<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Iroquois Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock and options to purchase Common Stock
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(2) Aggregate number of securities to which transaction applies:
2,306,880 shares plus 208,200 options
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
$33.25 per share
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(4) Proposed maximum aggregate value of transaction:
$76,703,760
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(5) Total fee paid:
$15,340.75
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
IROQUOIS BANCORP, INC.
115 Genesee Street
Auburn, New York 13021
(315) 252-9521
_______________, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of
Iroquois Bancorp, Inc., to be held at 11:00 a.m., local time, on ___________,
2000, at the Holiday Inn, 75 North Street, Auburn, New York.
At the special meeting, you will be asked to consider and vote upon a
proposal to adopt the Agreement and Plan of Merger dated as of March 26, 2000,
by and among First Niagara Financial Group, Inc. (formerly known as Niagara
Bancorp), First Niagara Merger Corp, a wholly-owned subsidiary of First Niagara
Financial, and Iroquois Bancorp. If the Agreement and Plan of Merger is
approved, First Niagara Financial will acquire Iroquois Bancorp for cash
consideration of $33.25, without interest, for each share of common stock.
Approval of the proposed merger requires the affirmative vote of the holders of
at least two-thirds of the outstanding shares of Iroquois Bancorp common stock
entitled to vote thereon. Your board of directors has unanimously adopted the
proposed merger and has determined that the merger is advisable and in the best
interests of Iroquois Bancorp and its shareholders. Accordingly, the board of
directors unanimously recommends approval of the proposal to adopt the Agreement
and Plan of Merger by the shareholders.
The attached proxy statement describes the proposed transaction in detail,
sets forth the basis of the positive recommendation by the board of directors
and the opinion of Endicott Financial Advisors, L.L.C., as to the fairness, from
a financial point of view, of the consideration to be paid to Iroquois Bancorp
shareholders. I urge you to give this material your careful attention.
If the merger is approved, shareholders will receive appropriate
instructions for exchanging their stock certificates for cash. Please do not
send in your stock certificates at this time.
Whether or not you intend to attend the special meeting in person and
regardless of the number of shares you own, we request that you complete, sign,
date and return the enclosed proxy promptly in the accompanying prepaid
envelope. You may, of course, attend the special meeting and vote in person,
even if you have previously returned your proxy.
Sincerely,
/s/ Richard D. Callahan
____________________________________
Richard D. Callahan
President and Chief Executive Officer,
Vice-Chairman of the Board
<PAGE>
IROQUOIS BANCORP, INC.
115 Genesee Street
Auburn, New York 13021
(315) 252-9521
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ___________, 2000
TO THE SHAREHOLDERS OF IROQUOIS BANCORP, INC.:
NOTICE HEREBY IS GIVEN that a special meeting of shareholders of Iroquois
Bancorp, Inc., a New York corporation, will be held at 11:00 a.m., local time,
on ______________, 2000, at the Holiday Inn, 75 North Street, Auburn, New York,
for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of March 26, 2000, by and among First Niagara Financial Group,
Inc. (formerly known as Niagara Bancorp), First Niagara Merger Corp, a wholly-
owned subsidiary of First Niagara Financial, and Iroquois Bancorp, pursuant to
which First Niagara Merger Corp would be merged with and into Iroquois Bancorp
and the shareholders of Iroquois Bancorp would receive a cash payment of $33.25,
without interest, for each share of common stock held by them (other than any
shares owned by First Niagara Financial or Iroquois Bancorp), in accordance with
the terms of the Agreement and Plan of Merger described in the accompanying
proxy statement, a copy of which is attached to such proxy statement as Annex I;
and
2. To transact such other business as may properly come before the special
meeting or any adjournments or postponements thereof.
The board of directors is not aware of any other business to be put before
the shareholders at the special meeting.
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of common stock entitled to vote thereon is required for
adoption of the Agreement and Plan of Merger. Record holders of common stock at
the close of business on ______________, 2000, are entitled to notice of and to
vote at the special meeting and any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF IROQUOIS BANCORP, AFTER CAREFUL REVIEW AND
CONSIDERATION OF THE TERMS OF THE AGREEMENT AND PLAN OF MERGER AND OTHER
FACTORS, INCLUDING THE OPINION OF ENDICOTT FINANCIAL ADVISORS, L.L.C., WITH
RESPECT TO THE FAIRNESS OF THE MERGER, FROM A FINANCIAL POINT OF VIEW, HAS
UNANIMOUSLY ADOPTED THE AGREEMENT AND PLAN OF MERGER AND BELIEVES THAT THE
MERGER IS ADVISABLE AND IN THE BEST INTERESTS OF IROQUOIS BANCORP'S
SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS OF IROQUOIS BANCORP
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER.
<PAGE>
PLEASE EXECUTE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD WHETHER OR NOT
YOU EXPECT TO ATTEND THE SPECIAL MEETING. YOUR PROXY, ONCE GIVEN, MAY BE
REVOKED AT ANY TIME PRIOR TO THE SPECIAL MEETING BY FILING A PROXY BEARING A
LATER DATE OR BY APPEARING AT THE SPECIAL MEETING AND VOTING IN PERSON. THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors
/s/ Kathleen A. Manley
----------------------
Corporate Secretary
________________________, 2000
YOUR VOTE IS IMPORTANT. PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY, WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING.
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
<PAGE>
IROQUOIS BANCORP, INC.
PROXY STATEMENT
MAILED ON OR ABOUT _______________, 2000
SPECIAL MEETING OF SHAREHOLDERS
___________, 2000
This proxy statement is furnished in connection with the solicitation by
the board of directors of Iroquois Bancorp, Inc. of proxies for use at the
special meeting of shareholders to be held on ___________, 2000 at 11:00 a.m.,
local time, at the Holiday Inn, 75 North Street, Auburn, New York, and any
adjournments or postponements thereof.
The board of directors of Iroquois Bancorp has agreed to a merger
transaction in which Iroquois Bancorp will be acquired by First Niagara
Financial Group, Inc. (formerly known as Niagara Bancorp), a Delaware
corporation, through the merger of a wholly-owned subsidiary of First Niagara
Financial with and into Iroquois Bancorp. Iroquois Bancorp will initially be
the surviving corporation in the merger but is expected to be merged with and
into First Niagara Financial immediately following the merger. Each share of
common stock that you own will be converted into the right to receive cash in
the amount of $33.25 per share, without interest.
In order to complete the merger, Iroquois Bancorp and First Niagara
Financial must obtain the necessary regulatory approvals, and Iroquois Bancorp
must obtain the approval of its shareholders. Iroquois Bancorp is holding a
special meeting of its shareholders to consider and vote on the merger. This
document describes that meeting and the merger transaction.
Your vote is very important. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card. If you sign, date and mail your proxy card without indicating how
you want to vote, your proxy will be voted "FOR" the merger. If you do not
return your card, or if you do not instruct your broker how to vote any shares
held for you in "street name," the effect will be the same as a vote against the
merger.
This proxy statement gives you detailed information about the proposed
merger and includes the Agreement and Plan of Merger as Annex I. You also can
obtain information about Iroquois Bancorp from publicly available documents we
have filed with the Securities and Exchange Commission. We encourage you to
read this entire document carefully.
<PAGE>
FORWARD-LOOKING STATEMENTS
This proxy statement contains certain forward-looking statements with
respect to the financial condition, results of operation and business of
Iroquois Bancorp. You can find many of these statements by looking for words
such as "believes," "expects," "anticipates," "estimates" or similar
expressions.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Various factors may cause actual results to be materially
different from those contemplated by the forward-looking statements.
Information concerning factors that may affect actual results is included in the
SEC filings incorporated into this proxy statement by reference. See "WHERE YOU
CAN FIND MORE INFORMATION" below.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended.
You may read and copy this information at the following SEC locations:
<TABLE>
<CAPTION>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center City Corp. Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York , New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You also may obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Further information on the operation of the
SEC's Public Reference Room in Washington, D.C. may be obtained by calling the
SEC at 1-800-SEC-0330.
The SEC also maintains a worldwide website that contains reports, proxy
statements and other information about registrants, such as us, that file
electronically with the SEC. The address of that website is:
http:\\www.sec.gov.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
FORWARD-LOOKING STATEMENTS......................................................... 5
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION................................................ 5
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING..................... i
SUMMARY............................................................................ 1
SPECIAL MEETING.................................................................... 4
General....................................................................... 4
Matters to be Considered...................................................... 5
Recommendation of the Board of Directors...................................... 5
Record Date; Proxies.......................................................... 5
Important Information For Shareholders Whose Shares are Held in Street Name... 5
Persons Making the Solicitation............................................... 6
Quorum; Vote Required......................................................... 6
THE MERGER......................................................................... 7
General....................................................................... 7
Background and Reasons for the Merger......................................... 7
Opinion of Financial Advisor.................................................. 11
Stock Option Agreement........................................................ 16
Voting Agreement.............................................................. 18
Interests of Certain Persons in the Merger.................................... 18
Operation and Management of Iroquois Bancorp's Subsidiaries after the Merger.. 20
Effective Date of the Merger.................................................. 20
Effects of the Merger......................................................... 21
Payment for Shares; Exchange Agent............................................ 21
Treatment of Stock Options.................................................... 22
Representations and Warranties................................................ 22
Conditions to the Merger...................................................... 23
Conduct of Business Pending the Merger........................................ 23
No Solicitation by Iroquois Bancorp........................................... 24
Additional Agreements......................................................... 25
Termination of the Agreement and Plan of Merger; Amendments................... 26
Expenses Payable Upon Termination............................................. 26
Certain Regulatory Matters.................................................... 27
Certain Federal Income Tax Consequences of the Merger......................... 27
Accounting Treatment of the Merger............................................ 28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
BUSINESS........................................................................... 28
General....................................................................... 28
Operations.................................................................... 28
Iroquois Bancorp Developments................................................. 29
Products and Services......................................................... 29
Sources of Funds.............................................................. 30
Regulation and Supervision.................................................... 30
Properties.................................................................... 31
Competition................................................................... 32
Employees..................................................................... 32
Legal Proceedings............................................................. 32
NO DISSENTERS RIGHTS............................................................... 32
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT........................ 33
SHAREHOLDER PROPOSALS.............................................................. 35
OTHER MATTERS...................................................................... 36
</TABLE>
ANNEX I - Agreement and Plan of Merger
ANNEX II - Opinion of Endicott Financial Advisors, L.L.C.
ANNEX III - Stock Option Agreement
ANNEX IV - Voting Agreement
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
AND THE SPECIAL MEETING
This is a summary of some important information regarding the proposed
merger.
Q: What will happen to the outstanding shares of Iroquois Bancorp common
stock?
A: If the merger occurs, each shareholder of Iroquois Bancorp will receive
$33.25 in cash, without interest, for each share of common stock held by that
shareholder.
Q: Will Iroquois Bancorp continue to exist following the merger?
A: No. Although Iroquois Bancorp will initially be the surviving corporation
in the merger, it is expected to be merged with and into First Niagara Financial
immediately following the merger. However, First Niagara Financial has stated
that it intends to continue to operate Cayuga Bank as a separate subsidiary
following the merger.
Q: Does First Niagara Financial have the resources to pay the full cash price
for all of the outstanding shares?
A: Iroquois Bancorp management conducted a review of First Niagara Financial
before entering into the Agreement and Plan of Merger and believes that First
Niagara Financial has sufficient resources to complete the transaction in
accordance with the terms of the Agreement and Plan of Merger.
Q: Is the financial condition of First Niagara Financial relevant to my
decision how to vote for any other reason?
A: No. Once your shares of Iroquois Bancorp common stock are purchased you
will no longer have an investment in the company that survives as a result of
the merger.
Q: Does Iroquois Bancorp's board of directors recommend approval of the
merger?
A: Yes. The board of directors of Iroquois Bancorp has approved the merger
and unanimously recommends that Iroquois Bancorp shareholders vote in favor of
the merger. See "THE MERGER - Background and Reasons for the Merger" for more
information. In addition, the directors of Iroquois Bancorp have agreed to vote
their shares of common stock in favor of the merger.
Q: Is the proposed merger a taxable transaction?
A: Yes. The acquisition of your shares for cash consideration is a taxable
transaction and may result in capital gains tax liability. You should consult
your own tax advisor to determine the tax consequences of the transaction.
Q: What needs to happen in order for the merger to occur?
A: The merger cannot occur unless holders of Iroquois Bancorp common stock
representing two-thirds of all outstanding shares entitled to vote thereon
approve the merger AND the necessary regulatory approvals are obtained.
i
<PAGE>
Q: When do you expect the merger to be completed?
A: We expect to complete the merger late in the third quarter of 2000.
However, because the merger is subject to regulatory approvals, we cannot
predict the exact timing.
Q: Is the merger fair to Iroquois Bancorp shareholders?
A: Endicott has issued a fairness opinion dated as of March 26, 2000, stating
that, as of that date, the amount which will be paid to Iroquois Bancorp
shareholders in the merger is fair from a financial point of view.
Q: Should I send in my stock certificates now?
A: No. After completion of the merger, First Niagara Financial will send
instructions to Iroquois Bancorp shareholders whose shares are being purchased
in the merger. These instructions will explain how to submit your Iroquois
Bancorp stock certificates for payment of the merger consideration.
Q: How do I vote?
A: Just mail your signed, dated and completed proxy card in the enclosed
return envelope as soon as possible so that your shares may be represented at
the special meeting. In order to assure that your vote is counted, please vote
your proxy as instructed on the proxy card as soon as possible even if you
currently plan to attend the meeting and vote in person. If you sign and send
in your proxy card and do not indicate how you wish to vote, your vote will be
counted as a vote "FOR" the merger.
Q: May I change my vote?
A: Yes. You may change your vote at any time prior to the special meeting by
submitting a signed proxy card dated a later date or by attending the meeting,
filing a notice of revocation with the corporate secretary, and voting in
person. However, if you are a shareholder whose shares are held in "street
name" or otherwise not in your own name, you will need appropriate documentation
from your broker or other record holder of your shares in order to vote in
person at the special meeting.
Q: If my shares are held in "street name" by a broker, will the broker vote
the shares for me?
A: Not unless you instruct your broker to vote your shares, following the
directions provided to you by your broker. A failure to instruct your broker
to vote your shares in favor of adoption of the Agreement and Plan of Merger
is the equivalent of a vote "AGAINST" the merger.
Q: Do I have appraisal rights?
A: No. Because your shares of common stock are designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., you will not be entitled to appraisal
rights.
Q: Do the directors and officers of Iroquois Bancorp have an interest in the
merger?
ii
<PAGE>
A: Certain officers of Iroquois Bancorp and its subsidiaries have stock
options under the Iroquois Bancorp stock option plans. Each option held by
those officers will be canceled immediately prior to the closing of the merger
and converted into cash in an amount equal to the $33.25 per share price less
the exercise price for the option. Certain officers and other employees,
including executive officers, will also receive other benefits from the merger,
including in some cases, severance payments. In addition, certain directors of
Iroquois Bancorp will serve as directors of Cayuga Bank after the
merger, Mr. Callahan will continue as president and chief executive officer of
Cayuga Bank, and one non-employee director of Iroquois Bancorp will be appointed
to the board of directors of First Niagara Financial. See "THE MERGER -
Interest of Certain Persons in the Merger" for more detailed information.
Q: Is Iroquois Bancorp subject to any restrictions pending the merger?
A: In general, Iroquois Bancorp has agreed that it will not seek or encourage
a competing transaction to acquire Iroquois Bancorp or any of its subsidiaries,
except in very limited situations in which an unsolicited offer is made. See
"THE MERGER - No Solicitation by Iroquois Bancorp" for more detailed
information. Additionally, Iroquois Bancorp has agreed to conduct its business
in the ordinary course, subject to certain restrictions, pending the merger.
iii
<PAGE>
SUMMARY
This brief summary highlights selected information from this proxy
statement. It may not contain all of the information that is important to you.
We urge you to read carefully the proxy statement and the annexes attached to
this document for a complete understanding of the merger. See "WHERE YOU CAN
FIND MORE INFORMATION" (Page ___). Each item in this summary includes a page
reference directing you to a more complete description of that item.
The Parties to the Merger (Page____)
Iroquois Bancorp, Inc.
115 Genesee Street
Auburn, New York 13021
(315) 252-9521
Iroquois Bancorp is a bank holding company that operates two wholly-owned
financial institutions located in upstate New York: Cayuga Bank and The
Homestead Savings (FA). Cayuga Bank is a New York state-chartered commercial
bank and trust company with its principal offices located in Auburn, New York,
and Homestead Savings is a federally-chartered savings association with its
principal offices in Utica, New York. Through its two subsidiary banks, Iroquois
Bancorp provides a range of financial services to consumers and businesses in
ten central New York communities, primarily located in Cayuga, Oswego, and
Oneida counties. Those products and services include deposit accounts,
residential mortgage loans, consumer and commercial loans, insurance brokerage,
investment brokerage, and trust services, and safe deposit facilities.
First Niagara Financial Group, Inc.
6950 South Transit Road, P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
First Niagara Financial is the holding company for First Niagara Bank,
formerly known as Lockport Savings Bank. First Niagara Bank is a New York
state-chartered savings bank with 22 offices in western New York. Additionally,
on December 28, 1999, First Niagara Financial entered into an Agreement and Plan
of Merger with CNY Financial Corporation, pursuant to which First Niagara
Financial will acquire and operate Cortland Savings Bank as a separate banking
subsidiary. First Niagara Bank is a traditional, full-service, community-
oriented savings bank engaged primarily in the business of accepting deposits
from its customers through its branches in the western New York counties of
Niagara, Orleans, Erie, Genesee and Monroe, and investing those deposits,
together with funds generated from operations and borrowings, in one-to-four-
family residential and commercial and real estate loans, commercial business
loans, consumer loans, and investment securities. First Niagara Financial also
owns, directly or indirectly, other subsidiaries involved in insurance, leasing,
investment advisory and third party benefits administration business.
<PAGE>
First Niagara Merger Corp
6950 South Transit Road, P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
First Niagara Merger Corp was formed as a corporation under the laws of the
State of Delaware for the specific purpose of being merged with and into
Iroquois Bancorp in order to facilitate the merger of Iroquois Bancorp with and
into First Niagara Financial.
Special Meeting (Page ___)
The special meeting of Iroquois Bancorp shareholders will be held on
___________, 2000 at 11:00 a.m., local time, at the Holiday Inn, 75 North
Street, Auburn, New York.
Record Date; Vote Required (Page _____)
You can vote at the special meeting if you owned common stock of Iroquois
Bancorp at the close of business on ___________, 2000. On that date, there were
[2,306,880] shares of common stock outstanding and entitled to vote. To adopt
the Agreement and Plan of Merger, the holders of two-thirds of those shares must
vote in favor of doing so. You may cast one vote for each share of common stock
that you owned on ___________, 2000.
A failure to vote, either by not returning the enclosed proxy card or by
checking the "Abstain" box on the proxy card, or a failure to instruct your
broker to vote if your shares are held in "street name," will have the same
effect as a vote "Against" adoption of the Agreement and Plan of Merger.
Accordingly, the board of directors of Iroquois Bancorp urges you to complete,
date and sign the accompanying proxy card and return it promptly in the
enclosed, postage paid envelope.
As of ___________, 2000, directors and executive officers of Iroquois
Bancorp held, as a group, approximately [521,111] shares (excluding outstanding
but unexercised options to purchase shares of common stock), representing
approximately [22.59%] of common stock entitled to vote at the special meeting.
All of the directors and executive officers of Iroquois Bancorp have signed a
voting agreement under which they have agreed to vote all shares of common stock
held by them in favor of the merger.
Recommendation of the Board of Directors and Reasons for the Merger (Page ____)
The board of directors of Iroquois Bancorp believes that the merger is
advisable and in your best interest. It unanimously recommends that you vote
"FOR" the proposal to adopt the Agreement and Plan of Merger.
To review the background and reasons for the merger in greater detail, see
Pages ____ through ____.
2
<PAGE>
The Merger (Page ____)
The Agreement and Plan of Merger is attached to this document as Annex I.
Please read the Agreement and Plan of Merger. It is the legal document that
governs the merger.
General.
We propose a merger in which a wholly-owned subsidiary of First Niagara
Financial will merge with and into Iroquois Bancorp. When the merger is
complete, each share of Iroquois Bancorp common stock (other than shares owned
by First Niagara Financial or Iroquois Bancorp) will automatically convert into
the right to receive cash in the amount of $33.25, without interest.
Opinion of Financial Advisor (Page ____)
Endicott has delivered its opinion to Iroquois Bancorp's board of directors
that the cash consideration to be received in the merger is fair from a
financial point of view to the holders of Iroquois Bancorp common stock. A copy
of the opinion delivered by Endicott is attached to this document as Annex II.
You should read the opinion completely to understand the assumptions made,
matters considered and limitations of the review undertaken by Endicott in
providing this opinion.
Effective Date (Page ___).
The merger will occur shortly after all of the conditions to the closing of
the merger have been satisfied. It is currently expected that the merger will
occur subsequent to the special meeting of shareholders. Shortly after the
merger is completed, you will be able to exchange your certificates of common
stock for the cash consideration.
Conditions to the Merger (Page ____)
The completion of the merger depends on a number of conditions being met.
In addition to some standard conditions regarding compliance with the Agreement
and Plan of Merger, these conditions include:
. Adoption of the Agreement and Plan of Merger by Iroquois Bancorp's
shareholders,
. Obtaining certain regulatory approvals in connection with the merger,
and
. Lack of any material adverse change in Iroquois Bancorp's business,
financial condition or results of operations since December 31, 1999.
If the law permits, either First Niagara Financial or Iroquois Bancorp
could choose to waive a condition to its obligation to complete the merger even
though that condition had not been satisfied. We cannot be certain when (or if)
the conditions to the merger will be satisfied or waived, or that the merger
will be completed.
Interest of Certain Persons in the Merger (Page ____)
You should be aware that certain members of the board of directors of
Iroquois Bancorp and certain of Iroquois Bancorp's executive officers have
interests which may present them with potential conflicts of interest regarding
the merger. Among other things, certain officers, including executive
3
<PAGE>
officers, will have the right to receive cash upon the cancellation of their
outstanding stock options and severance payments under their existing employment
agreements. Additionally, certain directors of Iroquois Bancorp will serve as
directors of Cayuga Bank after the merger. Each of these arrangements is
described in more detail in this proxy statement.
Conduct of Business Pending the Merger (Page ____)
Iroquois Bancorp has agreed to conduct its business pending the merger in
the ordinary course, except as otherwise permitted by the Agreement and Plan of
Merger. Iroquois Bancorp has also agreed not to take certain specified actions
related to its operations pending the merger without the consent of First
Niagara Financial, except as otherwise permitted by the Agreement and Plan of
Merger.
Stock Option Agreement (Page ____)
Iroquois Bancorp has entered into a stock option agreement with First
Niagara Financial providing for the issuance of up to 459,069 shares of Iroquois
Bancorp common stock to First Niagara Financial at an exercise price of $24.00
per share upon the occurrence of certain events specified in the stock option
agreement. The stock option agreement is intended to increase the likelihood
that the merger occurs and may discourage competing offers to acquire Iroquois
Bancorp. The stock option agreement is attached to this document as Annex III.
Expenses (Page ____)
In general, Iroquois Bancorp and First Niagara Financial will each bear its
own expenses in connection with the merger. However, Iroquois Bancorp is
obligated to reimburse First Niagara Financial for certain of its expenses in
connection with specified termination events under the Agreement and Plan of
Merger.
Certain Federal Income Tax Consequences (Page __)
Your exchange of shares of common stock for cash pursuant to the merger
will be a taxable transaction for federal income tax purposes. You will
recognize gain or loss for federal income tax purposes equal to the difference
between the amount of cash you receive for your shares and your tax basis in the
shares surrendered, assuming that you do not have a special tax status or did
not acquire your shares pursuant to an incentive stock option or special
compensation arrangement. Determining the actual tax consequences of the merger
to you may be complex. They will depend on your specific situation and on
variables not within our control. You should consult your own tax advisor for a
full understanding of the merger's tax consequences.
SPECIAL MEETING
General
This proxy statement is being furnished by Iroquois Bancorp to the holders
of outstanding shares of its common stock, par value $1.00 per share, in
connection with the solicitation of proxies
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by the board of directors. The proxies are to be used at the special meeting of
the shareholders of Iroquois Bancorp to be held at the Holiday Inn, 75 North
Street, Auburn, New York at 11:00 a.m., local time, on _____________, 2000, and
any adjournments or postponements thereof. Holders of common stock are entitled
to one vote for each share held by them.
Matters to be Considered
The purpose of the special meeting is to consider and vote upon a proposal
to adopt the Agreement and Plan of Merger, dated as of March 26, 2000, among
First Niagara Financial, First Niagara Merger Corp, a wholly-owned subsidiary of
First Niagara Financial, and Iroquois Bancorp, providing for the merger of First
Niagara Merger Corp with and into Iroquois Bancorp. In the merger, each
outstanding share of Iroquois Bancorp common stock (other than shares owned by
First Niagara Financial or Iroquois Bancorp) will be converted into the right to
receive a cash payment of $33.25, without interest (i.e., the merger
consideration). It is expected that Iroquois Bancorp will be merged with and
into First Niagara Financial immediately after the merger.
Recommendation of the Board of Directors
The board of directors of Iroquois Bancorp has unanimously adopted the
Agreement and Plan of Merger and has determined that the merger is advisable and
in the best interests of Iroquois Bancorp and its shareholders. Accordingly,
the board of directors of Iroquois Bancorp unanimously recommends that Iroquois
Bancorp's shareholders vote "FOR" adoption of the Agreement and Plan of Merger.
For a discussion of the factors considered by Iroquois Bancorp's board of
directors in approving the Agreement and Plan of Merger and the transactions
contemplated thereby, see "THE MERGER - Background and Reasons for the Merger."
Record Date; Proxies
Pursuant to the provisions of the New York Business Corporation Law and
Iroquois Bancorp's By-Laws, the board of directors of Iroquois Bancorp has fixed
the close of business on ________, 2000 as the record date for the determination
of shareholders entitled to notice of, and to vote at, the special meeting.
Accordingly, only holders of record of shares of common stock at the close of
business on the record date will be entitled to notice of, and to vote at, the
special meeting.
A proxy card for use at the special meeting is enclosed. Shares of common
stock represented by properly executed proxies, unless such proxies have been
previously revoked, will be voted in accordance with the instructions indicated
in such proxies. If no instructions are so indicated, such shares will be voted
in favor of the adoption of the Agreement and Plan of Merger and in the
discretion of the proxy holder as to any other matter that properly may come
before the special meeting. The board of directors of Iroquois Bancorp knows of
no business that will be presented for consideration at the special meeting
other than consideration of the Agreement and Plan of Merger. Your proxy, once
given, may be revoked at any time prior to the special meeting by filing a proxy
bearing a later date or by appearing at the special meeting and voting in
person. Your mere presence at the special meeting will not revoke the proxy.
However, if you are a shareholder whose shares are held in "street name" or
otherwise not in your own name, you will need appropriate documentation from
your broker or other record holder of your shares in order to vote in person at
the special meeting.
Important Information For Shareholders Whose Shares are Held in Street Name
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If you hold your stock in a "street name," which means that your stock is
held for you in a brokerage account and not registered on Iroquois Bancorp's
stock records in your own name, your broker will not vote your shares on the
Agreement and Plan of Merger unless you instruct your broker how you want your
votes to be cast. Please tell your broker as soon as possible how to vote your
shares to make sure that your broker has enough time to vote your shares before
the polls close at the special meeting. If your broker does not vote your
shares (called a "broker non-vote"), the effect will be the same as a vote
against the adoption of the Agreement and Plan of Merger. If your stock is held
in a street name, you do not have a direct right to vote your shares or to
revoke a proxy for your shares unless that record holder of your shares gives
you the right in writing.
Persons Making the Solicitation
This solicitation of proxies is being made by the board of directors of
Iroquois Bancorp. All expenses associated with soliciting proxies, including
the preparation, assembly, printing and mailing of this proxy statement, will be
borne by Iroquois Bancorp. It is contemplated that proxies will be solicited
principally through the use of the mail, but officers, directors and employees
of Iroquois Bancorp may solicit proxies personally or by telephone, without
receiving special compensation therefor. Iroquois Bancorp has retained Regan &
Associates to aid in the solicitation of proxies, including from brokers, bank
nominees, and other institutional owners, for a fee (including expenses) of
approximately $7,000. In addition, Iroquois Bancorp will reimburse banks,
brokerage houses, and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in forwarding these proxy materials to their
principals.
Quorum; Vote Required
The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of Iroquois Bancorp common stock
entitled to vote at the special meeting is required to constitute a quorum at
the special meeting.
The affirmative vote of the holders of two-thirds of the outstanding shares
of Iroquois Bancorp common stock entitled to vote thereon is required to adopt
the Agreement and Plan of Merger. For purposes of determining whether the
Agreement and Plan of Merger has been adopted by the shareholders, the inspector
of elections will exclude abstentions and broker non-votes from the number of
shares deemed to have been voted in favor of such matter at the special meeting.
Accordingly, abstentions and broker non-votes will have the effect of a "NO"
vote with respect to the adoption of the Agreement and Plan of Merger. See
"SPECIAL MEETING -- Important Information for Shareholders Whose Shares are Held
in Street Name" for a discussion of "broker non-votes."
As of the record date, [2,306,880] shares of common stock were outstanding
and held by approximately 1,880 record holders. Each shareholder of Iroquois
Bancorp is entitled to one vote for each share of common stock held in that
shareholder's name on the record date. Each of the directors and executive
officers of Iroquois Bancorp have agreed to vote each share of common stock
beneficially owned by that person in favor of adoption of the Agreement and Plan
of Merger and the transactions contemplated thereby. As of the record date, the
directors and executive officers as a group were the beneficial owners of an
aggregate of [521,111] shares of common stock on the record date (excluding
outstanding but unexercised options to purchase common stock), constituting
approximately [22.59]% of the shares of common stock outstanding on such date.
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Representatives of KPMG LLP, the principal accountants of Iroquois Bancorp,
are expected to be present at the special meeting. The representatives will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
THE MERGER
The following information with respect to the merger is qualified in its
entirety by reference to the complete text of the Agreement and Plan of Merger,
a copy of which is included in this proxy statement as Annex I. The following
information includes a summary of the material terms of the Agreement and Plan
of Merger, which sets forth the terms and conditions upon which the merger is to
be effected. If the Agreement and Plan of Merger is adopted by the requisite
vote of shareholders at the special meeting, and all other conditions to the
obligations of the parties thereto are satisfied or waived, the merger will be
consummated and First Niagara Merger Corp will merge with and into Iroquois
Bancorp at the time the merger becomes effective. Iroquois Bancorp will
initially be the surviving corporation in the merger but is expected to be
merged with and into First Niagara Financial immediately following the merger.
Shareholders are urged to read the Agreement and Plan of Merger in its entirety
for a more complete description of the merger.
General
Under the Agreement and Plan of Merger, at the time the merger becomes
effective, each outstanding share of common stock, other than shares owned by
First Niagara Financial or Iroquois Bancorp, will be converted automatically
into the right to receive the merger consideration. Additionally, all
outstanding options to purchase common stock, whether vested or unvested, will
be canceled and will be converted into the right to receive cash in an amount
equal to the merger consideration less the exercise price with respect to those
options, multiplied by the number of shares covered by those options. As a
result of the merger, holders of common stock will cease to have an equity or
other interest in, or possess any rights as shareholders of, Iroquois Bancorp.
Background and Reasons for the Merger
Since its formation in 1990, the vision of Iroquois Bancorp was a
confederation of independent community banks to serve local communities
throughout upstate New York. Iroquois Bancorp recognized that significant
changes were taking place in the banking industry and believed that the holding
company structure would preserve and strengthen the benefits of local community
banking in delivering financial services, because the efficiencies of shared
management and resources would enable the institutions to survive the
competitive pressures of an industry dominated by large banks and holding
companies. In late 1991, Iroquois Bancorp acquired Homestead Savings in its
first expansion endeavor. Consistent with its strategic plan, and as one
possible means of providing value to its shareholders, the board of directors of
Iroquois Bancorp sought merger and acquisition opportunities and engaged in
discussions with a number of other financial institutions that it believed would
fit into its vision of a confederation of community banks. In 1994, the goal of
forming a confederation of independent community banks was incorporated into the
formal strategic plan adopted by the Iroquois Bancorp board of directors. Over
the years, Iroquois Bancorp was successful in implementing some of the
objectives of its strategic plan, such
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as cutting costs to improve efficiency, expanding financial products and
services for its customers, and converting the charter of Cayuga Bank, its
primary subsidiary, to that of a full service commercial bank from that of a
savings bank. Iroquois Bancorp was, however, unable to conclude any arrangements
with other institutions to further its intention to build a confederation of
community banks.
More recently, as a result of intense competition in the financial services
industry, Iroquois Bancorp recognized that its stock value was low and that it
was failing to meet its financial performance targets. During 1998, the board
of directors reviewed with Endicott, serving as its financial advisor, the
continuing consolidation activity taking place in the banking industry
nationwide and, in particular, the lack of such activity in upstate New York,
the territory in which Iroquois Bancorp's expansion initiatives had been
focused. The board discussed, among other things, the advantages that expanded
operations would have toward product innovation and technological development
for Iroquois Bancorp and expressed concern that its desire to expand the holding
company structure through acquisition of additional banks in accordance with its
strategic plan had been unsuccessful. The board of directors believed that
Iroquois Bancorp's inability to expand the holding company structure had had an
adverse impact on its ability to leverage the management and operational
structure it was putting in place at the holding company level. In the fall of
1998, the board first began to consider whether a merger with a similarly sized
or even larger institution might accomplish benefits similar to an acquisition
of a smaller community bank. The board of directors did not at that time take
any formal action to modify its strategic plan.
During early 1999, the board of directors continued to focus on meeting
Iroquois Bancorp's financial projections and tailoring its growth strategy to
maximize shareholder value. At its regular monthly meeting on January 28, 1999,
the board of directors approved the annual financial plan but required Iroquois
Bancorp's management to bring to the April and July meetings specific
suggestions for improving Iroquois Bancorp's financial performance. At the
April 29, 1999 meeting of the board of directors, after a presentation by
Endicott regarding Iroquois Bancorp's valuation and financial performance to the
executive committee, the board mandated two special meetings to be held prior to
management's annual strategic planning session for the purpose of discussing
financial performance and shareholder value. Iroquois Bancorp management was
charged with the task of devising a plan, with input from the board of
directors, that would justify continued independence of Iroquois Bancorp and
improve Iroquois Bancorp's financial performance relative to its peers. At the
first special meeting, on May 20, 1999, the board of directors reviewed and
discussed Iroquois Bancorp's financial performance, which continued to be below
that of its peers. At the second special meeting on June 10, 1999, the board of
directors continued its review and discussions on how to improve financial
performance. After the annual strategic planning session in June, 1999, the
board of directors of Iroquois Bancorp formally revised its stated goal of
forming a confederation of community banks to a plan that focused on a broader
growth strategy and its commitment to community banking. The board of directors
discussed numerous alternatives, including a merger or consolidation of Iroquois
Bancorp. The board also engaged an independent facilitator to conduct a two-day
strategic intervention session to help Iroquois Bancorp deal with the issue of
the underperformance of Iroquois Bancorp's subsidiaries. If expansion would not
be the most favorable solution, the elimination of Iroquois Bancorp's costly
infrastructure, a consolidation of its subsidiaries, and a sale of Homestead
Savings were discussed as possible alternative courses of action. In November,
1999, the board's executive committee resolved to work with key executive
officers to develop a concrete plan and a timeline for making a decision
regarding Iroquois Bancorp's future. At a December 16, 1999 special meeting of
the board of directors, the board determined that, due to difficulty in growing
deposits, shrinking interest rate margins, new
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competitors entering the industry, financial reform legislation, increasing
technology requirements, flattening performance trends, and other factors,
remaining independent might no longer be the most attractive option for Iroquois
Bancorp. The board of directors further determined that partnering with another
financial institution with a similar commitment to community banking might be
preferable to selling one or more parts of Iroquois Bancorp, and at a December
20, 1999 special meeting of the board of directors, the board resolved to pursue
such a strategic partnership. The board of directors authorized Endicott to
prepare an approved list of prospective partners and to work with a special
committee of the board of directors, consisting of three members of the board of
directors, who were appointed by the board to lead this new strategic
initiative.
In January, 2000, the special committee and Endicott reviewed a list of
potential partners, and the special committee evaluated the information and
identified the institutions in order of priority for purposes of discussions.
On February 3, 2000, the board authorized the special committee to direct
Endicott to contact certain potential partners selected by the board and to
engage in meetings with representatives of such potential partners, as
appropriate. One of the institutions, a commercial bank, responded with some
expression of interest for possible discussions in the future but with no
interest in pursuing discussions at the present time. The next contact was
First Niagara Financial, which expressed interest and requested the parties
enter into a confidentiality agreement. That agreement, dated February 16,
2000, was signed and discussions commenced. While discussions were ongoing with
First Niagara Financial, the board learned that yet another company had
expressed interest in a "merger of equals" transaction with Iroquois Bancorp.
During the prior two years, numerous conversations between Iroquois Bancorp and
this other company had taken place, but without any serious pursuit of a
possible transaction. Now that Iroquois Bancorp was engaged in discussions with
First Niagara Financial as to the terms and conditions under which a transaction
might be accomplished, the special committee believed it was critical to pursue
more specific discussions with this third company in an effort to determine
whether the terms might be competitive with those being discussed with First
Niagara Financial.
On March 17, 2000, a lengthy and serious negotiating session was held
between representatives of this other company and Iroquois Bancorp, including a
discussion of the consideration that might be paid to Iroquois Bancorp's
shareholders in any transaction. At its meeting shortly thereafter on March 22,
2000, the board of directors decided to abandon discussions with this other
party as the First Niagara Financial proposal presented an offer of
substantially higher value to the Iroquois Bancorp shareholders and a greater
likelihood of success. At that same meeting, the board reviewed in great detail
the proposal of First Niagara Financial to acquire all of the issued and
outstanding shares of Iroquois Bancorp for approximately $33 in cash per share.
Endicott, Iroquois Bancorp's financial advisor, and Harris Beach & Wilcox, LLP,
its legal counsel, attended the meeting to review with the board the potential
financial and strategic benefits of the proposed transaction, the financial
valuation analyses, and the terms and conditions of the First Niagara Financial
proposal. At the conclusion of that meeting, the board authorized Iroquois
Bancorp management and the special committee to pursue further discussions with
a view towards a transaction and to commence due diligence. Although Iroquois
Bancorp had not expressed any particular interest or desire for a cash
acquisition, First Niagara Financial made clear that was a condition to any
transaction between the parties. The board concluded, after extensive analysis,
discussion and consultation with representatives of Endicott and Harris Beach &
Wilcox, as to the financial and legal impact of such a cash offer, that the
First Niagara Financial offer represented value to the Iroquois Bancorp
shareholders that could not be obtained through any other strategy. The board
further considered the fact that First Niagara Financial was insisting on a
definitive and immediate response.
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First Niagara Financial had indicated to Iroquois Bancorp that it wished to
conduct a due diligence review of Iroquois Bancorp during the following week and
to execute a definitive agreement with Iroquois Bancorp no later than March 26,
2000.
The board of directors of Iroquois Bancorp authorized the special committee
to assist First Niagara Financial in its due diligence investigation of Iroquois
Bancorp and to negotiate, with the advice of its financial advisor and legal
counsel, the terms and conditions of a definitive agreement. A draft agreement
was proposed by First Niagara Financial and its counsel, the details of which
were discussed at great length at a special meeting of the board of directors
held on March 26, 2000, for the specific purpose of considering whether to
approve and execute the definitive agreement. By this time, First Niagara
Financial had successfully completed its due diligence review of Iroquois
Bancorp and formalized its offer at $33.25 per share for all of the issued and
outstanding shares of Iroquois Bancorp common stock. Representatives of
Endicott and Harris Beach & Wilcox were in attendance at the March 26, 2000
board meeting. Endicott presented detailed analyses of the financial terms and
conditions of the proposed definitive agreement, including valuation comparisons
with recent transactions of a similar nature. Harris Beach & Wilcox assisted the
board of directors with a thorough analysis of the terms and conditions of the
proposed definitive agreement and the legal implications of the transaction, and
the members of the special committee discussed the results of its due diligence
review of First Niagara Financial.
During the meeting, after extended discussions covering the factors
described below, telephone conversations with First Niagara Financial and its
counsel to negotiate certain modifications, and a presentation by Endicott of
its oral opinion that the merger is fair to Iroquois Bancorp's shareholders from
a financial point of view, the board of directors unanimously approved the
proposed Agreement and Plan of Merger. The board of directors also unanimously
approved and adopted the voting agreement and the stock option agreement which
were a part of the proposed Agreement and Plan of Merger. Mr. Callahan
executed the Agreement and Plan of Merger and the stock option agreement on
behalf of Iroquois Bancorp. At a meeting held on the same date, the board of
directors of First Niagara Financial unanimously approved the Agreement and Plan
of Merger and an authorized representative of First Niagara Financial signed on
its behalf.
In determining whether to approve the merger and the Agreement and Plan of
Merger, the board of directors considered a number of factors, including the
following principal factors:
(i) the consideration to be received by the shareholders of Iroquois
Bancorp in the merger and the board of directors' view of the likelihood that
the merger would deliver value to the shareholders of Iroquois Bancorp exceeding
the value that could be expected in connection with continued independence;
(ii) the oral presentation of Endicott, followed by written confirmation,
with respect to its determination as to the fairness of the merger, from a
financial point of view, to Iroquois Bancorp's shareholders, and the analyses,
methodologies and conclusions underlying such determination (see "THE MERGER -
Opinion of Financial Advisor");
(iii) the premium of $15.39 per share, which represents the difference
between the merger consideration and the last reported sale price of the common
stock as reported by Nasdaq on March 24, 2000 ($17.86 per share), the last
trading day prior to the March 26, 2000 board of directors meeting;
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(iv) the historical and recent earnings performance of Iroquois Bancorp
and the trading prices of its common stock;
(v) Iroquois Bancorp's future prospects and uncertainties in the
business in which Iroquois Bancorp engages;
(vi) conditions in the banking industry, including increased competition
and consolidation in that industry;
(vii) comparisons to the prices and multiples of certain valuations in
recent acquisitions of companies deemed to be similar in certain respects to
Iroquois Bancorp (see "THE MERGER - Opinion of Financial Advisor");
(viii) the likelihood that the merger could be consummated, noting the
timing of and conditions to the merger, and the expected effect of the
announcement of the merger on relationships with Iroquois Bancorp's customers,
employees, servicers and suppliers; and
(ix) the terms and conditions set forth in the Agreement and Plan of
Merger, including, but not limited to, the provisions in the Agreement and Plan
of Merger permitting the board of directors to consider and respond to
unsolicited bona fide third-party offers to acquire Iroquois Bancorp, subject to
certain limitations (see "THE MERGER - No Solicitation by Iroquois Bancorp"),
and subject to the terms of the stock option agreement (see "THE MERGER - Stock
Option Agreement").
This description of the information and factors considered by the board of
directors of Iroquois Bancorp above is not meant to be exhaustive, but is
believed to include all material factors considered by the board of directors of
Iroquois Bancorp. The board of directors did not quantify or attach any
particular weight to the various factors that it considered in reaching its
determination that the Agreement and Plan of Merger is advisable for, and in the
best interests of, the shareholders of Iroquois Bancorp. Rather, the board of
directors made its determination based on the total mix of information available
to it, and the judgments of individual directors may have been influenced to a
greater or lesser degree by different factors. In considering the
recommendation of the board of directors of Iroquois Bancorp with respect to the
merger, shareholders of Iroquois Bancorp should be aware that the interests of
certain directors and executive officers with respect to the merger are or may
be different from or in addition to the interests of the shareholders of
Iroquois Bancorp generally. The board of directors was aware of these interests
and took them into account in making its recommendation. See "THE MERGER -
Interests of Certain Persons in the Merger."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS ADOPTION OF THE AGREEMENT AND
PLAN OF MERGER BY THE SHAREHOLDERS OF IROQUOIS BANCORP.
Opinion of Financial Advisor
The terms of the merger, including the merger consideration, were
determined by arms-length negotiation between Iroquois Bancorp and First Niagara
Financial. The board of directors of Iroquois Bancorp retained Endicott
Financial Advisors, L.L.C. to deliver an opinion to it as to the fairness of the
merger consideration to Iroquois Bancorp's shareholders from a financial point
of
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view. Endicott delivered to the board of directors of Iroquois Bancorp its
written opinion, dated as of March 26, 2000, to the effect that, as of that date
and based upon and subject to the various considerations described therein, the
merger consideration of $33.25 per share in cash to be received by the holders
of common stock pursuant to the Agreement and Plan of Merger is fair to such
shareholders from a financial point of view. As set forth in its opinion,
Endicott assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by it for the purposes of its
opinion. Endicott did not make or obtain an independent evaluation or appraisal
of the assets or liabilities of Iroquois Bancorp.
At the March 26, 2000 meeting of Iroquois Bancorp's board of directors, at
which the board of directors reviewed and considered the terms of the merger,
Endicott made a presentation discussing the factors that it considered in
evaluating the proposed terms of the transaction and delivered its oral opinion
that the merger consideration was fair to holders of common stock from a
financial point of view. The presentation included a discussion of the basis
for, and the methodologies used by Endicott to reach, its oral opinion.
Endicott subsequently delivered to Iroquois Bancorp's board of directors its
written opinion, dated as of March 26, 2000, confirming its oral opinion.
The full text of Endicott's opinion, which sets forth the assumptions made,
procedures followed and matters considered in, and the limitations on, the
review undertaken in connection with its opinion, is attached as Annex II and is
incorporated in this document by reference. The summary of the opinion set
forth below is qualified in its entirety by reference to the full text of the
opinion. The opinion was provided for the information and assistance of
Iroquois Bancorp's board of directors in connection with its consideration of
the transaction contemplated by the Agreement and Plan of Merger and the opinion
does not constitute a recommendation as to how holders of Iroquois Bancorp's
common stock should vote with respect to the merger.
In connection with its opinion, Endicott reviewed, among other things, the
following:
(i) The Agreement and Plan of Merger, including the voting agreement,
the stock option agreement and other exhibits and schedules;
(ii) Certain publicly available information concerning Iroquois Bancorp,
including its reports on Form 10-K for the fiscal years ended December 31, 1997,
December 31, 1998 and December 31, 1999 and Forms 10-Q for the quarterly periods
ended March 31, 1999, June 30, 1999, and September 30, 1999;
(iii) Certain publicly available information concerning First Niagara
Financial, including its reports on Form 10-K for the fiscal years ended
December 31, 1998 and December 31, 1999 and Forms 10-Q for the quarterly periods
ended March 31, 1999, June 30, 1999, and September 30, 1999;
(iv) Certain other internal information, including financial and
operating projections, lease agreements and other documents related to Iroquois
Bancorp;
(v) Certain publicly available information concerning the trading of,
and the trading market for, Iroquois Bancorp's common stock;
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(vi) Certain other publicly available information with respect to certain
other companies believed by Endicott to be comparable to Iroquois Bancorp and
the trading markets for certain of such other companies' securities; and
(vii) Certain publicly available information concerning the nature and
terms of certain other transactions that Endicott considered relevant to its
inquiry.
Endicott also held discussions with members of senior management of
Iroquois Bancorp regarding the rationale for the merger and the past and current
business operations, financial condition and future prospects of Iroquois
Bancorp. In preparing the opinion, Endicott performed a variety of financial
and comparative analyses and made assumptions (for instance, an assumption
without independent verification that the aggregate consolidated allowance for
loan losses for Iroquois Bancorp and First Niagara Financial were adequate to
cover such losses) in conjunction with Iroquois Bancorp with respect to assets,
financial conditions and other matters, many of which are beyond the control of
Iroquois Bancorp. The estimates of value arrived at by Endicott based on such
analyses and the valuation results determined from any particular analysis are
not necessarily indicative of actual values or predictive of future results or
values, and are inherently subject to substantial uncertainty.
The following paragraphs summarize the most significant quantitative and
qualitative analyses performed by Endicott in arriving at its opinion and
reviewed by Iroquois Bancorp's board of directors.
Comparable Companies Analysis
Endicott analyzed publicly available information to compare selected
financial and market information for four groups of peer companies that Endicott
selected and deemed to be relevant for this purpose. The comparative companies
had total assets of between $200 million to $1 billion. The four peer groups
were:
1. Mid-Atlantic Commercial Banks - 39 companies.
2. National Commercial Banks with Return on Equity above 12% and Current
Price to Book Value above 200% - 19 companies.
3. Mid-A tlantic Thrifts - 31 companies.
4. National Thrifts with Return on Average Equity above 10% and Price-to-
Book Value above 125% - 17 companies.
The financial information Endicott analyzed included book value, tangible
book value, earnings, asset quality ratios, loan loss reserve levels,
profitability and capital adequacy for Iroquois Bancorp and the median value for
each of the peer groups for each year since 1995. Endicott calculated median
stock market valuation multiples for Iroquois Bancorp and each of the groups
using price-to-earnings, price-to-book value and price-to-tangible book value.
The results of this analysis are summarized in the following table:
Stock Market Valuation Multiples (per share)
<TABLE>
Iroquois Group: 1 2 3 4
Bancorp ------ - - - -
<S> <C> <C> <C> <C> <C>
Price-to-Earnings 7.53x 12.46x 14.49x 9.90x 7.53x
Price-to-Book Value 86.76% 160.70% 241.51% 97.50% 163.25%
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Price-to-Tangible Book Value 90.21% 166.75% 276.96% 97.60% 167.25%
</TABLE>
Analysis of Selected Merger Transactions
Endicott reviewed merger and acquisition trends from 1990 to the present,
and reviewed specific transactions announced since January 1, 1999, involving
publicly traded commercial banks and thrifts as acquirees each having a
transaction value over $15 million. Among those reviewed were transactions
involving four groups of commercial banks in 1999 and 2000:
1. National Commercial Banks with between $200 million and $1 billion in
assets
2. Mid-Atlantic Commercial Banks with between $200 million and $1 billion
in assets
3. New York State Commercial Banks with less than $1 billion in assets
4. National Commercial Banks accounted for using purchase accounting
method
Also reviewed were transactions involving four groups of thrift
institutions in 1999 and 2000:
1. National Thrifts with between $200 million and $1 billion in Assets
2. Mid-Atlantic Thrifts with between $200 million and $1 billion in
Assets
3. New York State Thrifts with less than $1 billion in Assets
4. National Thrifts accounted for using purchase accounting method
For each of the transactions in the eight groups, Endicott calculated,
among other things, the multiples of the transaction value to book value,
tangible book value and the last twelve months net income. Endicott also
calculated the core deposit premium (defined as the transaction value minus
tangible book value divided by core deposits, excluding certificates of deposit
with balances equal to or greater than $100,000). Endicott's computations
yielded the following median multiples ("NM" means the results were not
meaningful):
<TABLE>
<CAPTION>
Core Premium
Commercial Number of Price-to Tangible Deposit to
Bank Groups Year Transactions Book Value Book Value Earnings Premium Market
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
1 1999 59 254% 275% 21.55x 20.57% 31.30%
- -----------------------------------------------------------------------------------------------------------------------------
2000 8 283 286 19.98 19.17 27.50
- -----------------------------------------------------------------------------------------------------------------------------
2 1999 8 230 212 23.14 18.04 35.22
- -----------------------------------------------------------------------------------------------------------------------------
2000 3 261 286 19.98 16.74 29.01
- -----------------------------------------------------------------------------------------------------------------------------
3 1999 3 227 227 23.14 14.39 40.73
- -----------------------------------------------------------------------------------------------------------------------------
2000 1 NM NM NM NM NM
- -----------------------------------------------------------------------------------------------------------------------------
4 1999 61 227 244 20.42 15.65 22.63
2000 10 209 230 18.53 14.71 29.01
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Thrift Number of Price-to Tangible Book Core Deposit Premium to
Group Year Transactions Book Value Value Earnings Premium Market
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
1 1999 18 203% 210% 24.89x 12.15% 48.78%
- -----------------------------------------------------------------------------------------------------------------------------
2000 6 135 143 19.81 10.12 47.89
- -----------------------------------------------------------------------------------------------------------------------------
2 1999 4 159 165 27.79 11.33 33.67
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2 133 133 28.95 8.56 47.12
- -----------------------------------------------------------------------------------------------------------------------------
3 1999 5 154 154 16.87 11.45 22.44
- -----------------------------------------------------------------------------------------------------------------------------
2000 1 151 151 28.95 11.12 69.23
- -----------------------------------------------------------------------------------------------------------------------------
4 1999 24 145 146 23.72 10.83 30.76
- -----------------------------------------------------------------------------------------------------------------------------
2000 6 125 125 20.13 11.17 45.67
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Endicott then applied the ranges of multiples derived from these analyses
to comparable data for Iroquois Bancorp under two scenarios because Iroquois
Bancorp has both commercial bank and thrift subsidiaries and the commercial bank
had converted from a savings bank in 1997. One scenario applied the multiples
of commercial banks and thrifts based on the proportional contributions of each
of the two Iroquois Bancorp subsidiaries (approximately 70% commercial bank and
30% thrift) and the second scenario applied a blend of the commercial bank and
thrift multiples using 50% for each.
The following table sets forth Imputed Valuation Range using a blend of
commercial bank and thrift median multiples based on the current contributions
of two subsidiaries (approximately 70% commercial bank, 30% thrift):
<TABLE>
<CAPTION>
Price-to- Tangible Core Dep. Premium to
Group Book Value Book Value Earnings Premium Market
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
1 $40.74 $42.55 $42.20 $47.25 $18.56
- -----------------------------------------------------------------------------------------------------------------------------
2 38.47 37.36 42.67 42.12 18.11
- -----------------------------------------------------------------------------------------------------------------------------
3 35.85 34.38 44.92 39.10 20.50
- -----------------------------------------------------------------------------------------------------------------------------
4 35.43 36.10 39.80 40.56 17.64
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth Imputed Valuation Range using blend of 50%
each commercial bank and thrift median multiples:
<TABLE>
<CAPTION>
Price-to- Tangible Core Dep. Premium to
Group Book Value Book Value Earnings Premium Market
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $36.21 $37.08 $44.72 $42.89 $19.34
- -----------------------------------------------------------------------------------------------------------------------------
2 33.26 32.61 47.96 39.46 18.27
- -----------------------------------------------------------------------------------------------------------------------------
3 31.94 30.71 43.84 37.64 19.32
- -----------------------------------------------------------------------------------------------------------------------------
4 30.93 30.89 42.41 38.41 17.89
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to the analysis of selected merger transactions, Endicott
reviewed the performance of selected Mid-Atlantic acquisition transactions
announced in 1999 where the consideration exchanged for selling shareholders was
100% stock. Endicott considered the impact that the recent drop in the value of
the stocks of acquiring companies had on the merger value of these transactions.
No company or transaction, however, used in this analysis is identical to
Iroquois Bancorp, First Niagara Financial or the merger. Accordingly, an
analysis of the foregoing is not mathematical; rather, it involves complex
considerations and judgements concerning differences in financial and
15
<PAGE>
operating characteristics of the companies and other factors that would affect
the public trading values of the companies or company to which they are being
compared.
Discounted Cash Flow Analysis
Endicott performed a discounted cash flow analysis of future income streams
of Iroquois Bancorp, based on management's internal projections of net income
for 2000, followed by assumed annual percentage increases in net income of 5%
and 10%. This analysis assumed Iroquois Bancorp was not acquired but remained
independent for five years.
Based on these assumptions, Endicott determined the theoretical value of a
share of Iroquois Bancorp common stock at the end of the five-year period by
applying terminal multiples representative of historical multiples paid in
commercial bank and thrift acquisitions (ranging from 14x to 21x earnings and
180% to 250% of tangible book value) and discount rates (ranging from 9% to 14%)
that Endicott viewed as appropriate for a company with Iroquois Bancorp's
particular risk characteristics. The following table sets forth the imputed
valuation ranges that Endicott calculated for Iroquois Bancorp's common stock
using these discounted cash flow analyses:
<TABLE>
<CAPTION>
Imputed Valuation Range Based on:
Case Earnings Tangible Book Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
5.00% Estimated Growth $20.97 - $38.47 $26.09 - $44.95
- ---------------------------------------------------------------------------------------
10.00% Estimated Growth $24.86 - $45.63 $27.31 - $46.99
- ---------------------------------------------------------------------------------------
</TABLE>
Retention of Endicott as Financial Advisor; Fees and Compensation
Endicott has served as financial advisor to Iroquois Bancorp since 1996
pursuant to the terms of a retainer agreement between the parties. As required
by the terms of the retainer agreement, Iroquois Bancorp paid Endicott a fee of
$50,000 for rendering the opinion. In addition, under the terms of the retainer
agreement, Iroquois Bancorp will pay Endicott a transaction fee equal to 1.0% of
the value of the merger. Approximately 25% of the transaction fee was paid upon
the signing of the Agreement and Plan of Merger and the remaining portion is
payable upon the consummation of the merger.
Iroquois Bancorp has also agreed to reimburse Endicott for its reasonable
out-of-pocket expenses in connection with its engagement, and to indemnify
Endicott and its affiliates and their respective partners, directors, officers,
employees, agents and controlling persons against certain expenses and
liabilities, including liabilities under securities laws. Iroquois Bancorp paid
Endicott a quarterly retainer of $10,000 during the four years before the
Agreement and Plan of Merger was signed.
In addition, certain affiliates of Endicott beneficially own, in the
aggregate, 99,200 shares of Iroquois Bancorp common stock, representing
approximately 4.3% of shares of Iroquois Bancorp common stock entitled to vote
at the special meeting.
Stock Option Agreement
16
<PAGE>
When Iroquois Bancorp signed the Agreement and Plan of Merger, Iroquois
Bancorp also entered into a stock option agreement with First Niagara Financial
pursuant to which Iroquois Bancorp granted to First Niagara Financial an option
to purchase up to 459,069 shares of common stock of Iroquois Bancorp, equal to
approximately 19.99% of the common stock then outstanding, at an exercise price
of $24.00 per share. The stock option agreement is attached to this document as
Annex III.
First Niagara Financial may exercise the option only if both an "initial
triggering event" and a "subsequent triggering event" occur. An "initial
triggering event", as defined in the stock option agreement, includes any one of
the following:
(i) Iroquois Bancorp participates in (or authorizes participation in)
negotiations regarding a superior proposal (for a discussion of "superior
proposals", see "THE MERGER -- No Solicitation by Iroquois Bancorp" at Page
_____);
(ii) Iroquois Bancorp or any of its significant subsidiaries enters into
an agreement to engage in a merger, consolidation, sale or lease of
substantially all of its assets, or sale of 20% or more of the voting power of
Iroquois Bancorp or any of its significant subsidiaries;
(iii) Any person or group other than First Niagara Financial or its
subsidiaries acquires beneficial ownership or the right to acquire beneficial
ownership of 20% or more of the outstanding shares of Iroquois Bancorp common
stock;
(iv) Iroquois Bancorp's board of directors fails to recommend to Iroquois
Bancorp's shareholders the adoption of the Agreement and Plan of Merger or
withdraws, modifies or changes its recommendation that Iroquois Bancorp's
shareholders approve the Agreement and Plan of Merger in a manner adverse to
First Niagara Financial;
(v) A competing proposal is made by a third party and either (A)
Iroquois Bancorp intentionally and knowingly breaches any representation,
warranty, covenant or agreement contained in the Agreement and Plan of Merger
and such breach would entitle First Niagara Financial to terminate the Agreement
and Plan of Merger, and such breach is not cured before First Niagara Financial
exercises the option, or (B) Iroquois Bancorp's shareholders fail to approve the
Agreement and Plan of Merger; or
(vi) Any person other than First Niagara Financial or its subsidiaries
files an application or notice with any federal or state bank regulatory
authority for approval to engage in a business combination with Iroquois Bancorp
or any of its subsidiaries.
Once an initial triggering event occurs, First Niagara Financial may
exercise the option, in whole or in part, and will have 180 days to do so, if
and only if the initial triggering event is of the type described in item (ii)
above or if any person other than First Niagara Financial or its subsidiaries
acquires beneficial ownership of 25% or more of Iroquois Bancorp's outstanding
common stock (each of which is called a "subsequent triggering event").
The option will terminate and will no longer be exercisable by First
Niagara Financial if (A) the Agreement and Plan of Merger terminates for any
reason and no initial triggering event has occurred at the time of termination
or (B) 18 months have passed since the Agreement and Plan of
17
<PAGE>
Merger was terminated and the termination occurred after or at the same time as
an initial triggering event.
The stock option agreement includes extensive provisions designed to avoid
circumvention of the option, such as anti-dilution provisions and provisions
regarding the continuance of the option if Iroquois Bancorp engages in a
business combination with a third party. In addition, within nine months after
the occurrence of a "repurchase event", First Niagara Financial may, in its
discretion, be entitled to receive the economic benefit of the option instead of
exercising the option and receiving common stock. A "repurchase event", as
defined in the stock option agreement, includes any one of the following: (i)
any person (other than First Niagara Financial or any of its subsidiaries)
acquires beneficial ownership or the right to acquire beneficial ownership of,
or any group is formed which beneficially owns or has the right to acquire
beneficial ownership of, 25% or more of the then outstanding shares of Iroquois
Bancorp common stock, or (ii) Iroquois Bancorp shall enter into an agreement to
(A) consolidate with or merge into any person, other than First Niagara
Financial or any of its subsidiaries, and is not the surviving entity, (B)
permit any person, other than First Niagara Financial or any of its
subsidiaries, to merge into Iroquois Bancorp pursuant to which Iroquois Bancorp
is the surviving entity but in connection with which the then outstanding shares
of Iroquois Bancorp common stock are exchanged for stock or other securities or
cash such that they represent less than 50% of the outstanding shares and share
equivalents of the surviving entity, or (C) sell or otherwise transfer all or
substantially all of its assets to any person, other than First Niagara
Financial or any of its subsidiaries.
The purpose of the stock option agreement is to increase the likelihood
that the merger as described in the Agreement and Plan of Merger will occur.
The existence of the option may discourage third parties from proposing
competing transactions even if the competing transaction might otherwise involve
a higher payment to Iroquois Bancorp's shareholders, as the option could
significantly increase the cost of acquiring Iroquois Bancorp to a potential
acquiror other than First Niagara Financial.
Voting Agreement
At the time of execution of the Agreement and Plan of Merger, each of the
directors and executive officers of Iroquois Bancorp entered into a voting
agreement with First Niagara Financial. The voting agreement is attached to
this proxy statement as Annex IV. The voting agreement requires each of the
directors and executive officers of Iroquois Bancorp to attend the special
meeting and to vote any shares of common stock of Iroquois Bancorp beneficially
owned by him or her for adoption of the Agreement and Plan of Merger. It also
precludes, subject to limited exceptions, the transfer prior to the special
meeting of any shares of common stock owned by such persons. In the voting
agreement, the directors and executive officers of Iroquois Bancorp also agree
not to solicit, initiate, encourage, facilitate or cooperate with any inquiry or
the making of any proposal related to an acquisition of Iroquois Bancorp, except
to the extent required in the exercise of their fiduciary duties as directors
and executive officers of Iroquois Bancorp.
Interests of Certain Persons in the Merger
In considering the recommendation of the board of directors with respect to
the merger, shareholders of Iroquois Bancorp should be aware that certain
members of the board of directors and certain of Iroquois Bancorp's executive
officers have interests in the merger in addition to their
18
<PAGE>
interests as shareholders of Iroquois Bancorp, which may present them with
potential conflicts of interest in connection with the merger. For information
with respect to management's beneficial ownership of Iroquois Bancorp's common
stock, which common stock will be subject to exchange for the merger
consideration upon consummation of the merger, see "PRINCIPAL SHAREHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT."
Indemnification and Insurance. The Agreement and Plan of Merger provides
that, for a period of six years following the closing date of the merger, First
Niagara Financial will indemnify, defend and hold harmless the present and
former directors and officers of Iroquois Bancorp and its subsidiaries
(determined immediately prior to the effective date of the merger) to the
fullest extent to which such persons were entitled under the New York Business
Corporation Law, Iroquois Bancorp's certificate of incorporation and by-laws, or
other applicable law as in effect on the date of the Agreement and Plan of
Merger. In addition, First Niagara Financial will cause the surviving
corporation to advance expenses incurred by such persons, subject to certain
limitations set forth in the Agreement and Plan of Merger. The Agreement and
Plan of Merger also provides that First Niagara Financial will cause directors
and officers of Iroquois Bancorp and its subsidiaries immediately prior to the
effective date of the merger to be covered for a period of three years by the
directors' and officers' liability insurance policy maintained by Iroquois
Bancorp, or a similar policy not materially less favorable, with respect to acts
or omissions occurring prior to the effective date of the merger, provided that
the premium cost does not exceed 130% of Iroquois Bancorp's present premium
cost.
Stock Options. The Agreement and Plan of Merger provides that, on the
effective date of the merger, each unexercised option to purchase common stock
(irrespective of whether such option is then vested or unvested) issued and
outstanding under Iroquois Bancorp's stock option plans shall be canceled and
converted into cash in an amount equal to the merger consideration less the
exercise price of the option, multiplied by the number of shares of common stock
covered by the option. The cash payments to be made to holders of options will
be made by Iroquois Bancorp on the effective date of the merger, without
interest, net of any withholding taxes. In addition, Iroquois Bancorp is
required to obtain from each holder of options to purchase Iroquois Bancorp
common stock a written acknowledgment that payment of cash in respect of such
holder's options pursuant to the Agreement and Plan of Merger shall be in full
satisfaction of all rights under Iroquois Bancorp's stock option plans and any
option or award agreement entered into thereunder. The number of options to
acquire shares of common stock that are held and expected to be exchanged for
cash by each executive officer of Iroquois Bancorp is as follows: Mr. Richard
D. Callahan, President and CEO, Vice-Chairman of the Board, [100,700]; Ms.
Marianne R. O'Connor, Treasurer and CFO, [25,600]; Mr. Robert B. Bantle, Senior
Vice President [6,700] and Mr. W. Anthony Shay, Jr., Vice President, [16,200].
Severance Payments. Iroquois Bancorp is party to employment agreements
with certain of its officers. Each of these agreements contains a provision
relating to a change of control of Iroquois Bancorp. The merger will constitute
a "change of control" under these agreements and may give rise to certain
payments as follows. If Mr. Callahan's employment is terminated within 24
months following a change of control for any reason other than cause, he will be
entitled to a lump-sum cash payment equal to 2.99 times base salary, plus an
amount equal to the three-year average of his annual incentive bonus and a pro
rata incentive compensation award as provided in his employment agreement.
First Niagara Financial has agreed to honor the change of control provisions of
the agreement with Mr. Callahan as well as to continue to employ Mr. Callahan as
president and chief executive officer of Cayuga Bank. Under the Agreement and
Plan of Merger, Mr. Callahan will receive a
19
<PAGE>
payment of $846,640, payable in four equal annual installments commencing as of
the effective date of the merger. Under the employment agreements for Mr.
Bantle, Ms. O'Connor and Mr. Shay, if employment is (i) terminated involuntarily
for any reason other than death, disability, or just cause or constructively
terminated for good reason during the 24-month period following a change of
control, or (ii) terminated voluntarily by him or her during the 30-day period
beginning on the first anniversary of a change of control, he or she will
receive a lump-sum cash payment of 2.99 times base salary, plus an amount equal
to the three-year average of his or her annual incentive bonus and a pro rata
incentive compensation award as provided in such person's employment agreement.
In the event any such person's employment is terminated as provided in the
employment agreement, he or she will receive the following lump sum cash
payments: in the case of Mr. Bantle, $378,425, in the case of Ms. O'Connor,
$365,592, and in the case of Mr. Shay, $318,391. In addition, Mr. Richard
Notebaert, who serves as president and chief executive officer of Homestead
Savings, has an employment agreement with Iroquois Bancorp containing the same
change of control provisions as Mr. Callahan's agreement. In the event Mr.
Notebaert's employment is terminated as provided in his employment agreement,
Mr. Notebaert will receive a lump cash payment of $491,067. All of these
severance payments are estimates that take into account reductions of the amount
that would be payable under the employment contract formula to comply with the
"excess parachute payment" provisions of Section 280G of the Internal Revenue
Code of 1986, as amended. Certain other officers of Iroquois Bancorp and its
subsidiaries have employment agreements with the same change of control
provisions as those described above. All other employees of Iroquois and its
subsidiaries who are terminated within twelve months of the merger will receive
severance benefits in accordance with Iroquois Bancorp's standard severance
policy currently in place.
Board Positions. Certain members of the board of directors of Iroquois
Bancorp will serve as directors of Cayuga Bank after the merger. In addition,
one non-employee member of the board of directors of Iroquois Bancorp will be
appointed to the board of directors of First Niagara Financial effective as of
the effective date of the merger.
Operation and Management of Iroquois Bancorp's Subsidiaries after the Merger
Following the effective date of the merger, First Niagara Financial intends
to operate Cayuga Bank as a separate subsidiary for at least two years, with a
board of directors as mutually agreed between Cayuga Bank and First Niagara
Financial, and with appropriate representation from First Niagara Financial.
First Niagara Financial does not intend to operate Homestead Savings as a
separate subsidiary and may, before or after the effective date of the merger,
merge Homestead Savings with and into Cayuga Bank or another First Niagara
Financial subsidiary or sell Homestead Savings to a third party.
Effective Date of the Merger
Pursuant to the Agreement and Plan of Merger, First Niagara Merger Corp
will be merged with and into Iroquois Bancorp on the effective date of the
merger. Iroquois Bancorp will initially be the surviving corporation in the
merger but is expected to be merged with and into First Niagara Financial
immediately following the merger. The merger will become effective upon the
filing of a certificate of merger with the Secretary of State of the State of
New York and one with the Secretary of State of the State of Delaware, and the
date upon which such effectiveness occurs is referred to as the "effective date"
of the merger. It is anticipated that such filing will be made promptly
following receipt of the requisite approval of shareholders of Iroquois Bancorp
and satisfaction or waiver of all other conditions to the merger. Each of the
parties to the Agreement and Plan of Merger will have certain rights to
terminate the Agreement and Plan of Merger in the event that the merger is not
20
<PAGE>
consummated on or before January 31, 2001. See "THE MERGER -- Termination of
the Agreement and Plan of Merger; Amendments." Although it is anticipated that
the certificate of merger will be filed and the effective date of the merger
will occur on or before January 31, 2001, there can be no assurance that
consummation of the merger will not be delayed, that the conditions to the
merger will be satisfied or waived or that the merger will occur. See "THE
MERGER -- Conditions to the Merger."
Effects of the Merger
On the effective date of the merger, each share of common stock issued and
outstanding (other than shares owned by First Niagara Financial or Iroquois
Bancorp) will be converted into the right to receive, without interest, the
merger consideration. Upon consummation of the merger, shareholders will cease
to have any further ownership or other interest in Iroquois Bancorp.
Payment for Shares; Exchange Agent
Upon the consummation of the merger, each issued and outstanding share of
Iroquois Bancorp common stock, other than shares owned by First Niagara
Financial or Iroquois Bancorp, will be deemed for all purposes to represent only
the right of the holder to receive the merger consideration. ChaseMellon
Shareholder Services, L.L.C. or its affiliates will act as exchange agent in
order to facilitate the payment in exchange for certificates previously
representing shares of common stock.
Instructions with regard to the surrender of certificates, together with a
letter of transmittal to be used for this purpose, will be mailed to
shareholders promptly after the effective date of the merger. Shareholders
should surrender certificates for shares of Iroquois Bancorp common stock in
accordance with the instructions in the letter of transmittal. Each holder of
common stock shall receive payment promptly after surrender of the certificate
or certificates representing his or her shares of common stock and related
documentation by mailing such stock certificate or certificates and related
documentation to the exchange agent, for payment, as promptly as practicable
following the effective date of the merger, by return mail. Each holder of
shares held in street name by a broker, dealer, clearing agency or other nominee
should contact such entity as soon as possible prior to the effective date of
the merger to direct the entity to tender such holder's shares as instructed by
the letter of transmittal. SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
WITH THE ENCLOSED PROXY CARD.
Upon receipt of a certificate or certificates for Iroquois Bancorp common
stock together with a duly executed letter of transmittal from a particular
shareholder, the exchange agent will issue cash or a cash equivalent to the
person or persons entitled thereto in an amount equal to the product determined
by multiplying the merger consideration by the number of shares of common stock
represented by such shareholder's certificate or certificates. NO INTEREST WILL
ACCRUE TO HOLDERS OF COMMON STOCK IN RESPECT OF PAYMENTS TO WHICH THEY BECOME
ENTITLED UPON CONSUMMATION OF THE MERGER.
If any payment for shares of common stock is to be made in a name other
than that in which the certificate or certificates for such shares surrendered
for payment are registered on the stock transfer books of Iroquois Bancorp as of
the effective date of the merger, it will be a condition of such payment that
the certificate or certificates so surrendered shall be properly endorsed or
otherwise in proper form for transfer, and that the person requesting such
transfer pay to the
21
<PAGE>
exchange agent all transfer or other taxes or establish that such taxes have
been paid or are not required to be paid.
First Niagara Financial has agreed in the Agreement and Plan of Merger to
deposit in trust with the exchange agent, not later than the effective date of
the merger, all of the cash required for payment of the aggregate merger
consideration to be made to all holders of Iroquois Bancorp common stock.
Treatment of Stock Options
As of the record date, options to purchase [208,200] shares of common stock
were outstanding at exercise prices ranging from $8.80 to $25.65 per share. On
the effective date of the merger, each outstanding option to purchase common
stock will be canceled and will be converted into the right to receive the
difference between the merger consideration and the exercise price for those
options. The cash payments to be made to holders of options will be made by
Iroquois Bancorp on the effective date of the merger, net of any withholding
taxes. Iroquois Bancorp is required to obtain from each holder of options a
written acknowledgment that payment of cash in respect of such holder's options
pursuant to the Agreement and Plan of Merger shall be in full satisfaction of
all rights of such holder under Iroquois Bancorp's stock option plans and any
option or award agreement entered into thereunder.
Representations and Warranties
Each of Iroquois Bancorp and First Niagara Financial has made certain
customary representations and warranties in the Agreement and Plan of Merger,
including those which relate to, among other things, (i) organization and
existence of each party and its subsidiaries, (ii) the authorization, execution,
delivery and performance of the Agreement and Plan of Merger and other matters
relating to its enforceability, (iii) the absence of broker fees, and (iv) the
absence of any undisclosed consents, approvals or authorizations required for
the execution, delivery or performance of the Agreement and Plan of Merger and
the consummation of the transactions contemplated thereby.
Iroquois Bancorp also has made certain customary representations and
warranties relating to, among other things, (i) the absence of undisclosed
liabilities; (ii) Iroquois Bancorp's capital structure; (iii) Iroquois Bancorp's
filing of all reports and documents required to be filed with the Securities and
Exchange Commission and the accuracy of filings made pursuant thereto; (iv) the
accuracy and preparation of certain financial statements of Iroquois Bancorp;
(v) receipt of Endicott's opinion as to the fairness of the merger, from a
financial point of view, to the shareholders of Iroquois Bancorp; (vi) the
granting of approvals and the taking of steps to exempt the merger from the
provisions of state anti-takeover laws; (vii) the validity and status of
Iroquois Bancorp's loan portfolio; (viii) the proper administration of all
accounts for which Iroquois Bancorp or any of its subsidiaries acts as a
fiduciary; and (ix) other matters relating to the conduct of Iroquois Bancorp's
business including, among other things, Iroquois Bancorp's employees, benefit
plans, insurance, litigation, real estate, permits, compliance with laws
(including environmental laws), title to and condition of properties, payment of
taxes, absence of defaults, effectiveness of contracts, related party
transactions, and the absence of any undisclosed material adverse change in the
financial condition, results of operation, business or assets of Iroquois
Bancorp.
22
<PAGE>
Conditions to the Merger
Consummation of the merger by Iroquois Bancorp is subject to the
satisfaction of certain conditions set forth in the Agreement and Plan of
Merger, including but not limited to (i) the completion of all actions required
to be taken by First Niagara Financial and First Niagara Merger Corp and all
transactions required by the Agreement and Plan of Merger, and the receipt of
all requisite regulatory approvals and the expiration or termination of all
applicable notice or waiting periods; (ii) the accuracy of the representations
and warranties of First Niagara Financial as of the effective date of the
merger; (iii) the absence of any order, decree or injunction of any court or
agency with jurisdiction over the parties which enjoins or prohibits any of the
transactions contemplated by the Agreement and Plan of Merger; (iv) the adoption
of the Agreement and Plan of Merger by Iroquois Bancorp shareholders; (v) the
performance or compliance in all material respects by First Niagara Financial
with all covenants and agreements pursuant to the Agreement and Plan of Merger;
(vi) the delivery to Iroquois Bancorp of a certificate of an officer of First
Niagara Financial relating to the foregoing conditions; (vii) the delivery by
counsel to First Niagara Financial of an opinion with respect to certain
matters, including, without limitation, the validity, binding effect and
enforceability of the Agreement and Plan of Merger; and (viii) the deposit by
First Niagara Financial of cash equal to the aggregate merger consideration with
the exchange agent.
The obligation of First Niagara Financial to consummate the merger is
subject to the satisfaction of conditions corresponding to conditions (i)
through (vii) described in the preceding paragraph with respect to Iroquois
Bancorp. In addition, consummation of the merger by First Niagara Financial is
subject to the following further conditions: (i) the lack of any material
adverse change, since December 31, 1999, in the business or financial condition
of Iroquois Bancorp; and (ii) the receipt by First Niagara Financial of an
opinion of its counsel with respect to certain tax matters.
The Agreement and Plan of Merger provides that any party may waive any
condition to its obligation to consummate the merger.
In addition, either party has the right to terminate the Agreement and Plan
of Merger upon the occurrence of certain events or circumstances described
therein. See "THE MERGER -- No Solicitation by Iroquois Bancorp" beginning at
Page _____, and "THE MERGER -- Termination of the Agreement and Plan of Merger;
Amendments" beginning at Page ____ for more information.
Conduct of Business Pending the Merger
The shareholders of Iroquois Bancorp will retain their equity interests in
Iroquois Bancorp until the effective date of the merger. Pursuant to the
Agreement and Plan of Merger, Iroquois Bancorp is required to conduct its
business in the usual, regular and ordinary course of business consistent with
past practice and to use its best efforts to preserve Iroquois Bancorp's
business. Iroquois Bancorp is further required to refrain from taking certain
actions without the written consent of First Niagara Financial (except as
expressly permitted under the Agreement and Plan of Merger). Pending the
merger, Iroquois Bancorp may not take, among others, the following actions: (i)
amend or change any provision of its certificate of incorporation, charter or
bylaws; (ii) change the number of authorized or issued shares of its capital
stock, including the grant or issuance of securities convertible into its
capital stock, a split, combination or reclassification of its capital stock, a
redemption or other acquisition of capital stock, or a declaration or setting
aside of dividends in
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respect of such capital stock other than its regular quarterly dividend; (iii)
grant any bonus or severance pay to Iroquois Bancorp employees or enter into,
renew or amend employment or severance agreements with or increase the
compensation payable to its officers, directors or employees; (iv) enter into,
modify or increase contributions under any pension, retirement, stock option,
profit sharing, deferred compensation, or other employee benefit, incentive or
welfare plan, contract or arrangement in respect of its directors, officers or
employees; (v) merge or consolidate Iroquois Bancorp or any of its subsidiaries
with or into any other corporation, sell or lease all or substantially all of
the business or assets of Iroquois Bancorp or any of its subsidiaries or acquire
all or substantially all of the business or assets of any other person (other
than in connection with a foreclosure or other collection action), enter into a
purchase and assumption transaction with respect to deposits and liabilities, or
establish any new branch office or permit the relocation of or surrender of
certificate of authority with respect to any existing branch office; (vi) sell
or otherwise dispose of all of its capital stock, sell or dispose of or permit
any lien or other encumbrance on any asset of Iroquois Bancorp or any of its
subsidiaries, or incur any indebtedness for borrowed money, in each case other
than in the ordinary course of business; (vii) take any action which would
result in any of Iroquois Bancorp's representations or warranties set forth in
the Agreement and Plan of Merger not being true or in any of the conditions to
the merger set forth in the Agreement and Plan of Merger not being satisfied;
(viii) change its accounting methods or practices; (ix) waive, release, grant or
transfer any material rights or modify in any material respect any existing
material agreement or indebtedness to which Iroquois Bancorp or any of its
subsidiaries is a party other than in the ordinary course of business; (x)
purchase any equity securities or any security inconsistent with Iroquois
Bancorp's or any subsidiary's current investment policy, or otherwise alter the
risk profile of its investment portfolios; (xi) other than existing commitments
and renewals of existing lines of credit, make any new loan or other credit
facility commitment in excess in the aggregate of $350,000 for unsecured loans
and $2,000,000 for secured loans, or make individual loans in excess of per loan
limits for specified types of loans set forth in the Agreement and Plan of
Merger; (xii) enter into, renew, extend, or modify any transaction with any
affiliate of Iroquois Bancorp; (xiii) enter into any hedging agreements or
arrangements; (xiv) other than the execution of the Agreement and Plan of Merger
and the transactions contemplated thereby, take any action that would give rise
to a right of payment to any individual under any employment agreement; (xv)
change any policy with regard to the extension of credit, the establishment of
reserves, investment, asset management, or other material banking policies;
(xvi) other than the execution of the Agreement and Plan of Merger and the
transactions contemplated thereby, take any action that would give rise to an
acceleration of the right to payment under any Iroquois Bancorp employee benefit
plan or arrangement; (xvii) make any capital expenditure in excess of $50,000
individually or $100,000 in the aggregate, other than pursuant to existing
commitments or as necessary to maintain existing assets; (xviii) acquire or
dispose of any assets or incur any liabilities other than in the ordinary course
of business; (xix) sell any loan (other than loans secured by one- to four-
family real estate) or Other Real Estate Owned properties (other than sales
which generate a net book loss of not more than $20,000 per property); or (xx)
agree to do any of the foregoing.
No Solicitation by Iroquois Bancorp
The Agreement and Plan of Merger also provides that Iroquois Bancorp, its
subsidiaries, and the officers, directors, employees, representatives, agents or
affiliates of any of them, will not, directly or indirectly, (i) initiate,
solicit, knowingly encourage, or take any other action to facilitate any
inquiries or the making of any proposal, or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of any such
inquiries or in solicitation of such a
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proposal, or agree to or endorse any such proposal, or authorize any of its
officers, directors or employees or any of its subsidiaries or the outside
advisors or other representatives of any of its subsidiaries to take any such
action, and Iroquois Bancorp shall promptly notify First Niagara Financial of
all inquiries or proposals which it or any such person receives, with respect to
any (a) merger, consolidation, share exchange, business combination, or similar
transaction by Iroquois Bancorp or any of its subsidiaries; (b) sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of the
assets of Iroquois Bancorp or any of its subsidiaries; (c) tender offer or
exchange offer for 20% or more of the outstanding shares of Iroquois Bancorp's
capital stock or the filing of a registration statement under the Securities Act
in connection therewith; or (d) public announcement of a proposal, plan or
intention, or any agreement to do any of the foregoing; or (ii) except to the
extent that, in connection with the receipt by Iroquois Bancorp of any
unsolicited written, bona fide proposal to acquire Iroquois Bancorp or any of
its subsidiaries, (A) Iroquois Bancorp receives a written opinion from its
independent financial advisor that such proposal is superior to the Iroquois
Bancorp shareholders, from a financial point of view, than the merger, (B)
Iroquois Bancorp's board of directors determines in good faith, upon the advice
of legal counsel, that such action is necessary for the board of directors to
comply with its fiduciary duties to shareholders (any proposal satisfying both
(A) and (B) is called a "superior proposal"), (C) all information disclosed to
the proposed acquiror is provided on a confidential basis and First Niagara
Financial is notified prior to any such disclosure, and (D) the special meeting
of Iroquois Bancorp shareholders has not yet taken place, engage or participate
in negotiations with, provide any nonpublic information or data to, or have any
discussions with, any person other than First Niagara Financial relating to an
acquisition proposal. However, the Agreement and Plan of Merger also provides
that the foregoing restrictions shall not prohibit Iroquois Bancorp's board of
directors from taking, and disclosing to Iroquois Bancorp's shareholders, a
position with respect to an acquisition proposal pursuant to the applicable
Securities and Exchange Commission proxy statement or tender offer rules or from
terminating the Agreement and Plan of Merger to enter into any agreement for an
unsolicited acquisition proposal, if Iroquois Bancorp's board of directors, in
exercising its fiduciary duties under applicable law as advised by counsel, and
after consultation with its financial advisors, determines that the acquisition
proposal is a "superior proposal."
Additional Agreements
In the Agreement and Plan of Merger, Iroquois Bancorp has made certain
additional covenants, including, among other things (i) to afford First Niagara
Financial reasonable access to Iroquois Bancorp's properties and personnel; (ii)
to disclose to First Niagara Financial such documents relating to Iroquois
Bancorp as First Niagara Financial may reasonably request and to advise First
Niagara Financial of the occurrence of certain material events; (iii) to
cooperate with First Niagara Financial to obtain all necessary regulatory
approvals; (iv) to provide First Niagara Financial with a list of its
nonperforming assets and to establish reasonable reserves with respect to
expected merger-related costs; (v) to submit the Agreement and Plan of Merger to
its shareholders for adoption, to hold a special meeting of its shareholders to
act on the Agreement and Plan of Merger and, subject to the fiduciary
obligations of the board of directors, to recommend the adoption of the
Agreement and Plan of Merger to its shareholders; (vi) to cooperate with First
Niagara Financial with respect to the conversion of its data processing and
electrical information systems; (vii) to terminate its Employee Stock Ownership
Plan and pay all outstanding indebtedness related thereto; and (viii) to use its
best efforts to cause all things necessary, proper and advisable for the
consummation of the merger to occur, including obtaining any necessary third
party waivers,
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consents and approvals, retaining a proxy solicitor, and affording First Niagara
Financial access to meetings of the boards of directors of Iroquois Bancorp and
its subsidiaries.
First Niagara Financial has made certain additional covenants to Iroquois
Bancorp, including, among other things, (i) to cooperate with Iroquois Bancorp
to obtain all necessary regulatory approvals; (ii) to use its best efforts to
preserve its business organization, relationships with its employees, and the
goodwill of its customers, and not to take certain extraordinary transactions
set forth in the Agreement and Plan of Merger; (iii) to cooperate with Iroquois
Bancorp with respect to the conversion of its data processing and electronic
information systems; (iv) to advise Iroquois Bancorp of the occurrence of
certain material events; and (v) to use its best efforts to cause all things
necessary, proper and advisable for the consummation of the merger to occur,
including assisting Iroquois Bancorp obtain all necessary third party waivers,
consents and approvals.
Additionally, pending the merger, Iroquois Bancorp and First Niagara
Financial have agreed to cooperate in the preparation and distribution of press
releases and other public announcements relating to the merger, to maintain
reasonable levels of insurance, to maintain their respective books and records
in accordance with generally accepted accounting principles, to deliver to each
other copies of all documents required for filing with the Securities and
Exchange Commission, and to file all requisite tax returns and pay all amounts
due thereunder.
Termination of the Agreement and Plan of Merger; Amendments
The Agreement and Plan of Merger provides that it may be terminated at any
time, whether before or after approval by Iroquois Bancorp's shareholders: (i)
by mutual consent of Iroquois Bancorp and First Niagara Financial; (ii) by
either First Niagara Financial or Iroquois Bancorp if (a) there is a material
breach of the Agreement and Plan of Merger by the other party that remains
uncured for 30 days, (b) the merger shall not have been consummated on or before
January 31, 2001, (c) any action shall have been taken by any regulatory
authority to enjoin or deny approval of the merger through no failure of the
parties to perform their obligations under the Agreement and Plan of Merger, (d)
there has been no superior proposal but the shareholders of Iroquois Bancorp do
not approve the merger at the special meeting, or (e) Iroquois Bancorp decides,
based upon advice of legal counsel, to accept a superior proposal; or (iii) by
First Niagara Financial if Iroquois Bancorp's board of directors fails to
recommend or withdraws, modifies or changes its recommendation to adopt the
Agreement and Plan of Merger in a manner adverse to First Niagara Financial.
The Agreement and Plan of Merger may be modified or amended by an agreement
signed by the parties. However, under applicable law, no amendment may be made
after adoption by Iroquois Bancorp's shareholders if such amendment would, by
law, require shareholder approval. Therefore, it is the intention of management
of Iroquois Bancorp to submit any amendment that might have a material adverse
effect on the rights of shareholders to the shareholders for approval. The
Agreement and Plan of Merger expressly permits the waiver or extension of any
term, provision or condition in writing by the party entitled to the benefits
thereof.
Expenses Payable Upon Termination
The Agreement and Plan of Merger generally provides that each party thereto
shall separately bear its own expenses incurred in the negotiation and
performance of the Agreement and Plan of Merger. However, in the event of a
willful breach of any representation, warranty, covenant or
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agreement contained in the Agreement and Plan of Merger, the breaching party
will be liable for all damages, costs and expenses of the non-breaching party
incurred as a result of or in connection with such breach.
Certain Regulatory Matters
In order for the merger to occur, the Board of Governors of the Federal
Reserve Board must approve the acquisition of Iroquois Bancorp by First Niagara
Financial because as a result of the merger, First Niagara Financial, a
registered bank holding company, will acquire control of Iroquois Bancorp,
another bank holding company, as well as Cayuga Bank and Homestead Savings.
Further, the Federal Deposit Insurance Corporation must approve the consummation
of the merger transactions contemplated by the Agreement and Plan of Merger. In
addition, the New York State Banking Board must approve the transaction because
Banking Board approval is required for First Niagara Financial to control Cayuga
Bank and Homestead Savings. First Niagara Financial has filed or will file
applications for those approvals. The merger may not be consummated unless First
Niagara Financial and Iroquois Bancorp obtain these approvals. In addition,
there is a 30-day waiting period after the Federal Reserve Board approves the
transaction (which the Federal Reserve Board may, in its discretion, shorten to
15 days) before the merger can become effective.
Iroquois Bancorp and First Niagara Financial do not believe that any
additional regulatory filings in the United States, other than certain filings
with the Securities and Exchange Commission and the filing of the certificate of
merger with the New York Secretary of State and the Delaware Secretary of State,
are required with respect to the merger. Consummation of the merger is
conditioned upon, among other things, the absence of any preliminary or
permanent injunction or other order issued by any court or other judicial or
administrative body of competent jurisdiction which prohibits or prevents
consummation of the merger.
Certain Federal Income Tax Consequences of the Merger
The following summary is a general discussion of certain anticipated United
States federal income tax consequences of the merger to Iroquois Bancorp
shareholders. The summary assumes that shareholders are individuals or
corporations who do not have a special tax status (e.g., dealers in securities,
nonresident aliens, individual retirement accounts, or tax-exempt
organizations). The discussion is based upon existing federal tax law and does
not address any state, local or foreign tax consequences of the merger. The
discussion also does not describe certain special tax rules that may apply to
shareholders who acquired their stock pursuant to incentive stock options or
other stock compensation arrangements.
The exchange by shareholders of their shares of common stock for the merger
consideration pursuant to the merger will be a taxable transaction for federal
income tax purposes. A shareholder whose shares are exchanged generally will
recognize gain or loss equal to the difference between the amount of cash
received pursuant to the merger and his or her adjusted tax basis in the shares
exchanged therefor. Such gain or loss will constitute capital gain or loss if
the shares exchanged in the merger were held as capital assets. Capital gain or
loss will constitute long-term capital gain or loss if the shareholder's holding
period with respect to the shares is greater than one year and otherwise will
constitute short-term capital gain or loss.
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Under current federal income tax law, the highest marginal tax rate
applicable to ordinary income of individuals is 39.6%, and the highest rate
applicable to corporations is 35%. Net capital gains (the excess of net long-
term capital gains over net short-term capital losses) generally are taxed at
rates up to 20% for individuals and at the regular corporate rates for
corporations. The excess of net short-term capital gains (the excess of short-
term capital gains over short-term capital losses) over net long-term capital
losses (the excess of long-term capital losses over long-term capital gains)
generally is taxed at the same rates as ordinary income for both individuals and
corporations, as applicable. Corporations may use capital losses only against
capital gains. Individuals may use capital losses only against capital gains
and up to $3,000 of ordinary income (married individuals filing separate returns
may each only apply capital losses against up to $1,500 of ordinary income).
Compensatory stock option holders whose options are canceled in connection with
the merger in exchange for a cash payment will recognize ordinary compensation
income in the amount of such cash payment. Iroquois Bancorp will be required to
withhold applicable federal and state taxes from such payment.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE MERGER, INCLUDING
POTENTIAL AND RECENT CHANGES OF LAW. THE FOREGOING SUMMARY IS INTENDED AS A
GENERAL DESCRIPTION ONLY OF CERTAIN MATERIAL TAX CONSEQUENCES AND DOES NOT
CONSIDER THE PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER.
Accounting Treatment of the Merger
The merger will be accounted for under the "purchase" method whereby the
purchase price paid for common stock will be allocated based upon the fair value
of the assets acquired and the liabilities assumed pursuant to the merger as of
the effective date of the merger.
BUSINESS
General
Iroquois Bancorp is a bank holding company, incorporated as a New York
corporation, which commenced operations in 1990 and now operates two wholly-
owned financial institution subsidiaries: Cayuga Bank, a New York state-
chartered commercial bank and trust company, and The Homestead Savings FA, a
federally-chartered savings association. Iroquois Bancorp is headquartered in
Auburn, New York, the largest city and business center of Cayuga County.
Iroquois Bancorp's [202] employees serve over 39,000 customers through 14
offices located throughout its market areas.
Operations
Iroquois Bancorp, through its two subsidiary banks and their respective
subsidiaries, is engaged solely in the business of providing financial services
to consumers and businesses. Iroquois Bancorp caters to the particular needs of
its market areas through its subsidiaries, offering a broad range of financial
products and services. Loan products offered by Iroquois Bancorp include
mortgages, home equity loans and lines of credit, consumer installment loans,
credit cards, student
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loans, and commercial loans; deposit products include savings, checking and time
deposits, money market accounts, a range of deposits for municipalities or other
public corporations, and mortgage escrow accounts. Iroquois Bancorp also
provides insurance agency services, investment brokerage services, trust
services and safe deposit facilities.
Iroquois Bancorp's market area primarily covers the Central New York
counties of Cayuga, Oswego and Oneida. Cayuga and Oswego counties are part of
the Syracuse MSA, which also includes Onondaga and Madison counties. Oneida
County is part of the Utica MSA, which also includes Herkimer County. Iroquois
Bancorp's residential mortgage lending extends to Monroe County, a part of the
Rochester MSA, and parts of Seneca and Onondaga counties through a broker
network, as well as to Old Forge and Lake Placid, NY, through loan production
offices.
Iroquois Bancorp Developments
Iroquois Bancorp's significant developments during 1999 were as follows:
. Iroquois Bancorp relocated its South Utica Homestead Savings branch office
to a new facility in New Hartford with higher visibility and greater
customer sales and service potential. Iroquois Bancorp also relocated its
Rome Homestead Savings office to temporary quarters, awaiting the
completion of construction of its new Rome office facility.
. Iroquois Bancorp continued to improve asset quality with significant
reductions in nonperforming loans and delinquency levels that are at their
lowest levels in years.
. Iroquois Bancorp successfully introduced several new home equity loan
products which contributed to loan growth in 1999, and enhanced its
commercial banking product line with the introduction of competitive cash
management and commercial sweep accounts.
. Iroquois Bancorp increased trust accounts by $20 million, or 44%, enhancing
the base of its trust business, and increased average municipal deposits by
29%, further increasing its base of large, local deposits and its ability
to fund local loan growth with local deposits.
Products and Services
The primary markets served by both Cayuga Bank and Homestead Savings are
towns and small cities in central New York with populations ranging from 1,500
to 60,000. Iroquois Bancorp's markets are typically stable and lower growth
communities where residents continue to place a high value on loyalty and
personal service. The market demographics of these communities contribute
significantly to Iroquois Bancorp's ability to compete and build its franchise.
Mortgage loans represent the largest portion of Iroquois Bancorp's loan
portfolio. The subsidiary banks offer a wide range of consumer loans,
consisting of auto loans, fixed-rate home equity and home improvement loans,
overdraft protection, credit cards, and other personal installment loans. The
subsidiary banks offer home equity lines of credit, providing customers with
immediately accessible funds through check writing privileges against a line of
credit secured by a
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lien on residential real estate. The home equity lines of credit offered by the
subsidiary banks carry variable rates of interest, tied to the prime rate, and
reprice generally within periods of one month to five years. Currently, Cayuga
Bank is the only subsidiary of Iroquois Bancorp to offer commercial lending.
Cayuga Bank offers a variety of loan products to its business customers,
including notes, lines of credit, installment loans, and an accounts receivable
management program. With Cayuga Bank's new business sweep product, customers
purchase interests in government securities owned by Cayuga Bank, which are
repurchased by the bank the following day. The customer benefits by being able
to invest excess checking balances in interest-bearing investments and the bank
benefits by offering a competitive product and retaining access to a
relationship-based funding source.
The composition of Iroquois Bancorp's loan portfolio remains very
conservative, with residential mortgages the largest category at 66%. Home
equity lines of credit make up 6% of Iroquois Bancorp's loan portfolio at the
end of 1999, consumer loans represent 11%, and almost equal shares in commercial
mortgage and commercial loans make up the balance. This portfolio mix keeps the
conservative character of the portfolio intact while enhancing its profitability
through a prudent blend of higher yielding, shorter term loan categories.
The securities available for sale by Iroquois Bancorp, which are carried at
fair value, consist primarily of obligations of the U.S. Government, states and
municipalities and adjustable rate mortgage-backed securities. The objective
of Iroquois Bancorp's investment strategy is to maintain securities portfolios
at each subsidiary bank that provide a source of liquidity through maturities
and selling opportunities, contribute to overall profitability, support pledging
requirements, and provide a balance to interest rate and credit risk in other
categories of the balance sheet. Iroquois Bancorp does not engage in securities
trading or derivatives activities in carrying out its investment strategies.
Sources of Funds
Iroquois Bancorp's principal source of revenue is net interest income. Net
interest income represents the difference between income from interest-earning
assets, primarily loans and securities, and the expense of interest-bearing
liabilities, primarily deposits and borrowings.
Customer deposits, consisting of interest-bearing time deposits, savings,
money market, NOW accounts, and non-interest bearing checking accounts,
represent the primary source of asset funding for the subsidiary banks. Other
sources of funds include securities sold under agreements to repurchase and
short term borrowings or term advances under agreements with the Federal Home
Loan Bank.
Regulation and Supervision
The earnings of the subsidiary banks, and therefore the earnings of
Iroquois Bancorp, are affected by policies of regulatory authorities, most
significantly the Federal Reserve Board, which implements policies to influence
interest rates and the supply of money and credit in the banking system. The
Federal Reserve Board's monetary policies strongly influence the behavior of
interest rates and can have a significant effect on the operating results of
banks, primarily through the Federal Reserve Board's policies that have a direct
impact on interest rates. The effects of various Federal Reserve Board policies
on future business and earnings of Iroquois Bancorp cannot be predicted, nor can
the nature or extent of any effects of possible future governmental controls,
legislative or
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regulatory changes that may be implemented by the Federal Reserve Board or any
of the other regulatory agencies with jurisdiction over Iroquois Bancorp or its
subsidiaries.
As sole shareholder of Cayuga Bank, under federal law Iroquois Bancorp is a
bank holding company subject to the jurisdiction of the Federal Reserve Board.
Iroquois Bancorp also falls within the definition of a thrift holding company as
sole shareholder of Homestead Savings, under the jurisdiction of the Office of
Thrift Supervision. Under the provisions of the Economic Growth and Regulatory
Paperwork Reduction Act of 1996, the Office of Thrift Supervision adopted rules
applicable to holding companies that qualify as both a bank and a thrift holding
company, and the Office of Thrift Supervision no longer supervises a holding
company that controls both a bank and a savings association if it is registered
with the Federal Reserve Board. Accordingly, under federal law, Iroquois
Bancorp files all reports with and is subject to regulation, examination, and
supervision solely by the Federal Reserve Board even though it continues to own
a savings association. The Office of Thrift Supervision, however, continues to
be the primary regulatory authority for Homestead Savings, Iroquois Bancorp's
wholly-owned savings association subsidiary.
Iroquois Bancorp also has been and continues to be a bank holding company
for purposes of state law and, as such, is subject to regulation, examination,
and supervision by the New York State Banking Department.
Cayuga Bank operates as a commercial bank, chartered as a New York State
trust company, and is subject to regulation, supervision and examination by the
New York State Banking Department as its primary regulatory authority and by the
Federal Deposit Insurance Corporation. As described above, Homestead Savings is
subject to regulation, supervision and examination by the Office of the Thrift
Supervision as its primary regulatory authority. Cayuga Bank's deposits are
insured by the Bank Insurance Fund and Homestead Savings' deposits are insured
by the Savings Association Insurance Fund, each of which is operated by the
Federal Deposit Insurance Corporation.
In November, 1999, the Gramm-Leach-Bliley Act of 1999 was signed into law,
representing a sweeping reform of financial services regulation and permitting
the creation of new financial services holding companies that can offer a full
range of financial products pursuant to regulatory reform based on functional
regulation of financial services. The legislation eliminates the legal barrier
to affiliations among banks and securities firms, insurance companies, and other
financial services companies and provides financial organizations with
flexibility in structuring these new affiliations while preserving appropriate
safeguards through regulation.
Although Iroquois Bancorp believes that it maintains operating procedures
satisfactory to comply with such regulations relating to such compliance,
maintains liability insurance, and to date has not had any material claim or
expense relating to such compliance, there can be no assurance that significant
compliance costs may not be incurred by Iroquois Bancorp and any such costs
incurred may have a material adverse affect on Iroquois Bancorp's earnings.
Properties
Iroquois Bancorp's properties are all located in Central New York. Six
banking office facilities are utilized by Cayuga Bank: three in Auburn, one in
Weedsport, one in Moravia, and one in Lacona, all of which are owned by Cayuga
Bank. Iroquois Bancorp has one office in Rome, one office in Utica, one office
in New Hartford, one office in Waterville, and one office in Clinton. The
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Rome, Utica, Waterville and Clinton offices are each owned and utilized as a
banking office by Homestead Savings. The New Hartford banking office facility is
owned by Homestead Savings with a ground lease of the land.
Competition
Because the primary business of Iroquois Bancorp is the ongoing business of
its subsidiaries, the competitive conditions faced by Iroquois Bancorp are
primarily those of the subsidiary banks as financial institutions in their
respective geographic markets. Within their respective markets, the subsidiary
banks encounter intense competition from other financial institutions offering
comparable products. Iroquois Bancorp's competition with a physical presence,
"bricks and mortar" financial institutions, consists primarily of larger
regional or super-regional commercial banks and some smaller savings
institutions. These competitors include commercial banks, savings banks,
savings and loan associations, and credit unions. Competition for the broader
range of financial services provided by the subsidiaries also comes from non-
banking entities such as personal loan companies, sales finance companies,
leasing companies, securities brokers and dealers, insurance companies, mortgage
companies, and money market and mutual fund companies. It is expected that this
competition will intensify with financial modernization, the redeployment of
technology dollars from Y2K concerns to new product and delivery technologies,
and investor expectations for growth.
To differentiate itself from other companies in its market areas, Iroquois
Bancorp places strong emphasis on providing customers with highly personalized
service and products tailored to the needs of its retail and commercial
customers. The subsidiaries also utilize personal sales calls, convenient hours
and locations, and relationship-based products and services to enhance customer
retention and loyalty. Additionally, to remain competitive with larger "bricks
and mortar" competitors and national providers of financial services, Iroquois
Bancorp has continued to invest in technology and the development of new and
improved products. During 1999, Iroquois Bancorp broadened its commercial
banking services by adding a cash management product and commercial sweep
accounts.
Employees
As of _________, 2000, Iroquois Bancorp had a total of [202] employees
located at 14 offices. Iroquois Bancorp has never had a work stoppage and none
of its employees is represented by a labor organization. Iroquois Bancorp
believes that it provides working conditions, wages and benefits that are
competitive with other providers of similar products and services, and considers
its employee relations to be excellent.
Legal Proceedings
Neither Iroquois Bancorp nor any of its subsidiaries is presently a party
to any litigation (i) that is not covered by insurance or (ii) which singly or
in the aggregate would have a material adverse effect on Iroquois Bancorp's
financial condition and results of operations.
NO DISSENTERS RIGHTS
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Holders of the common stock do not have a right to dissent under New York
law in connection with the merger. Section 910(a)(1)(A)(iii) of the New York
Business Corporation Law provides, in relevant part, that the right to dissent
and receive payment of the fair value of shares shall not be available to a
shareholder for shares which, like Iroquois Bancorp's shares of common stock,
were designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. at the record
date fixed for the special meeting.
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following tables set forth, as of ______________, 2000, certain
information regarding the beneficial ownership of Iroquois Bancorp's common
stock, as of the record date, by (i) each person known by Iroquois Bancorp to be
the beneficial owner of more than five percent of the outstanding common stock
(without taking into account shares of Iroquois Bancorp's common stock that
First Niagara Financial may be deemed to beneficially own as a result of the
voting agreement), (ii) each of Iroquois Bancorp's directors and executive
officers, and (iii) all directors and executive officers of Iroquois Bancorp as
a group. The nature of beneficial ownership shown in the tables is, unless
otherwise noted, shares for which the owner has sole voting and sole investment
power. Beneficial ownership as set forth in these tables includes 115,000
presently exercisable options to purchase shares of Iroquois Bancorp common
stock. On the effective date of the merger, each outstanding option to purchase
common stock will be canceled and will be converted into the right to receive
the difference between the merger consideration and the exercise price for those
options. However, the options listed in the following tables do not represent
shares of common stock entitled to vote at the special meeting. Only shares
actually held by such persons as of the record date, and not options to acquire
common stock, will be counted for purposes of voting at the special meeting.
Ownership information is based upon information furnished by the respective
persons listed.
33
<PAGE>
Owners of More Than 5% of the Outstanding Common Stock
- ------------------------------------------------------
<TABLE>
<CAPTION>
Amount and Nature of Percentage
-------------------- ----------
Name and Address Beneficial Ownership of Class
- ----------------------------------- -------------------- --------
<S> <C> <C>
The Baird Family 230,606(1) 9.52
c/o Brian D. Baird
120 Delaware Avenue
Buffalo, New York 14202
Iroquois Bancorp Inc. 175,399(2) 7.24
Employee Stock Ownership Plan
115 Genesee Street
</TABLE>
Directors and Executive Officers
- --------------------------------
<TABLE>
<CAPTION>
Percentage
Amount and Nature of ----------
Name Position Held Beneficial Ownership of Class
---- -------------------- -------------------------- --------
<S> <C> <C> <C>
Joseph P. Ganey Chairman of the 62,161(3) 2.57
Board
Richard D. Callahan President and CEO, 78,729(4) 3.25
Vice Chairman of
the Board
Brian D. Baird Director 230,606(1) 9.52
Robert B. Bantle Senior Vice 327 *
President
John Bisgrove, Jr. Director 9,709 *
Peter J. Emerson Director 51,949(5) 2.15
Arthur A. Karpinski Director 24,740 1.02
Henry D. Morehouse Director 9,405(6) *
Marianne R. O'Connor Treasurer and CFO 35,553(7) 1.47%
Edward D. Peterson Director 9,735 *
W. Anthony Shay, Jr. Vice President 14,566(8) *
Lewis E. Springer, II Director 68,481 2.83
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Percentage
Amount and Nature of ----------
Name Position Held Beneficial Ownership of Class
---- -------------------- -------------------------- --------
<S> <C> <C>
All directors and executive
officers as a group 595,961(9) 24.61
</TABLE>
* Less than 1%
(1) Such shares are beneficially owned either directly or as trustees or
custodians for other family members or as trustees of the Cameron Baird
Foundation. The respective beneficial owners have sole investment and voting
power with respect to their shares.
(2) Such shares are held in trust for the participants in the plan who are the
beneficial owners and who direct the voting of their allocated shares in the
trust. All unallocated shares in the trust are voted by the independent
trustee.
(3) Includes 6,455 shares held jointly with spouse.
(4) Includes 1,756 shares held jointly with spouse, 4,288 shares held by spouse,
and presently exercisable options to acquire 69,400 shares of common stock.
(5) Includes 36,000 shares held by the F.L. Emerson Foundation, Inc., of which
he is a director and as to which he disclaims beneficial ownership.
(6) Includes 2,655 shares held jointly with spouse.
(7) Includes 1,854 shares held jointly with spouse, 223 shares held as custodian
for minor children, and presently exercisable options to acquire 16,300
shares of common stock.
(8) Includes 3,242 shares owned jointly with spouse, and presently exercisable
options to acquire 8,900 shares of common stock.
(9) Includes presently exercisable options to acquire 94,600 shares of common
stock.
SHAREHOLDER PROPOSALS
If the merger is consummated, Iroquois Bancorp will not hold an annual
meeting of shareholders in 2001. However, if the merger is not consummated and
the 2001 annual meeting of shareholders is held, all proposals of shareholders
intended to be presented at the 2001 annual meeting must be received by Iroquois
Bancorp at the address on the cover of this proxy statement no later than
December 1, 2000, in order to be included in the proxy statement and form of
proxy for the 2001 annual meeting. All such proposals shall be subject to the
proxy rules adopted under the Securities Exchange Act of 1934. With respect to
any proposal not required to be included in the proxy statement under the rules
of the Securities and Exchange Commission, management will be permitted to
exercise discretionary voting power for all proxies and to vote against the
proposal unless notice of such proposal is received by Iroquois Bancorp at the
address on the cover of this proxy statement no later than February 14, 2001.
35
<PAGE>
OTHER MATTERS
Management knows of no other business to be transacted at the special
meeting, but, if any other matters do properly come before the special meeting,
the persons named as proxies or their substitute will vote or act with respect
to such other matters in accordance with the direction of a majority of the
board of directors of Iroquois Bancorp.
By Order of the Board of Directors
/s/ Kathleen A. Manley
-------------------------------
Kathleen A. Manley
Corporate Secretary
36
<PAGE>
ANNEX I
AGREEMENT AND PLAN OF MERGER
By and Between
NIAGARA BANCORP, INC.
FIRST NIAGARA MERGER CORP
And
IROQUOIS BANCORP, INC.
DATED AS OF MARCH 26, 2000
<PAGE>
AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions................................................................ 1
ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
Section 2.01 Effects of Merger; Surviving Corporation................................... 6
Section 2.02 Conversion of Shares....................................................... 6
Section 2.03 Exchange Procedures........................................................ 7
Section 2.04 Stock Options.............................................................. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IROQ
Section 3.01 Organization............................................................... 8
Section 3.02 Capitalization............................................................. 8
Section 3.03 Authority; No Violation.................................................... 9
Section 3.04 Consents................................................................... 9
Section 3.05 Financial Statements....................................................... 10
Section 3.06 Taxes...................................................................... 10
Section 3.07 No Material Adverse Effect................................................. 10
Section 3.08 Contracts.................................................................. 10
Section 3.09 Ownership of Property; Insurance Coverage.................................. 11
Section 3.10 Legal Proceedings.......................................................... 12
Section 3.11 Compliance With Applicable Law............................................. 12
Section 3.12 ERISA...................................................................... 13
Section 3.13 Brokers, Finders and Financial Advisors.................................... 14
Section 3.14 Environmental Matters...................................................... 14
Section 3.15 Loan Portfolio............................................................. 15
Section 3.16 Securities Documents....................................................... 15
Section 3.17 Related Party Transactions................................................. 16
Section 3.18 Schedule of Termination Benefits........................................... 16
Section 3.19 Deposits................................................................... 16
Section 3.20 Antitakeover Provisions Inapplicable; Required Vote of Stockholders........ 16
Section 3.21 Fairness Opinion........................................................... 16
Section 3.22 Administration of Fiduciary Accounts....................................... 16
Section 3.23 Derivative Transactions.................................................... 16
</TABLE>
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NIAGARA BANCORP
<TABLE>
<S> <C>
Section 4.01 Organization............................................................... 17
Section 4.02 Capitalization............................................................. 17
Section 4.03 Authority; No Violation.................................................... 17
Section 4.04 Consents................................................................... 18
Section 4.05 Compliance with Applicable Law............................................. 18
Section 4.06 Information to be Supplied................................................. 18
Section 4.07 Financing.................................................................. 18
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of IROQ's Business................................................. 19
Section 5.02 Access; Confidentiality.................................................... 21
Section 5.03 Regulatory Matters and Consents............................................ 22
Section 5.04 Taking of Necessary Action................................................. 22
Section 5.05 Certain Agreements......................................................... 22
Section 5.06 No Other Bids and Related Matters.......................................... 23
Section 5.07 Duty to Advise; Duty to Update IROQ Disclosure Schedules................... 24
Section 5.08 Conduct of Niagara Bancorp's Business...................................... 24
Section 5.09 Board and Committee Minutes................................................ 25
Section 5.10 Undertakings by IROQ and Niagara Bancorp................................... 25
Section 5.11 Employee and Termination of Benefits; Directors and Management............. 27
Section 5.12 Duty to Advise; Duty to Update Niagara Bancorp's Disclosure Schedule....... 27
Section 5.13 Governance and Related Matters............................................. 27
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to IROQ's Obligations under this Agreement...................... 28
Section 6.02 Conditions to Niagara Bancorp's Obligations under this Agreement........... 28
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination................................................................ 29
Section 7.02 Effect of Termination...................................................... 30
</TABLE>
<PAGE>
ARTICLE VIII
MISCELLANEOUS
<TABLE>
<S> <C>
Section 8.01 Expenses................................................................... 30
Section 8.02 Non-Survival of Representations and Warranties............................. 30
Section 8.03 Amendment, Extension and Waiver............................................ 30
Section 8.04 Entire Agreement........................................................... 31
Section 8.05 No Assignment.............................................................. 31
Section 8.06 Notices.................................................................... 31
Section 8.07 Captions................................................................... 31
Section 8.08 Counterparts............................................................... 31
Section 8.09 Severability............................................................... 32
Section 8.10 Specific Performance....................................................... 32
Section 8.11 Governing Law.............................................................. 32
</TABLE>
Exhibits:
Exhibit A Stock Option Agreement
Exhibit B Form of IROQ Voting Agreement
Exhibit 6.1 Form of Opinion of Counsel for Niagara Bancorp
Exhibit 6.2 Form of Tax Opinion of Counsel for Niagara Bancorp
Exhibit 6.3 Form of Opinion of Counsel for IROQ
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 26,
2000, is by and among Niagara Bancorp, Inc., a Delaware corporation ("Niagara
Bancorp"), First Niagara Merger Corp, a wholly-owned subsidiary of Niagara
Bancorp incorporated under the laws of the State of Delaware, and Iroquois
Bancorp, Inc., a New York corporation ("IROQ"). Each of Niagara Bancorp, First
Niagara Merger Corp and IROQ is sometimes individually referred to herein as a
"party," and Niagara Bancorp, First Niagara Merger Corp and IROQ are sometimes
collectively referred to herein as the "parties."
RECITALS
WHEREAS, Niagara Bancorp, a registered bank holding company, with principal
offices in Lockport, New York, owns all of the issued and outstanding capital
stock of First Niagara Bank, a New York chartered savings bank (formerly
Lockport Savings Bank) ("First Niagara"), with principal offices in Lockport,
New York.
WHEREAS, IROQ, a registered bank holding company, with principal offices in
Auburn, New York, owns all of the issued and outstanding capital stock of Cayuga
Bank ("CB"), a New York chartered commercial bank and trust company, with
principal offices in Auburn, New York, and The Homestead Savings FA ("HSFA"), a
federally-chartered savings association with principal offices in Utica, New
York.
WHEREAS, the Boards of Directors of the respective parties hereto deem it
advisable and in the best interests of the respective stockholders to consummate
the business combination transaction contemplated herein in which IROQ, subject
to the terms and conditions set forth herein, shall be merged with and into
First Niagara Merger Corp, with IROQ surviving the merger, to be followed by the
merger of IROQ with and into Niagara Bancorp, with Niagara Bancorp surviving the
merger (collectively referred to as the "Merger"); and
WHEREAS, in connection with the execution of this Agreement, as an
inducement to Niagara Bancorp to enter into this Agreement, IROQ and Niagara
Bancorp have entered into a Stock Option Agreement dated as of even date
herewith pursuant to which IROQ will grant Niagara Bancorp the right to purchase
certain shares of IROQ Common Stock; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
Merger, and the other transactions contemplated by this Agreement, and the Stock
Option Agreement (collectively, the "Merger Documents").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions. Except as otherwise provided herein, as used in
this Agreement, the following terms shall have the indicated meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means, with respect to any Person, any Person who
directly, or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with, such Person and, without
limiting the generality of the foregoing, includes any executive officer or
director of such Person and any Affiliate of such executive officer or
director.
"Agreement" means this agreement, and any amendment or supplement
hereto, which constitutes a "plan of merger" between Niagara Bancorp, First
Niagara Merger Corp and IROQ.
"Applications" means the applications for regulatory approval which
are required by the transactions contemplated hereby.
1
<PAGE>
"BIF" means the Bank Insurance Fund administered by the FDIC.
"BHCA" means the Bank Holding Company Act of 1956, as amended.
"Closing Date" means the date determined by Niagara Bancorp, in its
sole discretion, upon five (5) days prior written notice to IROQ, but in no
event later than thirty (30) days after the last condition precedent
pursuant to this Agreement has been fulfilled or waived (including the
expiration of any applicable waiting period), or such other date as to
which Niagara Bancorp and IROQ shall mutually agree.
"Code" means the Internal Revenue Code of 1986, as amended.
"Merger" means the merger of IROQ with and into First Niagara Merger
Corp, with IROQ surviving the merger, to be followed by the merger of IROQ,
as a wholly-owned subsidiary of Niagara Bancorp, with and into Niagara
Bancorp, with Niagara Bancorp being the surviving corporation.
"Department" means the Banking Department of the State of New York.
"DGCL" means the Delaware General Corporation Law.
"DOL" means the U.S. Department of Labor.
"Environmental Laws" means any Federal or state law, statute, rule,
regulation, code, order, judgement, decree, injunction, common law or
agreement with any Federal or state governmental authority relating to (i)
the protection, preservation or restoration of the environment (including
air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), (ii) human health or safety relating to the presence of
Hazardous Material, or (iii) exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of, Hazardous Material, in each case as
amended and now in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated from time to time thereunder.
"Exchange Agent" means the entity selected by Niagara Bancorp and
agreed to by IROQ, as provided in Section 2.03(a) of this Agreement.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FRB" means the Board of Governors of the Federal Reserve System.
"First Niagara" means First Niagara Bank, Lockport, New York, formerly
Lockport Savings Bank.
"GAAP" means generally accepted accounting principles as in effect at
the relevant date and consistently applied.
2
<PAGE>
"Hazardous Material" means any substance (whether solid, liquid or
gas) which is or could be detrimental to human health or safety or to the
environment, currently or hereafter listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component.
Hazardous Material includes, without limitation, any toxic waste,
pollutant, contaminant, hazardous substance, toxic substance, hazardous
waste, special waste, industrial substance, oil or petroleum, or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
"IROQ" means Iroquois Bancorp, Inc., a New York corporation.
"IROQ Common Stock" means the common stock of IROQ described in
Section 3.02(a).
"IROQ Disclosure Schedules" means the Disclosure Schedules delivered
by IROQ to Niagara Bancorp pursuant to Article III of this Agreement.
"IROQ Financials" means (i) the audited consolidated financial
statements of IROQ as of December 31, 1999 and 1998 and for the three years
ended December 31, 1999, including the notes thereto, and (ii) the
unaudited interim consolidated financial statements of IROQ as of each
calendar quarter thereafter included in Securities Documents filed by IROQ.
"IROQ Stock Option Plans" means the IROQ Amended and Restated 1996
Stock Option Plan and the IROQ Amended and Restated 1998 Stock Option Plan.
"IROQ Regulatory Reports" means the Call Reports of CB and HFSA and
accompanying schedules, as filed with the FDIC and the OTS, respectively,
for each calendar quarter beginning with the quarter ended March 31, 1998,
through the Closing Date, and all Annual Reports on Form FR Y-6, any
Current Report on Form FR Y-6A filed with the FRB by IROQ from December
31, 1998 through the Closing Date.
"IROQ Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by IROQ, except any
corporation the stock of which is held in the ordinary course of the
lending activities of IROQ.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"Loan Property" shall have the meaning given to such term in Section
3.14(b) of this Agreement.
"Material Adverse Effect" shall mean, with respect to IROQ, any
adverse effect on its assets, financial condition or results of operations
which is material to its assets, financial condition or results of
operations on a consolidated basis, except for any material adverse effect
caused by (i) any change in the value of the assets of IROQ resulting from
a change in interest rates generally, (ii) any individual or combination of
changes occurring after the date hereof in any federal or state law, rule
or regulation or in GAAP, which change(s) affect(s) financial institutions
generally, or (iii) any action taken by IROQ or any IROQ Subsidiary at the
request of Niagara Bancorp.
"Merger Effective Date" means that date upon which the certificate of
merger as to the merger of IROQ with and into First Niagara Merger Corp is
filed with both the Delaware Office of the Secretary of State, in
accordance with the of the DGCL, and the New York Department of State, in
accordance with the NYBCL, or as otherwise stated in the certificates of
merger.
"Niagara Bancorp" means Niagara Bancorp, Inc., a Delaware Corporation.
Niagara Bancorp will change its name to First Niagara Financial Group, Inc.
following the annual meeting of stockholders to be held in May, 2000.
References to Niagara Bancorp shall include First Niagara Financial Group,
Inc. after the effectiveness of the name change.
3
<PAGE>
"Niagara Bancorp Common Stock" has the meaning given to that term in
Section 4.02(a) of this Agreement.
"Niagara Bancorp Disclosure Schedules" means the Disclosure Schedules
delivered by Niagara Bancorp to IROQ pursuant to Article IV of this
Agreement.
"Niagara Bancorp Financials" means (i) the audited consolidated
financial statements of Niagara Bancorp as of December 31, 1998 and 1997
and for the three years ended December 31, 1998, including the notes
thereto, and (ii) the unaudited interim consolidated financial statements
of Niagara Bancorp as of each calendar quarter thereafter included in
Securities Documents filed by Niagara Bancorp
"Niagara Bancorp Regulatory Reports" means the Call Reports of First
Niagara and accompanying schedules, as filed with the FDIC, for each
calendar quarter beginning with the quarter ended March 31, 1999, through
the Closing Date, and all Annual Reports on Form FR Y-6, any Current
Report of on Form FR Y-6A filed with the FRB by Niagara Bancorp from April
17, 1998 through the Closing Date.
"Niagara Bancorp Option" means the option granted to Niagara Bancorp
to acquire shares of IROQ Common Stock pursuant to the Stock Option
Agreement.
"Niagara Bancorp Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by Niagara
Bancorp or First Niagara, except any corporation the stock of which is held
as security by First Niagara in the ordinary course of its lending
activities.
"NYBCL" means the New York Business Corporation Law.
"OTS" means the Office of Thrift Supervision.
"Participation Facility" shall have the meaning given to such term in
Section 3.14(b) of this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Previously Disclosed" shall mean disclosed in a writing by either
party in (i) the Securities Documents filed with the SEC after December
31, 1998 and before the date hereof or (ii) a disclosure schedule (the
"Disclosure Schedule") dated of even date herewith from the party making
such disclosure and delivered to the other party prior to the execution of
this Agreement. Any information disclosed by one party to the other for
any purpose hereunder shall be deemed to be disclosed for all purposes
hereunder. The inclusion of any matter in information Previously Disclosed
shall not be deemed an admission or otherwise to imply that any such matter
is material for purposes of this Agreement.
"Proxy Statement" means the proxy statement, together with any
supplements thereto, to be transmitted to holders of IROQ Common Stock in
connection with the transactions contemplated by this Agreement.
"Regulatory Agreement" has the meaning given to that term in Section
3.11 of this Agreement.
"Regulatory Authority" means any agency or department of any federal
or state government, including without limitation the Superintendent, the
FDIC, the FRB, the OTS, the SEC or the respective staffs thereof.
"REIT Preferred Stock" means the preferred stock of Cayuga Funding
Corporation, a New York corporation and a subsidiary of CB.
"Rights" means warrants, options, rights, convertible securities and
other capital stock equivalents which obligate an entity to issue its
securities.
"SAIF" means the Savings Association Insurance Fund administered by
the FDIC.
4
<PAGE>
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time thereunder.
"Securities Documents" means all registration statements, schedules,
statements, forms, reports, proxy material, and other documents filed or
required to be filed under the Securities Laws.
"Securities Laws" means the Securities Act and the Exchange Act.
"Stock Option Agreement" means the Stock Option Agreement dated as of
even date herewith pursuant to which IROQ has granted Niagara Bancorp the
right to purchase certain shares of IROQ Common Stock and which is attached
to this Agreement as Exhibit A thereto.
"Subsidiary" means any corporation, 50% or more of the capital stock
of which is owned, either directly or indirectly, by another entity, except
any corporation the stock of which is held as security by either Niagara
Bancorp or IROQ, as the case may be, in the ordinary course of its lending
activities.
"Superintendent" means the Superintendent of Banks of the State of New
York, and where appropriate includes the State of New York Banking
Department and the Banking Board of the State of New York.
5
<PAGE>
ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
Section 2.01 Effects of Merger; Surviving Corporation.
(a) (i) On the Merger Effective Date, First Niagara Merger Corp shall
merge with and into IROQ; the separate existence of First Niagara Merger Corp
shall cease; IROQ shall be the surviving corporation in the Merger (the
"Surviving Corporation") and a wholly-owned subsidiary of Niagara Bancorp; and
all of the property (real, personal and mixed), rights, powers and duties and
obligations of First Niagara Merger Corp shall be taken and deemed to be
transferred to and vested in IROQ, as the Surviving Corporation in the Merger,
without further act or deed; all in accordance with the applicable laws of the
States of Delaware and New York.
(ii) On the Merger Effective Date: the Certificate of Incorporation
of the Surviving Corporation shall be amended and restated to read in its
entirety as the Certificate of Incorporation of First Niagara Merger Corp, as in
effect immediately prior to the Merger Effective Date; and the Bylaws of the
Surviving Corporation shall be amended and restated to read in their entirety as
the Bylaws of First Niagara Merger Corp, as in effect immediately prior to the
Merger Effective Date, until thereafter altered, amended or repealed in
accordance with applicable law.
(iii) On the Merger Effective Date, the directors of First Niagara
Merger Corp duly elected and holding office immediately prior to the Effective
Date shall be the directors of the Surviving Corporation in the Merger, each to
hold office until his or her successor is elected and qualified or otherwise in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(iv) On the Merger Effective Date, the officers of First Niagara
Merger Corp duly elected and holding office immediately prior to the Effective
Date shall be the officers of the Surviving Corporation in the Merger, each to
hold office until his or her successor is elected and qualified or otherwise in
accordance with the Certificate of Incorporation and the Bylaws of the Surviving
Corporation.
(b) Notwithstanding any provision of this Agreement to the contrary,
Niagara Bancorp may elect, subject to the filing of all necessary applications
and the receipt of all required regulatory approvals, to modify the structure of
the transactions contemplated hereby, and the parties shall enter into such
alternative transactions, so long as (i) there are no adverse tax consequences
to any of the stockholders, directors or officers of IROQ as a result of such
modification, (ii) the Merger Consideration, the treatment of stock options
pursuant to Section 2.04, and the obligations under Sections 5.11 and 5.13 are
not thereby changed or reduced in amount because of such modification, (iii)
such modification will not be likely to materially delay or jeopardize receipt
of any required regulatory approvals, (iv) it does not result in any
representation or warranty of any party set forth in this Agreement becoming
incorrect in any material respect, and (v) it does not diminish the benefits of
any officer, director or employee of IROQ pursuant to this Agreement or any
separate agreement contemplated hereby.
Section 2.02 Conversion of Shares. Subject to Section 6.03, at the
Merger Effective Date, by virtue of the Merger and without any action on the
part of IROQ or the holders of shares of IROQ Common Stock:
(i) Each outstanding share of IROQ Common Stock issued and outstanding at
the Merger Effective Date, except as provided in clause (ii) of this Section,
shall cease to be outstanding, shall cease to exist and shall be converted into
the right to receive $33.25 in cash (referred to as the "Merger Consideration").
(ii) Any shares of IROQ Common Stock which are owned or held by either
party hereto or any of their respective Subsidiaries (other than in a fiduciary
capacity or in connection with debts previously contracted) at the Merger
Effective Date shall cease to exist, the certificates for such shares shall as
promptly as practicable be canceled, such shares shall not be converted into the
Merger Consideration, and no cash or shares of capital stock of Niagara Bancorp
shall be issued or exchanged therefor.
(iii) Each share of Niagara Bancorp Common Stock issued and outstanding
immediately before the Merger Effective Date shall remain an outstanding share
of Common Stock of Niagara Bancorp.
(iv) The holders of certificates representing shares of IROQ Common Stock
(any such certificate being hereinafter referred to as a "Certificate") shall
cease to have any rights as stockholders of IROQ, except such rights, if any, as
they may have pursuant to this Agreement or applicable law.
6
<PAGE>
Section 2.03 Exchange Procedures.
(a) As promptly as practicable after the Merger Effective Date, and in
any event within five business days of the Merger Effective Date, an Exchange
Agent designated by Niagara Bancorp and reasonably acceptable to IROQ, shall
mail to each holder of record of an outstanding share Certificate or
Certificates a Letter of Transmittal containing instructions for the surrender
of the Certificate or Certificates held by such holder for payment therefor.
Upon surrender of the Certificate or Certificates to the Exchange Agent in
accordance with the instructions set forth in the Letter of Transmittal, such
holder shall promptly receive in exchange therefor the Merger Consideration,
without interest thereon. The Exchange Agent shall send payments within three
business days after the receipt of properly submitted documents. Approval of
this Agreement by the stockholders of IROQ shall constitute authorization for
Niagara Bancorp to designate and appoint such Exchange Agent. Neither Niagara
Bancorp nor the Exchange Agent shall be obligated to deliver the Merger
Consideration to a former stockholder of IROQ until such former stockholder
surrenders his Certificate or Certificates or, in lieu thereof, any such
appropriate affidavit of loss and indemnity agreement and bond as may be
reasonably required by Niagara Bancorp. The Exchange Agent in its agreement
shall be obligated to pay the Merger Consideration in accordance with this
Agreement.
(b) If payment of the Merger Consideration is to be made to a person
other than the person in whose name a Certificate surrendered in exchange
therefore is registered, it shall be a condition of payment that the Certificate
so surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(c) On or prior to the Merger Effective Date, Niagara Bancorp shall
deposit or cause to be deposited, in trust with the Exchange Agent, an amount of
cash equal to the aggregate Merger Consideration that the IROQ stockholders
shall be entitled to receive on the Merger Effective Date pursuant to Section
2.02 hereof.
(d) The payment of the Merger Consideration upon the conversion of IROQ
Common Stock in accordance with the above terms and conditions shall be deemed
to have been issued and paid in full satisfaction of all rights pertaining to
such IROQ Common Stock.
(e) Promptly following the date which is twelve months after the Merger
Effective Date, the Exchange Agent shall deliver to Niagara Bancorp all cash,
certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing shares of IROQ
Common Stock may surrender such Certificate to Niagara Bancorp and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefore the Merger Consideration multiplied by the number of
shares of IROQ Common Stock formerly represented by such Certificate, without
any interest or dividends thereon.
(f) After the close of business on the Merger Effective Date, there shall
be no transfers on the stock transfer books of IROQ of the shares of IROQ Common
Stock which are outstanding immediately prior to the Merger Effective Date, and
the stock transfer books of IROQ shall be closed with respect to such shares.
If, after the Merger Effective Date, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be canceled and
exchanged for the Merger Consideration as provided in this Article II.
(g) In the event any certificate for IROQ Common Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall deliver in exchange for such
lost, stolen or destroyed Certificate, upon the making of an affidavit of the
fact by the holder thereof, the cash to be paid in the Merger as provided for
herein; provided, however, that Niagara Bancorp may, in its sole discretion and
as a condition precedent to the delivery thereof, require the owner of such
lost, stolen or destroyed Certificate to deliver a bond in such reasonable sum
as Niagara Bancorp may request as indemnity against any claim that may be made
against IROQ, Niagara Bancorp or any other party with respect to the Certificate
alleged to have been lost, stolen or destroyed.
(h) Niagara Bancorp is hereby authorized to adopt additional rules and
regulations with respect to the matters referred to in this Section 2.03 not
inconsistent with the provisions of this Agreement.
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Section 2.04 Stock Options. On the Merger Effective Date, each option
(irrespective of whether such option is then subject to any limitation upon
exercise) issued and outstanding that is unexercised pursuant to IROQ's Stock
Option Plans (options to purchase 208,200 shares are outstanding as of the date
hereof) shall be cancelled and converted into the right to receive cash in an
amount equal to the Merger Consideration minus the exercise price of the option,
multiplied by the number of shares covered by the option. The cash payments to
option holders shall be made by IROQ on the Merger Effective Date, net of any
applicable withholding taxes. Such payments shall be in full satisfaction of
all the optionee's rights with respect to the option. On the day prior to the
Merger Effective Date, IROQ shall provide Niagara Bancorp with a schedule of all
outstanding options not exercised, the exercise price thereof, the optionee's
mailing address, and the optionee's written acknowledgment that the payment
pursuant to this Section 2.04 shall be in full satisfaction of all rights under
the IROQ Stock Option Plans and any option award agreement entered into
thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IROQ
IROQ represents and warrants to Niagara Bancorp that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date in all
material respects (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article III), except
as Previously Disclosed. IROQ has made a good faith effort to ensure that the
disclosure on each schedule of the IROQ Disclosure Schedules corresponds to the
section reference herein. However, for purposes of the IROQ Disclosure
Schedules, any item Previously Disclosed on any schedule therein is deemed to be
fully disclosed with respect to all schedules under which such item may be
relevant.
Section 3.01 Organization.
(a) IROQ is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York, and is duly registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). IROQ has full corporate power and authority to carry on its business
as now conducted and is duly licensed or qualified to do business in the states
of the United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification, except
where the failure to be so licensed or qualified would not have a Material
Adverse Effect on IROQ.
(b) CB is a commercial bank organized, validly existing and in good
standing under the laws of the State of New York. HFSA is a savings association
organized, validly existing and in good standing under the laws of the United
States. Except as set forth in IROQ DISCLOSURE SCHEDULE 3.01(b), CB and HFSA are
the only IROQ Subsidiaries. The deposits of CB are insured by the FDIC through
the BIF to the fullest extent permitted by law, and all premiums and assessments
required to be paid in connection therewith have been paid when due by CB. The
deposits of HFSA are insured by the FDIC through the SAIF to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due by HFSA. CB and HFSA are members in
good standing of the Federal Home Loan Bank of New York and each owns the
requisite amount of stock therein. Each other IROQ Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. IROQ has heretofore made
available to Niagara Bancorp a complete and correct copy of the Certificate of
Incorporation and By-laws or comparable organizational documents, each as
amended to the date hereof, of each of IROQ and its Subsidiaries.
(c) Except as disclosed in IROQ DISCLOSURE SCHEDULE 3.01(c), the
respective minute books of IROQ and each IROQ Subsidiary accurately record, in
all material respects, all material corporate actions of their respective
shareholders and boards of directors (including committees) through the date of
this Agreement.
Section 3.02 Capitalization.
(a) The authorized capital stock of IROQ consists of 6,000,000 shares of
Common Stock, $1.00 par value per share ("IROQ Common Stock"), and 3,000,000
shares of Preferred Stock, par value $1.00 per share ("IROQ Preferred Stock").
There are 2,306,880 shares of IROQ Common Stock validly issued and outstanding,
all of which are fully paid and non-assessable. No shares of IROQ Preferred
Stock are outstanding. Neither IROQ nor any IROQ Subsidiary has or is bound by
any Right of any character relating to the purchase, sale or issuance or voting
of, or right to receive dividends or other distributions on, any shares of IROQ
Common Stock, or any other security of IROQ or any securities representing the
right to vote, purchase or otherwise receive any shares of IROQ
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Common Stock or any other security of IROQ, other than shares issuable under the
Stock Option Agreement and other than as set forth in reasonable detail in the
IROQ DISCLOSURE SCHEDULE 3.02(a). IROQ DISCLOSURE SCHEDULE 3.02(a) sets forth:
the name of each holder of options to purchase IROQ Common Stock, the number of
shares each such individual may acquire pursuant to the exercise of such
options, and the exercise price relating to the options held.
(b) IROQ owns all of the capital stock of CB and HFSA, free and clear of
any lien or encumbrance. Except for the IROQ Subsidiaries, and as set forth in
IROQ DISCLOSURE SCHEDULE 3.02(b), IROQ does not possess, directly or indirectly,
any material equity interest in any corporation, except for equity interests
held in the investment portfolios of IROQ Subsidiaries, equity interests held by
IROQ Subsidiaries in a fiduciary capacity, equity interests held in connection
with the lending activities of IROQ Subsidiaries, and equity interests held as
of the date of this Agreement by IROQ as passive investments not representing 5%
or more of any class of stock of any issuer. Except as disclosed in the IROQ
DISCLOSURE SCHEDULE 3.02(b), all the outstanding shares of capital stock of each
IROQ Subsidiary are validly issued, fully paid and non-assessable and are owned
by IROQ or by a wholly-owned subsidiary of IROQ, free and clear of any liens.
There are no existing options, warrants, calls or other rights, agreements or
commitments of any character relating to the sale, issuance or voting of any
shares of the issued or unissued capital stock of any IROQ Subsidiary which have
been issued, granted or entered into by IROQ or any of its Subsidiaries.
(c) To IROQ's knowledge, no Person or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act), is the beneficial owner (as defined in
Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of
IROQ Common Stock, except as disclosed in the IROQ DISCLOSURE SCHEDULE 3.02(c).
Section 3.03 Authority; No Violation.
(a) IROQ 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 by IROQ and the completion by IROQ of
the transactions contemplated hereby have been duly and validly approved by the
Board of Directors of IROQ and, except for approval of the shareholders of IROQ,
no other corporate proceedings on the part of IROQ are necessary to complete the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by IROQ and, subject to approval by the shareholders of
IROQ and receipt of the required approvals of Regulatory Authorities described
in Section 4.04 hereof, constitutes the valid and binding obligation of IROQ,
enforceable against IROQ in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally,
and as to CB, the conservatorship or receivership provisions of the FDIA, and
subject, as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by IROQ, (B) subject
to receipt of approvals from the Regulatory Authorities referred to in Section
4.04 hereof and IROQ's and Niagara Bancorp's compliance with any conditions
contained therein, the consummation of the transactions contemplated hereby, and
(C) compliance by IROQ, CB and HFSA with any of the terms or provisions hereof
will not (i) conflict with or result in a breach of any provision of the
certificate of incorporation or bylaws of IROQ or any IROQ Subsidiary or the
charter and bylaws of CB or HFSA; (ii) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to IROQ
or any IROQ Subsidiary or any of their respective properties or assets; or (iii)
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default), under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration or
the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of IROQ, CB, or HFSA under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other investment or obligation to which IROQ, CB or
HFSA is a party, or by which they or any of their respective properties or
assets may be bound or affected; except for such violations, conflicts, breaches
or defaults under clause (ii) or (iii) hereof which, either individually or in
the aggregate, will not have a Material Adverse Effect on IROQ.
Section 3.04 Consents. Except for the consents, waivers, approvals, and
filings from or with the Regulatory Authorities referred to in Section 4.04
hereof and compliance with any conditions contained therein, and the approval of
this Agreement by the requisite vote of the shareholders of IROQ, no consents,
waivers or approvals of, or filings or registrations with, any governmental
authority are necessary, and, to IROQ's knowledge, no consents, waivers or
approvals of, or filings or registrations with, any other third parties are
necessary (as to third parties, other than consents, waivers, approvals and
filings the failure of which to obtain or to file either individually or in the
aggregate will not have a Material Adverse Effect on IROQ), in connection with
(a) the execution and
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delivery of this Agreement by IROQ, and (b) the completion by IROQ, CB or HFSA
of the transactions contemplated hereby. IROQ has no reason to believe that (i)
any required consents or approvals will not be received, or that (ii) any public
body or authority, the consent or approval of which is not required or any
filing with which is not required, will object to the completion of the
transactions contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) IROQ has previously delivered to Niagara Bancorp the IROQ Regulatory
Reports. The IROQ Regulatory Reports have been, or will be, prepared in all
material respects in accordance with applicable regulatory accounting principles
and practices throughout the periods covered by such statements, and fairly
present, or will fairly present in all material respects, the consolidated
financial position, results of operations and changes in shareholders' equity of
IROQ as of and for the periods ended on the dates thereof, in accordance with
applicable regulatory accounting principles applied on a consistent basis.
(b) IROQ has previously delivered to Niagara Bancorp the IROQ Financials.
The IROQ Financials have been, or will be, prepared in accordance with GAAP, and
(including the related notes where applicable) fairly present, or will fairly
present, in each case in all material respects (subject in the case of the
unaudited interim statements to normal year-end adjustments), the consolidated
financial position, results of operations and cash flows of IROQ and the IROQ
Subsidiaries as of and for the respective periods ending on the dates thereof,
in accordance with GAAP applied on a consistent basis during the periods
involved, except as indicated in the notes thereto, or in the case of unaudited
statements, as permitted by Form 10-Q.
(c) At the date of each balance sheet included in the IROQ Financials or
the IROQ Regulatory Reports, IROQ did not have, or will not have any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such
IROQ Financials or IROQ Regulatory Reports or in the footnotes thereto which are
not fully reflected or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss contingencies which are
not material individually or in the aggregate and which are incurred in the
ordinary course of business, consistent with past practice and except for
liabilities, obligations and loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
Section 3.06 Taxes. IROQ and the IROQ Subsidiaries are members of the
same affiliated group within the meaning of IRC Section 1504(a). IROQ has duly
filed all federal, state and material local tax returns required to be filed by
or with respect to IROQ and all IROQ Subsidiaries on or prior to the Closing
Date (all such returns being accurate and correct in all material respects) and
has duly paid or will pay, or made or will make, provisions for the payment of
all material federal, state and local taxes which have been incurred by or are
due or claimed to be due from IROQ and any IROQ Subsidiary by any taxing
authority or pursuant to any written tax sharing agreement on or prior to the
Closing Date other than taxes or other charges which (i) are not delinquent,
(ii) are being contested in good faith, or (iii) have not yet been fully
determined. As of the date of this Agreement, there is no audit examination,
deficiency assessment, tax investigation or refund litigation with respect to
any taxes of IROQ or any of its Subsidiaries, and no claim has been made by any
authority in a jurisdiction where IROQ or any of its Subsidiaries do not file
tax returns that IROQ or any such Subsidiary is subject to taxation in that
jurisdiction. Except as set forth in IROQ DISCLOSURE SCHEDULE 3.06, IROQ and its
Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. IROQ and each of its Subsidiaries has withheld and paid all
taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder
or other third party, and IROQ and each of its Subsidiaries has timely complied
with all applicable information reporting requirements under Part III,
Subchapter A of Chapter 61 of the Code and similar applicable state and local
information reporting requirements in all material respects.
Section 3.07 No Material Adverse Effect. IROQ and the IROQ Subsidiaries,
taken as a whole, have not suffered any Material Adverse Effect since December
31, 1999.
Section 3.08 Contracts.
(a) Except as set forth in IROQ DISCLOSURE SCHEDULE 3.08(a), neither IROQ
nor any IROQ Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract or material arrangement with any past or
present officer, director or employee of IROQ or any IROQ Subsidiary, except for
"at will"
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arrangements; (ii) any plan, material arrangement or contract providing for
bonuses, pensions, options, deferred compensation, retirement payments, profit
sharing or similar material arrangements for or with any past or present
officers, directors or employees of IROQ or any IROQ Subsidiary; (iii) any
collective bargaining agreement with any labor union relating to employees of
IROQ or any IROQ Subsidiary; (iv) any agreement which by its terms limits the
payment of dividends by IROQ; (v) any instrument evidencing or related to
material indebtedness for borrowed money whether directly or indirectly, by way
of purchase money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which IROQ or any IROQ Subsidiary is an obligor to any
person, which instrument evidences or relates to indebtedness other than
deposits, repurchase agreements, Federal Home Loan Bank of New York advances,
bankers' acceptances, and "treasury tax and loan" accounts established in the
ordinary course of business and transactions in "federal funds" or which
contains financial covenants or other restrictions (other than those relating to
the payment of principal and interest when due) which would be applicable on or
after the Closing Date to Niagara Bancorp or any Niagara Bancorp Subsidiary; or
(vi) any contract (other than this Agreement) limiting the freedom, in any
material respect, of IROQ, CB or HFSA to engage in any type of banking or bank-
related business which IROQ is permitted to engage in under applicable law as of
the date of this Agreement.
(b) True and correct copies of agreements, plans, contracts, arrangements
and instruments referred to in Section 3.08(a), have been provided to Niagara
Bancorp on or before the date hereof, are listed on IROQ DISCLOSURE SCHEDULE
3.08(a) and are in full force and effect on the date hereof and neither IROQ nor
any IROQ Subsidiary (nor, to the knowledge of IROQ, any other party to any such
contract, plan, arrangement or instrument) has materially breached any provision
of, or is in default in any respect under any term of, any such contract, plan,
arrangement or instrument. Except as set forth in the IROQ DISCLOSURE SCHEDULE
3.08(b), no party to any material contract, plan, arrangement or instrument will
have the right to terminate any or all of the provisions of any such contract,
plan, arrangement or instrument as a result of the execution of, and the
transactions contemplated by, this Agreement. Except as set forth in IROQ
DISCLOSURE SCHEDULE 3.08(b), none of the employees (including officers) of IROQ,
possess the right to terminate their employment as a result of the execution of
this Agreement. Except as set forth in IROQ DISCLOSURE SCHEDULE 3.08(b), no
plan, contract, employment agreement, termination agreement, or similar
agreement or arrangement to which IROQ or any IROQ Subsidiary is a party or
under which IROQ or any IROQ Subsidiary may be liable contains provisions which
permit an employee or independent contractor to terminate it without cause and
continue to accrue future benefits thereunder. Except as set forth in IROQ
DISCLOSURE SCHEDULE 3.08(b), no such agreement, plan, contract, or arrangement
(x) provides for acceleration in the vesting of benefits or payments due
thereunder upon the occurrence of a change in ownership or control of IROQ or
any IROQ Subsidiary absent the occurrence of a subsequent event; or (y) requires
IROQ or any IROQ Subsidiary to provide a benefit in the form of IROQ Common
Stock or determined by reference to the value of IROQ Common Stock. Except as
set forth in IROQ DISCLOSURE SCHEDULE 3.08(b), no such agreement, plan or
arrangement with respect to officers or directors of IROQ, or to IROQ's
knowledge, to its employees, provides for benefits which will cause an "excess
parachute payment" or the disallowance of a federal income tax deduction under
IRC Section 280G.
Section 3.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in IROQ DISCLOSURE SCHEDULE 3.09, IROQ and the
IROQ Subsidiaries have good and, as to real property, marketable title to all
material assets and properties owned by IROQ or any IROQ Subsidiary in the
conduct of their businesses, whether such assets and properties are real or
personal, tangible or intangible, including assets and property reflected in the
balance sheets contained in the IROQ Regulatory Reports and in the IROQ
Financials or acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of in the ordinary course of business, since
the date of such balance sheets), subject to no material encumbrances, liens,
mortgages, security interests or pledges, except (i) those items which secure
liabilities for public or statutory obligations or any discount with, borrowing
from or other obligations to any Federal Home Loan Bank, inter-bank credit
facilities, or any transaction by a IROQ Subsidiary acting in a fiduciary
capacity, (ii) statutory liens for amounts not yet delinquent or which are being
contested in good faith, and (iii) items permitted under Article V. IROQ and the
IROQ Subsidiaries, as lessee, have the right under valid and subsisting leases
of real and material personal properties used by IROQ and its Subsidiaries in
the conduct of their businesses to occupy or use all such leased properties as
presently occupied and used by each of them. Except as disclosed in IROQ
DISCLOSURE SCHEDULE 3.09(a), such existing leases and commitments to lease
constitute or will constitute operating leases for both tax and financial
accounting purposes and the lease expense and minimum rental commitments with
respect to such leases and lease commitments are as disclosed in the Notes to
the IROQ Financials.
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(b) With respect to all material agreements pursuant to which IROQ or any
IROQ Subsidiary has purchased securities subject to an agreement to resell, if
any, IROQ or such IROQ Subsidiary, as the case may be, has a lien or security
interest (which to IROQ's knowledge is a valid, perfected first lien) in the
securities or other collateral securing the repurchase agreement, and the value
of such collateral equals or exceeds the amount of the debt secured thereby.
(c) IROQ and each IROQ Subsidiary currently maintains insurance considered
by IROQ to be reasonable for their respective operations and similar in scope
and coverage to that customarily maintained by other businesses similarly
engaged in a similar location, in accordance with good business practice. IROQ
has not received notice from any insurance carrier that (i) such insurance will
be canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. Except as disclosed in IROQ DISCLOSURE SCHEDULE 3.09(c), there are
presently no material claims pending under such policies of insurance and no
notices have been given by IROQ under such policies. All such insurance is
valid and enforceable and in full force and effect, and within the last three
years IROQ has received each type of insurance coverage for which it has applied
and during such periods has not been denied indemnification for any material
claims submitted under any of its insurance policies.
Section 3.10 Legal Proceedings. Except as disclosed in IROQ DISCLOSURE
SCHEDULE 3.10, neither IROQ nor any IROQ Subsidiary is a party to any, and there
are no pending or, to the best of IROQ's knowledge, threatened legal,
administrative, arbitration or other proceedings, claims (whether asserted or
unasserted), actions or governmental investigations or inquiries of any nature
(i) against IROQ or any IROQ Subsidiary, (ii) to which IROQ or any IROQ
Subsidiary's assets are or may be subject, (iii) challenging the validity or
propriety of any of the transactions contemplated by this Agreement, or (iv)
which could adversely affect the ability of IROQ to perform under this
Agreement, except for any proceedings, claims, actions, investigations or
inquiries referred to in clauses (i) or (ii) which, if adversely determined,
individually or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect on IROQ and the IROQ Subsidiaries, taken as a whole.
Section 3.11 Compliance With Applicable Law.
(a) IROQ and the IROQ Subsidiaries hold all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under, and have complied in all material respects with, applicable
laws, statutes, orders, rules or regulations of any federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their respective businesses nor otherwise have a
Material Adverse Effect on IROQ and the IROQ Subsidiaries, taken as a whole.
IROQ and its Subsidiaries, directly or indirectly, own, or are licensed or
otherwise possess legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights and any applications therefor,
technology, know-how and tangible or intangible proprietary information or
material that are material to the business of IROQ and its Subsidiaries.
(b) Except as disclosed in IROQ DISCLOSURE SCHEDULE 3.11(b), neither IROQ
nor any IROQ Subsidiary has received any notification or communication from any
Regulatory Authority (i) asserting that IROQ or any IROQ Subsidiary is not in
material compliance with any of the statutes, regulations or ordinances which
such Regulatory Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to IROQ or any
IROQ Subsidiary; (iii) requiring or threatening to require IROQ or any IROQ
Subsidiary, or indicating that IROQ or any IROQ Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement with any federal or state governmental agency or authority
which is charged with the supervision or regulation of banks or engages in the
insurance of bank deposits restricting or limiting, or purporting to restrict or
limit, in any material respect the operations of IROQ or any IROQ Subsidiary,
including without limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to direct, restrict or
limit, in any manner the operations of IROQ or any IROQ Subsidiary, including
without limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Neither IROQ nor any IROQ
Subsidiary has consented to or entered into any currently effective Regulatory
Agreement, except as set forth in IROQ DISCLOSURE SCHEDULE 3.11. Except as set
forth in IROQ DISCLOSURE SCHEDULE 3.11, the most recent regulatory ratings given
to CB and HFSA as to compliance with the Community Reinvestment Act is
satisfactory or better.
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Section 3.12 ERISA.
(a) IROQ DISCLOSURE SCHEDULE 3.12 contains a complete and accurate list of
all pension, retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation, consulting,
bonus, group insurance, severance and other benefit plans, contracts, agreements
and arrangements, including, but not limited to, "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), incentive and welfare policies, contracts, plans and
arrangements and all trust agreements related thereto with respect to any
present or former directors, officers or other employees of IROQ or any of its
Subsidiaries (hereinafter collectively referred to as the "IROQ Employee
Plans"). If the plan, contract, agreement or arrangement is funded through a
trust or third party funding vehicle, such as an insurance contract, a copy of
the trust or other funding arrangement (including all amendments thereto) and
the latest financial statements thereof have been provided to Niagara Bancorp.
All of the IROQ Employee Plans comply in all material respects with all
applicable requirements of ERISA, the IRC and other applicable laws; there has
occurred no "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the IRC) which is likely to result in the imposition of any
penalties or taxes under Section 502(i) of ERISA or Section 4975 of the IRC upon
IROQ or any of its Subsidiaries. No liability to the PBGC has been or is
expected by IROQ or any of its Subsidiaries to be incurred with respect to any
IROQ Employee Plan which is subject to Title IV of ERISA, or with respect to any
"single-employer plan" (as defined in Section 4001(a) of ERISA)(" IROQ Pension
Plan") currently or formerly maintained by IROQ or any entity which is
considered one employer with IROQ under Section 4001(b)(1) of ERISA or Section
414 of the IRC (an "ERISA Affiliate"). No IROQ Pension Plan had an "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not waived,
as of the last day of the end of the most recent plan year ending prior to the
date hereof; the fair market value of the assets of each IROQ Pension Plan
exceeds the present value of the "benefit liabilities" (as defined in Section
4001(a)(16) of ERISA) under such IROQ Pension Plan as of the end of the most
recent plan year with respect to the respective IROQ Pension Plan ending prior
to the date hereof, calculated on the basis of the actuarial assumptions used in
the most recent actuarial valuation for such IROQ Pension Plan as of the date
hereof; and no notice of a "reportable event" (as defined in Section 4043 of
ERISA) for which the 30-day reporting requirement has not been waived has been
required to be filed for any IROQ Pension Plan within the 12-month period ending
on the date hereof. Neither IROQ nor any of its Subsidiaries has provided, or is
required to provide, security to any IROQ Pension Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the IRC. Neither
IROQ, its Subsidiaries, nor any ERISA Affiliate has contributed to any
"multiemployer plan," as defined in Section 3(37) of ERISA, on or after
September 26, 1980.
(b) Each IROQ Employee Plan that is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) and which is intended to be qualified under
Section 401(a) of the IRC (a "IROQ Qualified Plan") has received a favorable
determination letter from the Internal Revenue Service ("IRS"), and IROQ and its
Subsidiaries are not aware of any circumstances likely to result in revocation
of any such favorable determination letter. There is no pending or, to IROQ's
knowledge, threatened litigation, administrative action or proceeding relating
to any IROQ Employee Plan. There has been no announcement or commitment by IROQ
or any of its Subsidiaries to create an additional IROQ Employee Plan, or to
amend any IROQ Employee Plan, except for amendments required by applicable law
which do not materially increase the cost of such IROQ Employee Plan; and,
except as specifically identified in IROQ DISCLOSURE SCHEDULES, IROQ and its
Subsidiaries do not have any obligations for post-retirement or post-employment
benefits under any IROQ Employee Plan that cannot be amended or terminated upon
60 days' notice or less without incurring any liability thereunder, except for
coverage required by Part 6 of Title I of ERISA or Section 4980B of the IRC, or
similar state laws, the cost of which is borne by the insured individuals. With
respect to each IROQ Employee Plan, IROQ has supplied to Niagara Bancorp a true
and correct copy of (A) the annual report on the applicable form of the Form
5500 series filed with the IRS for the most recent three plan years, if required
to be filed, (B) such IROQ Employee Plan, including amendments thereto, (C) each
trust agreement, insurance contract or other funding arrangement relating to
such IROQ Employee Plan, including amendments thereto, (D) the most recent
summary plan description and summary of material modifications thereto for such
IROQ Employee Plan, if the IROQ Employee Plan is subject to Title I of ERISA,
(E) the most recent actuarial report or valuation if such IROQ Employee Plan is
a IROQ Pension Plan and any subsequent changes to the actuarial assumptions
contained therein and (F) the most recent determination letter issued by the IRS
if such Employee Plan is a Qualified Plan.
(c) No compensation payable by IROQ and any IROQ Subsidiary to any of
their employees under any IROQ Employee Plan (including by reason of the
transactions contemplated hereby) will be subject to disallowance under Section
162(m) of the IRC.
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Section 3.13 Brokers, Finders and Financial Advisors. Except for IROQ's
engagement of Endicott Financial Advisors, L.L.C. ("Endicott") in connection
with transactions contemplated by this Agreement, neither IROQ nor any IROQ
Subsidiary, nor any of their respective officers, directors, employees or
agents, has employed any broker, finder or financial advisor in connection with
the transactions contemplated by this Agreement, or, except for its commitments
disclosed in IROQ DISCLOSURE SCHEDULE 3.13, incurred any liability or commitment
for any fees or commissions to any such person in connection with the
transactions contemplated by this Agreement, which has not been reflected in the
IROQ Financials.
Section 3.14 Environmental Matters.
(a) With respect to IROQ and each of its Subsidiaries, and except as set
forth in IROQ DISCLOSURE SCHEDULE 3.14:
(i) Each of IROQ and its Subsidiaries, the Participation
Facilities, and, to IROQ's knowledge, the Loan Properties are, and have been, in
substantial compliance with, and are not liable under, any Environmental Laws;
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
IROQ's knowledge, threatened, before any court, governmental agency or board or
other forum against it or any of its Subsidiaries or any Participation Facility
(x) for alleged noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (y) relating to the presence of or release (as
defined herein) into the environment of any Hazardous Material (as defined
herein), whether or not occurring at or on a site owned, leased or operated by
it or any of its Subsidiaries or any Participation Facility;
(iii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
IROQ's knowledge threatened, before any court, governmental agency or board or
other forum relating to or against any Loan Property (or IROQ or any of its
Subsidiaries in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by a Loan Property;
(iv) To IROQ's knowledge, the properties currently owned or
operated by IROQ or any of its Subsidiaries (including, without limitation,
soil, groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) are not contaminated with and do not otherwise contain any
Hazardous Material other than as permitted under applicable Environmental Law;
(v) Neither IROQ nor any of its Subsidiaries has received any
notice, demand letter, executive or administrative order, directive or request
for information from any federal, state, local or foreign governmental entity or
any third party indicating that it may be in violation of, or liable under, any
Environmental Law;
(vi) To IROQ's knowledge, there are no underground storage tanks
on, in or under any properties owned or operated by IROQ or any of its
Subsidiaries or any Participation Facility, and no underground storage tanks
have been closed or removed from any properties owned or operated by IROQ or any
of its Subsidiaries or any Participation Facility; and
(vii) To IROQ's knowledge, during the period of (s) IROQ's or any of
its Subsidiaries' ownership or operation of any of their respective current
properties or (t) IROQ's or any of its Subsidiaries' participation in the
management of any Participation Facility, there has been no contamination by or
release of Hazardous Materials in, on, under or affecting such properties. To
IROQ's knowledge, prior to the period of (x) IROQ's or any of its Subsidiaries'
ownership or operation of any of their respective current properties or (y)
IROQ's or any of its Subsidiaries' participation in the management of any
Participation Facility, there was no contamination by or release of Hazardous
Material in, on, under or affecting such properties.
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(b) "Loan Property" means any property in which the applicable party (or a
Subsidiary of it) holds a security interest, and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property. "Participation Facility" means any facility in which the applicable
party (or a Subsidiary of it) participates in the management (including all
property held as trustee or in any other fiduciary capacity) and, where required
by the context, includes the owner or operator of such property, but only with
respect to such property.
Section 3.15 Loan Portfolio.
(a) With respect to each loan owned by IROQ or its Subsidiaries in whole
or in part (each, a "Loan"), to the best knowledge of IROQ:
(i) the note and the related security documents are each legal,
valid and binding obligations of the maker or obligor thereof, enforceable
against such maker or obligor in accordance with their terms;
(ii) neither IROQ nor any of its Subsidiaries, nor any prior holder
of a Loan, has modified the note or any of the related security documents in any
material respect or satisfied, canceled or subordinated the note or any of the
related security documents except as otherwise disclosed by documents in the
applicable Loan file;
(iii) IROQ or a Subsidiary is the sole holder of legal and
beneficial title to each Loan (or IROQ's applicable participation interest, as
applicable), except as otherwise referenced on the books and records of IROQ;
(iv) the note and the related security documents, copies of which
are included in the Loan files, are true and correct copies of the documents
they purport to be and have not been suspended, amended, modified, canceled or
otherwise changed except as otherwise disclosed by documents in the applicable
Loan file;
(v) there is no pending or threatened condemnation proceeding or
similar proceeding affecting the property that serves as security for a Loan,
except as otherwise referenced on the books and records of IROQ;
(vi) there is no litigation or proceeding pending or threatened
relating to the property that serves as security for a Loan that would have a
Material Adverse Effect upon the related Loan; and
(vii) with respect to a Loan held in the form of a participation,
the participation documentation is legal, valid, binding and enforceable.
(b) The allowance for loan losses reflected on the IROQ Financial
Statements, as of their respective dates, is adequate in all material respects
to provide for possible or specific losses, net of recoveries relating to loans
previously charged off and on loans outstanding, and is in all material respects
consistent with the requirements of GAAP.
(c) IROQ DISCLOSURE SCHEDULE 3.15 sets forth by category the amounts of
all loans, leases, advances, credit enhancements, other extensions of credit,
commitments and interest-bearing assets of IROQ and its Subsidiaries that have
been classified (whether regulatory or internal) as "Special Mention,"
"Substandard," "Doubtful," "Loss" or words of similar import, and IROQ and its
Subsidiaries shall promptly after the end of any month inform Niagara Bancorp of
any such classification arrived at any time after the date hereof. The other
real estate owned ("OREO") included in any non-performing assets of IROQ or any
of its Subsidiaries is carried net of reserves at the lower of cost or fair
value, less estimated selling costs, based on current independent appraisals or
evaluations or current management appraisals or evaluations; provided, however,
that "current" shall mean within the past 12 months.
Section 3.16 Securities Documents. IROQ has delivered to Niagara Bancorp
copies of its (i) annual reports on Form 10-K for the years ended December 31,
1999 and 1998, (ii) quarterly reports on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1999, and (iii) proxy materials used or for use
in connection with its meetings of shareholders held in 1999 and to be held in
the year 2000. Such reports and such proxy materials complied, at the time filed
with the SEC, in all material respects, with the Securities Laws.
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Section 3.17 Related Party Transactions. Except as disclosed in IROQ
DISCLOSURE SCHEDULE 3.17, or as described in IROQ's Proxy Statement distributed
in connection with the 1999 annual meeting of shareholders (which has previously
been provided to Niagara Bancorp), IROQ is not a party to any transaction
(including any loan or other credit accommodation) with any Affiliate of IROQ
(except a IROQ Subsidiary). Except as disclosed in IROQ DISCLOSURE SCHEDULE
3.17, all such transactions (a) were made in the ordinary course of business,
(b) were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other Persons, and (c) did not involve more than the normal risk of
collectability or present other unfavorable features. Except as set forth on
IROQ DISCLOSURE SCHEDULE 3.17, no loan or credit accommodation to any Affiliate
of IROQ is presently in default or, during the three year period prior to the
date of this Agreement, has been in default or has been restructured, modified
or extended. IROQ has not been notified that principal and interest with respect
to any such loan or other credit accommodation will not be paid when due or that
the loan grade classification accorded such loan or credit accommodation by IROQ
is inappropriate.
Section 3.18 Schedule of Termination Benefits. IROQ DISCLOSURE SCHEDULE
3.18 includes a schedule of all termination benefits and related payments that
would be payable to the individuals identified thereon, excluding any options to
acquire IROQ Common Stock, granted to such individuals, under any and all
employment agreements, special termination agreements, supplemental executive
retirement plans, deferred bonus plans, deferred compensation plans, salary
continuation plans, or any compensation arrangement, or other pension benefit or
welfare benefit plan maintained by IROQ solely for the benefit of officers or
directors of IROQ or IROQ Subsidiaries (the "Benefits Schedule"), assuming their
employment or service is terminated as of September 30, 2000 and the Closing
Date occurs prior to such termination. No other individuals are entitled to
benefits under any such plans.
Section 3.19 Deposits. None of the deposits of IROQ or any of its
Subsidiaries is a "brokered" deposit.
Section 3.20 Antitakeover Provisions Inapplicable; Required Vote of
Stockholders. Except as set forth on IROQ DISCLOSURE SCHEDULE 3.20, and except
for approvals required under the federal and state banking laws, the
transactions contemplated by this Agreement are not subject to any applicable
state takeover law. The affirmative vote of the holders of two-thirds of the
issued and outstanding shares of IROQ common stock entitled to vote is necessary
to approve this Agreement and the transactions contemplated hereby.
Section 3.21 Fairness Opinion. IROQ has received an opinion from
Endicott which may be oral as of the date hereof, to be confirmed in writing to
be effective as of the date hereof, to the effect that, subject to the terms,
conditions and qualifications set forth therein, as of the date thereof, the
Merger Consideration to be received by the stockholders of IROQ pursuant to this
Agreement is fair to such stockholders from a financial point of view. Such
opinion has not been amended or rescinded as of the date of this Agreement.
Section 3.22 Administration of Fiduciary Accounts. IROQ and each of its
Subsidiaries has properly administered all accounts for which it acts as a
fiduciary, including but not limited to accounts for which it serves as trustee,
agent, custodian, personal representative, guardian, conservator or investment
advisor, in accordance with the terms of the governing documents and applicable
laws and regulations, except for failures to so administer which would not have
a Material Adverse Effect on the IROQ. Neither IROQ nor any of its Subsidiaries,
nor any of their respective directors, officers or employees, has committed any
breach of trust with respect to any such fiduciary account and the records for
each such fiduciary account, except for breaches of trust and failures to
maintain records which would not, individually or in the aggregate, have a
Material Adverse Effect on IROQ.
Section 3.23 Derivative Transactions. Except as set forth in IROQ
DISCLOSURE SCHEDULE 3.23, neither the Company nor any of its Subsidiaries
entered into any futures contract, option contract, interest rate caps, interest
rate floors, interest rate exchange agreement or other derivative instruments.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NIAGARA BANCORP
Niagara Bancorp represents and warrants to IROQ that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article IV), except as set forth in the Niagara
Bancorp Disclosure Schedules delivered by Niagara Bancorp to IROQ on the date
hereof. Niagara Bancorp has made a good faith effort to ensure that the
disclosure on each schedule of the Niagara Bancorp Disclosure Schedules
corresponds to the section reference herein. However, for purposes of the
Niagara Bancorp Disclosure Schedules, any item disclosed on any schedule therein
is deemed to be fully disclosed with respect to all schedules under which such
item may be relevant.
Section 4.01 Organization.
(a) Niagara Bancorp is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is duly registered
as a bank holding company under the BHCA. First Niagara Merger Corp is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Niagara Bancorp has full corporate power and authority
to carry on its business as now conducted and is duly licensed or qualified to
do business in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or the conduct of its business requires
such qualification.
(b) First Niagara is a stock savings bank duly organized, validly existing
and in good standing under the laws of the State of New York. The deposits of
First Niagara are insured by the FDIC through the BIF to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due by First Niagara.
(c) Prior to the date of this Agreement, Niagara Bancorp has delivered to
IROQ true and correct copies of the certificate of incorporation and bylaws of
Niagara Bancorp
Section 4.02 Capitalization.
(a) The authorized capital stock of Niagara Bancorp consists of (a)
45,000,000 shares of common stock, par value $0.01 per share (the "Niagara
Bancorp Common Stock"), of which, at the date of this Agreement, 29,756,250
shares are validly issued, fully paid and nonassessable (including shares are
held by Niagara Bancorp as treasury stock), and (b) 5,000,000 shares of
preferred stock, par value $0.01 per share, of which, at the date of this
Agreement, no shares of were issued and outstanding.
(b) Niagara Bancorp owns all of the capital stock of First Niagara, free
and clear of any lien or encumbrance.
Section 4.03 Authority; No Violation.
(a) Niagara Bancorp and First Niagara Merger Corp each 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
by Niagara Bancorp and First Niagara Merger Corp and the completion by Niagara
Bancorp and First Niagara Merger Corp of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of Niagara Bancorp
and First Niagara Merger Corp, and no other corporate proceedings on the part of
Niagara Bancorp or First Niagara Merger Corp are necessary to complete the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Niagara Bancorp and First Niagara Merger Corp and,
subject to receipt of the required approvals of Regulatory Authorities described
in Section 4.04 hereof, constitutes the valid and binding obligation of Niagara
Bancorp and First Niagara Merger Corp, enforceable against them in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally.
(b) (A) The execution and delivery of this Agreement by Niagara Bancorp
and First Niagara Merger Corp, (B) subject to receipt of approvals from the
Regulatory Authorities referred to in Section 4.04 hereof and IROQ's and Niagara
Bancorp's compliance with any conditions contained therein, the consummation of
the transactions contemplated hereby, and (C) compliance by Niagara Bancorp or
First Niagara Merger Corp with any of the terms or provisions hereof will not
(i) conflict with or result in a breach of any provision of the certificate of
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incorporation or bylaws of Niagara Bancorp or any Niagara Bancorp Subsidiary or
the charter and bylaws of First Niagara Merger Corp; (ii) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Niagara Bancorp or any Niagara Bancorp Subsidiary or any of their
respective properties or assets; or (iii) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default), under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of Niagara
Bancorp or First Niagara Merger Corp under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other investment or obligation to which Niagara Bancorp or
First Niagara Merger Corp is a party, or by which they or any of their
respective properties or assets may be bound or affected, except for such
violations, conflicts.
Section 4.04 Consents. Except for consents, approvals, filings and
registrations from or with the Superintendent, FDIC, FRB, OTS and SEC, and
compliance with any conditions contained therein, and the approval of this
Agreement by the shareholders of IROQ, and the filing of the certificates of
merger with the Secretary of State of the State of Delaware and the New York
Department of State, no consents or approvals of, or filings or registrations
with, any public body or authority are necessary, and no consents or approvals
of any third parties are necessary, or will be, in connection with (a) the
execution and delivery of this Agreement by Niagara Bancorp and First Niagara
Merger Corp, and (b) the completion by Niagara Bancorp and First Niagara Merger
Corp of the transactions contemplated hereby. Niagara Bancorp has no reason to
believe that (i) any required consents or approvals will not be received or will
be received with conditions, limitations or restrictions unacceptable to it or
which would adversely impact Niagara Bancorp's ability to complete the
transactions contemplated by this Agreement or that (ii) any public body or
authority, the consent or approval of which is not required or any filing with
which is not required, will object to the completion of the transactions
contemplated by this Agreement.
Section 4.05 Compliance With Applicable Law. Neither Niagara Bancorp nor
any Niagara Bancorp Subsidiary has received any notification or communication
from any Regulatory Authority (i) asserting that Niagara Bancorp or any Niagara
Bancorp Subsidiary is not in compliance in any material manner with any of the
statutes, regulations or ordinances which such Regulatory Authority enforces;
(ii) threatening to revoke any license, franchise, permit or governmental
authorization which is material to Niagara Bancorp or any Niagara Bancorp
Subsidiary; (iii) requiring or threatening to require Niagara Bancorp or any
Niagara Bancorp Subsidiary, or indicating that Niagara Bancorp or any Niagara
Bancorp Subsidiary may be required, to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement restricting or
limiting, or purporting to restrict or limit, in any manner the operations of
Niagara Bancorp or any Niagara Bancorp Subsidiary; or (iv) directing,
restricting or limiting, or purporting to direct, restrict or limit, in any
manner the operations of Niagara Bancorp or any Niagara Bancorp Subsidiary,
including without limitation any restriction on the payment of dividends (any
such notice, communication, memorandum, agreement or order described in this
sentence is hereinafter referred to as a "Regulatory Agreement"). Neither
Niagara Bancorp nor any Niagara Bancorp Subsidiary is a party to, nor has
consented to any Regulatory Agreement. The most recent regulatory rating given
to First Niagara as to compliance with the CRA is satisfactory or better.
Section 4.06 Information to be Supplied. The information to be supplied
by Niagara Bancorp for inclusion in the Proxy Statement will not, at the time
the Proxy Statement is mailed pursuant to the Exchange Act, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein not misleading. The information supplied,
or to be supplied, by Niagara Bancorp for inclusion in the Applications will, at
the time such documents are filed with any Regulatory Authority, be accurate in
all material aspects.
Section 4.07 Financing. As of the date hereof Niagara Bancorp has
adequate financial resources under regulatory capital standards, and at the
Merger Effective Date Niagara Bancorp will have sufficient cash funds, to meet
its obligations under this Agreement and to consummate in a timely manner the
transactions contemplated hereby and thereby, including without limitation the
payment of the Merger Consideration.
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ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of IROQ's Business.
(a) From the date of this Agreement to the Closing Date, IROQ, CB, HFSA
and each IROQ Subsidiary will conduct its business and engage in transactions,
including extensions of credit, only in the ordinary course and consistent with
past practice and policies, except as otherwise required or contemplated by this
Agreement or with the written consent of Niagara Bancorp. IROQ, CB, HFSA and
each IROQ Subsidiary will use their reasonable good faith efforts, to (i)
preserve their business organizations intact, (ii) maintain good relationships
with employees, and (iii) preserve for themselves the good will of their
customers and others with whom business relationships exist. From the date
hereof to the Closing Date, except as otherwise consented to or approved by
Niagara Bancorp in writing or as contemplated or required by this Agreement,
IROQ will not, and IROQ will not permit any IROQ Subsidiary to:
(i) amend or change any provision of its certificate of
incorporation, charter, or bylaws;
(ii) change the number of authorized or issued shares of its
capital stock or issue or grant any Right or agreement of any character relating
to its authorized or issued capital stock or any securities convertible into
shares of such stock, or split, combine or reclassify any shares of capital
stock, or declare, set aside or pay any dividend or other distribution in
respect of capital stock, or redeem or otherwise acquire any shares of capital
stock, except that (A) IROQ may issue shares of IROQ Common Stock upon the valid
exercise, in accordance with the information set forth in IROQ DISCLOSURE
SCHEDULE 3.02(a), of presently outstanding options to acquire IROQ Common Stock
under the IROQ Stock Option Plans, and (B) IROQ may continue to pay its regular
quarterly cash dividend of $0.12 per share with payment and record dates
consistent with past practice. Notwithstanding the foregoing, the following
dividends are also permitted: a dividend by a IROQ Subsidiary to its parent(s);
and the dividends on the REIT Preferred Stock that are paid in accordance with
its terms;
(iii) grant or agree to pay any bonus, severance or termination to,
or enter into, renew or amend any employment agreement, severance agreement
and/or supplemental executive agreement with, or increase in any manner the
compensation or fringe benefits of, any of its directors, officers or employees,
except and as may be required pursuant to legally binding commitments existing
on the date hereof and set forth on IROQ DISCLOSURE SCHEDULES 3.08 and 3.12; and
except that IROQ may pay its employees (including employees of its Subsidiaries)
retention bonuses as determined by IROQ, in consultation with Niagara Bancorp,
in the event that such employee remains an employee of IROQ (or an IROQ
Subsidiary) until the date the systems conversion occurs (or such later date
established by Niagara Bancorp not to exceed 90 days following the date the
systems conversion occurs) or is terminated prior to the date of the systems
conversion, but after the Merger Effective Date, and satisfactorily fulfills the
duties and responsibilities of the position of such employee, provided that
retention bonuses in the aggregate do not exceed $172,100, and no individual
bonus exceeds $14,000;
(iv) enter into or, except as may be required by law, modify any
pension, retirement, stock option, stock purchase, stock appreciation right,
stock grant, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees; or
make any contributions to any defined contribution or defined benefit plan not
in the ordinary course of business consistent with past practice;
(v) merge or consolidate IROQ or any IROQ Subsidiary with any other
corporation; sell or lease all or any substantial portion of the assets or
business of IROQ or any IROQ Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other person, firm,
association, corporation or business organization other than in connection with
foreclosures, settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit arrangement between IROQ,
or any IROQ Subsidiary, and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit the
revocation or surrender by any IROQ Subsidiary of its certificate of authority
to maintain, or file an application for the relocation of, any existing branch
office, or file an application for a certificate of authority to establish a new
branch office;
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(vi) sell or otherwise dispose of the capital stock of IROQ or sell
or otherwise dispose of any asset of IROQ or of any IROQ Subsidiary other than
in the ordinary course of business consistent with past practice; subject any
asset of IROQ or of any IROQ Subsidiary to a lien, pledge, security interest or
other encumbrance (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts established in
the ordinary course of business and transactions in "federal funds" and the
satisfaction of legal requirements in the exercise of trust powers) other than
in the ordinary course of business consistent with past practice; incur any
indebtedness for borrowed money (or guarantee any indebtedness for borrowed
money), except in the ordinary course of business consistent with past practice;
(vii) take any action which would result in any of the
representations and warranties of IROQ set forth in this Agreement becoming
untrue as of any date after the date hereof or in any of the conditions set
forth in Article VI hereof not being satisfied, except in each case as may be
required by applicable law;
(viii) change any method, practice or principle of accounting, except
as may be required from time to time by GAAP (without regard to any optional
early adoption date) or any Regulatory Authority responsible for regulating IROQ
or CB;
(ix) waive, release, grant or transfer any material rights of value
or modify or change in any material respect any existing material agreement or
indebtedness to which IROQ or any IROQ Subsidiary is a party, other than in the
ordinary course of business, consistent with past practice;
(x) purchase any equity securities, or purchase any security for
its investment portfolio inconsistent with IROQ's or any IROQ Subsidiary's
current investment policy, or otherwise alter, in any material respect, the mix,
maturity, credit or interest rate risk profile of its portfolio of investment
securities or its portfolio of mortgage-backed securities;
(xi) except for commitments issued prior to the date of this
Agreement which have not yet expired and which have been disclosed on the IROQ
DISCLOSURE SCHEDULE 5.01(a)(xi), and the renewal of existing lines of credit,
make any new loan or other credit facility commitment (including without
limitation, lines of credit and letters of credit) to any borrower or group of
affiliated borrowers in excess of $350,000 in the aggregate for unsecured loans
and $2,000,000 in the aggregate for secured loans. In addition, the following
require the prior consent of Niagara Bancorp: a residential loan of $350,000 or
greater; an unsecured loan of $250,000 or greater; and a commercial real estate
loan of $500,000 or greater;
(xii) except as set forth on the IROQ DISCLOSURE SCHEDULE
5.01(a)(xii), enter into, renew, extend or modify any other transaction with any
Affiliate;
(xiii) enter into any futures contract, option, interest rate caps,
interest rate floors, interest rate exchange agreement or other agreement or
take any other action for purposes of hedging the exposure of its interest-
earning assets and interest-bearing liabilities to changes in market rates of
interest;
(xiv) except for the execution of this Agreement, and actions taken
in accordance with this Agreement, take any action that would give rise to a
right of payment to any individual under any employment agreement;
(xv) make any change in policies with regard to: the extension of
credit, or the establishment of reserves with respect to the possible loss
thereon or the charge off of losses incurred thereon; investments;
asset/liability management; or other material banking policies in any material
respect except as may be required by changes in applicable law or regulations;
(xvi) except for the execution of this Agreement, or resulting
therefrom, take any action that would give rise to an acceleration of the right
to payment to any individual under any IROQ Employee Plan;
(xvii) except as set forth in IROQ DISCLOSURE SCHEDULE 5.01(a)(xvii),
make any capital expenditures in excess of $50,000 individually or $100,000 in
the aggregate, other than pursuant to binding commitments existing on the date
hereof and other than expenditures necessary to maintain existing assets in good
repair;
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(xviii) except as set forth in IROQ DISCLOSURE SCHEDULE
5.01(a)(xviii), purchase or otherwise acquire, or sell or otherwise dispose of,
any assets or incur any liabilities other than in the ordinary course of
business consistent with past practices and policies;
(xix) sell any loan (other than sales of loans secured by one- to
four-family real estate that are consistent with past practice) or OREO
properties (other than sales of OREO which generate a net book loss of not more
than $20,000 per property); or
(xxii) agree to do any of the foregoing.
(b) For purposes of this Section 5.01, unless provided for in a business
plan, budget or similar document delivered to Niagara Bancorp prior to the date
of this Agreement, it shall not be considered in the ordinary course of business
for IROQ or any IROQ Subsidiary to do any of the following: (i) except as set
forth in IROQ DISCLOSURE SCHEDULE 5.01(b), make any sale, assignment, transfer,
pledge, hypothecation or other disposition of any assets having a book or market
value, whichever is greater, in the aggregate in excess of $100,000, other than
pledges of assets to secure government deposits, to exercise trust powers, sales
of assets received in satisfaction of debts previously contracted in the normal
course of business, issuance of loans, sales of previously purchased government
guaranteed loans, or transactions in the investment securities portfolio by IROQ
or a IROQ Subsidiary or repurchase agreements made, in each case, in the
ordinary course of business; or (ii) undertake or enter any lease, contract or
other commitment for its account, other than in the normal course of providing
credit to customers as part of its banking business, involving a payment by IROQ
or any IROQ Subsidiary of more than $50,000 annually, or containing a material
financial commitment and extending beyond 12 months from the date hereof.
Section 5.02 Access; Confidentiality.
(a) Each of IROQ and the IROQ Subsidiaries shall permit Niagara Bancorp
and its representatives reasonable access to its properties, and shall disclose
and make available to them all books, papers and records relating to the assets,
stock ownership, properties, operations, obligations and liabilities of IROQ and
its Subsidiaries, including, but not limited to, all books of account (including
the general ledger), tax records, minute books of meetings of boards of
directors (and any committees thereof)(other than minutes of any confidential
discussion of this Agreement and the transactions contemplated hereby), and
stockholders, organizational documents, bylaws, material contracts and
agreements, filings with any Regulatory Authority, accountants' work papers,
litigation files, plans affecting employees, and any other business activities
or prospects in which Niagara Bancorp may have a reasonable interest. IROQ, CB
and HFSA shall make their respective officers, employees and agents and
authorized representatives (including counsel and independent public
accountants) available to confer with Niagara Bancorp and its representatives.
IROQ, CB and HFSA shall permit a representative of Niagara Bancorp to attend any
meeting of their Boards of Directors or the Executive Committees thereof
(provided that neither IROQ, CB, nor HFSA shall be required to permit the
Niagara Bancorp representative to remain present during any confidential
discussion of the Agreement and the transactions contemplated thereby). IROQ and
each Subsidiary shall permit Niagara Bancorp, at its expense, to cause a "phase
I environmental audit" and a "phase II environmental audit" to be performed at
any physical location owned or occupied by IROQ or any IROQ Subsidiary. The
parties will hold all such information delivered in confidence to the extent
required by, and in accordance with, the provisions of the confidentiality
agreement, dated February 16, 2000 among IROQ and Niagara Bancorp (the
"Confidentiality Agreement").
(b) Niagara Bancorp agrees to conduct such investigations and discussions
hereunder in a manner so as not to interfere unreasonably with normal operations
and customer and employee relationships of the other party.
(c) In addition to the access permitted by subparagraph (a) above, from
the date of this Agreement through the Closing Date, IROQ shall permit employees
of Niagara Bancorp reasonable access to information relating to problem loans,
loan restructurings and loan work-outs of IROQ.
(d) If the transactions contemplated by this Agreement shall not be
consummated, IROQ and Niagara Bancorp will each destroy or return all documents
and records obtained from the other party or its representatives, during the
course of its investigation and will cause all information with respect to the
other party obtained pursuant to this Agreement or preliminarily thereto to be
kept confidential, except to the extent such information becomes public through
no fault of the party to whom the information was provided or any of its
representatives or agents and except to the extent disclosure of any such
information is legally required. IROQ and Niagara Bancorp shall each
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give prompt written notice to the other party of any contemplated disclosure
where such disclosure is so legally required.
Section 5.03 Regulatory Matters and Consents.
(a) Niagara Bancorp and First Niagara will prepare all Applications and
make all filings for, and use their best efforts to obtain as promptly as
practicable after the date hereof, all necessary permits, consents, approvals,
waivers and authorizations of all Regulatory Authorities necessary or advisable
to consummate the transactions contemplated by this Agreement.
(b) IROQ will furnish Niagara Bancorp with all information concerning IROQ
and IROQ Subsidiaries as may be necessary or advisable in connection with any
Application or filing made by or on behalf of Niagara Bancorp to any Regulatory
Authority in connection with the transactions contemplated by this Agreement.
(c) Niagara Bancorp and IROQ will promptly furnish each other with copies
of all material written communications to, or received by them from any
Regulatory Authority in respect of the transactions contemplated hereby, except
information which is filed by either party which is designated as confidential.
(d) The parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities. Niagara Bancorp will furnish
IROQ with (i) copies of all Applications prior to filing with any Regulatory
Authority and provide IROQ a reasonable opportunity to provide changes to such
Applications, and (ii) copies of all Applications filed by Niagara Bancorp.
(e) IROQ and Niagara Bancorp will cooperate with each other in the
foregoing matters and will furnish the responsible party with all information
concerning it and its Subsidiaries as may be necessary or advisable in
connection with any Application or filing (including the Proxy Statement and any
report filed with the SEC) made by or on behalf of Niagara Bancorp or IROQ to
any Regulatory Authority in connection with the transactions contemplated by
this Agreement, and such information will be accurate and complete in all
material respects. In connection therewith, each party will provide certificates
and other documents reasonably requested by the other.
Section 5.04 Taking of Necessary Action.
(a) Niagara Bancorp and IROQ shall each use its best efforts in good
faith, and each of them shall cause its Subsidiaries to use their best efforts
in good faith, to (i) furnish such information as may be required in connection
with the preparation of the documents referred to in Section 5.03 of this
Agreement, and (ii) take or cause to be taken all action necessary on its part
using its best efforts so as to permit completion of the Merger including,
without limitation, (A) obtaining the consent or approval of each individual,
partnership, corporation, association or other business or professional entity
whose consent or approval is required for consummation of the transactions
contemplated hereby (including assignment of leases without any change in
terms), provided that neither IROQ nor any IROQ Subsidiary shall agree to make
any payments or modifications to agreements in connection therewith without the
prior written consent of Niagara Bancorp, and (B) requesting the delivery of
appropriate opinions, consents and letters from its counsel and independent
auditors. No party hereto shall take, or cause, or to the best of its ability
permit to be taken, any action that would substantially impair the prospects of
completing the Merger pursuant to this Agreement; provided that nothing herein
contained shall preclude Niagara Bancorp or IROQ from exercising its rights
under this Agreement or the Stock Option Agreement.
(b) IROQ shall prepare, subject to the review and consent of Niagara
Bancorp with respect to matters relating to Niagara Bancorp and the transactions
contemplated by this Agreement, a Proxy Statement to be filed by IROQ with the
SEC and to be mailed to the shareholders of IROQ in connection with the meeting
of its shareholders and transactions contemplated hereby, which Proxy Statement
shall conform to all applicable legal requirements. The parties shall cooperate
with each other with respect to the preparation of the Proxy Statement.
Section 5.05 Certain Agreements.
(a) From and after the Merger Effective Date through the sixth anniversary
thereof, or until the final disposition of such Claim (as herein defined) with
respect to any Claim asserted within the period, Niagara Bancorp agrees to
indemnify, defend and hold harmless each present and former director and officer
of IROQ and its Subsidiaries determined as of the Closing Date (the "Indemnified
-----------
Parties") against all losses, claims, damages, costs,
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expenses (including reasonable attorneys' fees and expenses), liabilities,
judgments or amounts paid in settlement (with the approval of Niagara Bancorp,
which approval shall not be unreasonably withheld) or in connection with any
claim, action, suit, proceeding or investigation arising out of matters
existing or occurring at or prior to the Merger Effective Date (a "Claim") in
-----
which an Indemnified Party is, or is threatened to be made, a party or a
witness based in whole or in part on, or arising in whole or in part out of,
the fact that such person is or was a or officer of IROQ or any of its
subsidiaries, regardless of whether such Claim is asserted or claimed prior to,
at or after the Closing Date, to the fullest extent to which directors and
officers of IROQ are entitled under the NYBCL, IROQ's certificate of
incorporation and bylaws, or other applicable law as in effect on the date
hereof (and Niagara Bancorp shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
extent permissible to a New York corporation under the NYBCL and IROQ's
certificate of incorporation and bylaws as in effect on the date hereof;
provided, that the person to whom expenses are advanced provides an
- --------
undertaking to repay such expenses if it is ultimately determined that such
person is not entitled to indemnification). All rights to indemnification in
respect of a Claim asserted or made within the period described in the preceding
sentence shall continue until the final non-appealable disposition of such
Claim.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.05(a), upon learning of any Claim, shall promptly notify Niagara Bancorp, but
the failure to so notify shall not relieve Niagara Bancorp of any liability it
may have to such Indemnified Party except to the extent that such failure
materially prejudices Niagara Bancorp In the event of any Claim, (1) Niagara
Bancorp shall have the right to assume the defense thereof (with counsel
reasonably satisfactory to the Indemnified Party) and upon such assumption shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that, if Niagara Bancorp elects
not to assume such defense or counsel for the Indemnified Parties advises that
there are issues which raise conflicts of interest between Niagara Bancorp and
the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory
to them, and Niagara Bancorp shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received, provided further that Niagara Bancorp shall in all cases be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (2) the Indemnified Parties will cooperate in the defense
of any such Claim and (3) Niagara Bancorp shall not be liable for any settlement
effected without its prior written consent (which consent shall not unreasonably
be withheld).
(c) In the event Niagara Bancorp or any of is successors or assigns (1)
consolidates with or merges into any other Person and shall not continue or
survive such consolidation or merger, or (2) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Niagara Bancorp assume the obligations set forth in
this Section 5.05.
(d) Niagara Bancorp shall maintain in effect for three years from the
Closing Date, if available, the current directors' and officers' liability
insurance policy maintained by IROQ (provided that Niagara Bancorp may
--------
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring at or prior to the Closing Date, provided, however, that in no event
-------- -------
shall Niagara Bancorp be required to expend pursuant to this Section 5.05(d)
more than the amount equal to 130% of the current annual amount expended by IROQ
to maintain or procure insurance coverage pursuant hereto. In connection with
the foregoing, IROQ agrees to provide such insurer or substitute insurer with
such representations as such insurer may reasonably request with respect to the
reporting of any prior claims.
(e) The provisions of this Section 5.05 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
Section 5.06 No Other Bids and Related Matters. From and after the date
hereof until the termination of this Agreement, neither IROQ, CB, HFSA or any
IROQ Subsidiary, nor any of their respective officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by IROQ or any of its
Subsidiaries), will, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain an Acquisition Proposal or agree to or endorse any Acquisition Proposal,
or authorize or permit any of its officers, directors, or employees or any of
its subsidiaries or any investment banker,
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financial advisor, attorney, accountant or other representative retained by any
of its subsidiaries to take any such action, and IROQ shall notify Niagara
Bancorp orally (within one business day) and in writing (as promptly as
practicable) of all of the relevant details relating to all inquiries and
proposals which it or any of its Subsidiaries or any such officer, director
employee, investment banker, financial advisor, attorney, accountant or other
representative may receive relating to any of such matters and if such inquiry
or proposal promptly. Provided, however, that nothing contained in this Section
5.06 shall prohibit the Board of Directors of IROQ from (i) furnishing
information to, or entering into discussions or negotiations with any person or
entity that makes an unsolicited written, bona fide proposal, to acquire IROQ or
any Subsidiary pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction, if, and only
------------
to the extent that, (A) the Board of Directors of IROQ receives a written
- ------------------
opinion from its independent financial advisor that such proposal may be
superior to the Merger from a financial point-of-view to IROQ's stockholders,
(B) the Board of Directors of IROQ, after consultation with and based upon the
advice of independent legal counsel, determines in good faith that such action
is necessary for the Board of Directors of IROQ to comply with its fiduciary
duties to stockholders under applicable law (such proposal that satisfies (A)
and (B) being referred to herein as a "Superior Proposal"), (C) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, IROQ (x) provides reasonable notice to Niagara
Bancorp to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity (identifying such person
or entity) and (y) receives from such person or entity an executed
confidentiality agreement in form and substance identical in all material
respects to the Confidentiality Agreement, and (D) the IROQ Special Meeting of
Stockholders convened to approve this Agreement has not occurred, (ii) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer, or (iii) prior to the IROQ Special Meeting of Stockholders
convened to approve this Agreement, failing to make or withdrawing or modifying
its recommendation to stockholders, and entering into a Superior Proposal if
there exists a Superior Proposal and the Board of Directors of IROQ, after
consultation with and based upon the advice of independent legal counsel,
determined in good faith that such action is necessary for such Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law. For purposes of this Agreement, "Acquisition Proposal" shall mean any of
the following (other than the transactions contemplated hereunder) involving
IROQ or any of its Subsidiaries: (i) any merger, consolidation, share exchange,
business combination, or other similar transactions; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of the
assets of IROQ, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock of IROQ or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
Section 5.07 Duty to Advise; Duty to Update the IROQ Disclosure
Schedules. IROQ shall promptly advise Niagara Bancorp of any change or event
having a Material Adverse Effect on it or on any IROQ Subsidiary or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants set forth herein.
IROQ shall update the IROQ DISCLOSURE SCHEDULES as promptly as practicable after
the occurrence of an event or fact which, if such event or fact had occurred
prior to the date of this Agreement, would have been disclosed in the IROQ
DISCLOSURE SCHEDULES. The delivery of such updated Schedule shall not relieve
IROQ from any breach or violation of this Agreement and shall not have any
effect for the purposes of determining the satisfaction of the condition set
forth in Sections 6.02(c) hereof.
Section 5.08 Conduct of Niagara Bancorp's Business. From the date of
this Agreement to the Closing Date, Niagara Bancorp will use its best efforts to
(x) preserve its business organizations intact, (y) maintain good relationships
with employees, and (z) preserve for itself the goodwill of customers of First
Niagara and its other Subsidiaries. From the date of this Agreement to the
Closing Date, neither Niagara Bancorp nor any Niagara Bancorp Subsidiary will
(i) amend its certificate of incorporation, charter or bylaws in any manner
inconsistent with the prompt and timely consummation of the transactions
contemplated by this Agreement, provided that Niagara Bancorp may amend its
certificate to change its name to First Niagara Financial Group, Inc., (ii) take
any action which would result in any of the representations and warranties of
Niagara Bancorp or First Niagara set forth in this Agreement becoming untrue as
of any date after the date hereof or in any of the conditions set forth in
Article VI hereof not being satisfied, except in each case as may be required by
applicable law, (iii) take any action which would or is reasonably likely to
adversely effect or materially delay the receipt of the necessary approvals from
the Regulatory Authorities; (iv) take action which would or is reasonably likely
to materially and adversely affect Niagara Bancorp's ability to perform its
covenants and agreements under this Agreement; (v) take any action that
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would result in any of the conditions to the Merger not being satisfied; or (vi)
agree to do any of the foregoing. IROQ acknowledges and understands that Niagara
Bancorp has entered into agreements to acquire Albion Banc Corp ("ABC") and CNY
Financial Corporation ("CNYF"), that Niagara Bancorp is likely to consummate its
acquisitions of ABC and CNYF prior to the consummation of the transactions
contemplated by this Agreement, and IROQ agrees that the consummation of the ABC
and the CNYF acquisitions is not inconsistent with, or in any way violative of
or contrary to, its obligations under, or any of the terms of, this Agreement.
Section 5.09 Board and Committee Minutes. IROQ, CB and HFSA shall each
provide to Niagara Bancorp, within thirty (30) days after any meeting of their
respective Board of Directors, or any committee thereof, a copy of the minutes
of such meeting, except that with respect to any meeting held within thirty (30)
days of the Closing Date, such minutes shall be provided to each party prior to
the Closing Date (provided that they may redact any portion of the minutes that
relate to any confidential discussion of the Agreement and the transactions
contemplated thereby).
Section 5.10 Undertakings by IROQ and Niagara Bancorp
(a) From and after the date of this Agreement:
(i) Voting by Directors. Simultaneously with the execution of this
Agreement, or within five days thereof, each Director of IROQ shall enter into
the agreement set forth as Exhibit B to this Agreement;
(ii) Proxy Solicitor. IROQ shall retain a proxy solicitor in
connection with the solicitation of shareholder approval of this Agreement;
(iii) Outside Service Bureau Contracts. If requested to do so by
Niagara Bancorp, IROQ shall use its best efforts to obtain an extension of, or
termination of, any contract with an outside service bureau or other vendor of
services to IROQ, on terms and conditions mutually acceptable to IROQ and
Niagara Bancorp;
(iv) Board Meetings. IROQ and CB shall permit a representative of
Niagara Bancorp to attend any meeting of IROQ, CB, or HFSA's Board of Directors
or the Executive Committees thereof (provided that they shall not be required to
permit the Niagara Bancorp representative to remain present during any
confidential discussion of the Agreement and the transactions contemplated
thereby). IROQ and CB shall effect such changes to the Restated Organization
Certificate and the Bylaws of CB, to be effective as of the Merger Effective
Date, as Niagara Bancorp may reasonably request in order to facilitate the
operation of CB as a wholly-owned subsidiary of Niagara Bancorp;
(v) List of Nonperforming Assets. IROQ shall provide Niagara
Bancorp, within ten (10) days of the end of each calendar month, a written list
of nonperforming assets (the term "nonperforming assets," for purposes of this
subsection, means (i) loans that are "troubled debt restructuring" as defined in
Statement of Financial Accounting Standards No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructuring," (ii) loans on nonaccrual, (iii) real
estate owned, (iv) all loans ninety (90) days or more past due) as of the end of
such month and (iv) and impaired loans; and
(vi) Reserves and Merger-Related Costs. On or before the Effective
Date, IROQ shall establish such additional accruals and reserves as may be
necessary to conform the accounting reserve practices and methods (including
credit loss practices and methods) of IROQ to those of Niagara Bancorp (as such
practices and methods are to be applied to IROQ from and after the Closing Date)
and Niagara Bancorp's plans with respect to the conduct of the business of IROQ
following the Merger and otherwise to reflect Merger-related expenses and costs
incurred by IROQ, provided, however, that IROQ shall not be required to take
such action unless Niagara Bancorp agrees in writing that all conditions to
closing set forth in Section 6.02 have been satisfied or waived (except for the
expiration of any applicable waiting periods); prior to the delivery by Niagara
Bancorp of the writing referred to in the preceding clause, IROQ shall provide
Niagara Bancorp a written statement, certified without personal liability by the
chief executive officer of IROQ and dated the date of such writing, that the
representation made in Section 3.15(b) hereof is true as of such date or,
alternatively, setting forth in detail the circumstances that prevent such
representation from being true as of such date; and no accrual or reserve made
by IROQ or any IROQ Subsidiary pursuant to this subsection, or any litigation or
regulatory proceeding arising out of any such accrual or reserve, shall
constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other
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provision of this Agreement or to constitute a termination event within the
meaning of Section 7.01(b) hereof. No action shall be required to be taken by
IROQ pursuant to this Section 5.10(vi) if, in the opinion of IROQ's independent
auditors, such action would contravene GAAP; and
(vii) Shareholders Meeting. IROQ shall submit this Agreement to its
shareholders for approval at a meeting to be held as soon as practicable, and,
subject to the next sentence, its Boards of Director shall recommend approval of
this Agreement to the IROQ shareholders. The Board of Directors of IROQ may
fail to make such a recommendation, or withdraw, modify or change any such
recommendation only in connection with a Superior Proposal, as set forth in
Section 5.06 of this Agreement, and only if such Board of Directors, after
having consulted with and considered the advice of outside counsel to such
Board, has determined that the making of such recommendation, or the failure so
to withdraw, modify or change its recommendation, would constitute a breach of
the fiduciary duties of such directors under New York law. IROQ shall take all
steps necessary in order to hold a special meeting of stockholders for the
purpose of approving this Agreement within four months of the date of this
Agreement, or as soon thereafter as is practicable.
(viii) Systems Conversions. IROQ and Niagara Bancorp shall meet on a
regular basis to discuss and plan for the conversion of IROQ and its
Subsidiaries' data processing and related electronic informational systems to
those used by Niagara Bancorp and its subsidiaries, which planning shall
include, but not be limited to, discussion of the possible termination by IROQ,
CB and HFSA of third-party service provider arrangements effective at the
Effective Time or at a date thereafter, non-renewal of personal property leases
and software licenses used by IROQ or any of its Subsidiaries in connection with
its systems operations, retention of outside consultants and additional
employees to assist with the conversion, and outsourcing, as appropriate, of
proprietary or self-provided system services, it being understood that IROQ
shall not be obligated to take any such action prior to the Effective Time and,
unless IROQ otherwise agrees, no conversion shall take place prior to the
Effective Time. In the event that IROQ or any of its Subsidiaries takes, at the
request of Niagara Bancorp, any action relative to third parties to facilitate
the conversion that results in the imposition of any termination fees, expenses
or charges, Niagara Bancorp shall indemnify IROQ and its Subsidiaries for any
such fees, expenses and charges, and the costs of reversing the conversion
process, if for any reason the Merger is not consummated in accordance with the
terms of this Agreement.
(b) From and after the date of this Agreement, Niagara Bancorp and IROQ
shall each:
(i) Filings and Approvals. Cooperate with the other in the
preparation and filing, as soon as practicable, of (A) the Applications, (B) the
Proxy Statement, (C) all other documents necessary to obtain any other approvals
and consents required to effect the completion of the Merger, and (D) all other
documents contemplated by this Agreement;
(ii) Public Announcements. Cooperate and cause their respective
officers, directors, employees and agents to cooperate in good faith, consistent
with their respective legal obligations, in the preparation and distribution of,
and agree upon the form and substance of, any press release related to this
Agreement and the transactions contemplated hereby, and any other public
disclosures related thereto, including without limitation communications to
shareholders, internal announcements and customer disclosures, but nothing
contained herein shall prohibit either party from making any disclosure which
its counsel deems necessary, provided that the disclosing party notifies the
other party reasonably in advance of the timing and contents of such disclosure;
(iii) Maintenance of Insurance. Maintain, and cause their respective
Subsidiaries to maintain, insurance in such amounts as are reasonable to cover
such risks as are customary in relation to the character and location of its
properties and the nature of its business;
(iv) Maintenance of Books and Records. Maintain, and cause their
respective Subsidiaries to maintain, books of account and records in accordance
with generally accepted accounting principles applied on a basis consistent with
those principles used in preparing the financial statements heretofore
delivered;
(v) Delivery of Securities Documents. Deliver to the other, copies
of all Securities Documents simultaneously with the filing thereof; or
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(vi) Taxes. File all federal, state, and local tax returns required
to be filed by them or their respective Subsidiaries on or before the date such
returns are due (including any extensions) and pay all taxes shown to be due on
such returns on or before the date such payment is due.
Section 5.11 Employee and Termination Benefits; Directors and Management.
(a) The IROQ Employee Stock Ownership Plan (the "IROQ ESOP") shall be
terminated as of, or prior to, the Merger Effective Date (all shares held by the
ESOP shall be converted into the right to receive the Merger Consideration), all
outstanding IROQ ESOP indebtedness shall be repaid, and the balance shall be
allocated and distributed to IROQ employees (subject to the receipt of a
determination letter from the IRS), as provided for in the IROQ ESOP and unless
otherwise required by applicable law. Niagara Bancorp will review other IROQ
Employee Plans to determine whether to maintain, terminate or continue such
plans. All IROQ Employees who become participants in a Niagara Bancorp (or
Subsidiary) Plan shall, for purposes of determining eligibility for and vesting
of such employee benefits only (and not for pension benefit accrual purposes)
and, if applicable and permitted under the Niagara Bancorp (or Subsidiary)
Plan(s), for purposes of satisfying any waiting periods concerning "preexisting
conditions" and the satisfaction of any "copayment" or deductible requirements,
be given credit for service with IROQ or an IROQ subsidiary or any predecessor
thereto prior to the Effective Date.
(b) After the Merger Effective Date, any former employees of IROQ or any
IROQ Subsidiary whose employment is terminated, other than for cause, within
twelve months of the Closing Date shall be provided with severance benefits in
accordance with the severance policy described on IROQ DISCLOSURE SCHEDULE
5.11(b), except for employees who have employment contracts (as set forth in
IROQ DISCLOSURE SCHEDULE 3.08(a)) in which event such employee shall be provided
with benefits in accordance with their employment agreement.
Section 5.12 Duty to Advise; Duty to Update Niagara Bancorp's Disclosure
Schedules. Niagara Bancorp shall promptly advise IROQ of any change or event
which it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants set forth
herein. Niagara Bancorp shall update Niagara Bancorp's DISCLOSURE SCHEDULES as
promptly as practicable after the occurrence of an event or fact which, if such
event or fact had occurred prior to the date of this Agreement, would have been
disclosed in the Niagara Bancorp DISCLOSURE SCHEDULE. The delivery of such
updated Schedule shall not relieve Niagara Bancorp from any breach or violation
of this Agreement and shall not have any effect for the purposes of determining
the satisfaction of the condition set forth in Sections 6.01(c) hereof.
Section 5.13 Governance and Related Matters.
(a) Following the Merger Effective Date, and subject to paragraph (c)
below, the board of directors of CB and the chairman of the board of directors
of CB shall be as mutually agreed upon between CB and Niagara Bancorp. The
directors of CB shall be entitled to receive attendance and retainer fees in the
same amounts as in effect on the date of this Agreement. The retirement age for
service on the CB board shall be 70 years. Niagara Bancorp shall have
appropriate representation on the CB board. IROQ and CB shall effect such
changes to the Organization Certificate and Bylaws of CB, such amendments to be
effective as of the Merger Effective Date, as Niagara Bancorp may reasonably
request in order to facilitate the operation of CB as a wholly-owned subsidiary
of Niagara Bancorp.
(b) Niagara Bancorp will honor the employment contract termination
provisions for executive officers of IROQ and its Subsidiaries, including that
for Richard Callahan (the payment to Mr. Callahan shall be made in four equal
installments commencing on the Merger Effective Date and ending on the third
anniversary thereof). Following the Merger Effective Date, Richard Callahan
shall continue to serve as President and Chief Executive Officer of CB.
(c) Niagara Bancorp hereby affirms that it is its present intention to
operate CB as a separate subsidiary for at least the next two years with the
same board of directors as constituted pursuant to Section 5.13(a). Niagara
Bancorp does not intend to operate HFSA as a separate subsidiary and Niagara
Bancorp may, in its discretion, merge HFSA into CB or another Niagara Bancorp
Subsidiary or take any other action with respect HFSA (including, without
limitation, a possible sale of HFSA to a third party). If prior to the Merger
Effective Date Niagara Bancorp determines to merge HFSA with a Niagara Bancorp
Subsidiary, HFSA shall take all actions
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necessary and appropriate, including causing the entering into of appropriate
merger agreements, as Niagara Bancorp reasonably deems advisable, in each case
in accordance with applicable laws and regulations and in no event effective
until (and subject to the occurrence of) the Merger Effective Date.
(d) One non-employee member of the board of directors of IROQ, mutually
agreeable to IROQ and Niagara Bancorp, shall be appointed to the Board of
Directors of Niagara Bancorp effective as of the Merger Effective Date.
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to IROQ's Obligations under this Agreement. The
obligations of IROQ hereunder shall be subject to satisfaction at or prior to
the Closing Date of each of the following conditions, unless waived by IROQ
pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, Niagara Bancorp and First Niagara Merger Corp to authorize the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated by this Agreement, shall have been duly and
validly taken by Niagara Bancorp and First Niagara Merger Corp; and IROQ shall
have received certified copies of the resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of Niagara Bancorp required
by this Agreement to be performed by Niagara Bancorp at or prior to the Closing
Date shall have been duly performed and complied with in all material respects;
(c) Representations and Warranties. Each of the representations and
warranties of Niagara Bancorp in this Agreement which is qualified as to
materiality shall be true and correct, and each such representation or warranty
that is not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement, and (except to the extent such
representations and warranties speak as of an earlier date) as of the Merger
Effective Date;
(d) Approvals of Regulatory Authorities. The Parties shall have received
all required approvals of Regulatory Authorities of the Merger, and all notice
and waiting periods required thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) Officer's Certificate. Niagara Bancorp shall have delivered to IROQ a
certificate, dated the Closing Date and signed, without personal liability, by
its chairman of the board or president, to the effect that the conditions set
forth in subsections (a) through (e) and (i) of this Section 6.01 have been
satisfied, to the best knowledge of the officer executing the same;
(g) Opinion of Niagara Bancorp's Counsel. IROQ shall have received an
opinion of Luse Lehman Gorman Pomerenk & Schick, P.C., counsel to Niagara
Bancorp, dated the Closing Date, in form and substance reasonably satisfactory
to IROQ and its counsel to the effect set forth on Exhibit 6.1 attached hereto;
(h) Approval of IROQ's Shareholders. This Agreement shall have been
approved by the shareholders of IROQ by such vote as is required under
applicable New York law, and IROQ's certificate of incorporation and bylaws; and
(i) Funds Deposited with the Exchange Agent. Niagara Bancorp shall have
deposited or caused to be deposited, in trust with the Exchange Agent, an amount
of cash equal to the aggregate Merger Consideration that the IROQ stockholders
shall be entitled to receive on the Merger Effective Date pursuant to Section
2.02 of this Agreement.
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Section 6.02 Conditions to Niagara Bancorp's Obligations under this
Agreement. The obligations of Niagara Bancorp hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by Niagara Bancorp pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken by, or on the
part of, IROQ to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, shall have been duly and validly taken by IROQ; and Niagara Bancorp
shall have received certified copies of the resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of IROQ required by this
Agreement to be performed by it at or prior to the Closing Date shall have been
duly performed and complied with in all material respects;
(c) Representations and Warranties. Each of the representations and
warranties of IROQ in this Agreement which is qualified as to materiality shall
be true and correct, and each such representation or warranty that is not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement, and (except to the extent such representations and
warranties speak as of an earlier date) as of the Merger Effective Date;
(d) Approvals of Regulatory Authorities. Niagara Bancorp shall have
received all required approvals of Regulatory Authorities of the Merger (without
the imposition of any conditions that are in Niagara Bancorp's reasonable
judgment unduly burdensome); and all notice and waiting periods required
thereunder shall have expired or been terminated;
(e) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) No Material Adverse Effect. Since December 31, 1999, there shall not
have occurred any Material Adverse Effect with respect to IROQ;
(g) Approval of IROQ's Shareholders. This Agreement shall have been
approved by the shareholders of IROQ by such vote as is required under
applicable New York law, and IROQ's certificate of incorporation and bylaws;
(h) Officer's Certificate. IROQ shall have delivered to Niagara Bancorp a
certificate, dated the Closing Date and signed, without personal liability, by
its chairman of the board or president, to the effect that the conditions set
forth in subsections (a) through (g) and (k) of this Section 6.02 have been
satisfied, to the best knowledge of the officer executing the same;
(i) Opinions of IROQ's Counsel. Niagara Bancorp shall have received an
opinion of Harris Beach & Wilcox, LLP, counsel to IROQ, dated the Closing Date,
in form and substance reasonably satisfactory to Niagara Bancorp and its counsel
to the effect set forth on Exhibit 6.3 attached hereto; and
(j) Tax Opinion. Niagara Bancorp shall have received an opinion of Luse
Lehman Gorman Pomerenk & Schick, P.C., its counsel, substantially to the effect
set forth on Exhibit 6.2 attached hereto.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination. This Agreement may be terminated on or at any
time prior to the Closing Date:
(a) By the mutual written consent of the parties hereto;
(b) By Niagara Bancorp or IROQ:
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(i) if there shall have been a material breach of any
representation, warranty, covenant or other obligation of the other party, and
the breach cannot be, or shall not have been, cured within 30 days after receipt
by such other party of notice in writing specifying the nature of such breach
and requesting that it be cured, and such breach would entitle the non-breaching
party not to consummate the Company Merger under Section 6 of this Agreement;
(ii) if the Closing Date shall not have occurred on or before January
31, 2001, unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe its
obligations set forth in this Agreement required to be performed or observed by
such party on or before the Closing Date;
(iii) if either party has been informed in writing by a Regulatory
Authority whose approval or consent has been requested that such approval or
consent has been denied or is likely to be denied, unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe its agreements set forth herein required to be
performed or observed by such party on or before the Closing Date; and
(iv) if there has been no Superior Proposal but the approval of the
shareholders of IROQ required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of shareholders or at any adjournment or postponement thereof;
(c) by IROQ if, as provided in Section 5.06, it receives a Superior
Proposal and the IROQ Board of Directors determines that it would be in
accordance with its fiduciary duties, based upon the advice of its outside legal
counsel, to accept the third party proposal; provided, however, that such
-------- -------
termination shall not effect the right of Niagara Bancorp to exercise the Stock
Option Agreement; or
(d) by Niagara Bancorp if (i) as provided in Section 5.06, the Board of
Directors of IROQ withdraws its recommendation of this Agreement, fails to make
such recommendation or modifies or qualifies its recommendation in a manner
adverse to Niagara Bancorp, or (ii) IROQ enters into an agreement to be
acquired by, or merge or combine with, a third party in connection with a
Superior Proposal. Provided, however, that such termination shall not effect the
-------- -------
right of Niagara Bancorp to exercise the Stock Option Agreement
Section 7.02 Effect of Termination. If this Agreement is terminated
pursuant to Section 7.01 hereof, this Agreement shall forthwith become void
(other than Section 5.02(a) and (d) and Section 8.01 hereof, which shall remain
in full force and effect), and except as otherwise provided herein there shall
be no further liability on the part of any of Niagara Bancorp, First Niagara
Merger Corp or IROQ, or their respective officers, directors and employees.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, except as
this Agreement otherwise expressly provides.
(b) In the event of a willful breach of any representation, warranty,
covenant or agreement contained in this Agreement, the breaching party shall
remain liable for any and all damages, costs and expenses, including all
reasonable attorneys' fees, sustained or incurred by the non-breaching party as
a result thereof or in connection therewith or with the enforcement of its
rights hereunder.
Section 8.02 Non-Survival of Representations and Warranties. All
representations, warranties and, except to the extent specifically provided
otherwise herein, agreements and covenants, other than those covenants set forth
in Article II, and Section 5.02(d), the last sentence of Section 5.02(a),
Sections 5.05, 5.11, and 5.13(a), (b) and (d), which will survive the Merger,
shall terminate on the Closing Date.
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Section 8.03 Amendment, Extension and Waiver. Subject to applicable law,
at any time prior to the consummation of the transactions contemplated by this
Agreement, the parties may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of either party hereto, (c)
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto, or (d) waive compliance with any of
the agreements or conditions contained in Articles V and VI hereof or otherwise.
This Agreement may not be amended except by an instrument in writing authorized
by the respective Boards of Directors and signed, by duly authorized officers,
on behalf of the parties hereto. Any agreement on the part of a party hereto to
any extension or waiver shall be valid only if set forth in an instrument in
writing signed by a duly authorized officer on behalf of such party, but such
waiver or failure to insist on strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 8.04 Entire Agreement. This Agreement, including the documents
and other writings referred to herein or delivered pursuant hereto, contains the
entire agreement and understanding of the parties with respect to its subject
matter. This Agreement supersedes all prior arrangements and understandings
between the parties, both written or oral with respect to its subject matter.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto and their respective successors, any rights, remedies,
obligations or liabilities other than pursuant to Sections 2.02, 2.03, 2.04,
5.02 and 5.05.
Section 8.05 No Assignment. Neither party hereto may assign any of its
rights or obligations hereunder to any other person, without the prior written
consent of the other party hereto.
Section 8.06 Notices. All notices or other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
prepaid registered or certified mail (return receipt requested), or sent by
telecopy, addressed as follows:
(a) If to Niagara Bancorp, Inc. to:
Niagara Bancorp
6950 South Transit Road, P.O. Box 514
Lockport, New York 14095-0514
Attention: William E. Swan
President and Chief Executive Officer
with a copy to:
Luse Lehman Gorman Pomerenk & Schick, PC
5335 Wisconsin Avenue, NW
Washington, D.C. 20015
Attention: John J. Gorman, Esq.
(b) If to IROQ, to:
IROQ
115 Genesee Street
Auburn, New York 13021
Attn: Richard Callahan
President and Chief Executive Officer
with a copy to:
Harris Beach & Wilcox, LLP
130 East Main Street
Rochester, New York 14604
Attn: Linda Oldfield
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Section 8.07 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Section 8.08 Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
Section 8.09 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
Section 8.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
Section 8.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic internal law (including the law of
conflicts of law) of the State of Delaware.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
NIAGARA BANCORP, INC.
By: /s/ William E. Swan
-------------------------------------------
William E. Swan
President and Chief Executive Officer
FIRST NIAGARA MERGER CORP
By: /s/ William E. Swan
-------------------------------------------
William E. Swan
President and Chief Executive Officer
IROQUOIS BANCORP
By: /s/ Richard D. Callahan
-------------------------------------------
Richard D. Callahan
President and Chief Executive Officer
33
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Exhibit A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated March 26, 2000, between Iroquois Bancorp,
Inc., a New York corporation ("Issuer") and Niagara Bancorp, Inc., a Delaware
corporation ("Grantee"). Capitalized terms used herein without definition have
the meanings specified in the Merger Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated March 26, 2000 (the "Merger Agreement"), which agreement has been
executed by the parties hereto prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 459,069
fully paid and nonassessable shares of its common stock, par value $1.00 per
share ("Common Stock"), at a price of $24.00 per share (such price, as adjusted
if applicable, the "Option Price"); provided, however, that in the event Issuer
issues or agrees to issue any shares of Common Stock (other than as permitted
under the Merger Agreement) at a price less than $24.00 per share, such Option
Price shall be equal to such lesser price. 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), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.99% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The holder or holders of the Option (including Grantee or any
subsequent transferee(s)) (the "Holder") 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 (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 180 days
following the first such Subsequent Triggering Event. Each of the following
shall be an Exercise Termination Event: (i)
<PAGE>
the Merger Effective Date (as defined in the Merger Agreement); (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; or
(iii) the passage of eighteen months after termination of the Merger Agreement
if such termination follows or occurs at the same time as the occurrence of an
Initial Triggering Event. Notwithstanding anything to the contrary contained in
this Agreement, the Option may not be exercised (nor may the holder's rights
under Section 11 be exercised) at any time when Grantee shall be in breach of
its covenants or agreements contained in the Merger Agreement under
circumstances that would entitle Issuer to terminate the Merger Agreement and
such breach has not been cured, unless the Merger Agreement has been terminated
in accordance with Section 7.01(c) or (d) thereof.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer participates (or authorizes participation in)
negotiations regarding a Superior Proposal, as contemplated in Sections
5.06 and 7.01(c) of the Merger Agreement.
(ii) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, and the rules
and regulations thereunder (the "1934 Act")) other than Grantee or any of
its Subsidiaries (each a "Grantee Subsidiary"). For purposes of this
Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the SEC) of Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Issuer or any
Significant Subsidiary of Issuer, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
beneficial ownership of securities representing 20% or more of the voting
power of Issuer or any Significant Subsidiary of Issuer, provided that the
term "Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(iii) (A) Any person other than Grantee, or any Grantee Subsidiary,
or any Issuer Subsidiary acting in a fiduciary capacity (collectively,
"Excluded Persons"), alone or together with such person's affiliates and
associates (as such terms are defined in Rule 12b-2 under the 1934 Act)
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of 20% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder) or (B) any group (as such term is defined
in Section 13(d)(3) of the 1934
2
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Act), other than a group of which only Excluded Persons are members, shall
have been formed that beneficially owns 20% or more of the shares of Common
Stock then outstanding;
(iv) The Board of Directors of Issuer shall have failed to
recommend to its stockholders the adoption of the Merger Agreement or shall
have withdrawn, modified or changed its recommendation in a manner adverse
to Grantee;
(v) After a proposal is made by a third party (other than an
Excluded Person) to Issuer to engage in an Acquisition Transaction: Issuer
shall have intentionally and knowingly breached any representation,
warranty, covenant or agreement contained in the Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger Agreement pursuant
to Section 7.01(b)(i) therein (without regard to any grace period provided
for therein) and (y) shall not have been cured prior to the Notice Date (as
defined below); or the IROQ stockholders shall fail to approve the Merger
Agreement.
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with any
federal or state bank regulatory authority ("Regulatory Authority"), for
approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than an Excluded Person
of beneficial ownership of 25% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (ii) of subsection (b) of this Section 2.
(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, it shall send to Issuer a written notice (the date of which is 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 any Regulatory Authority is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
3
<PAGE>
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At each closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Change in Bank Control
Act of 1978, as amended, or any state banking law, prior approval of or notice
to any state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications or
notices and providing such information to the any 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.
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4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, in the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions, or the like, the type and
number, and/or the price, of shares of Common Stock purchasable upon exercise
hereof shall be appropriately adjusted, and proper provision shall be made in
the agreements governing such transaction so that the Holder shall receive, upon
exercise of the Option (at the aggregate exercise price calculated in accordance
with Section 1 of this Agreement), the number and class of shares or other
securities or property that Holder would have received in respect of the Common
Stock if the Option had been exercised immediately prior to such event, or the
record date therefor, as applicable.
6.(a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
5
<PAGE>
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power with respect of
the election of directors (or other persons similarly responsible for
direction of the business and affairs) of the issuer of the Substitute
Option.
(3) "Assigned Value" shall mean the highest of (i) the price per
share of Common Stock at which a tender offer or exchange offer therefor
has been made, (ii) the price per share of Common Stock to be paid by any
third party pursuant to an agreement with Issuer, or (iii) in the event of
a sale of all or substantially all of Issuer's assets, the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder, 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 .
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the six months 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 and conditions as the
Option, provided, that if any term or condition of the Substitute Option cannot,
for legal reasons, be the same as the Option, such term or condition shall be as
similar as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to (i) the product of (A) the Assigned
Value and (B) the number of shares of Common Stock for which the Option is then
exercisable, divided by (ii) the Average
6
<PAGE>
Price. The exercise price of the Substitute Option per share of Substitute
Common Stock shall then be equal to the Option Price multiplied by a fraction
the numerator of which shall be the number of shares of Common Stock for which
the Option is then exercisable and the denominator of which shall be the number
of shares of Substitute Common Stock for which the Substitute Option is
exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 6 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
7. The 180-day period for exercise of certain rights under Section 2
shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
8. Repurchase at the Option of Holder. (a) At the request of Holder at
any time commencing upon the first occurrence of a Repurchase Event (as defined
in Section 8(d)) and ending nine months immediately thereafter, Issuer shall
repurchase from Holder (i) the Option and (ii) all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date". Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Option Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which Holder
then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Sections 1 and 5), multiplied by the number of shares of
Common Stock with respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Option
Price (subject to adjustment pursuant to Sections 1 and 5) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each share of Common Stock
with respect to which the Option has been exercised and with respect to which
Holder then has beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within 10
7
<PAGE>
business days after the Request Date, pay the Section 8 Repurchase Consideration
to Holder in immediately available funds, and contemporaneously with such
payment, Holder shall surrender to Issuer the Option and the certificates
evidencing the shares of Common Stock purchased thereunder with respect to which
Holder then has beneficial ownership, and Holder shall warrant that it has sole
record and beneficial ownership of such shares and that the same are then free
and clear of all liens. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any federal or state regulatory authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If any federal or
state regulatory authority disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Holder. If any federal or state regulatory authority prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by such regulatory
authority, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Holder shall thereupon have the
right to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 2(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Common Stock paid for any such
share by the person or groups described in Section 8(d)(i), (ii) the price per
share of Common Stock received by holders of Common Stock in connection with any
merger or other business combination transaction described in Section 6(a)(i),
6(a)(ii) or 6(a)(iii), or (iii) the highest closing bid price per share of
Issuer Common Stock quoted on the Nasdaq System (or if Issuer Common Stock is
not quoted on the Nasdaq System, the highest bid price per share as quoted on
the principal trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Holder) during the 40
business days preceding the Request Date; provided, however, that in the event
of a sale of less than all of Issuer's assets, the Applicable Price shall be the
sum of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Holder, divided by the number of shares of
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii)
8
<PAGE>
shall be other than in cash, the value of such consideration shall be determined
in good faith by an independent nationally recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if, prior to an
Exercise Termination Event, (i) any person (other than Grantee or any subsidiary
of Grantee) shall have acquired beneficial ownership of (as such term is defined
in Rule 13d_3 promulgated under the Exchange Act), or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 25% or more of the then outstanding shares of
Issuer Common Stock, or (ii) any of the transactions described in Section
6(a)(i), 6(a)(ii) or 6(a)(iii) shall be consummated.
9. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer. This Agreement is the valid and legally binding
obligation of Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all necessary action to exempt this Agreement, and
the transactions contemplated hereby and thereby from, and this Agreement and
the transactions contemplated hereby and thereby are exempt from, (i) any
applicable state takeover laws, (ii) any state laws limiting or restricting the
voting rights of stockholders and (iii) any provision in its or any of its
subsidiaries' articles of incorporation, certificate of incorporation, charter
or bylaws restricting or limiting stock ownership or the voting rights of
stockholders.
(d) The execution, delivery and performance of this Agreement does not or
will not, and the consummation by Issuer of any of the transactions contemplated
hereby will not, constitute or result in (i) a breach or violation of, or a
default under, its certificate of incorporation or bylaws, or the comparable
governing instruments of any of its subsidiaries, or
9
<PAGE>
(ii) a breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of it or
any of its subsidiaries (with or without the giving of notice, the lapse of time
or both) or under any law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or nongovernmental permit or license to which it or
any of its subsidiaries is subject, that would, in any case referred to in this
clause (ii), give any other person the ability to prevent or enjoin Issuer's
performance under this Agreement in any material respect.
(e) To the extent that Section 912 of the NYBCL applies to Grantee as a
result of this Agreement (i.e., the shares of Common Stock subject to this
Agreement are deemed beneficially owned by Niagara Bancorp) and shares of Common
Stock that otherwise are owned by Niagara Bancorp, the board of directors of
Issuer has approved Grantee as an interested stockholder (as defined in Section
912) prior to the date of execution of this Agreement (i.e., prior to the "stock
acquisition date" as that term is defined in Section 912).
10. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being acquired with a view to the public
distribution thereof and neither this Option nor any Option Shares will be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under applicable federal and state securities laws and
regulations.
11. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except (i)
to any wholly-owned Subsidiary or (ii) 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 to one or more transferees.
12. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement.
13. Notwithstanding anything to the contrary herein, in the event that the
Holder or any Related Person thereof is a person making an offer or proposal to
engage in an Acquisition Transaction (other than the transactions contemplated
by the Merger Agreement), then in the case of a Holder or any Related Person
thereof, the Option held by it shall immediately terminate and be of no further
force or effect. A Related Person of a Holder means any Affiliate (as defined
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<PAGE>
in Rule 12b-2 of the rules and regulations under the 1934 Act) of the Holder and
any person that is the beneficial owner of 20% or more of the voting power of
the Holder.
14. 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.
15. 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 the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire such lesser number of shares as may be permissible, without any
amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
18. 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.
19. 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.
20. Except as otherwise expressly provided herein, or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and, as
permitted herein, assignees, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly
11
<PAGE>
provided herein.
21. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers, all as of the date first above written.
IROQUOIS BANCORP, INC.
By:
------------------------------------
Richard D. Callahan
President and Chief Executive Officer
NIAGARA BANCORP, INC.
By:
------------------------------------
William E. Swan
President and Chief Executive
Officer
12
<PAGE>
Exhibit B
March 26, 2000
Niagara Bancorp, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
Ladies and Gentlemen:
Niagara Bancorp, Inc. ("Niagara Bancorp"), First Niagara Bancorp Corp
("Merger Corp"), and Iroquois Bancorp, Inc. ("IROQ") have entered into an
Agreement and Plan of Merger dated as of March 26, 2000 (the "Merger
Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) IROQ will merge with and into Merger Corp with IROQ surviving the
merger, to be followed by the merger of IROQ with and into Niagara Bancorp, with
Niagara Bancorp surviving the merger (collectively referred to as the "Merger");
and (b) shareholders of IROQ will receive $33.25 in cash in exchange for each
share of common stock of IROQ outstanding on the closing date.
Niagara Bancorp has requested, as a condition to its execution and delivery
to IROQ of the Merger Agreement, that the undersigned, being directors and
executive officers of IROQ, execute and deliver to Niagara Bancorp this Letter
Agreement.
Each of the undersigned, in order to induce Niagara Bancorp to execute and
deliver to IROQ the Merger Agreement, and intending to be legally bound, hereby
irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of IROQ called to vote for approval of the Merger so that all
shares of common stock of IROQ over which the undersigned or a member of the
undersigned's immediate family now has sole or shared voting power will be
counted for the purpose of determining the presence of a quorum at such meetings
and to vote, or cause to be voted, all such shares (i) in favor of approval and
adoption of the Merger Agreement and the transactions contemplated thereby
(including any amendments or modifications of the terms thereof approved by the
Board of Directors of IROQ), and (ii) against approval or adoption of any other
merger, business combination, recapitalization, partial liquidation or similar
transaction involving IROQ, it being understood that as to immediate family
members, the undersigned will use his/her reasonable efforts to cause the shares
to be present and voted in accordance with (i) and (ii) above;
(b) Agrees not to vote or execute any written consent to rescind or amend
in any manner any prior vote or written consent, as a shareholder of IROQ, to
approve or adopt the Merger Agreement;
(c) Agrees not to sell, transfer or otherwise dispose of any common stock
of IROQ on
<PAGE>
or prior to the date of the meeting of IROQ shareholders to vote on the Merger
Agreement, except for transfers to charities, charitable trusts, or other
charitable organizations under Section 501(c)(3) of the IRC, lineal descendant
or a spouse of the undersigned, or to a trust or other entity for the benefit of
one or more of the foregoing persons, providing that the transferee agrees in
writing to be bound by the terms of this letter agreement; and
(d) Represents that the undersigned has the capacity to enter into this
Letter Agreement and that it is a valid and binding obligation enforceable
against the undersigned in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights and general equitable
principles.
The obligations set forth herein shall terminate concurrently with any
termination of the Merger Agreement.
____________________________
This Letter Agreement may be executed in two or more counterparts, each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same Letter Agreement.
____________________________
The undersigned intend to be legally bound hereby.
Sincerely,
______________________________________
Name
______________________________________
Title
<PAGE>
EXHIBIT 6.1
[Matters to be covered in Opinion of Counsel to be delivered to IROQ pursuant to
Section 6.01(g) of the Agreement]
(a) Each of Niagara Bancorp and First Niagara Merger Corp ("Merger
Corp"), is incorporated, validly existing and in good standing under the laws of
the State of Delaware, and has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted. All eligible accounts of depositors in each depository institution
subsidiary of Niagara Bancorp are insured by the BIF or the SAIF administered by
the FDIC to the fullest extent permitted by law.
(b) Each of Niagara Bancorp and Merger Corp has the corporate power and
authority to adopt or execute and deliver the Agreement and the Bank Merger
Agreement included as Exhibit A thereto, as the case may be, and to consummate
the corporate transactions contemplated thereby and to carry out their
respective obligations thereunder, as applicable. The adoption or execution and
delivery of the Agreement and the Stock Option Agreement included as Exhibit A
thereto and the consummation of the transactions contemplated thereby, as
applicable, have been duly authorized by the board of directors of Niagara
Bancorp and Merger Corp, as the case may be, and no other corporate proceedings
on the part of such entities are necessary to consummate the transactions so
contemplated. The Agreement has been duly and validly executed and delivered by
Niagara Bancorp and Merger Corp, and in each case such instruments constitute
valid and legally binding obligations of Niagara Bancorp and Merger Corp,
enforceable in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, and except that the availability of
equitable remedies (including, without limitation, specific performance) is
within the discretion of the appropriate court.
(c) None of the adoption or execution and delivery of the Agreement and
the Stock Option Agreement included as Exhibit A thereto by Niagara Bancorp and
Merger Corp, or the consummation by such entities of the transactions
contemplated thereby in accordance with their respective terms, as applicable,
nor compliance by such entities with any of their respective terms, as
applicable, will (i) violate any provision of their respective Organization
Certificate, organization certificate or other chartering instrument or bylaws,
nor (ii) violate any federal or New York State banking statute, code, rule or
regulation or, to the knowledge of such counsel, any judgment, order, writ,
decree or injunction applicable to any of such entities or any of their
respective properties or assets, except, with respect to clauses (ii) above,
such as individually or in the aggregate will not have a material adverse effect
on the business, operations, assets or financial condition of Niagara Bancorp
and its subsidiaries taken as a whole and which will not prevent or delay the
consummation of the transactions contemplated by the Agreement.
(d) All regulatory or governmental approvals and consents which are
necessary to be obtained by Niagara Bancorp and Merger Corp to permit the
execution, delivery and performance of the Agreement and the Stock Option
Agreement have been obtained.
(e) Assuming due authorization of the Merger by all necessary corporate
and
<PAGE>
governmental proceedings on the part of IROQ and that IROQ has taken all action
required to be taken by them prior to the Effective Time, upon the filing of
Certificates of Merger with the Secretary of State of the State of Delaware and
the Department of State of the State of New York, the Merger will be validly
consummated in accordance with the Agreement and applicable laws and regulations
and each outstanding share of Common Stock will be converted into the right to
receive a cash payment in the manner specified in the Agreement.
(f) To the knowledge of such counsel, there are no judicial,
administrative, arbitral or other actions, suits, proceedings or investigations
pending or threatened which (i) if adversely determined, would have a material
adverse effect on the ability of Niagara Bancorp to consummate the transactions
contemplated by the Agreement or (ii) seek to restrain or prohibit the Merger or
to obtain monetary damages in connection therewith.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials and, as to matters of fact, certificates of any officer
or officers of Niagara Bancorp. The opinion of such counsel may include such
qualifications and explanations of the basis thereof as may be reasonably
acceptable to IROQ.
<PAGE>
EXHIBIT 6.2
[Matters to be covered in Opinion of Counsel to be delivered to Niagara Bancorp
pursuant to Section 6.02(j) of the Agreement]
1. The formation of First Niagara Merger Corp and its merger with and into
IROQ will be disregarded for federal income tax purposes, and the
transaction will be treated as a purchase by Niagara Bancorp of the
outstanding shares of IROQ. See 90-95, 1990-2 C.B. 67; Rev. Rul. 73-27,
1973-2 C.B. 301. The purchase will be treated as a qualified stock
purchase within the meaning of Section 338(d)(3) of the IRC.
2. For federal income tax purposes, no gain or loss will be recognized by
Niagara Bancorp, First Niagara Merger Corp or IROQ as a result of the
Merger.
3. For federal income tax purposes, the statutory merger of IROQ into
Niagara Bancorp pursuant to applicable law (the "Merger") will be
treated as a distribution by IROQ in complete liquidation within the
meaning of Section 332 of the IRC. See Section 1.332-2(d) of the
Treasury Regulations.
4. For federal income tax purposes, no gain or loss will be recognized by
Niagara Bancorp on its receipt of the assets of IROQ distributed in the
Merger. See Section 332(a) of the IRC.
5. For federal income tax purposes, no gain or loss will be recognized by
IROQ on the distribution of its assets to Niagara Bancorp in the Merger.
See Section 337(a) of the IRC.
6. For federal income tax purposes, the basis of the assets of IROQ in the
hands of Niagara Bancorp will be the same as the basis of those assets
in the hands of IROQ immediately preceding the Merger. See Section
334(b)(1) of the IRC.
7. The holding period of the assets received by Niagara Bancorp in the
Merger will include the period during which such property was held by
IROQ. See Section 1223(2) of the IRC.
8. As provided in Section 381(c)(2) of the IRC and Section 1.381(c)(2)-1 of
the Treasury Regulations, Niagara Bancorp will succeed to and take into
account the earnings and profits, or deficit in earnings and profits, of
IROQ as of the date of the Merger, subject to the limitations of
Sections 382 and 383 of the IRC.
<PAGE>
EXHIBIT 6.3
[Matters to be covered in Opinion of Counsel to be delivered to Niagara Bancorp
pursuant to Section 6.02(i) of the Agreement]
(a) Each of IROQ, CB and HSA is incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation. Each such
entity has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted.
Each of CB and HFSA is a member of the Federal Home Loan Bank of New York and
all eligible accounts of depositors in CB are insured by the BIF administered by
the FDIC to the fullest extent permitted by law, and all eligible accounts of
depositors in HFSA are insured by the SAIF administered by the FDIC to the
fullest extent permitted by law. IROQ is duly registered as a bank holding
company under the BHCA and the regulations of the FRB thereunder.
(b) The authorized capital stock of IROQ consists of 6,000,000 shares of
Common Stock, $1.00 par value per share, and 3,000,000 shares of preferred
stock, $1.00 par value per share ("Preferred Stock"). As of the date of this
opinion, there were 2,306,880 shares of Common Stock issued and outstanding and
no shares of Preferred Stock issued and outstanding. All issued and outstanding
shares of Common Stock, and all issued and outstanding shares of capital stock
of each IROQ Subsidiary, have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights. To the best of our
knowledge, all of the outstanding shares of CB and HFSA are owned, directly or
indirectly, by IROQ free and clear of any adverse claims, and, neither IROQ nor
any of its subsidiaries is a party to any subscription, option, warrant, call,
commitment or similar agreement providing for the transfer, purchase or issuance
of any shares of capital stock of IROQ or any of its subsidiaries or any
securities representing the right to purchase or otherwise acquire any shares of
such capital stock or any securities convertible into or representing the right
to purchase or otherwise acquire any such stock.
(c) IROQ has the corporate power and authority to execute and deliver
the Agreement and the Stock Option Agreement included as Exhibit A thereto, as
applicable, and to consummate the Merger and to carry out all of its obligations
thereunder. The execution and delivery of the Agreement and the Stock Option
Agreement included as Exhibit A thereto and the consummation of the Merger by
IROQ have been duly authorized by the boards of directors and stockholders of
IROQ and no other corporate proceedings on the part of IROQ or any IROQ
Subsidiary are necessary to consummate the transactions so contemplated. Each of
the Agreement and the Stock Option Agreement included as Exhibit A thereto has
been duly and validly executed and delivered by IROQ, and constitute valid and
legally binding obligations of IROQ enforceable in accordance with their terms,
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting creditors' rights and except as may be limited by the exercise of
judicial discretion in applying principles of equity (regardless of whether said
Agreement or Stock Option Agreement are considered in a proceeding in equity or
at law).
(d) None of the execution and delivery of the Agreement and the
agreement included as Exhibit A thereto by IROQ, nor the consummation by IROQ of
the transactions contemplated thereby in accordance with their respective terms,
as applicable, nor compliance by IROQ or CB and
<PAGE>
HFSA with any of their respective terms, as applicable, will (i) violate any
provision of IROQ's or CB and HFSA's Certificate of Incorporation, charter or
other chartering instrument or bylaws, nor (ii) violate any federal statute,
code, rule or regulation, or, to the knowledge of such counsel, any judgment,
order, writ, decree or injunction applicable to IROQ, CB and HFSA, or any of
their respective properties or assets, except, with respect to clauses (ii)
above, such as individually or in the aggregate will not have a material adverse
effect on the business, operations, assets or financial condition of IROQ and
its subsidiaries taken as a whole and which will not prevent or delay the
consummation of the transactions contemplated by the Agreement.
(e) All regulatory or governmental approvals and consents which are
necessary to be obtained by IROQ to permit the execution, delivery and
performance of the Agreement and the Stock Option Agreement included as Exhibit
A thereto have been obtained.
(f) The Agreement, including consummation of the transactions
contemplated thereby, has been approved by the requisite vote of stockholders of
IROQ.
(g) Assuming due authorization of the Merger by all necessary corporate
and governmental proceedings on the part of parties other than IROQ and CB and
HFSA and that such other parties have taken all action required to be taken by
them prior to the Effective Time, upon the proper filing of a [regulatory
filings,] the Merger will be validly consummated in accordance with the
Agreement and applicable laws and regulations and each outstanding share of
Common Stock will be converted into the right to receive a cash payment in the
manner specified in Agreement.
(h) To the knowledge of such counsel, there are no judicial,
administrative, arbitral or other actions, suits, proceedings or investigations
pending or threatened, which (i) if adversely determined, would result in any
material adverse change in the business, operations, assets or financial
condition of IROQ and its subsidiaries taken as a whole or (ii) seek to restrain
or prohibit the Merger or to obtain monetary damages in connection therewith.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials and, as to matters of fact, certificates of any officer
or officers of IROQ and its subsidiaries. The opinion of such counsel may
include such qualifications and explanations of the basis thereof as may be
reasonably acceptable to Niagara Bancorp.
<PAGE>
ANNEX II
March 26, 2000
Board of Directors
Iroquois Bancorp, Inc.
115 Genesee Street
Auburn, N.Y. 13021
Attention: Mr. Richard D. Callahan
President and Chief Executive Officer
Directors:
You have requested our opinion as to the fairness, from a financial
point of view, of the merger consideration being paid to the holders of the
outstanding shares of common stock, par value $1.00 per share (the "Iroquois
Shares"), of Iroquois Bancorp Inc. ("Iroquois") pursuant to the Agreement and
Plan of Merger, dated as of March 26, 2000 (the "Merger Agreement"), between
Iroquois and Niagara Bancorp, Inc. ("Niagara").
Pursuant to the Merger Agreement, Iroquois will merge with and into
Niagara (the "Merger") and each Iroquois Share issued and outstanding
immediately prior to the Merger Effective Date (subject to certain exceptions)
shall be cancelled and extinguished and converted into the right to receive cash
from Niagara in an amount equal to $33.25 per share (the "Merger
Consideration"). It is our understanding that the merger will be accounted for
using the purchase method under generally accepted accounting principles.
The investment banking business of Endicott Financial Advisors, L.L.C.
("Endicott") includes the valuation of financial institutions and their
securities in connection with mergers and acquisitions and other corporate
transactions.
In connection with this opinion, we have reviewed and considered, among
other things: (a) the Merger Agreement; (b) audited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations for Iroquois for the three fiscal years ended December
31, 1997, December 31, 1998 and December 31, 1999; (c) audited consolidated
financial statements and management's discussion and analysis of the financial
condition and results of operations for Niagara for the two fiscal years ended
December 31, 1997 and December 31, 1998; (d) unaudited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations for each of Iroquois and Niagara for the quarters
ended March 31, June 30, September 30, and December 31, 1999; (e) financial
analyses and forecasts for Iroquois and for Niagara; (f) the views of senior
management of Iroquois and Niagara of their respective past and current business
operations, results thereof, financial condition and future prospects; (g)
certain reported price and trading activity for Iroquois, including a comparison
of certain financial and stock market information with similar information for
certain other companies the securities of which are publicly traded; (h) the
financial terms of recent business combinations in the banking industry; (i) the
pro-forma impact of the transaction on Niagara; (j) the current market
environment generally and the banking environment in particular; and (k) such
other information, financial studies, analyses and investigations and financial,
economic and market criteria as we considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all of the financial
information, analyses and other information reviewed by
<PAGE>
Board of Directors
Iroquois Bancorp, Inc.
March 26,2000
and discussed with us. We have not made any independent evaluation or appraisal
of the specific assets, the collateral securing assets or the liabilities of
Iroquois or Niagara or any of their subsidiaries, or the collectibility of any
such assets (relying, where relevant on the analyses and estimates of Iroquois
and Niagara), nor have we been furnished with any such appraisals. With respect
to the financial forecast and cost savings information reviewed with Iroquois
and Niagara management, we have assumed that they reflect the best currently
available estimates and judgments of the senior management of Iroquois and
Niagara as to the future performance of Iroquois and Niagara. We have also
assumed that there has been no material change in Iroquois' or Niagara's assets,
financial condition, results of operations, business or prospects since the date
of the last financial statements made available to us. We have also assumed
without independent verification that the aggregate consolidated allowance for
loan losses for Iroquois and Niagara were adequate to cover such losses. We have
further assumed that the conditions precedent in the Agreement are not waived.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We have not undertaken to reaffirm
or revise this opinion or otherwise comment upon any events occurring after the
date hereof.
We have acted as Iroquois's financial advisor in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon consummation of the Merger. We will also receive a fee for
rendering this opinion. In the normal course of business, affiliates of Endicott
have invested for their own account in shares of Iroquois.
It is understood that this opinion is for the information of the Board
of Directors of Iroquois and, except for inclusion in its entirety in a proxy
statement required to be circulated to shareholders in connection with the
Merger, may not be quoted, referred to or reproduced at any time or in any
manner, without Endicott's written consent.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Merger Consideration is fair from a financial point of view
to the holders of Iroquois Shares.
Very Truly Yours,
DRAFT
----------------
ENDICOTT FINANCIAL ADVISORS, L.L.C.
<PAGE>
ANNEX III
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated March 26, 2000, between Iroquois Bancorp,
Inc., a New York corporation ("Issuer") and Niagara Bancorp, Inc., a Delaware
corporation ("Grantee"). Capitalized terms used herein without definition have
the meanings specified in the Merger Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated March 26, 2000 (the "Merger Agreement"), which agreement has been
executed by the parties hereto prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 459,069
fully paid and nonassessable shares of its common stock, par value $1.00 per
share ("Common Stock"), at a price of $24.00 per share (such price, as adjusted
if applicable, the "Option Price"); provided, however, that in the event Issuer
issues or agrees to issue any shares of Common Stock (other than as permitted
under the Merger Agreement) at a price less than $24.00 per share, such Option
Price shall be equal to such lesser price. 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), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.99% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The holder or holders of the Option (including Grantee or any
subsequent transferee(s)) (the "Holder") 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 (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 180 days
following the first such Subsequent Triggering Event. Each of the following
shall be an Exercise Termination Event: (i)
<PAGE>
the Merger Effective Date (as defined in the Merger Agreement); (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; or
(iii) the passage of eighteen months after termination of the Merger Agreement
if such termination follows or occurs at the same time as the occurrence of an
Initial Triggering Event. Notwithstanding anything to the contrary contained in
this Agreement, the Option may not be exercised (nor may the holder's rights
under Section 11 be exercised) at any time when Grantee shall be in breach of
its covenants or agreements contained in the Merger Agreement under
circumstances that would entitle Issuer to terminate the Merger Agreement and
such breach has not been cured, unless the Merger Agreement has been terminated
in accordance with Section 7.01(c) or (d) thereof.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer participates (or authorizes participation in)
negotiations regarding a Superior Proposal, as contemplated in Sections
5.06 and 7.01(c) of the Merger Agreement.
(ii) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, and the rules
and regulations thereunder (the "1934 Act")) other than Grantee or any of
its Subsidiaries (each a "Grantee Subsidiary"). For purposes of this
Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the SEC) of Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Issuer or any
Significant Subsidiary of Issuer, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
beneficial ownership of securities representing 20% or more of the voting
power of Issuer or any Significant Subsidiary of Issuer, provided that the
term "Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(iii) (A) Any person other than Grantee, or any Grantee Subsidiary,
or any Issuer Subsidiary acting in a fiduciary capacity (collectively,
"Excluded Persons"), alone or together with such person's affiliates and
associates (as such terms are defined in Rule 12b-2 under the 1934 Act)
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of 20% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder) or (B) any group (as such term is defined
in Section 13(d)(3) of the 1934
2
<PAGE>
Act), other than a group of which only Excluded Persons are members, shall
have been formed that beneficially owns 20% or more of the shares of Common
Stock then outstanding;
(iv) The Board of Directors of Issuer shall have failed to
recommend to its stockholders the adoption of the Merger Agreement or shall
have withdrawn, modified or changed its recommendation in a manner adverse
to Grantee;
(v) After a proposal is made by a third party (other than an
Excluded Person) to Issuer to engage in an Acquisition Transaction: Issuer
shall have intentionally and knowingly breached any representation,
warranty, covenant or agreement contained in the Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger Agreement pursuant
to Section 7.01(b)(i) therein (without regard to any grace period provided
for therein) and (y) shall not have been cured prior to the Notice Date (as
defined below); or the IROQ stockholders shall fail to approve the Merger
Agreement.
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with any
federal or state bank regulatory authority ("Regulatory Authority"), for
approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than an Excluded Person
of beneficial ownership of 25% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (ii) of subsection (b) of this Section 2.
(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, it shall send to Issuer a written notice (the date of which is 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 any Regulatory Authority is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
3
<PAGE>
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At each closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Change in Bank Control
Act of 1978, as amended, or any state banking law, prior approval of or notice
to any state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications or
notices and providing such information to the any 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
<PAGE>
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, in the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions, or the like, the type and
number, and/or the price, of shares of Common Stock purchasable upon exercise
hereof shall be appropriately adjusted, and proper provision shall be made in
the agreements governing such transaction so that the Holder shall receive, upon
exercise of the Option (at the aggregate exercise price calculated in accordance
with Section 1 of this Agreement), the number and class of shares or other
securities or property that Holder would have received in respect of the Common
Stock if the Option had been exercised immediately prior to such event, or the
record date therefor, as applicable.
6.(a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
5
<PAGE>
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power with respect of
the election of directors (or other persons similarly responsible for
direction of the business and affairs) of the issuer of the Substitute
Option.
(3) "Assigned Value" shall mean the highest of (i) the price per
share of Common Stock at which a tender offer or exchange offer therefor
has been made, (ii) the price per share of Common Stock to be paid by any
third party pursuant to an agreement with Issuer, or (iii) in the event of
a sale of all or substantially all of Issuer's assets, the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder, 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 .
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the six months 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 and conditions as the
Option, provided, that if any term or condition of the Substitute Option cannot,
for legal reasons, be the same as the Option, such term or condition shall be as
similar as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to (i) the product of (A) the Assigned
Value and (B) the number of shares of Common Stock for which the Option is then
exercisable, divided by (ii) the Average
6
<PAGE>
Price. The exercise price of the Substitute Option per share of Substitute
Common Stock shall then be equal to the Option Price multiplied by a fraction
the numerator of which shall be the number of shares of Common Stock for which
the Option is then exercisable and the denominator of which shall be the number
of shares of Substitute Common Stock for which the Substitute Option is
exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 6 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
7. The 180-day period for exercise of certain rights under Section 2
shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
8. Repurchase at the Option of Holder. (a) At the request of Holder at
any time commencing upon the first occurrence of a Repurchase Event (as defined
in Section 8(d)) and ending nine months immediately thereafter, Issuer shall
repurchase from Holder (i) the Option and (ii) all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date". Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Option Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which Holder
then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Common Stock over (y) the Option Price (subject to
adjustment pursuant to Sections 1 and 5), multiplied by the number of shares of
Common Stock with respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the Option
Price (subject to adjustment pursuant to Sections 1 and 5) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each share of Common Stock
with respect to which the Option has been exercised and with respect to which
Holder then has beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within 10
7
<PAGE>
business days after the Request Date, pay the Section 8 Repurchase Consideration
to Holder in immediately available funds, and contemporaneously with such
payment, Holder shall surrender to Issuer the Option and the certificates
evidencing the shares of Common Stock purchased thereunder with respect to which
Holder then has beneficial ownership, and Holder shall warrant that it has sole
record and beneficial ownership of such shares and that the same are then free
and clear of all liens. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any federal or state regulatory authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If any federal or
state regulatory authority disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Holder. If any federal or state regulatory authority prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by such regulatory
authority, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Holder shall thereupon have the
right to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 2(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Common Stock paid for any such
share by the person or groups described in Section 8(d)(i), (ii) the price per
share of Common Stock received by holders of Common Stock in connection with any
merger or other business combination transaction described in Section 6(a)(i),
6(a)(ii) or 6(a)(iii), or (iii) the highest closing bid price per share of
Issuer Common Stock quoted on the Nasdaq System (or if Issuer Common Stock is
not quoted on the Nasdaq System, the highest bid price per share as quoted on
the principal trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Holder) during the 40
business days preceding the Request Date; provided, however, that in the event
of a sale of less than all of Issuer's assets, the Applicable Price shall be the
sum of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Holder, divided by the number of shares of
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii)
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<PAGE>
shall be other than in cash, the value of such consideration shall be determined
in good faith by an independent nationally recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if, prior to an
Exercise Termination Event, (i) any person (other than Grantee or any subsidiary
of Grantee) shall have acquired beneficial ownership of (as such term is defined
in Rule 13d_3 promulgated under the Exchange Act), or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 25% or more of the then outstanding shares of
Issuer Common Stock, or (ii) any of the transactions described in Section
6(a)(i), 6(a)(ii) or 6(a)(iii) shall be consummated.
9. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer. This Agreement is the valid and legally binding
obligation of Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all necessary action to exempt this Agreement, and
the transactions contemplated hereby and thereby from, and this Agreement and
the transactions contemplated hereby and thereby are exempt from, (i) any
applicable state takeover laws, (ii) any state laws limiting or restricting the
voting rights of stockholders and (iii) any provision in its or any of its
subsidiaries' articles of incorporation, certificate of incorporation, charter
or bylaws restricting or limiting stock ownership or the voting rights of
stockholders.
(d) The execution, delivery and performance of this Agreement does not or
will not, and the consummation by Issuer of any of the transactions contemplated
hereby will not, constitute or result in (i) a breach or violation of, or a
default under, its certificate of incorporation or bylaws, or the comparable
governing instruments of any of its subsidiaries, or
9
<PAGE>
(ii) a breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of it or
any of its subsidiaries (with or without the giving of notice, the lapse of time
or both) or under any law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or nongovernmental permit or license to which it or
any of its subsidiaries is subject, that would, in any case referred to in this
clause (ii), give any other person the ability to prevent or enjoin Issuer's
performance under this Agreement in any material respect.
(e) To the extent that Section 912 of the NYBCL applies to Grantee as a
result of this Agreement (i.e., the shares of Common Stock subject to this
Agreement are deemed beneficially owned by Niagara Bancorp) and shares of Common
Stock that otherwise are owned by Niagara Bancorp, the board of directors of
Issuer has approved Grantee as an interested stockholder (as defined in Section
912) prior to the date of execution of this Agreement (i.e., prior to the "stock
acquisition date" as that term is defined in Section 912).
10. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being acquired with a view to the public
distribution thereof and neither this Option nor any Option Shares will be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under applicable federal and state securities laws and
regulations.
11. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except (i)
to any wholly-owned Subsidiary or (ii) 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 to one or more transferees.
12. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement.
13. Notwithstanding anything to the contrary herein, in the event that the
Holder or any Related Person thereof is a person making an offer or proposal to
engage in an Acquisition Transaction (other than the transactions contemplated
by the Merger Agreement), then in the case of a Holder or any Related Person
thereof, the Option held by it shall immediately terminate and be of no further
force or effect. A Related Person of a Holder means any Affiliate (as defined
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<PAGE>
in Rule 12b-2 of the rules and regulations under the 1934 Act) of the Holder and
any person that is the beneficial owner of 20% or more of the voting power of
the Holder.
14. 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.
15. 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 the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire such lesser number of shares as may be permissible, without any
amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
18. 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.
19. 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.
20. Except as otherwise expressly provided herein, or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and, as
permitted herein, assignees, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly
11
<PAGE>
provided herein.
21. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers, all as of the date first above written.
IROQUOIS BANCORP, INC.
By: /s/ Richard D. Callahan
--------------------------------------
Richard D. Callahan
President and Chief Executive Officer
NIAGARA BANCORP, INC.
By: /s/ William E. Swan
--------------------------------------
William E. Swan
President and Chief Executive
Officer
12
<PAGE>
ANNEX IV
March 26, 2000
Niagara Bancorp, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
Ladies and Gentlemen:
Niagara Bancorp, Inc. ("Niagara Bancorp"), First Niagara Bancorp Corp
("Merger Corp"), and Iroquois Bancorp, Inc. ("IROQ") have entered into an
Agreement and Plan of Merger dated as of March 26, 2000 (the "Merger
Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, (a) IROQ will merge with and into Merger Corp with IROQ surviving the
merger, to be followed by the merger of IROQ with and into Niagara Bancorp, with
Niagara Bancorp surviving the merger (collectively referred to as the "Merger");
and (b) shareholders of IROQ will receive $33.25 in cash in exchange for each
share of common stock of IROQ outstanding on the closing date.
Niagara Bancorp has requested, as a condition to its execution and delivery
to IROQ of the Merger Agreement, that the undersigned, being directors and
executive officers of IROQ, execute and deliver to Niagara Bancorp this Letter
Agreement.
Each of the undersigned, in order to induce Niagara Bancorp to execute and
deliver to IROQ the Merger Agreement, and intending to be legally bound, hereby
irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of IROQ called to vote for approval of the Merger so that all
shares of common stock of IROQ over which the undersigned or a member of the
undersigned's immediate family now has sole or shared voting power will be
counted for the purpose of determining the presence of a quorum at such meetings
and to vote, or cause to be voted, all such shares (i) in favor of approval and
adoption of the Merger Agreement and the transactions contemplated thereby
(including any amendments or modifications of the terms thereof approved by the
Board of Directors of IROQ), and (ii) against approval or adoption of any other
merger, business combination, recapitalization, partial liquidation or similar
transaction involving IROQ, it being understood that as to immediate family
members, the undersigned will use his/her reasonable efforts to cause the shares
to be present and voted in accordance with (i) and (ii) above;
(b) Agrees not to vote or execute any written consent to rescind or amend
in any manner any prior vote or written consent, as a shareholder of IROQ, to
approve or adopt the Merger Agreement;
(c) Agrees not to sell, transfer or otherwise dispose of any common stock
of IROQ on
<PAGE>
or prior to the date of the meeting of IROQ shareholders to vote on the Merger
Agreement, except for transfers to charities, charitable trusts, or other
charitable organizations under Section 501(c)(3) of the IRC, lineal descendant
or a spouse of the undersigned, or to a trust or other entity for the benefit of
one or more of the foregoing persons, providing that the transferee agrees in
writing to be bound by the terms of this letter agreement; and
(d) Represents that the undersigned has the capacity to enter into this
Letter Agreement and that it is a valid and binding obligation enforceable
against the undersigned in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights and general equitable
principles.
The obligations set forth herein shall terminate concurrently with any
termination of the Merger Agreement.
____________________________
This Letter Agreement may be executed in two or more counterparts, each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same Letter Agreement.
____________________________
The undersigned intend to be legally bound hereby.
Sincerely,
/s/
______________________________________
Name
Director/Executive Officer
______________________________________
Title
<PAGE>
REVOCABLE
PROXY IROQUOIS BANCORP, INC.
COMMON STOCK
SPECIAL MEETING OF SHAREHOLDERS ____________,2000
The undersigned holder of common stock of Iroquois Bancorp, Inc.
hereby appoints Marianne R. O'Connor and Robert B. Bantle and each of them
his/her attorneys, agents and proxies to represent the undersigned and to vote
and act upon the shares of common stock standing in the name of the undersigned
which he/she would be entitled to vote if personally present, as specified
below, at the Special Meeting of Shareholders to be held on ________________,
2000 at 11:00 a.m. or any adjournments or postponements thereof, with full power
of substitution and revocation.
BALLOT
1. APPROVAL OF THE AGREEMENT AND PLAN OF MERGER, DATED AS OF MARCH 26, 2000,
BY AND AMONG FIRST NIAGARA FINANCIAL, INC., FIRST NIAGARA MERGER CORP, AND
IROQUOIS BANCORP, INC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL
OF THE AGREEMENT AND PLAN OF MERGER. PLEASE SIGN, DATE AND RETURN THIS PROXY.
------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. At the present time, the
Board of Directors knows of no other business to be presented at the
Special Meeting.
(Signature on reverse side required)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE
OTHER SIDE OF THIS CARD. IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR PROPOSAL
1.
Date: ___________________________________
Signed __________________________________
(Name of shareholder should be signed exactly as
it appears to the left) Please mark, sign, date
and return this proxy card promptly in the
enclosed postpaid envelope. This will save your
Company the cost of a follow-up solicitation.
