by the Starting Price (such number being referred to
herein as the "COFI Ratio") shall be less than (B) the
number obtained by dividing the Index Price on the
Determination Date by the Index Price on the Starting Date
and subtracting 0.175 from the quotient in this clause
(ii)(B) (such number being referred to herein as the "Index
Ratio");
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subject, however, to the following three sentences. If ALBANK elects to
exercise its termination right pursuant to the immediately preceding
sentence, it shall give prompt written notice thereof to COFI; provided,
that such notice of election to terminate may be withdrawn at any time
within the above stated period. During the five-day period commencing with
its receipt of such notice, COFI shall have the option of adjusting the
Exchange Ratio to equal the lesser of (x) a number equal to a quotient
(rounded to the nearest one-ten-thousandth), the numerator of which is the
product of 0.825, the Starting Price and the Exchange Ratio (as then in
effect) and the denominator of which is the Average Closing Price, and (y)
a number equal to a quotient (rounded to the nearest one-ten-thousandth),
the numerator of which is the Index Ratio multiplied by the Exchange Ratio
(as then in effect) and the denominator of which is the COFI Ratio. If COFI
so elects, within such five-day period, it shall give prompt written notice
to ALBANK of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 8.01(f) and this
Agreement shall remain in full force and effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified and except
that the Effective Date shall occur on the later of the Effective Date as
determined pursuant to Section 2.04(i) or (ii) or on the fifth business day
after COFI's election as provided in the immediately preceding sentence,
and any references in this Agreement to "Exchange Ratio" shall thereafter
be deemed to refer to the Exchange Ratio as adjusted pursuant to this
Section 8.01(f).
For purposes of this Section 8.01(f), the following terms shall have the
meanings indicated:
"Average Closing Price" means the average of the daily last sale
prices of COFI Common Stock as reported on NASDAQ (as reported in The Wall
Street Journal or, if not reported therein, in another mutually agreed upon
authoritative source) for the ten consecutive full trading days in which
such shares are traded on NASDAQ ending at the close of trading on the
Determination Date.
"Determination Date" means the day that is the latest of (i) the day
of expiration of the last waiting period with respect to any approval of
any Governmental Authority required for consummation of the Company Merger,
(ii) the day on which the last of such approvals is obtained, and (iii) the
day on which the last of the required stockholder approvals has been
received.
"Index Group" means the 16 financial institutions and financial
institution holding companies listed below, the common stock of all which
shall be publicly traded and as to which there shall not have been, since
the Starting Date and before the Determination Date, any public
announcement of a proposal for such company (a) to be acquired or for such
company to acquire another company or companies in a
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transaction with a value exceeding 25% of the acquiror's market
capitalization as of the Starting Date or (b) to convert from a mutual
holding company to a stock form of organization. In the event that the
common stock of any such company ceases to be publicly traded or any such
announcement is made with respect to any such company, such company will be
removed from the Index Group and the weights (which have been determined
based on the number of outstanding shares of common stock) redistributed
proportionately for purposes of determining the Index Price. The 16
financial institutions and financial institution holding companies and the
weights attributed to them are as follows:
Holding Company Weighting
Bank United Corp. 3.4685%
Dime Bancorp, Inc. 12.5431%
Dime Community Bancorp, Inc. 1.3656%
Downey Financial Corp. 3.0841%
GP Financial Corp. 9.2729%
MAF Bancorp, Inc. 1.6500%
North Fork Bancorporation, Inc. 15.6202%
Northwest Bancorp, Inc. (MHC) 5.1418%
Old Kent Financial Corp. 10.0501%
People's Bank 8.0350%
Peoples Heritage Financial Group, 6.01106%
Inc.
Queens County Bancorp 1.6381%
St. Paul Bancorp, Inc. 3.7666%
Star Banc Corp. 10.4913%
Washington Federal, Inc. 5.7529%
Webster Financial Corp. 3.0092%
--------
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Total 100.00%
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices of the
companies comprising the Index Group.
"Starting Date" means June 9, 1998.
"Starting Price" shall mean $34.625.
If any company belonging to the Index Group or COFI declares or
effects a stock split, stock dividend, recapitalization, exchange of shares
or similar transaction between the Starting Date and the Determination
Date, the prices for the common stock of such company or COFI shall be
appropriately adjusted for the purposes of applying this Section 8.01(f).
8.02 Effect of Termination and Abandonment. In the event of termination
of this Agreement and the abandonment of the Transaction pursuant to this
Article VIII, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (i) as set forth in Section 9.01
and (ii) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement giving rise to such termination. Provided,
however, if a party pursues its rights under Section 6.17 or 6.18, whichever is
applicable, then such party shall not be entitled to any other relief.
Conversely, if a party pursues a remedy pursuant to this Section 8.02, then it
shall waive its rights under Section 6.17 or 6.18, whichever is applicable.
Provided, further, that nothing contained herein shall diminish the rights of
COFI under the Stock Option Agreement which may be separately exercised and
enforced pursuant to the terms and provisions thereof.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than the
agreements and covenants contained in Section 6.12, 6.13, 6.15, 6.16 and this
Article IX which shall survive the Effective Time) or the termination of this
Agreement if this Agreement is terminated prior to the Effective Time (other
than Sections 6.03(b), 6.04, 6.05(b), 6.17, 6.18, 8.02 and this Article IX which
shall survive such termination).
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9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (i) waived by the party benefitted by the provision, or (ii)
amended or modified at any time, by an agreement in writing between the parties
hereto executed in the same manner as this Agreement, except that after the
ALBANK Meeting, the consideration to be received by the ALBANK stockholders for
each share of ALBANK Common Stock shall not thereby be decreased.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware applicable to contracts made
and to be performed entirely within such State (except to the extent that
mandatory provisions of Federal law or of the MBCA are applicable).
9.05 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that (i) printing expenses and SEC fees shall be shared equally between ALBANK
and COFI and (ii) in the event that this Agreement is terminated for any reason
other than by COFI pursuant to Section 8.01(b) or (e), or pursuant to
8.01(d)(ii) as a result of the stockholders of ALBANK failing to approve and
adopt this Agreement, COFI will promptly reimburse ALBANK for all third party
expenses incurred by ALBANK to the date of termination in complying or taking
any steps to comply with Section 2.01 in an amount up to but not to exceed
$75,000.
9.06 Notices. All notices, requests and other communications hereunder to a
party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below or such other
address as such party may specify by notice to the parties hereto.
If to ALBANK, to:
ALBANK Financial Corporation
10 North Pearl Street
Albany, NY 12207
Attention: Herbert G. Chorbajian, Chief Executive Officer
With a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006-1470
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<PAGE> 63
Attn: Robert L. Tortoriello, Esq.
If to COFI or Charter Michigan, to:
Charter One Financial, Inc.
1215 Superior Avenue
Cleveland, OH 44114
Attention: Charles J. Koch, Chief Executive Officer
and
Robert J. Vana, Chief Corporate Counsel
With a copy to:
Silver, Freedman & Taff, LLP
Suite 700 East
1100 New York Avenue, N.W.
Washington, DC 20005-3934
Attn: Barry P. Taff, Esq.
9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement,
the Stock Option Agreement, and any Supplemental Letter entered into by the
parties on the date hereof represent the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and thereby and
this Agreement supersedes any and all other oral or written agreements
heretofore made (other than the Stock Option Agreement and any Supplemental
Letter). Except for Section 6.12, 6.13 and 6.15, nothing in this Agreement
expressed or implied, is intended to confer upon any person, other than the
parties hereto or their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
9.08 Interpretation; Effect. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." No provision of this Agreement shall
be construed to require ALBANK, COFI or any of their respective Subsidiaries,
affiliates or directors to take any action which would violate applicable law
(whether statutory or common law), rule or regulation.
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<PAGE> 64
* * *
The parties hereto have caused this Agreement to be executed in
counterparts by their duly authorized officers, all as of the day and year first
above written.
ALBANK FINANCIAL CORPORATION
By:___________________________________
Name:
Title:
CHARTER ONE FINANCIAL, INC.
By:___________________________________
Name:
Title:
CHARTER MICHIGAN BANCORP, INC.
By:___________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 2.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 15, 1998, between Charter One
Financial, Inc., a Delaware corporation ("Grantee"), and ALBANK Financial
Corporation, a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee, Charter Michigan Bancorp, Inc. and Issuer have entered
into an Agreement and Plan of Merger (the "Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to enter into the
Merger Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 1,305,819 fully paid and nonassessable shares of the common stock,
par value $0.01 per share, of Issuer ("Common Stock") at a price per share equal
to the average of last reported sale prices per share of Common Stock as
reported on the NASDAQ National Market System on June 11 and 12, 1998; provided,
however, that in the event Issuer issues or agrees to issue any shares of Common
Stock (other than shares of Common Stock issued pursuant to stock options
granted pursuant to any employee benefit plan prior to the date hereof) at a
price less than such average price per share (as adjusted pursuant to subsection
(b) of Section 5), such price shall be equal to such lesser price (such price,
as adjusted if applicable, the "Option Price"); provided, further, that in no
event shall the number of shares for which this Option is exercisable exceed
9.9% of the issued and outstanding shares of Common Stock. The number of shares
of Common Stock that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 9.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event
<PAGE> 2
(as hereinafter defined) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that the Holder
shall have sent the written notice of such exercise (as provided in subsection
(e) of this Section 2) within six (6) months following such Subsequent
Triggering Event (or such later period as provided in Section 10). Each of the
following shall be an Exercise Termination Event: (i) the Effective Time of the
Company Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Grantee pursuant to Section
8.01(b) or Section 8.01(e) of the Merger Agreement (but only if the breach
giving rise to the termination was willful) (each, a "Listed Termination");
(iii) the passage of fifteen (15) months (or such longer period as provided in
Section 10) after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event or is a Listed Termination
or (iv) the date on which the shareholders of the Grantee shall have voted and
failed to approve the issuance of Grantee common stock to be issued in the
Company Merger (unless (A) Issuer shall then be in material breach of its
covenants or agreements contained in the Merger Agreement or (B) on or prior to
such date, the stockholders of Issuer shall have also voted and failed to
approve and adopt the Merger Agreement). The term "Holder" shall mean the holder
or holders of the Option. Notwithstanding anything to the contrary contained
herein, (i) the Option may not be exercised at any time when Grantee shall be in
material breach of any of its covenants or agreements contained in the Merger
Agreement such that Issuer shall be entitled to terminate the Merger Agreement
pursuant to Section 8.01(b) thereof as a result of a material breach and (ii)
this Agreement shall automatically terminate upon the proper termination of the
Merger Agreement (x) by Issuer pursuant to Section 8.01(b)(ii) thereof as a
result of the material breach by Grantee of its covenants or agreements
contained in the Merger Agreement, or (y) by Issuer or Grantee pursuant to
Section 8.01(d)(i).
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board")
shall have recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction other than the Company Merger. For purposes of
this Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any Issuer
Subsidiary (other than mergers, consolidations or similar transactions (i)
involving solely Issuer and/or one or more wholly-owned (except for
directors' qualifying shares and a de minimis number of other shares)
Subsidiaries of the Issuer, provided, any such transaction is not entered
into in violation of the terms of the Merger Agreement or (ii) in which
the shareholders of Issuer immediately prior to the completion of such
transaction own at least
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<PAGE> 3
50% of the Common Stock of the Issuer (or the resulting or surviving
entity in such transaction) immediately after completion of such
transaction, provided any such transaction is not entered into in
violation of the terms of the Merger Agreement), (y) a purchase, lease or
other acquisition of all or any substantial part of the assets or deposits
of Issuer or any Issuer Subsidiary, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise)
of securities representing 10% or more of the voting power of Issuer or
any Issuer Subsidiary other than by the ALBANK, FSB Incentive Savings and
Employee Stock Ownership Plan (the "ESOP") and (b) "Subsidiary" shall have
the meaning set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary and
other than the ESOP shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding shares
of Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
adopt the Merger Agreement at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have been
cancelled prior to termination of the Merger Agreement if, prior to such
meeting (or if such meeting shall not have been held or shall have been
cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or publicly disclosed an intention to make, a proposal to
engage in an Acquisition Transaction;
(iv) (x) The Issuer Board shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Grantee its recommendation that the shareholders
of Issuer approve the transactions contemplated by the Merger Agreement,
(y) Issuer or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or (z) Issuer shall have provided
information to or engaged in negotiations with a third party relating to a
possible Acquisition Transaction.
(v) Any person other than Grantee or any Grantee Subsidiary shall
have made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy
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<PAGE> 4
statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer);
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging
in an Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(viii)Any person other than Grantee or any Grantee Subsidiary other
than in connection with a transaction to which Grantee has given its prior
written consent shall have filed an application or notice with the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board")
or other federal or state bank regulatory or antitrust authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
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<PAGE> 5
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option .
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file at
the principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of Counsel to the Holder;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed, subject to the receipt of any necessary regulatory
approvals, to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
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<PAGE> 6
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal thrift or banking law, prior
approval of or notice to the Federal Reserve Board or to any state or other
federal regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding
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<PAGE> 7
as a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock that remain subject to the Option
shall be increased so that, after such issuance and together with shares of
Common Stock previously issued pursuant to the exercise of the Option (as
adjusted on account of any of the foregoing changes in the Common Stock), it
equals 9.9% of the number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to
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<PAGE> 8
be filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be
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<PAGE> 9
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee
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<PAGE> 10
Subsidiary, or engage in a plan of exchange with any person, other than Grantee
or a Grantee Subsidiary and Issuer shall not be the continuing or surviving
corporation of such consolidation or merger or the acquirer in such plan of
exchange, (ii) to permit any person, other than Grantee or a Grantee Subsidiary,
to merge into Issuer or be acquired by Issuer in a plan of exchange and Issuer
shall be the continuing or surviving or acquiring corporation, but, in
connection with such merger or plan of exchange, the then outstanding shares of
Common Stock shall be changed into or exchanged for stock or other securities of
any other person or cash or any other property or the then outstanding shares of
Common Stock shall after such merger or plan of exchange represent less than 50%
of the outstanding shares and share equivalents of the merged or acquiring
company, or (iii) to sell or otherwise transfer all or a substantial part of its
or the Issuer Subsidiary's assets or deposits to any person, other than Grantee
or a Grantee Subsidiary, then, and in each such case, the agreement governing
such transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option
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<PAGE> 11
in substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 9.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 9.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute
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<PAGE> 12
Option and the Substitute Shares pursuant to this Section 9 by surrendering for
such purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an agreement, a
copy of this Agreement) and/or certificates for Substitute Shares accompanied by
a written notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the Substitute
Option Issuer to repurchase the Substitute Option and/or the Substitute Shares
in accordance with the provisions of this Section 9. As promptly as practicable
and in any event within five business days after the surrender of the Substitute
Option and/or certificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the Substitute
Share Repurchase Price therefor or the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a
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<PAGE> 13
period ending on the thirtieth day after such date, the Substitute Option Holder
shall nevertheless have the right to exercise the Substitute Option until the
expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation
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<PAGE> 14
of the transactions contemplated by this Agreement, including, without
limitation, applying to the Federal Reserve Board under the BHCA for approval to
acquire the shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems appropriate to do
so.
14. (a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $25 million
and, if it otherwise would exceed such amount, the Grantee, at its sole
election, shall either (a) reduce the number of shares of Common Stock subject
to this Option, (b) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (c) pay cash to Issuer, or (d) any combination thereof, so
that Grantee's actually realized Total Profit shall not exceed $25 million after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) of more than $25 million;
provided that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7, less (y) Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party, less (y)
the Grantee's purchase price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of the Option (or any portion thereof) to any
unaffiliated party, and (v) any amount equivalent to the foregoing with respect
to the Substitute Option.
(d) As used herein, the term 'Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option shall
be the Total Profit determined as of the date of such proposed exercise assuming
that this Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
15. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price; provided, however, that Grantee may not exercise its
rights pursuant to this Section 15 if Issuer has repurchased the Option (or any
portion thereof) or any Option Shares pursuant to Section 7. The "Surrender
Price" shall be equal to $25 million (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares and (ii)
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<PAGE> 15
minus, if applicable, the excess of (A) the net cash amounts, if any, received
by Grantee pursuant to the arms' length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to any
unaffiliated party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 15 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 15 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 15 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Event shall be extended to a date six months from the date
on which the Exercise Termination Event would have occurred if not for the
provisions of this Section 15(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
15).
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or
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<PAGE> 16
Section 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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<PAGE> 17
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
ALBANK FINANCIAL CORPORATION
By
----------------------------------
Name: Hergert G. Chorbajian
Title: Chairman of the Board and
Chief Executive Officer
CHARTER ONE FINANCIAL, INC.
By
----------------------------------
Name: Charles J. Koch
Title: Chairman of the Board and
Chief Executive Officer
EXECUTION COPY
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<PAGE> 1
Exhibit 99.1
FROM CHARTER ONE FINANCIAL, INC.
AND
ALBANK FINANCIAL CORPORATION
<TABLE>
<S> <C> <C> <C> <C> <C>
CONTACTS FROM CHARTER ONE: CONTACT FROM ALBANK FINANCIAL:
INVESTORS- Ellen Batkie (800) 262-6301 Richard Heller (518) 445-2100
MEDIA- William Dupuy (216) 566-5311
</TABLE>
CHARTER ONE AND ALBANK TO MERGE IN STOCK TRANSACTION
----------------------------------------------------
CLEVELAND, OHIO, June 15, 1998 -- Charter One Financial, Inc. (NASDAQ:COFI) and
ALBANK Financial Corporation (NASDAQ:ALBK) today announced a definitive
agreement under which ALBANK would be merged into a wholly owned subsidiary of
Charter One.
ALBANK, the holding company of ALBANK FSB, a federally chartered savings bank,
and ALBANK Commercial, a state-chartered commercial bank, is headquartered in
Albany, New York, has $4.1 billion in assets ($3.5 billion in deposits), and
operates 88 branch offices in upstate New York and 21 in Massachusetts and
Vermont.
Terms of the transaction - Terms of the agreement call for a tax-free exchange
of common shares at a fixed exchange ratio of 2.16 shares of Charter One common
stock for each of ALBANK's common shares. Based on the current number of
outstanding ALBANK common shares, it is expected that approximately 29.6 million
new shares of Charter One common stock will be issued in conjunction with the
merger, bringing the initial value of the transaction to approximately $1.0
billion and the pro forma market capitalization of the combined company to $5.3
billion.
Based on Charter One's June 12 closing stock price of $34.06, the exchange ratio
represents a price of $73.58 for each ALBANK share. The pricing equals 258% of
ALBANK's book value at March 31, 1998 and 24.5 times ALBANK's 1998 estimated
earnings (based on median IBES).
The merger, which would be accounted for as a pooling of interests, is expected
to close in the fourth quarter of 1998. Due diligence work (including an
assessment of Year 2000 readiness) has been completed by both companies and
their advisors. The transaction has been approved by the boards of directors of
both companies and is subject to approval by the Office of Thrift Supervision,
the New York Superintendent of Banking, and each company's shareholders.
1
<PAGE> 2
Cost saves - Charter One estimates that the synergies of the transaction will
produce annual cost savings equal to 30% to 35% of ALBANK's current operating
expenses, or $20 to $24 million after tax. The targeted cost savings would be
primarily created by eliminating duplicative back office operations and from
maintaining a unitary thrift holding company structure. Although job reduction
will result from eliminating certain operations, Charter One indicated its sales
approach frequently results in increased employment in the retail operation
following acquisitions.
Accretive elements - Charter One expects the transaction to break even on an
earnings per share basis for the combined company on cost savings alone. The
initial implementation schedule indicates cost saves could be fully phased in by
the second quarter of 1999.
Beginning in the year 2000, Charter One anticipates a number of additional
revenue opportunities resulting from the merger, including introducing its
retail banking product lines into ALBANK's retail branches (adding $5 to $7
million to annual earnings after tax), redeploying excess ALBANK liquidity into
Charter One loans (resulting in a spread increase on $700 million from 50 to 100
basis points, or incremental earnings of $2 to $5 million annually after tax),
and leveraging ALBANK's capital in excess of 6.5% (estimated at $100 million) to
earn 75 to 125 basis points pretax (equivalent to $7 to $12 million annually
after tax).
Merger costs - One-time, after-tax charges in conjunction with the merger are
expected to approximate $40 to $50 million.
Benefits to ALBANK - "We are very pleased with what this transaction means for
our customers, our community and our shareholders," stated Herbert G.
Chorbajian, ALBANK Chairman and Chief Executive Officer. "With Charter One
establishing a significant presence in western New York late last year, the
addition of our franchise creates a dominant New York institution spearheaded by
one of the premier financial institutions in the country. With this merger,
Charter One will have built an attractive upstate New York franchise that will
offer a broad array of products to meet the needs of our customer base. In terms
of shareholder value, Charter One's record is almost unequaled. Charter One has
consistently generated strong earnings growth which has been rewarded by the
investment community through outstanding share price appreciation over the past
10 years."
Chorbajian noted that upon completion of the merger, all ALBANK FSB and ALBANK
Commercial retail banking branches will remain open. He also noted that all
existing certificates of deposits and loan contracts would be unchanged and that
insured deposits would remain insured by the FDIC.
2
<PAGE> 3
Benefits to Charter One - "This is a tailor-made opportunity for us to continue
our market extension efforts in New York," commented Charles John Koch, Charter
One's Chairman and Chief Executive Officer. "The addition of ALBANK gives us one
contiguous market that runs from southeastern Michigan through to Springfield,
Massachusetts. We have stated all along that we are attracted to areas of
similar demographic character as that in Ohio, Michigan and western New York.
The primary geographical areas of the ALBANK franchise meet those criteria and
should be an ideal market for our retail lending and savings products."
Koch continued, "In addition to strong market presence, one of the most
compelling benefits of this transaction is a very attractive deposit base.
ALBANK has almost no wholesale funding; it has built a deposit base that is 46%
core with an average cost of 4.05%. By adding ALBANK's deposits to ours, we
immediately increase our funding mix from 60% in deposits to 66% and improve our
loan to deposit ratio from 122% to 111%. This fits extremely well with our
capacity as an excess asset generator. We can use this attractive deposit base
to fund retail lending at profitable margins.
"Our two organizations have very complementary asset generation capabilities,"
Koch observed. "While we are strong in residential and consumer lending, ALBANK
has a significant and growing base of commercial loans and companion business
checking products. This commercial strength will help Charter One accelerate its
growth in that area."
Koch went on to discuss the opportunity to once more capitalize on its
successful experience of quickly introducing a strong sales culture into an
existing organization and launching a product set that matches the needs of the
market. He noted that this was precisely the result following the entry into
Michigan in late 1995 with the FirstFed Michigan merger and again in western New
York with the October 1997 merger with RCSB Financial. "Our success in Michigan
is well documented, and the initial results in western New York are following a
parallel path. It has been only eight months since we concluded the RCSB deal
and during the first five months of 1998 our western New York division closed
over $260 million in loans, more than triple the level of last year's comparable
period. Probably the most significant statistic is the shift in our mortgage
lending market rank following these mergers. In Michigan we have moved from
number 6 to number 2, and in New York we have moved from number 9 just last year
to the number 1 lender in our markets."
3
<PAGE> 4
Additional terms of the transaction - Following the acquisition, three ALBANK
directors will join Charter One's Board of Directors, including Mr. Chorbajian,
who will join Charter One as a Vice Chairman.
As part of the transaction Charter One would receive a break-up fee of $40
million under certain circumstances, including an option to purchase, under
certain circumstances, shares of ALBANK common stock equal to 9.9% of ALBANK's
outstanding common stock. Additionally, ALBANK may terminate the transaction in
the event Charter One's common stock price declines more than 17.5 percent
during the period from June 9, 1998 through the date by which all regulatory and
shareholder approvals have been obtained and all waiting periods have expired
and such decline is at least 17.5 percentage points more than the decline in the
weighted average stock price of a predefined peer group during that same period.
Lehman Brothers is acting as financial advisor to Charter One, and Merrill Lynch
is acting as financial advisor to ALBANK. Both have provided fairness opinions
in connection with the transaction.
With nearly $20 billion in total assets, Charter One Bank is one of the largest
thrifts in the country. The Bank currently has more than 220 branch locations in
Ohio, Michigan and western New York. Additionally, Charter One Mortgage
Corporation, the Bank's mortgage banking subsidiary, operates 39 loan production
offices in 13 states, and ACSI, the Bank's indirect auto finance subsidiary,
generates loans in eight states. The Company's press releases are available by
telefax at no charge by calling PR Newswire Fax On Demand. To retrieve a
specific press release, call (800) 758-5804 and reference account 313075. Press
releases along with additional information may also be found at the Company's
web site: www.charterone.com.
4
<PAGE> 5
Forward-looking Information
Statements contained in this news release that are not historical facts,
including estimates, may constitute forward-looking statements (within the
meaning of the Private Securities Litigation Reform Act of 1995), which involve
significant risks and uncertainties. Actual results may differ materially from
the results discussed in these forward-looking statements. Factors that might
cause such a difference include, but are not limited to: (1) expected cost
savings from the merger cannot be fully realized within the expected time frame;
(2) revenues following the merger are lower than expected; (3) competitive
pressures among depository institutions increase; (4) costs or difficulties
related to the integration of the businesses of Charter One and ALBANK are
greater than expected; (5) changes in the interest rate environment reduce
interest margins; (6) general economic conditions, either nationally or in the
states in which the combined company will be doing business, are less favorable
than expected; and (7) legislation or regulatory changes adversely affect the
business in which the combined company would be engaged.
5
<PAGE> 6
CHARTER ONE FINANCIAL, INC./ALBANK FINANCIAL CORPORATION
AT-A-GLANCE
First Quarter 1998 Selected Financial Data
(financial ratios reflect year-to-date results, annualized)
($ in millions, except per share data)
<TABLE>
<CAPTION>
PRO FORMA
COFI ALBK (COMBINED)
---- ---- ----------
<S> <C> <C> <C>
Total assets ........................ $19,457.0 4,089.4 23,546.4
Total loans ......................... 12,835.2 2,814.0 15,649.2
Total deposits ...................... 10,548.1 3,539.7 14,087.8
Total equity ........................ 1,433.4 366.8 1,800.2
Shareholders' equity/assets ......... 7.37% 8.97% 7.65%
Net income (3 months ended) ......... 63.5 9.8 73.3
Return on assets .................... 1.28% 0.98% 1.31%(a)
Return on equity .................... 18.00% 10.96% 17.59%(a)
Nonperforming assets ................ $74.6 37.7 112.3
Nonperforming assets/assets ......... 0.38% 0.92% 0.48%
Book value per share ................ $11.19 28.54 11.55(c)
Closing stock price ................. 34.06(b) 51.50(b) --
Fully diluted shares (3 months ended) 131.6 13.7 161.2(c)
Market capitalization ............... $4,364.6 661.9 5,310.0(c)
Retail banking locations ............ 223 109 332
Stand-alone loan offices ............ 39 0 39
Households served (000s) ............ 828,000 270,000 1,098,000
Employees ........................... 4,181 1,458 5,639
- - ---------------------------
<FN>
(a) Assumes cost saves equal to 30% of ALBANK annual operating expenses.
(b) Friday, June 12 closing price.
(c) Adjusted for the 2.16 exchange ratio.
</FN>
</TABLE>
6
<PAGE> 1
Exhibit 99.2
CHARTER ONE FINANCIAL, INC.
ALBANK FINANCIAL CORPORATION
[CHARTER ONE FINANCIAL, INC.(R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
MERGER PRESENTATION
JUNE 15, 1998
<PAGE> 2
FORWARD-LOOKING INFORMATION
This presentation contains estimates of future operating results for 1998
for both Charter One Financial, Inc. and ALBANK Financial Corporation on a
stand-alone and pro forma combined basis, as well as estimates of financial
condition, operating efficiencies and revenue creation on a combined basis.
These estimates constitute forward-looking statements (within the meaning
of the Private Securities Litigation Reform Act of 1995), which involve
significant risks and uncertainties. Actual results may differ materially
from the results discussed in these forward-looking statements. Factors
that might cause such a difference include, but are not limited to: (1)
expected cost savings from the Merger cannot be fully realized or realized
within the expected time frame; (2) revenues following the Merger are lower
than expected; (3) competitive pressures among depository institutions
increase significantly; (4) costs or difficulties related to the
integration of the business of Charter One Financial, Inc. and ALBANK
Financial Corporation are greater than expected; (5) changes in the
interest rate environment reduce interest margins; (6) general economic
conditions, either nationally or in the states in which the combined
company will be doing business are less favorable than expected, and (7)
legislation or regulatory changes adversely affect the businesses in which
the combined company would be engaged.
[CHARTER ONE FINANCIAL, INC.(R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
<PAGE> 3
COFI MERGER HISTORY
POST COFI IPO (1/88) PRE COFI/IPO
- - -------------- ------------
1998 CS Financial (pending) 7 Ohio Institutions
1997 RCSB Financial
1997 Haverfield
1996 First Nationwide
1995 FirstFed Michigan
1995 ICX Corporation (leasing)
1994 Citizen's Equitable
1993 Women's Federal
1992 1st American
1991 1st Fed Toledo
1991 Civic Savings
1990 Broadview Savings
1989 Western Reserve
1989 1st Fed Akron
[CHARTER ONE FINANCIAL, INC.(R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
<PAGE> 4
SHARE PRICE GROWTH
COFI STOCK HAS OUTPERFORMED S&P 500 INDEX
COMPOUNDED ANNUAL TOTAL RETURN:
COFI - 38%
S&P 500 - 19%
<TABLE>
<CAPTION>
12-88 12-89 12-90 12-91 12-92 12-93 12-94 12-95 12-96 12-97 3-98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36 $33.47
31
26
21
16
11
S&P 500
6 $7.13
1 I.P.0. $1.16
</TABLE>
QUARTER CLOSE, ADJUSTED FOR STOCK SPLITS/DIVIDENDS
*S&P 500 Index relative to COFI share price; data source - Bloomberg
[CHARTER ONE FINANCIAL, INC.(R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
3
<PAGE> 5
COFI EARNINGS GROWTH
COFI EARNINGS HAVE BEEN ACCELERATED THROUGH MERGERS
COMPOUNDED ANNUAL EARNINGS GROWTH OF 18%
<TABLE>
<CAPTION>
1998 1989 1990 1991 1992 1993 1994 1995 1996 1997 3/98*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
$2.00
$1.75
$1.50
$1.25
$1.00
$0.75
$0.50
$0.25
COFI $0.41 $0.52 $0.56 $0.95 $1.00 $1.21 $1.32 $1.25 $1.64 $1.86 $1.94*
FIRST AKRON, WESTERN
BROADVIEW
CIVIC
TOLEDO
FIRST AMERICAN
WOMEN'S FEDERAL
FIRSTFED MICHIGAN
HAVERFIELD
RCSB FINANCIAL
</TABLE>
Based on originally reported operating earnings, adjusted for stock
splits/dividends.
* Annualized based on 1st Q 1998 earnings.
[CHARTER ONE FINANCIAL, INC.(R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
4
<PAGE> 6
SUPERIOR EFFICIENCY
COFI EFFICIENCY RATIO HAS BEEN ENHANCED BY MERGERS
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 3-98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
75%
70%
65%
60%
55%
50%
45%
40%
COFI 71% 70% 66% 60% 57% 51% 50% 49% 42% 46% 44%
FIRST AKRON, WESTERN
BROADVIEW
CIVIC
TOLEDO
FIRST AMERICAN
WOMEN'S FEDERAL
FIRSTFED MICHIGAN
HAVERFIELD
RCSB
</TABLE>
OTHER EXPENSES (EXCL GOODWILL) DIVIDED BY NET INTEREST INCOME PLUS OTHER
INCOME (EXCL GAIN ON SALE)
Prior period ratios have not been restated to reflect poolings.
[CHARTER ONE FINANCIAL, INC.(R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
5
<PAGE> 7
SUPERIOR EFFICIENCY
NET INCOME PER EMPLOYEE FOR SELECTED BANKS & THRIFTS*
<TABLE>
<S> <C> <C> <C>
FITB 65 K HBAN 37 K
COFI 61 K PHBK 31 K
WAMU 53 K ALBK 27 K
STB 49 K TCB 27 K
KEY 38 K NCC 27 K
MTB 37 K INDUSTRY AVG 36 K
</TABLE>
*Based on 1st Qtr 1998, annualized
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
6
<PAGE> 8
SNAPSHOT OF COFI/ALBK COMBINATION
- - - Unitary thrift holding company
- - - 332 retail banking offices - OH, MI, western and upstate NY, MA & VT
- - - 39 loan offices in 13 states
- - - Indirect auto lending in 8 states
- - - $5.3 B market cap (3rd highest thrift)
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
7
<PAGE> 9
SNAPSHOT OF COFI/ALBK COMBINATION
- - - $24 B assets (4th largest thrift)
- - - 7.6% equity/assets
- - - $14 B deposits @ 4.28%
- - - 1.9 M deposit accounts
- - - 705,000 DDAs
- - - 460,000 debit cards outstanding
- - - 1.1 M households
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
8
<PAGE> 10
223 RETAIL BANKING LOCATIONS
COFI
[Map of Retail Banking Locations]
OH
Charter One Bank (102)
Akron/Canton (23)
Metro Cleveland (51)
Portsmouth (2)
Toledo (20)
Youngstown (6)
MI
First Federal of Michigan(83)
Lansing (4)
Kalamazoo (4)
Metro Detroit (75)
NY
Rochester Community Savings Bank (38)
Buffalo (17)
Rochester (21)
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
9
<PAGE> 11
332 RETAIL BANKING LOCATIONS
COFI & ALBK
[map of 332 Retail Banking Locations]
OH
Charter One Bank (102)
Akron/Canton (23)
Metro Cleveland (51)
Portsmouth (2)
Toledo (20)
Youngstown (6)
MI
First Federal of Michigan (83)
Kalamazoo (4)
Lansing (4)
Metro Detroit (75)
NY
Rochester Community Savings Bank (38)
Buffalo (17)
Rochester (21)
VT MA
Albank (109)
Albany (28)
Binghamton (16)
Newburg (17)
Rutland (5)
Springfield (9)
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
10
<PAGE> 12
DEAL ECONOMICS
- - - Total value approx $1 B, 29.6 M shares to be issued
- - - 2.58x ALBK book value, 24.5 ALBK 1998 IBES EPS
- - - Breaks even on cost saves alone
- - - Accretive to stated book value
- - - One-time charges/costs of $40 to 50 M, after tax
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
11
<PAGE> 13
DEAL PRICING
<TABLE>
ALBK/COFI RECENT THRIFT COFI
MERGER(a) MERGERS (c) STAND-ALONE
------------ ------------- -------------
<S> <C>
Price to 1998 IBES (b) 24.5 X 24.2 X 16.2 X
Price / book value 2.58 X 3.20 X 3.04 X
Price / tangible book 3.30 X 3.53 X 3.26 X
Premium to deposits 22% 31% N/A
<FN>
(a) Based on COFI closing price of $34.06 on June 12, 1998
(b) Based on the median IBES estimate on June 12, 1998
(c) Median for 1998 thrift pooling deals greater than $500 million
</FN>
</TABLE>
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
12
<PAGE> 14
DEAL STRUCTURE
- - - Tax-free exchange
- - - 2.16 COFI shares for every ALBK share
- - - Pooling of interests accounting
- - - 3 ALBK directors join COFI board, incl CEO Herbert Chorbajian who becomes a
Vice Chairman
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
13
<PAGE> 15
DEAL STATUS
- - - Due diligence completed
- - - Definitive agreement signed
- - - Pending regulatory & shareholder approval
- - - Targeting completion 4th Q 1998
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
14
<PAGE> 16
STRATEGIC BENEFITS
- - - Market extension opportunity
- ALBANK is a natural extension to Rochester/Buffalo franchise
- Creates a significant "Upstate NY" thrift with presence in MA and VT
- Levers COFI back office and western NY network
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
15
<PAGE> 17
STRATEGIC BENEFITS
- - - ALBK franchise
- Albany demographics similar to Rochester/Buffalo
- Terrific platform for COFI products
- Strong transaction account balances provide significant fee revenue
potential with COFI products
- $4.5 B mortgage market
<TABLE>
<S> <C>
[CHARTER ONE FINANCIAL CORPORATION(R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
</TABLE>
16
<PAGE> 18
STRATEGIC BENEFITS
- Provides significant deposit base
- Adds $3.5 B in deposits
- 46% core
- Adds 134,000 DDAs
- Adds 270,000 households
- Loan to deposit ratio of 79% is ideal
for excess asset generator
- Low cost of deposits @ 4.05%
- Strong market share
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
17
<PAGE> 19
STRATEGIC BENEFITS
- Reduce overall cost of deposits
COFI $10.5 B 4.36%
ALBK 3.5 B 4.05%
-------
$14.0 B 4.28%
=======
- Strong deposit market share
- #3 in Albany County -14% share
- #5 in Upstate NY - 7% share
- #5 in Vermont - 6% share
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
18
<PAGE> 20
STRATEGIC BENEFITS
- - - Improve funding mix
PRO FORMA
COFI ALBK COMBINED
------------ ----------- ------------
Deposits $ 10.5 B 60% $ 3.5 B 97% $ 14.0 B 66%
Borrowings 7.0 B 40% .1 B 3% 7.1 B 34%
-------- ------- --------
$ 17.5 B $ 3.6 B $ 21.1B
======== ======= ========
Loans/deposits 122% 79% 111%
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
19
<PAGE> 21
STRATEGIC BENEFITS
LOW INTEGRATION RISK
- Data processing systems compatible
- common IBM architecture and platforms
facilitate speedy conversion
- minimizes Y2K exposure
- Comparable product line is easy to convert
- no new business lines
- Existing presence in NY fits nicely into regional model
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
20
<PAGE> 22
STRATEGIC PLAN
- - - Realize 30-35% annual cost savings
- - - Export COFI product sets and sales culture into ALBK branches
- - - Utilize excess capital to help optimize balance sheet
- - - Redeploy significant excess liquidity into retail lending
- - - Complete operational conversion 4/1/99
- - - Maintain one-bank structure for efficiency
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
21
<PAGE> 23
PROJECTED COST SAVES/SYNERGIES
Targeting 30-35% of ALKB G&A
<TABLE>
<CAPTION>
<S> <C> <C>
30% 35%
------ -------
Salaries & benefits $ 20 M to $ 23 M
Professional services & other 7 M to 8 M
Occupancy & equipment 4 M to 5 M
------ -------
Benefit before tax $ 31 M to $ 36 M
====== =======
Benefit after tax $ 20 M to $ 24 M
====== =======
</TABLE>
[CHARTER ONE FINANCIAL, INC.(R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
22
<PAGE> 24
DEAL BREAKS EVEN ON COST SAVES ALONE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1998 DILUTED EPS ON
IBES* SHARES EARNINGS 161 M SHARES
------ ------- ---------- ------------
COFI $2.10 131.6 M $276.4 M
ALBK 3.00 13.7 M 41.1 M
----------
317.5 M
Cost saves 20 to 24 M
----------
$337.5 to 341.5 M $2.10 to 2.12
=================
</TABLE>
- - ---------------
*Based on the IBES median estimate on June 10, 1998.
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
23
<PAGE> 25
<TABLE>
<CAPTION>
ESTIMATED ONE-TIME MERGER COSTS
<S> <C> <C>
After tax
--------------
Severance & benefits $17 M to $22 M
Duplicative systems & facilities 7 M to 9 M
Transaction costs 11 M to 13 M
Other 5 M to 6 M
--------------
$40 M to $50 M
==============
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
</TABLE>
24
<PAGE> 26
ACCRETIVE ELEMENTS
Beginning in Year 2000
<TABLE>
<CAPTION>
After-tax
Annual Benefit
--------------
<S> <C> <C>
Use COFI product set to increase retail
fee banking revenue $ 5 to 7 M
Redeploy excess liquidity into loans
(increase spread on $700M from 50
to 100 bp) 2 to 5 M
Leverage ALBK capital in excess of 6.5%
($100 M, to earn 75-125 bp pretax) 7 to 12 M
-------------
$ 14 to 24 M
=============
Per diluted share (161 M) $.09 to .15
</TABLE>
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
25
<PAGE> 27
ACCRETIVE ELEMENTS
INCREASE ALBK'S LENDING PRODUCTION
-Introducing COFI products into ALBK network
should result in increased originations.
-COFI strategy emphasizes "energized assets"
(non single-family lending)
-COFI is an established excess asset
generator
--loan originations consistently exceed pay downs
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
26
<PAGE> 28
COFI IS AN EXCESS ASSET GENERATOR
1998 LOAN PRODUCTION RUNNING AT RECORD LEVELS
<TABLE>
<CAPTION>
<S> <C> <C>
1ST 5 MOS. 1998
1998 ANNUAL GOAL
----------- ------------
Single family $ 2,532 M $ 4,000 M
Auto 485 M 900 M
Consumer 932 M 1,400 M
Comm'l & business 276 M 600 M
----------- ------------
Energized assets 1,693 M 2,900 M
----------- ------------
Total originations $ 4,225 M $ 6,900 M
=========== ============
</TABLE>
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
27
<PAGE> 29
COFI IS AN EXCESS ASSET GENERATOR
PORTFOLIO MIX REFLECTS EMPHASIS ON ENERGIZED ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
5/31/98 12/31/97
------------- --------------
Single Family $ 8.4 B 62% $ 8.4 B 66%
Energized assets 5.2 B 38% 4.3 B 34%
------------- --------------
$ 13.6 B $ 12.7 B
============= ==============
</TABLE>
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
28
<PAGE> 30
OPERATIONAL RESULTS OF RECENT ACQUISITIONS
MICHIGAN STATISTICS
COFI/FirstFed merger completed 10/31/95
<TABLE>
<CAPTION>
<S> <C> <C>
1ST 5 MONTHS
-------------------------
1995 1998
----------- ----------
Mortgage loan originations $ 178 M $ 686 M
- - - Rank in market #6 #2
Consumer loan originations $ 2 M 283 M
# new checking accounts 5 K 28 K
Net checking acct fees/acct $ 59 114
</TABLE>
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
29
<PAGE> 31
OPERATIONAL RESULTS OF RECENT ACQUISITIONS
NEW YORK STATISTICS
COFI/RCSB merger completed 10/3/97
<TABLE>
<CAPTION>
<S> <C> <C>
1ST 5 MONTHS
-------------------------
1997 1998
----------- ----------
Mortgage loan originations $ 44 M $ 150 M
- - - Rank in Market #9 #1
Consumer loan originations $ 32 M 113 M
# new checking accounts 9 K 15 K
Net checking acct fees/acct $ 51 60
</TABLE>
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
30
<PAGE> 32
PRO FORMA HIGHLIGHTS
BASED ON 1ST QTR 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRO FORMA
COFI ALBK COMBINED*
-------- ------- ---------
ROAA 1.28% .98% 1.31%
ROAE 18.00% 10.96% 17.59%
Equity to assets 7.37% 8.97% 7.65%
Book value/share $11.19 $28.54 $11.55
NPA ratio .38% .92% .48%
Efficiency ratio 45% 58% 44%
Net yield, 1st Qtr 2.98% 3.95% 3.14%
Loans/deposits 122% 79% 111%
</TABLE>
*Assumes annual cost saves of 30% are fully phased in
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
31
<PAGE> 33
BALANCE SHEET ($B)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRO FORMA
COFI ALBK COMBINED
--------- --------- ---------
Net loans and leases $ 12.8 $ 2.8 $ 15.6
MBS & investments 6.1 1.0 7.1
Other assets .5 .3 .8
--------- --------- ---------
Total assets $ 19.4 $ 4.1 $ 23.5
========= ========= =========
Deposits $ 10.5 $ 3.5 $ 14.0
Borrowings 7.0 .1 7.1
Other .5 .1 .6
--------- --------- ---------
Total liabilities 18.0 3.7 21.7
--------- --------- ---------
Total equity 1.4 .4 1.8
--------- --------- ---------
Total liabilities &
equity $ 19.4 $ 4.1 $ 23.5
========= ========= =========
</TABLE>
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
32
<PAGE> 34
IMPACT OF COMBINATION
- - - Creates major New York franchise
- strong market share
- low-cost deposits
- high % core
- - - Significant revenue growth potential
- - - Outstanding asset quality
- - - Substantial excess capital
[CHARTER ONE FINANCIAL, INC. (R)-LOGO] [ALBANK FINANCIAL CORPORATION-LOGO]
33
