SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------------
Date of report (Date of earliest event reported): March 29, 1997
ASTORIA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-22228 11-3170868
(State or other Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
ONE ASTORIA FEDERAL PLAZA, LAKE SUCCESS, NEW YORK 11042-1085
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (516) 327-3000
NONE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On March 29, 1997, Astoria Financial Corporation, a Delaware
corporation ("Astoria Financial"), entered into an Agreement and Plan of Merger
(the "Merger Agreement") by and among Astoria Financial, Astoria Federal Savings
and Loan Association, a federally chartered savings and loan association and a
wholly-owned subsidiary of Astoria Financial (the "Association"), and The
Greater New York Savings Bank, a New York chartered stock savings bank ("The
Greater"), a copy of which is attached hereto as Exhibit 2.1. The Merger
Agreement provides, among other things, that The Greater will be merged with and
into the Association, with the Association being the surviving corporation (the
"Merger").
Pursuant to the Merger Agreement, each share of common stock of The
Greater issued and outstanding at the Effective Time (as defined in the Merger
Agreement) will be converted into the right to receive either 0.50 shares of
Astoria Financial common stock or $19.00 in cash, pursuant to an election
procedure as described in the Merger Agreement, subject to 75% of The Greater
shares receiving Astoria Financial common stock and 25% receiving cash. In
addition, the outstanding shares of the 12% Noncumulative Preferred Stock,
Series B, of The Greater will be converted into a newly-created series of
preferred stock of Astoria Financial with substantially identical, and no less
favorable, terms.
Consummation of the merger is subject to the satisfaction of certain
conditions, including approval of the shareholders of both Astoria Financial and
The Greater and approval of the appropriate regulatory agencies.
The Greater has the right to terminate the Merger Agreement if the
market value of Astoria Financial (as defined in the Merger Agreement) falls
below $30.30 per share and such decline in value is 15% greater than the
percentage decline of a group of similar financial institutions, unless Astoria
Financial delivers to The Greater's shareholders Astoria Financial shares having
a minimum value established pursuant to a formula set forth in the Merger
Agreement.
In connection with the Merger Agreement, Astoria Financial and The
Greater also entered into a Stock Option Agreement, dated as of March 29, 1997
and a copy of which is attached hereto as Exhibit 4.1, pursuant to which The
Greater granted Astoria Financial an option to purchase up to 2,721,536, or
19.9%, of The Greater's issued and outstanding shares of common stock, upon the
terms and conditions stated therein. The Merger Agreement also includes a
provision for a $5 million termination fee that is payable to Astoria Financial
if the transaction is not completed under certain circumstances.
This Current Report on Form 8-K/A may contain certain forward-looking
statements regarding Astoria Financial's acquisition of The Greater, including
cost savings to be realized, earnings accretion, transaction charges and other
opportunities following the acquisition which are based on management's current
expectations regarding economic, legislative and regulatory issues. The factors
which may cause future results to vary materially include, but are not limited
to, general economic conditions, changes in interest rates, deposit flows, loan
demand, real estate values, and competition; changes in accounting principles,
policies, or guidelines;
2
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changes in legislation or regulation; and other economic, competitive,
governmental, regulatory, and technological factors affecting each company's
operations, pricing, products and services.
Astoria Financial and The Greater publicly announced the Merger in a
press release dated March 31, 1997, a copy of which was attached to Astoria
Financial's Current Report on Form 8-K filed on March 31, 1997.
3
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits. The following Exhibits are filed as part of this
report:
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Agreement and Plan of Merger, dated as
of March 29, 1997, by and among Astoria
Financial Corporation, Astoria Federal
Savings and Loan Association and The
Greater New York Savings Bank.
4.1 Stock Option Agreement, dated as of
March 29, 1997, by and between The
Greater New York Savings Bank and
Astoria Financial Corporation.
99.1 Press Release issued on March 31, 1997.*
99.2 Analyst Presentation.*
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*Previously filed with Astoria Financial Corporation's Current Report on Form
8-K on March 31, 1997.
4
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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.
ASTORIA FINANCIAL CORPORATION
By: /s/ George L. Engelke, Jr.
-----------------------------------
George L. Engelke, Jr.
President and Chief
Executive Officer
Dated: April 8, 1997
5
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger, dated as
of March 29, 1997, by and among
Astoria Financial Corporation, Astoria
Federal Savings and Loan Association
and The Greater New York Savings
Bank.
4.1 Stock Option Agreement, dated as of
March 29, 1997, by and between The
Greater New York Savings Bank and
Astoria Financial Corporation.
99.1 Press Release issued on March 31, 1997*
99.2 Analyst Presentation.*
- ----------
*Previously filed with Astoria Financial Corporation's Current Report on Form
8-K on March 31, 1997.
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 29th DAY OF MARCH, 1997
BY AND AMONG
ASTORIA FINANCIAL CORPORATION
ASTORIA FEDERAL SAVINGS AND
LOAN ASSOCIATION
AND
THE GREATER NEW YORK SAVINGS BANK
================================================================================
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TABLE OF CONTENTS
INTRODUCTORY STATEMENT......................... 1
ARTICLE I
THE MERGER
Section 1.01 Structure of the Merger ....................................... 1
Section 1.02 Effect on Outstanding Shares .................................. 2
Section 1.03 Effect on Outstanding Shares of Company Preferred Stock ....... 3
Section 1.04 Fractional Shares ............................................. 3
Section 1.05 Elections ..................................................... 4
Section 1.06 Allocations of Merger Consideration ........................... 4
Section 1.07 Exchange Procedures ........................................... 6
Section 1.08 Dissenters' Rights ............................................ 8
Section 1.09 Options ....................................................... 9
Section 1.10 Directors and Officers of the Association after Effective Time. 10
Section 1.11 Liquidation Account ........................................... 10
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Disclosure Letters ............................................ 11
Section 2.02 Standards ..................................................... 11
Section 2.03 Representations and Warranties of the Company ................. 12
Section 2.04 Representations and Warranties of the Parent .................. 27
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.01 Conduct of the Company's Business Prior to the Effective Time . 40
Section 3.02 Forbearance by the Company .................................... 40
Section 3.03 Conduct of the Parent's Business Prior to the Effective Time .. 44
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ARTICLE IV
COVENANTS
Section 4.01 Acquisition Proposals ......................................... 45
Section 4.02 Certain Policies of the Company ............................... 45
Section 4.03 Employees; Benefit Plans and Programs ......................... 46
Section 4.04 Access and Information ........................................ 48
Section 4.05 Certain Filings, Consents and Arrangements .................... 49
Section 4.06 Antitakeover Provisions ....................................... 49
Section 4.07 Additional Agreements ......................................... 50
Section 4.08 Publicity ..................................................... 50
Section 4.09 Stockholders' Meeting ......................................... 50
Section 4.10 Proxy; Registration Statement ................................. 50
Section 4.11 Registration of Parent Common Stock ........................... 51
Section 4.12 Affiliate Letters ............................................. 51
Section 4.13 Notification of Certain Matters ............................... 52
Section 4.14 Advisory Board ................................................ 52
Section 4.15 Directors ..................................................... 52
Section 4.16 Indemnification; Directors' and Officers' Insurance ........... 53
Section 4.17 Transition Committee .......................................... 54
Section 4.18 Series A ESOP Convertible Preferred Stock ..................... 54
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.01 Conditions to Each Party's Obligations ........................ 55
Section 5.02 Conditions to the Obligations of the Parent and the Association
Under this Agreement ........................................ 56
Section 5.03 Conditions to the Obligations of the Company .................. 58
ARTICLE VI
TERMINATION
Section 6.01 Termination ................................................... 61
Section 6.02 Effect of Termination ......................................... 64
Section 6.03 Third Party Termination ....................................... 64
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ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.01 Effective Date and Effective Time ............................. 66
Section 7.02 Deliveries at the Closing ..................................... 66
ARTICLE VIII
OTHER MATTERS
Section 8.01 Certain Definitions; Interpretation ........................... 67
Section 8.02 Survival ...................................................... 67
Section 8.03 Waiver; Amendment ............................................. 67
Section 8.04 Counterparts .................................................. 67
Section 8.05 Governing Law ................................................. 68
Section 8.06 Expenses ...................................................... 68
Section 8.07 Notices ....................................................... 68
Section 8.08 Entire Agreement; etc ......................................... 69
Section 8.09 Assignment .................................................... 69
EXHIBITS
Exhibit A Form of Settlement Agreement
Exhibit B Form of Release
Exhibit C Form of Affiliate Letter
iii
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This is an AGREEMENT AND PLAN OF MERGER, dated as of the 29th day of
March, 1997 (this "Agreement"), by and among ASTORIA FINANCIAL CORPORATION, a
Delaware corporation (the "Parent"), ASTORIA FEDERAL SAVINGS AND LOAN
ASSOCIATION, a federally chartered savings and loan association and a wholly
owned subsidiary of the Parent (the "Association"), and THE GREATER NEW YORK
SAVINGS BANK, a New York chartered stock savings bank (the "Company").
INTRODUCTORY STATEMENT
The Board of Directors of each of the Parent and the Company (i) has
determined that this Agreement and the transactions contemplated hereby are in
the best interests of the Parent and the Company, respectively, and in the best
long-term interests of their respective stockholders, (ii) has determined that
this Agreement and the transactions contemplated hereby are consistent with, and
in furtherance of, its respective business strategies and (iii) has approved, at
meetings of each of such Boards of Directors, this Agreement.
Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to the Parent's willingness to enter into this
Agreement, the Parent and the Company have entered into a Stock Option Agreement
(the "Option Agreement") pursuant to which the Company has granted to the Parent
an option to purchase shares of the Company's common stock, par value $1.00 per
share (the "Company Common Stock"), upon the terms and conditions therein
contained.
The Parent and the Company desire to make certain representations,
warranties and agreements in connection with the business combination
transaction provided for herein and to prescribe various conditions to the
transaction.
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
SECTION 1.01 STRUCTURE OF THE MERGER. On the Effective Date (as defined
in Section 7.01), the Company will merge with and into the Association (the
"Merger"), with the Association being the surviving entity, pursuant to the
provisions of, and with the effect provided in, the rules and regulations of the
Office of Thrift Supervision (the "OTS") and the Banking Law of the State of New
York (the "NYBL") and pursuant to the terms and conditions of an agreement and
plan of merger to be entered into between the Association and the Company in a
form to be mutually agreed upon. The separate corporate existence of the Company
shall thereupon cease. The Association shall continue to be governed by the laws
of the United States
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and its name and separate corporate existence with all of its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger.
SECTION 1.02 EFFECT ON OUTSTANDING SHARES OF COMPANY COMMON STOCK.
(a) By virtue of the Merger, automatically and without any action on
the part of the holder thereof, each share of Company Common Stock issued and
outstanding at the Effective Time (as defined in Section 7.01) (other than (i)
shares the holder of which (the "Dissenting Stockholder") pursuant to any
applicable law providing for dissenters' or appraisal rights is entitled to
receive payment in accordance with the provisions of any such law, such holder
to have only the rights provided in any such law (the "Dissenters' Shares"),
(ii) shares held directly or indirectly by the Parent (other than shares held in
a fiduciary capacity or in satisfaction of a debt previously contracted), and
(iii) shares held as treasury stock of the Company (the "Excluded Shares") shall
become and be converted into, at the election of the holder thereof (subject to
the provisions of this Article), the right to receive: (x) the "Cash
Consideration," described below, or (y) the "Stock Consideration" consisting of
shares of common stock, par value $.01 per share of the Parent ("Parent Common
Stock"), together with the related preferred share purchase right issued
pursuant to the rights agreement (the "Parent Rights Agreement") between the
Parent and ChaseMellon Shareholder Services, L.L.C. dated as of July 17, 1996
(the "Preferred Share Purchase Right"), described below (collectively, the
"Merger Consideration").
(i) The Cash Consideration shall be $19.00 for each share of
Company Common Stock.
(ii) The Stock Consideration shall be 0.50 of a share of
Parent Common Stock for each share of Company Common Stock.
(iii) If between the date of this Agreement and the Effective
Time the outstanding shares of Parent 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 Merger Consideration shall
be adjusted correspondingly to the extent appropriate to reflect the Stock
Adjustment.
(iv) As used herein, "Parent Market Value" shall be the
average of the mean between the closing high bid and low asked prices of a share
of Parent Common Stock, as reported on the National Association of Securities
Dealers Automated Quotation System National Market System (the "Nasdaq"), for
the 30 consecutive trading days immediately preceding the day (the "Valuation
Date") which is the day that is the latest of (i) the day of expiration of the
last waiting period with respect to any of the required regulatory approvals, as
defined in Section 5.01(b), (ii) the day on which the last of the required
regulatory approvals, as defined in Section
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5.01(b), is obtained and (iii) the day on which the last of the required
stockholder approvals have been received.
(b) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be cancelled and retired and cease to exist, and no
exchange or payment shall be made with respect thereto.
(c) As of the Effective Time, all shares of Company Common Stock other
than Excluded Shares shall no longer be outstanding and shall be automatically
cancelled and retired and shall cease to exist, and each holder of a certificate
formerly representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration. After the Effective Time, there shall be no transfers on the
stock transfer books of the Parent.
SECTION 1.03 EFFECT ON OUTSTANDING SHARES OF COMPANY PREFERRED STOCK.
(a) Subject to Section 4.18 hereof, at or prior to the Effective Time,
the Company shall use such procedures as they deem necessary and appropriate in
order to cause the shares of Series A ESOP Convertible Preferred Stock to be
converted into Company Common Stock which shall include, if necessary, giving
notice of its intention to redeem the Series A ESOP Convertible Preferred Stock
in accordance with the terms thereof.
(b) At or immediately prior to the Effective Time, the Certificate of
Incorporation of the Parent shall be amended to (i) change the par value of the
authorized shares of Parent Preferred Stock from $0.01 per share to $1.00 per
share and (ii) fix the preferences of a newly-created Series B Preferred Stock
of the Parent (the "Parent Series B Preferred Stock") to have terms
substantially identical, and in any event no less favorable, to those of the 12%
Noncumulative Preferred Stock, Series B of the Company (the "Company Series B
Preferred Stock") and agreeable to the Company; PROVIDED, THAT, the Parent may,
in its sole discretion, effect such an amendment provided for in clause (ii)
above through a Certificate of Designations filed pursuant to Section 151 of the
Delaware General Corporation Law. At the Effective Time, each share of Company
Series B Preferred Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into, and shall become, one share of the
Parent Series A Preferred Stock.
SECTION 1.04 FRACTIONAL SHARES. Notwithstanding any other provision
hereof, no fraction of a whole share of Parent Common Stock and no certificates
or scrip therefor will be issued in the Merger; instead, the Parent shall pay to
each holder of Company Common Stock who would otherwise be entitled to a
fractional share an amount in cash, rounded to the nearest cent, determined by
multiplying such fraction by the Parent Market Value.
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SECTION 1.05 ELECTIONS.
(a) Subject to the allocation procedures set forth in this Article,
each holder of Company Common Stock will be entitled, with respect to the Merger
Consideration to be received for each share of Company Common Stock held by such
holder, to (i) elect to receive the Stock Consideration (a "Stock Election")
with respect to such holder's Company Common Stock ("Stock Election Shares"),
(ii) elect to receive the Cash Consideration (a "Cash Election") with respect to
such holder's Company Common Stock ("Cash Election Shares"), (iii) make no
election (a "No-Election") with respect to such holder's Company Common Stock
("No-Election Shares") or (iv) elect to make a Stock Election with respect to
some of such holder's shares of Company Common Stock and a Cash Election with
respect to the remaining shares of Company Common Stock held by such holder (a
"Split Election"). Any Dissenting Shares shall be deemed to be No-Election
Shares. Notwithstanding the foregoing, in order to make a Stock Election, the
number of shares of Company Common Stock a Company stockholder elects to convert
must equal or exceed 100 shares.
(b) An election form and other appropriate transmittal materials (the
"Letter of Transmittal and Election Form") will be mailed within three business
days after the Effective Date to each holder of record of Company Common Stock
as of the Effective Time permitting such holder (or in the case of nominee
record holders, the beneficial owner through proper instructions and
documentation) to make a (i) Stock Election, (ii) Cash Election, (iii)
No-Election or (iv) Split Election. Holders who hold in a variety of capacities
may make a separate election in each capacity. Any election shall have been
properly made only if a bank or trust company designated by the Parent (the
"Exchange Agent") shall have actually received a properly completed Letter of
Transmittal and Election Form by the Election Deadline, described below. A
Letter of Transmittal and Election Form will be properly completed only if
accompanied by certificates representing all shares of Company Common Stock
converted thereby. Any shares of Company Common Stock with respect to which the
holder thereof shall not, as of the Election Deadline, have made such an
election by submission to the Exchange Agent of an effective, properly completed
Letter of Transmittal and Election Form shall be deemed to be No-Election Shares
(as defined herein). The Exchange Agent shall have reasonable discretion to
determine when any election, modification or revocation is received and whether
any such election, modification or revocation has been properly made.
(c) The Election Deadline shall be 5:00 p.m., Eastern Time, on the 10th
business day following but not including the date of mailing of the Letter of
Transmittal and Election Form or such other date as the Parent and the Company
shall mutually agree upon.
SECTION 1.06 ALLOCATIONS OF MERGER CONSIDERATION.
(a) As provided below, 75% of the shares of Company Common Stock will
be converted into the right to receive the Stock Consideration. The Exchange
Agent shall effectuate
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the allocations of the Merger Consideration described below among the holders of
Company Common Stock within five business days after the Election Deadline.
(b) If the aggregate number of Cash Election Shares exceeds the number
of shares of Company Common Stock equal to 25% of the shares of Company Common
Stock outstanding at the Effective Time (excluding such shares which are to be
cancelled and retired in accordance with Section 1.02(d)) (the "Cash Election
Number"), all Stock Election Shares and all NoElection Shares outstanding at the
Effective Time shall be converted into the right to receive the Stock
Consideration, and the Cash Election Shares shall be converted into the right to
receive the Stock Consideration and the Cash Consideration in the following
manner:
each Cash Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the
product, rounded to the nearest 1(cent), of (x) the Cash
Consideration and (y) a fraction (the "Cash Fraction"), the
numerator of which shall be the Cash Election Number and the
denominator of which shall be the total number of Cash
Election Shares, and (ii) a number of shares of Parent Common
Stock equal to the product, rounded to four decimal places, of
(x) the Stock Consideration and (y) a number equal to one
minus the Cash Fraction.
(c) If the aggregate number of Stock Election Shares exceeds the number
of shares of Company Common Stock equal to 75% of the shares of Company Common
Stock outstanding at the Effective Time (excluding such shares which are to be
cancelled and retired in accordance with Section 1.02(d)) (the "Stock Election
Number"), all Cash Election Shares and all NoElection Shares shall be converted
into the right to receive the Cash Consideration, and all Stock Election Shares
shall be converted into the right to receive the Stock Consideration and the
Cash Consideration in the following manner:
each Stock Election Share shall be converted into the right to
receive (i) a number of shares of Parent Common Stock equal to
the product, rounded to four decimal places, of (x) the Stock
Consideration and (y) a fraction (the "Stock Fraction"), the
numerator of which shall be the Stock Election Number and the
denominator of which shall be the total number of Stock
Election Shares, and (ii) an amount of cash, without interest,
equal to the product, rounded to the nearest 1(cent), of (x)
the Cash Consideration and (y) a number equal to one minus the
Stock Fraction.
(d) In the event that the number of Cash Election Shares does not
exceed the Cash Election Number and the number of Stock Election Shares does not
exceed the Stock Election Number, all Cash Election Shares shall be converted
into the right to receive the Cash Consideration, all Stock Election Shares
shall be converted into the right to receive the Stock
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Consideration, and the No-Election Shares shall be converted into either the
right to receive the Stock Consideration or the Cash Consideration as determined
by random selection so that the result provided for in Section 1.06(a) is
achieved.
(e) The random selection process to be used by the Exchange Agent
pursuant to this Section 1.06 will consist of drawing by lot or such other
process as the Exchange Agent deems equitable and necessary to effect the
allocations described in such subparagraphs.
SECTION 1.07 EXCHANGE PROCEDURES.
(a) At and after the Effective Time, each certificate previously
representing shares of Company Common Stock (except as specifically set forth in
Section 1.02) shall represent only the right to receive the Merger Consideration
and each certificate previously representing shares of Company Series B
Preferred Stock shall be deemed to represent shares of Parent Series B Preferred
Stock (the Company Common Stock Certificates and the Company Preferred Stock
Certificates, together, are herein referred to as the "Company Certificates").
(b) As of the Effective Time, the Parent shall deposit, or shall cause
to be deposited, with the Exchange Agent, for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance with this Section
1.07, an estimated amount of cash sufficient to pay the aggregate Cash
Consideration to be paid pursuant to Section 1.02 and the aggregate amount of
cash paid in lieu of fractional shares to be paid pursuant to Section 1.04, and
the Parent shall reserve for issuance with its Transfer Agent and Registrar, the
aggregate Stock Consideration and Parent Series B Preferred Stock to be issued.
(c) The Letter of Transmittal and Election Form to be mailed within
three business days of the Effective Date shall specify that delivery shall be
effected, and risk of loss and title to the Company Common Stock Certificates
shall pass, only upon delivery of the Company Common Stock Certificates to the
Exchange Agent, shall be in a form and contain any other provisions as the
Parent may reasonably determine and shall include instructions for use in
effecting the surrender of the Company Certificates in exchange for the Merger
Consideration or Parent Series B Preferred Stock, as appropriate. Upon the
proper surrender of a Company Certificate or Company Certificates to the
Exchange Agent, together with a properly completed and duly executed Letter of
Transmittal and Election Form, the holder of such Company Certificate or Company
Certificates shall be entitled to receive in exchange therefor (i) a certificate
representing that number of whole shares of Parent Common Stock or Preferred
Series B Stock, if any, that such holder has the right to receive pursuant to
Article I of this Agreement and (ii) a check in the amount equal to the cash, if
any, which such holder has the right to receive pursuant to Article I of this
Agreement (including any cash in lieu of any fractional shares of Parent Common
Stock to which such holder is entitled to pursuant to Section 1.04 and any
dividend or other distributions to which such holder of Parent Common Stock is
entitled to pursuant to Section 1.07(d)). Holders of Company Preferred Stock
Certificates shall not be required to exchange such certificates for
certificates representing Parent Series B Preferred
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Stock but may do so in accordance with the provisions hereof. Upon the proper
surrender of a Company Certificate or Company Certificates previously
representing shares of Company Preferred Stock, the holder of such Company
Certificates or Company Certificates shall be entitled to receive in exchange
therefor a certificate representing the same number of shares of Parent Series B
Preferred Stock. The Company Certificate or Company Certificates so surrendered
shall forthwith be cancelled. As soon as practicable after completion of the
allocations of the Merger Consideration and in no event later than ten business
days after the Election Deadline, the Exchange Agent shall distribute Parent
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 Parent 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. In
the event of a transfer of ownership of any shares of Company Common Stock not
registered in the transfer records of the Company, the Cash Consideration shall
be paid and the Stock Consideration shall be issued to the transferee if the
Company Certificate representing such Company Common Stock is presented to the
Exchange Agent, accompanied by documents sufficient, in the reasonable judgment
of the Parent and the Exchange Agent, (x) to evidence and effect such transfer
and (y) to evidence that all applicable stock transfer taxes have been paid.
(d) No interest will be paid or accrued on the Cash Consideration. No
dividend or other distributions declared or made after the Effective Time with
respect to the Parent Common Stock shall be remitted to any person entitled to
receive shares of Parent Common Stock until such person surrenders the Company
Common Stock Certificate or Company Common Stock Certificates, at which time
such dividends shall be remitted to such persons, without interest.
(e) From and after the Effective Time, there shall be no transfers on
the stock transfer records of the Company of any shares of Company Common Stock
or Company Preferred Stock that were outstanding immediately prior to the
Effective Time. If after the Effective Time Company Certificates are presented
to the Parent or the Association, they shall be cancelled and exchanged for the
Merger Consideration or Parent Series B Preferred Stock, as appropriate,
deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Section 1.07.
(f) Any portion of the aggregate Cash Consideration or the proceeds of
any investments thereof that remains unclaimed by the stockholders of the
Company for six (6) months after the Effective Time shall be repaid by the
Exchange Agent to the Parent upon the written request of the Parent. After such
request is made, any stockholders of the Company who have not theretofore
complied with this Section 1.07 shall look only to the Parent for payment and
issuance of their Merger Consideration deliverable in respect of each share of
Company Common Stock such stockholder holds as determined pursuant to this
Agreement without any interest thereon. If outstanding certificates for shares
of Company Common Stock are not surrendered or the payment for them is not
claimed prior to the date on which such payments would otherwise escheat to or
become the property of any governmental unit or agency, the
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unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of the Parent (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 the Parent, the Association, the Exchange Agent or any other
person shall be liable to any former holder of Company Common Stock for any
amount delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(g) The Parent and the Exchange Agent shall be entitled to rely upon
the Company's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration or shares of Parent Series B
Preferred Stock, which books shall be conclusive with respect thereto. In the
event of a dispute with respect to ownership of stock represented by any Company
Certificate, the Parent and the Exchange Agent shall be entitled to deposit any
consideration represented thereby in escrow with an independent third party and
thereafter be relieved with respect to any claims thereto.
(h) In the event any Company Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company 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 Company Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Company Certificate
the Merger Consideration or the shares of Parent Series B Preferred Stock
deliverable in respect thereof pursuant to this Agreement.
SECTION 1.08 DISSENTERS' RIGHTS.
(a) Any Dissenting Stockholder who shall be entitled to dissenters'
rights with respect to his or her Dissenters' Shares, as provided in Sections
604 and 6022 of the NYBL, shall not be entitled to the Merger Consideration,
unless and until the holder thereof shall have failed to perfect or shall have
effectively withdrawn or lost such holder's right to dissent from the Merger
under such law, and shall be entitled to receive only the payment to the extent
provided for therein with respect to such Dissenters' Shares. If any Dissenting
Stockholder shall fail to perfect or shall have effectively withdrawn or lost
the right to dissent, the Dissenters' Shares held by such Dissenting Stockholder
shall thereupon be treated as No-Election Shares.
(b) The Company shall (i) give the Parent prompt written notice of the
receipt of any notice from a stockholder to exercise any dissenters' rights,
(ii) not settle nor offer to settle any demand for payment without the prior
written consent of the Parent and (iii) not waive any failure strictly to comply
with any procedural requirements of Section 6022 of the NYBL.
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SECTION 1.09 OPTIONS.
(a) Subject to Section 1.09(b) and (c), at the Effective Time, each
option to purchase a share of Company Common Stock that has been granted
pursuant to Company's Long-Term Incentive Program, 1996 Equity Incentive Plan
and 1996 Non-Employee Directors' Stock Option Plan (collectively, the "Company's
Option Plans") and that is outstanding and unexercised at the Effective Time
(whether or not such option is otherwise vested or exercisable) (each, an
"Outstanding Company Option") shall be cancelled and shall cease to be
exercisable. In consideration for such cancellation, the Parent shall, with
respect to each Outstanding Company Option, pay to the holder thereof an amount
equal to the excess (if any) of (a) the Cash Consideration over (b) price at
which the holder may acquire a share of Company Common Stock upon exercise of
such Outstanding Company Option (the "Option Cashout Payment"). The Parent shall
make such payment as soon as practicable following the Effective Time or, if
later in the case of any holder of an Outstanding Company Option, the date on
which such holder delivers to the Parent his written acceptance of an Option
Cashout Payment as full and complete consideration for the cancellation of each
Outstanding Company Option held by him. The Company shall take such action as is
necessary or appropriate under the terms of Company's Option Plans to convert
each Outstanding Company Option, as of the Effective Time, into the right to
receive an Option Cashout Payment upon the terms and conditions set forth
herein. Payment hereunder shall be subject to withholding for applicable
federal, state and local taxes.
(b) Mr. Gerard C. Keegan and any two other officers of the Company to
be designated by Mr. Keegan or any one or more of them may, by written notice to
the Parent received by the Parent not less than the day that is ten (10)
business days prior to the Effective Time, elect to convert all or any portion
of the Outstanding Company Options held by them into options ("Parent Options")
to purchase shares of Parent Common Stock. Any such election shall identify the
Outstanding Company Options to be converted into Parent Options and shall become
irrevocable upon receipt by the Parent of the notice of election. Any conversion
pursuant to this Section 1.09(b) shall be effected by issuing to the electing
individual Parent Options to purchase the number of shares of Parent Common
Stock (rounded down to the nearest whole share) equal to the product of (i) the
number of shares of Company Common Stock subject to the Outstanding Company
Options being converted, and (ii) the Stock Consideration. The exercise price
per share for each share of Parent Common Stock subject to a Parent Option
issued under this Section 1.09(b) shall be equal to the quotient of the per
share exercise price of the Outstanding Company Option being converted into such
Parent Options divided by the Stock Consideration, rounded up to the next whole
cent. Each such Parent Option (i) shall be fully vested and nonforfeitable, (ii)
shall be exercisable at the same time and for the same terms as the related
Outstanding Company Options, (iii) shall not be subject to any condition, except
as may be required under applicable securities laws, including without
limitation the continued employment by the Parent of the holder thereof, and
(iv) shall be evidenced by a Parent Option agreement in a form to be provided by
the Parent that is reasonably acceptable to the Company, and that shall provide
for reasonable registration rights. No payment shall be made pursuant to Section
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1.09(a) with respect to any portion of a Outstanding Company Option that is
converted into a Parent Option as aforesaid. At or prior to the Effective Time,
Parent shall (i) take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise of
Outstanding Company Options converted into Parent Options in accordance with
this Section and (ii) file a registration statement on Form S-8 (or any
successor or other appropriate form) with respect to the Parent Common Stock
subject to such Parent Options. Parent shall use its best efforts to maintain
the effectiveness of such registration statement (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
Parent Options remain outstanding.
(c) Any holder of an Outstanding Company Option not included in Section
1.09(b) may request a conversion identical to that described in Section 1.09(b);
PROVIDED, however, that the Parent may, in its sole and absolute discretion,
determine whether to accept or deny such request. If the Parent denies such
request, the holder of the Outstanding Company Option shall be subject to
Section 1.09(a).
SECTION 1.10 DIRECTORS AND OFFICERS OF THE ASSOCIATION AFTER EFFECTIVE
TIME. At the Effective Time, the directors of the Association shall consist of
(a) the Directors of the Association serving immediately prior to the Effective
Time and (b) such additional persons who shall become directors of the Parent in
accordance with Section 4.15.
SECTION 1.11 LIQUIDATION ACCOUNT. The Association shall expressly
assume the Company's liquidation account and its obligations related thereto in
the Merger. In the event of a complete liquidation of the Association, and only
in such event, any amounts distributable from such liquidation account will be
determined in accordance with the rules and regulations pertaining to
conversions by a thrift from mutual to stock form of organization set forth in
Section 86.4(f) of the General Regulations of the Banking Board of the State of
New York. No merger, consolidation, purchase of bulk assets with assumption of
savings accounts and other liabilities, or similar transaction, whether or not
the Association is the surviving institution, will be deemed to be a complete
liquidation for this purpose, and, in any such transaction, the liquidation
account shall be assumed by the surviving institution.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 DISCLOSURE LETTERS. On or prior to the execution hereof,
the Company and the Parent have delivered to each other a letter (its
"Disclosure Letter") setting forth, among other items, the disclosure of which
is required or appropriate in relation to any or all of its representations and
warranties (and making specific reference to the Section of this Agreement to
which they relate), other than Section 2.03(h); 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 2.02, and (b) the mere
inclusion of an item in the 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
2.02(b)).
SECTION 2.02 STANDARDS.
(a) No representation or warranty of the Company or the Parent
contained in Section 2.03 or 2.04, 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 consequence of such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Section 2.03 or 2.04, as applicable, there is reasonably likely
to exist a Material Adverse Effect. The Company'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 the Parent.
(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 the Company or the Parent, as the context
may dictate, and its subsidiaries taken as a whole; PROVIDED, however, that any
such effects resulting from any changes (A) in law, rule or regulation or
generally accepted accounting principles or interpretations thereof that applies
to both the Parent and the Association and the Company, as the case may be, or
(B) changes in 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 2.03(a)(iv), 2.03(d),
2.03(h)(iii), 2.04(a)(iv), 2.04(d), 2.04(i)(iii) or 2.04(l) to be true and
correct or (y) a representation or warranty contained in the last sentence of
each of Section 2.03(f) or 2.04(f), the second sentence of each of 2.03(g)(i) or
2.04(h)(i) and the first two sentences of each of Section 2.03(bb) or 2.04(v) 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 that party's in-house counsel.
SECTION 2.03 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Subject to
Sections 2.01 and 2.02, the Company represents and warrants to the Parent that,
except as specifically disclosed in the Disclosure Letter of the Company:
(a) ORGANIZATION. (i) The Company is a stock savings bank duly
organized, validly existing and in good standing under the laws of the State of
New York. Each Subsidiary of the Company 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 the
Company 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) The Company and each Subsidiary of the Company 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) The Disclosure Letter sets forth all of the Subsidiaries
of the Company and all entities (whether corporations, partnerships, or similar
organizations), including the corresponding percentage ownership in which the
Company owns, directly or indirectly, 5% or more of the ownership interests as
of the date of this Agreement and indicates for each Subsidiary, as of such
date, its jurisdiction of organization and the jurisdiction 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. The Company owns, either directly or
indirectly, all of the outstanding capital stock of each of its Subsidiaries. No
Subsidiary of the Company is an "insured depositary institution" as defined in
the Federal Deposit Insurance Act, as amended (the "FDIA"), and applicable
regulations thereunder. All of the shares of capital stock of each of the
Subsidiaries held by the Company or by another Subsidiary of the Company are
fully paid, nonassessable and not subject to any preemptive rights and are owned
by the Company or a Subsidiary of the Company 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 the Company are insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC") to the
extent provided in the FDIA.
<PAGE>
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(b) CAPITAL STRUCTURE. (i) The authorized capital stock of the Company
consists of 45,000,000 shares of Company Common Stock and 10,000,000 shares, par
value $1.00 per share, of preferred stock (the "Company Preferred Stock"). As of
the date of this Agreement: (A) 13,676,065 shares of Company Common Stock were
issued and outstanding, (B) 1,478,077 shares of Company Series A ESOP Preferred
Stock, and 2,000,000 shares of 12% Noncumulative Perpetual Preferred Stock,
Series B were issued and outstanding, (C) no shares of Company Common Stock were
reserved for issuance except that 770,710 shares of Company Common Stock were
reserved for issuance pursuant to the Company Long-Term Incentive Program,
1,000,000 shares of Company Common Stock were reserved for issuance pursuant to
the Company 1996 Equity Incentive Plan, 200,000 shares of Company Common Stock
were reserved for issuance pursuant to Company 1996 Non-Employee Directors'
Stock Option Plan, a sufficient number of shares of Company Common Stock were
reserved for issuance to allow for the conversion of the Company Series A ESOP
Preferred Stock, a sufficient number of shares of Company Common Stock were
reserved for issuance pursuant to the Rights Agreement between the Company and
The Chase Manhattan Bank (as successor in interest to the Manufacturers Hanover
Trust Company), dated as of June 14, 1990, as amended, as in effect on the date
hereof (the "Rights Agreement"), and a sufficient number of shares of Company
Common Stock were reserved for issuance pursuant to the Option Agreement (D) no
shares of Company Preferred Stock were reserved for issuance except pursuant to
the Rights Agreement, and (E) no shares of Company Common Stock were held by the
Company in its treasury or by its Subsidiaries. All outstanding shares of
Company Common Stock and Company Preferred Stock are validly issued, fully paid
and nonassessable and not subject to any preemptive rights and, with respect to
shares held by the Company in its treasury or by its Subsidiaries, are free and
clear of all liens, claims, 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. The Disclosure Letter sets forth a complete and accurate list of
all options to purchase Company Common Stock that have been issued pursuant to
the Company Option Plans including the dates of grant, exercise prices, dates of
vesting, dates of termination and shares subject to option for each grant.
(ii) As of the date of this Agreement, except for this
Agreement, the Option Agreement and as set forth in the Disclosure Letter,
neither the Company 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 the Company 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 the Company or any of its
Subsidiaries or obligating the Company 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 the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries.
(c) AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of this
Agreement by the requisite vote of the
<PAGE>
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stockholders of the Company and receipt of all required regulatory or
governmental approvals as contemplated by Section 5.01(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 the
stockholders of the Company, the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary corporate actions on the part
of the Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
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) FAIRNESS OPINION. The Company has received the opinion of Sandler
O'Neill & Partners, L.P. to the effect that, as of the date hereof, the Merger
Consideration to be received by the stockholders of the Company is fair, from a
financial point of view, to such stockholders.
(e) NO VIOLATIONS. Subject to approval of this Agreement by the
Company's stockholders, the execution, delivery and performance of this
Agreement by the Company do not, the execution, delivery and performance of the
Option Agreement by the Company will not and the consummation of the
transactions contemplated hereby or thereby by the Company will not, constitute
(i) a breach or violation of, or a default under, any law, including any
Environmental Law (as defined in Section 2.03(s)), rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement, indenture
or instrument of the Company or any Subsidiary of the Company or to which the
Company or any of its Subsidiaries (or any of their respective properties) is
subject, (ii) a breach or violation of, or a default under, the organization
certificate or articles of incorporation or bylaws of the Company or any
Subsidiary of the Company 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 the Company
or any Subsidiary of the Company 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 the Company or any Subsidiary of
the Company is a party, or to which any of their respective properties or assets
may be bound or affected; and the consummation of the transactions contemplated
hereby by the Company or, upon its execution and delivery, by the Option
Agreement 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 (i) the required approvals, consents and waivers
referred to in Section 5.01(b), (ii) the approval of the stockholders of the
Company referred to in Section 2.01(d) and (iii) 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 or the
Option Agreement.
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(f) CONSENTS. Except as referred to herein or in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Home Owners' Loan Act of 1933, as amended (the "HOLA"), the
Bank Merger Act, as amended (the "BMA"), the FDIA, the NYBL, the rules and
regulations of the OTS, and the environmental, corporation, securities or "blue
sky" laws or regulations of the various states, no filing or registration with,
or authorization, consent or approval of, any other party is necessary for the
consummation by the Company of the Merger or the other transactions contemplated
by this Merger Agreement. As of the date hereof, the Company knows of no reason
why the approvals, consents and waivers of governmental authorities referred to
in this Section 2.03(f) that are required to be obtained should not be obtained
without the imposition of any condition or restriction referred to in the last
sentence in Section 5.01(b).
(g) REPORTS. (i) As of their respective dates, neither the Company's
Annual Report on Form F-2 for the fiscal year ended December 31, 1996, nor any
other document filed subsequent to December 31, 1996 under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act, each in the form (including exhibits and any
documents specifically incorporated by reference therein) filed with the FDIC or
the Securities and Exchange Commission (the "SEC") (collectively, the "Company'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 balance sheets contained
or incorporated by reference in the Company's Reports (including in each case
any related notes and schedules) fairly presented the financial position of the
entity or entities to which it relates as of its date and each of the statements
of income and of changes in stockholders' equity and of cash flows, contained or
incorporated by reference in the Company's Reports (including in each case any
related notes and schedules), fairly presented the results of operations,
stockholders' equity and cash flows, 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 generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein.
(ii) The Company and each of 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, 1992 with (A) the Banking Department of the State of New
York, (B) the FDIC, (C) the National Association of Securities Dealers, Inc.
(the "NASD"), and (D) any other self-regulatory organization ("SRO"), and have
paid all fees and assessments due and payable in connection therewith.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Company's Reports filed on or prior to the date of this Agreement, true and
complete copies of which have
<PAGE>
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been provided by the Company to the Parent, since December 31, 1996, and except
in connection with the formation of a holding company for the Company (which
exception shall not include the consummation of such holding company formation)
(i) the Company and its Subsidiaries have not incurred any liability, except in
the ordinary course of their business consistent with past practice, (ii) the
Company 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 condition, event, change or occurrence that, individually or in the
aggregate, has had, or is reasonably likely to have, a Material Adverse Effect
on the Company.
(i) TAXES. All federal, state, local and foreign tax returns required
to be filed by or on behalf of the Company 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 the Company or any
of its Subsidiaries, have been paid in full or adequate provision has been made
for any such taxes on the Company's balance sheet (in accordance with generally
accepted accounting principles). For purposes of this Section 2.03(i), the term
"taxes" shall include all income, franchise, gross receipts, real and personal
property, real property transfer and gains, wage and employment taxes. As of the
date of this Agreement, there is no audit examination, deficiency, or refund
litigation with respect to any taxes of the Company or any of its Subsidiaries,
and no claim has been made by any authority in a jurisdiction where the Company
or any of its Subsidiaries do not file tax returns that the Company 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 the Company or any of its Subsidiaries have
been paid in full or adequate provision has been made for any such taxes on the
Company's balance sheet (in accordance with generally accepted accounting
principles). The Company 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. The Company 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 the Company and each
of its Subsidiaries has timely complied with all applicable information
reporting requirements under Part III, Subchapter A of Chapter 61 of the
Internal Revenue Code of 1986 (the "Code") and similar applicable state and
local information reporting requirements.
(j) ABSENCE OF CLAIMS. No litigation, proceeding, controversy, claim or
action before any court or governmental agency is pending, against the Company
or any of its Subsidiaries and, to the best of the Company's knowledge, no such
litigation, proceeding, controversy, claim or action has been threatened.
(k) ABSENCE OF REGULATORY ACTIONS. Neither the Company nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding
<PAGE>
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with, or a party to any commitment letter or similar undertaking to, or is
subject to any action, proceeding, order or directive by, or is a recipient of
any extraordinary supervisory letter from, federal or state governmental
authorities 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 (the "Government Regulators")
nor has it been advised by any Government 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
or similar undertaking.
(l) AGREEMENTS. (i) Except for the Option Agreement and arrangements
made in the ordinary course of business, the Company and its Subsidiaries are
not bound by any material contract (as defined in Section 335.312 of the rules
and regulations of the FDIC) to be performed after the date hereof that has not
been filed with or incorporated by reference in the Company's Reports. Except as
disclosed in the Company's Reports filed prior to the date of this Agreement,
neither the Company 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 thirty (30) days' or less notice, (B) agreement with any executive
officer or other key employee of the Company 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 the Company or any of its
Subsidiaries of the nature contemplated by this Agreement or the Option
Agreement, (C) agreement with respect to any employee or director of the Company
or any of its Subsidiaries providing any term of employment or compensation
guarantee extending for a period longer than sixty (60) days or for the payment
of in excess of $30,000 per annum, (D) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the 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 Option Agreement or (E)
agreement containing covenants that limit the ability of the Company 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, the
Company (including any successor thereof) or any of its Subsidiaries may carry
on its business (other than as may be required bylaw or any regulatory agency).
(ii) Neither the Company nor any of its Subsidiaries is in
default under or in violation of any provision, and is not aware of any fact or
circumstance that would constitute a default or violation, of any note, bond,
indenture, mortgage, deed of trust, loan agreement 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.
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(iii) The Company and each of its Subsidiaries owns or
possesses valid and binding license and other rights to use without payment all
patents, copyrights, trade secrets, trade names, servicemarks and trademarks
used in its businesses and neither the Company nor any of its Subsidiaries has
received any notice of conflict with respect thereto that asserts the right of
others. Each of the Company 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.
(m) LABOR MATTERS. Neither the Company 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 the Company or
any of its Subsidiaries the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it or any such
Subsidiary to bargain with any labor organization as to wages and conditions of
employment, nor is the management of the Company aware of any strike, other
labor dispute or organizational effort involving the Company or any of its
Subsidiaries pending or threatened. The Company 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. The 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, arrangements, including, but not limited to,
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), incentive and welfare
policies, contracts, plans and arrangements and all trust agreements related
thereto with respect to any present or former directors, officers, or other
employees of the Company or any of its Subsidiaries (hereinafter referred to
collectively as the "Employee Plans"). All of the 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 the Company or any of its Subsidiaries. No
liability, to the Pension Benefit Guaranty Corporation, has been or is expected
by the Company or any of its Subsidiaries to be incurred with respect to any
Employee Plan which is subject to Title IV of ERISA ("Pension Plan"), or with
respect to any "single-employer plan" (as defined in Section 4001(a) of ERISA)
currently or formerly maintained by the Company or any entity which is
considered one employer with the Company under Section 4001(b)(1) of ERISA or
Section 414 of the Code (an "ERISA Affiliate"). No 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 Pension
Plan exceeds the present value of the "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA) under such Pension
<PAGE>
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Plan as of the end of the most recent plan year with respect to the respective
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
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 Pension Plan within the
12-month period ending on the date hereof. Neither the Company nor any
Subsidiary of the Company has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant
to Section 401(a)(29) of the Code. Neither the Company, its Subsidiaries, nor
any ERISA Affiliate has contributed to any "multiemployer plan", as defined in
Section 3(37) of ERISA, on or after September 26, 1980. Each Employee Plan of
the Company or of any of its Subsidiaries which 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 (a "Qualified Plan") has received a
favorable determination letter from the Internal Revenue Service (the "IRS") and
the Company and its Subsidiaries are not aware of any circumstances likely to
result in revocation of any such favorable determination letter. Each Qualified
Plan which is an "employee stock ownership plan" (as defined in Section
4975(e)(7) of the Code) has satisfied all of the applicable requirements of
Sections 409 and 4975(e)(7) of the Code and the regulations thereunder in all
material respects and any assets of any such Qualified Plan that are not
allocated to participants' individual accounts are pledged as security for, and
may be applied to satisfy, any securities acquisition indebtedness. There is no
pending or, to the knowledge of the Company, threatened litigation,
administrative action or proceeding relating to any Employee Plan. There has
been no announcement or commitment by the Company or any Subsidiary of the
Company to create an additional Employee Plan, or to amend an Employee Plan
except for amendments required by applicable law which do not materially
increase the cost of such Employee Plan; and except as specifically identified
on the Disclosure Letter, the Company and its Subsidiaries do not have any
obligations for post-retirement or post-employment benefits under any Employee
Plan that cannot be amended or terminated upon no more than sixty (60) days'
notice without incurring any liability thereunder, except for coverage required
by Part 6 of Title I of ERISA or Section 4980B of the Code. With respect to the
Company or any of its Subsidiaries, except as specifically identified on the
Disclosure Letter, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
payment or series of payments by the Company or any Subsidiary of the Company 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 Employee Plan other than a Pension Plan, or except to the
extent contemplated by Sections 1.09 and 4.03 accelerate the time of payment or
vesting of any such benefit. With respect to each Employee Plan, the Company has
supplied to the Parent 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, (B) such Employee Plan, including amendments thereto, (C) each
trust agreement, insurance contract or other funding arrangement relating to
such Employee Plan, including amendments thereto, (D) the most recent summary
plan description and summary of material modifications thereto for such Employee
Plan, including amendments thereto, if the Employee Plan is subject to Title I
of ERISA, (E) the most
<PAGE>
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recent actuarial report or valuation if such Employee Plan is a Pension Plan and
any subsequent changes to the actuarial assumptions contained therein and (F)
the most recent determination letter issued by the IRS if such Employee Plan is
a Qualified Plan.
(o) TERMINATION BENEFITS. The Disclosure Letter contains a complete and
accurate schedule showing the present value as of September 30, 1997 of the
monetary amounts payable and identifying the in-kind benefits 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, 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 Outstanding Company Options. For
purposes hereof, "Named Individual" shall include each non-employee director of
the Company or any of its subsidiaries and each executive officer of the
Company. For purposes of preparing the Disclosure Letter, the present value of
the benefits payable under the Specified Compensation and Benefit Programs shall
be determined as follows: (i) it shall be assumed that a change of control of
the Company occurs on September 30, 1997 and that each person entitled to
benefits under the Specified Compensation and Benefit Programs is discharged as
of September 30, 1997; (ii) it shall be assumed that all compensation levels
remain constant; (iii) it shall be assumed that the present value of any payment
or benefit which would be due and payable before November 1, 1997 is equal to
the amount of such payment or the cost of such benefit; (iv) the present value
of any payment or benefit that would be due and payable after November 1, 1997
shall be computed using the interest rate specified by the applicable plan for
purposes of valuing lump sum payments or if no rate is specified an assumed
interest rate of 6% per annum, compounded annually; and (v) that all accrued
benefits under all tax-qualified plans are 100% vested. Except as set forth in
the Disclosure Letter, the entire present value of the benefits payable under
the Specified Compensation and Benefit Programs has been accrued as a liability
on the financial statements of the Company as of December 31, 1996.
(p) TITLE TO ASSETS. The Company and each of its Subsidiaries has good
and marketable title to its properties and assets 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 the Company or any of its Subsidiaries
is lessor is valid and in full force and effect and no lessee under any such
lease is in default or in violation of any provisions of any such lease. All
material tangible properties of the Company 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 the Company to be adequate for
the current business of the Company and its Subsidiaries.
<PAGE>
-21-
(q) COMPLIANCE WITH LAWS. The Company 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, federal, state, local
and foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and, to the best knowledge of the Company, no suspension or
cancellation of any of them is threatened. Since the date of its incorporation,
the corporate affairs of the Company have not been conducted in violation of any
law, ordinance, regulation, order, writ, rule, decree or approval of any federal
or state regulatory authority having jurisdiction over insured depositary
institutions or their holding companies, the SEC, the NASD, or any other SRO
(each, a "Governmental Entity"). The business of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, order, writ, rule or decree approval of any Governmental Entity.
(r) FEES. Other than financial advisory services performed for the
Company by Sandler O'Neill & Partners, L.P., pursuant to an agreement, a true
and complete copy of which has been previously delivered to the Parent, neither
the Company 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 the
Company or any Subsidiary of the Company, in connection with the Agreement or
the transactions contemplated hereby.
(s) ENVIRONMENTAL MATTERS. (i) With respect to the Company and each of
its Subsidiaries:
(A) Each of the Company and its Subsidiaries, the
Participation Facilities, and, to the Company's knowledge, the Loan
Properties (each as defined herein) are, and have been, in substantial
compliance with 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 Company's knowledge, threatened, before
any court, governmental agency or board or other forum against it or
any of its Subsidiaries or any current or, to the Company's knowledge,
former Participation Facility (x) for alleged noncompliance (including
by any predecessor) with, or liability under, any Environmental Law or
(y) relating to the Release (as defined herein) into the environment of
any Hazardous Material (as defined herein), whether or not occurring at
or on a site owned, leased or operated by it or any of its Subsidiaries
or any Participation Facility;
(C) To the Company's knowledge, there is no suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending
<PAGE>
-22-
or threatened, before any court, governmental agency or board or other
forum relating to or against any Loan Property (or the Company 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 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;
(D) To the Company's knowledge, the properties
currently or formerly owned or operated by the Company or any of its
Subsidiaries (including, without limitation, soil, groundwater or
surface water on, under or adjacent to the properties, and buildings
thereon) do not contain any Hazardous Material other than in compliance
with applicable Environmental Law (PROVIDED, however, that with respect
to properties formerly owned or operated by the Company or any of its
Subsidiaries, such representation is limited to the period the Company
or any such Subsidiary owned or operated such properties);
(E) None of the Company or any of its Subsidiaries
has received any notice, demand letter, executive or administrative
order, directive or request for information from any federal, state,
local or foreign governmental entity or any third party relating to
Hazardous Materials or Remediation (as defined herein) thereof or
indicating that it may be in violation of, or liable under, any
Environmental Law, or any actual or, to the Company's knowledge,
potential administrative or judicial proceedings in connection with any
of the foregoing;
(F) To the Company's knowledge, there are no
underground storage tanks on, in or under any properties currently or
formerly owned or operated by the Company or any of its Subsidiaries,
any Participation Facility or any Loan Property and no underground
storage tanks have been closed or removed from any properties currently
or formerly owned or operated by the Company or any of its
Subsidiaries, any Participation Facility or any Loan Property which are
or have been in the ownership of the Company or any of its
Subsidiaries; and
(G) To the Company's knowledge, during the period of
(l) the Company or any of its Subsidiaries' ownership or operation of
any of their respective current or formerly owned properties, (m) the
Company's or any of its Subsidiaries' participation in the management
of any Participation Facility, or (n) its or any of its Subsidiaries'
holding of a security interest in a Loan Property, there has been no
Release and there is currently no threatened Release of Hazardous
Material in, on, under, affecting or migrating to such properties. To
the Company's knowledge, prior to the period of (x) the Company's or
any of its Subsidiaries' ownership or operation of any of their
respective current properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation
Facility, or (z) the Company's or any of its Subsidiaries' holding of a
security interest in a Loan Property, there was no
<PAGE>
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Release of Hazardous Material in, on, under, affecting or migrating to
any such property, Participation Facility or Loan Property.
(ii) The following definitions apply for purposes of this
Section 2.03(s): (u) "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property; (v) "Participation Facility" means any facility in
which the applicable party (or a Subsidiary of it) participates in the
management (including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or operator of
such property, but only with respect to such property; (w) "Environmental Law"
means (i) any federal, state or local law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine, order,
directive, executive or administrative order, judgment, decree, injunction,
legal requirement or agreement with any governmental entity, (A) relating to 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, without limitation,
(i) the Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act, 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, (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 (iii) any state and local laws, statutes,
ordinances, rules, regulations and the like, as well as common law: conditioning
transfer of property upon a negative declaration or other approval of a
governmental authority of the environmental condition of the property; requiring
notification or disclosure of Releases of "Hazardous Substances" or other
environmental condition of the Loan Property to any governmental authority or
other person or entity, whether or not in connection with transfer of title to
or interest in property; imposing conditions or requirements in connection with
permits or other authorization for lawful activity; relating to nuisance,
trespass or other causes of action related to the Loan Property; and relating to
wrongful death, personal injury,
<PAGE>
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or property or other damage in connection with any physical condition or use of
the Loan Property; (x) "Hazardous Material" means any substance (whether solid,
liquid or gas) which is 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, extremely hazardous wastes, or words of similar
meanings or regulatory effect under any Environmental Laws, including, but not
limited to, 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, flammables and explosives;
(y) "Release" of any Hazardous Material includes, but is not limited to, any
release, deposit, discharge, emission, leaking, spilling, seeping, migrating,
injecting, pumping, pouring, emptying, escaping, dumping, disposing or other
movement of Hazardous Materials in violation of or requiring action under any
applicable Environmental Law; and (z) "Remediation" includes, but is not limited
to, any response, remedial, removal, or corrective action, any activity to
cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous
Material, any actions to prevent, cure or mitigate any Release of Hazardous
Materials, any action to comply with any Environmental Laws or with any permits
issued pursuant thereto, any inspection, investigation, study, monitoring,
assessment, audit, sampling and testing, laboratory or other analysis, or
evaluation relating to any Hazardous Materials.
(t) LOAN PORTFOLIO; ALLOWANCE; ASSET QUALITY. (i) With respect to each
loan owned by the Company or its Subsidiaries in whole or in part (each, a
"Loan"), to the best knowledge of the Company:
(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 the Company 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,
cancelled or subordinated the note or any of the related security
documents except as otherwise disclosed by documents in the applicable
Loan file;
(C) the Company or a Subsidiary is the sole holder of
legal and beneficial title to each Loan (or the Company's applicable
participation interest, as applicable), except as otherwise referenced
on the books and records of the Company;
(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
<PAGE>
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be and have not been suspended, amended, modified, cancelled or
otherwise changed except as otherwise disclosed by documents in the
applicable Loan file;
(E) there is no pending, threatened condemnation
proceeding or similar proceeding affecting the property which serves as
security for a Loan, except as otherwise referenced on the books and
records of the Company;
(F) there is no litigation or proceeding pending,
threatened, relating to the property which 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 the
Company's audited statement of condition at December 31, 1996 was, and the
allowance for possible losses shown on the balance sheets in its Reports for
periods ending after December 31, 1996 will be, adequate, as of the dates
thereof, under generally accepted accounting principles applicable to savings
banks consistently applied.
(iii) The 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 the Company and its Subsidiaries that
have been classified by any bank examiner (whether regulatory or internal) as
"Other Loans Specially Mentioned," "Special Mention," "Substandard," "Doubtful,"
"Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned Loans" (in
the latter two cases, to the extent available) or words of similar import, and
the Company and its Subsidiaries shall promptly after the end of any month
inform the Parent 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 the Company 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.
(u) DEPOSITS. None of the deposits of the Company or any of its
Subsidiaries is a "brokered" deposit.
(v) ANTITAKEOVER PROVISIONS INAPPLICABLE. The Company and its
Subsidiaries have taken all actions required to exempt the Company, the
Agreement, the Merger and the Option Agreement from any provisions of an
antitakeover nature in their organization certificate and bylaws and the
provisions of any federal or state "antitakeover," "fair price," "moratorium,"
"control share acquisition" or similar laws or regulations.
<PAGE>
-26-
(w) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in the
Company's Proxy Statement for its 1997 Annual Meeting of Stockholders, no
officer or director of the Company, or any "associate" (as such term is defined
in Rule 12b-2 under the 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 the Company or
any of its Subsidiaries. No such interest has been created or modified since the
date of the last regulatory examination of the Company.
(x) INSURANCE. The Company and its Subsidiaries are presently insured,
and since December 31, 1994, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by the Company and its Subsidiaries are in full force and effect, the
Company 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 Stock and pledges to secure Federal Home Loan Bank
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 the Company included in the Company's Report on
Form F-2 for the quarter ended December 31, 1996, and none of the investment
securities held by it or any of its Subsidiaries since December 31, 1996, 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) Except as set forth in the Disclosure Letter, neither the
Company 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 the Disclosure Letter or
disclosed in its Reports filed on or prior to the date hereof.
(iii) Set forth in the Disclosure Letter is a true and correct
list of the Company's borrowed funds (excluding deposit accounts) as of the date
hereof.
<PAGE>
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(z) INDEMNIFICATION. Except as provided in the Company's Employment
Agreements or the organization certificate or bylaws of the Company, neither the
Company nor any Company 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 the Company (a "Covered Person"), and, except as
set forth in the Disclosure Letter, to the best knowledge of the Company, there
are no claims for which any Covered Person would be entitled to indemnification
under the organization certificate or bylaws of the Company or any Subsidiary of
the Company, applicable law regulation or any indemnification agreement.
(aa) BOOKS AND RECORDS. The books and records of the Company and its
Subsidiaries 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. The Company has delivered to the Parent true
and complete copies of its organization certificate and bylaws. The minute books
of the Company constitute a complete and correct record of all actions taken by
the board of directors of the Company (and each committee thereof) and the
stockholders of the Company. The minute books of each of the Company'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. The Merger will not result in any payment or
distribution payable out of the Liquidation Account of the Company.
(dd) TAX TREATMENT OF THE MERGER. As of the date hereof, the Company
has no knowledge of any fact or circumstance that would prevent the transactions
contemplated by this Agreement from qualifying as a tax-free reorganization
under the Code.
SECTION 2.04 REPRESENTATIONS AND WARRANTIES OF THE PARENT. Subject to
Sections 2.01 and 2.02, the Parent represents and warrants to the Company that:
(a) ORGANIZATION. (i) The Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and is a savings and loan holding company duly registered with the OTS under the
HOLA. The Association is a savings and loan association duly incorporated,
validly existing and in good standing under the laws of the United States of
America. Each Subsidiary of the Association 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 the
Parent, the Association and the Association's Subsidiaries has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The only Subsidiary of the Parent is the
Association.
<PAGE>
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(ii) The Parent, the Association and each Subsidiary of the
Association 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) The Disclosure Letter sets forth all of the Subsidiaries
of the Association and all entities (whether corporations,
partnerships, or similar organizations), including the corresponding
percentage ownership in which the Association owns, directly or
indirectly, 5% or more of the ownership interests as of the date of
this Agreement and indicates for each Subsidiary, as of the such date,
its jurisdiction of organization and the jurisdiction 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. The
Association owns, either directly or indirectly, all of the outstanding
capital stock of each of its Subsidiaries. No Subsidiary of the
Association is an "insured depositary institution" as defined in the
Federal Deposit Insurance Act, as amended (the "FDIA"), and applicable
regulations thereunder. All of the shares of capital stock of each of
the Subsidiaries held by the Association or by another Subsidiary of
the Association are fully paid, nonassessable and not subject to any
preemptive rights and are owned by the Association or a Subsidiary of
the Association 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 the Association are insured by the
Savings Association Insurance Fund of the FDIC to the extent provided
in the FDIA.
(b) CAPITAL STRUCTURE. (i) The authorized capital stock of the Parent
consists of 70,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share (the "Parent Series B Preferred
Stock"). As of the date of this Agreement, (A) 26,361,704 shares of Parent
Common Stock were issued and 21,230,708 were outstanding, (B) no shares of
Parent Series B Preferred Stock were outstanding ; (C) no shares of Parent
Common Stock were reserved for issuance except that 300,000 shares of Parent
Common Stock were reserved for issuance pursuant to the Parent's dividend
reinvestment plan, (D) no shares of Parent Series B Preferred Stock were
reserved for issuance except pursuant to Parent's rights agreement and (E)
5,130,996 shares of Parent Common Stock were held by the Parent in its treasury
or by its subsidiaries. The authorized capital stock of the Association consists
of 35,000,000 shares of common stock, par value $1.00 per share, and 5,000,000
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 the Parent. All outstanding
shares of capital stock of the Parent and the Association are, validly issued,
fully paid and nonassessable and not subject to any preemptive rights and, with
respect to shares held by the Parent in its treasury or by its Subsidiaries, are
free and clear of
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all 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 such shares.
(ii) As of the date of this Agreement, except for this
Agreement, and as set forth in the Disclosure Letter, neither the Parent 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 the Parent 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
the Parent or any of its Subsidiaries or obligating the Parent 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 the Parent or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Parent or any of its Subsidiaries.
(c) AUTHORITY. Each of the Parent and the Association has the requisite
corporate power and authority and subject to approval of this Agreement by the
requisite vote of the stockholders of the Parent and receipt of all required
regulatory or governmental approvals as contemplated by Section 5.01(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
the stockholders of the Parent, the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
actions on the part of the Parent and the Association. This Agreement has been
duly executed and delivered by the Parent and the Association and constitutes a
valid and binding obligation of the Parent and the Association, 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) FAIRNESS OPINION. The Parent has received the written opinion of
Merrill Lynch & Co. to the effect that, as of the date hereof, the Merger
Consideration is fair, from a financial point of view, to the stockholders of
the Parent.
(e) NO VIOLATIONS. Subject to approval of this Agreement by the
Parent's stockholders, the execution, delivery and performance of this Agreement
by the Parent or the Association do not, and the consummation of the
transactions contemplated hereby will not, constitute (i) a breach or violation
of, or a default under, any law, including any Environmental Law rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of the Parent or the Association or to which
the Parent or the Association (or any of their respective properties) is
subject, or enable any person to enjoin the Merger or the other transactions
contemplated hereby, (ii) a breach or violation of, or a default under, the
certificate or articles of incorporation or bylaws of the Parent or the
Association 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
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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
the Parent or the Association 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 the Parent or the Association is a party, or
to which any of its respective properties or assets may be bound or affected;
and the consummation of the transactions contemplated hereby 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
(i) the required approvals, consents and waivers of governmental authorities
referred to in Section 5.01(b), (ii) the approval of the stockholders as the
Parent referred to in Section 2.04(d). The Parent and the Association know of no
reason why the approvals, consents and waivers of governmental authorities
referred to in Section 5.01(b) should not be obtained without the imposition of
any material conditions or restrictions.
(f) CONSENTS. Except as referred to herein or in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act, the Exchange
Act, the HOLA, the BMA, the FDIA, the rules and regulations of the OTS, and the
environmental, corporation, securities or blue sky laws or regulations of the
various states, no filing or registration with, or authorization, consent or
approval of, any other party is necessary for the consummation by the Parent or
the Association of the Merger or the other transactions contemplated by this
Merger Agreement. As of the date hereof, the Parent knows of no reason why the
approvals, consents and waivers of governmental authorities referred to in this
Section 2.04(f) that are required to be obtained should not be obtained without
the imposition of any material condition or restriction referred to in the last
sentence of 5.01(b).
(g) ACCESS TO FUNDS. The Parent and the Association have, or on the
Closing Date (as defined herein) will have, access to all funds necessary to
consummate the Merger and pay the aggregate Merger Consideration.
(h) REPORTS. (i) As of their respective dates, neither the Parent's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, nor any
other document filed subsequent to December 31, 1996 under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act, each in the form (including exhibits and any
documents specifically incorporated by reference therein) filed with the SEC
(collectively, the "Parent 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 balance sheets contained or incorporated by reference in the Parent's
Reports (including in each case any related notes and schedules) fairly
presented the financial position of the entity or entities to which it relates
as of its date and each of the statements of income and of changes in
stockholders' equity and of cash flows, contained or incorporated by reference
in the Parent's Reports (including in each case any related notes and
schedules), fairly presented the results of operations, stockholders' equity and
cash flows, as the case may be, of the entity or entities to which it relates
for the
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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 generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein.
(ii) The Parent and each of 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, 1992 with (A) the OTS, (B) the SEC, (C) the NASD and (D)
any other self-regulatory organization, and have paid all fees and assessments
due and payable in connection therewith.
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Parent's Reports filed on or prior to the date of this Agreement, true and
complete copies of which have been provided by the Parent to the Company, since
December 31, 1996, (i) the Parent and its Subsidiaries have not incurred any
liability, except in the ordinary course of their business consistent with past
practice, (ii) the Parent 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 condition, event, change or occurrence that, individually
or in the aggregate, has had, or is reasonably likely to have, a Material
Adverse Effect on the Parent.
(j) ABSENCE OF CLAIMS. No litigation, proceeding or controversy claim
or action before any court or governmental agency is pending against the Parent,
the Association or any of its Subsidiaries, and, to the best of the Parent's
knowledge, no such litigation, proceeding, controversy, claim or action has been
threatened.
(k) ABSENCE OF REGULATORY ACTIONS. Neither the Parent, the Association
nor any of its Subsidiaries is a party to any cease and desist order, written
agreement or memorandum of understanding with, or a party to 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 Government Regulator, nor has it been advised by any
Governmental Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar written undertaking.
(l) PARENT COMMON STOCK. The shares of Parent Common Stock and shares
of Parent Series B Preferred Stock to be issued pursuant to this Agreement, when
issued in accordance with the terms of this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable and subject to no preemptive
rights.
(m) LABOR MATTERS. Neither the Parent, the Association 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
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organization with respect to its employees, nor is the Parent, the Association
or any of its Subsidiaries the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel the Parent, the
Association or any of its Subsidiaries to bargain with any labor organization as
to wages and conditions of employment, nor is the management of the Parent aware
of any strike, other labor dispute or organizational effort involving the
Parent, the Association or any of its Subsidiaries pending or threatened. The
Parent, the Association 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. The 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, 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 the Parent or any of its Subsidiaries (hereinafter referred
to collectively as the "Parent Employee Plans"). All of the Parent 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 the Parent or any of
its subsidiaries. No liability, to the Pension Benefit Guaranty Corporation, has
been or is expected by the Parent or any of its Subsidiaries to be incurred with
respect to any Parent Employee Plan which is subject to Title IV of ERISA
("Parent Pension Plan"), or with respect to any "single-employer plan" (as
defined in Section 4001(a) of ERISA) currently or formerly maintained by the
Parent or any entity which is considered one employer with the Parent under
Section 4001(b)(1) of ERISA or Section 414 of the Code (an "ERISA Affiliate").
No Parent 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 Parent Pension Plan exceeds the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such
Parent Pension Plan as of the end of the most recent plan year with respect to
the respective Parent 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 Parent 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
Parent Pension Plan within the 12-month period ending on the date hereof.
Neither the Parent nor any Subsidiary of the Parent has provided, or is required
to provide, security to any Parent Pension Plan or to any single-employer plan
of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code. Neither the
Parent, its Subsidiaries, nor any ERISA Affiliate has contributed to any
"multiemployer plan", as defined in Section 3(37) of ERISA, on or after
September 26, 1980. Each Parent Employee Plan of the Parent or
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of any of its Subsidiaries which 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 (a "Parent Qualified Plan") has received a favorable
determination letter from the IRS and the Parent and its Subsidiaries are not
aware of any circumstances likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the Parent,
threatened litigation, administrative action or proceeding relating to any
Parent Employee Plan.
(o) COMPLIANCE WITH LAWS. The Parent, the Association 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,
federal, state, local and foreign governmental or regulatory bodies that are
required in order to permit it to carry on its business as it is presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and, to the best knowledge of the
Parent, no suspension or cancellation of any of them is threatened. Since the
date of its incorporation, the corporate affairs of the Parent have not been
conducted in violation of any law, ordinance, regulation, order, writ, rule,
decree or approval of any Governmental Entity. The business of the Parent and
its Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, order, writ, rule or decree approval of any Governmental Entity.
(p) FEES. Other than the financial advisory services performed for the
Parent by Merrill Lynch & Co., pursuant to an agreement, a true and complete
copy of which has been previously delivered to the Company, neither the Parent,
the Association 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, brokage fees,
commissions, or finder's fee, and no broker or finder has acted directly or
indirectly for the purchase of any Subsidiary of the Parent, in connection with
the Agreement or the transactions contemplated hereby.
(q) ENVIRONMENTAL MATTERS. (i) With respect to the Parent and each of
its Subsidiaries:
(A) Each of the Parent and its Subsidiaries, the
Participation Facilities, and, to the Parent's knowledge, the Loan
Properties (each as defined herein) are, and have been, in substantial
compliance with 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 Parent's knowledge, threatened, before
any court, governmental agency or board or other forum against it or
any of its Subsidiaries or any current or, to the Parent's knowledge,
former Participation Facility (x) for alleged noncompliance (including
by any predecessor) with, or liability under, any Environmental Law or
(y) relating to the Release (as defined herein) into the environment of
any Hazardous Material (as defined herein), whether or not occurring at
or on a site owned, leased or operated by it or any of its Subsidiaries
or any Participation Facility;
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(C) To the Parent's knowledge, there is no suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened, before any court,
governmental agency or board or other forum relating to or against any
Loan Property (or the Parent 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 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;
(D) To the Parent's knowledge, the properties
currently or formerly owned or operated by the Parent or any of its
Subsidiaries (including, without limitation, soil, groundwater or
surface water on, under or adjacent to the properties, and buildings
thereon) do not contain any Hazardous Material other than in compliance
with applicable Environmental Law (PROVIDED, however, that with respect
to properties formerly owned or operated by the Parent or any of its
Subsidiaries, such representation is limited to the period the Parent
or any such Subsidiary owned or operated such properties);
(E) None of the Parent or any of its Subsidiaries has
received any notice, demand letter, executive or administrative order,
directive or request for information from any federal, state, local or
foreign governmental entity or any third party relating to Hazardous
Materials or Remediation (as defined herein) thereof or indicating that
it may be in violation of, or liable under, any Environmental Law, or
any actual or, to the Parent's knowledge, potential administrative or
judicial proceedings in connection with any of the foregoing;
(F) To the Parent's knowledge, there are no
underground storage tanks on, in or under any properties currently or
formerly owned or operated by the Parent or any of its Subsidiaries,
any Participation Facility or any Loan Property and no underground
storage tanks have been closed or removed from any properties currently
or formerly owned or operated by the Parent or any of its Subsidiaries,
any Participation Facility or any Loan Property which are or have been
in the ownership of the Parent or any of its Subsidiaries; and
(G) To the Parent's knowledge, during the period of
(l) the Parent or any of its Subsidiaries' ownership or operation of
any of their respective current or formerly owned properties, (m) the
Parent's or any of its Subsidiaries' participation in the management of
any Participation Facility, or (n) its or any of its Subsidiaries'
holding of a security interest in a Loan Property, there has been no
Release and there is currently no threatened Release of Hazardous
Material in, on, under, affecting or migrating to such properties. To
the Parent's knowledge, prior to the period of (x) the Parent's or any
of its Subsidiaries' ownership or operation of any of their respective
current properties, (y) the Parent's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z)
the Parent's or any of its Subsidiaries' holding of a security
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interest in a Loan Property, there was no Release of Hazardous Material
in, on, under, affecting or migrating to any such property,
Participation Facility or Loan Property.
(ii) The following definitions apply for purposes of this
Section 2.04(q): (u) "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property; (v) "Participation Facility" means any facility in
which the applicable party (or a Subsidiary of it) participates in the
management (including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or operator of
such property, but only with respect to such property; (w) "Environmental Law"
means (i) any federal, state or local law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine, order,
directive, executive or administrative order, judgment, decree, injunction,
legal requirement or agreement with any governmental entity, (A) relating to 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, without limitation,
(i) the Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act, 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, (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 (iii) any state and local laws, statutes,
ordinances, rules, regulations and the like, as well as common law: conditioning
transfer of property upon a negative declaration or other approval of a
governmental authority of the environmental condition of the property; requiring
notification or disclosure of Releases of Hazardous Substances or other
environmental condition of the Loan Property to any governmental authority or
other person or entity, whether or not in connection with transfer of title to
or interest in property; imposing conditions or requirements in connection with
permits or other authorization for lawful activity; relating to nuisance,
trespass or other causes of action related to the Loan Property; and relating to
wrongful death, personal injury,
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or property or other damage in connection with any physical condition or use of
the Loan Property; (x) "Hazardous Material" means any substance (whether solid,
liquid or gas) which is 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, extremely hazardous wastes, or words of similar
meanings or regulatory effect under any Environmental Laws, including, but not
limited to, 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, flammables and explosives;
(y) "Release" of any Hazardous Material includes, but is not limited to, any
release, deposit, discharge, emission, leaking, spilling, seeping, migrating,
injecting, pumping, pouring, emptying, escaping, dumping, disposing or other
movement of Hazardous Materials in violation of or requiring action under any
applicable Environmental Law; and (z) "Remediation" includes, but is not limited
to, any response, remedial, removal, or corrective action, any activity to
cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous
Material, any actions to prevent, cure or mitigate any Release of Hazardous
Materials, any action to comply with any Environmental Laws or with any permits
issued pursuant thereto, any inspection, investigation, study, monitoring,
assessment, audit, sampling and testing, laboratory or other analysis, or
evaluation relating to any Hazardous Materials.
(r) LOAN PORTFOLIO; ALLOWANCE; ASSET QUALITY. (i) With respect to each
loan owned by the Parent, the Association or its Subsidiaries in whole or in
part (each, a "Loan"), to the best knowledge of the Parent:
(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 the Parent, the Association 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, cancelled or subordinated the note or any of the related
security documents except as otherwise disclosed by documents in the
applicable Loan file;
(C) the Parent, the Association or a Subsidiary is
the sole holder of legal and beneficial title to each Loan (or the
Association's applicable participation interest, as applicable); except
as otherwise referenced on the books and records of the Association;
(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
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be and have not been suspended, amended, modified, cancelled or
otherwise changed except as otherwise disclosed by documents in the
applicable Loan file;
(E) there is no pending, threatened condemnation
proceeding or similar proceeding affecting the property which serves as
security for a Loan; except as otherwise referenced on the books and
records of the Association;
(F) there is no litigation or proceeding pending,
threatened, relating to the property which 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 the
Parent's audited statement of condition at December 31, 1996 was, and the
allowance for possible losses shown on the balance sheets in its Reports for
periods ending after December 31, 1996 will be, adequate, as of the dates
thereof, under generally accepted accounting principles applicable to federal
savings and loan associations consistently applied.
(iii) The 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 the Association and its Subsidiaries
that have been classified by any bank examiner (whether regulatory or internal)
as "Other Loans Specially Mentioned," "Special Mention," "Substandard,"
"Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans" (in the latter two cases, to the extent available) or words of similar
import, and the Association and its Subsidiaries shall promptly after the end of
any month inform the Company of any such classification arrived at any time
after the date hereof. The OREO included in any non-performing assets of the
Association 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.
(s) INVESTMENT SECURITIES. (i) Except for investments in Federal Home
Loan Bank Stock and pledges to secure Federal Home Loan Bank 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 the Parent included in the Parent's Report on Form 10-K for the
year ended December 31, 1996, and none of the investment securities held by it
or any of its Subsidiaries since December 31, 1996, 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.
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(ii) Except as set forth in the Disclosure Letter, neither the
Parent 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 the Disclosure Letter or
disclosed in its Reports filed on or prior to the date hereof.
(t) REGISTRATION STATEMENT. The information to be supplied by it 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, with the SEC
by the Parent for the purpose of, among other things, registering the Parent
Common Stock to be issued to the Stockholders of the Company in the Merger (the
"Registration Statement"), or (ii) the proxy statement to be filed with the FDIC
by the Company under the Exchange Act and distributed in connection with the
Company's meeting of its Stockholders to vote upon this Agreement (as amended or
supplemented from time to time, the "Proxy Statement", and together with the
prospectus included in the Registration Statement, as amended or supplemented
from time to time, the "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.
(u) BOOKS AND RECORDS. The books and records of the Parent and its
Subsidiaries 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.
(v) CORPORATE DOCUMENTS. The Parent has delivered to the Company true
and complete copies of its certificate of incorporation and bylaws and of the
Association's charter and bylaws. The minute books of the Parent and the
Association constitute a complete and correct record of all actions taken by the
respective boards of directors (and each committee thereof) and the stockholders
of the Parent and the Association. The minute books of each of the Parent'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 Subsidiary.
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(w) BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK. As of the date
hereof, the Parent beneficially owns 240,000 shares of Company Common Stock and,
other than as contemplated by the Option Agreement, does not have any option,
warrant or right of any kind to acquire the beneficial ownership of any shares
of Company Common Stock.
(x) TAX TREATMENT OF THE MERGER. As of the date hereof, the Parent has
no knowledge of any fact or circumstance that would prevent the transactions
contemplated by this Agreement from qualifying as a tax-free reorganization
under the Code.
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ARTICLE III
CONDUCT PENDING THE MERGER
SECTION 3.01 CONDUCT OF THE COMPANY'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, the Company shall use commercially
reasonable efforts to, and shall cause its Subsidiaries to use commercially
reasonable efforts to, (i) conduct its business in the ordinary and usual course
consistent with prudent banking 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 adversely affect or delay the ability of the Company,
the Parent or the Association to perform its covenants and agreements on a
timely basis under this Agreement, (iv) take no action which would adversely
affect or delay the ability of the Company, the Parent or the Association 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 the
Company.
SECTION 3.02 FORBEARANCE BY THE COMPANY. Without limiting the covenants
set forth in Section 3.01 hereof, during the period from the date of this
Agreement to the Effective Time the Company shall not, and shall not permit any
of its Subsidiaries, without the prior written consent of the Parent which shall
not be unreasonably withheld, to:
(a) complete any reorganization into a holding company structure or
otherwise change its corporate structure from that in effect on the date hereof,
or put into effect any change in any provisions of the organization certificate
or bylaws of the Company, or any similar governing documents of the Company's
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
the Company except pursuant to (i) the exercise of stock options or warrants as
set forth in the Disclosure Letter, (ii) the Option Agreement; (iii) the terms
of the certificate of designations of the Series A Preferred Stock (the "Series
A Certificate of Designations") or (iv) pursuant to the terms of the Rights
Agreement; adjust, split, combine or reclassify any capital stock; make, declare
or pay any dividend 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 except for the Company's regular quarterly dividend of $0.05 per
share and dividends payable pursuant to the Series A Certificate of Designations
and the certificate of designations of the Series B Preferred Stock. As promptly
as practicable following the date of this Agreement, the Board of Directors of
the Company shall cause its regular quarterly dividend
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record dates and payment dates to be the same as Parent's regular quarterly
dividend record dates and payments dates for Parent Common Stock, and the
Company shall not thereafter change its regular dividend payment dates and
record dates. Nothing contained in this Section 3.02(b) or in any other Section
of this Agreement shall be construed to permit holders of shares of the Company
to receive two dividends either from the Company or from Parent or the Company
and Parent in any one quarter or to deny or prohibit such holders from receiving
one dividend from the Company or Parent in any quarter;
(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 the Company or cancel, release or assign any
indebtedness of any such person, except pursuant to contracts or agreements in
force at the date of this Agreement and which have been described to the Parent;
(d) except to the extent required by law or as disclosed in Section
3.02(d) of the Company's Disclosure Letter or specifically provided for
elsewhere herein, increase in any manner the compensation or fringe benefits of
any of its employees or directors other than general increases in compensation
for non-officer employees in the ordinary course of business consistent with
past practice that do not cause the aggregate annualized compensation of all of
the Company's non-officer employees participating in the increase being granted,
immediately following such increase, to exceed by more than 5% the aggregate
total annual compensation expense of the Company with respect to such persons
for the twelve month period ended March 31, 1997 and that do not cause the
aggregate annual rates of base salaries of all of the Company's non-officer
employees participating in the increase being granted to increase by more than
5% over such aggregate base salaries at March 31, 1997, or 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 or fund
or otherwise establish any trust or account related to any Employee Plan (as
defined in Section 2.03(n)) with or for the benefit of any employee or director;
voluntarily accelerate the vesting of any stock options or other compensation or
benefit; terminate or increase the costs to the Company or any Subsidiary of any
Employee Plan; hire any employee with an annual compensation in excess of
$50,000 or enter into any employment contract; or make any discretionary
contributions to any Employee Plan;
(e) except as contemplated by Section 4.02, change its method of
accounting as in effect at December 31, 1996, except as required by changes in
generally accepted accounting principles as concurred in writing by the
Company's independent auditors;
(f) other than in the ordinary course of business consistent with past
practice in individual amounts not to exceed $50,000 and other than investments
for the Company's portfolio made in accordance with Section 3.02(g), make any
investment either by purchase of
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stock or securities, contributions to capital, property transfers, or purchase
of any property or assets of any other individual, corporation or other entity;
(g) make any investment in any debt security, including mortgage-backed
and mortgage related securities, other than US government and US government
agency securities with final maturities not greater than five years or
mortgage-backed or mortgage related securities which would not be considered
"high risk" securities pursuant to Thrift Bulletin Number 52 issued by the OTS,
that are purchased in the ordinary course of business consistent with past
practice;
(h) enter into or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than with respect to those
involving aggregate payments of less than, or the provision of goods or services
with a market value of less than, $100,000 per annum and other than contracts or
agreements covered by Section 3.02(k);
(i) settle any claim, action or proceeding involving any liability of
the Company or any of its Subsidiaries for money damages in excess of $500,000
or material restrictions upon the operations of the Company or any of its
Subsidiaries;
(j) except in the ordinary course of business and in amounts less than
$500,000, waive or release any material right or collateral or cancel or
compromise any extension of credit or other debt or claim;
(k) make, renegotiate, renew, increase, extend or purchase any (i)
loan, lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing, except (A)
in conformity with existing lending practices in amounts not to exceed
$1,000,000 to any individual borrower or (B) loans or advances as to which the
Company has a legally binding obligation to make such loan or advances as of the
date hereof and a description of which has been provided by the Company in
writing to the Parent prior to the execution of this Agreement; PROVIDED,
however, that the Company may not make, renegotiate, renew, increase, extend or
purchase any loan that is underwritten based on either no or limited
verification of income or otherwise without full documentation customary for
such a loan; or (ii) loans, advances or commitments to directors, officers or
other affiliated parties of the Company or any of its Subsidiaries;
(l) 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 the Company except in satisfaction of debts
previously contracted;
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(m) incur any additional borrowings beyond those set forth on the
Disclosure Letter other than short-term (two years or less) Federal Home Loan
Bank borrowings and reverse repurchase agreements consistent with past practice,
or pledge any of its assets to secure any borrowings other than as required
pursuant to the terms of borrowings of the Company or any Subsidiary in effect
at the date hereof or in connection with borrowings or reverse repurchase
agreements permitted hereunder. Deposits shall not be deemed to be borrowings
within the meaning of this paragraph;
(n) make any capital expenditures in excess of $100,000 per expenditure
from the date of this Agreement until the Effective Date other than pursuant to
binding commitments existing on the date hereof, other than expenditures
necessary to maintain existing assets in good repair;
(o) make any investment or commitment to invest in real estate or in
any real estate development project, other than real estate acquired in
satisfaction of defaulted mortgage loans and investments or commitments approved
by the Board of Directors of the Company prior to the date of this Agreement and
disclosed in writing to the Parent;
(p) except pursuant to commitments existing at the date hereof which
have previously been disclosed in writing to the Parent, make any real estate
loans secured by undeveloped land or real estate located outside the State of
New York or make any construction loan;
(q) establish or make any commitment relating to the establishment of
any new branch or other office facilities other than those for which all
regulatory approvals have been obtained; with respect to any such new branch or
other office facility for which regulatory approval has been received, make any
capital expenditures that in the aggregate would exceed the aggregate capital
expenditures for such facilities indicated in the Company's 1997 capital budget,
a copy of which has been provided to the Parent;
(r) organize, capitalize, lend to or otherwise invest in any
Subsidiary, or invest in or acquire a 10% or greater equity or voting interest
in any firm, corporation or business enterprise;
(s) elect to the Board of Directors of the Company any person who is
not a member of the Board of Directors of the Company as of the date of this
Agreement; or
(t) agree or make any commitment to take any action that is prohibited
by this Section 3.02.
In the event that the Parent does not respond in writing to the Company
within five business days of a written request for the Company to engage in any
of the actions for which the Parent's prior written consent is required pursuant
to this Section 3.02, the Parent shall be deemed to have consented to such
action. Any request by the Company or response thereto by the Parent shall be
made in accordance with the notice provisions of Section 8.07.
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SECTION 3.03 CONDUCT OF THE PARENT'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, the Parent shall use commercially
reasonable efforts to, and shall cause its Subsidiaries to use commercially
reasonable efforts to, (i) conduct its business in the ordinary and usual course
consistent with prudent banking 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 adversely affect or delay the ability of the Company,
the Parent or the Association to perform its covenants and agreements on a
timely basis under this Agreement, (iv) take no action which would adversely
affect or delay the ability of the Company, the Parent or the Association 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 the
Parent. Without limiting the foregoing, during the period from the date of this
Agreement to the Effective Time, the Parent shall not, without the prior written
consent of the Company, which shall not be unreasonably withheld, make, declare
or pay any cash dividends in an amount in excess of $0.25 per share quarter.
<PAGE>
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ARTICLE IV
COVENANTS
SECTION 4.01 ACQUISITION PROPOSALS. The Company agrees that neither it
nor any of its Subsidiaries nor any of the respective officers and directors of
the Company or its Subsidiaries shall, and the Company shall direct and use its
best efforts to cause its employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its Subsidiaries) not 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 stockholders of the Company) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or more than 10% of the assets or any equity securities of, the
Company or any of its material Subsidiaries (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or, (b) except to the
extent legally required for the discharge by the board of directors of its
fiduciary duties as advised in writing by such board's counsel, 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. The Company will notify the Parent immediately if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated or continued
with the Company after the date hereof, and the identity of the person making
such inquiry, proposal or offer and the substance thereof. Subject to the
foregoing, the Company 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. The Company 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 4.01.
The Company will promptly request each person (other than the Parent) that has
executed a confidentiality agreement prior to the date hereof in connection with
its consideration of a business combination with the Company or any Subsidiary
of the Company to return or destroy all confidential information previously
furnished to such person by or on behalf of the Company or any of its
Subsidiaries.
SECTION 4.02 CERTAIN POLICIES OF THE COMPANY.
(a) At the request of the Parent, the Company shall modify and change
its loan, litigation, 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 required
regulatory approval and shareholder approvals are received and after receipt of
written confirmation from the Parent 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 the Association; PROVIDED, that such policies and procedures are not
prohibited by generally accepted accounting principles or all applicable laws
and regulations.
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(b) The Company's representations, warranties and covenants contained
in this Agreement shall not be deemed to be untrue or breached in any respect
for any purpose as a consequence of any modifications or changes undertaken
solely on account of this Section 4.02.
SECTION 4.03 EMPLOYEES; BENEFIT PLANS AND PROGRAMS. (a) Each person who
is employed by the Company immediately prior to the Effective Time (a "Company
Employee") shall, at the Effective Time, become an employee (but not an officer)
of the Association. Beginning at the Effective Time, each of the Company
Employees shall serve the Association in the same capacity in which he or she
served the Company immediately prior to the Effective Time and upon the same
terms and conditions generally applicable to other employees of the Association
with comparable positions, with the following special provisions:
(i) If it is not practical to enroll the Company Employees as
of the Effective Time in a particular employee benefit plan or program
maintained by the Association for its employees (the "Association
Plans"), the Association shall continue any comparable plan or program
of the Company in effect immediately prior to the Effective Time (the
"Company Plans") for a transition period. During the transition period,
the Company Employees shall continue to participate in the Company
Plans which are continued, and all other employees of the Association
will participate only in the comparable Association Plans.
(ii) The Parent and the Association will amend each of their
respective employee benefit plans and programs to recognize the service
of each of the Company Employees with the Company as service with the
Parent and the Association for all purposes. Each of the Company's
tax-qualified plans will be amended, if necessary, to provide that all
benefits accrued by Continuing Employees through the Effective Time
will be fully vested without regard to their length of service.
(iii) The Association will amend its tax-qualified defined
benefit plan to recognize the service of each of the Company Employees
with the Company as service with the Association for purposes of
benefit accrual, with an offset for vested benefits accrued under the
Company's tax-qualified defined benefit plan. The Company will take all
necessary action to amend its tax-qualified defined benefit plan,
effective no later than the Effective Time, to cease all future benefit
accruals.
(iv) If Continuing Employees become eligible to participate in
a medical, dental or health plan of the Parent or the Association, the
Parent shall cause such plan to (A) waive any preexisting condition
limitations for conditions covered under the applicable medical, health
or dental plans of the Company and (B) honor any deductible and out of
pocket expenses incurred by the Continuing Employees and their
beneficiaries under such plans during the portion of the calendar year
prior to such participation. If Continuing Employees of the Company
become eligible to participate in a life insurance plan maintained by
the Parent or the Association, Parent shall cause such plan to waive
any
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medical certification for the Continuing Employees up to the amount of
coverage the Continuing Employees had under the life insurance plan of
the Company (but subject to any limits on the maximum amount of
coverage under the life insurance plan of the Parent or the
Association).
(v) The Company shall amend its Supplemental Executive
Retirement Plan to provide that amounts includable in the wages of a
Company Employee reportable on IRS Form W-2 as a result of stock option
exercises that occur after the date of execution of this Agreement and
payments in settlement of the Company obligations under any employment
agreement or change of control agreement will not be included as
compensation for purposes of benefit accrual under such plan. The
Company shall amend its Supplemental Executive Retirement Plan to cease
all future benefit accruals effective no later than the Effective Time,
but such amendment shall not affect the calculation of any "make-up"
payment provided for under any employment agreement or change in
control severance agreement.
(b) (i) The Parent shall assume the obligations of the Company with
respect to the employment agreements between the Company and the persons
identified on the Disclosure Schedule as having such agreements and with respect
to the change in control severance agreements between the Company and the
persons identified in the Disclosure Schedule as having such agreements. The
Company shall use reasonable efforts to secure from each Named Individual and
deliver to the Association within ten (10) business days after the execution of
this Agreement an agreement substantially in the form attached hereto as Exhibit
A (the "Settlement Agreement") to (A) accept as full settlement of his or her
rights in, to and under the Specified Compensation and Benefit Programs the
monetary amount and in-kind benefits reflected for such person on the Disclosure
Schedule and (B) agree to deliver in exchange for such payment and benefits a
written release, substantially in the form attached hereto as Exhibit B (the
"Release"), of any further claim in, to and under the Specified Compensation and
Benefit Programs.
(ii) As soon as practicable following the Effective Time, the
Parent shall pay to each of Messrs. Keegan, Harris and Henchy whose Settlement
Agreement has been timely delivered to the Association the monetary payment and
benefits set forth in Settlement Agreement in exchange for his Release.
(c) The Company shall amend its retirement plan for non-employee
directors to cease all future benefit accruals, and shall terminate its deferred
compensation plan for non-employee directors, in each case effective no later
than the Effective Time, but such amendment shall not prevent the application of
Section 4.4 of the retirement plan for non-employee directors providing for
immediate, unreduced benefits.
(d) Parent shall pay, in accordance with the terms of the 1997 Annual
Incentive Plan, the cash awards provided thereunder based, if applicable, on
performance through the Effective
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Time or if the Effective Time occurs prior to September 30, 1997, a PRO RATA
portion of such amount.
SECTION 4.04 ACCESS AND INFORMATION. (a) Upon reasonable notice, the
Company and the Parent shall (and shall cause its respective Subsidiaries to)
afford to each 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) 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 4.04 shall affect or be deemed to modify
any representation or warranty made herein. The Parent, the Association and the
Company will not, and will cause its respective representatives not to, use any
information obtained pursuant to this Section 4.04 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. Subject to
the requirements of law, each of the Parent, the Association and the Company
will keep confidential, and will cause its respective representatives to keep
confidential, all information and documents obtained pursuant to this Section
4.04 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 obligation or agreement, (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 which
furnished the same.
(b) During the period of time beginning on the day application
materials are initially filed with the OTS and continuing to the Effective Time,
including weekends and holidays, the Company shall provide the Association and
its authorized agents and representatives full access to the Company's offices
for the purpose of installing necessary wiring and equipment to be utilized by
the Association after the Effective Time; PROVIDED, that:
(i) reasonable advance notice of each entry shall be given to
the Company,and the Company approves of each entry, which approval
shall not be unreasonably withheld;
(ii) the Company 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 the Company's business conducted at
the Branch;
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(iv) all such work shall be done in compliance with all
applicable laws and government regulation, and the Association shall be
responsible for the procurement, at the Association's expense, of all
required governmental or administrative permits and approvals;
(v) the Association shall maintain appropriate insurance
satisfactory to the Company in connection with any work done by the
Association's agents and representatives pursuant to this Section 4.13;
(vi) the Association shall reimburse the Company for any
material out-of- pocket costs or expenses incurred by the Company in
connection with this undertaking; and
(vii) in the event this Agreement is Terminated in accordance
with Article VI hereof, the Association, 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 4.05 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. The Parent,
the Association and the Company 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
authorities and third parties necessary or appropriate for the consummation of
the transactions contemplated hereby or by the Option Agreement, (b) cooperate
with one another (i) in promptly determining what filings and notices are
required to be made or approvals, consents or waivers are required to be
obtained under any relevant federal, state or foreign law or regulation or under
any relevant agreement or other document and (ii) in promptly 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 4.06 ANTITAKEOVER PROVISIONS.
(a) The Company and its Subsidiaries shall take all steps (i) to exempt
or continue to exempt the Company, the Agreement, the Merger and the Option
Agreement from any provisions of an antitakeover nature in the Company's or its
Subsidiaries' organization certificates and bylaws and the provisions of any
federal or state antitakeover laws, and (ii) upon the request of the Parent, to
assist in any challenge by the Parent to the applicability to the Agreement, the
Merger or the Option Agreement of any state antitakeover law.
(b) Except for the Amendment and amendments approved in writing by the
Parent, the Company will not, following the date hereof, amend or waive any of
the provisions of or
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take any action to exempt any other persons from the provisions of the Rights
Agreement in any manner that adversely affects the Parent or the Association
with respect to the consummation of the Merger or except as provided in the next
sentence redeem the rights thereunder PROVIDED, HOWEVER, that nothing herein
shall prevent the Company from amending or otherwise taking any action under the
Rights Agreement to delay the Distribution Date (as defined in the Rights
Agreement). If requested by the Parent, the Company will redeem all outstanding
Rights at a redemption price of not more than $.01 per Right effective
immediately prior to the Effective Time with respect to the consummation of the
Merger.
SECTION 4.07 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 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;
it being understood and agreed that the Company may delay the Closing for up to
thirty (30) days after all conditions set forth in Article V have been met if
the provisions of Section 6.01(e) are in effect.
SECTION 4.08 PUBLICITY. The initial press release announcing this
Agreement shall be a joint press release and thereafter the Company and the
Parent shall consult with each other in issuing any press releases or otherwise
making public statements with respect to the acquisition contemplated hereby and
in making any filings with any governmental entity or with any national
securities exchange with respect thereto.
SECTION 4.09 STOCKHOLDERS' MEETING. The Company and the Parent each
shall take all action necessary, in accordance with applicable law and its
corporate documents, to convene a meeting of its respective stockholders (each,
"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 in writing by such board's
counsel, the board of directors of each of the Company and the Parent shall (a)
recommend at its Stockholder Meeting that the stockholders vote in favor of and
approve the transactions provided for in this Agreement, and (b) use its best
efforts to solicit such approvals.
SECTION 4.10 PROXY; REGISTRATION STATEMENT. As soon as practicable
after the date hereof, the Parent and the Company shall cooperate with respect
to the preparation of a Proxy Statement-Prospectus for the purpose of taking
stockholder action on the Merger and this Agreement, file the Proxy
Statement-Prospectus with the SEC and the FDIC, respond to comments of the staff
of the SEC and the FDIC and promptly thereafter mail the Proxy
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Statement-Prospectus to all holders of record (as of the applicable record date)
of shares of voting stock. The Parent and the Company each represents and
covenants to the other party that the 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 meeting of its stockholders to be held in connection with the Merger,
will be in compliance with the Exchange Act and all relevant rules and
regulations of the SEC and the FDIC 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. The Parent and the Company, in
consultation with the other, shall employ professional proxy solicitors to
assist it in contacting stockholders in connection with soliciting votes on the
Merger.
SECTION 4.11 REGISTRATION OF PARENT COMMON STOCK.
(a) The Parent shall, as promptly as practicable following the
preparation thereof, (and in any event within 45 days after the date hereof)
file a Registration Statement on Form S-4 (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 the Parent and the Company shall use all reasonable efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. The Parent will advise the Company
promptly after the Parent 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. The Parent will provide the Company with as many copies
of such Registration Statement and all amendments thereto promptly upon the
filing thereof as the Company may reasonably request.
(b) The Parent shall use its 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) The Parent shall use its best efforts to list, prior to the
Effective Time, on the Nasdaq National Market, subject only to official notice
of issuance, the shares of Parent Common Stock to be issued by the Parent in
exchange for the shares of Company Common Stock.
SECTION 4.12 AFFILIATE LETTERS. No later than the tenth business day
following the mailing of the Proxy Statement-Prospectus referred to in Section
4.10, the Company shall deliver to the Parent, after consultation with legal
counsel, a list of the names and addresses of those persons it deems to be
"Affiliates" of the Company within the meaning of Rule 145 promulgated under the
Securities Act and a letter in the form attached hereto as Exhibit C restricting
the disposition
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of shares of Parent Common Stock to be received by such Affiliate in exchange
for such Affiliate's shares of Company Common Stock.
SECTION 4.13 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 the Company and its Subsidiaries taken as a whole to
which the Company 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 Event. Each of the Company and
the Parent 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 the transactions contemplated by this
Agreement.
SECTION 4.14 ADVISORY BOARD. The Parent shall, promptly following the
Effective Time, cause all of the non-officer members of the Company's Board as
of the date of this Agreement who are willing to so serve to be elected or
appointed as members of an advisory board (the "Advisory Board") established by
the Parent, the function of which shall be to advise the Parent with respect to
deposit and lending activities in the Company'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 a three year term
beginning on the Effective Date. Each member of the Advisory Board who is not a
director of the Parent and who is not an employee of the Parent shall receive a
retainer fee for such service at an annual rate of $24,000, payable in monthly
installments or in one lump sum at any time in advance at the option of the
Parent. Within 30 days after the Effective Date, each member of the Advisory
Board shall receive a grant of options to purchase 4,000 shares of the Parent
Common Stock which subject to the terms of an option agreement to be provided by
the Parent and reasonably acceptable to the Company shall extend for a term of
ten (10) years beginning on the Effective Date; shall be exercisable at any time
after the Effective Date at an exercise price per share equal to the closing
sales price for a share of Parent Common Stock on the date of grant as reported
in The Wall Street Journal and shall provide for reasonable registration rights.
At or prior to the Effective Time, Parent shall (i) take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of options granted in accordance with this
Section and (ii) file a registration statement on Form S-8 (or any successor or
other appropriate form) with respect to the Parent Common Stock subject to such
options. Parent shall use its best efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Options remain outstanding.
SECTION 4.15 DIRECTORS. The Parent agrees to cause Mr. Gerard C. Keegan
and one other member of the Company's board of directors (on the date hereof)
selected by the Company and
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acceptable to the Parent, who are willing so to serve ("Former Company
Directors"), to be elected or appointed as directors of the Parent and
Association at, or as promptly as practicable after, the Effective Time (such
appointment or election of Former Company Directors to be as evenly distributed
as possible among the classes of the Parent directors).
SECTION 4.16 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a)
From and after the Effective Time through the sixth anniversary of the Effective
Date, the Parent agrees to indemnify and hold harmless each present and former
director and officer of the Company or its Subsidiaries and each officer or
employee of the Company or its Subsidiaries that is serving or has served as a
director or trustee of another entity expressly at the Company's request or
direction (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 Stock 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 then permitted under applicable law.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.16(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Parent thereof, but the failure to so
notify shall not relieve the Parent of any liability it may have hereunder to
such Indemnified Party if such failure does not materially and substantially
prejudice the indemnifying party. In the event of any such claim, action, suit,
proceeding or investigation, (i) the Parent shall have the right to assume the
defense thereof with counsel reasonably acceptable to the Indemnified Party and
the Parent 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 the Parent 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
the Parent and the Indemnified Party, the Indemnified Party may retain counsel
satisfactory to such Indemnified Party, and the Parent 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 the
Parent 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) the Parent 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.
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(c) Parent 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 4.16 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, the Parent
shall cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that the
Parent may substitute therefor policies with reputable and financially sound
carriers of at least the same coverage and amount containing terms which are no
less advantageous to the beneficiaries thereof); PROVIDED, however, that in no
event shall the Parent be obligated to expend, in order to maintain or provide
insurance coverage pursuant to this Subsection 4.16(d), any premium per annum in
excess of 200% of the amount of the annual premiums paid as of the date hereof
by the Company for such insurance (the "Maximum Agreement"); PROVIDED, further,
that if the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, the Parent shall maintain the
most advantageous policies of directors' and officers' insurance obtainable for
an annual premium equal to the Maximum Amount; and PROVIDED, further, that
officers and directors of the Company may be required to make application and
provide customary representations and warranties to the Parent's insurance
carrier for the purpose of obtaining such insurance.
SECTION 4.17 TRANSITION COMMITTEE. The Parent recognizes that
the Company has a talented group of officers and employees that will be
important to the future growth of the combined companies. In recognition of the
foregoing, immediately after the execution of this Agreement, the Parent shall
form an Employee Merger Transition Committee consisting of Mr. George L.
Engelke, Jr. and Mr. Gerard C. Keegan, who shall each serve as co-chairman, and
such other persons, if any, as they shall mutually select. The Employee Merger
Transition Committee shall have sole responsibility for all decisions affecting
the employees of the Company and its Subsidiaries after the Merger.
SECTION 4.18 SERIES A ESOP CONVERTIBLE PREFERRED STOCK. If the
stockholders of the Company and the Parent have each approved the transactions
contemplated hereby and all requisite regulatory approvals have been obtained,
the Company, within 5 business days of receiving a notice (the "Redemptive
Notice") from the Parent that it has waived all conditions to its obligations to
consummate the Merger, shall take all appropriate steps to call the Series A
ESOP Convertible Preferred Stock for redemption as long as, as of the date of
the Redemptive Notice the closing price of the Parent Common Stock is not less
than $34.125; it being understood that there is no obligation to redeem the
Series A Convertible Preferred Stock except as set forth in this Section 4.18.
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ARTICLE V
CONDITIONS TO CONSUMMATION
SECTION 5.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment of the following conditions:
(a) this Agreement shall have been approved by the requisite vote of
the Company's stockholders and the Parent's stockholders in accordance with
applicable law;
(b) all necessary regulatory or governmental approvals, consents or
waivers required to consummate the transactions contemplated hereby shall have
been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired; and all other consents,
waivers and approvals of any third parties which are necessary to permit the
consummation of the Merger and the other transactions contemplated hereby shall
have been obtained or made except for those the failure to obtain would not have
a Material Adverse Effect (i) on the Company and its subsidiaries taken as a
whole or (ii) on the Parent and its Subsidiaries taken as a whole. None of the
approvals or waivers referred to herein shall contain any term or condition
which would have a Material Adverse Effect on (x) the Company and its
Subsidiaries taken as a whole or (y) the Parent and its Subsidiaries taken as a
whole;
(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;
(d) no statute, rule or regulation, shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of the 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 the shares of
Parent Common Stock issuable pursuant to this Agreement shall have been approved
for listing on the Nasdaq National Market, subject to official notice of
issuance; and
(f) the Parent shall have received the agreement referred to in Section
4.12 from each affiliate of the Company, and the letters from the three persons
referred to in the last sentence of Section 4.03(b).
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SECTION 5.02 CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND THE
ASSOCIATION UNDER THIS AGREEMENT. The obligations of the Parent and the
Association to effect the Merger shall be further subject to the satisfaction of
the following additional conditions, any one or more of which may be waived by
the Parent:
(a) each of the obligations of the Company 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 the Company contained in this Agreement shall
be true and correct, subject to Sections 2.01 and 2.02, 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). The Parent shall have received a certificate to the foregoing
effect signed by the president and the chief financial or principal accounting
officer of the Company;
(b) all action required to be taken by, or on the part of, the Company
to authorize the execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby shall have
been duly and validly taken by the Board of Directors and stockholders of the
Company, and the Parent shall have received certified copies of the resolutions
evidencing such authorization;
(c) the Parent shall have received certificates (such certificates to
be dated as of a day as close as practicable to the date of the Closing) from
appropriate authorities as to the good standing of the Company;
(d) the Parent shall have received an opinion of Thacher Proffitt &
Wood, counsel to the Parent, dated as of the Effective Date in form and
substance customary in transactions of the type contemplated hereby, and
reasonably satisfactory to the Parent, 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 and that accordingly:
(i) No gain or loss will be recognized by the Parent,
the Association or the Company as a result of the Merger;
(ii) Except to the extent of any cash received in
lieu of a fractional share interest in Parent Common Stock or
of any Cash Consideration received, no gain or loss will be
recognized by the stockholders of the Company who exchange
their Company Stock for Parent Common Stock pursuant to the
Merger;
(iii) The tax basis of the Parent Common Stock
received by stockholders who exchange their Company Common
Stock for
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Parent Common Stock in the Merger will be the same as the tax
basis of the Company Common Stock surrendered pursuant to the
Merger, reduced by any amount allocable to a fractional share
interest for which cash is received and by the amount of any
Cash Consideration received and increased by any gain
recognized on the exchange;
(iv) The holding period of the Parent Stock received
by each stockholder in the Merger will include the holding
period of the Company Common Stock exchanged therefor,
provided that such stockholder held such Company Common Stock
as a capital asset on the date of the Merger;
(v) No gain or loss will be recognized by the
stockholders of the Company who exchange their Company Series
B Preferred Stock solely for Parent Series A Preferred Stock
pursuant to the Merger;
(vi) The tax basis of the Parent Series A Preferred
Stock received by stockholders who exchange their Company
Series B Preferred Stock solely for Parent Series A Preferred
Stock in the Merger will be the same as the tax basis of the
Company Series B Preferred Stock surrendered pursuant to the
Merger; and
(vii) The holding period of the Parent Series A
Preferred Stock received by each stockholder in the Merger
will include the holding period of the Company Series B
Preferred Stock exchanged therefor, provided that such
stockholder held such Company Series B Preferred Stock as a
capital asset on the date of the Merger.
Such opinion may be based on, in addition to the review of such matters
of fact and law as Thacher Proffitt & Wood considers appropriate, (i)
representations made at the request of Thacher Proffitt & Wood by the Parent,
the Association, the Company, stockholders of the Parent or the Company, or any
combination of such persons and (ii) certificates provided at the request of
Thacher Proffitt & Wood by officers of the Parent, the Association, the Company
and other appropriate persons;
(e) the Company shall have caused to be delivered to the Parent "cold
comfort" letters or letters of procedures from the Company's independent
certified public accountants, dated (i) the date of the mailing of the Proxy
Statement to the Company's stockholders and (ii) a date not earlier than five
business days preceding the date of the Closing and addressed to the Parent,
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concerning such matters as are customarily covered in transactions of the type
contemplated hereby;
(f) the Parent shall have received all state securities laws and "blue
sky" permits and other authorizations necessary to consummate the transactions
contemplated hereby; and
(g) neither the Parent nor the Association shall have become an
"Acquiring Person" and no "Stock Acquisition Date" or "Distribution Date" shall
have occurred under the Rights Agreement, and the rights reserved thereunder
shall not have become distributable, unredeemable or exercisable.
(h) The Company shall have provided to the trustee of the ESOP a notice
of its intention to redeem the Series A ESOP Convertible Preferred Stock, in
accordance with the terms thereof, sufficiently in advance of the Closing Date
to permit redemption prior to the Effective Time.
SECTION 5.03 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger shall be further subject to the
satisfaction of the following additional conditions, any one or more of which
may be waived by the Company:
(a) each of the obligations of the Parent and the Association,
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 the Parent
and the Association contained in this Agreement shall be true and correct,
subject to Sections 2.01 and 2.02, 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).
The Company shall have received a certificate to the foregoing effect signed by
the president and the chief financial officer of the Parent;
(b) all action required to be taken by, or on the part of, the Parent
and the Association to authorize the execution, delivery and performance of this
Agreement and the consummation by the Parent and the Association of the
transactions contemplated hereby shall have been duly and validly taken by the
Board of Directors and stockholders of the Parent, and the Company shall have
received certified copies of the resolutions evidencing such authorization;
(c) the Company shall have received certificates (such certificates to
be dated as of a day as close as practicable to the date of the Closing) from
appropriate authorities as to the good standing of the Parent;
(d) the Company shall have received an opinion of Sullivan & Cromwell,
counsel to the Company, dated as of the Effective Date, in form and substance
customary in transactions
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of the type contemplated hereby, and reasonably satisfactory to the Company,
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 and that accordingly:
(i) No gain or loss will be recognized by the Parent,
the Association or the Company as a result of the Merger;
(ii) Except to the extent of any cash received in
lieu of a fractional share interest in Parent Common Stock or
of any Cash Consideration received, no gain or loss will be
recognized by the stockholders of the Company who exchange
their Company Common Stock for Parent Common Stock pursuant to
the Merger;
(iii) The tax basis of the Parent Stock received by
stockholders who exchange their Company Common Stock for
Parent Common Stock in the Merger will be the same as the tax
basis of the Company Common Stock surrendered pursuant to the
Merger, reduced by any amount allocable to a fractional share
interest for which cash is received and by the amount of any
Cash Consideration received and increased by any gain
recognized on the exchange;
(iv) The holding period of the Parent Stock received
by each stockholder in the Merger will include the holding
period of the Company Common Stock exchanged therefor,
provided that such stockholder held such Company Common Stock
as a capital asset on the date of the Merger;
(v) No gain or loss will be recognized by the
shareholders of the Company who exchange their Company Series
B Preferred Stock solely for Parent Series A Preferred Stock
pursuant to the Merger;
(vi) The tax basis of the Parent Series A Preferred
Stock received by stockholders who exchange their Company
Series B Preferred Stock solely for Parent Series A Preferred
Stock in the Merger will be the same as the tax basis of the
Company Series B Preferred Stock surrendered pursuant to the
Merger;
(vii) The holding period of the Parent Series A
Preferred Stock received by each stockholder in the Merger
will include the
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holding period of the Company Series B Preferred Stock
exchanged therefore, provided that such stockholder held such
Company Series B Preferred Stock as a capital asset on the
date of the Merger.
Such opinion may be based on, in addition to the review of such matters
of fact and law as Sullivan & Cromwell considers appropriate, (i)
representations made at the request of Sullivan & Cromwell by the Parent, the
Association, the Company, stockholders of the Parent or the Company, or any
combination of such persons and (ii) certificates provided at the request of
Sullivan & Cromwell by officers of the Parent, the Association, the Company and
other appropriate persons;
(e) the Parent shall have caused to be delivered to the Company "cold
comfort" letters or letters of procedures from the Parent's independent
certified public accountants, dated (i) the date of the mailing of the Proxy
Statement to the Parent's stockholders and (ii) a date not earlier than five
business days preceding the date of the Closing and addressed to the Company,
concerning such matters as are the customarily covered in transactions of the
type contemplated hereby;
(f) the Parent shall have filed with the Secretary of State of the
State of Delaware the amendment to the certificate of incorporation changing the
par value of the shares of Parent Preferred Stock to $1.00 per share and the
certificate of designations with respect to Parent Series B Preferred Stock and
such document shall have become effective under the DGCL; and
(g) No "Shares Acquisition Date" or "Distribution Date" shall have
occurred under the Parent Rights Agreement, and the rights reserved thereunder
shall not have become distributable, unredeemable or exercisable.
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ARTICLE VI
TERMINATION
SECTION 6.01 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 the Company and the Parent:
(a) by the mutual consent of the Parent and the Company, if the board
of directors of each so determines by vote of a majority of the members of its
entire board;
(b) by the Parent or the Company, 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 the Company or the Parent, as
the case may be, to approve the Agreement at its meeting called to consider such
approval; PROVIDED, however, that the Company or the Parent, 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 4.0
and 4.10, 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 5.02(a) (in the case of termination by the
Parent) and Section 5.03(a) (in the case of the termination by the Company) 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 6.01(d) or any extension thereof;
(c) by the Parent or the Company by written notice to the other party
if either (i) any approval, consent or waiver of a governmental agency 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 the Parent or the Company, 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 March 31, 1998, 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 such date shall be extended for a period of 30 days
following the Valuation Date, as such term is defined in Section 1.02(a)(iv), in
the event the Company delivers the written notice referred to in Section
6.01(e); or
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(e) by the Company, if its board of directors so determines by a
majority vote of members of its entire board, at any time during the five-day
period commencing with the Valuation Date, such termination to be effective on
the 30th day following such Valuation Date (the "Effective Termination Date"),
if both of the following conditions are satisfied:
(i) the Parent Market Value on such Valuation Date of
shares of Parent Common Stock shall be less than an amount
equal to $30.30, adjusted as indicated in the last sentence of
this Section 6.01(e) (the "Initial Parent Market Value"); and
(ii) (A) the number obtained by dividing the Parent
Market Value on such Valuation Date by the Initial Parent
Market Value (the "Parent Ratio") shall be less than (B) the
number obtained by dividing the Final Index Price by the
Initial Index Price and subtracting .15 from the quotient in
this clause (ii)(B) (the "Index Ratio");
SUBJECT, HOWEVER, to the following three sentences. If the Company elects to
exercise its termination right pursuant to this Section 6.01(e), it shall give
prompt written notice to the Parent (PROVIDED THAT such notice of election to
terminate may be withdrawn at any time prior to the Effective Termination Date).
During the seven-day period commencing with its receipt of such notice, the
Parent shall have the option to increase the consideration to be received by the
holders of Company Common Stock hereunder, by adjusting the Stock Consideration
to equal the lesser of (x) a number equal to a fraction, the numerator of which
is $15.15 and the denominator of which is the Parent Market Value, and (y) a
number equal to a fraction, the numerator of which is the Index Ratio multiplied
by .50 and the denominator of which is the Parent Ratio. If the Parent so elects
it shall give prompt written notice to the Company of such election and the
revised Stock Consideration, whereupon no termination shall have occurred
pursuant to this Section 6.01(e) and this Agreement shall remain in effect in
accordance with its terms (except as the Stock Consideration shall have been so
modified).
For purposes of this Section 6.01(e), the following terms shall have
the meanings indicated below:
"Final Index Price" means the sum of the Final Prices for each
company comprising the Index Group multiplied by the appropriate
weighting.
"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, as reported on the consolidated
transaction reporting system for the market or exchange on which such
common stock is principally traded, during the period of 30 trading
days ending on the Valuation Date.
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"Index Group" means the 15 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 a publicly
announced proposal at any time during the period beginning on the date
of this Agreement and ending on the Valuation Date for any such company
to be acquired. In the event that the common stock of any such company
ceases to be publicly traded or a proposal to acquire any such company
is announced at any time during the period beginning on the date of
this Agreement and ending on the Valuation Date, such company 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. The 15
financial institution holding companies and the weights attributed to
them are as follows:
Holding Company Weighting
--------------- ---------
ALBANK Financial Corporation 2.4%
Bank United Corp. 5.9%
Charter One Financial 8.6%
Commercial Federal Corporation 4.0%
GreenPoint Financial Corp. 8.8%
Sovereign Bancorp, Inc. 11.8%
First Financial Corp. 6.8%
North Fork Bancorporation Inc. 6.0%
Dime Bancorp,Inc. 19.4%
Long Island Bancorp, Inc. 4.5%
New York Bancorp Inc. 3.1%
Peoples Heritage Finl Group 5.2%
RCSB Financial, Inc. 2.8%
St. Paul Bancorp, Inc. 4.2%
TCF Financial Corp. 6.4%
"Initial Index Price" means the sum of each per share closing
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 transactions reporting system for the market or
exchange on which such common stock is principally traded on the
trading day immediately preceding the public announcement of this
Agreement.
"Parent Market Value" shall have the meaning set forth in
Section 1.02(a)(iv) hereof.
"Valuation Date" means the Valuation Date, as defined in
Section 1.02(a)(iv) hereof.
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If the Parent 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 6.01(e);
(f) by the Parent or the Company if (i) the Board of Directors of the
Company shall have withdrawn or adversely modified its approval or
recommendation of this Agreement at a time when an Acquisition Transaction (as
defined in Section 6.03(b)) has been proposed or (ii) the Board of Directors of
the Parent shall have withdrawn or adversely modified its approval or
recommendation of this Agreement or the Parent has not convened a meeting of
stockholders at which a vote was taken to approve the transactions contemplated
by the Merger prior to the termination of this Agreement pursuant to the terms
hereof. In the event of such termination, the party referred to in clause (i) or
clause (ii), whichever is applicable, shall pay to the other party the
termination fee of five million and 00/100 Dollars ($5,000,000) in cash on
demand in recognition of the efforts, expenses and other opportunities foregone
by the other party while structuring the Merger, and if the Company makes the
payment as set forth herein, it shall have no further obligations to pay any
termination fee pursuant to Section 6.03. Such payment shall have no effect on
the ability of the Parent to exercise its then existing rights, if any, under
the Option Agreement.
SECTION 6.02 EFFECT OF TERMINATION. In the event of the termination of
this Agreement by either the Parent or the Company, as provided above, this
Agreement shall thereafter become void and, subject to the provisions of Section
8.02, there shall be no liability on the part of any party hereto or their
respective officers or directors, except that any such termination shall be
without prejudice to the rights of any party hereto arising out of the willful
breach by any other party of any covenant or willful misrepresentation contained
in this Agreement.
SECTION 6.03 THIRD PARTY TERMINATION FEE. In recognition of the
efforts, expenses and other opportunities foregone by the Parent while
structuring the Merger, the parties agree that the Company shall pay to the
Parent the termination fee of five million and 00/100 Dollars ($5,000,000) in
cash on demand if, during a period of eighteen (18) months after the date
hereof, any of the following occurs:
(a) the acquisition by any person other than the Parent or an affiliate
of the Parent of beneficial ownership of 20% or more of the then outstanding
voting power of the Company;
(b) the Company or any of its Subsidiaries, without having received the
Parent's prior written consent, shall have entered into an agreement to engage
in an Acquisition Transaction (as defined herein) 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 the Parent or any of its Subsidiaries or the Board of
Directors of the Company shall have recommended that the stockholders of the
Company approve or accept any Acquisition Transaction with any person other than
the Parent or any of
<PAGE>
-65-
its Subsidiaries. For purposes of this Agreement, "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction, involving
the Company, (y) a purchase, lease or other acquisition of all or substantially
all of the assets of the Company or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 20% or more of the voting power of the Company;
PROVIDED, that the term "Acquisition Transaction" does not include any internal
merger or consolidation involving only the Company and/or its Subsidiaries; or
(c) after a BONA FIDE proposal is made by a third party to the Company
or its stockholders to engage in an Acquisition Transaction, (i) the Company
shall have breached any covenant or obligation contained in the Agreement and
such breach would entitle the Parent to terminate the Agreement or (ii) the
holders of Company stock shall not have approved the Agreement at the meeting of
such stockholders held for the purpose of voting on the Agreement, or such
meeting shall not have been held or shall have been canceled prior to
termination of the Agreement or (iii) the Company's Board of Directors shall
have withdrawn or modified in a manner adverse to the Parent the recommendation
of the Company's Board of Directors with respect to the Agreement.
Any fee payable to the Parent pursuant to this Section 6.03 or Section
6.01(f) shall be reduced dollar for dollar (but shall not be reduced to a
negative number) to the extent that the Total Profit (as defined in the Option
Agreement) exceeds $10,000,000. Notwithstanding the foregoing, the Company shall
not be obligated to pay to the Parent such termination fees in the event that
(i) the Company or Parent validly terminate this Agreement pursuant to Section
6.01(a), 6.01(c) or 6.01(b)(i) if the stockholders of the Parent fail to approve
the transactions contemplated by this Agreement, (ii) the Parent shall have
received the termination fee set forth in Section 6.01(f), (iii) the Company
terminates this Agreement pursuant to Section 6.01(b)(ii) or 6.01(e) or (iv) the
Merger is terminated under Section 6.01(d) as a result of the failure to satisfy
the conditions set forth in Section 5.02(h).
<PAGE>
-66-
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.01 EFFECTIVE DATE AND EFFECTIVE TIME. The closing of the
transactions contemplated hereby shall take place at the offices of Thacher
Proffitt & Wood, Two World Trade Center, New York, New York 10048, on such date
(the "Closing Date") and at such time as the Parent reasonably selects that is
not later than the last business day of the month in which the expiration of the
last applicable waiting period in connection with approvals of governmental
authorities shall occur and all conditions to the consummation of this Agreement
are satisfied or waived, or on such earlier or later date as may be agreed by
the parties. On the Closing Date, the Association and the Company shall execute
articles of merger in accordance with all appropriate legal requirements and
shall be filed as required by law, and the Merger provided for herein shall
become effective upon such filing or on such date as may be specified in such
articles of merger. The date of such filing or such later effective date is
herein called the "Effective Date." The "Effective Time" of the Merger shall be
as set forth in such articles of merger.
SECTION 7.02 DELIVERIES AT THE CLOSING. Subject to the provisions of
Articles V and VI, on the Closing Date there shall be delivered to the Parent
and the Company the documents and instruments required to be delivered under
Article V.
<PAGE>
-67-
ARTICLE VIII
OTHER MATTERS
SECTION 8.01 CERTAIN DEFINITIONS; INTERPRETATION. As used in this
Agreement, the following terms shall have the meanings indicated:
"material" means material to the Parent or the Company (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 any other gender.
SECTION 8.02 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 without limitation Sections 4.03, 4.04(a), 4.14, 4.15,
4.16, 4.17 and 8.06 of this Agreement, shall survive the Effective Time. All
other representations, warranties, agreements and covenants shall be deemed to
be conditions of the Agreement and shall not survive the Effective Time. If the
Agreement shall be terminated, the agreements of the parties in the last three
sentences of Section 4.04 and Section 8.06 shall survive such termination.
SECTION 8.03 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 the Company or the
Parent, no amendment may be made that would reduce the aggregate Merger
Consideration or contravene applicable New York or federal banking laws, rules
and regulations.
SECTION 8.04 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.
<PAGE>
-68-
SECTION 8.05 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 8.06 EXPENSES. Except as provided in Section 6.03, each party
hereto will bear all expenses incurred by it in connection with this Agreement
and the transactions contemplated hereby.
SECTION 8.07 NOTICES. All notices, requests, acknowledgements 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 the Company, to:
The Greater New York Savings Bank
One Penn Plaza
New York, New York 10119
Facsimile: (212) 613-4195
Attention: Gerard C. Keegan
Chairman, President and Chief
Executive Officer
With copies to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Facsimile: (212) 558-3345
Attention: Mark J. Menting, Esq.
and
Sonnenschein Nath & Rosenthal
1221 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 391-1247
Attention: Robert E. Curry, Jr., Esq.
<PAGE>
-69-
If to the Parent or the Association, to:
Astoria Financial Corporation
One Astoria Federal Plaza
Lake Success, New York 11042-1805
Facsimile: (516) 327-7860
Attention: Mr. George L. Engelke, Jr.
President and Chief Executive Officer
With copies to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Facsimile: (212) 912-7751
Attention: Omer S. J. Williams, Esq.
SECTION 8.08 ENTIRE AGREEMENT; ETC. This Agreement, together with the
Option Agreement, the Disclosure Letters and the Confidentiality Agreements,
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 the Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Except for Sections 1.09(b),
4.03(b)(ii), 4.14, 4.15 and 4.16, 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 8.09 ASSIGNMENT. This Agreement may not be assigned by any
party hereto without the written consent of the other parties.
<PAGE>
-70-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ASTORIA FINANCIAL CORPORATION
By: /s/ George L. Engelke, Jr.
------------------------------
George L. Engelke, Jr.
President and Chief Executive Officer
ASTORIA FEDERAL SAVINGS AND LOAN
ASSOCIATION
By: /s/ George L. Engelke, Jr.
------------------------------
George L. Engelke, Jr.
President and Chief Executive Officer
THE GREATER NEW YORK SAVINGS BANK
By: /s/ Gerard C. Keegan
-------------------------------
Gerard C. Keegan
Chairman, President and Chief
Executive Officer
<PAGE>
Exhibit A
---------
[Form of Settlement Agreement]
__________, 1997
Astoria Financial Corporation
One Astoria Federal Plaza
Lake Success, New York
Gentlemen:
The Agreement and Plan of Merger dated as of March 29, 1997 by
and among Astoria Financial Corporation, Astoria Federal Savings and Loan
Association and The Greater New York Savings Bank (the "Agreement") provides for
an estimate of the monetary amount and certain continued welfare benefits that
would constitute full settlement of my rights in, to and under, any and all
employment agreements, change in control agreements, severance agreements,
termination agreements, supplemental executive retirement plans, salary
continuation plans, welfare plans, non-qualified deferred compensation plans and
non-qualified incentive compensation plans of The Greater New York Savings Bank
(the "Plans"), in the event of my discharge other than for cause or resignation
for good reason following the closing of the transactions contemplated by the
Agreement (the "Closing Date").
I hereby acknowledge and agree that $__________________
represents a reasonable estimate of the monetary amount due to me under the
Plans as of September 30, 1997 ("Estimated Settlement Amount") in the event of
such discharge or resignation as of September 30, 1997. In the event of such
resignation or discharge, I agree that the Estimated Settlement Amount will be
adjusted in such manner as the firm of certified public accountants retained by
Astoria Financial Corporation to audit its financial statements shall determine
to reflect: the amount of the bonus actually payable to me under the incentive
compensation and bonus plans of The Greater New York Savings Bank for the
current year, whether or not I am actually a "disqualified person" for purposes
of Section 280G of the Internal Revenue Code of 1986 (the "Code"), the actual
characterization for purposes of Section 280G of the Code of such bonus,
interest credits or deductions to reflect a closing date after or before
September 30, 1997, the extent to which my benefits under the tax-qualified
plans of The Greater New York Savings Bank are not 100% vested as of the Closing
Date and/or a change in the interest rates prescribed by the Internal Revenue
Service for purposes of applying section 280G and 4999 of the Internal Revenue
Code of 1986 for the month in which the closing date occurs. I agree, in the
event of my discharge other than for Cause (as defined in the Plans) or my
resignation for Good Reason (as defined in the Plans), to accept the Estimated
Settlement Amount as so adjusted ("Adjusted Settlement Amount") plus the
provision of applicable insurance benefits as full settlement of my rights in,
to and under the Plans.
The foregoing estimate, acknowledgement and agreement do not
apply to the benefits, if any, to which I am entitled under any tax-qualified
plans in which I participate as an employee of The Greater New York Savings
Bank, and my benefits (if any) under such plans shall be in addition to the
Adjusted Settlement Amount. In addition, the foregoing estimate, acknowledgement
and agreement do not apply to the stock options and stock appreciation rights,
if any, outstanding to me under the terms of any stock option plan in which I
participate as an employee of The Greater New York Savings Bank; I shall
continue to have the right to exercise such stock options and stock appreciation
rights (if any) in accordance with their terms, or to receive compensation in
lieu thereof as provided in the Agreement, but any such exercise or compensation
received shall not result in any adjustment in the Estimated Settlement Amount
or the Adjusted Settlement Amount.
I understand that this letter is being delivered to Astoria
Financial Corporation pursuant to section 4.03(b) of the Agreement and that
Astoria Financial Corporation is relying hereon.
Very truly yours,
___________________________________
<PAGE>
Exhibit B
---------
FORM OF RELEASE
1. In consideration of the payment by Astoria Financial
Corporation ("Astoria") of 2~, the receipt of which is hereby acknowledged, I,
1~ for myself and my heirs, executors, administrators, successors and assigns,
hereby irrevocably and unconditionally release and forever discharge Astoria,
Astoria Federal Savings and Loan Association ("Association") and The Greater New
York Savings Bank ("Greater"), the stockholders, subsidiaries, affiliates,
officers, directors, employees and agents of either of them, and their
respective heirs, executors, administrators, successors and assigns
(collectively, the "Releasee") of and from all actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, extents, executions, claims, and demands
whatsoever, in law, admiralty or equity, which against the Releasee, I or my
heirs, executors, administrators, successors or assigns ever had, now have or
hereafter can, shall or may, have by reason of any matter, cause or thing
whatsoever for payment of any amount owed pursuant to any and all employment
agreements, change in control agreements, severance agreements or plans,
termination agreements, supplemental executive retirement plans, salary
continuation plans, non-qualified deferred compensation plans and non-qualified
incentive compensation plans of Greater (the "Plans"), except for the (1)
continuation of life, health and long-term disability coverage for the period
ending no later than the second anniversary of the Effective Time (as such term
is defined in the Agreement and Plan of Merger dated as of March 29, 1997 by and
among Astoria, the Association and Greater) and (2) the provision of any
post-retirement insurance benefits to which I may be entitled under the terms of
the Plans.
2. I acknowledge that such payment will constitute, and agree
to accept it as, full settlement of any and all rights which I may have pursuant
to the Plans, except for (1) continuation of life, health and long-term
disability coverage for the period ending no later than the second anniversary
of the Effective Time and (2) the provision of any post-retirement insurance
benefits to which I may be entitled under the terms of the Plans.
3. This instrument may not be changed orally.
IN WITNESS WHEREOF, I have executed this Instrument this ____
day of _____________, 1997.
_______________________________________
1~
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On _____________, 1997, before me personally came 1~, to me
known, and known to me to be the person named in the above instrument, who did
depose and say that he is the person referred to as the undersigned in the above
instrument and that he signed his name thereto as his free act and deed.
_______________________________________
Notary Public
<PAGE>
Exhibit C
---------
March 29, 1997
Astoria Financial Corporation
One Astoria Federal Plaza
Lake Success, New York 11042-1085
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger, dated as of
March 29, 1997, by and among Astoria Financial Corporation (the "Parent"), a
Delaware corporation, Astoria Federal Savings and Loan Association (the
"Association"), a federally chartered savings and loan association and a
wholly-owned subsidiary of the Parent, and The Greater New York Savings Bank
(the "Company"), a New York State chartered savings bank (the "Merger
Agreement"). The Merger Agreement provides, among other things, for the merger
of Company, with and into Association, with Association being the surviving
entity (the "Merger"). Upon consummation of the Merger, each share of common
stock, par value $1.00 per share, of Company ("Company Common Stock") will be
converted into a number of shares of common stock, par value $0.01 per share, of
the Parent ("Parent Common Stock") and cash determined pursuant to Section 1.02
of the Merger Agreement. This Letter Agreement is being entered into pursuant to
Section 4.12 of the Merger Agreement.
I have been advised that (i) the Merger constitutes a transaction
covered by Rule 145 of the Rules and Regulations (the "Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), and (ii) I may be deemed to be an affiliate of
Company, as the term "affiliate" is defined for purposes of Rule 145 under the
Act; and that, accordingly, the shares of Parent Common Stock that I may acquire
in connection with the Merger only may be disposed of in conformity with the
provisions hereof.
I hereby represent and warrant to, and covenant with, the Parent as
follows:
1. I have full power to execute this Letter Agreement, to make the
representations, warranties and agreements herein and to perform my obligations
hereunder.
2. I have carefully read this Letter Agreement and, to the extent I
felt necessary, discussed its requirements and other applicable limitations upon
my ability to sell, transfer or otherwise dispose of Parent Common Stock with my
counsel or counsel for Company.
3. In the event I receive any shares of Parent Common Stock in exchange
for shares of Company Common Stock as a result of the consummation of the
Merger, or any securities which may be paid as a dividend or otherwise
distributed thereon or with respect thereto or issued or delivered in exchange
or substitution therefor, or any option, right or other interest (all such
shares and securities being referred to herein as "Restricted Securities"), and
with respect to any such Restricted Securities:
(A) I will not make any sale, transfer or other disposition of
Restricted Securities in violation of the Act or the Regulations.
<PAGE>
Astoria Financial Corporation
March 29, 1997 Page 2.
(B) I have been advised that the shares of Parent Common Stock
to be issued in the Merger have been registered under the Act by a
Registration Statement of Parent on Form S-4. However, I have also been
advised that because (i) at the time of the submission of the Merger
Agreement to a vote of the shareholders of Company, I may be deemed an
affiliate of Company, and (ii) the distribution by me of Parent Common
Stock has not been registered under the Act, that I may not sell,
transfer or otherwise dispose of Parent Common Stock issued to me in
the Merger or other Restricted Securities unless (a) such sale,
transfer or other disposition has been registered under the Act, (b)
such sale, transfer or other disposition is made in conformity with the
volume and other limitations imposed by Rule 145 under the Act, or (c)
in the opinion of counsel reasonably acceptable to the Parent, such
sale, transfer or other disposition is otherwise exempt from
registration under the Act.
(C) I understand that the Parent is under no obligation to
register the sale, transfer or other disposition of shares of Parent
Common Stock or other Restricted Securities by me or on my behalf under
the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
(D) I also understand that in the event I beneficially own 1%
or more of the outstanding Parent Common Stock as of the date hereof
after giving effect to the transactions contemplated by the Merger
Agreement, stop transfer instructions will be given to Parent's
transfer agent with respect to Restricted Securities owned by me and
that there will be placed on the certificates for Restricted Securities
issued to me, or any substitutions therefor, a legend stating in
substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF
1993, AS AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE ONLY MAY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND
THE PARENT, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE PARENT. A COPY OF SUCH AGREEMENT SHALL
BE PROVIDED, WITHOUT CHARGE UPON RECEIPT BY THE PARENT OF A
WRITTEN REQUEST.
(E) I also understand that, unless the transfer by me of my
Restricted Securities has been registered under the Act or is a sale
made in conformity with the provisions of Rule 145 under the Act, the
Parent reserves the right, in its sole discretion, to place on the
certificates issued to any transferee of such securities from me, a
legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES. THE SHARES HAVE BEEN ACQUIRED BY
THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY
<PAGE>
Astoria Financial Corporation
March 29, 1997 Page 3.
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED.
(F) It is understood and agreed that the legends set forth in
paragraphs D and E above shall be removed by delivery of substitute
certificates without such legend, and/or the issuance of a letter to
the Parent's transfer agent removing such stop transfer instructions,
if I shall have delivered to the Parent (i) a copy of a letter from the
staff of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to the Parent, or other evidence reasonably
satisfactory to the Parent, to the effect that such legend and/or stop
transfer instructions are not required for purposes of the Act or (ii)
reasonably satisfactory evidence or representations that the securities
represented by such certificates are being or have been transferred in
a transaction made in conformity with the provisions of Rule 145 under
the Act.
4. I recognize and agree that the foregoing provisions also apply to
(A) my spouse, (B) any relative of mine or my spouse occupying my home, (C) any
trust or estate in which I, my spouse or any such relative owns at least 10%
beneficial interest or of which any of us serves as trustee, executor or in any
similar capacity, and (D) any corporation or other organization in which I, my
spouse or any such relative owns at least 10% of any class of equity securities
or of the equity interest. It is understood that this Letter Agreement shall be
binding upon and enforceable against my administrators, executors,
representatives, heirs, legatees and devisees, and any pledgee holding
securities pursuant to this Letter Agreement.
5. This Letter Agreement shall terminate and be of no further force and
effect if the Merger Agreement is terminated pursuant to the terms thereof.
Very truly yours,
________________________________
Name:
Acknowledged this ____ day of
March, 1997, by
Astoria Financial Corporation
By: ________________________________
Name:
Title:
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER
RESTRICTIONS UNDER
FEDERAL AND STATE BANKING LAW
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT, dated as of March 29, 1997 (the
"Agreement"), by and between The Greater New York Savings Bank, a New York
chartered stock savings bank ("Issuer"), and Astoria Financial Corporation, a
Delaware corporation ("Grantee").
RECITALS
A. THE PLAN. Grantee, Issuer and the Association have entered
into an Agreement and Plan of Merger, dated as of March 29, 1997 (the "Plan"),
providing for, among other things, the merger of Issuer with and into a
wholly-owned subsidiary of Grantee, with such subsidiary being the surviving
corporation.
B. CONDITION TO PLAN. As a condition and an inducement to
Grantee's execution and delivery of the Plan, 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 Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 2,721,536 shares of common stock, par value $1.00
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 $17.875. Each
Option Share issued upon exercise of the Option shall be accompanied by the
related preferred share purchase right ("Company Rights") issued pursuant to the
Rights Agreement between the Company and The Chase Manhattan Bank (as successor
in interest to Manufacturers Hanover Trust Company), dated as of June 14, 1990,
as amended ("Company Rights Agreement").
-1-
<PAGE>
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the agreements or
covenants contained in this Agreement or the Plan, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the 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 Plan 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 6.01(b)(ii) of the Plan (a
termination of the Plan by Grantee pursuant to Section 6.01(b)(ii) of the Plan,
being referred to herein as a "Default Termination"), (C) 15 months after a
Default Termination or (D) 15 months after termination of the Plan (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. 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 Section 8 of this
Agreement shall terminate when the right to exercise the Option terminates
(other than as a result of a complete exercise of the Option) as set forth
herein.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent, Issuer
shall have 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 25% or more of the consolidated assets or
deposits of Issuer and its subsidiaries 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 25% or more of the voting power of Issuer or any of its
significant subsidiaries, other than, in the case of (A) or (C), any
transaction involving Issuer or any of its significant subsidiaries in
which the voting securities of Issuer outstanding immediately prior
thereto continue to represent (by either remaining outstanding or being
converted into the voting securities of the surviving entity of any
such transaction) at least 65% of the combined voting power of the
voting securities of the Issuer or the surviving entity outstanding
immediately after the consummation of such transaction (provided any
such transaction is not violative of the Plan) (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, promulgated under the Securities and Exchange
Act of 1934 (the "Exchange Act") of, or the right to acquire beneficial
ownership of, or any "group" (as such term is defined in Section
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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,
20% 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, promulgated under the Exchange Act) or shall have filed a
registration statement under the Securities Act of 1933, as amended
(the "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 20% or
more of the voting power of Issuer (such an offer being referred to
herein as a "Tender Offer" or an "Exchange Offer," respectively); or
(ii) The stockholders shall not have approved the
Plan by the requisite vote at the stockholders meeting of the Issuer
called for that purpose ("Company Meeting"), the Company Meeting shall
not have been held or shall have been canceled prior to termination of
the Plan 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 Plan, in each case after it
shall have been publicly announced that any person (other than Grantee
or any subsidiary of Grantee) shall have (A) made, or disclosed an
intention to make, a bona fide proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer or
(C) filed an application (or given a notice), whether in draft or final
form, under the Home Owners' Loan Act of 1933, as amended, the Bank
Holding Company Act, as amended, the Bank Merger Act, as amended or the
Change in Bank Control Act of 1978, as amended, for approval to engage
in an Acquisition Transaction; or
(iii) 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 Plan terminates, Issuer shall have breached any
representation, warranty, covenant or agreement contained in the Plan
and such breach would entitle Grantee to terminate the Plan under
Section 6.01(b) thereof (without regard to the cure period provided for
therein unless such cure is promptly effected without jeopardizing
consummation of the Merger pursuant to the terms of the Plan).
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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, 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 "Stock Exercise 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 (the "Closing") of such
purchase (the "Closing Date"); provided that the first notice of exercise shall
be sent to Issuer within 180 days after the first Purchase Event of which
Grantee has been notified. If prior notification to or approval of any
Regulatory Authority 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 immediately 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 12(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 Plan) and subject to no preemptive rights, and (B) if the Option
is exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT
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DATED AS OF MARCH 29, 1997. 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 Exchange Commission (the "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 the written notice
of exercise of the Option provided for under Section 3(e) of this Agreement, 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 Regulatory Authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Regulatory Authority as it may require) in
order to permit Holder to exercise the Option and Issuer duly and effectively to
issue shares of the Issuer Common Stock pursuant hereto and (iv) promptly to
take all action provided herein to protect the rights of Holder against
dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee (and Holder, if different than Grantee) as
follows:
(a) CORPORATE AUTHORITY. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of
Issuer, and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions
so
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contemplated; 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 15% 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 an
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 bylaws, 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, exercise of the Company Rights 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
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provision shall be made in the agreements governing any such transaction so that
Holder shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Holder would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a), upon exercise of any option to purchase Issuer Common Stock
outstanding on the date hereof or upon conversion into Issuer Common Stock of
any convertible security of Issuer outstanding on the date hereof), the number
of shares of Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, it, together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option. 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 Plan.
(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 (the "Substitute Option"), at the election of Holder, 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. 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 (the "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
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theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (B) Issuer in a merger in which Issuer
is the continuing or surviving person, or (C) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares
of capital stock (or similar equity interest) with the greatest voting
power in respect of the election of directors (or persons similarly
responsible for the direction of the business and affairs) of the
Substitute Option Issuer.
(iii) "Assigned Value" shall mean the highest of (A)
the price per share of Issuer Common Stock at which a Tender Offer or
an Exchange Offer therefor has been made, (B) the price per share of
Issuer Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (C) the highest closing price for shares of
Issuer Common Stock within the six-month 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
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
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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).
(h) Notwithstanding anything herein to the contrary and in
lieu of any other adjustments provided for herein, in the event that the Issuer
completes a reorganization involving the formation of a holding company for the
Issuer, 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 of such holding company with terms substantially identical to those
contained herein.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) of this
Agreement, at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and ending
12 months immediately thereafter, Issuer shall repurchase from Holder (i) the
Option and (ii) all shares of Issuer Common Stock purchased by Holder pursuant
hereto with respect to which Holder then has beneficial ownership. The date on
which Holder exercises its rights under this Section 8 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for
any shares of Issuer Common Stock acquired pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (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
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(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
Regulatory Authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to 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 Regulatory Authority disapproves of any part of Issuer's
proposed repurchase pursuant to this Section 8, Issuer shall promptly give
notice of such fact to Holder and Holder shall have the right (i) to revoke the
repurchase request or (ii) to the extent permitted by such Regulatory Authority,
determine whether the repurchase should apply to the Option and/or Option Shares
and to what extent to each, and Holder shall thereupon have the right to
exercise the Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the 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 the
Option or Issuer Common Stock would result in the recapture of Issuer's bad debt
reserves under the Internal Revenue Code of 1986, as amended, Holder's
repurchase request shall be deemed to be automatically revoked and be of no
effect.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock paid
for any such share by the person or groups described in Section 8(d)(i) hereof,
(ii) the price per share of Issuer Common Stock received by holders of Issuer
Common Stock in connection with any merger, sale or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
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Agreement, or (iii) the highest closing sales price per share of Issuer Common
Stock quoted on the Nasdaq (or if Issuer Common Stock is not quoted on the
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 the 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, 50%
or more 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. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the
conditions of Section 9(c) of this Agreement, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Shareholder"), as
expeditiously as possible, prepare and file a registration statement under the
Securities Act or equivalent statements under the rules and regulations of the
Federal Deposit Insurance Corporation ("FDIC") or the Banking Law of the State
of New York ("NYBL"), as applicable, if such registration is necessary in order
to permit the sale or other disposition of any or all shares of Issuer Common
Stock or other securities that have been acquired by or are issuable to the
Selling Shareholder upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by the Selling Shareholder in such
request, including without limitation a "shelf" registration statement under
Rule 415, promulgated under the Securities Act, or any successor provision, and
Issuer shall use its best efforts to qualify such shares or other securities for
sale under any applicable state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time
after the exercise of the Option proposes to register any shares of Issuer
Common Stock under the Securities Act, the NYBL or the rules and regulations of
the FDIC 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
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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 any such shares to be so registered (i) if
the underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 of the Securities Act or any equivalent or
successor Form; provided, further, however, that such election pursuant to (i)
may only be made two times. If some, but not all the shares of Issuer Common
Stock, with respect to which Issuer shall have received requests for
registration pursuant to this Section 9(b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among 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
9(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 9(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 9(a) hereof:
(i) Prior to the earliest of (A) termination of the
Plan pursuant to Article VI thereof, (B) failure to obtain the
requisite stockholder approval pursuant to Section 6.01 of Article VI
of the Plan, 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 9(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 securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended
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<PAGE>
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 where it is not otherwise required to so consent to such jurisdiction or
to so qualify to do business.
(d) EXPENSES. Except where applicable state law prohibits such
payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses (including the
fees and expenses of counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are being registered,
printing expenses and the costs of special audits or "cold comfort" letters,
expenses of underwriters, excluding discounts and commissions but including
liability insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to Section 9(a) or 9(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 9(a) or
9(b) of this Agreement.
(e) INDEMNIFICATION. In connection with any registration under
Section 9(a) or 9(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.
Promptly upon receipt by a party indemnified under this
Section 9(e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this Section 9(e), such indemnified party
shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its
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<PAGE>
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 (i) the indemnifying party either agrees to
pay the same, (ii) the indemnifying party fails to assume the defense of such
action with counsel satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 9(e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative 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.
In connection with any registration pursuant to Section 9(a)
or 9(b) of this Agreement, Issuer and each Selling Shareholder (other than
Grantee) shall enter into an agreement containing the indemnification provisions
of Section 9(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.
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<PAGE>
(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.
10. 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 Nasdaq or any securities
exchange, Issuer, upon the request of Holder, will promptly file an application,
if required, to authorize for quotation or trading or listing the shares of
Issuer Common Stock or other securities to be acquired upon exercise of the
Option on the 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.
11. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
12. PROFIT LIMITATION. (a) Notwithstanding any other provision
of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter
defined) exceed $10 million and, if it otherwise would exceed such amount, the
Grantee, at its sole election, shall either (a) deliver to the Issuer for
cancellation Shares previously purchased by Grantee, (b) pay cash or other
consideration to the Issuer or (c) undertake any combination thereof, so that
Grantee's Total Profit shall not exceed $10 million after taking into account
the foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of Shares as would, as of the
Notice Date, result in a Notional Total Profit (as defined below) of more than
$10 million and, if exercise of the Option otherwise would exceed such amount,
the Grantee, at its discretion, may increase the Purchase Price for that number
of Shares set forth in the Stock Exercise Notice so that the Notional Total
Profit shall not exceed $10 million; 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.
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<PAGE>
(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 6.01(f) or 6.03 of the Merger Agreement
and Section 8(a)(ii) hereof, (ii) (x) the amount received by Grantee pursuant to
the Issuer's repurchase of Option Shares pursuant to Section 8 hereof, less (y)
the Grantee's purchase price for such Option Shares, and (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee's purchase price 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
Stock Exercise 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).
13. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay
all costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT: NO THIRD-PARTY BENEFICIARIES;
SEVERABILITY. This Agreement, together with the Plan and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto (other than the indemnified parties under Section 9(e)
of this Agreement and any transferees of the Option Shares or any permitted
transferee of this Agreement pursuant to Section 12(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 Regulatory
Authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. If
for any reason such court or Regulatory Authority 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.
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<PAGE>
(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 Plan (or at
such other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the
Option by the Holder, Issuer, and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
<PAGE>
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.
THE GREATER NEW YORK SAVINGS BANK
By:/s/ Gerard C. Keegan
-----------------------
Gerard C. Keegan
Chairman, President and
Chief Executive Officer
ASTORIA FINANCIAL CORPORATION
By:/s/ George L. Engelke, Jr.
-----------------------------
George L. Engelke, Jr.
President and Chief Executive Officer
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