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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): August 16, 1999
JSB FINANCIAL, INC.
(Exact name of registrant as specified in charter)
DELAWARE 001-13157 11-3000874
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
303 MERRICK ROAD, LYNBROOK, NEW YORK 11563
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (516) 887-7000
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEMS 1 THROUGH 4.NOT APPLICABLE.
ITEM 5. OTHER EVENTS.
On August 16, 1999, JSB Financial, Inc., a Delaware corporation
("JSB"), announced that it had entered into an Agreement and Plan of Merger,
dated as of August 16, 1999 ("Merger Agreement"), with North Fork
Bancorporation, Inc., a Delaware corporation ("NFB"). NFB is the bank holding
company parent of North Fork Bank and Trust Company, a New York State chartered
stock commercial bank. The Merger Agreement provides, among other things, that
JSB will merge with and into NFB, with NFB being the surviving corporation
("Merger"). A copy of the Merger Agreement is attached hereto as Exhibit 2.1.
Capitalized terms which are used but not defined herein shall have the meanings
ascribed to such terms in the Merger Agreement.
Pursuant to the Merger Agreement, each share of JSB common stock, par
value $0.01 per share ("JSB Common Stock"), issued and outstanding immediately
prior to the Effective Time will be converted into and become the right to
receive 3.0 shares of NFB common stock, par value $2.50 per share ("NFB Common
Stock"), except for (i) shares of JSB Common Stock held directly or indirectly
by NFB, other than shares held in a fiduciary capacity in satisfaction of a debt
previously contracted, and (ii) shares held by JSB as treasury stock. Each
holder of JSB Common Stock who would otherwise be entitled to receive a fraction
of a share of NFB Common Stock will receive an amount in cash equal to the
product arrived at by multiplying such fraction of a share of NFB Common Stock
by the NFB Market Value.
The Merger will be structured as a tax-free reorganization and it is
expected that it will be accounted for as a pooling-of-interests; the Merger
Agreement, however, is not conditioned upon such accounting treatment.
Consummation of the Merger is subject to the satisfaction of certain customary
conditions, including approval of the Merger Agreement by the stockholders of
both JSB and NFB and approval of the appropriate regulatory agencies.
JSB has the right to terminate the Merger Agreement if (i) the NFB
Market Value on the Valuation Date falls below $16.35 per share and (ii) such
decline in value is 10% greater than the percentage decline of the shares of
stock of a group of similar financial institutions over the same period, unless
NFB elects to increase the Merger Consideration to be received by JSB's
stockholders as set forth in the Merger Agreement.
The Merger Agreement also provides that options to purchase shares of
JSB Common Stock under JSB's stock option plans that are outstanding at the
Effective Time shall be converted into options to purchase shares of NFB Common
Stock in accordance with the procedure set forth in the Merger Agreement. In
connection with the Merger Agreement, JSB granted to NFB a stock option pursuant
to a Stock Option Agreement, dated as of August 16, 1999, which, under certain
defined circumstances, would enable NFB to purchase up to 19.9% of JSB's issued
and outstanding shares of common stock. The Stock Option Agreement provides that
the total profit receivable thereunder may not exceed $30 million plus
reasonable out-of-pocket expenses. A copy of the Stock Option Agreement is
attached hereto as Exhibit 4.1.
JSB and NFB publicly announced the Merger in a press release dated
August 16, 1999, a copy of which is attached hereto as Exhibit 99.1.
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The press release and analyst presentation incorporated by reference
herein may contain certain forward-looking statements with respect to the
financial condition, results of operations and business of NFB following the
consummation of the Merger, including statements relating to (a) the expected
cost savings and revenue enhancements to be realized from the Merger and (b)
projected 2000 pro forma earnings per share. Factors that may cause actual
results to differ materially from those contemplated by such forward-looking
statements include, among others, the following possibilities: (1) expected cost
savings or revenue enhancements from the Merger cannot be fully realized; (2)
deposit attrition, customer loss or revenue loss following the Merger is greater
than expected; (3) competitive pressure in the banking and financial services
industry increases significantly; (4) changes in the interest rate environment
reduce margins; (5) general economic conditions, either nationally or in the
State of New York, are less favorable than expected; (6) changes in real estate
values; (7) changes in accounting principles; (8) changes in legislation; (9)
changes in other economic, governmental, regulatory and technological factors
affecting each company's operations, pricing, products and services; and (10)
the impact of the year 2000.
ITEM 6. NOT APPLICABLE.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
a. Financial Statements of Businesses Acquired.
Not Applicable
b. Pro forma Financial Information.
Not Applicable
c. Exhibits: The following Exhibits are filed as part of
this report:
EXHIBIT NO. DESCRIPTION
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2.1 Agreement and Plan of Merger, dated as of
August 16, 1999, by and between North Fork
Bancorporation, Inc. and JSB Financial, Inc.
4.1 Stock Option Agreement, dated August 16,
1999, by and between North Fork
Bancorporation, Inc. and JSB Financial, Inc.
99.1 Press Release issued August 16, 1999.*
99.2 Analyst Presentation.*
* Previously filed with JSB Financial, Inc.'s Current
Report on Form 8-K on August 18, 1999.
ITEM 8. NOT APPLICABLE.
ITEM 9. NOT APPLICABLE.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
JSB FINANCIAL INC.
By: /s/ Thomas R. Lehmann
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Thomas R. Lehmann
Executive Vice President and
Chief Financial Officer
Date: August 31, 1999
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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2.1 Agreement and Plan of Merger, dated as of August 16,
1999, by and between North Fork Bancorporation, Inc.
and JSB Financial, Inc.
4.1 Stock Option Agreement, dated as of August 16, 1999,
by and between North Fork Bancorporation, Inc. and JSB
Financial, Inc.
99.1 Press Release issued August 16, 1999.*
99.2 Analyst Presentation.*
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* Previously filed with JSB Financial, Inc.'s Current Report on Form 8-K on
August 18, 1999.
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AGREEMENT AND PLAN OF MERGER
dated as of August 16, 1999
by and between
NORTH FORK BANCORPORATION, INC.
and
JSB FINANCIAL, INC.
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TABLE OF CONTENTS
INTRODUCTORY STATEMENT
ARTICLE I
THE MERGER
Section 1.1. Structure of the Merger...........................................2
Section 1.2. Effect on Outstanding Shares of JSB Common Stock..................2
Section 1.3. Exchange Procedures...............................................3
Section 1.4. Stock Options.....................................................4
Section 1.5. Bank Merger.......................................................5
Section 1.6. Directors of NFB after Effective Time.............................5
Section 1.7. Alternative Structure.............................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Disclosure Letters................................................6
Section 2.2. Standards.........................................................6
Section 2.3. Representations and Warranties of JSB.............................7
Section 2.4. Representations and Warranties of NFB............................18
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.1. Conduct of JSB's Business Prior to the Effective Time............28
Section 3.2. Forbearance by JSB...............................................28
Section 3.3. Conduct of NFB's Business Prior to the Effective Time............30
Section 3.4. Forbearance by NFB...............................................30
ARTICLE IV
COVENANTS
Section 4.1. Acquisition Proposals............................................31
Section 4.2. Certain Policies of JSB..........................................32
Section 4.3. Access and Information...........................................33
Section 4.4. Certain Filings, Consents and Arrangements.......................34
Section 4.5. Antitakeover Provisions..........................................34
Section 4.6. Additional Agreements............................................34
Section 4.7. Publicity........................................................34
Section 4.8. Stockholders Meetings............................................34
Section 4.9. Proxy Statements; Comfort Letters................................35
Section 4.10. Registration of NFB Common Stock................................35
Section 4.11. Affiliate Letters...............................................36
Section 4.12. Notification of Certain Matters.................................36
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Section 4.13. Directors and Officers..........................................36
Section 4.14. Indemnification; Directors' and Officers' Insurance.............37
Section 4.15. Employees; Benefit Plans and Programs...........................38
Section 4.16. Advisory Board..................................................41
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.1. Conditions to Each Party's Obligations...........................41
Section 5.2. Conditions to the Obligations of NFB and NFB Bank................42
Section 5.3. Conditions to the Obligations of JSB and JSB Bank................43
ARTICLE VI
TERMINATION
Section 6.1. Termination......................................................44
Section 6.2. Effect of Termination............................................47
Section 6.3 Termination Fee...................................................47
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time................................49
Section 7.2. Deliveries at the Closing........................................49
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation..............................49
Section 8.2. Survival.........................................................49
Section 8.3. Waiver; Amendment................................................50
Section 8.4. Counterparts.....................................................50
Section 8.5. Governing Law....................................................50
Section 8.6. Expenses.........................................................50
Section 8.7. Notices..........................................................50
Section 8.8. Entire Agreement; etc............................................51
Section 8.9. Assignment.......................................................51
EXHIBITS AND SCHEDULES
Exhibit A Plan of Bank Merger
Exhibit B Form of Affiliate Letter for JSB Affiliates
Exhibit C Form of Affiliate Letter for NFB Affiliates
Schedule 4.13(d)
Schedule 4.15(e)
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INDEX OF DEFINED TERMS
Page
Acquisition Proposal..........................................................32
Acquisition Transaction.......................................................31
Advisory Board................................................................41
Agreement......................................................................1
Bank Merger....................................................................1
Bank Regulator................................................................10
BHCA..........................................................................19
BIF............................................................................7
Closing.......................................................................49
Closing Date..................................................................49
Code...........................................................................1
Converted Options..............................................................5
Costs.........................................................................37
Covered Person................................................................17
Date Data.....................................................................18
Date-Sensitive System.........................................................18
Derivatives Contract..........................................................17
Disclosure Letter..............................................................6
Effective Date................................................................49
Effective Time................................................................49
Environmental Law.............................................................14
ERISA.........................................................................12
Exchange Act..................................................................16
Exchange Agent.................................................................3
Exchange Ratio.................................................................2
Excluded Shares................................................................2
FDIA...........................................................................7
FDIC...........................................................................7
FHLB..........................................................................17
Final Index Price.............................................................45
Final Price...................................................................45
FRB............................................................................9
GAAP...........................................................................9
GATT..........................................................................40
Governmental Entity...........................................................10
Hazardous Material............................................................15
HOLA...........................................................................7
Indemnified Party.............................................................37
Index Group...................................................................45
Index Ratio...................................................................45
Initial Index Price...........................................................47
Initial NFB Market Value......................................................47
Initial Termination Date......................................................44
IRS...........................................................................12
Joint Proxy Statement-Prospectus..............................................18
JSB............................................................................1
JSB Bank.......................................................................1
JSB Bank BRP..................................................................40
JSB Bank ESOP.................................................................41
JSB Bank Outside Directors' Plan..............................................36
JSB Certificate................................................................3
JSB Common Stock...............................................................1
JSB Employee..................................................................38
JSB Employee Plans............................................................12
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JSB ERISA Affiliate...........................................................12
JSB Option.....................................................................4
JSB Option Agreement...........................................................1
JSB Option Plans...............................................................4
JSB Pension Plan..............................................................12
JSB Preferred Stock............................................................7
JSB Qualified Plan............................................................12
JSB Y2K Plan..................................................................18
JSB's Reports..................................................................9
Letter of Transmittal..........................................................3
Loan..........................................................................15
Loan Property.................................................................14
Material Adverse Effect........................................................6
Maximum Agreement.............................................................38
Merger.........................................................................2
Merger Consideration...........................................................2
Named Individual..............................................................13
New Compensation and Benefits Program.........................................39
New NFB Director..............................................................36
NFB............................................................................1
NFB Bank.......................................................................1
NFB Common Stock...............................................................2
NFB Employee Plans............................................................23
NFB ERISA Affiliate...........................................................23
NFB Market Value...............................................................2
NFB Pension Plan..............................................................23
NFB Preferred Stock...........................................................19
NFB Qualified Plan............................................................23
NFB Ratio.....................................................................44
NFB Stock Plans...............................................................19
NFB Y2K Plan..................................................................27
NFB's Reports.................................................................21
NYSBD..........................................................................9
NYSE...........................................................................2
OREO..........................................................................16
OTS............................................................................9
Participation Facility........................................................14
PBGC..........................................................................12
Permitted Transaction.........................................................47
Registration Statement........................................................18
Requisite Regulatory Approvals.................................................9
SEC............................................................................9
Securities Act................................................................18
Skadden.......................................................................42
Specified Compensation and Benefit Programs...................................13
SRO............................................................................9
Stock Adjustment...............................................................2
Stockholder Meeting...........................................................34
Subsidiary.....................................................................7
Superfund.....................................................................15
Superlien.....................................................................15
Thacher Proffitt..............................................................43
Unsolicited Acquisition Proposal..............................................32
Valuation Date.................................................................2
Voting Debt....................................................................8
Year 2000 Compliance..........................................................18
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AGREEMENT AND PLAN OF MERGER
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This is an AGREEMENT AND PLAN OF MERGER, dated as of the 16th
day of August, 1999 ("Agreement"), by and between NORTH FORK BANCORPORATION,
INC., a Delaware corporation ("NFB"), and JSB FINANCIAL, INC., a Delaware
corporation ("JSB").
INTRODUCTORY STATEMENT
The Board of Directors of NFB (i) has determined that this
Agreement and the business combination and related transactions contemplated
hereby are in the best interests of NFB and its stockholders, (ii) has
determined that this Agreement and the transactions contemplated hereby are
consistent with, and in furtherance of, its business strategy and (iii) has
approved this Agreement.
The Board of Directors of JSB (i) has determined that this
Agreement and the business combination and related transactions contemplated
hereby are in the best interests of JSB and in the best long-term interests of
its stockholders, (ii) has determined that this Agreement and the transactions
contemplated hereby are consistent with, and in furtherance of, its business
strategy and (iii) has approved this Agreement.
Concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to NFB's willingness to enter into
this Agreement, NFB and JSB have entered into a stock option agreement ("JSB
Option Agreement"), pursuant to which JSB has granted to NFB an option to
purchase shares of JSB's common stock, par value $.01 per share ("JSB Common
Stock"), upon the terms and conditions therein contained.
Following the consummation of the Merger (as defined below),
Jamaica Savings Bank, a wholly owned subsidiary of JSB Financial, Inc. ("JSB
Bank"), may be merged with and into North Fork Bank, a wholly owned subsidiary
of North Fork Bancorporation, Inc. ("NFB Bank"), with NFB Bank being the
surviving entity ("Bank Merger").
The parties hereto intend that the Merger and the Bank Merger,
if effected, each shall qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended ("Code"), for
federal income tax purposes, and that the Merger shall be accounted for as a
pooling-of- interests for financial accounting purposes.
NFB and JSB desire to make certain representations, warranties
and agreements in connection with the business combination and related
transactions provided for herein and to prescribe various conditions to such
transactions.
In consideration of their mutual promises and obligations
hereunder, the parties hereto adopt and make this Agreement and prescribe the
terms and conditions hereof and the manner and basis of carrying it into effect,
which shall be as follows:
<PAGE>
ARTICLE I
THE MERGER
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Section 1.1 STRUCTURE OF THE MERGER. On the Effective Date (as
defined in Section 7.1), JSB will merge with and into NFB ("Merger"), with NFB
being the surviving entity, pursuant to the provisions of, and with the effect
provided in, the Delaware General Corporation Law. Upon consummation of the
Merger, the separate corporate existence of JSB shall cease. NFB shall continue
to be governed by the laws of the State of Delaware and its name and separate
corporate existence, with all of its rights, privileges, immunities, powers and
franchises, shall continue unaffected by the Merger.
Section 1.2 EFFECT ON OUTSTANDING SHARES OF JSB COMMON STOCK.
(a) By virtue of the Merger, automatically and without any
action on the part of the holder thereof, each share of JSB Common Stock issued
and outstanding at the Effective Time (as defined in Section 7.1), other than
(i) shares held directly or indirectly by NFB (other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted) and (ii)
shares held by JSB as treasury stock (such shares referred to in clauses (i) and
(ii) being referred to herein as the "Excluded Shares"), shall become and be
converted into the right to receive 3.0 shares (the "Exchange Ratio") of NFB's
common stock, par value $2.50 per share ("NFB Common Stock"); provided, however,
that, notwithstanding any other provision hereof, no fraction of a share of NFB
Common Stock and no certificates or scrip therefor will be issued in the Merger;
instead, NFB shall pay to each holder of JSB Common Stock who would otherwise be
entitled to a fraction of a share of NFB Common Stock an amount in cash, rounded
to the nearest cent, determined by multiplying such fraction by the NFB Market
Value (as defined below). The shares of NFB Common Stock and any cash for
fractional shares are collectively referred to in this Agreement as the "Merger
Consideration."
(b) As used herein, "NFB Market Value" shall be the average of
the daily closing sales prices of a share of NFB Common Stock (and if there is
no closing sales price on any such day, then the mean between the closing bid
and the closing asked prices on that day), as reported on the New York Stock
Exchange ("NYSE"), for the 15 consecutive trading days immediately preceding the
Valuation Date.
(c) As used herein, "Valuation Date" shall mean the date that
is the latest of (i) the day of expiration of the last waiting period with
respect to any of the Requisite Regulatory Approvals (as defined in Section
2.3(e)), (ii) the day on which the last of the Requisite Regulatory Approvals is
obtained and (iii) the day on which the last of the required stockholder
approvals have been obtained.
(d) If, between the date of this Agreement and the Effective
Time, the outstanding shares of NFB Common Stock shall have been changed into a
different number of shares or into a different class by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares (each, a "Stock Adjustment"), the Exchange Ratio shall be
adjusted correspondingly to the extent appropriate to reflect the Stock
Adjustment.
(e) As of the Effective Time, each Excluded Share shall be
canceled and retired and shall cease to exist, and no exchange or payment shall
be made with respect thereto. All shares of NFB Common Stock and NFB Preferred
Stock (as defined in Section 2.4(b)) that are held by JSB, if any, other than
shares held in a fiduciary capacity or in satisfaction of a debt previously
contracted, shall become treasury stock of NFB.
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Section 1.3 EXCHANGE PROCEDURES.
(a) Appropriate transmittal materials ("Letter of
Transmittal") shall be mailed as soon as reasonably practicable after the
Effective Time, and in no event later than 5 business days thereafter, to each
holder of record of JSB Common Stock as of the Effective Time. A Letter of
Transmittal will be deemed properly completed only if accompanied by
certificates representing all shares of JSB Common Stock to be converted
thereby.
(b) At and after the Effective Time, each certificate ("JSB
Certificate") previously representing shares of JSB Common Stock (except as
specifically set forth in Section 1.2) shall represent only the right to receive
the Merger Consideration.
(c) Prior to the Effective Time, NFB shall deposit, or shall
cause to be deposited, with such bank or trust company that is selected by NFB
and is reasonably acceptable to JSB to act as exchange agent ("Exchange Agent"),
for the benefit of the holders of shares of JSB Common Stock, for exchange in
accordance with this Section 1.3, an estimated amount of cash sufficient to pay
the aggregate amount of cash in lieu of fractional shares to be paid pursuant to
Section 1.2, and NFB shall reserve for issuance with its transfer agent and
registrar a sufficient number of shares of NFB Common Stock to provide for
payment of the Merger Consideration.
(d) The Letter of Transmittal shall (i) specify that delivery
shall be effected, and risk of loss and title to the JSB Certificates shall
pass, only upon delivery of the JSB Certificates to the Exchange Agent, (ii) be
in a form and contain any other provisions as NFB may reasonably determine and
(iii) include instructions for use in effecting the surrender of the JSB
Certificates in exchange for the Merger Consideration. Upon the proper surrender
of the JSB Certificates to the Exchange Agent, together with a properly
completed and duly executed Letter of Transmittal, the holder of such JSB
Certificates shall be entitled to receive in exchange therefor (m) a certificate
representing that number of whole shares of NFB Common Stock that such holder
has the right to receive pursuant to Section 1.2 and (n) a check in the amount
equal to the cash in lieu of fractional shares, if any, that such holder has the
right to receive pursuant to Section 1.2 and any dividends or other
distributions to which such holder is entitled pursuant to this Section 1.3. JSB
Certificates so surrendered shall forthwith be canceled. As soon as practicable,
but no later than 10 business days following receipt of the properly completed
Letter of Transmittal and any necessary accompanying documentation, the Exchange
Agent shall distribute NFB Common Stock and cash as provided herein. The
Exchange Agent shall not be entitled to vote or exercise any rights of ownership
with respect to the shares of NFB Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares for the account of
the persons entitled thereto. If there is a transfer of ownership of any shares
of JSB Common Stock not registered in the transfer records of JSB, the Merger
Consideration shall be issued to the transferee thereof if the JSB Certificates
representing such JSB Common Stock are presented to the Exchange Agent,
accompanied by all documents required, in the reasonable judgment of NFB and the
Exchange Agent, (x) to evidence and effect such transfer and (y) to evidence
that any applicable stock transfer taxes have been paid.
(e) No dividends or other distributions declared or made after
the Effective Time with respect to NFB Common Stock shall be remitted to any
person entitled to receive shares of NFB Common Stock hereunder until such
person surrenders his or her JSB Certificates in accordance with this Section
1.3. Upon the surrender of such person's JSB Certificates, such person shall be
entitled to receive any dividends or other distributions, without interest
thereon, which theretofore had become payable with respect to shares of NFB
Common Stock represented by such person's JSB Certificates.
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(f) From and after the Effective Time there shall be no
transfers on the stock transfer records of JSB of any shares of JSB Common
Stock. If, after the Effective Time, JSB Certificates are presented to NFB, they
shall be canceled and exchanged for the Merger Consideration deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 1.3.
(g) Any portion of the aggregate amount of cash to be paid in
lieu of fractional shares pursuant to Section 1.2, any dividends or other
distributions to be paid pursuant to this Section 1.3 or any proceeds from any
investments thereof that remain unclaimed by the stockholders of JSB for six
months after the Effective Time shall be repaid by the Exchange Agent to NFB
upon the written request of NFB. After such request is made, any stockholders of
JSB who have not theretofore complied with this Section 1.3 shall look only to
NFB for the Merger Consideration deliverable in respect of each share of JSB
Common Stock such stockholder holds, as determined pursuant to Section 1.2 of
this Agreement, without any interest thereon. If outstanding JSB Certificates
are not surrendered prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by any abandoned property,
escheat or other applicable laws, become the property of NFB (and, to the extent
not in its possession, shall be paid over to it), free and clear of all claims
or interest of any person previously entitled to such claims. Notwithstanding
the foregoing, none of NFB, NFB Bank, the Exchange Agent or any other person
shall be liable to any former holder of JSB Common Stock for any amount
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(h) NFB and the Exchange Agent shall be entitled to rely upon
JSB's stock transfer books to establish the identity of those persons entitled
to receive the Merger Consideration, which books shall be conclusive with
respect thereto. In the event of a dispute with respect to ownership of stock
represented by any JSB Certificate, NFB and the Exchange Agent shall be entitled
to deposit any Merger Consideration represented thereby in escrow with an
independent third party and thereafter be relieved with respect to any claims
thereto.
(i) If any JSB Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such JSB Certificate to be lost, stolen or destroyed and, if required by the
Exchange Agent, the posting by such person of a bond in such amount as the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such JSB Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed JSB Certificate the Merger
Consideration deliverable in respect thereof pursuant to Section 1.2.
Section 1.4 Stock Options.
(a) Each option to purchase shares of JSB Common Stock issued
by JSB and outstanding at the Effective Time (a "JSB Option") pursuant to the
JSB 1990 Incentive Stock Option Plan, the JSB 1990 Stock Option Plan for Outside
Directors and the JSB 1996 Stock Option Plan (collectively, the "JSB Option
Plans") shall be converted into an option to purchase shares of NFB Common Stock
as follows:
(i) the aggregate number of shares of NFB Common
Stock issuable upon the exercise of the converted JSB Option after the
Effective Time shall be equal to the product of the Exchange Ratio
multiplied by the number of shares of JSB Common Stock issuable upon
exercise of the JSB Option immediately prior to the Effective Time,
such product to be rounded to the nearest whole share of NFB Common
Stock; and
(ii) the exercise price per share of each converted
JSB Option shall be equal to the quotient of the exercise price of such
JSB Option at the Effective Time divided by the Exchange Ratio, such
quotient to be rounded to the nearest whole cent;
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<PAGE>
provided, however, that, in the case of any JSB Option that is intended to
qualify as an incentive stock option under Section 422 of the Code, the number
of shares of NFB Common Stock issuable upon exercise of and the exercise price
per share for such converted JSB Option determined in the manner provided above
shall be further adjusted in such manner as NFB may determine to be necessary to
conform to the requirements of Section 424(b) of the Code. Options to purchase
shares of NFB Common Stock that arise from the operation of this Section 1.4
shall be referred to as the "Converted Options." All Converted Options shall be
exercisable for the same period and otherwise have the same terms and conditions
applicable to the JSB Options that they replace; provided, however, that such
exercise period, terms and conditions shall be further modified if and to the
extent necessary to enable the Merger to qualify for pooling-of-interests
accounting treatment. Prior to the Effective Time, NFB shall take, or cause to
be taken, all necessary action to effect the intent of the provisions set forth
in this Section 1.4.
(b) Prior to the date of the JSB stockholders meeting
contemplated by Section 4.8, JSB shall take, or cause to be taken, appropriate
action under the terms of any stock option plan, agreement or arrangement under
which JSB Options have been granted to provide for the conversion of JSB Options
outstanding at the Effective Time into Converted Options and to effect any other
modifications contemplated by Section 1.4(a).
(c) Concurrently with the reservation of shares of NFB Common
Stock to provide for the payment of the Merger Consideration, NFB shall take all
corporate action necessary to reserve for future issuance a sufficient
additional number of shares of NFB Common Stock to provide for the satisfaction
of its obligations with respect to the Converted Options. On or before the
Effective Time, NFB shall file a registration statement on Form S-8 (or any
successor or other appropriate form) and make any state filings or obtain state
exemptions with respect to the NFB Common Stock issuable upon exercise of the
Converted Options. Within 15 days after the Effective Time, NFB shall cause to
be executed and delivered to each holder of a Converted Option an agreement,
certificate or other instrument, in such form and of such substance as NFB may
reasonably determine, evidencing such holder's rights with respect to the
Converted Options. JSB shall use its best efforts to obtain from each person
holding JSB Options, within 30 days after the date of this Agreement, a waiver
of such person's limited stock appreciation rights for purposes of the Merger,
in the form mutually agreed to by the parties.
Section 1.5. BANK MERGER. At the election of NFB, concurrently
with or within 60 days after the execution and delivery of this Agreement, NFB
Bank and JSB Bank shall enter into the Plan of Bank Merger, in the form attached
hereto as Exhibit A, pursuant to which the Bank Merger will be effected. The
parties hereto intend that, if the Plan of Bank Merger is entered into, the Bank
Merger shall become effective promptly following consummation of the Merger. The
Plan of Bank Merger shall provide that the directors of NFB Bank as the
surviving entity of the Bank Merger shall be all of the directors of NFB Bank
serving immediately prior to the Bank Merger and the additional person who shall
become a director of NFB Bank in accordance with Section 4.13.
Section 1.6. DIRECTORS OF NFB AFTER EFFECTIVE TIME. At and
after the Effective Time, the directors of NFB shall consist of all of the
directors of NFB serving immediately prior to the Effective Time and the
additional person who shall become a director of NFB in accordance with Section
4.13.
Section 1.7. ALTERNATIVE STRUCTURE. Notwithstanding anything
to the contrary contained in this Agreement, prior to the Effective Time, NFB
may specify that the structure of the transactions contemplated hereby be
revised and the parties shall enter into such alternative transactions as NFB
may determine to effect the purposes of this Agreement; provided, however, that
such revised structure shall not adversely affect the tax effects or economic
benefits of the transactions contemplated hereby to the holders of JSB Common
Stock, and, further, such revised structure shall not materially delay the
Closing Date (as
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defined in Section 7.1). This Agreement and any related documents shall be
appropriately amended in order to reflect any such revised structure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 2.1. DISCLOSURE LETTERS. On or prior to the execution
and delivery of this Agreement, JSB and NFB each shall have delivered to the
other a letter (each, its "Disclosure Letter") setting forth, among other
things, facts, circumstances and events the disclosure of which is required or
appropriate in relation to any or all of their respective representations and
warranties (and making specific reference to the Section of this Agreement to
which they relate), other than Section 2.3(g) and Section 2.4(g); provided, that
(a) no such fact, circumstance or event is required to be set forth in the
Disclosure Letter as an exception to a representation or warranty if its absence
is not reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standards established by Section 2.2
and (b) the mere inclusion of a fact, circumstance or event in a Disclosure
Letter shall not be deemed an admission by a party that such item represents a
material exception or that such item is reasonably likely to result in a
Material Adverse Effect (as defined in Section 2.2(b)).
Section 2.2. STANDARDS.
(a) No representation or warranty of JSB or NFB contained in
Sections 2.3 or 2.4, respectively, shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, on
account of the existence of any fact, circumstance or event unless, as a direct
or indirect consequence of such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Sections 2.3 or 2.4, as applicable, there is reasonably likely
to exist a Material Adverse Effect. JSB's representations, warranties and
covenants contained in this Agreement shall not be deemed to be untrue or
breached as a result of effects arising solely from actions taken in compliance
with a written request of NFB.
(b) As used in this Agreement, the term "Material Adverse
Effect" means either:
(i) an effect which is material and adverse to the
business, financial condition or results of operations of JSB or NFB,
as the context may dictate, and its Subsidiaries taken as a whole;
provided, however, that any such effect resulting from any (A) changes
in laws, rules or regulations or generally accepted accounting
principles or interpretations thereof that apply to both NFB and NFB
Bank and JSB and JSB Bank, as the case may be, or (B) changes in the
general level of market interest rates shall not be considered in
determining if a Material Adverse Effect has occurred; or
(ii) the failure of (x) a representation or warranty
contained in Section 2.3(a)(i) and (iv), Section 2.3(d), Section
2.3(g)(iii), Section 2.4(a)(i) and (iv), Section 2.4(d), Section
2.4(g)(ii) or Section 2.4(l) to be true and correct or (y) a
representation or warranty contained in Section 2.3(b)(i), Section
2.3(c), clause (ii) of Section 2.3(e), the last sentence of Section
2.3(e), Section 2.3(f), Section 2.3(j), the first sentence of Section
2.3(m), Section 2.3(q), Section 2.3(u), Section 2.3(v), the first two
sentences of Section 2.3(bb), Section 2.4(b)(i), Section 2.4(c), clause
(ii) of Section 2.4(e), the last sentence of Section 2.4(e), Section
2.4(f), Section 2.4(j), the first sentence of Section 2.4(n), Section
2.4(q), Section 2.4(t) and the first two sentences of 2.4(w) to be true
and correct in all material respects.
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(c) For purposes of this Agreement, "knowledge" shall mean,
with respect to a party hereto, actual knowledge of the members of the Board of
Directors of that party, its counsel, any officer of that party with the title
ranking not less than senior vice president and, with respect to JSB, any Vice
President of JSB whose name is listed in Section 4.13(d) hereof.
Section 2.3. Representations and Warranties of JSB. Subject to
Sections 2.1 and 2.2, JSB represents and warrants to NFB that, except as
disclosed in JSB's Disclosure Letter:
(a) Organization. (i) JSB is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly registered as a savings and loan holding company under the Home
Owners' Loan Act of 1933, as amended ("HOLA"). JSB Bank is a savings association
duly organized, validly existing and in good standing under the laws of the
United States of America and is a wholly owned Subsidiary (as defined below) of
JSB. Each Subsidiary of JSB, other than JSB Bank, is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
Each of JSB and its Subsidiaries has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. As used in this Agreement, unless the context requires otherwise, the
term "Subsidiary" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial reporting purposes or which is
controlled, directly or indirectly, by such party.
(ii) JSB and each of its Subsidiaries has the
requisite corporate power and authority, and is duly qualified and is in good
standing, to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary.
(iii) JSB's Disclosure Letter sets forth all of
JSB's Subsidiaries and all entities (whether corporations, partnerships or
similar organizations), including the corresponding percentage ownership, in
which JSB owns, directly or indirectly, 5% or more of the ownership interests as
of the date of this Agreement and indicates for each of JSB's Subsidiaries, as
of such date, its jurisdiction of organization and the jurisdiction(s) wherein
it is qualified to do business. All such Subsidiaries and ownership interests
are in compliance with all applicable laws, rules and regulations relating to
direct investments in equity ownership interests. JSB owns, either directly or
indirectly, all of the outstanding capital stock of each of its Subsidiaries. No
Subsidiary of JSB other than JSB Bank is an "insured depository institution" as
defined in the Federal Deposit Insurance Act, as amended ("FDIA"), and the
applicable regulations thereunder. All of the shares of capital stock of each of
the Subsidiaries of JSB are duly authorized and validly issued, fully paid and
nonassessable and not subject to any preemptive rights and are owned by JSB or a
Subsidiary of JSB free and clear of any claims, liens, encumbrances or
restrictions (other than those imposed by applicable federal and state
securities laws), and there are no agreements or understandings with respect to
the voting or disposition of any such shares.
(iv) The deposits of JSB Bank are insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC") to
the extent provided in the FDIA. JSB Bank is a member of the Federal Home Loan
Bank of New York.
(b) CAPITAL STRUCTURE. (i) The authorized capital stock
of JSB consists of 65,000,000 shares of JSB Common Stock and 15,000,000 shares
of preferred stock, par value $.01 per share ("JSB Preferred Stock"). As of the
date of this Agreement: (A) 9,286,897 shares of JSB Common Stock were issued and
outstanding, (B) no shares of JSB Preferred Stock were issued and outstanding,
(C) no shares of JSB Common Stock were reserved for issuance, except that
952,676 shares of JSB Common Stock were reserved for issuance pursuant to the
JSB Option Plans, which includes 810,676 shares reserved for issuance upon the
exercise of options that have already been granted under the JSB Option Plans,
plus
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142,000 shares reserved for issuance upon the exercise of options that will be
automatically granted pursuant to the terms of the JSB 1996 Option Plan as a
result of the execution of this Agreement, (D) no shares of JSB Preferred Stock
were reserved for issuance and (E) 6,713,103 shares of JSB Common Stock were
held by JSB in its treasury or by its Subsidiaries. The authorized capital stock
of JSB Bank consists of 40,000,000 shares of common stock, par value $1.00 per
share, and 20,000,000 shares of preferred stock, par value $1.00 per share. As
of the date of this Agreement, 1,000 shares of such common stock were
outstanding, no shares of such preferred stock were outstanding and all
outstanding shares of such common stock were, and as of the Effective Time will
be, owned by JSB. All outstanding shares of capital stock of JSB and JSB Bank
are duly authorized and validly issued, fully paid and nonassessable and not
subject to any preemptive rights and, with respect to shares held by JSB in its
treasury or by its Subsidiaries, are free and clear of all claims, liens,
encumbrances or restrictions (other than those imposed by applicable federal or
state securities laws) and there are no agreements or understandings with
respect to the voting or disposition of any such shares. JSB's Disclosure Letter
sets forth a complete and accurate list of all outstanding options to purchase
JSB Common Stock that have been granted pursuant to the JSB Option Plans,
including the dates of grant, exercise prices, dates of vesting, dates of
termination and shares subject to each grant, and all options to purchase JSB
Common Stock that will be automatically granted as a result of the execution of
this Agreement.
(ii) No bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which stockholders may
vote ("Voting Debt") of JSB are issued or outstanding.
(iii) As of the date of this Agreement, except for
this Agreement, the JSB Option Agreement, the JSB Option Plans and as set forth
in JSB's Disclosure Letter, neither JSB nor any of its Subsidiaries has or is
bound by any outstanding options, warrants, calls, rights, convertible
securities, commitments or agreements of any character obligating JSB or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, any additional shares of capital stock of JSB or any of its Subsidiaries
or obligating JSB or any of its Subsidiaries to grant, extend or enter into any
such option, warrant, call, right, convertible security, commitment or
agreement. As of the date hereof, there are no outstanding contractual
obligations of JSB or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of JSB or any of its Subsidiaries.
(c) AUTHORITY. Each of JSB and JSB Bank has the requisite
corporate power and authority to enter into this Agreement and the Plan of Bank
Merger, respectively, and, subject to approval of this Agreement by the
requisite vote of JSB's stockholders and receipt of all required regulatory or
governmental approvals, as contemplated by Section 5.1(b) of this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, and, subject to the approval of this Agreement by JSB's
stockholders, the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate actions on the part of JSB and
JSB Bank. This Agreement has been duly executed and delivered by JSB and
constitutes a valid and binding obligation of JSB, enforceable in accordance
with its terms subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, whether applied in a court of
law or a court of equity.
(d) STOCKHOLDER APPROVAL; FAIRNESS OPINION. The affirmative
vote of the holders of a majority of the outstanding shares of JSB Common Stock
entitled to vote on this Agreement is the only vote of the stockholders of JSB
required for approval of this Agreement by JSB and the consummation by JSB of
the Merger and the related transactions contemplated hereby. JSB has received
the written opinion of Northeast Capital & Advisory, Inc. to the effect that, as
of the date hereof, the Exchange Ratio is fair, from a financial point of view,
to JSB's stockholders.
(e) NO VIOLATIONS. The execution, delivery and performance of
this Agreement by JSB do not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming
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receipt of all Requisite Regulatory Approvals (as defined below) and requisite
stockholder approvals, a breach or violation of, or a default under, any law,
rule or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of JSB or any of its
Subsidiaries, or to which JSB or any of its Subsidiaries (or any of their
respective properties) is subject, (ii) a breach or violation of, or a default
under, the certificate of incorporation or bylaws of JSB or the similar
organizational documents of any of its Subsidiaries or (iii) a breach or
violation of, or a default under (or an event which, with due notice or lapse of
time or both, would constitute a default under), or result in the termination
of, accelerate the performance required by, or result in the creation of any
lien, pledge, security interest, charge or other encumbrance upon any of the
properties or assets of JSB or any of its Subsidiaries, under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which JSB or any of
its Subsidiaries is a party, or to which any of their respective properties or
assets may be subject; and the consummation of the transactions (including the
Bank Merger) contemplated hereby (exclusive of the effect of any changes
effected pursuant to Section 1.7) will not require any approval, consent or
waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than (x) the
approval of the holders of a majority of the outstanding shares of JSB Common
Stock and the approval of JSB as the sole stockholder of JSB Bank and (y) the
provision of notice to or the approval of, if required, the Office of Thrift
Supervision ("OTS") under HOLA, the approval, if required, of the Federal
Deposit Insurance Corporation under Section 18(c) of the FDIA, the approval of
the Board of Governors of the Federal Reserve System ("FRB") under the Bank
Holding Company Act of 1956, as amended, and the approval of the New York State
Banking Department ("NYSBD") under the Banking Law of the State of New York
(collectively, the "Requisite Regulatory Approvals"), and (z) such approvals,
consents or waivers as are required under the federal and state securities or
"blue sky" laws in connection with the transactions contemplated by this
Agreement. As of the date hereof, the executive officers of JSB know of no
reason pertaining to JSB why any of the approvals referred to in this Section
2.3(e) should not be obtained.
(f) REPORTS. (i) As of their respective dates, none of the
reports or other statements filed by JSB or JSB Bank on or subsequent to
December 31, 1997 with the Securities and Exchange Commission ("SEC")
(collectively, "JSB's Reports"), contained, or will contain, any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. Each
of the financial statements of JSB included in JSB's Reports complied as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP") (except as may be indicated in the
notes thereto or, in the case of unaudited financial statements, as permitted by
Form 10-Q of the SEC). Each of the consolidated statements of condition,
consolidated statements of operations, consolidated statements of cash flows and
consolidated statements of changes in stockholders' equity contained or
incorporated by reference in JSB's Reports (including in each case any related
notes and schedules) fairly presented, or will fairly present, as the case may
be, the financial position, results of operations, cash flows and stockholders'
equity, as the case may be, of the entity or entities to which it relates for
the periods set forth therein (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments that are not material in amount
or effect), in each case in accordance with GAAP, except as may be noted
therein.
(ii) JSB and its Subsidiaries have each timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1996 with (A) the OTS, (B) the FDIC, (C) the SEC, (D) the NYSE and
(E) any other self-regulatory organization ("SRO"), and have paid all fees and
assessments due and payable in connection therewith.
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(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in JSB's Reports filed on or prior to the date of this Agreement, since December
31, 1998, (i) JSB and its Subsidiaries have not incurred any liability, except
in the ordinary course of their businesses consistent with past practice, (ii)
JSB and its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses and (iii) there has not been any
Material Adverse Effect with respect to JSB.
(h) ABSENCE OF CLAIMS. Except as disclosed in JSB's Disclosure
Letter, no litigation, proceeding, controversy, claim or action before any court
or any federal, state, local or foreign governmental or regulatory body (each, a
"Governmental Entity") is pending against JSB or any of its Subsidiaries and, to
the best of JSB's knowledge, no such litigation, proceeding, controversy, claim
or action has been threatened.
(i) ABSENCE OF REGULATORY ACTIONS. Neither JSB nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or any commitment letter or similar written
undertaking to, or is subject to any action, proceeding, order or directive by,
or is a recipient of any extraordinary supervisory letter from any federal or
state governmental authority charged with the supervision or regulation of
depository institutions or depository institution holding companies or engaged
in the insurance of bank and/or savings and loan deposits (each, a "Bank
Regulator"), or has adopted any board resolutions at the request of any Bank
Regulator, nor has it been advised by any Bank Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar written undertaking.
(j) TAXES. All federal, state, local and foreign tax returns
required to be filed by or on behalf of JSB or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown on
such returns, all taxes required to be shown on returns for which extensions
have been granted and all other taxes required to be paid by JSB or any of its
Subsidiaries have been paid in full or adequate provision has been made for any
such taxes on JSB's balance sheet (in accordance with GAAP). For purposes of
this Section 2.3(j), the term "taxes" shall include all federal, state, local or
foreign taxes, charges or other assessments, including, without limitation,
income, franchise, gross receipts, real and personal property, real property
transfer and gains, wage and employment taxes, and the term "tax return" shall
mean any return or other report (including elections, declarations, disclosures,
schedules, estimates and information returns) required to be filed with respect
to any tax. Except as disclosed in JSB's Disclosure Letter, as of the date of
this Agreement, there is no audit examination, deficiency assessment, tax
investigation or refund litigation with respect to any taxes of JSB or any of
its Subsidiaries, and no claim has been made by any authority in a jurisdiction
where JSB or any of its Subsidiaries do not file tax returns that JSB or any
such Subsidiary is subject to taxation in that jurisdiction. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to JSB or any of its Subsidiaries
have been paid in full or adequate provision has been made for any such taxes on
JSB's balance sheet (in accordance with GAAP). JSB and its Subsidiaries have not
executed an extension or waiver of any statute of limitations on the assessment
or collection of any material tax due that is currently in effect. JSB and each
of its Subsidiaries has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and JSB and
each of its Subsidiaries has timely complied with all applicable information
reporting requirements under Part III, Subchapter A of Chapter 61 of the Code
and similar applicable state and local information reporting requirements.
Neither JSB nor any of its Subsidiaries (i) has made an election under Section
341(f) of the Code, (ii) has issued or assumed any obligation under Section 279
of the Code, any high yield discount obligation as described in Section 163(i)
of the Code or any registration-required obligation within the
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meaning of Section 163(f)(2) of the Code that is not in registered form or (iii)
is or has been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code.
(k) AGREEMENTS. (i) Except for the JSB Option Agreement and
arrangements made in the ordinary course of business, and except as disclosed in
JSB's Disclosure Letter, JSB and its Subsidiaries are not bound by any material
contract (as defined in Item 601(b)(10) of Regulation S-K) to be performed after
the date hereof that has not been filed with or incorporated by reference in
JSB's Reports. Except as disclosed in JSB's Reports filed prior to the date of
this Agreement or as disclosed in JSB's Disclosure Letter, neither JSB nor any
of its Subsidiaries is a party to an oral or written (A) consulting agreement
(other than data processing, software programming and licensing contracts
entered into in the ordinary course of business) not terminable on 60 days' or
less notice, (B) agreement with any executive officer or other key employee of
JSB or any of its Subsidiaries the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving JSB or any of its Subsidiaries of the nature contemplated by this
Agreement or the JSB Option Agreement, (C) agreement with respect to any
employee or director of JSB or any of its Subsidiaries providing any term of
employment or compensation guarantee extending for a period longer than 60 days
or for the payment of in excess of $50,000 per annum, (D) agreement or plan,
including any stock option plan, phantom stock or stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting or payment of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the JSB Option Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement or the JSB Option Agreement or (E) agreement containing covenants
that limit the ability of JSB or any of its Subsidiaries to compete in any line
of business or with any person, or that involve any restriction on the
geographic area in which, or method by which, JSB (including any successor
thereof) or any of its Subsidiaries may carry on its business (other than as may
be required by law or any regulatory agency).
(ii) Neither JSB nor any of its Subsidiaries is in
default under or in violation of any provision of any note, bond, indenture,
mortgage, deed of trust, loan agreement, lease or other agreement to which it is
a party or by which it is bound or to which any of its respective properties or
assets is subject.
(iii) JSB and each of its Subsidiaries owns or
possesses valid and binding licenses and other rights to use without payment all
patents, copyrights, trade secrets, trade names, servicemarks and trademarks
used in its businesses, and neither JSB nor any of its Subsidiaries has received
any notice of conflict with respect thereto that asserts the right of others.
Each of JSB and its Subsidiaries has performed all the obligations required to
be performed by it and are not in default under any contact, agreement,
arrangement or commitment relating to any of the foregoing.
(l) LABOR MATTERS. Neither JSB nor any of its Subsidiaries is
or has ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization with respect to its employees, nor is JSB or any of
its Subsidiaries the subject of any proceeding asserting that it has committed
an unfair labor practice or seeking to compel it to bargain with any labor
organization as to wages and conditions of employment, nor is there any strike,
other labor dispute or organizational effort involving JSB or any of its
Subsidiaries pending or, to the best of JSB's knowledge, threatened. JSB and its
Subsidiaries are in compliance with applicable laws regarding employment of
employees and retention of independent contractors and are in compliance with
applicable employment tax laws.
(m) EMPLOYEE BENEFIT PLANS. JSB's Disclosure Letter contains a
complete and accurate list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements and arrangements, including, but not
limited to, "employee benefit plans," as
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defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), incentive and welfare policies, contracts, plans and
arrangements and all trust agreements related thereto with respect to any
present or former directors, officers or other employees of JSB or any of its
Subsidiaries (hereinafter collectively referred to as the "JSB Employee Plans").
Except as disclosed in JSB's Disclosure Letter:
(i) all of the JSB Employee Plans comply in all
material respects with all applicable requirements of ERISA, the Code and
other applicable laws; there has occurred no "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) which is
likely to result in the imposition of any penalties or taxes under Section
502(i) of ERISA or Section 4975 of the Code upon JSB or any of its
Subsidiaries.
(ii) no liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been or is expected by JSB or any of its
Subsidiaries to be incurred with respect to any JSB Employee Plan which is
subject to Title IV of ERISA ("JSB Pension Plan"), or with respect to any
"single-employer plan" (as defined in Section 4001(a) of ERISA) currently
or formerly maintained by JSB or any entity which is considered one
employer with JSB under Section 4001(b)(1) of ERISA or Section 414 of the
Code (a "JSB ERISA Affiliate");
(iii) no JSB Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, as
of the last day of the end of the most recent plan year ending prior to the
date hereof; the fair market value of the assets of each JSB Pension Plan
exceeds the present value of the "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA) under such JSB Pension Plan as of the end of
the most recent plan year with respect to the respective JSB Pension Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such JSB
Pension Plan as of the date hereof; and no notice of a "reportable event"
(as defined in Section 4043 of ERISA) for which the 30-day reporting
requirement has not been waived has been required to be filed for any JSB
Pension Plan within the 12-month period ending on the date hereof;
(iv) neither JSB nor any of its Subsidiaries has
provided, or is required to provide, security to any JSB Pension Plan or to
any single-employer plan of a JSB ERISA Affiliate pursuant to Section
401(a)(29) of the Code;
(v) neither JSB, its Subsidiaries, nor any JSB ERISA
Affiliate has contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980;
(vi) each JSB Employee Plan that is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and which is
intended to be qualified under Section 401(a) of the Code ("JSB Qualified
Plan") has received a favorable determination letter from the Internal
Revenue Service ("IRS"), and JSB and its Subsidiaries are not aware of any
circumstances likely to result in revocation of any such favorable
determination letter;
(vii) there is no pending or, to JSB's knowledge,
threatened litigation, administrative action or proceeding relating to any
JSB Employee Plan;
(viii) there has been no announcement or commitment by
JSB or any of its Subsidiaries to create an additional JSB Employee Plan,
or to amend any JSB Employee Plan, except for amendments required by
applicable law which do not materially increase the cost of such JSB
Employee Plan; and, except as specifically identified in JSB's Disclosure
Letter, JSB and its Subsidiaries do not have any obligations for
post-retirement or post-employment benefits under any
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JSB Employee Plan that cannot be amended or terminated upon 60 days' notice
or less without incurring any liability thereunder, except for coverage
required by Part 6 of Title I of ERISA or Section 4980B of the Code, or
similar state laws, the cost of which is borne by the insured individuals;
(ix) neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in any payment or series of payments by JSB or any of its
Subsidiaries to any person which is an "excess parachute payment" (as
defined in Section 280G of the Code), increase or secure (by way of a trust
or other vehicle) any benefits payable under any JSB Employee Plan or
accelerate the time of payment or vesting of any such benefit; and
(x) with respect to each JSB Employee Plan, JSB has
made available to NFB a true and correct copy of (A) the annual report on
the applicable form of the Form 5500 series filed with the IRS for the most
recent three plan years, if required to be filed, (B) such JSB Employee
Plan, including amendments thereto, (C) each trust agreement, insurance
contract or other funding arrangement relating to such JSB Employee Plan,
including amendments thereto, (D) the most recent summary plan description
and summary of material modifications thereto for such JSB Employee Plan,
if the JSB Employee Plan is subject to Title I of ERISA, (E) the most
recent actuarial report or valuation if such JSB Employee Plan is a JSB
Pension Plan and any subsequent changes to the actuarial assumptions
contained therein and (F) the most recent determination letter issued by
the IRS if such JSB Employee Plan is a Qualified Plan.
(n) TERMINATION BENEFITS. JSB's Disclosure Letter contains a
schedule identifying the types of benefits and other payments due under the
Specified Compensation and Benefit Programs (as defined herein) for each Named
Individual (as defined herein) individually and for all persons other than the
Named Individuals as a group. For purposes hereof, "Specified Compensation and
Benefit Programs" shall include all employment agreements, change in control
agreements, severance or special termination agreements, severance plans,
pension, retirement or deferred compensation plans for non-employee directors,
supplemental executive retirement programs, tax indemnification agreements,
outplacement programs, cash bonus programs, deferred compensation plans, all
performance and/or bonus plans, stock appreciation right, phantom stock or stock
unit plan, and health, life, disability and other insurance or welfare plans,
but shall not include any tax-qualified pension, profit-sharing or employee
stock ownership plan or any JSB Option Plans. For purposes hereof, "Named
Individual" shall include each non-employee director of JSB or any of its
Subsidiaries and each executive officer of JSB.
(o) TITLE TO ASSETS. JSB and each of its Subsidiaries has good
and marketable title to its properties and assets (including any intellectual
property asset such as any trademark, servicemark, trade name or copyright) and
property acquired in a judicial foreclosure proceeding or by way of a deed in
lieu of foreclosure or similar transfer, other than property as to which it is
lessee, in which case the related lease is valid and in full force and effect.
Each lease pursuant to which JSB or any of its Subsidiaries is lessor is valid
and in full force and effect and no lessee under any such lease is in material
default or violation of any provisions of any such lease. All material tangible
properties of JSB and each of its Subsidiaries are in a good state of
maintenance and repair, conform with all applicable ordinances, regulations and
zoning laws and are considered by JSB to be adequate for the current business of
JSB and its Subsidiaries.
(p) COMPLIANCE WITH LAWS. JSB and each of its Subsidiaries has
all permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, all Governmental
Entities that are required in order to permit it to carry on its business as it
is presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the best knowledge of
JSB, no suspension or cancellation of any of them is threatened. Since the date
of its incorporation, the corporate affairs of JSB have not been conducted in
violation of any law,
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ordinance, regulation, order, writ, rule, decree or approval of any Governmental
Entity. The businesses of JSB and its Subsidiaries are not being conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
condition to approval of any Governmental Entity.
(q) FEES. Other than financial advisory services performed for
JSB by Northeast Capital & Advisory, Inc. pursuant to an agreement dated May 27,
1999, a true and complete copy of which has been previously delivered to NFB,
neither JSB nor any of its Subsidiaries, nor any of their respective officers,
directors, employees or agents, has employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for JSB
or any of its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
(r) ENVIRONMENTAL MATTERS. (i) With respect to JSB and each of
its Subsidiaries, except as disclosed in JSB's Disclosure Letter:
(A) each of JSB and its Subsidiaries and, to JSB's
knowledge, the Participation Facilities (as defined herein)
and the Loan Properties (as defined herein) are, and have
been, in substantial compliance with, and are not liable
under, all Environmental Laws (as defined herein);
(B) there is no suit, claim, action, demand, executive
or administrative order, directive, investigation or
proceeding pending or, to the best of JSB's knowledge,
threatened, before any court, Governmental Entity or board or
other forum against it or any of its Subsidiaries or any
Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or
release into the environment of any Hazardous Material (as
defined herein), whether or not occurring at or on a site
owned, leased or operated by it or any of its Subsidiaries or
any Participation Facility;
(C) to the best of JSB's knowledge, there is no suit,
claim, action, demand, executive or administrative order,
directive, investigation or proceeding pending or threatened
before any court, Governmental Entity or board or other forum
relating to or against any Loan Property (or JSB or any of its
Subsidiaries in respect of such Loan Property) (x) relating to
alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the
presence of or release into the environment of any Hazardous
Material, whether or not occurring at or on a site owned,
leased or operated by a Loan Property; and
(D) to the best of JSB's knowledge, during the period
of (l) JSB's or any of its Subsidiaries' ownership or
operation of any of their respective current properties or (m)
JSB's or any of its Subsidiaries' participation in the
management of any Participation Facility, there has been no
contamination by or release of Hazardous Materials in, on,
under or affecting such properties.
(ii) The following definitions apply for purposes of
this Section 2.3(r) and Section 2.4(r): (w) "Loan Property" means any property
in which the applicable party (or any of its Subsidiaries) holds a security
interest, and, where required by the context, includes the owner or operator of
such property, but only with respect to such property; (x) "Participation
Facility" means any facility in which the applicable party (or any of its
Subsidiaries) participates in the management (including all property held as
trustee or in any other fiduciary capacity) and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property; (y) "Environmental Law" means (i) any
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federal, state or local law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, legal doctrine, order,
directive, executive or administrative order, judgment, decree, injunction,
legal requirement or agreement with any Governmental Entity relating to (A) the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, structures, soil, surface land, subsurface land, plant and animal life
or any other natural resource), or to human health or safety as it relates to
Hazardous Materials, or (B) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of, Hazardous Materials, in each case as amended
and as now in effect. The term Environmental Law includes all federal, state and
local laws, rules, regulations or requirements relating to the protection of the
environment or health and safety, including, without limitation, (i) the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976
(including, but not limited to, the Hazardous and Solid Waste Amendments thereto
and Subtitle I relating to underground storage tanks), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970 as it relates to Hazardous Materials, the Federal Hazardous Substances
Transportation Act, the Emergency Planning and Community Right-To-Know Act, the
Safe Drinking Water Act, the Endangered Species Act, the National Environmental
Policy Act, the Rivers and Harbors Appropriation Act or any so-called
"Superfund" or "Superlien" law, each as amended and as now or hereafter in
effect, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Material; and (z) "Hazardous Material" means any
substance (whether solid, liquid or gas) which is or could be detrimental to
human health or safety or to the environment, currently or hereafter listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any substance containing any such substance as a component.
Hazardous Material includes, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance, oil or petroleum, or any derivative or by-product
thereof, radon, radioactive material, asbestos, asbestos-containing material,
urea formaldehyde foam insulation, lead and polychlorinated biphenyl.
(s) LOAN PORTFOLIO; ALLOWANCE; ASSET QUALITY. (i) With respect
to each loan owned by JSB or its Subsidiaries in whole or in part (each, a
"Loan"), to the best knowledge of JSB:
(A) the note and the related security documents are
each legal, valid and binding obligations of the maker or
obligor thereof, enforceable against such maker or obligor in
accordance with their terms;
(B) neither JSB nor any of its Subsidiaries, nor any
prior holder of a Loan, has modified the note or any of the
related security documents in any material respect or
satisfied, canceled or subordinated the note or any of the
related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(C) JSB or a Subsidiary is the sole holder of legal
and beneficial title to each Loan (or JSB's applicable
participation interest, as applicable), except as otherwise
referenced on the books and records of JSB;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and
correct copies of the documents they purport to be and have
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not been suspended, amended, modified, canceled or otherwise
changed, except as otherwise disclosed by documents in the
applicable Loan file;
(E) there is no pending or threatened condemnation
proceeding or similar proceeding affecting the property that
serves as security for a Loan, except as otherwise referenced
on the books and records of JSB;
(F) there is no litigation or proceeding pending or
threatened relating to the property that serves as security
for a Loan that would have a material adverse effect upon the
related Loan; and
(G) with respect to a Loan held in the form of a
participation, the participation documentation is legal,
valid, binding and enforceable.
(ii) The allowance for possible losses reflected in
JSB's audited statement of condition at December 31, 1998 was, and the allowance
for possible losses shown on the balance sheets in JSB's Reports for periods
ending after December 31, 1998 will be, adequate, as of the dates thereof, under
GAAP.
(iii) JSB's Disclosure Letter sets forth by category
the amounts of all loans, leases, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets of JSB and its
Subsidiaries that have been classified by any bank examiner (whether regulatory
or internal) as "Special Mention," "Substandard," "Doubtful," "Loss" or words of
similar import, and JSB and its Subsidiaries shall promptly after the end of any
month inform NFB of any such classification arrived at any time after the date
hereof. The other real estate owned ("OREO") included in any non-performing
assets of JSB or any of its Subsidiaries is carried net of reserves at the lower
of cost or fair value, less estimated selling costs, based on current management
appraisals or evaluations to the extent material; provided, however, that
"current" shall mean within the past 12 months. JSB's Disclosure Letter sets
forth a list of the unsold co- operative shares owned by JSB or its
Subsidiaries.
(t) DEPOSITS. None of the deposits of JSB or any of its
Subsidiaries is a "brokered" deposit.
(u) ACCOUNTING MATTERS. Except as disclosed in JSB's
Disclosure Letter, neither JSB nor any of its Subsidiaries or, to the best of
its knowledge, any of its other affiliates has, through the date hereof, taken
or agreed to take any action that would prevent NFB from accounting for the
business combination to be effected by the Merger as a pooling-of-interests, and
JSB has no knowledge of any fact or circumstance that would prevent such
accounting treatment.
(v) ANTITAKEOVER PROVISIONS INAPPLICABLE. JSB and its
Subsidiaries have taken all actions required to exempt JSB, the Agreement, the
Plan of Bank Merger, the Merger, the Bank Merger and the JSB Option Agreement
from any provisions of an antitakeover nature in their organization certificates
and bylaws, including Article Eighth of JSB's certificate of incorporation, and
the provisions of any federal or state "antitakeover," "fair price,"
"moratorium," "control share acquisition" or similar laws or regulations.
(w) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed
in JSB's Proxy Statement for its 1999 Annual Meeting of Stockholders, no officer
or director of JSB, or any "associate" (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended ("Exchange Act")) of any
such officer or director, has any material interest in any material contract or
property (real or personal), tangible or intangible, used in or pertaining to
the business of JSB or any of its Subsidiaries. No such interest has been
created or modified since the date of the last regulatory examination of JSB or
its Subsidiaries.
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(x) INSURANCE. JSB and its Subsidiaries are presently insured,
and since December 31, 1996, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by JSB and its Subsidiaries are in full force and effect, JSB and its
Subsidiaries are not in default thereunder and all material claims thereunder
have been filed in due and timely fashion.
(y) INVESTMENT SECURITIES; BORROWINGS. (i) Except for
investments in Federal Home Loan Bank ("FHLB") stock and pledges to secure FHLB
borrowings and reverse repurchase agreements entered into in arms-length
transactions pursuant to normal commercial terms and conditions and entered into
in the ordinary course of business and restrictions that exist for securities to
be classified as "held to maturity," none of the investments reflected in the
consolidated balance sheet of JSB included in JSB's Report on Form 10-K for the
year ended December 31, 1998, and none of the investment securities held by it
or any of its Subsidiaries since December 31, 1998, is subject to any
restriction (contractual or statutory) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time.
(ii) Neither JSB nor any Subsidiary is a party to or
has agreed to enter into an exchange-traded or over-the-counter equity, interest
rate, foreign exchange or other swap, forward, future, option, cap, floor or
collar or any other contract that is not included on the consolidated statements
of condition and is a derivative contract (including various combinations
thereof) (each, a "Derivatives Contract") or owns securities that (A) are
referred to generically as "structured notes," "high risk mortgage derivatives,"
"capped floating rate notes" or "capped floating rate mortgage derivatives" or
(B) are likely to have changes in value as a result of interest or exchange rate
changes that significantly exceed normal changes in value attributable to
interest or exchange rate changes, except for those Derivatives Contracts and
other instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and listed (as of the date hereof) in JSB's Disclosure Letter or
disclosed in JSB's Reports filed on or prior to the date hereof.
(iii) Set forth in JSB's Disclosure Letter is a true
and complete list of JSB's borrowed funds (excluding deposit accounts) as of the
date hereof.
(z) INDEMNIFICATION. Except as provided in JSB's Disclosure
Letter, JSB's Employment Agreements or the organization certificate or bylaws of
JSB and its Subsidiaries, neither JSB nor any Subsidiary is a party to any
indemnification agreement with any of its present or future directors, officers,
employees, agents or other persons who serve or served in any other capacity
with any other enterprise at the request of JSB (a "Covered Person"), and,
except as disclosed in JSB's Disclosure Letter, to the best knowledge of JSB,
there are no claims for which any Covered Person would be entitled to
indemnification under the organization certificate or bylaws of JSB or any of
its Subsidiaries, under any applicable law or regulation or under any
indemnification agreement.
(aa) BOOKS AND RECORDS. The books and records of JSB and its
Subsidiaries on a consolidated basis have been, and are being, maintained in
accordance with applicable legal and accounting requirements and reflect in all
material respects the substance of events and transactions that should be
included therein.
(bb) CORPORATE DOCUMENTS. JSB has made available to NFB true
and complete copies of its certificate of incorporation and bylaws and of JSB
Bank's organization certificate and bylaws. The minute books of JSB and JSB Bank
constitute a complete and correct record of all actions taken by their
respective boards of directors (and each committee thereof) and their
stockholders. The minute books of
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each of JSB's Subsidiaries constitutes a complete and correct record of all
actions taken by the respective boards of directors (and each committee thereof)
and the stockholders of each such Subsidiary.
(cc) LIQUIDATION ACCOUNT. Neither the Merger nor the Bank
Merger will result in any payment or distribution payable out of the liquidation
account of JSB Bank established in connection with JSB Bank's conversion from
mutual to stock form.
(dd) TAX TREATMENT OF THE MERGER. As of the date hereof, JSB
has no knowledge of any fact or circumstance that would prevent the Merger or
the Bank Merger, if effected, from qualifying as a reorganization under Section
368(a) of the Code.
(ee) BENEFICIAL OWNERSHIP OF NFB COMMON STOCK. As of the date
hereof, JSB does not beneficially own any shares of NFB Common Stock and does
not have any option, warrant or right of any kind to acquire the beneficial
ownership of any shares of NFB Common Stock.
(ff) YEAR 2000 MATTERS. (i) JSB's Disclosure Letter sets forth
a true and complete copy of JSB's plan to cause all of the Date-Sensitive
Systems owned, leased or used by JSB or any of its Subsidiaries intended and
necessary for use after December 31, 1999, or licensed to JSB or any of its
Subsidiaries for use by JSB or any of its Subsidiaries, and all of the Date Data
of JSB or any of its Subsidiaries to be Year 2000 Compliant (the "JSB Y2K
Plan"). JSB believes that the JSB Y2K Plan can be substantially achieved on or
before September 30, 1999, with aggregate expenditures under the JSB Y2K Plan
not materially in excess of $200,000.
(ii) The following definitions apply for purposes of
this Section 2.3(ff) and Section 2.4(z): (x) "Date Data" means any data of any
type that includes date information or that is otherwise derived from, dependent
on or related to date information; (y) "Date-Sensitive System" means, with
respect to a particular entity, any software, microcode or hardware system or
component, including any electronic or electronically controlled system or
component, that processes any Date Data and that is installed in a development
or on order by such entity or any Subsidiary of such entity for its internal
use; and (z) "Year 2000 Compliance" means, (A) with respect to Date Data, that
such data are in proper format for all dates in the twentieth and twenty-first
centuries and (B) with respect to Date-Sensitive Systems, that such system
accurately processes all Date Data, including for the twentieth and twenty-first
centuries, without loss of any functionality or performance, including
calculating, comparing, sequencing, storing and displaying such Date Data
(including all leap-year considerations), when used as a stand-alone system or
in combination with other software or hardware.
(gg) REGISTRATION STATEMENT. The information regarding JSB to
be supplied by JSB for inclusion in (i) the Registration Statement on Form S-4
and/or such other form(s) as may be appropriate to be filed under the Securities
Act of 1933, as amended ("Securities Act"), with the SEC by NFB for the purpose
of, among other things, registering the NFB Common Stock to be issued to JSB's
stockholders in the Merger (as amended or supplemented from time to time, the
"Registration Statement"), or (ii) the joint proxy statement to be filed with
the SEC by JSB and NFB under the Exchange Act and distributed in connection with
JSB's and NFB's respective meeting of stockholders to vote upon this Agreement
(together with the prospectus included in the Registration Statement, the "Joint
Proxy Statement-Prospectus") will not, at the time such Registration Statement
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
Section 2.4. REPRESENTATIONS AND WARRANTIES OF NFB. Subject to
Sections 2.1 and 2.2, NFB represents and warrants to JSB that, except as
disclosed in NFB's Disclosure Letter:
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(a) ORGANIZATION. (i) NFB is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended ("BHCA"). NFB Bank is a bank duly organized, validly
existing and in good standing under the laws of the State of New York and is a
wholly owned Subsidiary of NFB. Each Subsidiary of NFB, other than NFB Bank, is
a corporation, limited liability company or partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of NFB and its Subsidiaries has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(ii) NFB and each of its Subsidiaries has the
requisite corporate power and authority, and is duly qualified and is in good
standing, to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary.
(iii) NFB's Disclosure Letter sets forth all of NFB's
Subsidiaries and all entities (whether corporations, partnerships or similar
organizations), including the corresponding percentage ownership, in which NFB
owns, directly or indirectly, 5% or more of the ownership interests as of the
date of this Agreement and indicates for each of NFB's Subsidiaries, as of such
date, its jurisdiction of organization and the jurisdiction(s) wherein it is
qualified to do business. All such Subsidiaries and ownership interests are in
compliance with all applicable laws, rules and regulations relating to direct
investments in equity ownership interests. NFB owns, either directly or
indirectly, all of the outstanding capital stock of each of its Subsidiaries. No
Subsidiary of NFB other than NFB Bank and Superior Savings of New England is an
"insured depository institution" as defined in the FDIA and the applicable
regulations thereunder. All of the shares of capital stock of each of the
Subsidiaries of NFB are duly authorized and validly issued, fully paid and
nonassessable and not subject to any preemptive rights and are owned by NFB or a
Subsidiary of NFB free and clear of any claims, liens, encumbrances or
restrictions (other than those imposed by applicable federal and state
securities laws) and there are no agreements or understandings with respect to
the voting or disposition of any such shares.
(iv) The deposits of NFB Bank are insured by the BIF
or the Savings Association Insurance Fund of the FDIC to the extent provided in
the FDIA.
(b) CAPITAL STRUCTURE. (i) The authorized capital stock of NFB
consists of 200,000,000 shares of NFB Common Stock and 10,000,000 shares of
preferred stock, par value $1.00 per share ("NFB Preferred Stock"). As of the
date of this Agreement, (A) 135,767,087 shares of NFB Common Stock were issued
and outstanding, (B) no shares of NFB Preferred Stock were issued and
outstanding, (C) no shares of NFB Common Stock were reserved for issuance,
except that 2,000,000 shares of NFB Common Stock were reserved for issuance
pursuant to the NFB Dividend Reinvestment and Stock Purchase Plan and 1,973,140
shares of NFB Common Stock were reserved for issuance pursuant to the NFB 1985
Incentive Stock Option Plan, the NFB 1987 Long-Term Incentive Plan, the NFB 1989
Executive Management and Compensation Plan, the NFB 1994 Key Employee Stock
Plan, the NFB 1997 Non-Officer Stock Plan and the NFB 1998 Stock Compensation
Plan (the "NFB Stock Plans"), (D) no shares of NFB Preferred Stock were reserved
for issuance and (E) 9,359,435 shares of NFB Common Stock were held by NFB in
its treasury or by its Subsidiaries. The authorized capital stock of NFB Bank
consists of 5,500,000 shares of common stock, par value $1.00 per share, and no
shares of preferred stock. As of the date of this Agreement, 5,500,000 shares of
such common stock were outstanding, no shares of such preferred stock were
outstanding and all outstanding shares of such common stock were, and as of the
Effective Time will be, owned by NFB. All outstanding shares of capital stock of
NFB and NFB Bank are duly authorized and validly issued, fully paid and
nonassessable and not subject to any preemptive rights and, with respect to
shares held by NFB in its treasury or by its Subsidiaries, are free and clear of
all claims, liens, encumbrances or restrictions (other than those imposed by
applicable federal or state securities laws) and there are no agreements or
understandings with respect to the voting or disposition of any such shares.
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(ii) No Voting Debt of NFB is issued or outstanding.
(iii) As of the date of this Agreement, except for
this Agreement, the NFB Stock Plans and as set forth in NFB's Disclosure Letter,
neither NFB nor any of its Subsidiaries has or is bound by any outstanding
options, warrants, calls, rights, convertible securities, commitments or
agreements of any character obligating NFB or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, any additional shares
of capital stock of NFB or any of its Subsidiaries or obligating NFB or any of
its Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, convertible security, commitment or agreement. As of the date hereof,
there are no outstanding contractual obligations of NFB or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of NFB or any of its Subsidiaries.
(c) AUTHORITY. Each of NFB and NFB Bank has the requisite
corporate power and authority to enter into this Agreement and the Plan of Bank
Merger, respectively and, subject to approval of this Agreement by the requisite
vote of NFB's stockholders and receipt of all required regulatory or
governmental approvals, as contemplated by Section 5.1(b) of this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, and, subject to the approval of this Agreement by NFB's
stockholders, the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate actions on the part of NFB and
NFB Bank. This Agreement has been duly executed and delivered by NFB and
constitutes a valid and binding obligation of NFB, enforceable in accordance
with its terms subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, whether applied in a court of
law or a court of equity.
(d) STOCKHOLDER APPROVAL; FAIRNESS OPINION. The affirmative
vote of the holders of a majority of the outstanding shares of NFB Common Stock
entitled to vote on this Agreement is the only vote of the stockholders of NFB
required for approval of this Agreement by NFB and the consummation by NFB of
the Merger and the related transactions contemplated hereby. NFB has received
the written opinion of Donaldson, Lufkin & Jenrette Securities Corporation to
the effect that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to NFB's stockholders.
(e) NO VIOLATIONS. The execution, delivery and performance of
this Agreement by NFB do not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming receipt of all Requisite
Regulatory Approvals and requisite stockholder approvals, a breach or violation
of, or a default under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or instrument of
NFB or any of its Subsidiaries, or to which NFB or any of its Subsidiaries (or
any of their respective properties) is subject, (ii) a breach or violation of,
or a default under, the certificate of incorporation or bylaws of NFB or the
similar organizational documents of any of its Subsidiaries or (iii) a breach or
violation of, or a default under (or an event which, with due notice or lapse of
time or both, would constitute a default under), or result in the termination
of, accelerate the performance required by, or result in the creation of any
lien, pledge, security interest, charge or other encumbrance upon any of the
properties or assets of NFB or any of its Subsidiaries, under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which NFB or any of
its Subsidiaries is a party, or to which any of their respective properties or
assets may be subject; and the consummation of the transactions (including the
Bank Merger) contemplated hereby (exclusive of the effect of any changes
effected pursuant to Section 1.7) will not require any approval, consent or
waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than (x) the
approval of the holders of a majority of the outstanding shares of NFB Common
Stock, (y) the Requisite Regulatory Approvals and (z) such approvals, consents
or waivers as are
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required under the federal and state securities or "blue sky" laws in connection
with the transactions contemplated by this Agreement. As of the date hereof, the
executive officers of NFB know of no reason pertaining to NFB why any of the
approvals referred to in this Section 2.4(e) should not be obtained.
(f) REPORTS. (i) As of their respective dates, none of the
reports or other statements filed by NFB or NFB Bank on or subsequent to
December 31, 1997 with the SEC (collectively, "NFB's Reports"), contained, or
will contain, any untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Each of the financial statements of NFB included in NFB's
Reports complied as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto and have
been prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited financial statements, as permitted by Form
10-Q of the SEC). Each of the consolidated statements of condition, consolidated
statements of operations, consolidated statements of cash flows and consolidated
statements of changes in stockholders' equity contained or incorporated by
reference in NFB's Reports (including in each case any related notes and
schedules) fairly presented, or will fairly present, as the case may be, the
financial position, results of operations, cash flows and stockholders' equity,
as the case may be, of the entity or entities to which it relates for the
periods set forth therein (subject, in the case of unaudited interim statements,
to normal year-end audit adjustments that are not material in amount or effect),
in each case in accordance with GAAP, except as may be noted therein.
(ii) NFB and its Subsidiaries have each timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1996 with (A) the NYSBD, (B) FRB (C) the FDIC, (D) the SEC, (E) the
NYSE and (F) any other SRO, and have paid all fees and assessments due and
payable in connection therewith.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in NFB's Reports filed on or prior to the date of this Agreement, since December
31, 1998, (i) NFB and its Subsidiaries have not incurred any liability, except
in the ordinary course of their businesses consistent with past practice and
(ii) there has not been any Material Adverse Effect with respect to NFB.
(h) ABSENCE OF CLAIMS. Except as disclosed in NFB's Disclosure
Letter, no litigation, proceeding, controversy, claim or action before any court
or Governmental Entity is pending against NFB or any of its Subsidiaries, and,
to the best of NFB's knowledge, no such litigation, proceeding, controversy,
claim or action has been threatened.
(i) ABSENCE OF REGULATORY ACTIONS. Neither NFB nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or any commitment letter or similar written
undertaking to, or is subject to any action, proceeding, order or directive by,
or is a recipient of any extraordinary supervisory letter from any Bank
Regulator, or has adopted any board resolutions at the request of any Bank
Regulator, nor has it been advised by any Bank Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar written undertaking.
(j) TAXES. All federal, state, local and foreign tax returns
required to be filed by or on behalf of NFB or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown on
such returns, all taxes required to be shown on returns for which extensions
have been granted and all other taxes required to be paid by NFB or
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any of its Subsidiaries have been paid in full or adequate provision has been
made for any such taxes on NFB's balance sheet (in accordance with GAAP). For
purposes of this Section 2.4(j), the terms "taxes" and "tax return" shall have
the meanings assigned to such terms in Section 2.3(j) of this Agreement. Except
as disclosed in NFB's Disclosure Letter, as of the date of this Agreement, there
is no audit examination, deficiency assessment, tax investigation or refund
litigation with respect to any taxes of NFB or any of its Subsidiaries, and no
claim has been made by any authority in a jurisdiction where NFB or any of its
Subsidiaries do not file tax returns that NFB or any such Subsidiary is subject
to taxation in that jurisdiction. All taxes, interest, additions and penalties
due with respect to completed and settled examinations or concluded litigation
relating to NFB or any of its Subsidiaries have been paid in full or adequate
provision has been made for any such taxes on NFB's balance sheet (in accordance
with GAAP). NFB and its Subsidiaries have not executed an extension or waiver of
any statute of limitations on the assessment or collection of any material tax
due that is currently in effect. NFB and each of its Subsidiaries has withheld
and paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and NFB and each of its Subsidiaries has
timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the Code and similar applicable state
and local information reporting requirements. Neither NFB nor any of its
Subsidiaries (i) has made an election under Section 341(f) of the Code, (ii) has
issued or assumed any obligation under Section 279 of the Code, any high yield
discount obligation as described in Section 163(i) of the Code or any
registration-required obligation within the meaning of Section 163(f)(2) of the
Code that is not in registered form or (iii) is or has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(k) AGREEMENTS. (i) Except for arrangements made in the
ordinary course of business, and except as disclosed in NFB's Disclosure Letter,
NFB and its Subsidiaries are not bound by any material contract (as defined in
Item 601(b)(10) of Regulation S-K) to be performed after the date hereof that
has not been filed with or incorporated by reference in NFB's Reports. Except as
disclosed in NFB's Reports filed prior to the date of this Agreement or as
disclosed in NFB's Disclosure Letter, neither NFB nor any of its Subsidiaries is
a party to an oral or written agreement containing covenants that limit the
ability of NFB or any of its Subsidiaries to compete in any line of business or
with any person, or that involve any restriction on the geographic area in
which, or method by which, NFB (including any successor thereof) or any of its
Subsidiaries may carry on its business (other than as may be required by law or
any regulatory agency).
(ii) Neither NFB nor any of its Subsidiaries is in
default under or in violation of any provision of any note, bond, indenture,
mortgage, deed of trust, loan agreement, lease or other agreement to which it is
a party or by which it is bound or to which any of its respective properties or
assets is subject.
(iii) NFB and each of its Subsidiaries owns or
possesses valid and binding licenses and other rights to use without payment all
patents, copyrights, trade secrets, trade names, servicemarks and trademarks
used in its businesses, and neither NFB nor any of its Subsidiaries has received
any notice of conflict with respect thereto that asserts the right of others.
Each of NFB and its Subsidiaries has performed all the obligations required to
be performed by it and are not in default under any contact, agreement,
arrangement or commitment relating to any of the foregoing.
(l) NFB COMMON STOCK. The shares of NFB Common Stock to be
issued pursuant to this Agreement, when issued in accordance with the terms of
this Agreement, will be duly authorized and validly issued, fully paid and
nonassessable and not subject to any preemptive rights.
(m) LABOR MATTERS. Neither NFB nor any of its Subsidiaries is
or has ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization with respect to its employees, nor is NFB or any of
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its Subsidiaries the subject of any proceeding asserting that it has committed
an unfair labor practice or seeking to compel it to bargain with any labor
organization as to wages and conditions of employment, nor is there any strike,
other labor dispute or organizational effort involving NFB or any of its
Subsidiaries pending or, to the best of NFB's knowledge, threatened. NFB and its
Subsidiaries are in compliance with applicable laws regarding employment of
employees and retention of independent contractors and are in compliance with
applicable employment tax laws.
(n) EMPLOYEE BENEFIT PLANS. NFB's Disclosure Letter contains a
complete and accurate list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements and arrangements, including, but not
limited to, "employee benefit plans," as defined in Section 3(3) of ERISA,
incentive and welfare policies, contracts, plans and arrangements and all trust
agreements related thereto with respect to any present or former directors,
officers or other employees of NFB or any of its Subsidiaries (hereinafter
collectively referred to as the "NFB Employee Plans"). Except as disclosed in
NFB's Disclosure Letter:
(i) all of the NFB Employee Plans comply in all
material respects with all applicable requirements of ERISA, the Code and
other applicable laws; there has occurred no "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) which is
likely to result in the imposition of any penalties or taxes under Section
502(i) of ERISA or Section 4975 of the Code upon NFB or any of its
Subsidiaries;
(ii) no liability to the PBGC has been or is expected
by NFB or any of its Subsidiaries to be incurred with respect to any NFB
Employee Plan which is subject to Title IV of ERISA ("NFB Pension Plan"),
or with respect to any "single-employer plan" (as defined in Section
4001(a) of ERISA) currently or formerly maintained by NFB or any entity
which is considered one employer with NFB under Section 4001(b)(1) of ERISA
or Section 414 of the Code (a "NFB ERISA Affiliate");
(iii) no NFB Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, as
of the last day of the end of the most recent plan year ending prior to the
date hereof; the fair market value of the assets of each NFB Pension Plan
exceeds the present value of the "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA) under such NFB Pension Plan as of the end of
the most recent plan year with respect to the respective NFB Pension Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such NFB
Pension Plan as of the date hereof; and no notice of a "reportable event"
(as defined in Section 4043 of ERISA) for which the 30-day reporting
requirement has not been waived has been required to be filed for any NFB
Pension Plan within the 12-month period ending on the date hereof;
(iv) neither NFB nor any of its Subsidiaries has
provided, or is required to provide, security to any NFB Pension Plan or to
any single-employer plan of a NFB ERISA Affiliate pursuant to Section
401(a)(29) of the Code;
(v) neither NFB, its Subsidiaries, nor any NFB ERISA
Affiliate has contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980;
(vi) each NFB Employee Plan that is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and which is
intended to be qualified under Section 401(a) of the Code ("NFB Qualified
Plan") has received a favorable determination letter from the IRS, and NFB
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and its Subsidiaries are not aware of any circumstances likely to result in
revocation of any such favorable determination letter;
(vii) there is no pending or, to NFB's knowledge,
threatened litigation, administrative action or proceeding relating to any
NFB Employee Plan;
(viii) there has been no announcement or commitment by
NFB or any of its Subsidiaries to create an additional NFB Employee Plan,
or to amend any NFB Employee Plan, except for amendments required by
applicable law which do not materially increase the cost of such NFB
Employee Plan; and, except as specifically identified in NFB's Disclosure
Letter, NFB and its Subsidiaries do not have any obligations for
post-retirement or post-employment benefits under any NFB Employee Plan
that cannot be amended or terminated upon 60 days' notice or less without
incurring any liability thereunder, except for coverage required by Part 6
of Title I of ERISA or Section 4980B of the Code, or similar state laws,
the cost of which is borne by the insured individuals;
(ix) neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in any payment or series of payments by NFB or any of its
Subsidiaries to any person which is an "excess parachute payment" (as
defined in Section 280G of the Code), increase or secure (by way of a trust
or other vehicle) any benefits payable under any NFB Employee Plan or
accelerate the time of payment or vesting of any such benefit; and
(x) with respect to each NFB Employee Plan, NFB has
made available to JSB a true and correct copy of (A) the annual report on
the applicable form of the Form 5500 series filed with the IRS for the most
recent three plan years, if required to be filed, (B) such NFB Employee
Plan, including amendments thereto, (C) each trust agreement, insurance
contract or other funding arrangement relating to such NFB Employee Plan,
including amendments thereto, (D) the most recent summary plan description
and summary of material modifications thereto for such NFB Employee Plan,
if the NFB Employee Plan is subject to Title I of ERISA, (E) the most
recent actuarial report or valuation if such NFB Employee Plan is an NFB
Pension Plan and any subsequent changes to the actuarial assumptions
contained therein and (F) the most recent determination letter issued by
the IRS if such NFB Employee Plan is a Qualified Plan.
(o) TITLE TO ASSETS. NFB and each of its Subsidiaries has good
and marketable title to its properties and assets (including any intellectual
property asset such as any trademark, servicemark, trade name or copyright) and
property acquired in a judicial foreclosure proceeding or by way of a deed in
lieu of foreclosure or similar transfer, other than property as to which it is
lessee, in which case the related lease is valid and in full force and effect.
Each lease pursuant to which NFB or any of its Subsidiaries is lessor is valid
and in full force and effect and no lessee under any such lease is in material
default or violation of any provisions of any such lease. All material tangible
properties of NFB and each of its Subsidiaries are in a good state of
maintenance and repair, conform with all applicable ordinances, regulations and
zoning laws and are considered by NFB to be adequate for the current business of
NFB and its Subsidiaries.
(p) COMPLIANCE WITH LAWS. NFB and each of its Subsidiaries has
all permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, all Governmental
Entities that are required in order to permit it to carry on its business as it
is presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the best knowledge of
NFB, no suspension or cancellation of any of them is threatened. Since the date
of its incorporation, the corporate affairs of NFB have not been conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
approval of any Governmental Entity. The businesses of
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NFB and its Subsidiaries are not being conducted in violation of any law,
ordinance, regulation, order, writ, rule, decree or condition to approval of any
Governmental Entity.
(q) FEES. Other than financial advisory services performed for
NFB by Donaldson, Lufkin & Jenrette Securities Corporation pursuant to an
agreement dated July 29, 1999, a true and complete copy of which has been
previously delivered to JSB, neither NFB nor any of its Subsidiaries, nor any of
their respective officers, directors, employees or agents, has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for NFB or any of its Subsidiaries in connection with
this Agreement or the transactions contemplated hereby.
(r) ENVIRONMENTAL MATTERS. With respect to NFB and each of its
Subsidiaries, except as disclosed in NFB's Disclosure Letter:
(i) each of NFB and its Subsidiaries and, to NFB's
knowledge, the Participation Facilities and the Loan Properties are, and
have been, in substantial compliance with, and are not liable under, all
Environmental Laws;
(ii) there is no suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending or, to the best of NFB's knowledge, threatened, before any court,
Governmental Entity or board or other forum against it or any of its
Subsidiaries or any Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any Environmental
Law or (y) relating to the presence of or release into the environment of
any Hazardous Material, whether or not occurring at or on a site owned,
leased or operated by it or any of its Subsidiaries or any Participation
Facility;
(ii) to the best of NFB's knowledge, there is no suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened before any court,
Governmental Entity or board or other forum relating to or against any Loan
Property (or NFB or any of its Subsidiaries in respect of such Loan
Property) (x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y)
relating to the presence of or release into the environment of any
Hazardous Material, whether or not occurring at or on a site owned, leased
or operated by a Loan Property; and
(iv) to the best of NFB's knowledge, during the period
of (l) NFB's or any of its Subsidiaries' ownership or operation of any of
their respective current properties or (m) NFB's or any of its
Subsidiaries' participation in the management of any Participation
Facility, there has been no contamination by or release of Hazardous
Materials in, on, under or affecting such properties.
(s) LOAN PORTFOLIO; ALLOWANCE; ASSET QUALITY. (i) With respect
to each Loan owned by NFB or its Subsidiaries in whole or in part, to the best
knowledge of NFB:
(A) the note and the related security documents are
each legal, valid and binding obligations of the maker or
obligor thereof, enforceable against such maker or obligor in
accordance with their terms;
(B) neither NFB nor any of its Subsidiaries nor any
prior holder of a Loan has modified the note or any of the
related security documents in any material respect or
satisfied, canceled or subordinated the note or any of the
related security documents except as otherwise disclosed by
documents in the applicable Loan file;
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(C) NFB or a Subsidiary is the sole holder of legal
and beneficial title to each Loan (or NFB Bank's applicable
participation interest, as applicable); except as otherwise
referenced on the books and records of NFB;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and
correct copies of the documents they purport to be and have
not been suspended, amended, modified, canceled or otherwise
changed, except as otherwise disclosed by documents in the
applicable Loan file;
(E) there is no pending or threatened condemnation
proceeding or similar proceeding affecting the property that
serves as security for a Loan, except as otherwise referenced
on the books and records of NFB;
(F) there is no litigation or proceeding pending or
threatened, relating to the property that serves as security
for a Loan that would have a material adverse effect upon the
related Loan; and
(G) with respect to a Loan held in the form of a
participation, the participation documentation is legal,
valid, binding and enforceable.
(ii) The allowance for possible losses reflected in
NFB's audited statement of condition at December 31, 1998 was, and the allowance
for possible losses shown on the balance sheets in NFB's Reports for periods
ending after December 31, 1998 will be, adequate, as of the dates thereof, under
GAAP.
(iii) NFB's Disclosure Letter sets forth by category
the amounts of all loans, leases, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets of NFB and its
Subsidiaries that have been classified by any bank examiner (whether regulatory
or internal) as "Special Mention," "Substandard," "Doubtful," "Loss" or words of
similar import, and NFB and its Subsidiaries shall promptly after the end of any
month inform JSB of any such classification arrived at any time after the date
hereof. The OREO included in any non-performing assets of NFB or any of its
Subsidiaries is carried net of reserves at the lower of cost or fair value, less
estimated selling costs, based on current independent appraisals or evaluations
or current management appraisals or evaluations; provided, however, that
"current" shall mean within the past 12 months.
(t) ACCOUNTING MATTERS. Except as disclosed in NFB's
Disclosure Letter, neither NFB nor any of its Subsidiaries or, to the best of
its knowledge, any of its other affiliates has, through the date hereof, taken
or agreed to take any action that would prevent NFB from accounting for the
business combination to be effected by the Merger as a pooling-of-interests, and
NFB has no knowledge of any fact or circumstance that would prevent such
accounting treatment.
(u) INSURANCE. NFB and its Subsidiaries are presently
insured, and since December 31, 1996, have been insured, for reasonable amounts
with financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by NFB and its Subsidiaries are in full force and effect, NFB and its
Subsidiaries are not in default thereunder and all material claims thereunder
have been filed in due and timely fashion.
(v) INVESTMENT SECURITIES; BORROWINGS. (i) Except for
investments in FHLB Stock and pledges to secure FHLB borrowings and reverse
repurchase agreements entered into in arms-length transactions pursuant to
normal commercial terms and conditions and entered into in the ordinary course
of
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business and restrictions that exist for securities to be classified as "held
to maturity," none of the investments reflected in the consolidated balance
sheet of NFB included in NFB's Report on Form 10-K for the year ended December
31, 1998, and none of the investment securities held by it or any of its
Subsidiaries since December 31, 1998 is subject to any restriction (contractual
or statutory) that would materially impair the ability of the entity holding
such investment freely to dispose of such investment at any time.
(ii) Neither NFB nor any Subsidiary is a party to or
has agreed to enter into any Derivatives Contract or owns securities that (A)
are referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes" or "capped floating rate mortgage
derivatives" or (B) are likely to have changes in value as a result of interest
or exchange rate changes that significantly exceed normal changes in value
attributable to interest or exchange rate changes, except for those Derivatives
Contracts and other instruments legally purchased or entered into in the
ordinary course of business, consistent with safe and sound banking practices
and regulatory guidance, and listed (as of the date hereof) in NFB's Disclosure
Letter or disclosed in NFB's Reports filed on or prior to the date hereof.
(iii) Set forth in NFB's Disclosure Letter is a true
and complete list of NFB's borrowed funds (excluding deposit accounts) as of the
date hereof.
(w) CORPORATE DOCUMENTS. NFB has made available to JSB
true and complete copies of its certificate of incorporation and bylaws and of
NFB Bank's organization certificate and bylaws. The minute books of NFB and NFB
Bank constitute a complete and correct record of all actions taken by their
respective boards of directors (and each committee thereof) and their
stockholders. The minute books of each of NFB's Subsidiaries constitutes a
complete and correct record of all actions taken by the respective boards of
directors (and each committee thereof) and the stockholders of each such
Subsidiary.
(x) TAX TREATMENT OF THE MERGER. As of the date
hereof, NFB has no knowledge of any fact or circumstance that would prevent the
Merger or the Bank Merger, if effected, from qualifying as a reorganization
under Section 368(a) of the Code.
(y) BENEFICIAL OWNERSHIP OF JSB COMMON STOCK. As of
the date hereof, NFB does not beneficially own any shares of JSB Common Stock
and, other than as contemplated by the JSB Option Agreement, does not have any
option, warrant or right of any kind to acquire the beneficial ownership of any
shares of JSB Common Stock.
(z) YEAR 2000 MATTERS. NFB's Disclosure Letter sets
forth a true and complete copy of NFB's plan to cause all of the Date-Sensitive
Systems owned, leased or used by NFB or any of its Subsidiaries intended and
necessary for use after December 31, 1999, or licensed to NFB or any of its
Subsidiaries for use by NFB or any of its Subsidiaries, and all of the Date Data
of NFB or any of its Subsidiaries to be Year 2000 Compliant (the "NFB Y2K
Plan"). NFB believes that the NFB Y2K Plan can be substantially achieved on or
before September 30, 1999, with aggregate expenditures under the NFB Y2K Plan
not materially in excess of $2 million.
(aa) REGISTRATION STATEMENT. The information to be
supplied by NFB for inclusion in (i) the Registration Statement or (ii) the
Joint Proxy Statement-Prospectus will not, at the time such Registration
Statement becomes effective, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
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ARTICLE III
CONDUCT PENDING THE MERGER
--------------------------
Section 3.1 CONDUCT OF JSB'S BUSINESS PRIOR TO THE EFFECTIVE
TIME. Except as expressly provided in this Agreement, during the period from the
date of this Agreement to the Effective Time, JSB shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to (i) conduct its business
in the regular, ordinary and usual course consistent with past practice; (ii)
maintain and preserve intact its business organization, properties, leases,
employees and advantageous business relationships and retain the services of its
officers and key employees, (iii) take no action which would materially
adversely affect or delay the ability of JSB or NFB to perform their respective
covenants and agreements on a timely basis under this Agreement, (iv) take no
action which would adversely affect or delay the ability of JSB, JSB Bank, NFB
or NFB Bank to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated hereby or
which would reasonably be expected to result in any such approvals, consents or
waivers containing any material condition or restriction, and (v) take no action
that results in or is reasonably likely to have a Material Adverse Effect on JSB
or JSB Bank.
Section 3.2. FORBEARANCE BY JSB. Without limiting the
covenants set forth in Section 3.1 hereof, except as otherwise provided in this
Agreement and except to the extent required by law or regulation or any Bank
Regulators, during the period from the date of this Agreement to the Effective
Time, JSB shall not, and shall not permit any of its Subsidiaries to, without
the prior consent of NFB, which consent shall not be unreasonably withheld:
(a) change any provisions of the certificate of incorporation
or bylaws of JSB or the similar governing documents of its Subsidiaries;
(b) issue any shares of capital stock or change the terms of
any outstanding stock options or warrants or issue, grant or sell any option,
warrant, call, commitment, stock appreciation right, right to purchase or
agreement of any character relating to the authorized or issued capital stock of
JSB, except pursuant to (i) the exercise of stock options or warrants
outstanding as of the date of this Agreement, (ii) the automatic grant of
142,000 stock options under the JSB 1996 Stock Option Plan as a result of the
execution of this Agreement or (iii) the JSB Option Agreement; adjust, split,
combine or reclassify any capital stock; make, declare or pay any dividend
(except for JSB's regular quarterly dividend, which shall not be increased by
more than $.05 per share from the current level) or make any other distribution
on, or directly or indirectly redeem, purchase or otherwise acquire, any shares
of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock. As promptly as practicable
following the date of this Agreement, the Board of Directors of JSB shall cause
its regular quarterly dividend record dates and payment dates to be the same as
NFB's regular quarterly dividend record dates and payments dates for NFB Common
Stock, and JSB shall not thereafter change its regular dividend payment dates
and record dates. Nothing contained in this Section 3.2(b) or in any other
Section of this Agreement shall be construed to permit holders of shares of JSB
Common Stock to receive two dividends from either JSB or from JSB and NFB in any
one quarter or to deny or prohibit such holders from receiving one dividend from
either JSB or NFB in any quarter. Subject to applicable regulatory restrictions,
if any, JSB Bank may pay a cash dividend that is, in the aggregate, sufficient
to fund any dividend by JSB permitted hereunder and to allow JSB to make the
payments required under Section 4.13(d) of this Agreement;
(c) other than in the ordinary course of business consistent
with past practice and pursuant to policies currently in effect, sell, transfer,
mortgage, encumber or otherwise dispose of any of its material properties,
leases or assets to any individual, corporation or other entity other than a
direct or indirect wholly owned Subsidiary of JSB or cancel, release or assign
any indebtedness of any such individual, corporation or other entity, except
pursuant to contracts or agreements in force at the date of this
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Agreement and which have been disclosed to NFB and except for the sale of unsold
cooperative shares owned by JSB or its Subsidiaries, as disclosed in JSB's
Disclosure Letter;
(d) except to the extent required by law or as disclosed in
JSB's Disclosure Letter or specifically provided for elsewhere herein, (i)
increase the compensation or fringe benefits of any of its employees or
directors, other than general increases in compensation in the ordinary course
of business consistent with past practice and, upon consultation with NFB, the
payment of reasonable "stay in place" pay where necessary or appropriate to
retain key employees in an amount not to exceed $500,000 in the aggregate; (ii)
pay any pension or retirement allowance not required by any existing plan or
agreement to any such employees or directors, or become a party to, amend or
commit itself to fund or otherwise establish any trust or account related to any
JSB Employee Plan (as defined in Section 2.3(m)) with or for the benefit of any
employee or director; or (iii) voluntarily accelerate the vesting of any stock
options or other compensation or benefit;
(e) except as contemplated by Section 4.2, change its method
of accounting as in effect at December 31, 1998, except as required by changes
in GAAP as concurred in by JSB's independent auditors;
(f) settle any claim, action or proceeding involving any
liability of JSB or any of its Subsidiaries for money damages in excess of
$500,000 or impose material restrictions upon the operations of JSB or any of
its Subsidiaries;
(g) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, in each case which are
material, individually or in the aggregate, to JSB, except in satisfaction of
debts previously contracted;
(h) except pursuant to commitments existing at the date hereof
which have previously been disclosed to NFB, make any real estate loans secured
by undeveloped land or real estate located outside the States of New York, New
Jersey or Connecticut (other than real estate secured by one-to-four family
homes) or make any construction loan (other than construction loans secured by
one-to-four family homes) outside the States of New York, New Jersey or
Connecticut;
(i) establish or commit to the establishment of any new branch
or other office facilities other than those for which all regulatory approvals
have been obtained;
(j) take, fail to take, or cause to be taken or not taken any
action that would prevent or impede the Merger from qualifying (A) for
pooling-of-interests accounting treatment or (B) as a reorganization within the
meaning of Section 368(a) of the Code; or
(k) make any capital expenditures other than those which (i)
are made in the ordinary course of business or are necessary to maintain
existing assets in good repair and (ii) in any event are in an amount of no more
than $500,000 in the aggregate;
(l) enter into any new line of business;
(m) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or any of the
conditions to the Merger set forth in Article V not being satisfied;
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(n) other than in the ordinary course of business consistent
with prudent banking practices, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other entity;
(o) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings in the ordinary course of business consistent with
prudent banking practices;
(p) other than in prior consultation with NFB, restructure or
materially change its investment securities portfolio, through purchases, sales
or otherwise, or the manner in which the portfolio is classified or reported; or
(q) agree or commit to take any action that is prohibited by
this Section 3.2.
In the event that NFB does not respond in writing to JSB within five business
days of receipt by NFB of a written request for JSB to engage in any of the
actions for which NFB's prior written consent is required pursuant to this
Section 3.2, NFB shall be deemed to have consented to such action. Any request
by JSB or response thereto by NFB shall be made in accordance with the notice
provisions of Section 8.7, shall note that it is a request pursuant to this
Section 3.2 and shall state that a failure to respond within five business days
shall constitute consent.
Section 3.3 CONDUCT OF NFB'S BUSINESS PRIOR TO THE EFFECTIVE
TIME. Except as expressly provided in this Agreement, during the period from the
date of this Agreement to the Effective Time, NFB shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to (i) conduct its business
in the regular, ordinary and usual course consistent with past practice; (ii)
maintain and preserve intact its business organization, properties, leases,
employees and advantageous business relationships and retain the services of its
officers and key employees, (iii) take no action which would materially
adversely affect or delay the ability of JSB or NFB to perform their respective
covenants and agreements on a timely basis under this Agreement, (iv) take no
action which would adversely affect or delay the ability of JSB, NFB, JSB Bank
or NFB Bank to obtain any necessary approvals, consents or waivers of any
Governmental Entity required for the transactions contemplated hereby and (v)
take no action that results in or is reasonably likely to have a Material
Adverse Effect on NFB.
Section 3.4. FORBEARANCE BY NFB. Without limiting the
covenants set forth in Section 3.3 hereof, except as otherwise provided in this
Agreement and except to the extent required by law or regulation or any Bank
Regulators, during the period from the date of this Agreement to the Effective
Time, NFB shall not, and shall not permit any of its Subsidiaries to, without
the prior consent of JSB, which consent shall not be unreasonably withheld:
(a) change any provisions of the certificate of incorporation
of NFB or the organization certificate of NFB Bank, other than to increase the
authorized capital stock of NFB or to change the par value of NFB Common Stock;
(b) issue any shares of capital stock or change the terms of
any outstanding stock options or warrants or issue, grant or sell any option,
warrant, call, commitment, stock appreciation right, right to purchase or
agreement of any character relating to the authorized or issued capital stock of
NFB except (i) in transactions permitted under Section 3.4(e), (ii) pursuant to
the exercise of stock options or warrants outstanding as of the date of this
Agreement or granted in accordance with this Section 3.4(b), (iii) for the grant
of options under the NFB Stock Plans consistent with NFB's past practice or (iv)
for the issuance of such number of shares of NFB Common Stock as is necessary to
permit the Merger to be accounted for as
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a pooling-of-interests; adjust, split, combine or reclassify any capital stock;
or, solely in the case of NFB, make, declare or pay any dividend (except for
NFB's regular quarterly cash dividend) or make any other distribution on any
shares of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock; provided, however, that
nothing contained herein shall prohibit NFB from increasing the quarterly cash
dividend on NFB Common Stock;
(c) make any acquisition or take any other action that
individually or in the aggregate could materially adversely affect the ability
of NFB to consummate the transactions contemplated hereby, or enter into any
agreement providing for, or otherwise participate in, any merger, consolidation
or other transaction in which NFB or any surviving corporation may be required
not to consummate the Merger or any of the other transactions contemplated
hereby in accordance with the terms of this Agreement;
(d) take, fail to take, or cause to be taken or not taken any
action that would prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code; provided,
however, that nothing contained herein shall limit the ability of NFB to
exercise its rights under the JSB Option Agreement;
(e) enter into an agreement with respect to an Acquisition
Transaction (as defined below) with a third party; provided, that the foregoing
shall not prevent NFB or any of its Subsidiaries from entering into any
agreement with respect to an Acquisition Transaction if such action is, in the
reasonable judgment of NFB, desirable in the conduct of the business of NFB and
its Subsidiaries and would not, in the reasonable judgment of NFB, likely delay
the Effective Time to a date subsequent to the date set forth in Section 6.1(d)
of this Agreement or adversely affect the Merger Consideration to be received by
JSB's stockholders pursuant to this Agreement. For purposes of this Agreement,
"Acquisition Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving NFB, (y) a purchase, lease or other acquisition
of all or substantially all of the assets of NFB or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of NFB;
provided, that the term "Acquisition Transaction" does not include (i) any
internal merger or consolidation involving only NFB and its Subsidiaries or (ii)
any acquisition or acquisitions by NFB subsequent to August 15, 1999 involving
in the aggregate, for all such acquisitions, the issuance of up to the
difference between (1) 10% of the shares of NFB Common Stock outstanding as of
the date hereof and (2) the number of shares, if any, issued pursuant to Section
3.4(b)(iv), or cash consideration equal to such number of shares multiplied by
$20.44 per share;
(f) change its method of accounting as in effect at December
31, 1998, except as required by changes in GAAP as concurred in by JSB's
independent auditors;
(g) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or any of the
conditions to the Merger set forth in Article V not being satisfied; or
(h) agree or commit to take any action that is prohibited by
this Section 3.4.
ARTICLE IV
COVENANTS
---------
Section 4.1 ACQUISITION PROPOSALS. JSB agrees that neither it
nor any of its Subsidiaries, nor any of the respective officers and directors of
JSB or any of its Subsidiaries, shall, and JSB shall not authorize or permit any
of its employees, agents or representatives (including, without limitation, any
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investment banker, attorney or accountant retained by it or any of its
Subsidiaries) to, (a) initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to JSB's stockholders) with respect to a
merger, consolidation or similar transaction involving, or any purchase of all
or any significant portion of the assets or any equity securities of, JSB or any
of its material Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or (b) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent JSB or
its Board of Directors from (i) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal or (ii) (A) providing
information in response to a request therefor by a person who has made an
unsolicited bona fide written Acquisition Proposal (an "Unsolicited Acquisition
Proposal") if the Board of Directors receives from the person so requesting such
information an executed confidentiality agreement on terms substantially
equivalent to those contained in the confidentiality agreement between NFB and
JSB, dated as of July 13, 1999; or (B) engaging in any negotiations or
discussions with any person who has made an Unsolicited Acquisition Proposal, if
and only to the extent that, in each such case referred to in clause (A) or (B)
above, (x) the Board of Directors of JSB, after consultation with and based upon
the written opinion of outside legal counsel, in good faith deems such action to
be legally necessary for the proper discharge of its fiduciary duties under
applicable law and (y) the Board of Directors of JSB, after consultation with
its financial advisor, determines in good faith that such Unsolicited
Acquisition Proposal, if accepted, is reasonably likely to be consummated,
taking into account all legal, financial and regulatory aspects of the proposal
and the person making the proposal and would, if consummated, result in a more
favorable transaction than the transaction contemplated by this Agreement,
taking into account the prospects and interests of JSB and its stockholders. JSB
will notify NFB immediately orally (within one day) and in writing (within three
days) if any such Unsolicited Acquisition Proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with JSB after the date hereof, the identity
of the person making such inquiry, proposal or offer and the substance thereof
and will keep NFB informed of any developments with respect thereto immediately
upon the occurrence thereof. Subject to the foregoing, JSB will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. JSB will take the necessary steps to inform the appropriate
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 4.1. JSB will promptly request each
person (other than NFB) that has executed a confidentiality agreement prior to
the date hereof in connection with its consideration of a business combination
with JSB or any of its Subsidiaries to return or destroy all confidential
information previously furnished to such person by or on behalf of JSB or any of
its Subsidiaries. JSB shall take all steps necessary to enforce all such
confidentiality agreements.
Section 4.2 CERTAIN POLICIES OF JSB.
(a) At the request of NFB, JSB shall cause JSB Bank to modify
and change its loan, litigation and real estate valuation policies and practices
(including loan classifications and levels of reserves) and investment and
asset/liability management policies and practices after the date on which all
Requisite Regulatory Approvals and stockholder approvals are received, and after
receipt of written confirmation from NFB that it is not aware of any fact or
circumstance that would prevent completion of the Merger, and prior to the
Effective Time so as to be consistent on a mutually satisfactory basis with
those of NFB Bank; provided, however, that JSB shall not be required to take
such action more than 30 days prior to the Effective Date; and provided,
further, that such policies and procedures are not prohibited by GAAP or any
applicable laws and regulations.
(b) JSB's representations, warranties and covenants contained
in this Agreement shall not be deemed to be untrue or breached in any respect
for any purpose as a consequence of any modifications
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or changes undertaken solely on account of this Section 4.2. NFB agrees to hold
harmless, indemnify and defend JSB and its Subsidiaries, and their respective
directors, officers and employees, for any loss, claim, liability or other
damage caused by or resulting from compliance with this Section 4.2.
Section 4.3. ACCESS AND INFORMATION.
(a) Upon reasonable notice, JSB and NFB shall (and shall cause
their respective Subsidiaries to) afford to the other and their respective
representatives (including, without limitation, directors, officers and
employees of such party and its affiliates and counsel, accountants and other
professionals retained by such party) such reasonable access during normal
business hours throughout the period prior to the Effective Time to the books,
records (including, without limitation, tax returns and work papers of
independent auditors), properties, personnel and to such other information as
either party may reasonably request; provided, however, that no investigation
pursuant to this Section 4.3 shall affect or be deemed to modify any
representation or warranty made herein. In furtherance, and not in limitation of
the foregoing, JSB shall make available to NFB all information necessary or
appropriate for the preparation and filing of all real property and real estate
transfer tax returns and reports required by reason of the Merger or the Bank
Merger. NFB and JSB will not, and will cause their respective representatives
not to, use any information obtained pursuant to this Section 4.3 for any
purpose unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of applicable law, each of NFB and JSB
will keep confidential, and will cause their respective representatives to keep
confidential, all information and documents obtained pursuant to this Section
4.3 unless such information (i) was already known to such party or an affiliate
of such party, other than pursuant to a confidentiality agreement or other
confidential relationship, (ii) becomes available to such party or an affiliate
of such party from other sources not known by such party to be bound by a
confidentiality agreement or other obligation of secrecy, (iii) is disclosed
with the prior written approval of the other party or (iv) is or becomes readily
ascertainable from published information or trade sources. In the event that
this Agreement is terminated or the transactions contemplated by this Agreement
shall otherwise fail to be consummated, each party shall promptly cause all
copies of documents or extracts thereof containing information and data as to
another party hereto (or an affiliate of any party hereto) to be returned to the
party that furnished the same.
(b) During the period of time beginning on the day application
materials to obtain the Requisite Regulatory Approvals for the Merger are
initially filed and continuing to the Effective Time, including weekends and
holidays, JSB shall cause JSB Bank to provide NFB, NFB Bank and their authorized
agents and representatives full access to JSB Bank's offices after normal
business hours for the purpose of installing necessary wiring and equipment to
be utilized by NFB Bank after the Effective Time; provided, that:
(i) reasonable advance notice of each entry shall be
given to JSB Bank and JSB Bank approves of each entry, which approval shall
not be unreasonably withheld;
(ii) JSB Bank shall have the right to have its
employees or contractors present to inspect the work being done;
(iii) to the extent practicable, such work shall be
done in a manner that will not interfere with JSB Bank's business conducted
at any affected branch offices;
(iv) all such work shall be done in compliance with
all applicable laws and government regulations, and NFB Bank shall be
responsible for the procurement, at NFB Bank's expense, of all required
governmental or administrative permits and approvals;
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(v) NFB Bank shall maintain appropriate insurance
satisfactory to JSB Bank in connection with any work done by NFB Bank's
agents and representatives pursuant to this Section 4.3;
(vi) NFB Bank shall reimburse JSB Bank for any
material out-of-pocket costs or expenses incurred by JSB Bank in connection
with this undertaking; and
(vii) in the event this Agreement is terminated in
accordance with Article VI hereof, NFB Bank, within a reasonable time
period and at its sole cost and expense, will restore such offices to their
condition prior to the commencement of any such installation.
Section 4.4. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. NFB
and JSB shall (a) as soon as practicable (and in any event within 45 days after
the date hereof) make, or cause to be made, any filings and applications and
provide any notices required to be filed or provided in order to obtain all
approvals, consents and waivers of Governmental Entities and third parties
necessary or appropriate for the consummation of the transactions contemplated
hereby or by the JSB Option Agreement; (b) cooperate with one another in
promptly (i) determining what filings and notices are required to be made or
approvals, consents or waivers are required to be obtained under any relevant
federal or state law or regulation or under any relevant agreement or other
document and (ii) making any such filings and notices, furnishing information
required in connection therewith and seeking timely to obtain any such
approvals, consents or waivers; and (c) deliver to the other copies of the
publicly available portions of all such filings, notices and applications
promptly after they are filed.
Section 4.5. ANTITAKEOVER PROVISIONS. JSB and its Subsidiaries
shall take all steps required by any relevant federal or state law or regulation
or under any relevant agreement or other document to exempt or continue to
exempt NFB, the Agreement, the Plan of Bank Merger, the Merger, the Bank Merger
and the JSB Option Agreement from any provisions of an antitakeover nature in
JSB's or its Subsidiaries' organization certificates and bylaws and the
provisions of any federal or state antitakeover laws.
Section 4.6. ADDITIONAL AGREEMENTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement (including, if the
Plan of Bank Merger is executed, the Bank Merger) as expeditiously as possible,
including using efforts to obtain all necessary actions or non-actions,
extensions, waivers, consents and approvals from all applicable Governmental
Entities, effecting all necessary registrations, applications and filings
(including, without limitation, filings under any applicable state securities
laws) and obtaining any required contractual consents and regulatory approvals.
Section 4.7. PUBLICITY. The initial press release announcing
this Agreement shall be a joint press release and thereafter JSB and NFB shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the Merger and any other transaction contemplated
hereby and in making any filings with any Governmental Entity or with any
national securities exchange with respect thereto.
Section 4.8. STOCKHOLDERS MEETINGS. JSB and NFB each shall
take all action necessary, in accordance with applicable law and its respective
corporate documents, to convene a meeting of its respective stockholders (each,
a "Stockholder Meeting") as promptly as practicable for the purpose of
considering and voting on approval and adoption of the transactions provided for
in this Agreement. Except to the extent legally required for the discharge by
the Board of Directors of its fiduciary duties as advised by such Board's
counsel in writing, the Board of Directors of each of JSB and NFB shall (a)
recommend at
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its Stockholder Meeting that the stockholders vote in favor of and approve the
transactions provided for in this Agreement and (b) use its best efforts to
solicit such approvals. JSB and NFB, in consultation with the other, shall each
employ professional proxy solicitors to assist in contacting stockholders in
connection with soliciting favorable votes on the Merger. JSB and NFB shall
coordinate and cooperate with respect to the timing of their respective
Stockholder Meetings.
Section 4.9. PROXY STATEMENTS; COMFORT LETTERS. (i) As soon as
practicable after the date hereof, NFB and JSB shall cooperate with respect to
the preparation of a Joint Proxy Statement- Prospectus for the purpose of taking
stockholder action on the Merger and this Agreement and file the Joint Proxy
Statement-Prospectus with the SEC, respond to comments of the staff of the SEC
and, promptly after the Registration Statement is declared effective by the SEC,
mail the Joint Proxy Statement-Prospectus to the respective holders of record
(as of the applicable record date) of shares of voting stock of each of JSB and
NFB. NFB and JSB each represents and covenants to the other that the Joint Proxy
Statement- Prospectus, and any amendment or supplement thereto, with respect to
the information pertaining to it or its Subsidiaries at the date of mailing to
its stockholders and the date of its Stockholder Meeting will be in compliance
with the Exchange Act and all relevant rules and regulations of the SEC and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(ii) NFB shall cause KPMG LLP, its independent public
accounting firm, to deliver to JSB, and JSB shall cause KPMG LLP, its
independent public accounting firm, to deliver to NFB and to its officers and
directors who sign the Registration Statement for this transaction, a "comfort
letter" or "agreed upon procedures" letter, in the form customarily issued by
such accountants at such time in transactions of this type, dated (a) the date
of the mailing of the Joint Proxy Statement-Prospectus for the Stockholders
Meeting of JSB and the date of mailing of the Joint Proxy Statement-Prospectus
for the Stockholders meeting of NFB, respectively, and (b) a date not earlier
than five business days preceding the date of the Closing (as defined in Section
7.1).
Section 4.10. REGISTRATION OF NFB COMMON STOCK.
(a) NFB shall, as promptly as practicable following the
preparation thereof, file the Registration Statement (including any
pre-effective or post-effective amendments or supplements thereto) with the SEC
under the Securities Act in connection with the transactions contemplated by
this Agreement, and NFB and JSB shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. NFB will advise JSB promptly after NFB
receives notice of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of the shares of capital stock issuable
pursuant to the Registration Statement, or the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information. NFB
will provide JSB with as many copies of such Registration Statement and all
amendments thereto promptly upon the filing thereof as JSB may reasonably
request.
(b) NFB shall use its reasonable best efforts to obtain, prior
to the effective date of the Registration Statement, all necessary state
securities laws or "blue sky" permits and approvals required to carry out the
transactions contemplated by this Agreement.
(c) NFB shall use its reasonable best efforts to list, prior
to the Effective Time, on the NYSE, or on such other exchange as NFB Common
Stock shall then be trading, subject only to official notice
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of issuance, the shares of NFB Common Stock to be issued by NFB in exchange for
the shares of JSB Common Stock.
Section 4.11. AFFILIATE LETTERS. Promptly, but in any event
within two weeks after the execution and delivery of this Agreement, JSB shall
deliver to NFB a letter identifying all persons who, to the knowledge of JSB,
may be deemed to be "affiliates" of JSB under Rule 145 of the Securities Act and
the pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of JSB. Within two weeks after delivery of such
letter, JSB shall deliver executed letter agreements, each substantially in the
form attached hereto as Exhibit B, executed by each such person so identified as
an affiliate of JSB agreeing (i) to comply with Rule 145, (ii) to refrain from
transferring shares as required by the pooling-of-interests accounting rules and
(iii) to be present in person or by proxy and vote in favor of the Merger at the
JSB Stockholders Meeting. Within four weeks after the date hereof, NFB shall
cause its directors and executive officers to enter into letter agreements, in
the form attached hereto as Exhibit C, with NFB concerning the
pooling-of-interests accounting rules. NFB hereby agrees to publish, or file a
Form 8-K, Form 10-K or Form 10-Q containing, financial results covering at least
30 days of post-Merger combined operations of NFB and JSB as soon as
practicable, but in no event later than 30 days following the end of the first
calendar month ending at least 30 days after the Effective Time, in form and
substance sufficient to remove the restrictions in connection with the
pooling-of-interests accounting rules contained therein.
Section 4.12. NOTIFICATION OF CERTAIN MATTERS. Each party
shall give prompt notice to the others of: (a) any event or notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by it or any of its Subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties, businesses or
results of operations of each party and its Subsidiaries taken as a whole to
which each party or any Subsidiary is a party or is subject; and (b) any event,
condition, change or occurrence which individually or in the aggregate has, or
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Effect. Each of JSB and NFB
shall give prompt notice to the other party of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with any of the transactions contemplated by this
Agreement.
Section 4.13. DIRECTORS AND OFFICERS.
(a) NFB agrees to cause Park T. Adikes (the "New NFB
Director") to be elected or appointed as a director of NFB and NFB Bank at, or
as promptly as practicable after, the Effective Time; provided, however, that if
Mr. Adikes does not become a director of NFB or NFB Bank because of death,
disability or otherwise, or if Mr. Adikes shall cease to be a director of NFB or
NFB Bank at any time before the third anniversary of the Effective Time, NFB
agrees to cause a person who is a member of the Board of Directors of JSB as of
the date hereof to be elected or appointed as the New NFB Director.
(b) At the Effective Time, NFB shall cause NFB Bank, or, if
the Bank Merger is not effected, JSB Bank, to assume and honor the JSB Bank
Outside Directors' Consultation and Retirement Plan ("JSB Bank Outside
Directors' Plan") in accordance with the terms and conditions of such plan as of
the date hereof; provided, however, that, notwithstanding any provision of such
plan to the contrary, (i) effective immediately prior to the Effective Time, the
references to "fifteen (15) years" in Section 3 of the JSB Bank Outside
Directors' Plan regarding eligibility shall be amended so as to refer to "one
(1) year" for the purpose of making all eight outside directors of JSB Bank
participants under such plan and (ii) any outside member of the JSB Bank Board
of Directors who does not become a member of the Board of Directors of NFB Bank
from and after the Effective Time shall have the right to commence receiving
benefits under the JSB Bank Outside Directors' Plan effective as of the
Effective Time and shall not be required to provide consulting services in order
to receive such benefits; provided, further, that in no event shall any
amendment or termination of the JSB Bank Outside Directors' Plan on or after the
Effective Time adversely affect the right
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of any plan participant, former participant or beneficiary thereof to receive
any benefits under such plan in respect of participation for any period ending
on or before the date on which such amendment or termination is adopted or, if
later, the date on which it is made effective. NFB Bank and JSB Bank also agree
that all individuals who, prior to the Effective Time, were receiving benefits
under the JSB Bank Outside Directors' Plan shall continue to receive all such
benefits from this plan on the same terms and conditions from and after the
Effective Time.
(c) NFB shall use all reasonable efforts to identify and offer
employment opportunities to qualified, satisfactorily performing officers and
employees of JSB and its Subsidiaries in positions within the business
operations of NFB and its Subsidiaries for which such officers and employees are
qualified. NFB shall give, and shall cause its Subsidiaries to give, priority
consideration to all such officers and employees of JSB and its Subsidiaries
vis-a-vis all individuals other than current officers and employees of NFB;
provided, however, that officers and employees of JSB and its Subsidiaries who
become employed by NFB or its Subsidiaries shall then be treated on an equal
basis with the officers and employees of NFB and its Subsidiaries.
(d) NFB shall honor (i) the Employment Agreements between JSB
and, respectively, Park T. Adikes, Edward P. Henson, Joanne Corrigan, Thomas R.
Lehmann, Lawrence J. Kane, John F. Bennett, Jack Connors, John J. Conroy,
Bernice Glaz, Teresa D. Covello, Joseph J. Hennessy, Philip Pepe, Daniel J.
Huber and Laurel M. Romito, each as amended and restated as of June 22, 1999 and
(ii) the Employment Agreements between JSB Bank and, respectively, Park T.
Adikes, Edward P. Henson, Joanne Corrigan, Thomas R. Lehmann, Lawrence J. Kane,
John F. Bennett, Jack Connors, John J. Conroy, Bernice Glaz, Teresa D. Covello,
Joseph J. Hennessy, Philip Pepe, Daniel J. Huber and Laurel M. Romito, each as
amended and restated as of June 22, 1999, by permitting JSB to pay to each such
individual on the Closing Date the lump sum amounts that are due under each
agreement and by providing any additional payments or benefits in accordance
with the terms of such Employment Agreements, regardless of whether or not the
individual officer continues employment with NFB or NFB Bank. NFB and JSB have
delivered to each other a good faith reasonable estimate of the amounts payable
on the Closing Date under the Employment Agreements, based upon procedures and
information available at the date of this Agreement, and the procedures used in
preparing such estimates shall be followed in determining the actual amounts
payable under the Employment Agreements on the Closing Date, which estimate is
attached hereto as Schedule 4.13(d).
Section 4.14. INDEMNIFICATION; DIRECTORS' AND OFFICERS'
INSURANCE.
(a) From and after the Effective Time through the sixth
anniversary of the Effective Date, NFB agrees to indemnify and hold harmless
each present and former director and officer of JSB and its Subsidiaries and
each officer or employee of JSB and its Subsidiaries that is serving or has
served as a director or trustee of another entity expressly at JSB's request or
direction (each, an "Indemnified Party"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time (including the transactions contemplated by this
Agreement, including the entering into of the JSB Option Agreement), whether
asserted or claimed prior to, at or after the Effective Time, and to advance any
such Costs to each Indemnified Party as they are from time to time incurred, in
each case to the fullest extent such Indemnified Party would have been
indemnified as a director, officer or employee of JSB and its Subsidiaries and
as then permitted under applicable law.
(b) Any Indemnified Party wishing to claim indemnification
under Section 4.14(a), upon learning of any such claim, action, suit, proceeding
or investigation, shall promptly notify NFB thereof, but the failure to so
notify shall not relieve NFB of any liability it may have hereunder to such
Indemnified Party
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if such failure does not materially prejudice the indemnifying party. In the
event of any such claim, action, suit, proceeding or investigation, (i) NFB
shall have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Party and NFB shall not be liable to such
Indemnified Party for any legal expenses of other counsel subsequently incurred
by such Indemnified Party in connection with the defense thereof, except that if
NFB does not elect to assume such defense within a reasonable time or counsel
for the Indemnified Party at any time advises that there are issues which raise
conflicts of interest between NFB and the Indemnified Party (and counsel for NFB
does not disagree), the Indemnified Party may retain counsel satisfactory to
such Indemnified Party, and NFB shall remain responsible for the reasonable fees
and expenses of such counsel as set forth above, to be paid promptly as
statements therefor are received; provided, however, that NFB shall be obligated
pursuant to this paragraph (b) to pay for only one firm of counsel for all
Indemnified Parties in any one jurisdiction with respect to any given claim,
action, suit, proceeding or investigation unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest; (ii)
the Indemnified Party will reasonably cooperate in the defense of any such
matter; and (iii) NFB shall not be liable for any settlement effected by an
Indemnified Party without its prior written consent, which consent may not be
withheld unless such settlement is unreasonable in light of such claims,
actions, suits, proceedings or investigations against, or defenses available to,
such Indemnified Party.
(c) NFB shall pay all reasonable Costs, including attorneys'
fees, that may be incurred by any Indemnified Party in successfully enforcing
the indemnity and other obligations provided for in this Section 4.14 to the
fullest extent permitted under applicable law. The rights of each Indemnified
Party hereunder shall be in addition to any other rights such Indemnified Party
may have under applicable law.
(d) For a period of six years after the Effective Time, NFB
shall cause the former directors and officers of JSB to be covered by the policy
of directors and officers liability insurance currently maintained by JSB;
provided, however, that NFB may substitute therefor a policy of at least the
same coverage and containing terms no less advantageous to the beneficiaries
thereof than such policies (including, without limitation, by providing coverage
under its existing policy); provided, however, that in no event shall NFB be
obligated to expend, in order to maintain or provide insurance coverage pursuant
to this Section 4.14(d), any premium per annum in excess of 175% of the amount
of the annual premiums paid as of the date hereof by JSB for such insurance
("Maximum Agreement"); provided, further, that if the amount of the annual
premiums necessary to maintain or procure such insurance coverage exceeds the
Maximum Amount, NFB shall obtain the most advantageous coverage of directors'
and officers' insurance obtainable for an annual premium equal to the Maximum
Amount; and provided, further, that officers and directors of JSB may be
required to make application and provide customary representations and
warranties to NFB's insurance carrier for the purpose of obtaining such
insurance.
Section 4.15. EMPLOYEES; BENEFIT PLANS AND PROGRAMS.
(a) Each person who is employed by JSB or JSB Bank immediately
prior to the Effective Time (a "JSB Employee") shall, at the Effective Time,
become an employee of NFB or NFB Bank (unless the Bank Merger is not effected,
in which case the references in this Section 4.15 to NFB Bank shall mean JSB
Bank). Beginning at the Effective Time, each of the JSB Employees shall serve
NFB or NFB Bank in the same capacity in which he or she served immediately prior
to the Effective Time and upon the same terms and conditions generally
applicable to other employees of NFB or NFB Bank with comparable positions, with
the following special provisions:
(i) No JSB Employee shall be, or have or exercise the
authority of, an officer of NFB or NFB Bank unless and until elected or
appointed an officer of NFB or NFB Bank in accordance with NFB's or NFB
Bank's bylaws.
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(ii) At or as soon as practicable following the
Effective Time, NFB and NFB Bank shall establish and implement a program of
compensation and benefits designed to cover all similarly situated
employees on a uniform basis ("New Compensation and Benefits Program"). The
New Compensation and Benefits Program may contain any combination of new
plans, continuations of plans maintained by NFB or NFB Bank immediately
prior to the Effective Time and continuation of plans maintained by JSB or
JSB Bank immediately prior to the Effective Time as NFB, in its discretion,
may determine. To the extent that it is not practicable to implement any
constituent part of the New Compensation and Benefits Program at the
Effective Time, NFB and NFB Bank shall continue in effect any comparable
plan maintained immediately prior to the Effective Time for the respective
employees of NFB, JSB, NFB Bank and JSB Bank for a transition period.
During the transition period, the persons who were employees of JSB or JSB
Bank immediately prior to the Effective Time who become employees of NFB or
NFB Bank at the Effective Time shall continue to participate in the plans
of JSB and JSB Bank that are continued for transitional purposes, and all
other employees of NFB or NFB Bank will participate only in the comparable
plans of NFB and NFB Bank that are continued for transitional purposes.
(iii) Each constituent part of the New Compensation
and Benefits Program shall recognize, in the case of persons employed by
NFB, NFB Bank, JSB or JSB Bank immediately prior to the Effective Time who
are also employed by NFB or NFB Bank immediately after the Effective Time,
all service with NFB, NFB Bank, JSB or JSB Bank as service with NFB and NFB
Bank for all purposes, including eligibility, vesting, benefit accrual and
level of matching contributions; provided, however, that such service shall
not be recognized to the extent that such recognition would result in a
duplication of benefit; provided further, however, that in no event will
such recognition result in any current or former employees of JSB or any of
its Subsidiaries being covered under the post-retirement medical benefits
plan of NFB or any of its Subsidiaries to the extent such coverage is
provided at the expense of NFB or any of its Subsidiaries.
(iv) In the case of any constituent part of the New
Compensation and Benefits Program which is a life or health insurance plan:
(A) such plan shall not apply any preexisting condition limitations for
conditions covered under the applicable life or health insurance plans
maintained by NFB, NFB Bank, JSB and JSB Bank as of the Effective Time, (B)
each such plan which is a life or health insurance plan shall honor any
deductible and out of pocket expenses incurred under the applicable life or
health insurance plans maintained by NFB, NFB Bank, JSB and JSB Bank as of
the Effective Time and (C) each such plan which is a life insurance plan
shall waive any medical certification otherwise required in order to assure
the continuation of coverage at a level not less than that in effect
immediately prior to the implementation of such plan (but subject to any
overall limit on the maximum amount of coverage under such plans).
(b) NFB shall assume the obligations of JSB and JSB Bank with
respect to any severance plans or agreements identified in JSB's Disclosure
Letter, as they may be in effect at the Effective Time, and shall pay amounts
thereunder when due; provided, however, that in the event of the termination of
employment of officers and employees of JSB or JSB Bank within 15 months
following the Effective Time, such persons shall be provided severance benefits
equal to the greater of those provided under the JSB Bank Severance Plan or
those provided by NFB or NFB Bank under any severance plan maintained by NFB or
NFB Bank.
(c) Notwithstanding any other provision in this Agreement to
the contrary, officers and employees of JSB and its Subsidiaries who are covered
under the JSB Pension Plan immediately prior to the Effective Time and who
continue to be employed by NFB or its Subsidiaries on and after the Effective
Time shall, if, as of the Effective Time, they either:
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(i) are within 10 years of their normal retirement age
(as defined in the JSB Pension Plan) and have a period of service (as
defined in the JSB Pension Plan) of at least 10 years with JSB or its
Subsidiaries, or
(ii) have a period of service (as defined in the JSB
Pension Plan) of at least 25 years with JSB or its Subsidiaries,
have the right to elect to continue to accrue benefits under the benefit accrual
formula under the JSB Pension Plan rather than having their benefits be
determined under the NFB Cash Balance Retirement Plan.
(d) Notwithstanding any other provision in this Agreement to
the contrary, if the Closing Date occurs after December 31, 1999, the amounts
payable to any officer or employee of JSB under the Benefit Restoration Plan of
Jamaica Savings Bank FSB ("JSB Bank BRP") shall be determined under the
actuarial factors and interest rate assumptions in effect on December 31, 1999
even if such factors and assumptions would otherwise have changed by the express
terms of the JSB Bank BRP, the JSB Pension Plan, by changes in the law (such as
the pension and benefit provisions of the Uruguay Round Agreements Act of the
General Agreement on Tariffs and Trade ("GATT")), or otherwise, the purpose of
this Section 4.15(d) being that any benefits payable under the JSB Bank BRP
shall be determined under the actuarial factors and interest rate assumptions in
effect on December 31, 1999. JSB shall, and shall cause JSB Bank to, take all
actions as shall be necessary to provide that no change-in-control, termination
or severance payments or benefits (including without limitation any amounts paid
under the agreements listed in Section 4.13(d)) will be taken into account for
purposes of determining any amounts payable under the JSB Bank BRP.
(e) In the event that the Closing Date occurs on or before
December 31, 1999, the employees of JSB Bank shall receive bonuses in accordance
with JSB Bank's past practices (and the amount of such bonuses shall be based
upon such employees' compensation for the entire year of 1999), and such bonuses
shall be paid at least five business days prior to the Closing Date. In the
event that the Closing Date occurs on or after January 1, 2000, (i) the
employees of JSB Bank shall be paid bonuses in accordance with JSB Bank's past
practices (and the amount of such bonuses shall be based upon such employees'
compensation for the entire year of 1999) for 1999, which shall be paid in
December 1999 in accordance with JSB Bank's past practices, and (ii) the
employees of JSB Bank shall be paid additional bonuses equal to the amounts
payable to each such employee as a bonus for 1999 multiplied by a fraction, the
numerator of which is the number of days in 2000 through and including the
Closing Date and the denominator of which is 366, and such additional bonuses
shall be paid at least five business days prior to the Closing Date. A schedule
showing the aggregate bonus estimates for 1999 is attached hereto as Schedule
4.15(e).
(f) Employees of JSB Bank who have obtained or who have
received approval to obtain, at any time prior to the Closing Date, a loan or a
mortgage loan under the existing JSB Bank employee loan program shall continue
to receive the benefits of such employee loan program, subject to the terms and
conditions of such program; provided, however, that if the employment of any
such employee with JSB Bank or, after the Closing Date, NFB Bank, shall
terminate for any reason other than cause, the interest rate reduction under the
employee loan shall continue in effect notwithstanding such termination of
employment.
(g) Employees of JSB Bank (other than officers) shall be
entitled to receive attendance bonuses in accordance with JSB Bank's past
practices for 1999, and, if the Closing Date occurs after December 31, 1999,
such persons shall be entitled to attendance bonuses in accordance with JSB
Bank's past practices for 2000, pro-rated through the Closing Date in the manner
described in Section 4.15(e).
(h) Employees of JSB Bank shall be entitled to receive payment
for accrued but unused vacation days in accordance with JSB Bank's past
practices, and any accrued but unused vacation days of
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employees of JSB Bank as of the Closing Date shall, at the employee's option,
either be paid immediately prior to the Closing Date or taken as vacation time
as soon as practicable following the Closing Date; provided, however, that JSB
shall deliver to NFB, not later than 15 business days after the date of this
Agreement, a schedule of employees indicating their accrued but unused vacation
days as of the most recent date practicable. Life insurance and continued health
insurance for retirees of JSB Bank shall be continued in accordance with JSB
Bank's past practices, to the extent that such continued coverage does not
result in a material increase in the costs of such continued coverage to NFB
Bank over the costs of such coverage to JSB Bank. JSB and NFB agree to use all
reasonable efforts to review the tax-qualified defined benefit plans of both
banks with a view towards, effective as of the Closing Date, continuing, to the
extent practicable, the types and forms of benefits under the JSB Pension Plan
for participants in such JSB Pension Plan whose employment is terminated upon or
within one-year following the Closing Date, particularly with respect to the
100% joint and survivor form of benefits provided in the event that the
participant dies prior to the commencement of the participant's benefit
payments. JSB Bank shall make a contribution to the JSB Bank Employee Stock
Ownership Plan ("JSB Bank ESOP") for 1999 in accordance with its past practices
and such contribution shall be allocated in accordance with the terms of the JSB
Bank ESOP. A pro-rated JSB Bank contribution shall be made to the JSB Bank ESOP
for the portion of the year 2000 through the Closing Date.
Section 4.16 ADVISORY BOARD. NFB shall, promptly following the
Effective Time, cause all of the members of JSB's Board of Directors as of the
date of this Agreement, other than the New NFB Director, who are willing to so
serve to be elected or appointed as members of NFB's advisory board ("Advisory
Board"), the function of which shall be to advise NFB with respect to deposit
and lending activities in JSB's former market area and to maintain and develop
customer relationships. The members of the Advisory Board who are willing to so
serve shall be elected to serve an initial term of three years beginning on the
Effective Date. Each member of the Advisory Board shall receive an annual
retainer fee for such service of $25,000, payable in monthly installments or in
one lump sum at any time in advance at the option of NFB, notwithstanding that
such Advisory Board members are receiving benefits under the JSB Bank Outside
Directors' Plan. Service on the Advisory Board shall be considered service as a
director of NFB for purposes of any stock option plan of JSB or NFB.
ARTICLE V
CONDITIONS TO CONSUMMATION
--------------------------
Section 5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The
respective obligations of each party to effect the Merger , the Bank Merger and
any other transactions contemplated by this Agreement shall be subject to the
satisfaction of the following conditions:
(a) this Agreement shall have been approved by (i) the
requisite vote of JSB's stockholders in accordance with applicable law and
regulations and (ii) the requisite vote of NFB's stockholders in accordance with
applicable law and regulations;
(b) the Requisite Regulatory Approvals and any necessary
regulatory consents and waivers with respect to this Agreement and the
transactions contemplated hereby shall have been obtained and shall remain in
full force and effect, and all statutory waiting periods shall have expired;
(c) no party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger or the Bank Merger;
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(d) no statute, rule or regulation shall have been enacted,
entered, promulgated, interpreted, applied or enforced by any Governmental
Entity which prohibits, restricts or makes illegal consummation of the Merger or
the Bank Merger;
(e) the Registration Statement shall have been declared
effective by the SEC and no proceedings shall be pending or threatened by the
SEC to suspend the effectiveness of the Registration Statement; all required
approvals by state securities or "blue sky" authorities with respect to the
transactions contemplated by this Agreement shall have been obtained; and
(f) NFB shall have caused to be listed on the NYSE, or on such
other market on which shares of NFB Common Stock shall then be trading, subject
only to official notice of issuance, the shares of NFB Common Stock to be issued
by NFB in exchange for the shares of JSB Common Stock.
Section 5.2. CONDITIONS TO THE OBLIGATIONS OF NFB AND NFB
BANK. The obligations of NFB and NFB Bank to effect the Merger, the Bank Merger
and any other transactions contemplated by this Agreement shall be further
subject to the satisfaction of the following additional conditions, any one or
more of which may be waived by NFB:
(a) each of the obligations of JSB and JSB Bank, respectively,
required to be performed by it at or prior to the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with in all
material respects and the representations and warranties of JSB and JSB Bank
contained in this Agreement shall be true and correct, subject to Sections 2.1
and 2.2, as of the date of this Agreement and as of the Effective Time as though
made at and as of the Effective Time (except as to any representation or
warranty which specifically relates to an earlier date). NFB shall have received
a certificate to the foregoing effect signed by the chief executive officer and
the chief financial or principal accounting officer of JSB;
(b) all action required to be taken by, or on the part of, JSB
and JSB Bank to authorize the execution, delivery and performance of this
Agreement and the consummation by JSB and JSB Bank of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors and stockholders of JSB or JSB Bank, as the case may be, and NFB shall
have received certified copies of the resolutions evidencing such authorization;
(c) JSB shall have obtained the consent, waiver or approval of
each person (other than the regulatory approvals or consents referred to in
Section 5.1(b)) whose consent, waiver or approval shall be required in order to
consummate the Merger or the Bank Merger or to permit the succession by the
surviving corporation pursuant to the Merger to any obligation, right or
interest of JSB or its Subsidiaries under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument to which
JSB or its Subsidiaries is a party or is otherwise bound, except those for which
failure to obtain such consents, waivers and approvals would not, individually
or in the aggregate, have a Material Adverse Effect on NFB (after giving effect
to the consummation of the transactions contemplated hereby) or upon the
consummation of the transactions contemplated hereby;
(d) NFB shall have received certificates (such certificates to
be dated as of a day as close as practicable to the Closing Date) from
appropriate authorities as to the corporate existence and good standing of JSB
and JSB Bank; and
(e) NFB shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP ("Skadden"), counsel to NFB, dated as of the Effective
Date, in form and substance reasonably satisfactory to NFB, substantially to the
effect that on the basis of the facts, representations and assumptions set forth
in such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be
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treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code. In rendering its opinion, Skadden may require and
rely upon, in addition to the review of such matters of fact and law as Skadden
considers appropriate, representations and covenants, including those contained
in certificates of officers of NFB, NFB Bank, JSB, JSB Bank and others,
reasonably satisfactory in form and substance to Skadden.
Section 5.3. CONDITIONS TO THE OBLIGATIONS OF JSB AND JSB
BANK. The obligations of JSB and JSB Bank to effect the Merger, the Bank Merger
and any other transactions contemplated by this Agreement shall be further
subject to the satisfaction of the following additional conditions, any one or
more of which may be waived by JSB:
(a) each of the obligations of NFB and NFB Bank, respectively,
required to be performed by it at or prior to the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with in all
material respects and the representations and warranties of NFB and NFB Bank
contained in this Agreement shall be true and correct, subject to Sections 2.1
and 2.2, as of the date of this Agreement and as of the Effective Time as though
made at and as of the Effective Time (except as to any representation or
warranty which specifically relates to an earlier date). JSB shall have received
a certificate to the foregoing effect signed by the chief executive officer and
the chief financial or principal accounting officer of NFB;
(b) all action required to be taken by, or on the part of, NFB
and NFB Bank to authorize the execution, delivery and performance of this
Agreement and the consummation by NFB and NFB Bank of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors and stockholders of NFB or NFB Bank, as the case may be, and JSB shall
have received certified copies of the resolutions evidencing such authorization;
(c) NFB shall have obtained the consent, waiver or approval of
each person (other than the governmental approvals or consents referred to in
Section 5.1(b)) whose consent, waiver or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument to which NFB or its Subsidiaries is a party or is otherwise bound,
except those for which failure to obtain such consents, waivers and approvals
would not, individually or in the aggregate, have a Material Adverse Effect on
NFB (after giving effect to the transactions contemplated hereby) or upon the
consummation of the transactions contemplated hereby;
(d) JSB shall have received certificates (such certificates to
be dated as of a day as close as practicable to the Closing Date) from
appropriate authorities as to the corporate existence and good standing of NFB
and NFB Bank; and
(e) JSB shall have received an opinion of Thacher Proffitt &
Wood ("Thacher Proffitt"), counsel to JSB, dated as of the Effective Date, in
form and substance reasonably satisfactory to JSB, substantially to the effect
that on the basis of the facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
its opinion, Thacher Proffitt may require and rely upon, in addition to the
review of such matters of fact and law as Thacher Proffitt considers
appropriate, representations and covenants, including those contained in
certificates of officers of NFB, NFB Bank, JSB, JSB Bank and others, reasonably
satisfactory in form and substance to Thacher Proffitt.
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ARTICLE VI
TERMINATION
-----------
Section 6.1 TERMINATION. This Agreement may be terminated, and
the Merger abandoned, at or prior to the Effective Date, either before or after
its approval by the stockholders of JSB and NFB:
(a) by the mutual consent of NFB and JSB, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board;
(b) by NFB or JSB, if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the event of (i) the
failure of the stockholders of JSB or NFB to approve the Agreement at its
Stockholder Meeting called to consider such approval; provided, however, that
JSB or NFB, as the case may be, shall only be entitled to terminate the
Agreement pursuant to this clause (i) if it has complied in all material
respects with its obligations under Sections 4.8 and 4.9, or (ii) a material
breach by the other party hereto of any representation, warranty, covenant or
agreement contained herein which causes the conditions set forth in Section
5.2(a) (in the case of termination by NFB) and Section 5.3(a) (in the case of
the termination by JSB) not to be satisfied and such breach is not cured within
25 business days after written notice of such breach is given to the party
committing such breach by the other party or which breach is not capable of
being cured by the date set forth in Section 6.1(d) or any extension thereof;
(c) by NFB or JSB, by written notice to the other party, if
either (i) any approval, consent or waiver of a Governmental Entity required to
permit consummation of the transactions contemplated hereby shall have been
denied or (ii) any governmental authority of competent jurisdiction shall have
issued a final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Agreement;
(d) by NFB or JSB, if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the event that the
Merger is not consummated by February 29, 2000 ("Initial Termination Date"),
unless the failure to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in this Agreement by the party
seeking to terminate; provided, that if, as of such date, all necessary
regulatory or governmental approvals, consents or waivers required to consummate
the transactions contemplated hereby shall not have been obtained but all other
conditions to the consummation of the Merger (other than the delivery of
executed documents at the Closing) shall be fulfilled, the Initial Termination
Date shall be extended to April 30, 2000;
(e) by NFB or JSB, if the Board of Directors of the other
party does not publicly recommend in the Joint Proxy Statement-Prospectus that
its stockholders approve and adopt this Agreement or if, after recommending in
the Joint Proxy Statement-Prospectus that its stockholders approve and adopt
this Agreement, the Board of Directors of the other party shall have withdrawn,
qualified or revised such recommendation in any respect materially adverse to
the party seeking to terminate this Agreement; or
(f) by JSB, if its Board of Directors so determines by a
majority vote of the members of its entire Board, if both of the following
conditions are satisfied:
(i) the NFB Market Value on the Valuation Date is
less than $16.35; and
(ii) (A) the number obtained by dividing the NFB
Market Value as of the Valuation Date by the Initial NFB Market Value ("NFB
Ratio") shall be less than (B) the number
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<PAGE>
obtained by dividing the Final Index Price by the Initial Index Price and
subtracting 0.10 from the quotient in this clause (ii)(B) ("Index Ratio");
subject, however, to the following three sentences. If JSB elects to exercise
its termination right pursuant to this Section 6.1(f), it shall give written
notice thereof to NFB at any time during the five business day period commencing
on the day following the Valuation Date; provided, that such notice of election
to terminate may be withdrawn at any time during the 15 business day period
commencing on the day such notice is received by NFB. During the five business
day period commencing with its receipt of such notice, NFB shall have the option
to increase the consideration to be received by the holders of JSB Common Stock
hereunder by increasing the Exchange Ratio from 3.0 to a number equal to the
lesser of (1) the product of (x) the Index Ratio plus 0.10 and (y) 3.0, divided
by the NFB Ratio or (2) the quotient obtained by dividing $61.31 by the NFB
Market Value. If NFB so elects, it shall give, within such five business day
period, written notice to JSB of such election and the revised Exchange Ratio,
whereupon no termination shall be deemed to have occurred pursuant to this
Section 6.1(f) and this Agreement shall remain in full force and effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified).
For purposes of this Section 6.1(f), the following terms shall have the meanings
indicated below:
"Acquisition Transaction" shall have the meaning set forth in
Section 3.4(e), without regard to subsection (ii) of the proviso set forth
therein.
"Final Index Price" means the sum of the Final Prices for each
company comprising the Index Group multiplied by the weighting set forth
opposite such company's name in the definition of Index Group below.
"Final Price," with respect to any company belonging to the
Index Group, means the average of the daily closing sales prices of a share of
common stock of such company (and if there is no closing sales price on any such
day, then the mean between the closing bid and the closing asked prices on that
day), as reported on the consolidated transaction reporting system for the
market or exchange on which such common stock is principally traded, for the 15
consecutive trading days immediately preceding the Valuation Date.
"Index Group" means the 25 financial institution holding
companies listed below, the common stock of all of which shall be publicly
traded and as to which there shall not have been an Acquisition Transaction
involving any of such companies publicly announced at any time during the period
beginning on the date of this Agreement and ending on the day immediately
preceding the Valuation Date. In the event that:
(i) the common stock of any of such companies ceases to be
publicly traded, or
(ii) an Acquisition Transaction involving any of such
companies is announced at any time during the period beginning on the date
of this Agreement and ending on the day immediately preceding the Valuation
Date, or
(iii) any such company shall announce at any time during the
period beginning on the date of this Agreement and ending on the day
immediately preceding the Valuation Date that it has entered into a
definitive agreement to acquire insured deposits from another financial
institution in excess of 20% of its deposit base as of the most recent
quarter end for which information is available or intends to issue
additional capital securities in excess of 10% of the total value of its
Tier 1 capital securities outstanding as of the most recent quarter end for
which information is available,
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<PAGE>
then such company or companies will be removed from the Index Group, and the
weights attributed to the remaining companies will be adjusted proportionately
for purposes of determining the Final Index Price and the Initial Index Price;
provided, however, that, in the event an Acquisition Transaction is publicly
announced which involves only companies that are listed below, none of such
companies shall be removed from the Index Group. The 25 financial institution
holding companies and the weights attributed to them are as follows:
Holding Company Symbol Weighting
- --------------- ------ ---------
Astoria Financial Corporation ASFC 4.71%
CCB Financial Corporation CCB 4.90%
Charter One Financial, Inc. COFI 10.43%
Chittenden Corporation CHZ 1.96%
City National Corporation CYN 3.73%
Dime Bancorp, Inc. DME 5.57%
Dime Community Bancshares, Inc. DCOM 0.73%
First Commonwealth Financial Corporation FCF 1.77%
FirstMerit Corporation FMER 6.07%
Fulton Financial Corporation FULT 3.38%
GreenPoint Financial Corp. GPT 8.19%
Independence Community Bank Corp. ICBC 2.06%
Keystone Financial, Inc. KSTN 3.31%
M & T Bank Corporation MTB 9.24%
Peoples Heritage Financial Group, Inc. PHBK 4.58%
Queens County Bancorp, Inc. QCSB 1.53%
Reliance Bancorp, Inc. RELY 0.60%
Richmond County Financial Corp. RCBK 1.50%
State Bancorp, Inc. STB 0.29%
Staten Island Bancorp, Inc. SIB 1.81%
Suffolk Bancorp SUBK 0.41%
Summit Bancorp SUB 15.22%
Susquehanna Bancshares, Inc. SUSQ 1.52%
Valley National Bancorp VLY 4.01%
Webster Financial Corporation WBST 2.48%
-------
100.00%
"Initial Index Price" means the sum of the per share closing
sales price of the common stock of each company comprising the Index Group
multiplied by the applicable weighting, as such prices are reported on the
consolidated transaction reporting system for the market or exchange on which
such common
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<PAGE>
stock is principally traded on the trading day immediately preceding
the public announcement of this Agreement.
"Initial NFB Market Value" means the closing sales price of a
share of NFB Common Stock, as reported on the NYSE, on the trading day
immediately preceding the public announcement of this Agreement, adjusted as
indicated in the last sentence of this Section 6.1(f).
"NFB Market Value" shall have the meaning set forth in Section
1.2(b) hereof.
"Valuation Date" shall have the meaning set forth in Section
1.2(c) hereof.
If NFB or any company belonging to the Index Group declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the date of this Agreement and the
Valuation Date, the prices for the common stock of such company shall be
appropriately adjusted for the purposes of applying this Section 6.1(f).
Section 6.2 EFFECT OF TERMINATION. In the event of the
termination of this Agreement by either NFB or JSB, as provided above, this
Agreement shall thereafter become void and, subject to Section 6.3, there shall
be no liability on the part of any party hereto or their respective officers or
directors, except that (a) any such termination shall be without prejudice to
the rights of any party hereto arising out of the breach by any other party of
any covenant, representation or obligation contained in this Agreement and (b)
the obligations of the parties under the last three sentences in Section 4.3(a)
and under Section 8.6 shall survive.
Section 6.3 TERMINATION FEE. In recognition of the efforts,
expenses and other opportunities foregone by NFB and JSB, respectively, while
structuring the Merger, the parties hereto agree that:
(a) NFB shall pay to JSB a termination fee of Twelve Million,
Five Hundred Thousand Dollars ($12,500,000) plus JSB's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) in cash on demand if, within 12 months after the date of
this Agreement, after a written bona fide proposal is made after the date of
this Agreement by a third party to NFB or its stockholders to engage in an
Acquisition Transaction (as defined in Section 3.4(e)), other than any
Acquisition Transaction permitted pursuant to the terms of this Agreement,
including without limitation Section 3.4(e) (a "Permitted Transaction"), any of
the following occur:
(i) NFB shall have willfully breached any covenant or
obligation contained in this Agreement and such breach would entitle JSB to
terminate the Agreement;
(ii) the stockholders of NFB shall not have approved
the Agreement at the meeting of such stockholders held for the purpose of
voting on the Agreement, such meeting shall not have been held or shall
have been canceled prior to termination of the Agreement; or
(iii) NFB's Board of Directors shall have withdrawn or
modified in a manner adverse to JSB the recommendation of NFB's Board of
Directors with respect to the Agreement; and
(b) NFB shall pay to JSB a termination fee of Twenty-Five
Million Dollars ($25,000,000) plus JSB's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) in cash on demand if, during a period of 18 months after the date
hereof, NFB or any of its Subsidiaries, without having received JSB's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as defined in Section 3.4(e)), other than
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<PAGE>
a Permitted Transaction, with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act and the rules and regulations thereunder) other than JSB or
any of its Subsidiaries or the Board of Directors of NFB shall have recommended
that the stockholders of NFB approve or accept an Acquisition Transaction other
than a Permitted Transaction with any person other than JSB or any of its
Subsidiaries. Any fee payable to JSB pursuant to Section 6.3(b) shall be reduced
dollar for dollar to the extent that any fee is actually paid pursuant to
Section 6.3(a). Notwithstanding the foregoing, NFB shall not be obligated to pay
to JSB the termination fee described in Section 6.3(a) or Section 6.3(b) in the
event that at or prior to such time as such fee becomes payable (i) NFB and JSB
validly terminate this Agreement pursuant to Section 6.1(a), (ii) NFB or JSB
validly terminates this Agreement pursuant to Sections 6.1(c) or 6.1(d), (iii)
NFB validly terminates this Agreement pursuant to Section 6.1(b) or Section
6.1(e) or (iv) JSB validly terminates this Agreement pursuant to Section 6.1(f).
(c) JSB shall pay to NFB a termination fee of Twelve Million,
Five Hundred Thousand Dollars ($12,500,000) plus NFB's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) in cash on demand if, within 12 months after the date of
this Agreement, after a bona fide proposal is made after the date of this
Agreement by a third party to JSB or its stockholders to engage in an
Acquisition Transaction (as defined in the JSB Option Agreement), any of the
following occur:
(i) JSB shall have willfully breached any covenant or
obligation contained in this Agreement and such breach would entitle
NFB to terminate the Agreement;
(ii) the stockholders of JSB shall not have approved
the Agreement at the meeting of such stockholders held for the purpose
of voting on the Agreement, such meeting shall not have been held or
shall have been canceled prior to termination of the Agreement; or
(iii) JSB's Board of Directors shall have withdrawn
or modified in a manner adverse to NFB the recommendation of JSB's
Board of Directors with respect to the Agreement; and
(d) JSB shall pay to NFB a termination fee of Twenty-Five
Million Dollars ($25,000,000) plus NFB's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) in cash on demand if, during a period of 18 months after the date
hereof, JSB or any of its Subsidiaries, without having received NFB's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as defined in the JSB Option Agreement) with any person
other than NFB or any of its Subsidiaries or the Board of Directors of JSB shall
have recommended that the stockholders of JSB approve or accept an Acquisition
Transaction (as defined in the JSB Option Agreement) with any person other than
NFB or any of its Subsidiaries. Any fee payable to NFB pursuant to this Section
6.3(d) shall be reduced dollar for dollar to the extent that any fee is actually
paid pursuant to Section 6.3(c). Notwithstanding the foregoing, JSB shall not be
obligated to pay to NFB the termination fee described in Section 6.3(c) or
Section 6.3(d) in the event that at or prior to such time as such fee becomes
payable (i) NFB and JSB validly terminate this Agreement pursuant to Section
6.1(a), (ii) NFB or JSB validly terminates this Agreement pursuant to Sections
6.1(c) or 6.1(d) or (iii) JSB validly terminates this Agreement pursuant to
Section 6.1(b), Section 6.1(e) or Section 6.1(f).
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<PAGE>
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
------------------------------------------
Section 7.1. EFFECTIVE DATE AND EFFECTIVE TIME. The closing of
the transactions contemplated hereby ("Closing") shall take place at the offices
of Thacher Proffitt & Wood, Two World Trade Center, New York, New York 10048, on
a date ("Closing Date") that is no later than five business days following the
date on which the expiration of the last applicable waiting period in connection
with notices to and approvals of regulatory and governmental authorities shall
occur and all conditions to the consummation of this Agreement are satisfied or
waived, or on such other date as may be agreed to by the parties. Prior to the
Closing Date, NFB and JSB shall execute a Certificate of Merger in accordance
with all appropriate legal requirements, which shall be filed as required by law
on the Closing Date, and the Merger provided for therein shall become effective
upon such filing or on such date as may be specified in such Certificate of
Merger. The date of such filing or such later effective date as specified in the
Certificate of Merger is herein referred to as the "Effective Date." The
"Effective Time" of the Merger shall be as set forth in the Certificate of
Merger.
Section 7.2 DELIVERIES AT THE CLOSING. Subject to the
provisions of Articles V and VI, on the Closing Date there shall be delivered to
NFB and JSB the documents and instruments required to be delivered under Article
V.
ARTICLE VIII
CERTAIN OTHER MATTERS
---------------------
Section 8.1. CERTAIN DEFINITIONS; INTERPRETATION. As used in
this Agreement, the following terms shall have the meanings indicated:
"material" means material to NFB or JSB (as the case may be)
and its respective Subsidiaries, taken as a whole.
"person" includes an individual, corporation, limited
liability company, partnership, association, trust or unincorporated
organization.
When a reference is made in this Agreement to Sections, Exhibits or Schedules,
such reference shall be to a Section of, Exhibit or Schedule to, this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation." Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular. Any reference to gender
in this Agreement shall be deemed to include any other gender.
Section 8.2. SURVIVAL. Only those agreements and covenants of
the parties that are by their terms applicable in whole or in part after the
Effective Time, including Sections 4.3(a), 4.13, 4.14, 4.15, 4.16, 4.17 and 8.6
of this Agreement, shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall not survive the Effective Time. If
the Agreement shall be terminated, the agreements of the parties in the last
three sentences of Section 4.3(a) and in Section 8.6 shall survive such
termination.
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<PAGE>
Section 8.3 WAIVER; AMENDMENT. Prior to the Effective Time,
any provision of this Agreement may be: (i) waived in writing by the party
benefitted by the provision or (ii) amended or modified at any time (including
the structure of the transaction) by an agreement in writing between the parties
hereto except that, after the vote by the stockholders of JSB or NFB, no
amendment or modification may be made that would reduce the Merger Consideration
or contravene any provision of the Delaware General Corporation Law or the
federal banking laws, rules and regulations.
Section 8.4. COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
Section 8.5. GOVERNING LAW. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of New York,
without regard to conflicts of laws principles.
Section 8.6. EXPENSES. Each party hereto will bear all
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby.
Section 8.7 NOTICES. All notices, requests, acknowledgments
and other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, overnight courier or
facsimile transmission (confirmed in writing) to such party at its address or
facsimile number set forth below or such other address or facsimile transmission
as such party may specify by notice to the other party hereto.
If to JSB, to:
JSB Financial, Inc.
303 Merrick Road
Lynbrook, New York 11563
Facsimile: (516) 887-6007
Attention: Mr. Park T. Adikes
Chairman of the Board and
Chief Executive Officer
With copies to:
JSB Financial, Inc.
303 Merrick Road
Lynbrook, New York 11563
Facsimile: (516) 887-6007
Attention: Mr. Lawrence J. Kane
Executive Vice President
and
Douglas J. McClintock, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Facsimile: 212-432-2898
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<PAGE>
If to NFB, to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Facsimile: (516) 844-1471
Attention: Mr. John Adam Kanas
Chairman, President and
Chief Executive Officer
With copies to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Facsimile: (516) 844-1471
Attention: Mr. Daniel M. Healy
Executive Vice President and
Chief Financial Officer
and
William S. Rubenstein, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2000
Section 8.8 ENTIRE AGREEMENT; ETC. This Agreement, together
with the Plan of Bank Merger, the JSB Option Agreement and the Disclosure
Letters, represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and all
other oral or written agreements heretofore made. All terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Except for Section
4.13 (other than Section 4.13(c)) and Section 4.14, which confer rights on the
parties described therein, nothing in this Agreement is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 8.9. ASSIGNMENT. This Agreement may not be assigned by
either party hereto without the written consent of the other party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the 16th day of
August, 1999.
NORTH FORK BANCORPORATION, INC.
By: /s/ John Adam Kanas
----------------------------------
John Adam Kanas
Chairman of the Board, President and
Chief Executive Officer
JSB FINANCIAL, INC.
By: /s/ Park T. Adikes
----------------------------------
Park T. Adikes
Chairman of the Board and
Chief Executive Officer
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JSB FINANCIAL, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 16, 1999
("Agreement"), by and between JSB Financial, Inc., a Delaware corporation
("Issuer"), and North Fork Bancorporation, Inc., a Delaware corporation
("Grantee").
RECITALS
A. The Agreement and Plan of Merger. Grantee and Issuer have
entered into an Agreement and Plan of Merger, dated as of August 16, 1999
("Merger Agreement"), providing for, among other things, the merger of Issuer
with and into Grantee, with Grantee being the surviving corporation.
B. Condition to Agreement and Plan of Merger. As a condition
and an inducement to Grantee's execution and delivery of the Merger Agreement,
Grantee has required that Issuer agree, and Issuer has agreed, to grant Grantee
the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein and in the Merger Agreement, and intending to be legally bound hereby,
Issuer and Grantee agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but
not defined herein shall have the meanings ascribed to such terms in the Merger
Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option ("Option")
to purchase up to 1,848,092 shares of common stock, par value $.01 per share
("Issuer Common Stock"), of Issuer (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares, but in no event shall the number of Option Shares for which
this Option is exercisable exceed 19.9% of the issued and outstanding shares of
Issuer Common Stock), at a purchase price per Option Share (as adjusted as set
forth herein, the "Purchase Price") equal to $58.75.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the agreements or
covenants contained in this Agreement or the Merger Agreement, and (ii) no
preliminary or permanent injunction or other order against the delivery of
shares covered by the Option issued by any court of competent jurisdiction in
the United States shall be in effect, the Holder may exercise the Option, in
whole or in part, at any time and from time to time, following the occurrence of
a Purchase Event (as hereinafter defined); provided, that, the Option shall
terminate and be of no further force or effect upon the earliest to occur of (A)
the Effective Time, (B) termination of the Merger Agreement in accordance with
the terms thereof prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event other than a termination thereof by Grantee pursuant to Section
6.1(b)(ii) of the Merger Agreement (a termination of the Merger Agreement by
Grantee pursuant to Section 6.1(b)(ii) of the Merger Agreement, being referred
to herein as a "Default Termination"), (C) 18 months after a Default Termination
or (D) 18 months after termination of the Merger Agreement (other than a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event; PROVIDED, however, that any purchase of shares upon exercise of
the Option shall be subject to compliance with applicable law; PROVIDED FURTHER,
<PAGE>
HOWEVER, that if the Option cannot be exercised on any day because of an
injunction, order or similar restraint issued by a court of competent
jurisdiction, the period during which the Option may be exercised shall be
extended so that the Option shall expire no earlier than the tenth business day
after such injunction, order or restraint shall have been dissolved or when such
injunction, order or restraint shall have become permanent and no longer subject
to appeal, as the case may be. The term "Holder" shall mean the holder or
holders of the Option from time to time, and which initially is Grantee. The
rights set forth in Sections 8 and 9 of this Agreement shall terminate when the
right to exercise the Option and Substitute Option terminate (other than as a
result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent, Issuer
shall have authorized, recommended, publicly proposed or publicly
announced an intention to authorize, recommend or propose, or Issuer
shall have entered into an agreement with any person (other than
Grantee or any subsidiary of Grantee) to effect (A) a merger,
consolidation or similar transaction involving Issuer or any of its
significant subsidiaries, (B) the disposition, by sale, lease, exchange
or otherwise, of assets or deposits of Issuer or any of its significant
subsidiaries representing in either case 10% or more of the
consolidated assets or deposits of Issuer and its subsidiaries, other
than in the ordinary course of business, or (C) the issuance, sale or
other disposition by Issuer of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 10% or more of the voting power of Issuer or any of its
significant subsidiaries (each of (A), (B) or (C), an "Acquisition
Transaction"); or
(ii) Any person (other than Grantee or any subsidiary
of Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended ("Exchange Act")) of, or the right to acquire beneficial
ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act), other than a group of which Grantee or
any subsidiary of Grantee is a member, shall have been formed which
beneficially owns, or has the right to acquire beneficial ownership of,
10% or more of the voting power of Issuer or any of its significant
subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any
of the following events:
(i) Any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act) or shall have filed a registration statement
under the Securities Act of 1933, as amended, ("Securities Act"), with
respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such
person would own or control 10% or more of the then outstanding shares
of Issuer Common Stock (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer," respectively); or
(ii) The stockholders of Issuer shall not have
approved the Merger Agreement by the requisite vote at the meeting of
the stockholders of the Issuer required to be called to approve the
Merger Agreement ("Issuer Meeting"), the Issuer Meeting shall not have
been held or shall have been canceled prior to termination of the
Merger Agreement or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Merger Agreement, in each case
after it shall have been publicly announced that any person (other than
Grantee or any subsidiary of Grantee) shall have (A) made, or disclosed
an intention to make, a bona fide proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to
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<PAGE>
an Exchange Offer or (C) filed an application (or given a notice),
whether in draft or final form, under the Bank Holding Company Act of
1956, as amended ("BHC Act"), the Home Owners' Loan Act of 1933, as
amended ("HOLA"), the Bank Merger Act, as amended ("BMA") or the Change
in Bank Control Act of 1978, as amended ("CBCA"), for approval to
engage in an Acquisition Transaction; or
(iii) Any person (other than Grantee or any
subsidiary of Grantee) shall have made a bona fide proposal to Issuer
or its stockholders by public announcement, or written communication
that is or becomes the subject of public disclosure, to engage in an
Acquisition Transaction; or
(iv) After a proposal is made by a third party to
Issuer or its stockholders to engage in an Acquisition Transaction, or
such third party states its intention to the Issuer to make such a
proposal if the Merger Agreement terminates, and thereafter Issuer
shall have breached any representation, warranty, covenant or agreement
contained in the Merger Agreement and such breach would entitle Grantee
to terminate the Merger Agreement under Section 6.1(b) thereof (without
regard to the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the Merger
pursuant to the terms of the Merger Agreement).
As used in this Agreement, the term "person" shall have the
meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event of which it has
knowledge, it being understood that the giving of such notice by Issuer shall
not be a condition to the right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it
shall send to Issuer a written notice (the "Option Notice," the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of Option Shares it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 15 business
days from the Notice Date for the closing ("Closing") of such purchase ("Closing
Date"); provided, that the first Option Notice shall be sent to Issuer within
180 days after the first Purchase Event of which Grantee has been notified. If
prior notification to or approval of any Governmental Entity is required in
connection with any such purchase, Issuer shall cooperate with the Holder in the
filing of the required notice of application for approval and the obtaining of
such approval, and the Closing shall occur promptly following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 13(f)
of this Agreement.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a) of this Agreement, (i) Issuer shall deliver to Holder (A) a
certificate or certificates representing the Option Shares to be purchased at
such Closing, which Option Shares shall be free and clear of all liens (as
defined in the Merger Agreement) and subject to no preemptive rights, and (B) if
the Option is exercised in part only, an executed new agreement with the same
terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock
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purchasable hereunder, and (ii) Holder shall deliver to Issuer a letter agreeing
that Holder shall not offer to sell or otherwise dispose of such Option Shares
in violation of applicable federal and state law or of the provisions of this
Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF AUGUST
16, 1999. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the portion of the above legend relating to the
Securities Act shall be removed by delivery of substitute certificate(s) without
such legend if Holder shall have delivered to Issuer a copy of a letter from the
staff of the Securities and Exchange Commission ("SEC"), or an opinion of
counsel in form and substance reasonably satisfactory to Issuer and its counsel,
to the effect that such legend is not required for purposes of the Securities
Act.
(d) Upon the giving by Holder to Issuer of an Option Notice,
the tender of the applicable purchase price in immediately available funds and
the tender of this Agreement to Issuer, Holder shall be deemed to be the holder
of record of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Issuer Common Stock shall not then
be actually delivered to Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.
(e) Issuer agrees (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Issuer Common Stock so that the Option may be exercised without
additional authorization of Issuer Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Issuer
Common Stock, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer, (iii) promptly to take all action as may from time to time
be required (including (A) complying with all premerger notification, reporting
and waiting period requirements and (B) in the event prior approval of or notice
to any Governmental Entity is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Governmental Entity as it may require) in
order to permit Holder to exercise the Option and Issuer duly and effectively to
issue shares of Issuer Common Stock pursuant hereto and (iv) promptly to take
all action provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee (and Holder, if different than Grantee) as
follows:
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(a) Corporate Authority. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of
Issuer, and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and
validly executed and delivered by Issuer.
(b) Beneficial Ownership. To the best knowledge of Issuer, as
of the date of this Agreement, no person or group has beneficial
ownership of more than 10% of the issued and outstanding shares of
Issuer Common Stock.
(c) Shares Reserved for Issuance; Capital Stock. Issuer has
taken all necessary corporate action to authorize and reserve and
permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms, will have
reserved for issuance upon the exercise of the Option, that number of
shares of Issuer Common Stock equal to the maximum number of shares of
Issuer Common Stock at any time and from time to time purchasable upon
exercise of the Option, and all such shares, upon issuance pursuant to
the Option, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims,
liens, encumbrances and security interests (other than those created by
this Agreement) and not subject to any preemptive rights.
(d) No Violations. The execution, delivery and performance of
this Agreement does not and will not, and the consummation by Issuer of
any of the transactions contemplated hereby will not, constitute or
result in (i) a breach or violation of, or a default under, its
Certificate of Incorporation or By-Laws, or the comparable governing
instruments of any of its subsidiaries, or (ii) a breach or violation
of, or a default under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time
or both) or under any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or
license to which it or any of its subsidiaries is subject, that would,
in any case, give any other person the ability to prevent or enjoin
Issuer's performance under this Agreement in any material respect.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby
represents and warrants to Issuer that Grantee has full corporate power and
authority to enter into this Agreement and, subject to obtaining the approvals
referred to in this Agreement, to consummate the transactions contemplated by
this Agreement; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Grantee; and this Agreement has
been duly executed and delivered by Grantee.
7. ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing any such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
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described in the first sentence of this Section 7(a), upon exercise of any
option to purchase Issuer Common Stock outstanding on the date hereof or upon
conversion into Issuer Common Stock of any convertible security of Issuer
outstanding on the date hereof), the number of shares of Issuer Common Stock
subject to the Option shall be adjusted so that, after such issuance, the
Option, together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option. No provision of this Section 7 shall be deemed to
affect or change, or constitute authorization for any violation of, any of the
covenants or representations in the Merger Agreement.
(b) In the event that Issuer shall enter into an agreement (i)
to consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property, or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall, after such merger, represent less than 50% of the outstanding
shares and share equivalents of the merged company or (iii) to sell or otherwise
transfer all or substantially all of its assets or deposits to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
("Substitute Option"), at the election of Holder, to purchase shares of either
(A) the Acquiring Corporation (as hereinafter defined), (B) any person that
controls the Acquiring Corporation or (C) in the case of a merger described in
clause (ii), Issuer (such person being referred to as "Substitute Option
Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided, that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. The Substitute Option Issuer shall
also enter into an agreement with Holder in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of Substitute Common Stock ("Substitute Option Price") shall
then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of Issuer Common Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (B) Issuer in a merger in which Issuer
is the continuing or surviving person, or (C) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares
of capital stock (or similar equity interest) with the greatest voting
power in respect of the election of directors (or
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persons similarly responsible for the direction of the business and
affairs) of the Substitute Option Issuer.
(iii) "Assigned Value" shall mean the highest of (A)
the price per share of Issuer Common Stock at which a Tender Offer or
an Exchange Offer therefor has been made, (B) the price per share of
Issuer Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (C) the highest closing price for shares of
Issuer Common Stock within the 60-day period immediately preceding the
consolidation, merger or sale in question and (D) in the event of a
sale of all or substantially all of Issuer's assets or deposits, an
amount equal to (x) the sum of the price paid in such sale for such
assets (and/or deposits) and the current market value of the remaining
assets of Issuer, as determined by a nationally recognized investment
banking firm selected by Holder, divided by (y) the number of shares of
Issuer Common Stock outstanding at such time. In the event that a
Tender Offer or an Exchange Offer is made for Issuer Common Stock or an
agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally recognized investment banking firm
selected by Holder.
(iv) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question,
but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation, merger
or sale; provided, that, if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into Issuer or by any
company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
outstanding but for the limitation in the first sentence of this Section 7(f),
Substitute Option Issuer shall make a cash payment to Holder equal to the excess
of (i) the value of the Substitute Option without giving effect to the
limitation in the first sentence of this Section 7(f) over (ii) the value of the
Substitute Option after giving effect to the limitation in the first sentence of
this Section 7(f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in
Section 7(b) of this Agreement unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value (other than any diminution in
value resulting from the fact that the shares Substitute Common Stock are
restricted securities, as defined in Rule 144, promulgated under the Securities
Act ("Rule 144"), or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) of this
Agreement, at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)
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hereof) and ending 12 months immediately thereafter, Issuer shall repurchase
from Holder (i) the Option and (ii) all shares of Issuer Common Stock purchased
by Holder pursuant hereto with respect to which Holder then has beneficial
ownership. The date on which Holder exercises its rights under this Section 8 is
referred to as the "Request Date." Such repurchase shall be at an aggregate
price ("Section 8 Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for
any shares of Issuer Common Stock acquired pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable Price
(as defined below) for each share of Issuer Common Stock over (B) the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement), multiplied by the number of shares of Issuer Common Stock
with respect to which the Option has not been exercised; and
(iii) The excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to Section 7 of
this Agreement) paid (or, in the case of Option Shares with respect to
which the Option has been exercised but the Closing Date has not
occurred, payable) by Holder for each share of Issuer Common Stock with
respect to which the Option has been exercised and with respect to
which Holder then has beneficial ownership, multiplied by the number of
such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within 10 business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all Liens. Notwithstanding
the foregoing, to the extent that prior notification to or approval of any
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to this Section 8, in whole
or in part, or to require that Issuer deliver from time to time that portion of
the Section 8 Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
approval). If any Governmental Entity disapproves of any part of Issuer's
proposed repurchase pursuant to this Section 8, Issuer shall promptly give
notice of such fact to Holder and Holder shall have the right (i) to revoke the
repurchase request or (ii) to the extent permitted by such Governmental Entity,
determine whether the repurchase should apply to the Option and/or Option Shares
and to what extent to each, and Holder shall thereupon have the right to
exercise the Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the number of shares covered by the Option
in respect of which payment has been made pursuant to Section 8(a)(ii) of this
Agreement. Holder shall notify Issuer of its determination under the preceding
sentence within five business days of receipt of notice of disapproval of the
repurchase. Notwithstanding anything herein to the contrary, in the event that
Issuer delivers to the Holder written notice accompanied by a certification of
Issuer's independent auditor each stating that a requested repurchase of Issuer
Common Stock would result in the recapture of Issuer's bad debt reserves under
the Internal Revenue Code of 1986, as amended ("Code"), Holder's repurchase
request shall be deemed to be automatically revoked. Notwithstanding anything
herein to the contrary, all of Holder's rights under this Section 8 shall
terminate on the date of termination of this Option pursuant to Section 3(a) of
this Agreement.
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(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock paid
for any such share by the person or groups described in Section 8(d)(i) hereof,
(ii) the price per share of Issuer Common Stock received by holders of Issuer
Common Stock in connection with any merger, sale or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement, or (iii) the highest closing sales price per share of Issuer Common
Stock as quoted on the New York Stock Exchange ("NYSE"), the American Stock
Exchange ("AMEX") or the National Market System of The Nasdaq Stock Market
("Nasdaq") (or if Issuer Common Stock is not quoted on the NYSE, AMEX or Nasdaq,
the highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source chosen by Holder) during the 40 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3, promulgated
under the Exchange Act), or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of,
more than 25% of the then outstanding shares of Issuer Common Stock, or (ii) any
of the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement shall be consummated.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) Subject to the last sentence of Section 3(a) of this
Agreement, at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and ending
12 months immediately thereafter, Substitute Option Issuer (or any successor
entity thereof) shall repurchase from Holder (i) the Substitute Option and (ii)
all shares of Substitute Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 9 is referred to as the "Section 9
Request Date." Such repurchase shall be at an aggregate price ("Section 9
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for
any shares of Substitute Common Stock acquired pursuant to the
Substitute Option with respect to which Holder then has beneficial
ownership;
(ii) The excess, if any, of (A) the Highest Closing
Price (as defined below) for each share of Substitute Common Stock over
(B) the Purchase Price (subject to adjustment pursuant to Section 7 of
this Agreement), multiplied by the number of shares of Substitute
Common Stock with respect to which the Substitute Option has not been
exercised; and
(iii) The excess, if any, of the Highest Closing
Price over the Purchase Price (subject to adjustment pursuant to
Section 7 of this Agreement) paid (or, in the case of Substitute Option
Shares with respect to which the Substitute Option has been exercised
but the Closing Date has not occurred, payable) by Holder for each
share of Substitute Common Stock with respect to
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which the Substitute Option has been exercised and with respect to
which Holder then has beneficial ownership, multiplied by the number of
such shares.
(b) If Holder exercises its rights under this Section 9,
Substitute Option Issuer shall, within 10 business days after the Section 9
Request Date, pay the Section 9 Repurchase Consideration to Holder in
immediately available funds, and contemporaneously with such payment, Holder
shall surrender to Substitute Option Issuer the Substitute Option and the
certificates evidencing the shares of Substitute Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all Liens. Notwithstanding
the foregoing, to the extent that prior notification to or approval of any
Governmental Entity is required in connection with the payment of all or any
portion of the Section 9 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to this Section 9, in whole
or in part, or to require that Substitute Option Issuer deliver from time to
time that portion of the Section 9 Repurchase Consideration that it is not then
so prohibited from paying and promptly file the required notice or application
for approval and expeditiously process the same (and each party shall cooperate
with the other in the filing of any such notice or application and the obtaining
of any such approval). If any Governmental Entity disapproves of any part of
Substitute Option Issuer's proposed repurchase pursuant to this Section 9,
Substitute Option Issuer shall promptly give notice of such fact to Holder and
Holder shall have the right (i) to revoke the repurchase request or (ii) to the
extent permitted by such Governmental Entity, determine whether the repurchase
should apply to the Substitute Option and/or Substitute Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Substitute Option as to the number of Substitute Option Shares for which the
Substitute Option was exercisable at the Section 9 Request Date less the number
of shares covered by the Substitute Option in respect of which payment has been
made pursuant to Section 9(a)(ii) of this Agreement. Holder shall notify
Substitute Option Issuer of its determination under the preceding sentence
within five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, in the event that Substitute
Option Issuer delivers to the Holder written notice accompanied by a
certification of Substitute Option Issuer's independent auditor each stating
that a requested repurchase of Substitute Common Stock would result in the
recapture of Substitute Option Issuer's bad debt reserves under the Code,
Holder's repurchase request shall be deemed to be automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's rights under
this Section 9 shall terminate on the date of termination of this Substitute
Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Highest Closing
Price" means the highest of the closing sales price per share of Substitute
Common Stock, as quoted on the NYSE, AMEX or Nasdaq (or if the Substitute Common
Stock is not quoted on the NYSE, AMEX or Nasdaq, the highest bid price per share
as quoted on the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source) during the six-month
period preceding the Section 9 Request Date.
10. REGISTRATION RIGHTS.
(a) Demand Registration Rights. Issuer shall, subject to the
conditions of Section 10(c) of this Agreement, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Shareholder"), as
expeditiously as possible, prepare and file and keep current a registration
statement under the Securities Act if such registration is necessary in order to
permit the sale or other disposition of any or all shares of Issuer Common Stock
or other securities that have been acquired by or are issuable to the Selling
Shareholder upon exercise of the Option in accordance with the intended method
of sale or other disposition stated by the Selling Shareholder in such request,
including without limitation a "shelf" registration statement under Rule 415,
promulgated under the Securities Act, or any successor provision, and Issuer
shall use its best efforts to qualify such shares or other securities for sale
under any applicable state securities laws.
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(b) Additional Registration Rights. If Issuer at any time
after the exercise of the Option proposes to register any shares of Issuer
Common Stock under the Securities Act in connection with an underwritten public
offering of such Issuer Common Stock, Issuer will promptly give written notice
to the Selling Shareholders of its intention to do so and, upon the written
request of any Selling Shareholder given within 30 days after receipt of any
such notice (which request shall specify the number of shares of Issuer Common
Stock intended to be included in such underwritten public offering by the
Selling Shareholder), Issuer will cause all such shares for which a Selling
Shareholder requests participation in such registration, to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause some or all of such shares to be so registered (i) if the
underwriters in the Public Offering in good faith object for valid business
reasons, or (ii) in the case of a registration solely to implement an employee
benefit agreement or a registration filed on Form S-4 of the Securities Act or
any equivalent or successor Form. If some, but not all the shares of Issuer
Common Stock, with respect to which Issuer shall have received requests for
registration pursuant to this Section 10(b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among the Selling Shareholders desiring to register their shares pro
rata in the proportion that the number of shares requested to be registered by
each such Selling Shareholder bears to the total number of shares requested to
be registered by all such Selling Shareholders then desiring to have Issuer
Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
10(a) of this Agreement to become effective and to obtain all consents or
waivers of other parties which are required therefor and to keep such
registration statement effective, provided, however, that Issuer may delay any
registration of Option Shares required pursuant to Section 10(a) of this
Agreement for a period not exceeding 90 days provided Issuer shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by Issuer, and Issuer shall not be
required to register Option Shares under the Securities Act pursuant to Section
10(a) hereof:
(i) Prior to the earliest of (A) termination of the
Merger Agreement pursuant to Article VI thereof, (B) failure to obtain
the requisite stockholder approval pursuant to Section 6.1(b) of the
Merger Agreement, and (C) a Purchase Event or a Preliminary Purchase
Event;
(ii) On more than one occasion during any calendar
year;
(iii) Within 90 days after the effective date of a
registration referred to in Section 10(b) of this Agreement pursuant to
which the Selling Shareholder or Selling Shareholders concerned were
afforded the opportunity to register such shares under the Securities
Act and such shares were registered as requested; and
(iv) Unless a request therefor is made to Issuer by
Selling Shareholders that hold at least 25% or more of the aggregate
number of Option Shares (including shares of Issuer Common Stock
issuable upon exercise of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state or local securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares; provided, however, that Issuer
shall not be required to consent to general jurisdiction or qualify to do
business in any state or locality where it is not otherwise required to so
consent to such jurisdiction or to so qualify to do business.
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(d) Expenses. Except where applicable state law prohibits such
payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses (including the
fees and expenses of counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are being registered,
printing expenses and the costs of special audits or "cold comfort" letters,
expenses of underwriters, excluding discounts and commissions but including
liability insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to Section 10(a) or 10(b) of this Agreement
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to Section 10(a) or
10(b) of this Agreement.
(e) Indemnification. (i) In connection with any registration
under Section 10(a) or 10(b) of this Agreement, Issuer hereby indemnifies the
Selling Shareholders, and each underwriter thereof, including each person, if
any, who controls such holder or underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, losses, claims, damages and
liabilities caused by any untrue, or alleged untrue, statement of a material
fact contained in any registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission, or alleged omission, to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expenses, losses,
claims, damages or liabilities of such indemnified party are caused by any
untrue statement or alleged untrue statement that was included by Issuer in any
such registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon and in
conformity with, information furnished in writing to Issuer by such indemnified
party expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Shareholders,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement, that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such holder or such underwriter, as the case
may be, expressly for such use.
(ii) Promptly upon receipt by a party indemnified under this
Section 10(e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this Section 10(e), such indemnified party
shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
Section 10(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (x) the indemnifying party either
agrees to pay the same, (y) the indemnifying party fails to assume the defense
of such action with counsel satisfactory to the indemnified party, or (z) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
(iii) If the indemnification provided for in this Section
10(e) is unavailable to a party otherwise entitled to be indemnified in respect
of any expenses, losses, claims, damages or liabilities referred
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to herein, then the indemnifying party, in lieu of indemnifying such party
otherwise entitled to be indemnified, shall contribute to the amount paid or
payable by such party to be indemnified as a result of such expenses, losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative benefits received by Issuer, the Selling Shareholders and the
underwriters from the offering of the securities and also the relative fault of
Issuer, the Selling Shareholders and the underwriters in connection with the
statements or omissions which resulted in such expenses, losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
amount paid or payable by a party as a result of the expenses, losses, claims,
damages and liabilities referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall any Selling Shareholder be responsible, in the aggregate, for any
amount in excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any holder to indemnify shall be several
and not joint with other holders.
(iv) In connection with any registration pursuant to Section
10(a) or 10(b) of this Agreement, Issuer and each Selling Shareholder (other
than Grantee) shall enter into an agreement containing the indemnification
provisions of Section 10(e) of this Agreement.
(f) MISCELLANEOUS REPORTING. Issuer shall comply with all
reporting requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent permitted by any rule
or regulation promulgated by the SEC from time to time, including, without
limitation, Rule 144. Issuer shall at its expense provide the Selling
Shareholders with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Act or the Exchange Act, or required pursuant to any state securities
laws or the rules of any stock exchange.
(g) ISSUE TAXES. Issuer will pay all stamp taxes in connection
with the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
11. QUOTATION; LISTING. If Issuer Common Stock or any other
securities to be acquired in connection with the exercise of the Option are then
authorized for quotation or trading or listing on the NYSE, AMEX, Nasdaq or any
other securities exchange, Issuer, upon the request of Holder, will promptly
file an application, if required, to authorize for quotation or trading or
listing the shares of Issuer Common Stock or other securities to be acquired
upon exercise of the Option on the NYSE, AMEX, Nasdaq or such other securities
exchange and will use its best efforts to obtain approval, if required, of such
quotation or listing as soon as practicable.
12. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
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of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
13. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this agreement, in
no event shall Grantee's Total Profit (as hereinafter defined) exceed $30
million, plus Grantee's documented, reasonable out-of-pocket expenses (including
fees and expenses of legal, financial and accounting advisors) incurred in
connection with the transactions contemplated by the Merger Agreement, and, if
it otherwise would exceed such amount, Grantee, at its sole election, shall
either (i) deliver to Issuer for cancellation Shares previously purchased by
Grantee, (ii) pay cash or other consideration to Issuer or (iii) undertake any
combination thereof, so that Grantee's Total Profit shall not exceed $30
million, plus Grantee's documented, reasonable out-of-pocket expenses (including
fees and expenses of legal, financial and accounting advisors) incurred in
connection with the transactions contemplated by the Merger Agreement, after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of Shares as would, as of the
Notice Date, result in a Notional Total Profit (as defined below) of more than
$30 million, plus Grantee's documented, reasonable out-of-pocket expenses
(including fees and expenses of legal, financial and accounting advisors)
incurred in connection with the transactions contemplated by the Merger
Agreement, and, if exercise of the Option otherwise would exceed such amount,
Grantee, at its discretion, may increase the Purchase Price for that number of
Shares set forth in the Option Notice so that the Notional Total Profit shall
not exceed $30 million, plus Grantee's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) incurred in connection with the transactions contemplated by the
Merger Agreement; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date at the Purchase
Price set forth in Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount of cash
received by Grantee pursuant to Section 6.3 of the Merger Agreement and Section
8(a)(ii) hereof, (ii) (x) the amount received by Grantee pursuant to the
repurchase of Option Shares pursuant to Section 8 or Section 9 hereof, less
Grantee's purchase price for such Option Shares, and (iii) the net cash amounts
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less Grantee's purchase price for such Option Shares.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of Option Shares as to which Grantee may propose to
exercise this Option shall be the Total Profit determined as of the date of the
Option Notice assuming that this Option were exercised on such date for such
number of Shares and assuming that such Option Shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
14. MISCELLANEOUS.
(a) EXPENSES. Except to the extent expressly provided for
herein, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
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(b) WAIVER AND AMENDMENT. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES;
SEVERABILITY. This Agreement, together with the Merger Agreement and the other
documents and instruments referred to herein and therein, between Grantee and
Issuer (i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any person
other than the parties hereto (other than the indemnified parties under Section
10(e) of this Agreement and any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 14(h) of this
Agreement) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
Governmental Entity to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or Governmental Entity determines that the Option
does not permit Holder to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common Stock as provided in Section 3 of this
Agreement (as may be adjusted herein), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of New York without regard to
any applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Merger
Agreement (or at such other address for a party as shall be specified by like
notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the
Option by the Holder, Issuer, and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
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(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
(k) LIMITATION ON RESALE OF ISSUER COMMON STOCK. Grantee
agrees that no shares of Issuer Common Stock acquired by it upon exercise of the
Option, if any, shall be sold, transferred or otherwise disposed by it prior to
the termination of the Merger Agreement in accordance with the terms thereof,
except as follows. If the Grantee shall determine to accept a bona fide offer to
purchase the Issuer Common Stock then held by it or to sell any such Stock on
the open market, the Grantee shall give notice thereof to the Issuer specifying
(i) the Issuer Common Stock to be sold and (ii) the purchase price to be offered
therefor (or in the case of open market sales, that the sales are to be at
prices prevailing on the market) and any other significant terms of the proposed
transaction. Upon receipt of such notice, the Issuer shall, for a period of
three business days immediately following such receipt, have the right of first
refusal to purchase the Issuer Common Stock then held by Grantee that is
proposed to be sold at the purchase price set forth in such notice or, if such
shares are to be sold in open market transaction, at a purchase price equal to
the average of the closing prices therefor (and if there is no such closing
price on any of such days, then the mean of the closing bid and the closing
asked prices on that day) on the principal market on which Issuer Common Stock
is traded for the five trading days immediately prior to the Issuer's receipt of
such notice. Payment for such shares shall be made to the Grantee in immediately
available funds within three business days immediately following receipt of the
notice of the proposed sale.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
JSB FINANCIAL, INC.
By: /s/ Park T. Adikes
--------------------------------
Park T. Adikes
Chairman of the Board and Chief
Executive Officer
NORTH FORK BANCORPORATION, INC.
By: /s/ John Adam Kanas
--------------------------------
John Adam Kanas
Chairman of the Board,
President and Chief Executive
Officer
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