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As filed with the Securities and Exchange Commission on February 18, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GreenPoint Financial Corp.
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
Delaware 06-1379001 6712
(State or Other Jurisdiction (I.R.S. Employer Identification No.) (Primary Standard Industrial
of Incorporation or Organization) Classification Code Number)
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90 Park Avenue
New York, New York 10016
(212) 834-1710
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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Howard C. Bluver
Senior Vice President and General Counsel
90 Park Avenue
New York, New York 10016
(212) 834-1724
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Agent For Service)
Copy to:
Craig M. Wasserman, Esq. H. Rodgin Cohen, Esq.
Wachtell, Lipton, Rosen & Katz Sullivan & Cromwell
51 West 52nd Street 125 Broad Street
New York, New York 10019 New York, New York 10004
(212) 403-1000 (212) 558-4000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]_____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities to Amount to be Offering Price Per Aggregate Offering Registration
be Registered Registered (1) Share(2) Price(2) Fee(3)
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Common Stock............... 13,010,000 $ 30.25 $393,551,662 $109,408
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(1) Based upon the maximum number of shares that may be issued upon
consummation of the merger described herein, and upon exercise of
securities exercisable for shares of common stock of GreenPoint Financial
Corp.
(2) Pursuant to Rule 457(f), and solely for the purpose of calculating the
registration fee, the proposed maximum offering price per share and maximum
aggregate offering price are based upon the average of the high and the low
sale prices of the common stock, no par value, of Headlands Mortgage
Company to be cancelled in the Merger on the Nasdaq National Market New
York Stock Exchange on February 16, 1999.
(3) In accordance with Rule 457(b), the filing fee of $83,460.60 paid pursuant
to Section 14(g) of the Securities Exchange Act of 1934, as amended, and
Rule 0-11 thereunder at the time of the filing of the Proxy Statement-
Prospectus contained in this Registration Statement as preliminary proxy
materials of Headlands Mortgage Company has been credited to offset the
$109,408 registration fee that would otherwise be payable.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH THE PROVISIONS OF SECTION
8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
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[LOGO] HEADLANDS/R/ MORTGAGE COMPANY
February 17, 1999
Dear Shareholder:
The Boards of Directors of Headlands Mortgage Company and GreenPoint
Financial Corp. have agreed on a merger in which Headlands would become a
wholly owned subsidiary of GreenPoint. In the merger, each of your shares of
Headlands common stock would be converted into the right to receive 0.62 shares
of GreenPoint common stock. We believe this transaction will enhance
stockholder value by providing Headlands Shareholders, in a tax-free
transaction, with a significant premium for their shares of Headlands common
stock as well as the opportunity to participate in the growth and future value
of GreenPoint. The merger would provide the opportunity for the mortgage and
sales forces of Headlands and GreenPoint to offer each other's products and for
Headlands to access GreenPoint's capital and funding base.
Before we can complete the proposed merger, the holders of a majority of
Headlands' outstanding shares of common stock must vote in favor of the
principal terms of the merger at a special meeting of shareholders. YOUR VOTE
IS VERY IMPORTANT. Whether or not you plan to attend the special meeting,
please take the time to vote by completing and mailing the enclosed proxy card.
If you attend the special meeting, you may vote in person even if you have
previously returned your proxy card. I and certain other members of your Board
of Directors and our affiliates have agreed with GreenPoint to vote the shares
of Headlands common stock over which we have voting authority--approximately
53.1% of the outstanding Headlands shares--in favor of the proposed merger.
We have scheduled a special meeting so that you can vote on the proposed
merger. The date, time and place of the meeting are as follows:
March 23, 1999 at 10:00 a.m., Pacific Time
Courtyard by Marriott
2500 Larkspur Landing Circle
Larkspur, California 94939
This Proxy Statement/Prospectus provides detailed information about the
proposed merger on which you are being asked to vote. You can also get
information about Headlands and GreenPoint from publicly available documents
that each of us have filed with the Securities and Exchange Commission. I
encourage you to read this entire document carefully.
Your Board of Directors has carefully considered the terms and conditions of
the proposed merger and believes that the merger is in the best interests of
Headlands and its shareholders. Accordingly, your Board of Directors, by the
unanimous vote of all directors, recommends that you approve the merger.
Sincerely,
Peter T. Paul
Chairman, Chief Executive Officer
and President
Neither the Securities and Exchange Commission nor any state securities
commission has approved of the securities to be issued under this Proxy
Statement/Prospectus or determined if this Proxy Statement/Prospectus is
accurate or adequate. Any representation to the contrary is a criminal
offense. These securities are not savings or deposit accounts or other
obligations of any bank or nonbank subsidiary of any of the parties, and
they are not insured by the Federal Deposit Insurance Corporation, the
Saving Insurance Fund or any other governmental agency.
Proxy Statement/Prospectus dated February 17, 1999
and first mailed to shareholders on February 22, 1999.
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HEADLANDS MORTGAGE COMPANY
1100 LARKSPUR LANDING CIRCLE, SUITE 101
LARKSPUR, CALIFORNIA 94939
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MARCH 23, 1999
TO THE SHAREHOLDERS OF HEADLANDS MORTGAGE COMPANY:
A special meeting of shareholders of Headlands Mortgage Company, a California
corporation, will be held on Tuesday, March 23, 1999 at 10:00 a.m., local time,
at Courtyard by Marriott, located at 2500 Larkspur Landing Circle, Larkspur,
California for the following purposes:
(1) To consider and vote on a proposal to approve and adopt the principal terms
of the proposed merger pursuant to the Agreement and Plan of Merger, dated as
of December 8, 1998, by and among GreenPoint Financial Corp., a Delaware
corporation, GF Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of GreenPoint, and Headlands, pursuant to which Headlands will
become a wholly owned subsidiary of GreenPoint; and
(2) To transact such other business as may properly come before the special
meeting or any adjournments or postponements of the special meeting.
The close of business on February 12, 1999 has been fixed as the record date
for determining shareholders entitled to vote at the special meeting.
Accordingly, only shareholders of record on such date are entitled to notice
of, and to vote at, the special meeting and any adjournments or postponements
of the special meeting. To ensure your representation at the special meeting,
please complete and promptly mail your proxy in the return envelope enclosed.
This will not prevent you from voting in person, but will help secure a quorum
and avoid added solicitation costs. Your proxy may be revoked at any time
before it is voted. Please review the Proxy Statement/Prospectus accompanying
this notice for more complete information regarding the proposed merger and the
special meeting.
By Order of the Board of Directors,
Peter T. Paul
Chairman, Chief Executive Officer and President
Larkspur, California
February 17, 1999
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the merger is completed, each outstanding share of Headlands common
stock will be converted into the right to receive 0.62 shares of GreenPoint
common stock. GreenPoint will not issue fractional shares of GreenPoint common
stock. Instead, each Headlands shareholder will receive a check for the value
of any fractional share.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We presently expect to complete the merger in the first quarter of 1999,
but we can't assure you that we will complete the merger during the time
expected.
Q: AM I ENTITLED TO DISSENTERS' RIGHTS?
A: Maybe. You will have the right under California law to seek appraisal of
the value of your Headlands shares provided that the holders of at least 5% of
the outstanding Headlands common stock (including you) seek appraisal rights
and you comply with California law. For a more detailed description of your
rights, see page 68.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES TO HEADLANDS SHAREHOLDERS OF
THE MERGER?
A: The exchange of shares by Headlands shareholders is intended to be tax-
free to Headlands shareholders for federal income tax purposes, except for any
cash received instead of a fractional share of GreenPoint common stock. To
review the federal income tax consequences in greater detail, see page 39. Each
Headlands shareholder should consult his or her own tax advisor as to his or
her particular tax consequences.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon
as possible so that your shares may be represented at the special meeting. YOUR
BOARD OF DIRECTORS, BY THE UNANIMOUS VOTE OF ALL DIRECTORS, RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE MERGER.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Just send in a later-dated, signed proxy card to Headlands' Secretary
before the meeting or attend the meeting and vote in person.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, GreenPoint will send you written
instructions for exchanging your stock certificates.
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To find any one of the principal sections identified below, simply bend the
document slightly to expose the black tabs and open the document to the tab
which corresponds to the title of the section you wish to read. For your
convenience, we have included an index of frequently used capitalized terms in
this Joint Proxy Statement/Prospectus in an Index of Defined Terms, which is
printed on gold paper as the last item in the Summary section of this Joint
Proxy Statement/Prospectus.
TABLE OF CONTENTS [TAB MARKER]
SUMMARY [TAB MARKER]
SPECIAL MEETING [TAB MARKER]
THE MERGER [TAB MARKER]
BUSINESS AND MANAGEMENT [TAB MARKER]
REGULATION AND SUPERVISION [TAB MARKER]
CAPITAL STOCK AND COMPARISON OF STOCKHOLDER RIGHTS [TAB MARKER]
ADDITIONAL INFORMATION [TAB MARKER]
FINANCIAL INFORMATION [TAB MARKER]
EXHIBITS [TAB MARKER]
<PAGE>
TABLE OF CONTENTS
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Page
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SUMMARY................................................................... 1
The Companies........................................................... 1
Headlands' Reasons for the Merger....................................... 1
Our Recommendations to Shareholders..................................... 1
The Special Meeting of the Headlands Shareholders....................... 2
Record Date and Vote Required........................................... 2
The Merger.............................................................. 2
Recent Developments..................................................... 8
CERTAIN COMPARATIVE PER SHARE DATA AND SHARE PRICES....................... 9
SELECTED HISTORICAL FINANCIAL DATA OF GREENPOINT FINANCIAL CORP........... 11
SELECTED HISTORICAL FINANCIAL DATA OF HEADLANDS MORTGAGE COMPANY.......... 13
SELECTED PRO FORMA COMBINED FINANCIAL DATA................................ 15
THE SPECIAL MEETING OF HEADLANDS SHAREHOLDERS............................. 18
General................................................................. 18
Matters to be Considered................................................ 18
Proxies................................................................. 18
Solicitation of Proxies................................................. 18
Record Date and Voting Rights........................................... 19
Support Agreements...................................................... 20
Recommendation of the Headlands Board................................... 21
THE MERGER................................................................ 22
Description of the Merger............................................... 22
Background of the Merger................................................ 24
Recommendation of the Headlands Board and Reasons for the Merger........ 25
Opinion of Headlands' Financial Advisor................................. 27
Effective Date.......................................................... 33
Exchange of Certificates; Fractional Shares............................. 34
Representations and Warranties.......................................... 35
Conduct of Business Pending Consummation of the Merger and Other
Agreements............................................................. 35
Indemnification; Directors' and Officers' Insurance..................... 37
Certain Other Matters Relating to the Merger............................ 38
Conditions to Consummation of the Merger; Termination................... 38
Waiver; Amendment....................................................... 39
Expenses................................................................ 39
Federal Income Tax Consequences......................................... 39
Accounting Treatment of the Merger...................................... 40
Federal Securities Laws Consequences; Resale Restrictions............... 41
Stock Option Agreement.................................................. 41
Interests of Certain Persons in the Merger.............................. 44
Regulatory Matters...................................................... 46
BUSINESS AND MANAGEMENT................................................... 47
Management and Operations After the Merger.............................. 47
Price Range of Common Stock and Dividends............................... 47
INFORMATION ABOUT GREENPOINT AND HEADLANDS................................ 49
Greenpoint.............................................................. 49
Headlands............................................................... 49
REGULATION AND SUPERVISION................................................ 51
GreenPoint.............................................................. 51
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Headlands................................................................ 54
CAPITAL STOCK AND COMPARISON OF STOCKHOLDER RIGHTS......................... 56
Description of GreenPoint Capital Stock.................................. 56
Comparison of Stockholder Rights......................................... 57
ADDITIONAL INFORMATION..................................................... 68
Dissenters' Appraisal Rights............................................. 68
Shareholder Proposals.................................................... 70
Other Matters............................................................ 70
Where You Can Find More Information...................................... 70
Legal Matters............................................................ 72
Experts.................................................................. 72
Cautionary Statement Concerning Forward-Looking Statements............... 72
FINANCIAL INFORMATION...................................................... 74
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EXHIBIT A--Agreement and Plan of Merger
EXHIBIT B--Stock Option Agreement
EXHIBIT C--Opinion of NationsBanc Montgomery Securities LLC
EXHIBIT D--Chapter 13 of the General Corporation Law of the State of
California pertaining to dissenters' rights
ii
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SUMMARY
This summary highlights selected information from this Proxy
Statement/Prospectus. It does not contain all of the information that is
important to you. You should carefully read this entire Proxy
Statement/Prospectus and the documents to which we have referred you in order
to fully understand the transaction. See "Additional Information--Where You Can
Find More Information" on page 70. Each item in this summary includes a page
reference to a section of this document that contains a more complete
description of the topic summarized.
The Companies (Page 49)
GreenPoint Financial Corp.
90 Park Avenue
New York, New York 10016
(212) 834-1000
GreenPoint Financial Corp. is a bank holding company registered under federal
law and incorporated in Delaware. GreenPoint provides a variety of financial
services, primarily through its bank subsidiary, GreenPoint Bank, a New York
State chartered savings bank, and GreenPoint Bank's wholly owned subsidiaries,
GreenPoint Mortgage Corp., a national home mortgage banking company
headquartered in Charlotte, North Carolina, and GreenPoint Credit Corp., a
company engaged primarily in originating, purchasing and servicing manufactured
housing installment sale contracts and installment loan agreements and
headquartered in San Diego, California. Through its subsidiaries, GreenPoint is
primarily engaged in mortgage lending in New York and across the nation. As of
December 31, 1998, GreenPoint had consolidated total assets of approximately
$14.0 billion, total net loans of approximately $9.9 billion, total deposits of
approximately $11.2 billion and stockholders' equity of approximately $1.8
billion.
Headlands Mortgage Company
1100 Larkspur Landing Circle, Suite 101
Larkspur, California 94939
(415) 461-6790
Headlands is a specialty mortgage banking company engaged in the business of
originating, selling, securitizing and servicing mortgage loans secured by one-
to four-family residences. Headlands was incorporated in California and
commenced its mortgage banking business in 1986. As a specialty mortgage
lender, Headlands' strategy is to focus on specialized mortgage loan products
for primarily high credit quality borrowers where the mortgage loans fail to
satisfy one or more of the standardized criteria (other than credit quality of
the borrower) required for sale or exchange through governmental agencies or
private mortgage conduits. As of December 31, 1998, Headlands had consolidated
total assets of approximately $1.1 billion, total net loans held for sale of
approximately $910.8 million and stockholders' equity of approximately $126.3
million.
Headlands' Reasons for the Merger (page 25)
Headlands shareholders will recognize a significant premium for their shares of
Headlands common stock as a result of the merger, and will have the ability to
participate in the future value and growth of GreenPoint. In addition, we
believe that by combining our complementary products and abilities in the
mortgage banking business with those of GreenPoint we will create a stronger
mortgage banking competitor. As a result of the merger, GreenPoint will obtain
a leadership position in an additional area of the specialty home finance
business and the new Headlands will gain access to GreenPoint's capital and
funding base.
Our Recommendations to Shareholders
Your Board of Directors believes that the merger is fair to you and in your
best interests and unanimously recommends that
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you vote "FOR" the proposal to approve the principal terms of the merger.
The Special Meeting of the Headlands Shareholders (page 18)
The special meeting of the Headlands shareholders will be held at Courtyard by
Marriott, 2500 Larkspur Landing Circle, Larkspur, California, at 10:00 a.m.
Pacific time on Tuesday, March 23, 1999. At the special meeting, you will be
asked:
1. To approve the principal terms of the merger.
2. To act on any other items that may be submitted to a vote at the special
meeting.
Record Date and Vote Required (page 19)
You can vote at the special meeting of Headlands' shareholders if you owned
Headlands common stock at the close of business on February 12, 1999. You can
cast one vote for each share of Headlands common stock that you owned on that
date. In order to approve the merger, the holders of a majority of the shares
of Headlands common stock outstanding on that date must vote in its favor. You
can vote your shares by attending the special meeting of Headlands
shareholders and voting in person or you can mark the enclosed proxy card with
your vote, sign it and mail it in the enclosed return envelope. You can revoke
your proxy as late as the date of the special meeting either by sending in a
new proxy or by attending the meeting and voting in person.
The Merger (page 22)
We've attached the Agreement and Plan of Merger to this Proxy
Statement/Prospectus as Exhibit A. Please read the Agreement. It is the legal
document that governs the merger.
Structure
The proposed combination calls for GF Acquisition Corp., a wholly owned
subsidiary of GreenPoint, to merge with and into Headlands. Headlands will be
the surviving corporation in the merger and will become a wholly owned
subsidiary of GreenPoint. GreenPoint intends to contribute its interest in the
surviving corporation to GreenPoint Bank, its wholly owned savings bank
subsidiary, immediately after the merger.
Exchange of Shares (page 34)
As a Headlands shareholder, each of your shares of Headlands common stock
(other than shares held by Headlands shareholders who properly demand and are
entitled to dissenters' rights), will automatically become exchangeable for
0.62 shares of GreenPoint common stock. The total number of shares that you'll
receive will therefore be equal to 0.62 times the number of shares of
Headlands common stock that you own. GreenPoint, however, will not issue any
fractional shares of GreenPoint common stock. Instead, you'll receive the
value of any fractional share in cash, based on the average market value of
GreenPoint's common stock for the five consecutive New York Stock Exchange
trading days immediately preceding the date on which the merger is completed.
For example, if you owned 10 shares of Headlands common stock, you will
receive 6 whole shares of GreenPoint common stock and a check for the value of
0.2 shares of GreenPoint common stock. Following the merger, you will be
entitled to exchange your certificates representing shares of Headlands common
stock for certificates representing shares of GreenPoint common stock by
sending your Headlands common stock share certificates, and a form that we
will send you, to the exchange agent indicated on that form. The exchange
agent will then send you the GreenPoint common stock share certificates to
which you are entitled. For more information on how this exchange procedure
works, see "The Merger--Exchange of Certificates; Fractional Shares" on page
33 of this Proxy Statement/Prospectus.
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Comparative Per Share Market Prices (page 47)
Shares of Headlands are quoted on the Nasdaq National Market and shares of
GreenPoint are listed on the New York Stock Exchange. On December 7, 1998, the
last trading day before we announced the merger, Headlands common stock closed
at $16.125 per share and GreenPoint common stock closed at $39.25 per share. On
February 16, 1999, Headlands common stock closed at $18.56 per share and
GreenPoint common stock closed at $31.25 per share.
Based on the 0.62 exchange ratio, the market value of the consideration that
you will receive as a Headlands shareholder in the merger for each of your
shares of Headlands common stock would have been $24.34 per share based on
GreenPoint's closing stock price on December 7, 1998 and would have been $19.38
per share based on GreenPoint's closing stock price on February 16, 1999. Of
course, the market price of GreenPoint and Headlands will fluctuate prior to
the merger, while the exchange ratio is fixed, and therefore the market value
of the merger consideration will fluctuate. You should obtain current stock
price quotations for GreenPoint common stock and Headlands common stock. These
quotations are available from a variety of sources, including, for example,
your broker, major newspapers such as The Wall Street Journal and on the
Internet.
Opinion of Financial Advisor (page 27)
NationsBanc Montgomery Securities LLC has delivered its opinion to the
Headlands Board of Directors that as of the date of this Proxy
Statement/Prospectus the exchange ratio is fair to Headlands shareholders from
a financial point of view. NationsBanc Montgomery's opinion is attached as
Exhibit C to this Proxy Statement/Prospectus. We encourage you to read it
carefully.
Stock Options (page 41)
Upon completion of the merger, options to acquire Headlands common stock
granted under Headlands' stock option plan that are outstanding and unexercised
immediately before completing the merger will become options to purchase
GreenPoint common stock. The options will continue to be governed by the terms
of Headlands' stock option plan, which will be assumed by GreenPoint. The
number of shares of GreenPoint common stock subject to the new stock options,
as well as the exercise price of those stock options, will be adjusted to
account for the exchange ratio in the merger.
Conditions that Must be Satisfied to Complete the Merger (page 38)
In order to complete the merger, there are a number of conditions specified in
the agreement and plan of merger that must be met that have not been met as of
the date of this Proxy Statement/Prospectus. These conditions include:
1. Approval of the principal terms of the merger by a majority of the
outstanding shares of Headlands common stock.
2. Receipt by each company of a legal opinion that on the day of the merger,
for United States federal income tax purposes, the merger will be a
reorganization and the Headlands shareholders who exchange their shares of
Headlands common stock for GreenPoint common stock will not recognize any
gain or loss as a result of the merger, except in connection with the
payment of cash instead of fractional shares. These opinions will be subject
to various limitations and we recommend that you read the more complete
description of the tax consequences of the merger beginning on page 39 of
this Proxy Statement/Prospectus.
3. Receipt by each company of a letter from its independent accountants that
the merger will qualify for "pooling of interests" accounting treatment.
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4. Approval by the New York Stock Exchange of the listing of the shares of
GreenPoint common stock to be issued in the merger.
5. The absence of any injunction or legal restraint blocking the merger or any
government proceedings trying to block the merger.
6. Receipt of required regulatory approvals and expiration of statutory
waiting periods.
Where the law permits, GreenPoint or Headlands could decide to complete the
merger even if one or more of these conditions hasn't been met. We can't be
certain when (or if) the conditions to the merger will be satisfied or waived,
or that the merger will be completed.
GreenPoint does not require any approval of its stockholders to complete the
merger.
Regardless of whether the merger is completed, we will each pay our own fees
and expenses, except that we will each pay one-half of the costs and expenses
incurred in printing and mailing this Proxy Statement/Prospectus and the
registration fee that we have paid to the Securities and Exchange Commission,
and GreenPoint will pay the expenses incurred in certain regulatory filings.
Termination of the Agreement and Plan of Merger; Expenses (pages 38 and 39)
We can agree at any time to terminate the agreement and plan of merger without
completing the merger, even if the Headlands shareholders have already
approved it. Also, either of us can decide, without having to get the other's
consent, to terminate the agreement if:
1. The other party materially breaches the agreement (and doesn't promptly
correct the breach).
2. The merger hasn't been completed by July 31, 1999, unless the failure to
complete the merger by that time is the fault of the party that wants to
terminate the agreement.
3. Any governmental authority denies an approval that we need to complete the
merger, and the denial is final and non-appealable.
4. The Headlands shareholders fail to approve the merger.
Waiver and Amendment (page 39)
We can agree to amend the agreement and plan of merger, and each of us can
waive our right to require the other party to adhere to the terms and
conditions of the agreement, where the law allows. However, we may not do so
after the Headlands shareholders approve the merger if the amendment or waiver
reduces the consideration that will be received by Headlands shareholders
unless the Headlands shareholders approve the amendment or waiver.
Accounting Treatment (page 40)
We expect the merger to qualify as a "pooling of interests." This means that
for accounting and financial reporting purposes, we will treat our companies
as if they had always been one company.
Regulatory Approvals (page 46)
We are required to make certain filings with the Antitrust Division of the
U.S. Department of Justice and the Federal Trade Commission under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
applicable rules of the U.S. Federal Trade Commission. We have made the
required filings; the waiting period on one filing received early termination
on February 5, 1999, and the waiting period on a second filing is currently
scheduled to expire on March 13, 1999. Federal or state regulatory authorities
can act at any time to challenge the proposed merger if any of them believe
that it poses antitrust problems. We do not have any reason to believe that
the merger will be challenged on those grounds, although there can be no
assurance that a challenge won't be made or, if a challenge is made, what the
result will be.
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Stock Option Agreement (page 41)
Headlands, as a condition to GreenPoint's entering into the agreement and plan
of merger, entered into a stock option agreement granting GreenPoint an
irrevocable option to purchase shares of Headlands common stock under certain
circumstances. The companies entered into this stock option agreement in order
to increase the likelihood that we would complete the merger. The stock option
agreement could discourage other companies from trying or proposing to combine
with Headlands before we complete the merger.
The stock option agreement, if it became exercisable, would permit GreenPoint
to acquire up to 3,929,580 shares of Headlands common stock (19.9% of the
Headlands common stock outstanding on the day prior to the day on which we
entered into the stock option and merger agreements) at an exercise price of
$16.125 per share (the closing price of Headlands common stock on the day prior
to the day on which we entered into the agreements). In addition to the option
to purchase Headlands common stock, under certain circumstances the person
holding the option (or the person holding shares purchased under the option)
may require Headlands to repurchase the option and/or any option shares
previously purchased under the option, at a pre-determined price. GreenPoint
could also surrender the option and any option shares purchased under the
option at a pre-determined price under certain circumstances.
GreenPoint cannot exercise its option unless certain events occur. These events
are business combinations involving Headlands (other than the merger discussed
here) and certain related activities such as a merger or the sale of a
substantial amount of the assets or stock of Headlands. Neither of us knows of
any event that has occurred as of the date of this Proxy Statement/Prospectus
that would permit GreenPoint to exercise its option.
Support Agreements (page 20)
Mr. Paul and certain other members of the Board of Directors of Headlands and
their affiliates have entered into agreements with GreenPoint to support the
merger. The people that entered into these support agreements agreed, among
other things, to vote all of the shares of Headlands common stock that they
have the ability to vote in favor of the merger. On the date that these
individuals entered into the support agreements, they had the ability to direct
the voting of shares constituting 53.1% of the Headlands Common Stock on
matters such as the Merger. The support agreements can be terminated when the
merger is completed or the agreement and plan of merger is terminated.
Board of Directors and Management Following the Merger (page 47)
GreenPoint Board of Directors. If the merger is completed, Mr. Paul will become
a member of the GreenPoint Board of Directors.
Management. If the merger is completed, Mr. Paul will also join GreenPoint's
management as a Vice Chairman, and he will continue to serve in his present
position with Headlands. The current executives of Headlands will be the
initial executives of Headlands following the merger. Certain of those
executives have entered into employment agreements with GreenPoint that will
become effective when the merger is completed, including Mr. Paul, Gilbert J.
MacQuarrie (Executive Vice President, Chief Financial Officer and Secretary of
Headlands), Becky S. Poisson (Executive Vice President, Operations of
Headlands), and Steven M. Abreu (Executive Vice President, Production and
Secondary Marketing of Headlands).
Interests of Other People in the Merger that are Different from Yours (page 44)
Some of Headlands directors and officers have interests in the merger that are
5
<PAGE>
different from yours. These interests exist because some of our officers and
directors have entered into agreements with GreenPoint providing for their
employment by GreenPoint following the merger and for service on the
GreenPoint Board of Directors (in Mr. Paul's case only) following the merger.
In addition, the approval of the merger by the Headlands shareholders will be
considered a "change of control" under Headlands' stock option plan, and
therefore the restrictions on exercising the stock options held by our
officers and directors will go away, even if they would otherwise have gone
away at a later time. The total number of stock options held by all directors
and officers of Headlands that will become exercisable earlier than they would
have because of the merger is 606,000. Mr. Paul has entered into an agreement
with GreenPoint that will become effective when the merger is completed giving
him additional benefits in the event of a change in control of GreenPoint. In
addition, GreenPoint will indemnify and provide liability insurance for the
members of Headlands' Board of Directors and its officers pursuant to the
merger agreement. The Headlands Board of Directors was aware of these
interests and took them into account in approving the agreement and plan of
merger. Additional information regarding these interests is located under "The
Merger--Interests of Certain Persons in the Merger" beginning on page 44 of
this Proxy Statement/Prospectus.
Dissenters' Rights (page 68)
Under California law, you may have the right to dissent from the merger and to
have the appraised fair market value of your shares of Headlands common stock
paid to you in cash. You have the right to seek appraisal of the value of your
Headlands shares and be paid the appraised value if all of the following
conditions exist:
1. You deliver to Headlands, before the vote is taken at the special meeting,
a written demand for payment of your shares of Headlands common stock.
2. The holders of at least 5% of the total number of shares of Headlands
common stock (including you) make the required written demand.
3. You vote against the merger.
4. You otherwise comply with the provisions governing dissenters' rights under
California law.
If you dissent from the merger and the previously outlined conditions are met,
your shares of Headlands common stock will not be exchanged for shares of
GreenPoint common stock in the merger, and your only right will be to receive
the appraised value of your shares in cash. You should be aware that
submitting a signed proxy card without indicating a vote with respect to the
merger will be deemed a vote "FOR" the merger and a waiver of your dissenters'
rights.
For more detailed information about your rights under California law, see
"Additional Information--Dissenters' Appraisal Rights" on page 68.
Certain Federal Income Tax Consequences (page 39)
We expect that for United States federal income tax purposes, your exchange of
shares of Headlands common stock for shares of GreenPoint common stock
generally will not cause you to recognize any gain or loss. However, you will
have to recognize gain in connection with any cash received instead of
fractional shares.
Our obligation to complete the merger is conditioned on our receipt of legal
opinions about the federal income tax treatment of our companies and our
stockholders. These opinions won't bind the Internal Revenue Service, which
could take a different view.
This tax treatment may not apply to certain Headlands shareholders, including
those shareholders who dissent from the merger. Determining the actual tax
consequences of the
6
<PAGE>
merger to you can be complicated and will depend on your specific situation and
on variables not within our control. You should consult your own tax advisor
for a full understanding of the merger's tax consequences.
Certain Differences in the Rights of Stockholders (page 57)
The rights of Headlands shareholders are currently governed by the General
Corporation Law of the State of California, Headlands' Articles of
Incorporation and Headlands' Amended and Restated Bylaws. Upon completion of
the merger, you will become stockholders of GreenPoint, and your rights will be
governed by the General Corporation Law of the State of Delaware, GreenPoint's
Certificate of Incorporation, as amended, and GreenPoint's Bylaws. The
significant differences between your rights as stockholders of GreenPoint and
your rights as Headlands shareholders are discussed in more detail on page 57
of this Proxy Statement/Prospectus.
7
<PAGE>
Recent Developments
The following table shows summarized unaudited financial data for our
companies at or for the year ended December 31, 1998. We expect to incur
restructuring and merger-related expenses as a result of combining our
companies. We also anticipate that the merger will provide the combined
company with financial benefits, including reduced operating expenses and
greater opportunities to earn revenue. However, none of these anticipated
expenses or benefits have been factored into the selected financial data
presented below, nor has the data been audited.
Selected Financial Data of GreenPoint and Headlands
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
As of or for the year
ended December 31,
1998
----------------------
GreenPoint Headlands
----------- ----------
(unaudited)
<S> <C> <C>
Income Data (thousands)
Net interest income................................ $ 483,693 $ 25,839
Provision for loan losses.......................... 13,835 5,373
Non-interest income................................ 75,180 133,584
Non-interest expense............................... 303,101 102,387
Income tax expense................................. 92,403 21,699(1)
----------- ----------
Net income......................................... $ 149,534 $ 29,964(1)
=========== ==========
End of Period Balance Sheet Items (thousands)
Assets............................................. $13,970,344 $1,052,801
Total net loans.................................... 9,940,531 910,830
Deposits........................................... 11,173,115 --
Long term debt..................................... 399,599 --
Shareholders' equity............................... 1,796,267 126,309
Per Share Data
Basic earnings per share........................... $ 1.99 $ 1.56
Diluted earnings per share......................... $ 1.92 $ 1.54
Cash dividends declared............................ $ 0.64 $ --
Book value, end of period.......................... $ 21.51 $ 6.30
Shares Outstanding (thousands)
Average--diluted(2)................................ 77,821 19,455
</TABLE>
- -------
(1) Prior to the closing of Headlands' initial public offering, Headlands was
treated as an S corporation for federal and state income tax purposes. The
income tax expense and net income information of Headlands are pro forma
presentations reflecting the provision for income taxes as if Headlands
had always been fully subject to federal and state taxes as a C
corporation at the tax rate effective for the period presented (42%).
(2) Average diluted shares includes all options issued under applicable stock
option plans and is calculated using the treasury stock method in
accordance with SFAS No. 128.
8
<PAGE>
CERTAIN COMPARATIVE PER SHARE DATA AND SHARE PRICES
The following table shows information about our income per share, dividends
per share and book value per share, and similar information reflecting the
merger (which we refer to as "pro forma" information). In presenting the
comparative pro forma information for certain time periods, we assumed that we
had been merged throughout those periods.
We also assumed that we will treat our companies as if they had always been
combined for accounting and financial reporting purposes (a method known as
"pooling of interests" accounting). The information listed as "equivalent pro
forma" was obtained by multiplying the pro forma amounts by the exchange ratio
of 0.62. We present this information to reflect the fact that Headlands
shareholders will receive 0.62 of a share of GreenPoint's common stock for each
share of Headlands common stock exchanged in the merger. We expect that we will
incur reorganization and restructuring expenses as a result of the merger.
These expenses cannot be estimated at this time and therefore are not included
in the pro forma financial statements. We also anticipate that the merger will
provide GreenPoint with financial benefits that include cost savings and the
opportunity to earn more revenue, but the pro forma information doesn't take
into account any of these expenses or revenues. The pro forma information,
while helpful in illustrating the financial characteristics of the new company,
doesn't attempt to predict or suggest future results.
9
<PAGE>
The information in the following table is based on the historical financial
information that we've presented in our prior Securities and Exchange
Commission filings. We have incorporated this material into this document by
reference. See "Additional Information--Where You Can Find More Information" on
page 70.
<TABLE>
<CAPTION>
At or for the At or for the
nine months years ended
ended December 31,
September 30, ------------------
1998 1997 1996 1995
------------- ------ ----- -----
<S> <C> <C> <C> <C>
GreenPoint Common Stock(1)
Net Income per common share--basic:
Historical................................. $ 1.59 $ 1.96 $1.56 $1.16
Pro forma combined for the merger(2): 1.47 2.02 1.52 1.10
Net Income per share--diluted(3):
Historical................................. $ 1.53 $ 1.86 $1.51 $1.14
Pro forma combined for the merger(2)....... 1.42 1.93 1.48 1.09
Cash dividends declared per common share(4):
Historical................................. $ 0.48 $ 0.50 $0.40 $0.40
Pro forma combined for the merger(2): 0.41 0.43 0.35 0.35
Book value per share as of end of period(5):
Historical................................. $21.40 $17.00
Pro forma combined for the merger(2): 19.92 16.02
Headlands Common Stock
Pro forma net income per common share--
basic(6):
Historical................................. $ 0.43 $ 1.60 $0.76 $0.30
Equivalent Pro forma(7): 0.91 1.25 0.94 0.68
Pro forma net income per common share--
diluted(3)(6):
Historical................................. $ 0.43 $ 1.60 $0.76 $0.30
Equivalent Pro forma(7).................... 0.88 1.20 0.92 0.68
Cash dividends declared per common share:
Historical................................. -- -- -- --
Equivalent Pro forma(7): 0.25 0.27 0.22 0.22
Book value per common share as of end of
period(6):
Historical................................. $ 6.14 $ 4.73
Equivalent Pro forma(7):................... 12.35 9.93
</TABLE>
- --------
(1) Adjusted for a 2-for-1 stock split on March 4, 1998.
(2) GreenPoint will account for the Merger using the "pooling of interests"
method of accounting.
(3) Net income per share--diluted and pro forma net income per common share--
diluted are based on average diluted shares, which includes options issued
under applicable stock option plans and is calculated using the treasury
stock method in accordance with SFAS No. 128.
(4) Pro forma cash dividends represent historical cash dividends of GreenPoint
and Headlands, divided by pro forma weighted average common shares.
(5) Book value per common share is based on total period-end stockholders'
equity.
(6) Prior to the closing of Headlands' initial public offering, Headlands was
treated as an S corporation for federal and state income tax purposes. The
pro forma presentation reflects the provision for income taxes as if
Headlands had always been fully subject to federal and state taxes as a C
corporation at the tax rates effective for the periods presented (41% for
1995 through 1998).
(7) Headlands pro forma equivalent amounts are computed by multiplying the pro
forma combined amounts by an assumed exchange ratio of 0.62.
10
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF GREENPOINT FINANCIAL CORP.
In the table below, we provide you with selected historical financial data of
GreenPoint. We prepared this data using the consolidated financial statements
of GreenPoint. When you read this selected historical consolidated financial
data, it is important that you read the footnotes set forth below the financial
data. You should also read the historical financial statements and accompanying
notes that GreenPoint has included in its Annual Report on Form 10-K for the
year ended December 31, 1997 and its Quarterly Report on Form 10-Q for the
period ended September 30, 1998. You can obtain these reports by following the
instructions we provide in this Proxy Statement/Prospectus under "Additional
Information--Where You Can Find More Information" on page 70.
It is also important that you read the unaudited pro forma combined condensed
financial information and accompanying notes that we have included in this
Proxy Statement/Prospectus under "Financial Information" on page 74.
The results of operations for the nine months ended September 30, 1998 are
not necessarily indicative of the actual financial results achieved by
GreenPoint during the 1998 fiscal year.
11
<PAGE>
GreenPoint Financial Corp. and Subsidiaries
Selected Historical Financial Data
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Six
Ended Months Year
September 30, Year Ended December 31, Ended Ended
----------------------- ---------------------------------------------- December 31, June 30,
1998 1997 1997 1996 1995 1994 1993 1993
----------- ----------- ----------- ----------- ----------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income Data:
Net interest income..... $ 361,672 $ 358,398 $ 474,975 $ 446,487 $ 350,738 $ 337,516 $ 158,373 $303,174
Provision for loan
losses................. 9,896 14,837 18,885 15,675 9,494 32,306 25,324 63,565
Non-interest income..... 39,032 43,065 56,283 56,938 35,787 27,067 16,211 32,986
Non-interest expense.... 202,368 203,541 270,286 263,245 178,584 121,403 51,823 99,702
Income taxes............ 71,941 72,192 94,439 92,054 90,978 97,951 41,188 83,690
----------- ----------- ----------- ----------- ----------- ---------- ---------- --------
Income before cumulative
effect of changes in
accounting principles,
net of tax............. 116,499 110,893 147,648 132,451 107,469 112,923 56,249 89,203
----------- ----------- ----------- ----------- ----------- ---------- ---------- --------
Cumulative effect of
changes in accounting
principles, net of tax
(1).................... -- -- -- -- -- -- -- (5,254)
----------- ----------- ----------- ----------- ----------- ---------- ---------- --------
Net income.............. $ 116,499 $ 110,893 $ 147,648 $ 132,451 $ 107,469 $ 112,923 $ 56,249 $ 83,949
=========== =========== =========== =========== =========== ========== ========== ========
End of Period Balance
Sheet:
Total assets............ $13,612,611 $13,093,985 $13,083,518 $13,325,585 $14,670,463 $6,955,044 $7,377,072 --
Total net loans......... 9,981,617 8,495,104 8,801,159 7,299,096 6,033,700 5,605,187 5,442,339 --
Securities sold under
agreements to
repurchase............. 100,000 91,491 106,149 89,500 -- -- -- --
Deposits................ 10,851,536 11,035,921 10,972,978 11,452,266 12,898,323 5,223,526 5,650,435 --
Long term debt.......... 399,588 399,541 399,552 -- -- -- -- --
Stockholders' equity.... 1,792,301 1,268,776 1,269,603 1,459,803 1,551,317 1,521,192 786,275 --
Per Share Data (2)(3):
Net income--basic....... $ 1.59 $ 1.44 $ 1.96 $ 1.56 $ 1.16 $ 1.12 -- --
Net Income--diluted(4).. 1.53 1.37 1.86 1.51 1.14 1.11 -- --
Cash dividends
declared............... 0.48 0.38 0.50 0.40 0.40 0.30 -- --
Book value, end of
period................. 21.40 16.82 17.00 17.39 17.12 16.16 -- --
Shares Outstanding:
Average--basic.......... 73,262 76,829 75,333 85,145 92,539 93,730 -- --
Average--diluted(4)..... 76,049 80,870 79,331 87,817 93,938 94,546 -- --
</TABLE>
- -------
(1)Reflects changes due to the adoption of SFAS Nos. 106 and 112.
(2) Per share data has been restated to reflect the impact of a 2-for-1 split
of GreenPoint's common stock on March 4, 1998.
(3) Per share data is for the period subsequent to GreenPoint's initial public
offering on January 28, 1994.
(4) Net income--diluted is based on average diluted shares, which includes all
options issued under GreenPoint's stock option plans and is calculated
using the treasury stock method in accordance with SFAS No. 128.
12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
OF HEADLANDS MORTGAGE COMPANY
In the table below, we provide you with selected historical financial data of
Headlands. We prepared this data using the consolidated financial statements of
Headlands. When you read this selected historical consolidated financial data,
it is important that you read the footnotes set forth below the financial data.
You should also read the historical financial statements and accompanying notes
that Headlands has included in its Annual Report on Form 10-K for the year
ended December 31, 1997 and its Quarterly Report on Form 10-Q for the period
ended September 30, 1998. You can obtain these reports by following the
instructions we provide in this Proxy Statement/Prospectus under "Additional
Information--Where You Can Find More Information" on page 70.
It is also important that you read the unaudited pro forma combined condensed
financial information and accompanying notes that we have included in this
Proxy Statement/Prospectus under "Financial Information" on page 74.
The results of operations for the nine months ended September 30, 1998 are
not necessarily indicative of the actual financial results achieved by
Headlands during the 1998 fiscal year.
13
<PAGE>
Headlands Mortgage Company and Subsidiaries
Selected Historical Pro Forma Financial Data
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Data:
Net interest income .... $ 18,377 $ 8,826 $ 12,524 $ 5,624 $ 1,814 $ 2,709 $ 1,797
Provision for loan
losses................. 4,474 2,359 3,588 3,641 3,113 660 1,847
Non-interest income..... 106,368 68,471 82,906 53,632 38,402 34,361 59,735
Non-interest expense.... 74,178 36,659 53,220 37,315 29,880 35,090 34,450
Income taxes related to
earnings............... 21,313 1,342 1,354 640 252 50 568
Income taxes related to
S corporation
conversion............. 18,488 -- -- -- -- -- --
-------- -------- -------- -------- -------- ------- --------
Net income.............. $ 6,292 $ 36,937 $ 37,268 $ 17,660 $ 6,971 $ 1,270 $ 24,667
======== ======== ======== ======== ======== ======= ========
Pro Forma Information:
Income before income
taxes.................. 46,093 38,279 38,622 18,300 7,223 1,320 25,235
Provision for pro forma
income taxes(1)........ 37,847 16,077 16,221 7,686 3,034 541 10,599
-------- -------- -------- -------- -------- ------- --------
Pro forma net
income(1).............. $ 8,246 $ 22,202 $ 22,401 $ 10,614 $ 4,189 $ 779 $ 14,636
======== ======== ======== ======== ======== ======= ========
End of Period Balance
Sheet Items:
Total assets............ $961,739 $348,496 $737,805 $288,990 $147,432 $98,730 $349,198
Total net loans......... 862,851 263,122 651,904 238,865 98,164 76,409 322,540
Notes payable and
securities sold under
agreements to
repurchase............. 791,595 264,382 651,631 251,013 91,234 76,278 307,566
Stockholders' equity.... 122,791 66,080 66,531 29,144 25,874 18,904 26,901
Per Share Data:
Net income--basic....... $ 0.33 $ 2.63 $ 2.66 $ 1.26 $ 0.49 $ 0.09 $ 1.76
Net income--diluted(2).. 0.33 2.63 2.66 1.26 0.49 0.09 1.76
Pro forma net income--
basic(1)............... 0.43 1.59 1.60 0.76 0.30 0.06 1.05
Pro forma net income--
diluted(1)(2).......... 0.43 1.59 1.60 0.76 0.30 0.06 1.05
Cash Dividends
declared............... -- -- -- -- -- -- --
Book value, end of
period................. 6.14 4.71 4.73 2.08 1.85 1.35 1.92
Shares Outstanding:
Average--basic.......... 18,945 14,000 14,000 14,000 14,000 14,000 14,000
Average--diluted(2)..... 19,240 14,006 14,010 14,000 14,000 14,000 14,000
</TABLE>
- -------
(1) Prior to the closing of Headlands' initial public offering, Headlands was
treated as an S corporation for federal and state income tax purposes. The
pro forma presentation reflects the provision for income taxes as if
Headlands had always been fully subject to federal and state taxes as a C
corporation at the tax rates effective for the periods presented (41% for
1994; 42% for 1993 and 1995 through 1998).
(2) Net income--diluted and pro forma net income--diluted are based on average
diluted shares, which includes all options issued under Headlands' stock
option plan and is calculated using the treasury stock method in
accordance with SFAS No. 128.
14
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited selected pro forma financial data combines
GreenPoint's historical results with Headlands' historical results using
pooling of interests accounting, in each case as of or for the nine months
ended September 30, 1998 and 1997 and as of or for the years ended December 31,
1997, 1996 and 1995. The unaudited pro forma condensed combined statements of
income information gives effect to the merger as if it had occurred on January
1, 1995. The unaudited pro forma condensed combined balance sheet information
gives effect to the merger as if it occurred on the date of the information
presented.
It is important to remember that this information is hypothetical, and does
not necessarily reflect the financial performance that would have actually
resulted if the merger had been completed on those dates. It is also important
to remember that this information does not necessarily reflect future financial
performance if the merger actually occurs.
Please see "Financial Information" on page 74 of this Proxy
Statement/Prospectus for a more detailed explanation of this analysis.
15
<PAGE>
Selected Unaudited Pro Forma Financial Data
GreenPoint and Headlands Combined
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------------- -----------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income Data:
Net interest income..... $ 380,050 $ 367,224 $ 487,499 $ 452,111 $ 352,552
Provision for loan
losses................. 14,370 17,196 22,473 19,316 12,607
Non-interest income..... 145,399 111,536 139,189 110,571 74,189
Non-interest expense.... 276,546 240,200 323,506 300,561 208,464
Income taxes related to
earnings............... 93,254 73,534 95,793 92,694 91,230
Income taxes related to
S corporation
conversion............. 18,488 -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income.............. $ 122,791 $ 147,830 $ 184,916 $ 150,111 $ 114,440
=========== =========== =========== =========== ===========
Pro Forma Information:
Income before income
taxes.................. $ 234,533 $ 221,364 $ 280,709 $ 242,805 $ 205,670
Provision for pro forma
income taxes........... 109,788 88,269 110,660 99,740 94,012
----------- ----------- ----------- ----------- -----------
Pro forma net income.... $ 124,745 $ 133,095 $ 170,049 $ 143,065 $ 111,658
=========== =========== =========== =========== ===========
End of Period Balance
Sheet Data:
Assets.................. $14,574,350 $13,442,481 $13,821,323 $13,614,575 $14,817,895
Total net loans......... 10,844,468 8,758,226 9,423,063 7,538,148 6,131,864
Deposits................ 10,851,536 11,035,921 10,972,978 11,452,266 12,898,323
Notes payable and
securities sold under
agreements to
repurchase............. 891,595 355,873 757,780 340,513 91,234
Long-term debt.......... 399,588 399,541 399,552 -- --
Stockholders' equity.... 1,915,092 1,334,856 1,336,134 1,488,947 1,577,191
Per share Data:
Net income--basic(1).... $ 1.44 $ 1.73 $ 2.20 $ 1.60 $ 1.13
Net income--diluted..... 1.40 1.65 2.10 1.56 1.12
Pro forma net income--
basic(1)............... 1.47 1.56 2.02 1.52 1.10
Pro forma net income--
diluted................ 1.42 1.49 1.93 1.48 1.09
Cash Dividends
declared............... 0.48 0.38 0.50 0.40 0.40
Book value, end of
period................. 19.92 15.87 16.02 16.07 15.89
Shares Outstanding:
Average--basic.......... 85,008 85,509 84,013 93,825 101,219
Average--diluted(1)..... 87,978 89,554 88,018 96,496 102,617
</TABLE>
- --------
(1) Net income--diluted is based on average diluted shares, which includes all
options issued under Headlands and GreenPoint's stock option plans and is
calculated using the treasury stock method in accordance with SFAS No. 128.
16
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Acquisition Proposal....................................................... 37
Acquisition Transaction.................................................... 42
Agent...................................................................... 66
Bank....................................................................... 49
BHCA....................................................................... 49
BIF........................................................................ 53
Business Combination....................................................... 61
Cash EPS................................................................... 31
CGCL....................................................................... 19
Change in Control Agreement................................................ 45
Code....................................................................... 23
Continuation Period........................................................ 45
Demand..................................................................... 68
DGCL....................................................................... 22
Dissenting Shares.......................................................... 22
DPC Shares................................................................. 22
Effective Date............................................................. 23
Effective Time............................................................. 20
Engagement Letter.......................................................... 27
Excess Shares.............................................................. 56
Exchange Act............................................................... 29
Exchange Agent............................................................. 34
Exchange Ratio............................................................. 22
Exercise Termination Event................................................. 43
FDIC....................................................................... 51
FICO....................................................................... 54
FNMA....................................................................... 49
FRB........................................................................ 51
GAAP....................................................................... 29
GCC........................................................................ 49
GPMC....................................................................... 49
GreenPoint................................................................. 18
GreenPoint Board........................................................... 22
GreenPoint Bylaws.......................................................... 22
GreenPoint Certificate..................................................... 22
GreenPoint Common Stock.................................................... 22
GreenPoint Indemnitee...................................................... 65
GreenPoint Interested Stockholder.......................................... 62
GreenPoint Preferred Stock................................................. 56
GreenPoint Stockholders.................................................... 25
Headlands.................................................................. 18
Headlands Articles......................................................... 19
Headlands Board............................................................ 18
Headlands Bylaws........................................................... 19
Headlands Common Stock..................................................... 18
Headlands Shareholder...................................................... 18
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Headlands Special Meeting.................................................. 18
Headlands Stock Option..................................................... 23
Highly Valued Thrifts...................................................... 29
HMSI....................................................................... 42
Holder..................................................................... 43
HSR Act.................................................................... 46
HUD........................................................................ 55
Initial Triggering Event................................................... 42
Interested Stockholder..................................................... 61
Interim Dividends.......................................................... 33
IRS........................................................................ 40
Limit...................................................................... 60
Listed Termination......................................................... 43
LTM........................................................................ 29
Market/Offer Price......................................................... 43
Merger..................................................................... 18
Merger Agreement........................................................... 18
Merger Consideration....................................................... 22
Merger Sub................................................................. 18
NationsBanc Montgomery..................................................... 24
Notice of Approval......................................................... 68
NYSE....................................................................... 47
Option..................................................................... 41
Option Repurchase Price.................................................... 43
Option Shares.............................................................. 43
Owner...................................................................... 43
Proceeding................................................................. 65
Record Date................................................................ 19
Regional Thrifts........................................................... 29
Reigle-Neal................................................................ 54
Reported EPS............................................................... 31
Repurchase Event........................................................... 43
Rules...................................................................... 60
SAIF....................................................................... 53
SEC........................................................................ 19
Securities Act............................................................. 23
State Banking Laws......................................................... 51
Stock Option Plan.......................................................... 23
Stock Option Agreement..................................................... 41
Subsequent Triggering Event................................................ 42
Support Agreements......................................................... 20
Supporting Shareholders.................................................... 20
Surviving Company.......................................................... 22
Tier 1..................................................................... 52
Tier 2..................................................................... 52
Trust Account Shares....................................................... 22
</TABLE>
17
<PAGE>
THE SPECIAL MEETING OF HEADLANDS SHAREHOLDERS
General
This Proxy Statement/Prospectus is first being mailed to each holder
("Headlands Shareholder") of common stock (the "Headlands Common Stock"), no
par value, of Headlands Mortgage Company ("Headlands") on or about February 22,
1999, and is accompanied by the notice of the special meeting of Headlands
Shareholders (the "Headlands Special Meeting") and a form of proxy that is
being solicited by the Board of Directors of Headlands (the "Headlands Board")
for use at the Headlands Special Meeting, to be held on Tuesday, March 23,
1999, at 10:00 a.m., Pacific time, at Courtyard by Marriott, 2500 Larkspur
Landing Circle, Larkspur, California, and at any adjournments or postponements
thereof.
Matters to be Considered
The purpose of the Headlands Special Meeting is to take action with respect
to the approval of the principal terms of the proposed merger (the "Merger")
pursuant to the Agreement and Plan of Merger, dated as of December 8, 1998, by
and among GreenPoint Financial Corp. ("GreenPoint"), GF Acquisition Corp.
("Merger Sub") and Headlands (the "Merger Agreement") and on such other matters
as may be properly submitted to a vote at the Headlands Special Meeting.
Headlands Shareholders may also be asked to vote upon a proposal to adjourn or
postpone the Headlands Special Meeting, which adjournment or postponement could
be used for the purpose, among others, of allowing additional time for
soliciting additional votes to approve the principal terms of the Merger
pursuant to the Merger Agreement.
Proxies
The accompanying form of proxy is for use at the Headlands Special Meeting if
a Headlands Shareholder will be unable, or does not wish, to attend in person.
The proxy may be revoked by the Headlands Shareholder at any time before it is
exercised by submitting to the Secretary of Headlands written notice of
revocation or a properly executed proxy of a later date or attending the
Headlands Special Meeting and electing to vote in person. Written notices of
revocation, later-dated proxies and other communications with respect to the
revocation of Headlands proxies should be addressed to Headlands Mortgage
Company, 1100 Larkspur Landing Circle, Suite 101, Larkspur, California 94939,
Attention: Gilbert MacQuarrie, Secretary. All shares represented by valid
proxies received pursuant to this solicitation, and not revoked before they are
exercised, will be voted in the manner specified therein. If no specification
is made, the proxies will be voted in favor of approval of the principal terms
of the proposed merger pursuant to the Merger Agreement. The Headlands Board is
unaware of any other matters that may be presented for action at the Headlands
Special Meeting. If other matters do properly come before the Headlands Special
Meeting, however, it is intended that shares represented by proxies in the
accompanying form will be voted or not voted by the persons named in the
proxies in their discretion, provided that no proxy that is voted against
approval of the principal terms of the Merger will be voted in favor of any
adjournment or postponement of the Headlands Special Meeting that is made for
the purpose of soliciting additional proxies.
Solicitation of Proxies
The entire cost of soliciting the proxies from the Headlands Shareholders
will be borne by Headlands; provided, however, that GreenPoint and Headlands
have each agreed to pay
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<PAGE>
one-half of the printing and mailing costs of this Proxy Statement/Prospectus
and related materials and fees paid to the Securities and Exchange Commission
(the "SEC"). In addition to the solicitation of the proxies by mail, Headlands
will request banks, brokers and other record holders to send proxies and proxy
material to the beneficial owners of Headlands Common Stock and secure their
voting instructions, if necessary. Headlands will reimburse such record
holders for their reasonable expenses in so doing. If necessary, Headlands may
use its regular employees, who will not be specially compensated, to solicit
proxies from Headlands Shareholders, either personally or by telephone,
telegram, facsimile or special delivery letter.
Record Date and Voting Rights
Pursuant to the provisions of the General Corporation Law of the State of
California (the "CGCL"), the Amended and Restated Bylaws of Headlands (the
"Headlands Bylaws") and the rules of the Nasdaq National Market, February 12,
1999 has been fixed as the record date for determining the Headlands
Shareholders entitled to notice of and to vote at the Headlands Special
Meeting (the "Record Date"). Accordingly, only Headlands Shareholders of
record at the close of business on the Record Date will be entitled to notice
of and to vote at the Headlands Special Meeting. At the close of business on
the Record Date, there were 19,785,471 shares of Headlands Common Stock
outstanding held by approximately 1,100 holders of record. The presence, in
person or by proxy, of shares of Headlands Common Stock representing a
majority of such shares outstanding and entitled to vote on the Record Date is
necessary to constitute a quorum at the Headlands Special Meeting. Each share
of Headlands Common Stock outstanding on the Record Date entitles its holder
to one vote.
Shares of Headlands Common Stock held by Headlands Shareholders present in
person at the Headlands Special Meeting but not voting, and shares of
Headlands Common Stock for which Headlands has received proxies but with
respect to which holders of such shares have abstained, will be counted as
present at the Headlands Special Meeting for purposes of determining the
presence or absence of a quorum for the transaction of business. Brokers who
hold shares of Headlands Common Stock in nominee or "street" name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers with respect to the
matters to be considered and voted upon at the Headlands Special Meeting
without specific instructions from such customers. Since, as described below,
the affirmative vote of the holders of all outstanding shares of Headlands
Common Stock is required to approve the principal terms of the Merger, broker
non-votes and absentions will have the effect of a vote against the Merger.
Under the CGCL and the Articles of Incorporation of Headlands (the
"Headlands Articles"), approval of the principal terms of the Merger requires
the affirmative vote of the holders of a majority of the outstanding shares of
Headlands Common Stock entitled to vote at the Headlands Special Meeting. As
described below under "Support Agreements," Mr. Paul and certain other members
of the Headlands' Board of Directors and their affiliates have agreed to vote
shares of Headlands Common Stock constituting a majority of the outstanding
shares of Headlands Common Stock in favor of the Merger.
Abstentions from voting and broker non-votes will have the same effect as
votes against such approval. Accordingly, the Headlands Board urges Headlands
Shareholders to complete, date and sign the accompanying proxy and return it
promptly in the enclosed, postage-paid envelope.
As of the Record Date, directors and executive officers of Headlands
beneficially owned approximately 7,574,613 shares of Headlands Common Stock,
entitling them to exercise
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<PAGE>
approximately 38.3% of the voting power of the Headlands Common Stock entitled
to vote at the Headlands Special Meeting. Certain of such persons also have the
ability to direct the voting of shares of Headlands Common Stock with respect
to which they disclaim beneficial ownership for certain purposes under federal
securities laws and, accordingly, the directors and executive officers of
Headlands have the ability to direct the voting of approximately 53.1% of the
voting power of the Headlands Common Stock entitled to vote at the Headlands
Special Meeting. It is currently expected that each such person will vote the
shares of Headlands Common Stock beneficially owned by him or her for approval
of the principal terms of the Merger. In addition, as described below under "--
Support Agreements," Mr. Paul and certain other Headlands directors and their
affiliates have executed support agreements pursuant to which they have agreed,
among other things, to vote in favor of the Merger. As of the Record Date, no
directors or executive officers of GreenPoint beneficially owned any shares of
Headlands Common Stock.
Additional information with respect to beneficial ownership of Headlands
Common Stock by persons and entities owning more than 5% of such stock and more
detailed information with respect to beneficial ownership of Headlands Common
Stock by directors and executive officers of Headlands is incorporated by
reference to the 1997 Annual Report on Form 10-K of Headlands. See "Additional
Information--Where You Can Find More Information" on page 70.
Support Agreements
Mr. Paul and certain other members of the Headlands Board and their
affiliates ("Supporting Shareholders") entered into agreements with GreenPoint
("Support Agreements") immediately prior to the execution of the Merger
Agreement. Pursuant to these agreements, such persons have agreed, among other
things: (i) not to sell, agree to sell, or otherwise transfer or dispose of any
shares of Headlands Common Stock owned by the Supporting Shareholder or over
which such person has the authority to direct the voting unless such transfer
or disposition would not adversely affect the ability of the Merger to be
accounted for as a "pooling of interest"; (ii) to vote all of the shares of
Headlands Common Stock owned by such Supporting Shareholder, or over which such
Supporting Shareholder has the authority to direct the voting, at any meeting
of Headlands Shareholders called to consider and vote to approve the principal
terms of the Merger; and (iii) to not, directly or indirectly, solicit,
encourage or facilitate any inquiries or proposals, or enter into any
definitive agreement, with respect to, or initiate or participate in any
negotiations or discussions with, any third party concerning any proposal
related to an Acquisition Transaction (as hereinafter defined). Each Support
Agreement terminates at the option of either party at any time after the
earlier of the effective time of the Merger (the "Effective Time") or the
termination of the Merger Agreement pursuant to its terms.
Each Supporting Shareholder and the approximate number of shares of Headlands
Common Stock over which such person has voting authority with respect to
matters such as the Merger as of February 12, 1999 are as follows:
<TABLE>
<S> <C>
Peter T. Paul(1).................................................. 8,820,100
Daniel Paul....................................................... 840,000
Gilbert J. MacQuarrie............................................. 841,289
Becky S. Poisson.................................................. 724
Steven M. Abreu................................................... 5,000
----------
All Supporting Shareholders as a Group............................ 10,507,113
</TABLE>
- --------
(1) Includes 2,100,000 shares with respect to which Mr. Paul has the authority
to direct the voting of in certain circumstances, including the Merger,
pursuant to a voting trust agreement.
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<PAGE>
Recommendation of the Headlands Board
The Headlands Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby. The Headlands Board believes that the
Merger Agreement and the transactions contemplated thereby are in the best
interests of Headlands and Headlands Shareholders and recommends that the
Headlands Shareholders vote "FOR" approval of the principal terms of the
Merger. See "The Merger--Recommendation of the Headlands Board and Reasons for
the Merger."
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<PAGE>
THE MERGER
The following summary of the material terms and provisions of the Merger
Agreement and the Stock Option Agreement (as defined herein) is qualified in
its entirety by reference to the Merger Agreement and the Stock Option
Agreement. The Merger Agreement is attached as Exhibit A to this Proxy
Statement/Prospectus. The Stock Option Agreement is attached as Exhibit B to
this Proxy Statement/Prospectus.
Description of the Merger
The Board of Directors of GreenPoint (the "GreenPoint Board") and the
Headlands Board have each unanimously approved the Merger Agreement, which
provides for the merger of Merger Sub, a wholly owned subsidiary of GreenPoint,
with and into Headlands at the Effective Time, with Headlands surviving the
Merger and becoming a wholly-owned subsidiary of GreenPoint (sometimes referred
to as the "Surviving Company"). Following the Merger, GreenPoint intends to
contribute its interest in the Surviving Company to GreenPoint Bank (a wholly
owned subsidiary of GreenPoint), which intends initially to hold Headlands as a
separate operating subsidiary. GreenPoint may at any time change the method of
effecting the combination with Headlands if and to the extent it deems such
change to be desirable, provided that no such change (i) alters or changes the
amount or kind of the consideration to be issued to Headlands Shareholders or
holders of Headlands stock options in the Merger, (ii) adversely affects the
tax treatment of Headlands Shareholders as a result of receiving the
consideration to be paid in the merger (the "Merger Consideration"), or (iii)
is reasonably likely to materially impede or delay consummation of the
transactions contemplated by the Merger Agreement. Subject to the satisfaction
or waiver of certain conditions set forth in the Merger Agreement and described
more fully in "--Conditions to Consummation of the Merger; Termination," the
Merger will become effective upon the filing of an agreement of merger and
appropriate officers' certificates with the Secretary of State of the State of
California and the filing of a certificate of merger with the Secretary of
State of the State of Delaware, in each case in accordance with the CGCL and
the General Corporation Law of the State of Delaware (the "DGCL"),
respectively. The Headlands Articles and the Headlands Bylaws will continue to
be the governing corporate documents of Headlands following the Merger but the
rights of former Headlands Shareholders who receive shares of Common Stock, par
value $0.01 per share, of GreenPoint ("GreenPoint Common Stock") in the Merger
will be governed by the certificate of incorporation of GreenPoint, as amended
(the "GreenPoint Certificate"), and the bylaws of GreenPoint (the "GreenPoint
Bylaws") after the Effective Time, and the GreenPoint Certificate and the
GreenPoint Bylaws will be the same immediately before and immediately after
consummation of the Merger.
At the Effective Time, automatically by virtue of the Merger and without any
action on the part of any party or Headlands Shareholder, each share of
Headlands Common Stock (excluding shares of Headlands Common Stock with respect
to which dissenters' rights have been properly demanded in accordance with
Chapter 13 of the CGCL ("Dissenting Shares"), or the shares held by Headlands
or GreenPoint or any of their respective subsidiaries, in each case other than
shares held in a fiduciary capacity ("Trust Account Shares") or in respect of a
debt previously contracted ("DPC Shares")) issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive 0.62
shares (the "Exchange Ratio") of GreenPoint Common Stock. The Exchange Ratio is
subject to potential adjustment if, before the Effective Time, the shares of
GreenPoint Common Stock are changed into a different number or class of shares
due to any stock split, stock dividend, recapitalization, reclassification or
exchange or readjustment of shares or similar transactions with a record date
occurring before the effective date of the Merger (the
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<PAGE>
"Effective Date"). Shares of Headlands Common Stock issued and outstanding
immediately prior to the Effective Time will be canceled, and shares of
GreenPoint Common Stock issued and outstanding immediately prior to the
Effective Time will remain issued and outstanding after the Merger.
The market price of GreenPoint Common Stock will fluctuate between the date
of this Proxy Statement/Prospectus and the date on which the Merger is
consummated and thereafter. Because the Exchange Ratio is fixed and the market
price of GreenPoint Common Stock is subject to fluctuation, the value of the
shares of GreenPoint Common Stock that holders of Headlands Common Stock will
receive in the Merger may increase or decrease prior to the Merger. For
further information concerning the historical market prices of GreenPoint
Common Stock and Headlands Common Stock, see "Business and Management--Price
Range of Common Stock and Dividends." No assurance can be given concerning the
market price of GreenPoint Common Stock before or after the Effective Time.
At the Effective Time, all employee and non-employee director stock options
to purchase shares of Headlands Common Stock (each, a "Headlands Stock
Option") that are then outstanding and unexercised will cease to represent
rights to purchase shares of Headlands Common Stock and will be converted
automatically into options to purchase shares of GreenPoint Common Stock, but
such Headlands Stock Options will otherwise remain subject to the terms of
Headlands' 1997 Executive and Non-Employee Director Stock Option Plan (the
"Stock Option Plan") and the agreements evidencing grants thereunder and any
other agreements between Headlands and an optionee, except that, from and
after the Effective Time, (i) the number of shares of GreenPoint Common Stock
purchasable upon exercise of a Headlands Stock Option will be equal to the
number of shares of Headlands Common Stock purchasable under such Headlands
Stock Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded to the nearest whole share, and (ii) the per share
exercise price under each such Headlands Stock Option will be adjusted by
dividing such exercise price by the Exchange Ratio, and rounding to the
nearest cent. Notwithstanding the foregoing, each Headlands Stock Option that
is intended to be an "incentive stock option" (as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code")) will be adjusted
in accordance with the requirements of the Section 424 of the Code. In
connection with the conversion of the Headlands Stock Options in the Merger,
GreenPoint will (i) reserve for issuance a sufficient number of shares of
GreenPoint Common Stock necessary to satisfy GreenPoint's obligations with
respect to the Headlands Stock Options, and (ii) as soon as reasonably
practicable after the Effective Time file a registration statement with
respect to the sale of such GreenPoint Common Stock under the Securities Act
of 1933, as amended (the "Securities Act") and use its reasonable best efforts
to maintain the effectiveness of such registration statement and to maintain
the current status of the prospectus contained in such registration statement
for so long as such options remain outstanding.
At the Effective Time, all shares of Headlands Common Stock held by
Headlands, GreenPoint or by any of their subsidiaries, other than Trust
Account Shares or DPC Shares, will be canceled and will cease to exist, and no
GreenPoint Common Stock or other consideration will be delivered in exchange
for such shares. All shares of common stock, par value $0.01 per share, of
Merger Sub will be converted into one share of Headlands Common Stock and
thereafter cease to exist. All shares of GreenPoint Common Stock outstanding
as of the Effective Time will remain outstanding. Dissenting Shares will not
be converted into the right to receive, or be exchangeable for, GreenPoint
Common Stock; instead, the holders of Dissenting Shares will be entitled to
payment of the appraised value of the Dissenting Shares in accordance with
Article 13 of the CGCL. Notwithstanding the foregoing, if any
23
<PAGE>
holder of Dissenting Shares subsequently delivers a written withdrawal of such
holder's demand for appraisal thereof, or if any such holder fails to establish
such holder's entitlement to dissenters' rights under Article 13 of the CGCL,
such holder will forfeit the right to appraisal and such shares will be deemed
to have been converted into the right to receive, and to have become
exchangeable for, the Merger Consideration. See "Additional Information--
Dissenters' Appraisal Rights."
Background of the Merger
In May 1998, Mr. Charles Richardson, Executive Vice President, Corporate
Development of GreenPoint, was invited to visit Headlands in California. In
California, Mr. Richardson met with various members of Headlands' senior
management, including Mr. Paul. During the course of his visit, Mr. Richardson
indicated that GreenPoint might be interested in discussing the possibility of
a strategic combination of GreenPoint and Headlands. Following these meetings,
Mr. Paul informed Mr. Richardson that he viewed GreenPoint's business
favorably, but he did not believe that Headlands needed to combine with another
company at that time.
On several occasions in July and August 1998, Mr. Paul met informally with
Mr. Thomas Johnson, Chief Executive Officer of GreenPoint, and various members
of GreenPoint's senior management to hold exploratory discussions regarding a
possible business combination. During these informal meetings, Messrs. Johnson
and Paul preliminarily determined that such a combination could be beneficial
for each of GreenPoint and Headlands and their respective stockholders in view
of the characteristics of the companies' businesses and franchises (including
the companies' complementary mortgage banking franchises) and the accelerating
trend toward consolidation in the mortgage banking industry and in the
financial services industry generally.
In August 1998, Headlands retained NationsBanc Montgomery Securities LLC
("NationsBanc Montgomery") as its financial advisor and Sullivan & Cromwell and
Tobin & Tobin as its legal advisors. In August, informal discussions continued
regarding a potential business combination between the two companies and the
potential terms and structure of such a transaction, but no definitive
agreement concerning such terms was reached as a result of these preliminary
meetings.
In the middle of September, Messrs. Richardson and Paul and certain members
of their senior management teams conducted more advanced discussions with
respect to the terms of a potential transaction and jointly developed an
outline of some of the key terms of such a potential business combination.
During that time, GreenPoint hired Keefe, Bruyette & Woods Inc. as its
financial advisor and Wachtell, Lipton, Rosen & Katz as its legal advisor. On
September 27, 1998, GreenPoint and Headlands entered into a customary
confidentiality agreement with respect to a potential business combination.
From time to time, members of GreenPoint's and Headlands' managements advised
certain members of the GreenPoint Board and the Headlands Board, respectively,
of the status of such discussions.
Thereafter, Messrs. Johnson and Richardson and other members of GreenPoint's
senior management continued discussions with Mr. Paul and other members of
Headlands' senior management concerning the proposed transaction. After a
series of meetings held on November 23, 1998, Messrs. Johnson and Paul agreed
upon the terms of the proposed transaction (including the Exchange Ratio),
subject only to completion of mutually satisfactory due diligence by each
party, agreement on certain administrative matters such as employment
agreements for certain Headlands employees following completion of the proposed
merger, and signing a definitive merger agreement. The parties completed their
due diligence on December 5, 1998, to the satisfaction of each.
24
<PAGE>
At a special meeting of the Headlands Board on December 8, 1998, Mr. Paul
and senior management of Headlands reviewed the reasons for and the potential
benefits of the Merger in light of Headlands' due diligence review of
GreenPoint's business. At the meeting, Headlands' legal advisors reviewed the
terms of the Merger Agreement, the Support Agreements and the Stock Option
Agreement and advised the members of the Headlands Board of the legal
standards applicable to their consideration of the Merger Agreement and the
Stock Option Agreement. Also at the meeting, Headlands' financial advisors
made a presentation regarding GreenPoint and the financial terms and fairness,
from a financial point of view, of the Exchange Ratio to holders of Headlands
Common Stock. After discussion and consideration of the factors discussed
under "--Recommendation of the Headlands Board and Reasons for the Merger,"
the members of the Headlands Board unanimously approved and authorized the
execution of the Merger Agreement and the Stock Option Agreement.
At a regularly scheduled meeting of the GreenPoint Board on the same date,
Messrs. Johnson and Richardson reviewed the reasons for and the potential
benefits of the Merger in light of GreenPoint's due diligence review of
Headlands' business. At the meeting, GreenPoint's legal advisors reviewed the
terms of the Merger Agreement, the Stock Option Agreement and the Support
Agreements and advised the members of the GreenPoint Board of the legal
standards applicable to their consideration of the Merger Agreement and the
Stock Option Agreement. Also at the meeting, GreenPoint's financial advisors
made a presentation regarding the financial terms and fairness, from a
financial point of view, of the Exchange Ratio to GreenPoint. After discussion
and consideration of the factors deemed relevant by the GreenPoint Board, the
GreenPoint Board unanimously approved and authorized the execution of the
Merger Agreement and the Stock Option Agreement.
The Merger Agreement and the Stock Option Agreement were entered into on
December 8, 1998.
Recommendation of the Headlands Board and Reasons for the Merger
The Headlands Board believes that the Merger is fair to, and in the best
interests of, Headlands and the Headlands Shareholders. Accordingly, the
Headlands Board has unanimously approved the Merger Agreement and unanimously
recommends that the Headlands Shareholders vote for the approval and adoption
of the principal terms of the Merger pursuant to the Merger Agreement.
In reaching its decision to approve the Merger Agreement and the Stock
Option Agreement, the Headlands Board consulted with Headlands management, as
well as with its financial and legal advisors, and considered a variety of
factors, including the following:
(i) the Headlands Board's familiarity with and review of Headlands'
business, operations, financial condition and earnings on an historical and
a prospective basis;
(ii) the Headlands Board's review, based in part on presentations by its
financial advisor and Headlands' management, of the business, operations,
financial condition and earnings of GreenPoint on an historical and a
prospective basis and of the combined company on a pro forma basis and the
historical stock price performance of the GreenPoint Common Stock and the
resulting relative interests of Headlands Shareholders and holders of
GreenPoint Common Stock (the "GreenPoint Stockholders") in the common
equity of the combined company;
25
<PAGE>
(iii) the presentation of NationsBanc Montgomery to the Headlands Board,
the financial information reviewed by NationsBanc Montgomery at the meeting
of the Headlands Board, and the opinion of NationsBanc Montgomery, rendered
on December 8, 1998, that, as of such date and based upon and subject to
the procedures followed, assumptions made, matters considered, and
limitations on the analyses undertaken, the Exchange Ratio was fair from a
financial point of view to Headlands Shareholders (see "--Opinion of
Headlands' Financial Advisor");
(iv) the terms of the Merger Agreement and the Merger, including the
Exchange Ratio, noting that the indicated value of the Exchange Ratio was
$24.34 as of December 7, 1998, reflecting a 51% premium for the holders of
Headlands Common Stock based on the closing prices of GreenPoint Common
Stock and Headlands Common Stock on that day, which was the last trading
day prior to the approval of the Merger by the Headlands Board, and the
indicated value-to-1998 consensus earnings and the indicated value-to-book
value (as of September 30, 1998) multiples of approximately 13.45 and 3.91,
respectively;
(v) the strategic fit of Headlands' mortgage business with GreenPoint's
existing mortgage and manufactured housing businesses, as well as the
opportunities of the Headlands and GreenPoint mortgage sales forces to
offer each other's products; and that the Merger would provide Headlands
with a stronger capital and funding base and permit it to establish a
strong broker distribution channel in the eastern half of the United
States;
(vi) the current and prospective economic and competitive environment
facing the financial services industry generally, and Headlands in
particular, including the continued rapid consolidation in the industry and
the increasing importance of operational scale and financial resources in
maintaining efficiency and remaining competitive over the long term and in
being able to capitalize on technological developments which significantly
impact industry competition;
(vii) the Headlands Board's review, based in part on the presentations of
NationsBanc Montgomery to the Headlands Board, of alternatives to the
Merger for enhancing shareholder value, the range of possible values to
Headlands Shareholders obtainable through implementation of such
alternatives, and the timing and likelihood of actually achieving such
value;
(viii) the general impact that the Merger could be expected to have on
the non-shareholder constituencies served by Headlands, including its
customers, employees and communities;
(ix) the expectation that the Merger would constitute a reorganization
under Section 368(a) of the Code and that it would be accounted for as a
pooling of interests for accounting and financial reporting purposes (see
"--Federal Income Tax Consequences" and "--Accounting Treatment of the
Merger");
(x) based in part on the presentations by NationsBanc Montgomery, the
anticipated cost savings, operating efficiencies and opportunities for
revenue enhancement available to the combined company from the Merger, and
the likelihood of the foregoing being achieved following consummation of
the Merger;
(xi) the fact that Mr. Paul would be appointed to the GreenPoint Board
and would serve as a Vice Chairman of GreenPoint following the Effective
Time, that the key members of Headlands' management would continue to serve
in the same or similar roles with respect to Headlands' operations within
GreenPoint following the Effective Time, and that Messrs. Paul, MacQuarrie,
Abreu and Ms. Poisson, as well as certain other key members of Headlands'
management would enter into employment
26
<PAGE>
agreements with GreenPoint to be effective as of the Effective Time and
that the directors and officers of Headlands might be deemed to have
interests in the Merger other than their interests generally as Headlands
Shareholders (see "--Interests of Certain Persons in the Merger");
(xii) the results of the due diligence investigation of GreenPoint
conducted by Headlands' management; the Headlands Board's assessment, with
the assistance of counsel, concerning the likelihood that GreenPoint would
obtain all required regulatory approvals for the Merger (see "--Regulatory
Matters"); and
(xiii) the terms of the Stock Option Agreement, including the risk that
the Stock Option Agreement might discourage third parties from offering to
acquire Headlands by increasing the cost of such an acquisition, and the
terms of the Support Agreements, which made it unlikely that a third party
would offer to acquire Headlands, in each case with the recognition that
the execution of the Stock Option Agreement and the Support Agreements was
a condition to GreenPoint's willingness to enter into the Merger Agreement
(see "--Stock Option Agreement" and "The Special Meeting of Headlands
Shareholders--Support Agreements").
Opinion of Headlands' Financial Advisor
General. Pursuant to an engagement letter dated August 27, 1998 (the
"Engagement Letter"), the Headlands Board engaged NationsBanc Montgomery to
advise Headlands regarding a potential sale of Headlands to GreenPoint. As
part of its engagement, NationsBanc Montgomery agreed to render to the
Headlands Board an opinion with respect to the fairness from a financial point
of view of the consideration to be received by the Headlands Shareholders in a
potential sale of Headlands to GreenPoint. NationsBanc Montgomery is a
nationally recognized investment banking firm and, as part of its investment
banking activities, is regularly engaged in the valuation of businesses and
their securities in connection with merger transactions and other types of
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Headlands selected NationsBanc Montgomery to render the opinion on
the basis of its experience and expertise and its reputation in the banking
and investment communities.
At a meeting of the Headlands Board on December 8, 1998, NationsBanc
Montgomery delivered its oral opinion that the consideration to be received by
the Headlands Shareholders pursuant to the Merger was fair to such
shareholders from a financial point of view, as of the date of such opinion.
NationsBanc Montgomery's oral opinion was subsequently confirmed in writing as
of such date. No limitations were imposed by Headlands Board on NationsBanc
Montgomery with respect to the investigations made or procedures followed in
rendering its opinion.
On the date hereof, NationsBanc Montgomery delivered its written opinion
that the consideration to be received by the Headlands Shareholders pursuant
to the Merger was fair to such shareholders from a financial point of view, as
of the date of such opinion. No limitations were imposed by the Headlands
Board on NationsBanc Montgomery with respect to the investigations made or
procedures followed in rendering its opinion.
The full text of NationsBanc Montgomery's written opinion to the Headlands
Board, dated as of the date of this Proxy Statement/Prospectus, which sets
forth the assumptions made, matters considered, and limitations of the review
by NationsBanc Montgomery, is attached hereto as Exhibit C and is incorporated
herein by reference. The following summary of the material aspects of
27
<PAGE>
NationsBanc Montgomery's opinion is qualified in its entirety by reference to
the full text of the opinion, which should be read carefully and in its
entirety in connection with this Proxy Statement/Prospectus. NationsBanc
Montgomery's opinion is directed to the Headlands Board, covers only the
fairness from a financial point of view of the consideration to be received by
the Headlands Shareholders as of the date of the opinion and does not
constitute a recommendation to any Headlands Shareholder as to how such
shareholder should vote at the Headlands Special Meeting with respect to the
Merger, and statements to such effect are included in NationsBanc Montgomery's
opinion. In furnishing such opinion, NationsBanc Montgomery does not admit that
it is an expert with respect to the Registration Statement of which this Proxy
Statement/Prospectus is part within the meaning of the term "expert" as used in
the Securities Act and the rules and regulations promulgated thereunder, nor
does it admit that its opinion constitutes a report or valuation within the
meaning of Section 11 of the Securities Act.
In connection with its opinion dated the date hereof, NationsBanc Montgomery,
among other things: (i) reviewed certain publicly available financial and other
data with respect to Headlands and GreenPoint, including the audited
consolidated financial statements for the recent years and interim periods to
December 31, 1998, and certain other relevant financial and operating data
relating to Headlands and GreenPoint made available to NationsBanc Montgomery
from published sources and, in the case of Headlands, from the internal records
of Headlands; (ii) reviewed the financial terms and conditions of the Merger
Agreement; (iii) reviewed certain publicly available information concerning the
trading of, and the trading market for, Headlands Common Stock and GreenPoint
Common Stock; (iv) compared Headlands and GreenPoint from a financial point of
view with certain other companies in the mortgage banking and thrift industries
which NationsBanc Montgomery deemed to be relevant; (v) considered the
financial terms, to the extent publicly available, of selected recent business
combinations of companies in the mortgage banking industry which NationsBanc
Montgomery deemed to be comparable, in whole or in part, to the Merger; (vi)
reviewed and discussed with representatives of the management of Headlands
certain information of a business and financial nature regarding Headlands
furnished to NationsBanc Montgomery by them, including financial forecasts and
related assumptions of Headlands; (vii) reviewed certain third party analysts'
estimates regarding Headlands and GreenPoint; (viii) made inquiries regarding
and discussed the Merger and the Merger Agreement and other matters related
thereto with Headlands' counsel; and (ix) performed such other analyses and
examinations as NationsBanc Montgomery deemed appropriate.
In connection with NationsBanc Montgomery's review, NationsBanc Montgomery
did not assume any obligation independently to verify the foregoing information
and relied on its being accurate and complete in all material respects. With
respect to the financial forecasts for Headlands and GreenPoint provided to
NationsBanc Montgomery by First Call and the management of Headlands, upon
their advice and with Headlands' consent, NationsBanc Montgomery assumed for
purposes of its opinion that the forecasts were reasonably prepared on bases
reflecting the best available estimates and judgments of First Call and the
management of Headlands at the time of preparation as to the future financial
performance of Headlands and that they provided a reasonable basis upon which
NationsBanc Montgomery could form its opinion. NationsBanc Montgomery also
assumed that there were no material changes in Headlands' or GreenPoint's
assets, financial condition, results of operations, business or prospects since
the respective dates of their last financial statements made available to
NationsBanc Montgomery. NationsBanc Montgomery relied on advice of counsel and
independent accountants to Headlands as to all legal and financial reporting
matters with respect to Headlands, the Merger and the Merger Agreement.
NationsBanc
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Montgomery also assumed that the Merger will be consummated in a manner that
complies in all respects with the applicable provisions of the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and all
other applicable federal and state statutes, rules and regulations.
NationsBanc Montgomery is not an expert in the evaluation of loan portfolios
for purposes of assessing the adequacy of the allowances for losses with
respect thereto and assumed, with Headlands' consent, that such allowances for
GreenPoint were in the aggregate adequate to cover such losses. In addition,
NationsBanc Montgomery did not assume responsibility for reviewing any
individual credit files, or making an independent evaluation, appraisal or
physical inspection of any of the assets or liabilities (contingent or
otherwise) of Headlands or GreenPoint, nor was NationsBanc Montgomery
furnished with any such appraisals. Headlands informed NationsBanc Montgomery,
and NationsBanc Montgomery assumed, that the Merger will be recorded as a
"pooling of interests" under generally accepted accounting principles
("GAAP"). Finally, NationsBanc Montgomery's opinion was based on economic,
monetary and market and other conditions as in effect on, and the information
made available to NationsBanc Montgomery as of, the date of the opinion.
Accordingly, although subsequent developments may effect its opinion,
NationsBanc Montgomery has not assumed any obligation to update, revise or
reaffirm its opinion.
Set forth below is a brief summary of the material information presented by
NationsBanc Montgomery to Headlands' Board of Directors on December 8, 1998 in
connection with its opinion:
Comparable Public Company Analysis: Based upon public and other available
information, NationsBanc Montgomery analyzed the trading multiples of a
comparison group of six publicly traded thrifts that, as of September 30,
1998, had total assets in excess of $5 billion, had a return on average equity
in excess of 10% and whose stock price traded at or above 2.5x tangible book
value ("Highly Valued Thrifts"). NationsBanc Montgomery also analyzed the
trading multiples of four publicly traded thrifts located in either
Connecticut, Massachusetts, New Jersey, New York or Rhode Island and that had
a market capitalization in excess of $1 billion ("Regional Thrifts"). The
multiples that were analyzed were price to book value, price to tangible book
value, price to latest twelve months ("LTM") earnings, price to 1998 estimated
earnings, price to 1999 estimated earnings, price to LTM cash earnings, price
to 1998 estimated cash earnings, price to 1999 estimated cash earnings,
premium to deposits, and market capitalization to total assets. The median
values of these multiples were then multiplied by GreenPoint's current values
as of September 30, 1998. This analysis indicated that GreenPoint's current
Common Stock price should range from $15.43 to $45.86 per share. Based on the
closing price of GreenPoint Common Stock on December 7, 1998 of $39.25 per
share, the price of GreenPoint Common Stock is trading in-line with its peer
groups.
NationsBanc Montgomery also analyzed the trading multiples of a comparison
group of four publicly traded prime mortgage banks. The multiples that were
analyzed were price to book value, price to tangible book value, price to
adjusted tangible book value, price to LTM earnings, price to 1998 estimated
earnings and price to 1999 estimated earnings. The median values of these
multiples were then multiplied by Headlands' current values as of
September 30, 1998. This analysis indicated that Headlands' current Common
Stock price should range from $16.95 to $27.32 per share. GreenPoint's offer
of $24.34 per share is in-line with these values.
Discounted Cash Flow Analysis: Using a discounted cash flow analysis,
NationsBanc Montgomery calculated a range of theoretical per share values for
the GreenPoint based on the net present value of: (i) annual dividend income,
defined as excess equity above a 6%
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<PAGE>
tangible equity to assets ratio; and (ii) a terminal value for Headlands in
2003 calculated based upon a multiple of net income. The projected financial
data for Headlands for 1999 through 2003 utilized by NationsBanc Montgomery in
this analysis assumed that GreenPoint increased it's total assets by 5% per
annum and its cash earnings by 13.0% per annum. NationsBanc Montgomery
calculated the range of net present values per share for Headlands based on a
range of discount rates of 11.0% to 15% and a range of terminal value multiples
of forecasted 2003 earnings of 9.0x to 13.0x. Utilizing a more narrow range of
discount rates of 11.0% and 13.4% and terminal multiples of 10.0x to 12.0x,
this analysis yielded a range of estimated present values per share for
GreenPoint of approximately $46.56 to $58.22, with a median value of $52.04.
The closing price of GreenPoint Common Stock on December 7, 1998 was $39.25, a
significant discount to the range of values implied by this analysis.
Analysis of Selected Merger Transactions: NationsBanc Montgomery reviewed the
consideration paid in selected categories of specialty finance transactions.
Specifically, NationsBanc Montgomery reviewed selected specialty finance
transactions from January 1, 1994 to December 7, 1998 involving mergers of
specialty finance companies whose businesses closely resemble those of
Headlands. For each transaction, NationsBanc Montgomery analyzed data
illustrating, among other things, purchase price to book value, purchase price
to tangible book value, purchase price to LTM earnings and purchase price to
forward estimated earnings.
A summary of the median multiples in the analysis is as follows:
<TABLE>
<CAPTION>
Price to Price to Price to
Price to Book Tangible Book LTM Forward Estimated
Transaction Categories Value Per Share Value Per Share EPS Earnings
---------------------- --------------- --------------- -------- -----------------
<S> <C> <C> <C> <C>
Median Values of
Specialty Finance
Transactions Announced
Since January 1,
1994.................. 2.5x 4.1x 17.7x 12.7x
</TABLE>
A summary of the results of NationsBanc Montgomery's analysis of the
multiples paid in the Merger is as follows:
<TABLE>
<CAPTION>
Price to Price to Price to
Price to Book Tangible Book LTM Forward Estimated
Value Per Share Value Per Share Earnings Earnings
--------------- --------------- -------- -----------------
<S> <C> <C> <C> <C>
Headlands / GreenPoint.. 3.9x 3.9x 17.4x 12.2x
</TABLE>
Implied Valuation: NationsBanc Montgomery used the median values of specialty
finance transactions announced since January 1, 1994 (described above) and
applied the multiples paid in these transactions to Headlands' current values
as of September 30, 1998. Specifically, NationsBanc Montgomery analyzed the
premium to the seller's stock price one day prior to announcement, price to
book value, price to tangible book value, price to LTM earnings and price to
estimated forward earnings. This analysis indicated a range of values for
Headlands' Common Stock of $15.55 to $25.73, with a median value of $24.82.
GreenPoint's offer of $24.34 per share is in-line with these values.
Premium Paid Analysis: NationsBanc Montgomery used a group of 18 financial
services transactions since January 1, 1997 with transaction value greater than
$250 million and less than $750 million where pricing information was available
to analyze premiums paid compared to the seller's stock price at various times
prior to the announcement of the acquisition. The figures produced (i) a median
premium to the seller's stock price one month prior to announcement of 31.8%;
(ii) a median premium to the seller's stock price six days prior to
announcement of 24.2%; and (iii) a median premium to the seller's stock price
the day prior to announcement of 21.8%.
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In comparison, GreenPoint's offer of $24.34 exceeded the price of Headlands
Common Stock one month prior to the announcement by 65.7%, Headlands' Common
Stock price six days prior to the announcement by 50.3% and Headlands' Common
Stock price one day prior to the announcement by 50.9%.
No other company or transaction used in a comparable company or comparable
transactions analysis as a comparison is identical to Headlands or the Merger.
Accordingly, an analysis of the results of the foregoing is not mathematical;
rather, it involves complex considerations and judgements concerning
differences in financial and operating characteristics of the companies and
other factors that could affect the public trading value of the companies to
which Headlands and the Merger are being compared.
Contribution Analysis: NationsBanc Montgomery analyzed the contribution of
each of Headlands and GreenPoint to, among other things, tangible equity,
adjusted tangible equity (defined as tangible common equity less mortgage
servicing rights plus deferred tax liability associated with mortgage
servicing rights), and total assets for the period ending September 30, 1998,
estimated GAAP and cash earnings for the calendar years ending December 31,
1998 and 1999, and estimated loan origination volume for the year ended
December 31, 1999 of the pro forma combined companies. This analysis showed,
among other things, that based on pro forma combined balance sheets for
Headlands and GreenPoint at September 30, 1998, Headlands would have
contributed approximately 14% of the tangible equity, 14% of the adjusted
tangible equity and 7% of the total assets. The pro forma projected income
statements for the periods ending December 31, 1998 and 1999 showed that
Headlands would contribute approximately 18% and 17%, of the net income in
1998 and 1999, respectively, and 12% and 12%, of the cash net income in 1998
and 1999, respectively. The pro forma projected loan volume for the period
ending December 31, 1999 showed that Headlands would contribute approximately
37% of the total loan origination volume. Based on an exchange ratio of 0.62
shares of GreenPoint Common Stock for each share of Headlands Common Stock,
Headlands Shareholders would own approximately 12.0% of the combined companies
based on common shares outstanding at September 30, 1998.
Pickup Analysis: In performing the pickup analysis, NationsBanc Montgomery
analyzed the exchange ratio of 0.62 shares of GreenPoint Common Stock for each
share of Headlands Common Stock based on Headlands' and GreenPoint's stock
prices and applied it to the pro forma book value per share and the pro forma
estimated 1999 cash earnings per share. This analysis showed, among other
things, that Headlands Shareholders would receive a book value of $11.06 per
share, or a 77.8% increase from Headlands' current book value per share of
$6.22 and estimated 1999 cash earnings per share of $2.20 per share, or a
10.2% increase from Headlands' current estimated 1999 cash earnings per share
of $2.00.
In addition, based upon GreenPoint's dividend per share of $0.64 and the
exchange ratio of 0.62, Headlands will receive a dividend of $0.40 per share.
Headlands does not currently pay a dividend.
Pro Forma Earnings Accretion/Dilution Analysis: Using earnings estimates and
projected growth rates for Headlands and GreenPoint provided by First Call,
NationsBanc Montgomery compared estimated reported earnings per share
("Reported EPS") and estimated cash earnings per share ("Cash EPS") of
GreenPoint Common Stock on a stand-alone basis to the Reported EPS and Cash
EPS of the Common Stock for the pro forma combined company for the calendar
year ending December 31, 1999. NationsBanc Montgomery noted that the Merger
would result in dilution of 0.9% to GreenPoint's Cash
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EPS for the year ending December 31, 1999 and accretion of 5.6% to GreenPoint's
Reported EPS for the year ending December 31, 1999. For the purpose of this
analysis, NationsBanc Montgomery assumed that GreenPoint realized $5.6 million
of pre-tax cost savings in 1999. These estimates were used for purposes of this
analysis only and are not necessarily indicative of expected results or plans
of GreenPoint, Headlands, or the combined institution. Additionally, this
analysis did not incorporate any revenue enhancements.
Earnings Growth Analysis: Using a 13.1x terminal multiple (the median price
to 1999 estimated earnings multiple of prime mortgage banks) and a 17.2%
discount rate (formula used for small company stocks as determined by Ibbotson
Associates), NationsBanc Montgomery determined that Headlands would have to
achieve an average annual earnings growth rate of 17.8% through the year 2003
in order to obtain a present value stock price of $24.34. First Call's
estimated stand-alone earnings growth rate for Headlands through the year 2003
is 12.5%.
Component Valuation: NationsBanc Montgomery performed a component valuation
of Headlands' Common Stock, which estimated values for Headlands' mortgage
origination operations, its servicing portfolio and its tangible book value.
The financial information used for this analysis was as of September 30, 1998.
As part of this analysis, NationsBanc Montgomery estimated the after-tax value
of Headlands' servicing portfolio based on current market values for servicing
rights with similar characteristics to Headlands' servicing portfolio.
NationsBanc Montgomery also estimated the value of Headlands' origination
operations based on a discounted cash flow valuation basis. In addition,
NationsBanc Montgomery also estimated the tangible book value of Headlands by
subtracting intangibles and originated mortgage servicing rights from its
common equity. This analysis resulted in an implied range of value for
Headlands Common Stock ranging from $12.97 to $16.84 per share.
The summary set forth above does not purport to be a complete description of
the presentation by NationsBanc Montgomery to the Headlands Board or of the
analyses performed by NationsBanc Montgomery. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. NationsBanc Montgomery believes that its analyses and the summary
set forth above must be considered as a whole and that selecting a portion of
its analyses and factors, without considering all analyses and factors, would
create an incomplete view of the process underlying the analyses set forth in
its presentation to the Headlands Board. In addition, NationsBanc Montgomery
may have given various analyses more or less weight than other analyses, and
may have deemed various assumptions more or less probable than other
assumptions. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was given greater
weight than any other analysis. Accordingly, the ranges of various valuations
resulting from any particular analysis described above should not be taken to
be NationsBanc Montgomery's view of the actual value of Headlands or the
combined companies.
In performing its analyses, NationsBanc Montgomery made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Headlands or
GreenPoint. The analyses performed by NationsBanc Montgomery are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of NationsBanc Montgomery's analysis of
the fairness of the consideration to be received by the holders of Headlands'
Common Stock in the Merger and were provided to the Headlands Board in
connection with the delivery of NationsBanc Montgomery's opinion. The analyses
do not purport to be appraisals or to reflect the prices at which a company
might actually be sold or the prices at
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which any securities may trade at the present time or any time in the future.
The forecasts used by NationsBanc Montgomery in certain of its analyses are
based on numerous variables and assumptions, which are inherently
unpredictable and must be considered not certain of occurrence as projected.
Accordingly, actual results could vary significantly from those contemplated
in such forecasts.
As described above under "--Recommendation of the Headlands Board and
Reasons for the Merger," NationsBanc Montgomery's opinion and presentation to
Headlands' Board were among the many factors taken into consideration by
Headlands' Board in making its determination to approve the Merger Agreement.
Pursuant to the Engagement Letter, Headlands paid NationsBanc Montgomery a
cash introduction fee of $75,000 and a fee of $250,000 upon the signing of a
definitive agreement. Based on the current transaction value, NationsBanc
Montgomery will receive an additional fee of approximately $3,470,000 upon the
closing of the Merger. Accordingly, a significant portion of NationsBanc
Montgomery's fee is contingent upon the closing of the Merger. Headlands has
also agreed to reimburse NationsBanc Montgomery for its reasonable out-of-
pocket expenses, including reasonable fees and disbursements for NationsBanc
Montgomery's legal counsel and other experts retained by NationsBanc
Montgomery. Pursuant to a separate letter agreement, Headlands has agreed to
indemnify NationsBanc Montgomery, its affiliates, and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against certain liabilities, including liabilities under the federal
securities laws.
In the ordinary course of its business, NationsBanc Montgomery actively
trades the equity securities of Headlands and GreenPoint for its own account
and for the accounts of customers and, accordingly, may at any time hold a
long or short position in such securities. NationsBanc Montgomery has also
acted as an underwriter in connection with offerings of securities of
Headlands and GreenPoint and performed various investment banking services for
Headlands and GreenPoint.
Effective Date
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on (i) the fifth business day to occur
after the last of the conditions set forth in the Merger Agreement has been
satisfied or waived (or, at the election of GreenPoint, on the last business
day of the month in which such day occurs or, if such last business day occurs
on one of the last five business days of such month, on the last business day
of the succeeding month), or (ii) such date as GreenPoint and Headlands
mutually agree upon. Subject to the foregoing, it is currently anticipated
that the Merger will be consummated in the first quarter of 1999, although
there can be no assurances that the Merger will be consummated during that
time. Regardless of when the Merger is consummated, Headlands Shareholders
should not assume or expect that the Effective Date will precede the record
date for any dividend on GreenPoint Common Stock for that quarter so as to
enable such stockholders to receive such dividend. However, if GreenPoint
elects to have the Effective Date occur after the fifth business day to occur
after satisfaction or waiver of the last of the conditions set forth in the
Merger Agreement, any dividend or other distribution for which the record date
occurs during such period ("Interim Dividends") will be paid to the former
Headlands Shareholders upon the exchange of the certificates formerly
representing shares of Headlands Common Stock in accordance with the
procedures discussed below under "--Exchange of Certificates; Fractional
Shares." The Board of Directors of either GreenPoint or Headlands may
terminate the Merger Agreement if the
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Effective Date does not occur on or before July 31, 1999. See "--Exchange of
Certificates; Fractional Shares", "--Conduct of Business Pending Consummation
of the Merger and Other Agreements" and "--Conditions to Consummation of the
Merger; Termination."
Exchange of Certificates; Fractional Shares
At or prior to the Effective Date, GreenPoint will cause certificates
representing the shares of GreenPoint Common Stock and cash in lieu of
fractional shares or in respect of any dividends or distributions that the
former Headlands Shareholders are entitled to receive under the Merger
Agreement to be deposited with ChaseMellon Shareholder Services L.L.C., as
exchange agent (the "Exchange Agent"), for the benefit of the holders of
certificates of Headlands Common Stock.
Within five business days of the Effective Date, GreenPoint will send or
cause to be sent to each holder of record of Headlands Common Stock as of the
Effective Date transmittal materials for use in exchanging all of such holder's
certificates representing Headlands Common Stock for a certificate or
certificates representing the GreenPoint Common Stock to which such holder is
entitled and a check for such holder's fractional share interest and any
dividends to which such holder is entitled, as appropriate. The transmittal
materials will contain information and instructions with respect to the
surrender and exchange of such certificates.
Headlands Shareholders should not send in their certificates with the
enclosed proxy card and they should not send their certificates to the Exchange
Agent until they receive and complete the letter of transmittal form and
instructions.
Upon surrender of the certificates for Headlands Common Stock registered in
the name of a holder of such certificates (or indemnity satisfactory to
GreenPoint and the Exchange Agent if any of such certificates are lost, stolen
or destroyed), together with a properly completed letter of transmittal, the
Exchange Agent will mail to such holder a certificate or certificates
representing the number of shares of GreenPoint Common Stock to which such
holder is entitled, together with any undelivered dividends or distributions in
respect of such shares and, where applicable, a check for any fractional share
interest (in each case, without interest).
All GreenPoint Common Stock issued to the holders of Headlands Common Stock
pursuant to the Merger will be deemed issued as of the Effective Date. After
the Effective Time, former holders of record of Headlands Common Stock will be
entitled to vote at any meeting of the holders of GreenPoint Common Stock that
number of shares of GreenPoint Common Stock into which their shares of
Headlands Common Stock have been converted, regardless of whether they have
surrendered their Headlands Common Stock certificates. Until the certificates
representing shares of Headlands Common Stock are surrendered for exchange
after the Effective Time, holders of such certificates will accrue but will not
be paid dividends or other distributions declared after the Effective Time (or
Interim Dividends) with respect to GreenPoint Common Stock into which their
shares have been converted. When such certificates are surrendered, any unpaid
dividends or other distributions will be paid, without interest. After the
Effective Time, there will be no transfers on the stock transfer books of
Headlands of shares of Headlands Common Stock.
The Merger Agreement provides that each of Headlands and GreenPoint will use
its reasonable best efforts to cause each person who may be deemed to be an
"affiliate" (as defined in the Securities Act) of Headlands to execute an
agreement restricting the disposition of such affiliate's shares of Headlands
Common Stock and GreenPoint Common
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<PAGE>
Stock. The Merger Agreement further provides that although shares of Headlands
Common Stock held by an affiliate of Headlands will automatically be converted
into GreenPoint Common Stock on the Effective Date, such shares will not be
physically exchanged for GreenPoint Common Stock until GreenPoint receives
such an agreement.
No fractional shares of GreenPoint Common Stock will be issued to any holder
of Headlands Common Stock upon consummation of the Merger. For each fractional
share that would otherwise be issued, GreenPoint will pay cash in an amount
equal to such fraction multiplied by the average of the closing sale prices of
GreenPoint Common Stock on the NYSE as reported by The Wall Street Journal for
the five trading days immediately preceding the Effective Date. No interest
will be paid or accrued on the cash in lieu of fractional shares payable to
holders of such certificates.
None of GreenPoint, Headlands nor any other person will be liable to any
former holder of Headlands Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
If a certificate for Headlands Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Merger Agreement upon receipt of appropriate evidence as
to such loss, theft or destruction, appropriate evidence as to the ownership
of such certificate by the claimant, and appropriate and customary
indemnification.
Representations and Warranties
The Merger Agreement contains representations and warranties of Headlands as
to, among other things: corporate organization; capitalization; subsidiaries;
power and authority to enter into the Merger Agreement and the Stock Option
Agreement; regulatory approvals; litigation; absence of violation of
organizational documents or contracts; reports to regulators; financial
statements; regulatory matters; compliance with laws; certain material
contracts; broker's fees; employment, compensation and benefits matters;
approval for purposes of takeover laws and absence of dissenters' rights;
environmental matters; tax matters; risk management instruments; books and
records; insurance; accounting treatment of the Merger; mortgage banking
business and securitizations; absence of material adverse change; Year 2000
compliance; and transactions with related parties.
The Merger Agreement also contains representations and warranties of
GreenPoint with respect to itself and Merger Sub as to, among other things:
corporate organization; capitalization; power and authority to enter into the
Merger Agreement and the Stock Option Agreement; absence of violation of
organizational documents or contracts; compliance with laws; regulatory
approvals; regulatory matters; litigation; broker's fees; tax and accounting
treatment of the Merger; reports to regulators; financial statements; absence
of material adverse change; and Year 2000 compliance.
Conduct of Business Pending Consummation of the Merger and Other Agreements
Business Pending Consummation of the Merger. Headlands has agreed in the
Merger Agreement to refrain from taking certain actions relating to its
operations pending consummation of the Merger without the prior written
consent of GreenPoint except as otherwise permitted in the Merger Agreement.
These actions include, without limitation: (i) conducting the business of
Headlands other than in the ordinary and usual course or failing to use
reasonable efforts to preserve Headlands' business organizations, assets and
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<PAGE>
relationships, or taking any action reasonably likely to have an adverse effect
upon Headlands' ability to perform its obligations under the Merger Agreement;
(ii) issuing any additional shares of Headlands Common Stock, or permitting any
additional shares of Headlands Common Stock to become subject to new grants of
employee or director stock options, or similar stock-based employee rights;
(iii) (a) declaring or paying any dividend on shares of Headlands Common Stock
or (b) adjusting, reclassifying or acquiring any shares of Headlands' capital
stock; (iv) entering into, amending or renewing any employment, consulting,
severance or similar agreement with any director, officer or employee, or
granting any salary or wage increase or increasing any employee benefit, except
(a) for normal individual compensation increases in the ordinary course of
business consistent with past practice and certain bonus payments, (b) for
changes required by applicable law, or (c) to satisfy existing contractual
obligations; (v) entering into, establishing, adopting or amending (except (a)
as required by applicable law or (b) to satisfy existing obligations) any
employee benefit, incentive or welfare contract, plan or arrangement, in
respect of any director, officer or employee, or taking any action to
accelerate the vesting or exercisability of stock options, restricted stock or
other compensation or benefits payable thereunder; (vi) encumbering or
disposing of or discontinuing any of its assets, business or properties except
in a transaction that is not material to Headlands or selling, assigning or
otherwise transferring any rights to service loans other than servicing rights
in respect of loans on a retail basis or, in certain instances, on a wholesale
basis; (vii) acquiring all or any portion of, the assets, business, deposits or
properties of any other entity except in a transaction that is not material to
Headlands, or acquiring any servicing right in a "bulk" transaction; (viii)
amending the Headlands Articles or the Headlands Bylaws; (ix) implementing or
adopting any change in its accounting principles, practices or methods, other
than as may be required by generally accepted accounting principles; (x)
entering into, terminating, amending or modifying any material contract; (xi)
settling any claim, action or proceeding, except for those involving solely
money damages in an amount, individually or in the aggregate for all such
settlements, that is not material to Headlands; (xii) knowingly taking any
action that would (a) prevent or impede the Merger from qualifying (1) for
pooling of interests accounting treatment or (2) as a reorganization within the
meaning of Section 368(a) of the Code, or (b) result in (1) any of its
representations and warranties set forth in the Merger Agreement being untrue
in any material respect at any time at or prior to the Effective Date, (2) any
of the conditions to the Merger set forth in the Merger Agreement not being
satisfied or (3) a material violation of any provision of the Merger Agreement
except, in each case, as may be required by applicable law; (xiii) except as
required by applicable law, (a) implementing or adopting any material change in
Headlands' interest rate or other risk management policies, procedures or
practices, (b) failing to follow Headlands' existing policies or practices with
respect to managing exposure to interest rate and other risk, (c) failing to
use commercially reasonable means to avoid any material increase in Headlands'
aggregate exposure to interest rate risk or (d) altering underwriting,
origination or warehousing policies; (xiv) incurring any indebtedness for
borrowed money other than in the ordinary course of business; (xv) making,
renewing, increasing or purchasing any loan, lease, advance or other extension
of credit except in the ordinary course of business consistent with past
practice or loans or advances as to which Headlands has an existing legally
binding obligation to make; and (xvi) agreeing or committing to do any of the
foregoing.
GreenPoint has agreed in the Merger Agreement to refrain from taking certain
actions relating to its operation pending consummation of the Merger without
the prior written consent of Headlands except as otherwise permitted in the
Merger Agreement. These actions include, without limitation: (i) declaring or
paying any extraordinary dividends on shares of GreenPoint Common Stock other
than increases in the quarterly dividend rate payable on GreenPoint Common
Stock in the ordinary course consistent with past practice; (ii)
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<PAGE>
knowingly taking any action that would (a) prevent or impede the Merger from
qualifying (1) for pooling of interests accounting treatment or (2) as a
reorganization within the meaning of Section 368(a) of the Code, or (b) result
in (1) any of its representations and warranties set forth in the Merger
Agreement being untrue in any material respect at any time at or prior to the
Effective Date, (2) any of the conditions to the Merger set forth in the
Merger Agreement not being satisfied or (3) a material violation of any
provision of the Merger Agreement except, in each case, as may be required by
applicable law; (iii) amending the GreenPoint Certificate in a manner that
changes the GreenPoint Common Stock or the governing documents of Merger Sub;
and (iv) agreeing or committing to do any of the foregoing.
Other Agreements. In the Merger Agreement, Headlands agreed not to solicit
or encourage any inquiries or proposals with respect to, or engage in any
negotiations concerning, or provide any confidential information or
participate in any negotiations with any person relating to, an "Acquisition
Proposal," subject to compliance by the Headlands Board of Directors with its
fiduciary duties. As used in the Merger Agreement, "Acquisition Proposal"
means any tender or exchange offer, proposal for a merger, consolidation or
other business combination involving Headlands or its subsidiaries or any
proposal or offer to acquire in any manner a substantial equity interest in,
or a substantial portion of the assets of, Headlands or its subsidiaries
(other than the proposed transaction between GreenPoint and Headlands).
Headlands and GreenPoint each has agreed to use its reasonable best efforts
to take all actions and do all things necessary or desirable in order to
permit consummation of the Merger as promptly as practicable. The Merger
Agreement also contains certain other agreements of the parties, including:
(i) granting to the other party reasonable access to information and personnel
and maintaining the confidentiality of supplied information; (ii) consulting
with respect to loan, litigation, risk management, accounting and real estate
valuation policies and practices and, with respect to Headlands, making such
modifications to such policies and practices as may be mutually agreed upon;
(iii) GreenPoint agreed to use its reasonable best efforts to have the
GreenPoint Common Stock being issued in the Merger listed on the New York
Stock Exchange, subject to official notice of issuance; (iv) GreenPoint and
Headlands agreed to cooperate and use their respective reasonable best efforts
to prepare and file all documents, and to obtain all permits, consents,
approvals and authorizations of all third parties and governmental authorities
necessary to consummate the Merger and related transactions; (v) GreenPoint
agreed to indemnify and provide insurance for directors and officers of
Headlands as discussed under "--Indemnification; Directors' and Officers'
Insurance"; (vi) GreenPoint will continue to provide Headlands' employees with
comparable employee benefits following the Merger as they had prior to the
Merger and will honor vested benefits existing as of the date of the Merger
Agreement; (vii) GreenPoint agreed to cause Peter T. Paul to be appointed to
the GreenPoint Board and to become a Vice Chairman of GreenPoint; (viii)
GreenPoint agreed to publish combined financial results after the effective
time of the Merger for purposes related to pooling of interests restrictions
on the shares of GreenPoint Common Stock received by affiliates of Headlands;
and (ix) Headlands agreed to suspend its 1998 Employee Stock Purchase Plan
after December 31, 1998.
Indemnification; Directors' and Officers' Insurance
The Merger Agreement provides that for the six-year period following the
Effective Date, GreenPoint will indemnify the directors and officers of
Headlands holding such positions on or prior to the Effective Date against
certain liabilities to the extent such persons could have been indemnified
under the laws of the State of California, the Headlands Articles and the
Headlands Bylaws as in effect on the date of the Merger Agreement.
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In addition, GreenPoint agreed in the Merger Agreement to maintain Headlands'
directors' and officers' liability insurance policy existing as of the date of
the Merger Agreement (or substitute therefor a directors' and officers'
liability insurance policy containing terms with respect to coverage or amount
no less favorable than such policy) for persons who were covered by such policy
on the date of the Merger Agreement for a period of six years after the
Effective Date at an annual cost not to exceed 150 percent of the current
amount expended by Headlands to maintain such policy.
Certain Other Matters Relating to the Merger
The Merger Agreement provides for GreenPoint to cause Peter T. Paul to be
appointed as a director to the GreenPoint Board as of the Effective Date.
Pursuant to his employment agreement with GreenPoint, Mr. Paul's position on
the GreenPoint Board will be conditioned on his continued employment by
GreenPoint.
Conditions to Consummation of the Merger; Termination
Consummation of the Merger is subject, among other things, to: (i) approval
of the Merger Agreement by the requisite vote of the Headlands Shareholders;
(ii) receipt of the regulatory approvals referred to above without any
requirements, restrictions or conditions that would, following the Effective
Date, have a material adverse effect on the Surviving Company; (iii) no court
or governmental or regulatory authority having taken any action which enjoins
or prohibits the Merger; (iv) receipt by Headlands of the opinion of Sullivan &
Cromwell and by GreenPoint of the opinion of Wachtell, Lipton, Rosen & Katz,
each dated as of the Effective Date, and to the effect that the Merger
constitutes a "reorganization" within the meaning of Section 368(a) of the Code
and that no gain or loss will be recognized by Headlands Shareholders who
receive shares of GreenPoint Common Stock in exchange for their shares of
Headlands Common Stock, except with respect to cash received in lieu of
fractional share interests; and (v) the GreenPoint Common Stock having been
approved for listing on the NYSE, subject to official notice of issuance.
Consummation of the Merger is also subject to the satisfaction or waiver of
various other conditions specified in the Merger Agreement, including, among
others: (i) the delivery by Headlands and GreenPoint, each to the other, of
certificates executed by certain of their respective executive officers as to
compliance with the Merger Agreement; and (ii) the receipt by GreenPoint and
Headlands of letters from their respective independent certified public
accountants, dated as of or shortly prior to the Effective Date to the effect
that the Merger, including the transactions contemplated by the Merger
Agreement and other agreements between the parties to the Merger Agreement
related thereto, qualifies for pooling of interests accounting treatment.
The Merger Agreement provides that, whether before or after the Headlands
Special Meeting and notwithstanding the approval of the Merger Agreement by the
Headlands Shareholders, the Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Date: (i) by mutual consent of
GreenPoint and Headlands; or (ii) by either the Board of Directors of
GreenPoint or the Headlands Board (a) if the Headlands Shareholders fail to
approve the Merger Agreement or any required regulatory approval is denied, (b)
in the event of a material breach by the other party of any representation,
warranty or covenant contained in the Merger Agreement, which breach is not
cured after 30 days' written notice thereof is given to the party committing
such breach, or (c) if the Merger is not consummated on or before July 31,
1999.
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Waiver; Amendment
Prior to the Effective Date, any provision of the Merger Agreement may be:
(i) waived by the party benefited by the provision; or (ii) amended or
modified at any time by an agreement in writing among the parties executed in
the same manner as the Merger Agreement, provided that after approval by the
Headlands Shareholders of the principal terms of the Merger, the Merger
Agreement may not be amended if it would violate the CGCL or reduce the
consideration to be received by the Headlands Shareholders in the Merger.
Expenses
All expenses incurred by or on behalf of the parties in connection with the
Merger Agreement and the transactions contemplated thereby shall be borne by
the party incurring the same, except that printing expenses and the SEC fee
for filing the Registration Statement containing this Proxy
Statement/Prospectus will be shared equally by GreenPoint and Headlands and
GreenPoint will bear fees in connection with certain regulatory filings.
Federal Income Tax Consequences
The following is a summary of the material anticipated United States federal
income tax consequences of the Merger to Headlands Shareholders, who hold such
stock as a capital asset. The summary is based on the Code, Treasury
regulations thereunder, and administrative rulings and court decisions in
effect as of the date hereof, all of which are subject to change at any time,
possibly with retroactive effect. This summary is not a complete description
of all of the consequences of the Merger and, in particular, may not address
United States federal income tax considerations applicable to stockholders
subject to special treatment under United States federal income tax law
(including, for example, non-United States persons, certain financial
institutions, dealers in securities, traders in securities that elect a mark-
to-market method of accounting, tax-exempt entities, holders who acquired
their shares of GreenPoint Common Stock or Headlands Common Stock pursuant to
the exercise of an employee stock option or right or otherwise as compensation
and holders who hold GreenPoint Common Stock or Headlands Common Stock as part
of a hedge, straddle or conversion transaction). In addition, no information
is provided herein with respect to the tax consequences of the Merger under
applicable foreign, state or local laws.
Headlands Shareholders are urged to consult their tax advisors regarding the
tax consequences of the Merger to them.
General. In connection with the filing of the Registration Statement,
GreenPoint has received an opinion of Wachtell, Lipton, Rosen & Katz, counsel
to GreenPoint, and Headlands has received an opinion of Sullivan & Cromwell,
counsel to Headlands, each dated the date hereof, and each addressing the
United States federal income tax consequences of the Merger described below.
Such opinions have been rendered on the basis of facts, representations and
assumptions set forth or referred to in such opinion that are consistent with
the expected state of facts at the Effective Time. In rendering these
opinions, Wachtell, Lipton, Rosen & Katz and Sullivan & Cromwell have required
and relied upon factual representations contained in certificates of officers
of GreenPoint, Merger Sub and Headlands (subject to the limitations set forth
above). The opinions are each to the effect that, for United States federal
income tax purposes:
(i) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code; and
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(ii) No gain or loss will be recognized by Headlands Shareholders who
receive shares of GreenPoint Common Stock in exchange for shares of
Headlands Common Stock in the Merger, except with respect to cash received
in lieu of a fractional share interest in GreenPoint Common Stock.
The respective obligations of GreenPoint and Headlands to consummate the
Merger are conditioned upon the receipt of a further similar opinion of
Wachtell, Lipton, Rosen & Katz and Sullivan & Cromwell, respectively, each to
be dated the Effective Date. None of the tax opinions to be delivered to the
parties in connection with the Merger as described herein are binding on the
Internal Revenue Service (the "IRS") or the courts, and the parties do not
intend to request a ruling from the IRS with respect to the Merger.
Accordingly, there can be no assurance that the IRS will not challenge the
conclusions reflected in such opinions or that a court will not sustain such
challenge.
In the event that Headlands Shareholders have the right to dissent from the
Merger and to demand and obtain payment of the "fair market value" of their
shares in cash, the receipt of a cash payment in respect of Dissenting Shares
will be a taxable event for United States federal income tax purposes, and any
such stockholder should consult his or her tax advisor with respect to the tax
impact of such a cash payment in his or her individual situation. Based upon
the current ruling position of the IRS, cash received by a Headlands
Shareholder in lieu of a fractional share interest in GreenPoint Common Stock
will be treated as received in redemption of such fractional share interest,
and a Headlands Shareholder should generally recognize capital gain or loss for
United States federal income tax purposes measured by the difference between
the amount of cash received and the portion of the tax basis of the share of
Headlands Common Stock allocable to such fractional share interest. Such gain
or loss should be long-term capital gain or loss if the holding period for such
share of Headlands Common Stock is greater than one year at the Effective Time.
In the case of an individual Headlands Shareholder, such capital gain will be
taxed at a maximum rate of 20% if such Headlands Shareholder's holding period
is more than one year. The holding period of a share of GreenPoint Common Stock
received in the Merger (including a fractional share interest deemed received
and redeemed as described above) will include the holder's holding period in
the Headlands Common Stock surrendered in exchange therefor.
Accounting Treatment of the Merger
It is anticipated that the Merger will be accounted for as a "pooling of
interests" transaction under GAAP. Under such method of accounting, the book
value of the assets, liabilities and stockholders' equity of each of Headlands
and GreenPoint, as reported on its respective consolidated balance sheet, will
be carried over to the consolidated balance sheet of the combined company and
no goodwill will be created. The combined company will be able to include in
its consolidated income the consolidated income of both companies for the
entire fiscal year in which the Merger occurs; however, certain expenses
incurred to effect the Merger must be treated as current charges against income
rather than adjustments to the balance sheet.
The unaudited pro forma information included in this Proxy
Statement/Prospectus reflects the Merger using the pooling of interests method
of accounting. See "Summary--Certain Comparative Per Share Data and Share
Prices", "Summary--Selected Financial Data of GreenPoint and Headlands," and
"Financial Information--Unaudited Pro Forma Combined Condensed Balance Sheet."
To conform to the provisions of Staff Accounting Bulletin 96, "Treasury Stock
Acquisitions Following Consummation of a Business Combination Accounted for as
a Pooling
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of Interests," GreenPoint has terminated its share purchase program. Under the
pooling of interests method of accounting, repurchased shares, if considered
"tainted" under applicable accounting principles, combined with intercorporate
common stock holdings, fractional shares in lieu of which cash is issued and
Dissenting Shares, must be less than 10 percent of the shares expected to be
issued in the Merger. GreenPoint expects to meet this 10 percent de minimis
test by the Effective Time. However, in order to meet this test, GreenPoint
expects to issue approximately 1.7 million shares in a transaction exempt from
the registration requirements of the Securities Act.
It is a condition to consummation of the Merger that GreenPoint and
Headlands receive a letter from their respective independent accountants to
the effect that the Merger will be accounted for as a pooling of interests.
See "--Conditions to Consummation of the Merger; Termination."
Federal Securities Laws Consequences; Resale Restrictions
All shares of GreenPoint Common Stock received by Headlands Shareholders in
the Merger will be freely transferable under the Securities Act, except shares
of GreenPoint Common Stock received by persons who are deemed to be
"affiliates" of Headlands under the rules and regulations of the Securities
Act at the time of the Special Meeting may be resold by them only in
transactions permitted by Rule 145 of the rules and regulations of the
Securities Act or as otherwise permitted under the Securities Act. Persons who
may be deemed to be affiliates of Headlands for such purposes generally
include individuals or entities that control, are controlled by or are under
common control with Headlands and generally include certain officers,
directors and significant Headlands Shareholders. The Merger Agreement
requires Headlands to use its reasonable best efforts to cause each of such
affiliates to execute a written agreement to the effect that such person will
not offer or sell or otherwise dispose of any of the shares of GreenPoint
Common Stock issued to such person in the Merger in violation of the
Securities Act or the rules and regulations promulgated by the SEC thereunder.
This Proxy Statement/Prospectus does not cover any resales of the GreenPoint
Common Stock to be received by the Headlands Shareholders upon consummation of
the Merger, and no person is authorized to make any use of this Proxy
Statement/Prospectus in connection with any such resale.
Stock Option Agreement
As an inducement and condition to GreenPoint's willingness to enter into the
Merger Agreement, Headlands entered into the Stock Option Agreement with
GreenPoint. Pursuant to the stock option agreement (the "Stock Option
Agreement"), Headlands granted the option (the "Option") to GreenPoint to
purchase up to 19.9 percent of the issued and outstanding shares of Headlands
Common Stock for a purchase price of $16.125 per share, subject to adjustment
in certain circumstances. The purchase of any shares of Headlands Common Stock
pursuant to the Option is subject to compliance with applicable law, including
the receipt of any necessary approval under the BHCA.
Subject to applicable law and regulatory restrictions, GreenPoint may
exercise the Option, in whole or in part, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event
(as hereinafter defined) have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that written notice of
such exercise as required by the Stock Option Agreement is provided within six
months following such Subsequent Triggering Event (or such later period as
provided in the Stock Option Agreement).
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As defined in the Stock Option Agreement, "Initial Triggering Event" means
any of the following events or transactions occurring on or after the date of
signing the Stock Option Agreement:
(i) Headlands or Headlands Mortgage Securities, Inc., a wholly owned
subsidiary of Headlands ("HMSI"), without having received GreenPoint's
prior written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person or the
Headlands Board shall have recommended that the Headlands Shareholders
approve or accept any Acquisition Transaction other than as contemplated by
the Merger Agreement. For purposes of the Stock Option Agreement,
"Acquisition Transaction" means (x) a merger or consolidation, or any
similar transaction, involving Headlands or HMSI, (y) a purchase, lease or
other acquisition of all or any substantial part of the assets of Headlands
or HMSI, or (z) a purchase or other acquisition of securities representing
ten percent or more of the voting power of Headlands or HMSI;
(ii) any person (other than GreenPoint) shall have acquired beneficial
ownership or the right to acquire beneficial ownership of ten percent or
more of the outstanding shares of Headlands Common Stock;
(iii) the Headlands Shareholders shall have voted and failed to approve
the Merger Agreement at the Special Meeting, or the Special Meeting shall
not have been held in violation of the Merger Agreement or shall have been
canceled prior to termination of the Merger Agreement if, prior to the
Special Meeting (or if the Special Meeting shall not have been held or
shall have been canceled, prior to such termination), it shall have been
publicly announced that any person (other than GreenPoint) shall have made,
or disclosed an intention to make, a bona fide proposal to engage in an
Acquisition Transaction;
(iv) the Headlands Board shall have withdrawn or modified in any manner
adverse in any respect to GreenPoint its recommendation that the Headlands
Shareholders approve the transactions contemplated by the Merger Agreement,
or Headlands or HMSI shall have authorized, recommended or proposed an
agreement to engage in an Acquisition Transaction with any person (other
than GreenPoint);
(v) any person (other than GreenPoint) shall have made a bona fide
proposal to Headlands or Headlands' Shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) any person (other than GreenPoint) shall have filed with the SEC a
registration statement or tender offer materials with respect to a
potential exchange or tender offer that would constitute an Acquisition
Transaction;
(vii) Headlands shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach GreenPoint would be
entitled to terminate the Merger Agreement; or
(viii) any person (other than GreenPoint) shall have filed an application
or notice with the Federal Reserve Board or other federal or state bank
regulatory or antitrust authority for approval to engage in an Acquisition
Transaction.
As defined in the Stock Option Agreement, "Subsequent Triggering Event" means
any of the following events or transactions occurring after the date of signing
the Stock Option Agreement:
(i) the acquisition by any person (other than GreenPoint) of beneficial
ownership of 20% or more of the then outstanding Headlands Common Stock; or
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(ii) the occurrence of an Initial Triggering Event described above,
except that the percentage referred to in clause (z) of subparagraph (i)
thereof shall be 20%.
As defined in the Stock Option Agreement, "Exercise Termination Event" means
each of the following:
(i) the Effective Time;
(ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event, except a termination (a) by GreenPoint due to a
breach of the Merger Agreement by Headlands (unless such breach is not
willful) or due to the Headlands Board failing to recommend the Merger
Agreement to Headlands' stockholders, or (b) by GreenPoint or Headlands if
Headlands' stockholders fail to approve the Merger Agreement (each, a
"Listed Termination"); or
(iii) the passage of 15 months (or such longer period as provided in the
Stock Option Agreement) after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
Listed Termination.
Under applicable law, GreenPoint may be required to obtain the prior
approval of the Federal Reserve Board prior to acquiring five percent or more
of the issued and outstanding shares of Headlands Common Stock. Certain other
regulatory approvals may also be required before such an acquisition could be
completed.
At any time after the occurrence of a Repurchase Event (as hereinafter
defined) at the request of the holder of the option (the "Holder") or the
owner of shares purchased under the Option (the "Owner"), delivered prior to
an Exercise Termination Event (or such later period as provided in the Stock
Option Agreement), Headlands must repurchase the Option and/or the shares of
Headlands Common Stock purchased pursuant to the Option (the "Option Shares"),
as applicable, from such Holder at a price (the "Option Repurchase Price")
equal to the amount by which (i) the Market/Offer Price (as defined below)
exceeds (ii) $16.125, multiplied by the number of shares for which the Option
may then be exercised and from such Owner at a price equal to the Market/Offer
Price multiplied by the number of shares designated for repurchase. The
minimum aggregate repurchase price is $13.93 million.
A "Repurchase Event" will be deemed to have occurred upon the occurrence of
any of the following events or transactions after the date of the signing of
the Stock Option Agreement:
(i) the acquisition by any person (other than GreenPoint) of beneficial
ownership of 50% or more of the then outstanding Headlands Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
subparagraph (i) under the definition of Initial Triggering Event, except
that the percentage referred to in clause (z) shall be 50%.
As defined in the Stock Option Agreement, "Market/Offer Price" means the
highest of
(i) the price per share of Headlands Common Stock at which a tender or
exchange offer therefor has been made;
(ii) the price per share of Headlands Common Stock to be paid by any
third party pursuant to an agreement with Headlands;
(iii) the highest closing price for shares of Common Stock within the
three month period immediately preceding the date the Holder gives notice
of the required
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repurchase of the Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be; or
(iv) in the event of a sale of all or any substantial part of Headlands'
assets or deposits, the sum of the net price paid in such sale for such
assets or deposits and the current market value of the remaining net assets
of Headlands as determined by a nationally recognized investment banking
firm selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to Headlands, divided by the number of shares of
Headlands Common Stock outstanding at the time of such sale. In determining
the Market/Offer price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by
the Holder or Owner, as the case may be, and reasonably acceptable to
Headlands.
GreenPoint may, at any time following a Repurchase Event and prior to the
occurrence of an Exercise Termination Event (or such later period as provided
in the Stock Option Agreement), relinquish the Option (together with any Option
Shares issued to and owned by GreenPoint) to Headlands in accordance with the
terms of the Stock Option Agreement in exchange for a cash fee equal to $13.93
million (subject to adjustment if GreenPoint has previously purchased Option
Shares).
The Stock Option Agreement and the Option are intended to increase the
likelihood that the Merger will be consummated according to the terms set forth
in the Merger Agreement, and may be expected to discourage offers by third
parties to acquire Headlands.
To the knowledge of Headlands and GreenPoint, no event giving rise to
exercise of the Option has occurred as of the date of this Proxy
Statement/Prospectus.
The foregoing discussion is qualified in its entirety by reference to the
Stock Option Agreement. A copy of the Stock Option Agreement is set forth as
Exhibit B hereto, and reference is made thereto for the complete terms of the
Stock Option Agreement and the Option.
Interests of Certain Persons in the Merger
Certain members of Headlands' management and the Headlands Board may be
deemed to have certain interests in the Merger that are in addition to their
interests as Headlands Shareholders generally. The Headlands Board was aware of
these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby.
Employment Agreements. In connection with the execution of the Merger
Agreement, GreenPoint entered into employment agreements with Mr. Paul, Gilbert
J. MacQuarrie, Becky S. Poisson, and Steven M. Abreu, as well as certain other
employees of Headlands.
Pursuant to Mr. Paul's employment agreement, Mr. Paul will become a member of
GreenPoint's management as a Vice Chairman of GreenPoint and will be appointed
as a director on the GreenPoint Board upon completion of the Merger. If Mr.
Paul's employment with GreenPoint terminates, Mr. Paul will cease to be a
director of GreenPoint. Mr. Paul's initial salary will consist of a base salary
of $300,000 and a performance-based bonus with a target bonus amount of 75% of
base salary and a maximum bonus amount of 150% of base salary. Under the terms
of his employment agreement, Mr. Paul will be granted an option to purchase
75,000 shares of GreenPoint Common Stock (such option to vest over a period of
three years following the Effective Date). The term of his employment agreement
commences on the Effective Date and ends on the second anniversary of the
Effective Date.
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Mr. Paul's employment agreement also provides that he will be eligible to
participate in the benefit plans, programs and arrangements generally made
available to him by GreenPoint from time to time on the terms and conditions
thereof, including paid vacation, life insurance, health insurance, disability
insurance and retirement benefits.
Mr. Paul's employment agreement further provides that during its term, if
his employment is terminated by GreenPoint without cause or if Mr. Paul
terminates his employment for good reason, he will be paid the following
amounts: (a) any earned and unpaid portion of his annual base salary through
the date of termination, and (b) base salary for the period (the "Continuation
Period") equal to the longer of (x) twelve months or (y) the number of months
from the date of termination until the second anniversary of the Effective
Date, as and when such amounts were otherwise payable in accordance with
GreenPoint's normal payroll practice. In addition, during the Continuation
Period (or, if earlier, the date he commences employment with a new employer),
he will be entitled to continued health, life and disability insurance
benefits on a similar basis as such benefits are generally provided to active
employees of GreenPoint from time to time, including cost sharing.
In addition, GreenPoint entered into a change in control agreement with Mr.
Paul (the "Change in Control Agreement") that will become effective upon
completion of the Merger. The Change in Control Agreement has a two-year term
that is extended on an annual basis. Under the Change in Control Agreement, an
amount is payable to Mr. Paul upon the occurrence of a change in control of
GreenPoint (as defined in the Change in Control Agreement) followed at any
time during the term of the Change in Control Agreement by the involuntary
termination or certain voluntary terminations of Mr. Paul's employment, other
than for cause. The termination payment consists of an amount equal to two
times Mr. Paul 's base salary and annual bonus plus the amount of any
contributions made to any employee benefit plan by GreenPoint on behalf of Mr.
Paul for two years after termination of his employment. Payment in the event
of a change in control may constitute an excess parachute payment under
Section 280G of the Code, resulting in the imposition of an excise tax (under
Section 4999 of the Code) on Mr. Paul and denial of the deduction for such
excess amounts to GreenPoint. Mr. Paul's Change in Control Agreement provides
that under such circumstances, his payment will be limited to the greater of
(i) all payments under the Change in Control Agreement less any excise taxes
and (ii) one dollar less than the amount that would trigger any excise taxes.
Pursuant to his employment agreement, Mr. Paul has agreed, during his
employment and for two years thereafter, not to engage in or solicit any non-
conforming mortgage banking business of the sort engaged in by GreenPoint and
not to solicit employees whose employment relates or is related to
GreenPoint's non-conforming mortgage banking business and who were employed as
of the Effective Date or thereafter by Headlands, GreenPoint or its
affiliates.
The terms of the employment agreements of Messrs. MacQuarrie and Abreu and
Ms. Poisson are substantially similar to the terms of Mr. Paul's employment
agreement, although none of such persons will become a member of the
GreenPoint Board or an officer of GreenPoint, none of such persons have
entered into change in control agreements, and they will be compensated as
follows: each will have an initial salary consisting of a base salary of
$170,000 and a performance-based bonus with a target bonus amount of 60% of
base salary (75% for Mr. Abreu) and a maximum bonus amount of 120% of base
salary (150% for Mr. Abreu), and each will be granted an option to purchase
37,500 shares of GreenPoint Common Stock (such option to vest on the second
anniversary of the Effective Date). In addition, such persons' agreements not
to engage in similar businesses or solicit employees terminate one year after
their employment with GreenPoint terminates.
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Stock Based Rights. Pursuant to the terms of Headland's 1997 Executive and
Non-Employee Director Stock Option Plan, approval of the Merger by Headlands
Shareholders will result in the stock options granted under such plan and not
previously exercisable and vested becoming fully exercisable and vested. The
total number of options held by all directors and officers of Headlands that
will vest on an accelerated basis as a result of such shareholder approval is
606,000.
Indemnification; Insurance. The Merger Agreement provides generally that for
the six-year period following the Effective Date, GreenPoint will indemnify the
directors and officers of Headlands holding such positions on or prior to the
Effective Date against certain liabilities to the extent such persons could
have been indemnified under the CGCL, the Headlands Certificate and the
Headlands Bylaws as in effect on the date of the Merger Agreement. The Merger
Agreement also provides that GreenPoint will maintain Headlands' directors' and
officers' liability insurance policy existing as of the date of the Merger
Agreement (or substitute therefor a directors' and officers' liability
insurance policy containing terms with respect to coverage or amount no less
favorable than such policy) for persons who were covered by such policy on the
date of the Merger Agreement for a period of six years after the Effective Date
at an annual cost not to exceed 150 percent of the current amount expended by
Headlands to maintain such policy. See "--Indemnification; Directors' and
Officers' Insurance."
Regulatory Matters
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), the Merger cannot be completed unless certain filings are made
with the Antitrust Division of the Department of Justice and the Federal Trade
Commission, and the expiration of certain waiting period requirements. On
January 25, 1999, GreenPoint and Headlands submitted the required filings on
behalf of their respective companies and on February 5, 1999, they each
received notice that the applicable waiting period under the HSR Act had
received early termination. GreenPoint and Mr. Paul also were required to
submit filings under the HSR Act with respect to the shares being acquired by
Mr. Paul in the Merger, and the applicable waiting period with respect to those
filings is currently scheduled to terminate on March 13, 1999. Despite the
early termination of one waiting period, and expected termination of the other,
under the HSR Act, if federal or state regulatory or other governmental
authorities believed that the proposed merger posed antitrust problems, any of
them could still challenge the merger if they chose to do so. Neither Headlands
nor GreenPoint has any reason to believe that the merger will be challenged by
any such authority.
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<PAGE>
BUSINESS AND MANAGEMENT
Management and Operations After the Merger
Management. GreenPoint intends initially to maintain Headlands as a separate
operating subsidiary of its wholly owned banking subsidiary, GreenPoint Bank.
The officers and employees of Headlands initially will continue in their pre-
Merger roles with the Surviving Corporation following the Merger. There can be
no assurances that GreenPoint will continue to hold the Surviving Corporation
as a separate subsidiary and GreenPoint could, among other things, merge
Headlands with and into GreenPoint Bank's wholly-owned subsidiary, GreenPoint
Mortgage Corp., a national home mortgage banking company.
As discussed under "The Merger--Certain Other Matters Relating to the
Merger," Peter T. Paul, Chairman, Chief Executive Officer and President of
Headlands will be appointed as a member of the GreenPoint Board upon
consummation of the Merger and will become a member of GreenPoint's management
as a Vice Chairman of GreenPoint.
Operations. While there can be no assurances that the business and financial
goals of GreenPoint and Headlands can be achieved following the Merger, it is
currently expected that the Merger will more than double GreenPoint's loan
origination capability and will materially increase its servicing scale. It is
also currently expected that the Merger will add revenue growth and provide
cost saving opportunities. The merger is expected to be slightly dilutive to
cash earnings, and accretive to GAAP earnings. Specifically, it is expected to
be 1.7% dilutive to cash earnings per share in 1999, and 0.3% accretive in
2000. On a GAAP basis, it is expected to be 5.2% accretive to earnings per
share in 1999 and 8.8% accretive in 2000. Additionally, the merger is expected
to be accretive to tangible book value per share by 12.3% in 1999 and 16.8% in
2000.
Price Range of Common Stock and Dividends
GreenPoint. GreenPoint Common Stock is, and the GreenPoint shares offered
hereby are expected to be, listed on The New York Stock Exchange (the "NYSE")
and traded under the symbol "GPT." The following table sets forth, for the
periods indicated, the high and low reported closing sale prices per share of
GreenPoint on the NYSE Composite Transactions Tape and cash dividends declared
per share of GreenPoint Common Stock in each quarter (all such numbers
adjusted to reflect a two-for-one stock split on March 4, 1998):
<TABLE>
<CAPTION>
High Low Dividends
------ ------ ---------
<S> <C> <C> <C>
1996
First Quarter......................................... $14.50 $12.00 $0.10
Second Quarter........................................ 15.25 13.63 0.10
Third Quarter......................................... 19.13 13.50 0.10
Fourth Quarter........................................ 25.07 19.63 0.10
1997
First Quarter......................................... $31.69 $22.81 $0.13
Second Quarter........................................ 33.28 25.88 0.13
Third Quarter......................................... 33.00 29.34 0.13
Fourth Quarter........................................ 36.28 31.13 0.13
1998
First Quarter......................................... $37.31 $32.69 $0.16
Second Quarter........................................ 42.06 36.19 0.16
Third Quarter......................................... 42.63 25.19 0.16
Fourth Quarter........................................ 39.25 25.38 0.16
1999
First Quarter (through February 16, 1999)............. $36.69 $30.44 $0.22
</TABLE>
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<PAGE>
Future dividends will be determined by the GreenPoint Board based upon an
assessment of the earnings and financial condition of GreenPoint and other
factors, including applicable governmental regulations and policies. Cash
dividends from GreenPoint Bank and liquid assets at the holding company level
are GreenPoint's principal sources of funds for paying cash dividends on
GreenPoint Common Stock. GreenPoint Bank is subject to certain regulatory
requirements that affect its ability to pay cash dividends to GreenPoint.
Headlands. Headlands common stock has been quoted on the Nasdaq National
Market under the symbol "HDLD" since February 5, 1998. Headlands has not
declared any dividends on shares of Headlands Common Stock since it became a
publicly traded company in February 1998, and Headlands has agreed in the
Merger Agreement not to declare or pay any dividends while the Merger Agreement
is in effect. The following table sets forth, for the periods indicated, the
high and low reported closing sale prices per share of Headlands quoted on the
Nasdaq National Market:
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1998
First Quarter.................................................. $17.31 $11.50
Second Quarter................................................. 19.00 15.13
Third Quarter.................................................. 19.88 13.88
Fourth Quarter................................................. 21.75 6.75
1999
First Quarter (through February 16, 1999)...................... $22.06 $18.25
</TABLE>
48
<PAGE>
INFORMATION ABOUT GREENPOINT AND HEADLANDS
GreenPoint
GreenPoint is a bank holding company organized under the laws of the state
of Delaware and registered under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). GreenPoint provides a variety of financial services,
primarily through its bank subsidiary, GreenPoint Bank, a New York State
chartered savings bank (the "Bank"), GreenPoint Mortgage Corp. ("GPMC"), a
national home mortgage banking company wholly-owned by the Bank and
headquartered in Charlotte, North Carolina, and GreenPoint Credit Corp.
("GCC"), a Delaware corporation wholly-owned by the Bank and headquartered in
San Diego, California. As of December 31, 1998, excluding the impact of GCC,
GreenPoint had consolidated total assets of approximately $14.0 billion, total
net loans of approximately $9.9 billion, total deposits of approximately $11.2
billion and stockholders' equity of approximately $1.8 billion. The Bank
operates 73 full-service branches in the greater New York City Metropolitan
area.
Through the Bank, GPMC and GCC, GreenPoint is primarily engaged in mortgage
lending in New York and across the nation. GreenPoint originates both
adjustable-rate mortgage and fixed-rate loans, primarily through a network of
mortgage brokers, mortgage bankers, attorneys and other real estate
professionals and, to a lesser extent, from customers and members of the local
communities in GreenPoint's lending area. GreenPoint specializes in a limited
documentation mortgage loan product referred to as "No Doc" loans. GreenPoint
has historically funded its No Doc portfolio with consumer deposits raised
through its thrift operations in the greater New York City Metropolitan area.
In 1997, GreenPoint's No Doc lending program accounted for 96.0% of its loan
originations. As a result of its No Doc lending focus, GreenPoint
traditionally has achieved higher interest margins and levels of net interest
income than those generated by lenders that concentrate on loans underwritten
in conformance with the Federal National Mortgage Association ("FNMA")
standards. This, in turn, has resulted in a relatively high level of
profitability despite traditionally higher levels of loan delinquencies.
GreenPoint, which expanded into 11 new markets in fiscal 1998, currently
operates in 27 markets across the United States. GCC was formed in May 1998
for the purpose of acquiring the operating business of the BankAmerica Housing
Services division of Bank of America, FSB, a wholly-owned subsidiary of
BankAmerica Corporation. The acquired operating business of the BankAmerica
Housing Services division consisted primarily of originating, purchasing and
servicing manufactured housing installment sale contracts and installment loan
agreements. The acquisition of the BankAmerica Housing Services division was
completed on September 30, 1998, and as a result of such acquisition.
Headlands
Headlands is a publicly held California corporation that was organized in
1981, and completed an initial public offering of common stock on February 4,
1998. Headlands is a specialty mortgage banking company in the business of
originating, selling, securitizing and servicing residential mortgage loans
secured by one- to four-unit family residences, and purchasing and selling
mortgage servicing rights. As of December 31, 1998, Headlands had consolidated
total assets of approximately $1.1 billion, total net loans of approximately
$910.8 million and stockholders' equity of approximately $126.3 million.
Headlands is headquartered in Larkspur, California, and has production
branches in California, Washington, Oregon, Nevada, Florida, New Jersey,
Virginia, Idaho, New Mexico,
49
<PAGE>
and Arizona. Loans are originated primarily through Headlands' wholesale
division, through a network of independent mortgage loan brokers approved by
Headlands, and also through its correspondent lending and retail lending
divisions. The mortgage loans are acquired by Headlands in one of the three
following manners: (i) originated by an independent broker and purchased by
Headlands, (ii) originated by a broker and funded by Headlands, or (iii)
originated and funded by Headlands in the ordinary course of business. The
market for Headlands' mortgage banking operations is predominantly California
and the western United States.
50
<PAGE>
REGULATION AND SUPERVISION
GreenPoint
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to GreenPoint and its subsidiaries. This
regulatory framework is intended primarily for the protection of depositors
and the federal deposit insurance funds and not for the protection of security
holders. To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to those
provisions. A change in the statutes, regulations or regulatory policies
applicable to GreenPoint or its subsidiaries may have a material effect on the
business of GreenPoint.
General. As a registered bank holding company under the BHCA, GreenPoint is
subject to examination and supervision by the Board of Governors of the
Federal Reserve System (the "FRB"). Under the BHCA, bank holding companies
generally may not acquire ownership or control of more than 5% of the voting
shares or substantially all of the assets of any company, including a bank,
without the FRB's prior approval. In addition, bank holding companies
generally may engage, directly or indirectly, only in banking and such other
activities as are determined by the FRB to be closely related to banking.
Subsidiary banks of a bank holding company are subject to certain
quantitative and qualitative restrictions imposed by the Federal Reserve Act
on any extension of credit to, or purchase of assets from, or letter of credit
issued on behalf of, the bank holding company or its non-bank subsidiaries,
and on the investment in or acceptance of stocks or securities of such holding
company or its subsidiaries as collateral for loans. In addition, federal laws
and regulations limit the amounts of, and establish required procedures and
credit standards with respect to, loans and other extensions of credit to
certain officers, directors and principal shareholders of GreenPoint, certain
of its subsidiaries and related interests of such persons.
In addition, if GreenPoint were to acquire another bank or bank holding
company, it could become subject to the bank holding company regulations
promulgated under New York State Banking Law ("State Banking Laws").
GreenPoint is not currently subject to the bank holding company regulations of
State Banking Laws because a company such as GreenPoint that controls only one
banking institution is not deemed to be a bank holding company under State
Banking Laws. However, the Bank is subject to other State Banking Laws and to
extensive regulation by the Banking Department, as its chartering agency, and
by the Federal Deposit Insurance Corporation (the "FDIC"), as its deposit
insurer. The Bank is also subject to regulation by the FRB. GreenPoint and its
subsidiaries also are affected by the fiscal and monetary policies of the
federal government and the FRB, and by various other governmental requirements
and regulations.
Liability for Bank Subsidiaries. Under current FRB policy, a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to maintain resources adequate to support
each such subsidiary bank. This support may be required at times when the bank
holding company may not have the resources to provide it. In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company
to a federal bank regulatory agency to maintain the capital of a subsidiary
bank would be assumed by the bankruptcy trustee and entitled to priority of
payment.
Similarly, any depository institution insured by the FDIC, including the
Bank, can be held liable for any loss incurred, or reasonably expected to be
incurred, by the FDIC in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured
51
<PAGE>
depository institution in danger of default. "Default" is defined generally as
the appointment of a conservator or receiver and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. Also, if
such a default occurred with respect to a bank, any capital loans to the bank
from its parent holding company would be subordinate in right of payment to
payment of the bank's depositors and certain of its other obligations.
Capital Requirements. GreenPoint is subject to risk-based capital
requirements and guidelines imposed by the FRB, which are substantially similar
to the capital requirements and guidelines imposed by the FDIC, the Office of
Thrift Supervision and the Office of the Comptroller of the Currency on the
depository institutions within their respective jurisdictions. For this
purpose, a depository institution's or holding company's assets and certain
specified off-balance sheet commitments are assigned to four risk categories,
each weighted differently based on the level of credit risk that is ascribed to
such assets or commitments. A depository institution's or holding company's
capital, in turn, is divided into two tiers: core ("Tier 1") capital, which
includes common equity, non-cumulative perpetual preferred stock and a limited
amount of cumulative perpetual preferred stock and related surplus (excluding
auction rate issues) and a limited amount of cumulative perpetual preferred
stock and minority interests in equity accounts of consolidated subsidiaries,
less goodwill, certain identifiable intangible assets and certain other assets;
and supplementary ("Tier 2") capital, which includes, among other items,
perpetual preferred stock not meeting the Tier 1 definition, mandatory
convertible securities, subordinated debt and allowances for loan and lease
losses, subject to certain limitations, less certain required deductions.
GreenPoint, like other bank holding companies, currently is required to
maintain Tier 1 and "total capital" (the sum of Tier 1 and Tier 2 capital)
equal to at least 4% and 8% of its total risk-weighted assets (including
certain off-balance-sheet items, such as standby letters of credit),
respectively. At December 31, 1998, GreenPoint met both requirements, with
Tier 1 and total capital equal to 12.16% and 13.41% of its total risk-weighted
assets.
The FRB, the FDIC and the Banking Department have adopted rules to
incorporate market and interest rate risk components into their risk-based
capital standards. Amendments to the risk-based capital requirements of the FRB
and the FDIC, incorporating market risk, became effective January 1, 1998.
Under the new market risk requirements, capital will be allocated to support
the amount of market risk related to a financial institution's ongoing trading
activities.
The FRB also requires bank holding companies to maintain a minimum "leverage
ratio" (Tier 1 capital to adjusted total assets) of 3% if the holding company
has the highest regulatory rating and meets certain other requirements, or of
3% plus an additional cushion of at least 100 to 200 basis points if the
holding company does not meet these requirements. At December 31, 1998,
GreenPoint's leverage ratio was 7.58%.
The FRB may set capital requirements higher than the minimums noted above for
holding companies whose circumstances warrant it. For example, holding
companies experiencing or anticipating significant growth may be expected to
maintain capital positions substantially above the minimum supervisory levels
without significant reliance on intangible assets. Furthermore, the FRB has
indicated that it will consider a "tangible Tier 1 capital leverage ratio"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
The Bank is subject to similar risk-based and leverage capital requirements
adopted by the FDIC. The Bank was in compliance with the applicable minimum
capital requirements
52
<PAGE>
as of December 31, 1998. The Bank has not been advised by any federal banking
agency or by the Banking Department of any specific minimum leverage ratio
requirement applicable to it.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described under
"--FDICIA."
FDICIA. FDICIA, among other things, identifies five capital categories for
insured depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires federal bank regulatory agencies to implement
systems for "prompt corrective action" for insured depository institutions
that do not meet minimum capital requirements, based on these categories.
FDICIA imposes progressively more restrictive constraints on operations,
management and capital distributions, depending on the category in which an
institution is classified. Unless a bank is "well capitalized," it is subject
to restrictions on its ability to offer brokered deposits and on certain other
aspects of its operations. An "undercapitalized" bank must develop a capital
restoration plan and its parent holding company must guarantee the bank's
compliance with the plan up to the lesser of 5% of the bank's assets at the
time it became undercapitalized and the amount needed to comply with the plan.
As of December 31, 1998, GreenPoint Bank was "well capitalized," based on
the "prompt corrective action" ratios and guidelines described above. It
should be noted, however, that the Bank's capital category is determined
solely for the purpose of applying the FDIC's "prompt corrective action"
regulations and that the capital category may not constitute an accurate
representation of the Bank's overall financial condition or prospects.
Dividend Restrictions. State Banking Laws impose certain restrictions on the
payment of dividends by the Bank to GreenPoint, including a provision that,
without regulatory approval, the Bank cannot declare and pay dividends in any
calendar year in excess of its net profits, as defined by the State Banking
Laws, for that year combined with its retained net profits, as defined by the
State Banking Laws, of the two preceding years, less any required transfer to
surplus. Likewise, the approval of the FDIC is required for any dividend if
the total of all dividends declared by the Bank in any calendar year would
exceed the total of its net profits, as defined by the FDIC, for such year
combined with its retained net profits, as defined by the FDIC, for the
preceding two years. In addition, GreenPoint may not pay a dividend in an
amount greater than its net profits then on hand. At December 31, 1998, $131.3
million of the total stockholders' equity of the Bank was available for
payment of dividends to GreenPoint without approval by the applicable
regulatory authority.
In addition, federal bank regulatory authorities have authority to prohibit
the Bank from engaging in an unsafe or unsound practice in conducting its
business. The payment of dividends, depending upon the financial condition of
the bank in question, could be deemed to constitute such an unsafe or unsound
practice. The ability of the Bank to pay dividends in the future is currently,
and could be further, influenced by bank regulatory policies and capital
guidelines.
Deposit Insurance Assessments. The deposits of the Bank are insured up to
regulatory limits by the FDIC and, accordingly, are subject to deposit
insurance assessments to maintain the Bank Insurance Fund (the "BIF") and the
Savings Association Insurance Fund ("SAIF") administered by the FDIC. The FDIC
has adopted regulations establishing a permanent risk-related deposit
insurance assessment system. Under this system, the FDIC places each insured
bank in one of nine risk categories based on (i) the bank's capitalization and
(ii) supervisory evaluations provided to the FDIC by the institution's primary
federal
53
<PAGE>
regulator. Each insured bank's insurance assessment rate is then determined by
the risk category in which it is classified by the FDIC.
Due to the Bank's current risk-based assessment, as of January 1, 1999, the
annual insurance premiums on bank deposits insured by the BIF (approximately
75% of the Bank's deposits) and the SAIF (approximately 25% of the Bank's
deposits) were both zero.
The Deposit Insurance Funds Act of 1996 provides for assessments to be
imposed on insured depository institutions with respect to deposits insured by
the BIF and the SAIF (in addition to assessments currently imposed on
depository institutions with respect to BIF- and SAIF-insured deposits) to pay
for the cost of Financing Corporation ("FICO") funding. The FICO assessment
rates as of January 1, 1999 were $0.0122 per $100 annually for BIF-assessable
deposits and $0.061 per $100 annually for SAIF-assessable deposits.
Depositor Preference Statute. Federal legislation has been enacted providing
that deposits and certain claims for administrative expenses and employee
compensation against an insured depository institution would be afforded a
priority over other general unsecured claims against such institution,
including federal funds and letters of credit, in the "liquidation or other
resolution" of the institution by any receiver.
Brokered Deposits. Under FDIC regulations, no FDIC-insured depository
institution can accept brokered deposits unless it (i) is well capitalized, or
(ii) is adequately capitalized and receives a waiver from the FDIC. In
addition, these regulations prohibit any depository institution that is not
well capitalized from (a) paying an interest rate on deposits in excess of 75
basis points over certain prevailing market rates or (b) offering "pass
through" deposit insurance on certain employee benefit plan accounts subject to
certain exceptions.
Interstate Banking And Branching. Under the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 ("Riegle-Neal"), subject to certain
concentration limits and other requirements, (i) bank holding companies such as
GreenPoint are permitted to acquire banks and bank holding companies located in
any state; (ii) any bank that is a subsidiary of a bank holding company is
permitted to receive deposits, renew time deposits, close loans, service loans
and receive loan payments as an agent for any other bank subsidiary of that
holding company; and (iii) banks are permitted to acquire branch offices
outside their home states by merging with out-of-state banks, purchasing
branches in other states, and establishing de novo branch offices in other
states; provided that, in the case of any such purchase or opening of
individual branches, the host state has adopted legislation "opting in" to
those provisions of Riegle-Neal; and provided that, in the case of a merger
with a bank located in another state, the host state has not adopted
legislation "opting out" of that provision of Riegle-Neal. GreenPoint could use
Riegle-Neal to acquire banks in additional states.
Headlands
Headlands' business is subject to extensive regulation, supervision and
licensing by federal, state and local governmental authorities and is subject
to various laws and judicial and administrative decisions imposing requirements
and restrictions on part or all of its operations. Regulated matters include,
without limitation, mortgage loan originations, marketing efforts, credit
application and underwriting activities, maximum finance and other charges,
disclosure to customers, certain rights of rescission on mortgage loans,
closing and servicing mortgage loans, collection and foreclosure procedures,
qualification and licensing requirements for doing business in various
jurisdictions and other trade practices. Activities as a lender are also
subject to various federal laws. The Truth in Lending Act and
54
<PAGE>
Regulation Z promulgated thereunder, as both are amended from time to time,
contain disclosure requirements designed to provide consumers with information
and certain other protections. Headlands is also required to comply with the
Equal Credit Opportunity Act of 1974, as amended, which prohibits creditors
from discriminating against applicants on the basis of race, color, sex, age
or marital status. Headlands is also subject to the Real Estate Settlement
Procedures Act and the Debt Collection Practices Act and must file annual
reports with the Department of Housing and Urban Development ("HUD") pursuant
to the Home Mortgage Disclosure Act. The Company is also subject to the rules
and regulations of, and examinations by, HUD, FNMA and other federal and state
regulatory authorities with respect to originating, processing, underwriting,
selling and servicing mortgage loans. Failure to comply with these
requirements can lead to loss of approved status, termination or suspension of
servicing contracts without compensation to the servicer, demands for
indemnifications or mortgage loan repurchases, certain rights of rescission
for mortgage loans, class action lawsuits and administrative enforcement
actions.
The laws and regulations described above are subject to legislative,
administrative and judicial interpretation, and additional laws and
regulations could be adopted in the future. There can be no assurance that
Headlands will maintain compliance with these requirements in the future
without additional expenses, or that more restrictive local, state or federal
laws, rules and regulations will not be adopted or that existing laws and
regulations will not be interpreted in a more restrictive manner, which would
make compliance more difficult and more expensive for Headlands.
55
<PAGE>
CAPITAL STOCK AND COMPARISION OF STOCKHOLDER RIGHTS
As a result of the conversion of shares of Headlands Common Stock to shares
of GreenPoint Common Stock in the Merger, Headlands Shareholders will become
GreenPoint Stockholders, and their rights will be governed by the DGCL and by
the GreenPoint Certificate and the GreenPoint Bylaws, which differ in certain
respects from the CGCL and the Headlands Articles and the Headlands Bylaws. The
following is a description of GreenPoint's capital stock, including the
GreenPoint Common Stock to be issued in the Merger, and a summary of the
material differences between the rights of Headlands Shareholders and
GreenPoint Stockholders. Although it is impractical to compare all of the
aspects in which the DGCL and the CGCL and the companies' governing instruments
differ with respect to stockholders' rights, the following discussion
summarizes the material significant differences between them.
Description of GreenPoint Capital Stock
General. GreenPoint is authorized to issue two hundred and seventy million
(270,000,000) shares of capital stock consisting of two hundred and twenty
million (220,000,000) shares of GreenPoint Common Stock and 50,000,000 shares
of preferred stock, par value $.01 per share ("GreenPoint Preferred Stock"). As
of January 31, 1999, there were approximately 94,747,000 shares of GreenPoint
Common Stock outstanding and no shares of GreenPoint Preferred Stock
outstanding. GreenPoint Common Stock is traded on the NYSE under the symbol
"GPT."
Common Stock. GreenPoint Stockholders generally are entitled to one vote per
share. The GreenPoint Certificate, however, provides that any requirement for
stockholder consent or approval is deemed not to include those shares ("Excess
Shares") of GreenPoint Common Stock beneficially owned, directly or indirectly,
by any stockholder in excess of the Limit (as defined below, see "--Limitations
on Voting Rights"). GreenPoint Stockholders do not have the right to cumulative
voting in the election of directors.
Subject to the prior rights of the holders of any GreenPoint Preferred Stock
then outstanding, holders of GreenPoint Common Stock are entitled to receive
such dividends as may be declared by the GreenPoint Board out of funds legally
available therefor and, in the event of liquidation or dissolution, to receive
the net assets of GreenPoint remaining after payment of all liabilities and
after payment to holders of all shares of GreenPoint Preferred Stock of the
full preferential amounts to which such holders may be entitled, in proportion
to their respective holdings.
GreenPoint is a legal entity separate and distinct from its banking and other
subsidiaries. A substantial portion of GreenPoint's revenues result from
amounts paid as dividends to GreenPoint by the Bank. New York law imposes
certain restrictions on the ability of the Bank to pay such dividends. In
addition, GreenPoint and the Bank are subject to various general regulatory
policies and requirements relating to the payment of dividends, including
requirements to maintain adequate capital above regulatory minimums. The
Banking Department and the FDIC are authorized to determine, under certain
circumstances relating to the financial condition of a state bank, that the
payment of dividends would be an unsafe or unsound practice and to prohibit
payment thereof. The Banking Department and the FDIC have indicated that paying
dividends that deplete a bank's capital base to an inadequate level would be an
unsound and unsafe banking practice.
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<PAGE>
The Banking Department, the FDIC and the FRB have each indicated that banking
organizations should generally pay dividends only out of current operating
earnings.
GreenPoint Stockholders are not entitled to any preemptive, subscription or
conversion rights. The GreenPoint Common Stock is not subject to redemption.
All of the outstanding shares of Common Stock, including the securities
offered hereby, are fully paid and nonassessable.
Preferred Stock. No shares of GreenPoint Preferred Stock are currently
outstanding. The GreenPoint Board can, without GreenPoint Stockholder
approval, (i) provide for the issuance of shares of GreenPoint Preferred Stock
in series, (ii) establish the number of such shares to be included in such
series, and (iii) fix the designation, powers, preferences and rights of each
such series and any qualifications, limitations or restrictions thereon.
GreenPoint does not currently have any plans to issue GreenPoint Preferred
Stock.
Comparison of Stockholder Rights
General. Headlands is a California corporation and GreenPoint is a Delaware
corporation. Headlands Shareholders, whose rights are currently governed by
the CGCL, the Headlands Articles and the Headlands Bylaws, will, at the
Effective Time of the Merger, become GreenPoint Stockholders and their rights
as such will be governed by the DGCL, the GreenPoint Certificate, and the
GreenPoint Bylaws. Certain differences between the rights of Headlands
Shareholders and GreenPoint Stockholders are summarized below. For information
on how to obtain copies of the Headlands Articles, the Headlands Bylaws, the
GreenPoint Certificate and the GreenPoint Bylaws, see "Additional
Information--Where You Can Find More Information."
Amendment of Charter Documents. The DGCL requires approval by the holders of
a majority of the voting power of GreenPoint Common Stock in order to amend
the GreenPoint Certificate. In addition, the GreenPoint Certificate requires
the vote of the holders of 80% of the voting power of GreenPoint Common Stock
(as with all other matters requiring GreenPoint Stockholder approval, after
giving effect to the provision of the GreenPoint Certificate regarding Excess
Shares), in order to amend or repeal the provisions of the GreenPoint
Certificate with respect to voting Excess Shares (Section C of Article
Fourth), taking action by written consent of the GreenPoint Stockholders
(Section C of Article Fifth), calling special meetings of GreenPoint
Stockholders (Section D of Article Fifth), the GreenPoint Board (Article VI),
adoption, amendment or repeal of the GreenPoint Bylaws (Article Seventh),
approval of certain business combinations or transactions (Article Eighth),
consideration of GreenPoint's constituencies in evaluating certain business
combinations or transactions (Article Ninth), director liability and
indemnification (Article Tenth) and the supermajority vote requirement
described in this sentence (Article Twelfth).
To amend the articles of incorporation of a California corporation, the CGCL
requires the approval of the corporation's board of directors and a majority
of the outstanding shares entitled to vote. An amendment cannot reduce the
number of directors on a board of directors having a fixed size or the minimum
number of directors on a board of directors having a variable size to fewer
than five directors if the votes cast against adoption of such a provision (or
the shares not consenting in the case of action by written consent) are equal
to more than 16 2/3% of the outstanding shares entitled to vote. The Headlands
Articles do not contain any supermajority voting provisions.
Amendment and Repeal of By-laws and Regulations. Under the DGCL, holders of
a majority of the voting power of a corporation and, when provided in the
certificate of
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incorporation, the directors of the corporation, have the power to adopt, amend
and repeal the by-laws of a corporation. The GreenPoint Certificate grants the
GreenPoint Board such power. In addition, the GreenPoint Bylaws require the
vote of the holders of 80% of the voting power of GreenPoint Common Stock in
order for the GreenPoint Stockholders to amend or repeal the provisions of the
GreenPoint Bylaws.
The CGCL provides that holders of a majority of the outstanding shares
entitled to vote and the corporation's board of directors each have the power
to adopt, amend or repeal a corporation's bylaws, although the articles or
bylaws of the corporation may restrict or eliminate the power of the board to
take such action. Furthermore, a bylaw provision cannot reduce the number of
directors on a board of directors having a fixed size or the minimum number of
directors on a board of directors having a variable size to fewer than five
directors if the votes cast against adoption of a such provision (or the shares
not consenting in the case of action by written consent) are equal to more than
16 2/3% of the outstanding shares entitled to vote. Neither the Headlands
Bylaws nor the Headlands Articles restricts the power of the Headlands Board to
adopt, amend or repeal the Headlands Bylaws, except that the Headlands Bylaws
do not permit the Headlands Board to change the minimum and maximum number of
directors set forth in the Bylaws without shareholder approval.
Removal of Directors. The DGCL provides that directors may be removed from
office, with or without cause, by the holders of a majority of the voting power
of all outstanding voting stock, unless the corporation has a classified board
and its certificate of incorporation otherwise provides. The GreenPoint
Certificate does provide for a classified board and removal of directors only
for cause. In addition, the GreenPoint Certificate requires the affirmative
vote of the holders of at least 80% of the voting power of GreenPoint Common
Stock to remove any director.
The CGCL provides that directors may be removed without cause if the removal
is approved by the majority of the outstanding shares entitled to vote, but the
CGCL further provides that with respect to directors of corporations not having
classified boards of directors, no director can be removed (unless the entire
board is removed) if the votes cast against removal of the director would be
sufficient to elect the director if voted cumulatively (without regard to
whether cumulative voting is permitted) at an election at which the same total
number of votes were cast and the entire number of directors authorized at the
time of the director's most recent election were then being elected. Headlands
does not currently have a classified board.
Vacancies on the Board. The DGCL provides that, unless the governing
documents of a corporation provide otherwise, vacancies and newly created
directorships resulting from a resignation or any increase in the authorized
number of directors elected by all of the stockholders having the right to vote
as a single class may be filled by a majority of the directors then in office.
The GreenPoint Certificate provides that newly created directorships resulting
from any increase in the number of directors and any vacancies on the board of
directors resulting from death, resignation, disqualification, removal or other
cause are to be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum. The GreenPoint
Certificate provides that any director so chosen will hold office for a term
expiring at the annual meeting of GreenPoint Stockholders at which the term of
office of the class to which such director has been chosen expires.
The CGCL provides that, unless the governing documents of a corporation
provide otherwise, vacancies (other than those created by removal) may be
filled by approval of the board of directors, or if the number of directors
then in office is less than a quorum, by (i) unanimous written consent of the
directors then in office, (ii) by affirmative vote of a majority
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of directors then in office at a duly called meeting or (iii) the sole
remaining director. Unless the corporation's articles or a bylaw provision
adopted by the corporation's shareholders provides that vacancies on the board
of directors that are created by removal can be filled by the board of
directors, such vacancies must be filled by the affirmative vote of a majority
of the shares represented and voting at a duly held meeting at which a quorum
is present (which shares voting affirmatively must also constitute at least a
majority of the required quorum) or by such greater vote required by the
corporation's articles. The CGCL permits shareholders to elect a director at
any time to fill any vacancy not filled by the directors. Any such election by
written consent (other than to fill a vacancy created by removal) requires the
consent of a majority of the outstanding shares entitled to vote. The CGCL
further provides that if, after the filling of any vacancy by the directors,
the directors in office who were elected by the shareholders constitute less
than a majority of the directors then in office, then (i) any holder or
holders of an aggregate of 5% or more of the total number of shares at the
time outstanding having the right to vote for those directors may call a
special meeting of shareholders or (ii) upon the application of such holder or
holders, the superior court of the proper county will order a special meeting
of shareholders to elect the entire board of directors.
The Headlands Bylaws further provide that the Headlands Shareholders cannot
elect a director by written consent to fill a vacancy created by removal
except by unanimous consent of all shares entitled to vote for the election of
directors. The Headlands Bylaws do not provide the Headlands Board with the
ability to fill vacancies created by removal.
Right to Call Special Meetings of Stockholders. The DGCL permits special
meetings of stockholders to be called by the board of directors and such other
persons, including stockholders, as the certificate of incorporation or by-
laws may provide. The DGCL does not require that stockholders be given the
right to call special meetings. The GreenPoint Certificate provides that
special meetings of stockholders of the corporation may be called only by the
GreenPoint Board pursuant to a resolution approved by a majority of the total
number of authorized directors (without regard to any vacancies on the Board).
Under the CGCL, a corporation's board of directors, its chairman of the
board of directors, its president, the holders of shares entitled to cast not
less than 10% of the votes at a meeting of shareholders and such additional
persons as are specified in the corporation's articles or bylaws have the
authority to call special meetings of shareholders. Neither the Headlands
Articles nor the Headlands Bylaws specify any additional persons having
authority to call special meetings of shareholders.
Stockholder Action Without a Meeting. The DGCL provides that, unless
otherwise provided in the certificate of incorporation, any action that may be
taken at a meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if the holders of common stock having not
less than the minimum number of votes otherwise required to approve such
action at a meeting of stockholders consent in writing. The GreenPoint
Certificate provides that any action required or permitted to be taken by the
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing by such
stockholders.
The CGCL provides that, unless otherwise provided in the articles of
incorporation, any action that may be taken at a special or annual meeting of
shareholders may be taken without a meeting and without prior notice if a
consent in writing, setting forth the action taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. The Headlands Articles
do
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not otherwise provide. Except as discussed above with respect to filling
vacancies on the board of directors, the CGCL does not permit directors to be
elected by written consent except by the unanimous written consent of all
shares entitled to vote in the election of directors.
Class Voting. The DGCL requires voting by separate classes only with respect
to amendments to a corporation's certificate of incorporation that increase or
decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of the shares of such class, or alter or change the
powers, preferences, or special rights of the shares of such class so as to
affect them adversely.
The CGCL requires voting by separate classes with respect to amendments to a
corporation's articles of incorporation that (i) increase or decrease the
aggregate number of authorized shares of the class, (ii) effect an exchange,
reclassification or cancellation of all or part of the shares of such class,
(iii) effect an exchange, or create a right of exchange, of all or part of the
shares of another class into shares of such class, (iv) change the rights,
preferences, privileges or restrictions of the shares of such class, (v) create
a new class of shares having rights, preferences or privileges prior to the
shares of such class, or increase the rights, preferences or privileges or the
number of authorized shares of any class having rights, preferences or
privileges prior to the shares of such class, (vi) divide the shares of any
class of preferred shares into series having different rights, preferences,
privileges or restrictions or authorize the board to do so, or (vii) cancel or
otherwise affect dividends on the shares of such class that have accrued but
have not been paid. In addition, the CGCL requires voting by class with respect
to mergers, share exchanges, reorganizations and similar transactions. For
purposes of such voting requirement, classes of common stock differing only as
to voting rights are considered a single class of shares.
Cumulative Voting. Under the DGCL, stockholders do not have the right to
cumulate their votes in the election of directors unless such right is granted
in the certificate of incorporation. The GreenPoint Certificate does not grant
such rights.
Under the CGCL, shareholders have the right to cumulate their votes in the
election of directors, but a listed corporation may adopt a provision to
eliminate cumulative voting. Headlands is a listed corporation and has
eliminated the ability of Headlands Shareholders to cumulate votes.
Limitations on Voting Rights. The GreenPoint Certificate provides that no
record owner of GreenPoint Common Stock beneficially owned, directly or
indirectly, by a person who beneficially owns more than 10% of the then-
outstanding shares of GreenPoint Common Stock (the "Limit") as of the record
date for determining the stockholders entitled to vote on any matter may vote
any shares of GreenPoint Common Stock in excess of the Limit. Any such record
holder may cast that number of votes equal to the number of votes that a single
record owner of all GreenPoint Common Stock beneficially owned by such person
would be entitled to cast subject to the limitation on voting rights described
in this paragraph, multiplied by a fraction, the numerator of which is the
number of shares of GreenPoint Common Stock that are both beneficially owned by
such person and owned of record by such record owner and the denominator of
which is the total number of shares of GreenPoint Common Stock beneficially
owned by such person owning shares in excess of the limit. "Beneficial
ownership" is determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act (the "Rules") and includes (i) shares
beneficially owned, directly or indirectly, by such person or any of his
"affiliates" (as defined in the GreenPoint Certificate), (ii) shares that such
person or any of his affiliates (A) has the right to acquire upon exercise of
conversion rights, exchange rights, warrants, options or otherwise or (B) has
sole or shared voting or investment power with respect thereto pursuant to any
agreement,
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arrangement, understanding, relationship or otherwise or (iii) shares
beneficially owned, directly or indirectly, by any other person with which
such first mentioned person or any of its affiliates acts as a partnership,
limited partnership, syndicate or other group pursuant to any agreement,
arrangement or undertaking for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of GreenPoint (provided that no
person shall be considered the beneficial owner of any shares solely because
such person holds a revocable proxy granted for a particular meeting of
stockholders pursuant to a public solicitation of proxies).
The governing documents of Headlands contain no similar restrictions.
Provisions Affecting Business Combinations. Section 203 of the DGCL provides
generally that any person who acquires 15% or more of a corporation's voting
stock (thereby becoming an "Interested Stockholder") may not engage in a wide
range of "business combinations" with the corporation for a period of three
years following the date the person became an interested stockholder, unless
(i) the board of directors of the corporation has approved, prior to that
acquisition date, either the business combination or the transaction that
resulted in the person becoming an interested stockholder, (ii) upon
consummation of the transaction that resulted in the person becoming an
interested stockholder, that person owns at least 85% of the corporation's
voting stock outstanding at the time the transaction commenced (excluding
shares owned by persons who are directors and also officers and shares owned
by employee stock plans in which participants do not have the right to
determine confidentially whether shares will be tendered in a tender or
exchange offer), or (iii) the business combination is approved by the board of
directors and authorized by the affirmative vote (at an annual or special
meeting and not by written consent) of at least 66 2/3% of the outstanding
voting stock not owned by the interested stockholder. These restrictions on
interested stockholders do not apply under certain circumstances, including,
but not limited to, the following (i) if the corporation's original
certificate of incorporation contains a provision expressly electing not to be
governed by Section 203 of the DGCL, or (ii) if the corporation, by action of
its stockholders, adopts an amendment to its by-laws or certificate of
incorporation expressly electing not to be governed by such section. Neither
the GreenPoint Certificate nor the GreenPoint Bylaws contain a provision
electing not to be governed by such section.
The GreenPoint Certificate provides that Business Combinations between
GreenPoint or any majority-owned subsidiary of GreenPoint and a "GreenPoint
Interested Stockholder" (as defined below) or any affiliate thereof require
the affirmative vote of the holders of at least 80% of the Voting Stock,
voting as a single class, unless such Business Combination (i) is approved by
a majority of GreenPoint's directors who are unaffiliated with the Interested
Stockholder and were members of the GreenPoint Board prior to the time the
Interested Stockholder became such (or were elected by a majority of such
directors) or (ii) meets certain price and procedure requirements that provide
for consideration per share of common stock and any other class of voting
stock generally equal to the greater of that paid by the Interested
Stockholder when it acquired its shares of such stock or the highest per share
closing price of the GreenPoint Common Stock on the NYSE during the 30-day
period immediately preceding the date in question. "Business Combination" is
defined to include: (i) any merger or consolidation of GreenPoint or any
subsidiary of GreenPoint with any GreenPoint Interested Stockholder or any
other corporation that is or, after such merger or consolidation, would be an
"Affiliate" (as defined in Rule 12b-2 of the Rules) of a GreenPoint Interested
Stockholder, (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any GreenPoint Interested Stockholder or
Affiliate thereof or any of the assets of GreenPoint or any subsidiary having
a Fair Market Value (as defined in the
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GreenPoint Certificate) of at least 25% of the combined assets of GreenPoint
and its Subsidiaries, (iii) the issue or transfer by GreenPoint or any
subsidiary of any securities of GreenPoint or any Subsidiary to any GreenPoint
Interested Stockholder or Affiliate thereof in exchange for cash, securities or
other property having a Fair Market Value of at least 25% of the combined Fair
Market Value of the common stock of GreenPoint and its Subsidiaries (other than
an issuance or transfer to an employee benefit plan of GreenPoint or any
Subsidiary), (iv) the adoption of any plan for the liquidation or dissolution
of GreenPoint proposed by or on behalf of a GreenPoint Interested Stockholder
or Affiliate thereof, or (v) any reclassification of securities or
recapitalization of GreenPoint, or any merger or consolidation of GreenPoint
with any of its Subsidiaries or any other transaction that has the effect of
increasing the proportionate share of the outstanding shares of any class of
equity or convertible securities of GreenPoint or any of its Subsidiaries owned
by any GreenPoint Interested Stockholder or Affiliate thereof. "GreenPoint
Interested Stockholder" is defined to include any person who beneficially owns,
directly or indirectly, more than 10% of the Voting Stock, is an Affiliate of
GreenPoint and at any time within the two-year period immediately prior to the
date in question was the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the then-outstanding Voting Stock, or is an
assignee of or otherwise succeeded to any such shares, if such assignment or
succession was by means of a transaction not involving a public offering within
the meaning of the Securities Act.
Mergers, Acquisitions and Certain Other Transactions. Except as disclosed
above in "--Provisions Affecting Business Combinations," the DGCL and
GreenPoint's governing documents require approval of mergers, consolidations
and dispositions of all or substantially all of a corporation's assets (other
than so-called "parent-subsidiary" mergers) by a majority of the voting power
of the corporation. The DGCL does not require stockholder approval for majority
share acquisitions or for combinations involving the issuance of less than 20%
of the voting power of the corporation, except for "business combinations"
subject to Section 203 of the DGCL.
Under the CGCL, a merger or consolidation by a California corporation
generally requires the affirmative vote of a majority of the outstanding shares
entitled to vote in each particular class of shares, voting separately by
class. For purposes of such voting requirement, classes of common stock
differing only as to voting rights are considered a single class of shares. See
"--Class Voting." Neither the Headlands Articles nor the Headlands Bylaws
provides for any greater vote.
Constituencies Provisions. Article Ninth of the GreenPoint Certificate
provides that the GreenPoint Board may, in connection with determining what is
in the best interest of GreenPoint and its stockholders when evaluating any
tender or exchange offer or other offer to engage in a business combination or
to otherwise acquire all or substantially all of the properties and assets of
GreenPoint, give due consideration to all relevant factors, including but not
limited to (i) the social and economic effect of accepting such offer on
GreenPoint's present and future customers and employees and those of its
subsidiaries, on the communities in which GreenPoint and its subsidiaries
operate or are located, (ii) on the ability of GreenPoint to fulfill its
corporate objective as a holding company under applicable laws and regulations,
and (iii) on the ability of GreenPoint's bank subsidiary to fulfill the
objectives of a stock form financial institution under applicable statutes and
regulations. Neither the Headlands Articles nor the Headlands Bylaws contain a
comparable provision.
Rights of Dissenting Stockholders. Under the DGCL, appraisal rights are
available to dissenting stockholders in connection with certain mergers or
consolidations. However, unless the certificate of incorporation otherwise
provides, the DGCL does not provide for appraisal rights (i) with respect to
shares of a corporation that are listed on a national
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securities exchange or designated as a national market systems security on an
interdealer quotations system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 stockholders (as long as
the stockholders receive in the merger shares of the surviving corporation or
of any other corporation the shares of which are listed on a national
securities exchange or designated as a national market systems security on an
interdealer quotations system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 stockholders) or (ii) if
the corporation is the surviving corporation and no vote of its stockholders
is required for the merger. The GreenPoint Certificate does not provide
otherwise. The DGCL does not provide appraisal rights to stockholders who
dissent from the sale of all or substantially all of a corporation's assets or
an amendment to the corporation's certificate of incorporation, although a
corporation's certificate of incorporation may so provide. The GreenPoint
Certificate does not so provide.
Under the CGCL, if approval of the outstanding shares of a corporation is
required for a merger, exchange or a sale of all or substantially all of a
corporation's assets, appraisal rights are available to dissenting
shareholders. However, subject to certain exceptions, the CGCL does not
provide for appraisal rights with respect to shares of certain corporations,
including those that are listed on a national securities exchange or
designated as a national market systems security on an interdealer quotations
system by the National Association of Securities Dealers, Inc. (as long as
such exchange or interdealer quotation system has been certified by rule or
order of the Commissioner of Corporations of the State of California). An
exception to the rule regarding shares listed on a national securities
exchange or designated as a national market systems security on an interdealer
quotations system exists if demands for appraisal are filed with respect to 5%
or more of the outstanding shares of that class, in which case, the holders of
such shares are entitled to appraisal rights. The Headlands Common Stock is
quoted on Nasdaq and Headlands Shareholders therefore have appraisal rights
only if 5% or more of the outstanding shares of Headlands Common Stock seek
appraisal rights. See "Additional Information--Dissenters' Appraisal Rights."
Under the DGCL, among other procedural requirements, a stockholder's written
demand for appraisal of shares must be received before the taking of the vote
on the matter giving rise to appraisal rights. Under the CGCL, a shareholder
of a corporation that is listed on a national securities exchange or
designated as a national market systems security on an interdealer quotations
system must deliver written demand for appraisal to the corporation not later
than the date of the shareholders' meeting being held to vote upon the
corporation action giving rise to appraisal rights.
Dividends. Both the DGCL and the CGCL permit dividends to be paid in cash,
property or shares of a corporation's capital stock. The DGCL provides that a
corporation may pay dividends out of any surplus, and, if it has no surplus,
out of any net profits for the fiscal year in which the dividend was declared
or for the preceding fiscal year (provided that such payment will not reduce
capital below the amount of capital represented by all classes of shares
having a preference upon the distribution of assets). The CGCL provides that a
corporation may pay dividends if the amount of the retained earnings of the
corporation immediately prior thereto equals or exceeds the amount of the
proposed distribution. The CGCL also provides that a corporation may pay
dividends if immediately after giving effect thereto, (i) the sum of the
assets of the corporation (exclusive of goodwill, capitalized research and
development expenses and deferred charges) would be at least equal to 1.25
times its liabilities (not including deferred taxes, deferred income and other
deferred credits) and (ii) the current assets of the corporation would be at
least equal to its current liabilities or, if the average of the earnings of
the corporation before taxes on income and before interest expense for the two
preceding fiscal years was less than the average of the interest
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expense of the corporation for those fiscal years, at least equal to 1.25 times
it current liabilities.
Preemptive Rights of Stockholders. The DGCL provides that no stockholder
shall have any preemptive rights to purchase additional securities of the
corporation unless the certificate of incorporation expressly grants such
rights. The GreenPoint Certificate does not provide for preemptive rights.
The CGCL provides that a corporation's articles of incorporation may grant to
shareholders preemptive rights to subscribe to any or all issues of shares or
securities. The Headlands Articles do not grant preemptive rights to
shareholders.
Director Liability and Indemnification. The DGCL allows a Delaware
corporation to include in its certificate of incorporation, and the GreenPoint
Certificate contains, a provision eliminating the liability of a director for
monetary damages for a breach of such director's fiduciary duties as a
director, except liability (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or that involve intentional misconduct or knowing violation of law, (iii)
under Section 174 of the DGCL (which deals generally with unlawful payments of
dividends, stock repurchases and redemptions), and (iv) for any transaction
from which the director derived an improper personal benefit.
The DGCL permits a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the relevant conduct was unlawful. The DGCL permits
a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reason of the fact that such person acted in
any of the capacities set forth above against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action if such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim or issue as to which such person is adjudged liable to the
corporation unless, and only to the extent that, the Court of Chancery or the
court in which such action was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the Court of Chancery of Delaware or such other court deems proper.
The DGCL provides that a corporation must indemnify a present or former
director or officer of a corporation who has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to above or
in defense of any claim, issue or matter therein against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
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The GreenPoint Certificate provides that each person who is made a party or
is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(a "Proceeding") by reason of the fact that he or she is or was a director or
officer of GreenPoint or is or was serving at GreenPoint's request as a
director, officer, employee or agent or another corporation or a partnership,
joint venture, trust or other enterprise (each, a "GreenPoint Indemnitee"),
shall be indemnified to the fullest extent authorized by the DGCL (as it
exists now or as it may be amended to provide broader indemnification rights),
against all expense, liability and loss (including attorneys' fees) reasonably
incurred or suffered by the GreenPoint Indemnitee in connection with his or
her activities as a director or officer of GreenPoint or service as a
director, officer, employee or agent of another entity at GreenPoint's
request. Except with respect to a proceeding to enforce such GreenPoint
Indemnitee's right to indemnification, the GreenPoint Certificate provides
that GreenPoint will indemnify the GreenPoint Indemnitee in connection with a
Proceeding initiated by the GreenPoint Indemnitee only if the Proceeding was
authorized by the GreenPoint Board.
The DGCL permits a corporation to pay expenses (including attorneys' fees)
incurred by an officer or director in defending any proceeding in advance of
the final disposition of such matter upon receipt of an undertaking by or on
behalf of such person to repay such amount if it is ultimately determined that
such person is not entitled to indemnity. The GreenPoint Certificate provides
that expenses incurred in defending a Proceeding shall be paid by GreenPoint
in advance of the final disposition thereof, and that if required by the DGCL,
such advancement of expenses incurred by a GreenPoint Indemnitee in his or her
capacity as a director or officer (and not in any other capacity) will be made
only upon delivery of an undertaking by or on behalf of the GreenPoint
Indemnitee to repay such amount unless it is ultimately determined that the
GreenPoint Indemnitee is entitled to indemnification. The GreenPoint
Certificate and the DGCL also provide that the indemnification provisions of
the GreenPoint Certificate and the statute are not exclusive of any other
right which a person seeking indemnification may have or later acquire under
any statute, provision of the GreenPoint Certificate and GreenPoint Bylaws,
agreement, vote of stockholders or disinterested directors, or otherwise. In
addition, the GreenPoint Certificate and the DGCL provide that the corporation
may maintain insurance, at its expense, to protect itself and any director,
officer, employee or agent of the corporation or of any subsidiary or
affiliate or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not GreenPoint
would have the power to indemnify such person against such expense, liability
or loss under the DGCL.
The CGCL allows a California corporation to include in its articles of
incorporation, and the Headlands Articles so include, a provision eliminating
the liability of a director for monetary damages in an action brought by or in
the right of the corporation for breach of a director's duties to the
corporation and its shareholders, except liability (i) for acts or omissions
that involve intentional misconduct or a knowing and culpable violation of
law, (ii) for acts or omissions that a director believes to be contrary to the
best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director, (iii) for any transaction
from which a director derived improper personal benefits, (iv) for acts or
omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (vi) under Section 310 of the CGCL (which deals generally with
contracts and other transactions between corporations and their directors or
other corporations in which one or more of their directors has a material
financial interest) and (vii) under Section 316 of the CGCL (which deals
generally with unlawful distributions and unlawful loans or guarantees to or
on behalf of directors and officers).
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The CGCL permits a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any proceeding (other than an action by
or in the right of the corporation to procure a judgment in its favor) by
reason of the fact that the person is or was a director, officer, employee or
other agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise, or
was a director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of the predecessor corporation (each, an "Agent") of the
corporation, against expenses, judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with the proceeding if that
person acted in good faith and in a manner the person reasonably believed to be
in the best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of the person was
unlawful. The CGCL permits a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending, or
completed action by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that the person is or was an Agent, against
expenses actually and reasonably incurred by that person in connection with the
defense or settlement of the action if the person acted in good faith, in a
manner the person believed to be in the best interests of the corporation and
its shareholders. The CGCL further provides, however, that in an action by or
in the right of the corporation, indemnity is not available for any of the
following: (i) in respect of any claim, issue or matter as to which the person
shall have been adjudged to be liable to the corporation in the performance of
that person's duty to the corporation and its shareholders, unless and only to
the extent that the court in which the proceeding is or was pending shall
determine that the person is fairly and reasonably entitled to indemnity for
expenses; (ii) of amounts paid in settling or otherwise disposing of a pending
action without court approval; and (iii) of expenses incurred in defending a
pending action which is settled or otherwise disposed of without court
approval.
The Headlands Articles authorize Headlands to indemnify any person who is or
was an Agent of Headlands through bylaw provisions, agreements and agents, vote
of shareholder or disinterested directors, or otherwise, to the fullest extent
permitted under California law. The Headlands Bylaws provide that Headlands
shall indemnify its directors, and that Headlands may indemnify its employees,
officers, and agents, in each case to the maximum extent permitted by the CGCL,
against expenses (including attorneys' fees), judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, arising by reason of the fact that he or she
is or was acting in such capacity for Headlands, for another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise at
the request of Headlands, or for a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
Under the CGCL, a person is entitled to expenses actually and reasonably
incurred by the Agent to the extent that such person was successful on the
merits. Indemnification with respect to amounts other than expenses may be made
only upon a determination that indemnification of the Agent is proper in the
circumstances because the Agent met the applicable standard of conduct set
forth in the CGCL, which determination is made by (i) a majority vote of a
quorum consisting of directors who are not parties to the proceeding, (ii)
independent legal counsel in a written opinion if such a quorum is not
obtainable, (ii) approval of the majority of the shares represented and voting
at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum), with
the shares owned by the person to be indemnified not voting, or (iv) the court
in which the proceeding is or was pending upon application.
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<PAGE>
The Headlands Bylaws provide that expenses incurred in defending a
Proceeding for which indemnification is required by the Headlands Bylaws, or
for which indemnification has been authorized by the Headlands Board, shall be
paid by Headlands in advance of the final disposition of such Proceeding upon
receipt of an undertaking by or on behalf of the Headlands Indemnitee to repay
such amount if it is ultimately determined that the Headlands Indemnitee is
not entitled to indemnification. The Headlands Bylaws and the CGCL also
provide that the indemnification provisions of the Headlands Articles and the
statute are not exclusive of any additional rights to indemnification for
breach of duty to the corporation and its shareholders while acting in the
capacity of a director or officer of the corporation to the extent the
additional rights to indemnification are authorized in a properly authorized
provision of the corporation's articles. In addition, the Headlands Articles
and the CGCL provide that the corporation may maintain insurance, at its
expense, to protect any director, officer, employee or agent of the
corporation against any liability asserted against or incurred by such person
in such capacity or arising out of that person's status as such, whether or
not the corporation would have the power to indemnify that person against such
liability.
Stockholder Rights Plans. Neither GreenPoint nor Headlands has implemented a
stockholder rights plan, but either corporation could do so without further
action of its stockholders.
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<PAGE>
ADDITIONAL INFORMATION
Dissenters' Appraisal Rights
Headlands Shareholders who do not vote in favor of the Merger and who follow
certain procedures, as described below, may have the right to dissent from the
Merger and to demand and obtain payment of the "fair market value" of their
shares in cash. The proceedings resulting from such a demand may result in a
determination of "fair market value" equal to, less than or greater than the
consideration to be received under the Merger Agreement.
The following is a summary of Chapter 13 of the CGCL, which specifies the
conditions under which Headlands Shareholders will have the right to dissent
from the Merger and the procedures that a Headlands Shareholder must follow to
dissent from the Merger and demand payment for his or her shares. The following
summary is not a complete statement of the law pertaining to dissenters' rights
under the CGCL. Any Headlands Shareholder contemplating the exercise of
dissenters' rights should carefully review the provisions of Chapter 13 of the
CGCL, the text of which is attached as Exhibit D to this Proxy
Statement/Prospectus, particularly the specific procedural steps required to
perfect such rights contained in Chapter 13 of the CGCL. Failure to comply with
the procedural requirements of Chapter 13 will result in a waiver of
dissenters' rights.
Under Chapter 13 of the CGCL, Headlands Shareholders will be entitled to
assert dissenters' rights only if written demands for payment in cash of the
fair market value under Chapter 13 (each a "Demand") are filed with respect to
5% or more of the outstanding shares of Headlands Common Stock (before giving
effect to the Merger).
In the event that (i) the Merger is approved by the Headlands Shareholders
and (ii) Demands are made with respect to 5% or more of the Headlands Common
Stock, a Headlands Shareholder who objects to the Merger will not receive
shares of GreenPoint Common Stock pursuant to the Merger Agreement, but instead
will be entitled to receive the "fair market value" of such Dissenting Shares
in cash, determined as of December 7, 1998, the last trading day before the
first announcement of the proposed Merger, excluding any appreciation or
depreciation in consequence of the Merger. For Headlands Shares to qualify as
Dissenting Shares, the holders of such shares (i) must have voted against the
approval of the Merger Agreement; (ii) must have made a Demand and (iii) must
have submitted stock certificates for endorsement (as described below).
If Demands are made with respect to 5% or more of the outstanding shares of
Headlands Common Stock and are perfected pursuant to Chapter 13 of the CGCL,
and the Merger Agreement is approved by the Headlands Shareholders, Headlands
will, within ten days after such approval, mail to any Shareholder, a notice
that the Merger was approved by the Headlands Shareholders (a "Notice of
Approval"), accompanied by a copy of Chapter 13 of the CGCL. The Notice of
Approval will set forth the price determined by Headlands to represent the
"fair market value" of any Dissenting Shares (which shall constitute an offer
by Headlands to purchase such Dissenting Shares at such stated price) and will
set forth a brief description of the procedures to be followed by such
shareholders who wish to exercise their dissenters' rights.
The Demand must be made by the dissenting Headlands Shareholder within 30
days after the date on which the Notice of Approval was mailed. Each Demand
must contain (i) a statement concerning the number and class of Headlands
Shares held of record by such dissenting Headlands Shareholder and (ii) the
shareholder's claim as to the fair market
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<PAGE>
value of the Dissenting Shares as of the close of business on December 7, 1998
(the statement of fair market value in such Demand by the dissenting Headlands
Shareholder constitutes an offer by the dissenting Headlands Shareholder to
sell the Dissenting Shares at such price). Such Demand must be addressed to
Headlands Mortgage Company, 1100 Larkspur Landing Circle, Larkspur, California
94939, Attention: Gilbert J. MacQuarrie. A dissenting Headlands Shareholder
may not withdraw a demand for payment unless Headlands consents to such
withdrawal.
Within 30 days after the Notice of Approval was mailed, the dissenting
Headlands Shareholder also must submit the certificates representing the
Dissenting Shares to Headlands at the above address. The certificates
representing the Dissenting Shares will be stamped or endorsed with a
statement that the shares are Dissenting Shares. If the price contained in the
Notice of Approval is acceptable to the dissenting Headlands Shareholder, such
shareholder may demand the same price. This action would constitute an
acceptance of the offer by Headlands to purchase the dissenting Headlands
Shareholder's stock at the price stated in the Notice of Approval.
If Headlands and a dissenting Headlands Shareholder agree upon the price to
be paid for the Dissenting Shares, upon surrender by the dissenting Headlands
Shareholders of the certificates representing the dissenting Headlands Shares,
such price (together with interest thereon at the legal rate on judgments from
the date of the agreement between Headlands and the dissenting Headlands
Shareholder) is required by law to be paid to the dissenting Headlands
Shareholder within 30 days after such agreement or within 30 days after any
statutory or contractual conditions to the Merger are satisfied, whichever is
later, subject to the surrender of the Headlands stock certificates therefor.
If Headlands and a dissenting Headlands Shareholder disagree as to the price
for such Dissenting Shares or disagree as to whether such Headlands Shares are
entitled to be classified as Dissenting Shares, such holder may, within six
months after the Notice of Approval is mailed, file a complaint in the
Superior Court of the proper county requesting the court to make such
determination or, alternatively, may intervene in any pending action brought
by another dissenting Headlands Shareholder. Costs of such an action
(including compensation of appraisers) are required to be assessed as the
court considers equitable but must be assessed against Headlands if the
appraised value determined by the court exceeds the price offered by
Headlands.
The court action to determine the fair market value of the Dissenting Shares
will be suspended if litigation is instituted to test the sufficiency or
regularity of the votes of the Headlands Shareholders in approving the Merger.
Furthermore, no Headlands Shareholder who is entitled to assert dissenters'
rights under Chapter 13 of the CGCL shall have any right to attack the
validity of the Merger, or to have the Merger set aside or rescinded, except
in an action to test whether the consents required to authorize or approve the
Merger have been legally and validly obtained in favor of the Merger.
Dissenting Shares may lose their status and the right to demand payment will
terminate, among other reasons, if (i) the Merger is abandoned; (ii) the
shares are transferred before being submitted for endorsement or are
surrendered for conversion into shares of another class; (iii) the dissenting
Headlands Shareholder and Headlands do not agree upon the status of the shares
as Dissenting Shares or upon the price of such shares and the dissenting
Headlands Shareholders fails to file suit against Headlands or intervene in a
pending action within six months following the date on which the Notice of
Approval was mailed to the shareholder; or (iv) the dissenting Headlands
Shareholder withdraws his or her demand for the purchase of the Dissenting
Shares with the consent of Headlands.
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<PAGE>
Shareholder Proposals
If the Merger is not consummated for any reason, then proposals of Headlands
Shareholders which are intended to be presented by such shareholders at the
next annual meeting of Headlands Shareholders must be received by Headlands no
later than April 12, 1999 in order to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
Other Matters
The Headlands Board knows of no other matters which are likely to be brought
before the Special Meeting. If any matters are brought before the Special
Meeting, Peter T. Paul, Becky S. Poisson, Gilbert J. MacQuarrie and Steven M.
Abreu, as the proxy agents named in the enclosed proxy, will vote on such
matters in accordance with their best judgment.
Where You Can Find More Information
GreenPoint and Headlands file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that both companies file at the
following locations in Washington D.C., New York, New York and Chicago,
Illinois:
Public Reference Room New York Regional Chicago Regional
450 Fifth Street, N.W. Office Office
Room 1024 7 World Trade Center Citicorp Center
Washington, D.C. 20549 Suite 1300 500 West Madison
New York, New York Street
10048 Suite 1400
Chicago, Illinois 60661-
2511
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the Internet web site maintained
by the SEC at "http://www.sec.gov." Reports, proxy statements and other
information should also be available for inspection at the offices of the NASD.
GreenPoint filed a Registration Statement on Form S-4 to register with the
SEC the GreenPoint Common Stock to be issued to Headlands Shareholders in the
Merger. This Proxy Statement/Prospectus is a part of that Registration
Statement and constitutes a prospectus of GreenPoint in addition to being a
proxy statement/ prospectus of Headlands for the Special Meeting. As allowed by
SEC rules, this Proxy Statement/Prospectus does not contain all the information
you can find in the Registration Statement or the exhibits to the Registration
Statement.
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<PAGE>
The SEC allows us to "incorporate by reference" information into this Proxy
Statement/Prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Proxy
Statement/Prospectus, except for any information superseded by information in
this Proxy Statement/ Prospectus. This Proxy Statement/Prospectus incorporates
by reference the documents set forth below that we have previously filed with
the SEC. These documents contain important information about our companies and
their finances.
<TABLE>
<CAPTION>
GreenPoint Period
---------- ------
<S> <C>
Annual Report on Form 10-K................. Fiscal Year ended December 31, 1997
Quarterly Report on Form 10-Q.............. Quarters ended March 31, June 30 and
September 30, 1998
Current Reports on Form 8-K................ Dated April 11, July 6, July 10,
September 30, December 11, 1998
The description of GreenPoint Common Stock
set forth in its registration statement on
Form 8-A, filed on September 27, 1993,
including any amendments or reports filed
for the purpose of updating such
description.
<CAPTION>
Headlands Period
--------- ------
<S> <C>
Annual Report on Form 10-K................. Fiscal Year ended December 31, 1997
Quarterly Report on Form 10-Q.............. Quarters ended March 31, June 30 and
September 30, 1998
Current Reports on Form 8-K................ Dated February 4, December 16, 1998
The description of Headlands Common Stock
set forth in the Registration Statement on
Form 8-A, filed on December 29, 1997,
including any amendments or reports filed
for the purpose of updating such
description.
</TABLE>
We are also incorporating by reference additional documents that we file with
the SEC between the date of this Proxy Statement/Prospectus and the date of the
Special Meeting.
GreenPoint has supplied all information contained or incorporated by
reference in this Proxy Statement/Prospectus relating to GreenPoint, and
Headlands has supplied all such information relating to Headlands.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the
SEC. Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this Proxy Statement/Prospectus. Stockholders may obtain documents
incorporated by reference in this Proxy Statement/Prospectus by requesting them
in writing or by telephone from the appropriate party at the following address:
GreenPoint Financial Corp. Headlands Mortgage Company
ATTN: Investor Relations ATTN: Investor Relations
90 Park Avenue 1100 Larkspur Landing Circle, Suite
New York, New York 10016 101
Tel: (212) 834-1710 Larkspur, CA 94939
Tel: (415) 461-6790
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<PAGE>
If you would like to request documents from us, please do so by March 15,
1999 to receive them before the Special Meeting.
You should rely only on the information contained or incorporated by
reference in this Proxy Statement/Prospectus to vote on the Merger. We have
not authorized anyone to provide you with information that is different from
what is contained in this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus is dated February 17, 1999. You should not assume that
the information contained in the Proxy Statement/Prospectus is accurate as of
any date other than such date, and neither the mailing of this Proxy
Statement/Prospectus to Headlands Shareholders nor the issuance of GreenPoint
Common Stock in the Merger shall create any implication to the contrary.
Legal Matters
The validity of the GreenPoint Common Stock to be issued to Headlands
Shareholders pursuant to the Merger will be passed upon by Wachtell, Lipton,
Rosen & Katz, special counsel to GreenPoint. It is a condition to the
consummation of the Merger that GreenPoint receive an opinion from Wachtell,
Lipton, Rosen & Katz, and that Headlands receive an opinion from Sullivan &
Cromwell, special counsel to Headlands, each to the effect that, among other
things, the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code. See "The Merger--Conditions to Consummation of the
Merger; Termination" and "The Merger--Federal Income Tax Consequences."
Experts
The financial statements of GreenPoint and its subsidiaries as of and for
the years ended December 31, 1997 and 1996 incorporated herein by reference to
GreenPoint's Annual Report on Form 10-K for the year ended December 31, 1997
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as an expert
in auditing and accounting.
The financial statements of GreenPoint for the year ended December 31, 1995
incorporated by reference to GreenPoint's 1997 Annual Report on Form 10-K and
incorporated by reference herein and in the Registration Statement have been
so incorporated in reliance upon the report of KPMG LLP, independent certified
public accountants, incorporated by reference herein and upon the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Headlands as of December 31, 1997
and 1996, and for each of the years in the three-year period ended December
31, 1997, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing. The report of KPMG LLP
covering the December 31, 1997, financial statements refers to the adoption of
the provisions of Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities" in 1997.
Cautionary Statement Concerning Forward-Looking Statements
We have made forward-looking statements in this document that are subject to
risks and uncertainties. These forward-looking statements include information
concerning possible or assumed future results of operations and business
plans, including estimates and projections relating to accretion to earnings
that may be realized from the acquisition, enhanced revenue growth, cost
savings, transaction charges, and other opportunities following the Merger set
forth under "Questions and Answers About the Merger and the Special Meeting,"
"The Merger--Recommendation of the Headlands Board and Reasons for the Merger"
and those preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. For those statements, we claim
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<PAGE>
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995 to the extent provided by
applicable law. Forward-looking statements involve inherent risks and
uncertainties. We caution you that a number of important factors could cause
actual results to differ materially from those contained in any forward-looking
statement. Such factors include, but are not limited to: risks and
uncertainties related to execution of the Merger, including integration
activities and the ability of GreenPoint to retain senior management from
Headlands; prevailing economic conditions; changes in interest rates, loan
demand, real estate values, and competition; the level of defaults and
prepayments on loans made by the combined company; changes in accounting
principles, policies, and guidelines; adverse changes or conditions in capital
or financial markets; changes in any applicable law, rule, regulation or
practice with respect to tax or legal issues; and other economic, competitive,
governmental, regulatory, and technological factors affecting the combined
company's operations, pricing, products and services. The forward-looking
statements are made as of the date of this Proxy Statement/Prospectus, and
neither GreenPoint nor Headlands assumes any obligation to update the forward-
looking statements or to update the reasons why actual results could differ
from those projected in the forwarding-looking statements.
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<PAGE>
FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Condensed Balance Sheet as of
September 30, 1998, combines the historical consolidated statement of financial
condition of GreenPoint and the historical consolidated balance sheet of
Headlands using "pooling of interests" accounting, after giving effect to
certain adjustments described in the attached Notes to Unaudited Pro Forma
Combined Condensed Financial Information. Under the "pooling of interests"
method of accounting, the recorded assets, liabilities, shareholders' equity,
income and expenses of GreenPoint and Headlands are combined and reflected at
their historical amounts. The Unaudited Pro Forma Combined Condensed Balance
Sheet information gives effect to the Merger as if it occurred on the date of
the information presented.
The Unaudited Pro Forma Combined Condensed Income Statements for the nine
months ended September 30, 1998 and 1997 and the years ended December 31, 1997,
1996 and 1995 present the combined results of operations of GreenPoint and
Headlands as if the Merger had been effective at the beginning of each period
presented therein, after giving effect to certain adjustments described in the
attached Notes to Unaudited Pro Forma Combined Condensed Financial Information.
While no assurances can be given, it is expected that the combined company
will achieve benefits from the Merger in the form of operating cost savings and
revenue enhancements. The pro forma earnings, which do not reflect any direct
costs, potential savings or revenue enhancements expected to result from the
Merger, are not indicative of the results of future operations. No assurances
can be given with respect to the ultimate level of expense savings or revenue
enhancements.
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<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
At September 30, 1998
----------------------------------------------
Pro forma
GreenPoint Headlands Adjustments Combined
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks........ $ 109,049 $ 6,443 $ 115,492
Investment portfolio........... 1,650,539 -- 1,650,539
Loans: --
Held for sale................ 767,579 862,693 1,630,272
Held for investment.......... 9,326,038 158 9,326,196
Allowance for loan losses.. (112,000) -- (112,000)
----------- -------- --------- -----------
Total loans, net......... 9,981,617 862,851 -- 10,844,468
Other interest earning assets.. 118,750 32,647 151,397
Servicing assets............... 113,382 19,769 133,151
Deferred income taxes, net..... 54,707 -- 54,707
Other real estate owned, net... 13,108 149 13,257
Goodwill....................... 1,024,061 -- 1,024,061
Other assets................... 547,398 39,880 587,278
----------- -------- --------- -----------
Total assets............. $13,612,611 $961,739 $ -- $14,574,350
=========== ======== ========= ===========
Liabilities & Stockholders'
Equity:
Liabilities:
Deposits....................... $10,851,536 $ -- $ -- $10,851,536
Notes payable.................. -- 298,093 298,093
Mortgagors' escrow............. 151,796 -- 151,796
Securities sold under
agreements to repurchase...... 100,000 493,502 593,502
Dividends payable.............. -- -- --
Senior bank notes.............. 199,859 -- 199,859
Long term debt................. 199,729 -- 199,729
Other liabilities.............. 317,390 47,353 364,743
----------- -------- --------- -----------
Total liabilities........ 11,820,310 838,948 -- 12,659,258
Stockholders' Equity:
Common Stock................... 1,103 92,152 (92,152) 1,103
Additional paid in capital..... 1,182,630 1,038 (315,020) 868,648
Retained earnings.............. 1,219,975 29,601 1,249,576
Unallocated ESOP............... (111,310) -- (111,310)
Unearned stock plans........... (4,752) -- (4,752)
Accumulated other comprehensive
income........................ 12,500 -- 12,500
Treasury stock................. (507,845) -- 407,172 (100,673)
----------- -------- --------- -----------
Total stockholders'
equity.................... 1,792,301 122,791 -- 1,915,092
----------- -------- --------- -----------
Total liabilities and
stockholders' equity.... $13,612,611 $961,739 $ -- $14,574,350
=========== ======== ========= ===========
</TABLE>
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<PAGE>
PRO FORMA CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
-----------------------------------------
Pro Forma
GreenPoint Headlands Adjustments Combined
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Net interest income................. $361,672 $18,378 $ -- $380,050
Less: provision for loan losses (9,896) (4,474) (14,370)
-------- ------- ------- --------
Net interest income after provision
for loan losses.................... 351,776 13,904 -- 365,680
-------- ------- ------- --------
Non-interest income:
Income from fees and commissions:
Mortgage loan operations fee
income........................... 13,259 -- 13,259
Mortgage servicing fees........... 3,717 9,844 13,561
Banking services fees and
commissions...................... 19,798 -- 19,798
Other fee income.................. 518 300 818
Net gain on securities............ 1,391 -- 1,391
Net gain on sale of loans......... 349 98,959 99,308
Net unrealized loss in valuation
of retained interests in
securitizations.................. -- (3,448) (3,448)
Gain from sale of mortgage
servicing rights................. -- 712 712
-------- ------- ------- --------
Total non-interest income....... 39,032 106,367 -- 145,399
-------- ------- ------- --------
Non-interest expense:
Salaries and benefits............. 68,063 38,966 107,029
ESOP and stock plans expense...... 17,091 -- 17,091
Premises and equipment expense.... 35,243 7,193 42,436
F.D.I.C. premiums................. 2,004 -- 2,004
Other administrative expenses..... 41,992 15,514 57,506
ORE operating income, net......... (5,045) -- (5,045)
Amortization and impairment of
originated servicing rights...... -- 12,505 12,505
Goodwill amortization............. 34,685 -- 34,685
Non-recurring personnel expense... 8,335 -- 8,335
-------- ------- ------- --------
Total non-interest expense...... 202,368 74,178 -- 276,546
-------- ------- ------- --------
Income before income taxes........ 188,440 46,093 234,533
Income taxes related to earnings.. 71,941 21,313 93,254
Income taxes related to S
corporation conversion........... -- 18,488 18,488
-------- ------- ------- --------
Net Income........................ $116,499 $ 6,292 $ -- $122,791
======== ======= ======= ========
Basic earnings per share.......... $ 1.59 $ 1.44
======== ========
Diluted earnings per share........ $ 1.53 $ 1.40
======== ========
Pro Forma Information
Income before income taxes........ $188,440 $46,093 $ -- $234,533
Provision for pro forma income
taxes............................ 71,941 37,847 109,788
-------- ------- ------- --------
Pro forma net income............ $116,499 $ 8,246 $ -- $124,745
======== ======= ======= ========
Basic pro forma earnings per
share............................ $ 1.59 $ 1.47
======== ========
Diluted pro forma earnings per
share............................ $ 1.53 $ 1.42
======== ========
</TABLE>
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<PAGE>
PRO FORMA CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
-----------------------------------------
Pro Forma
GreenPoint Headlands Adjustments Combined
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Net interest income................. $358,398 $ 8,826 $ -- $367,224
Less: provision for loan losses (14,837) (2,359) (17,196)
-------- ------- ------- --------
Net interest income after provision
for loan losses.................... 343,561 6,467 -- 350,028
-------- ------- ------- --------
Non-interest income:
Income from fees and commissions:
Mortgage loan operations fee
income........................... 11,464 -- 11,464
Mortgage servicing fees........... 5,235 7,196 12,431
Banking services fees and
commissions...................... 15,851 -- 15,851
Other fee income.................. 1,210 377 1,587
Net gain on securities............ 1,222 -- 1,222
Net (loss) gain on sale of loans.. (183) 50,855 50,672
Net unrealized gain in valuation
of retained interests in
securitizations.................. -- 668 668
Gain from sale of mortgage
servicing rights................. -- 9,375 9,375
Gain on sale of assets............ 2,416 -- 2,416
Gain on sale of branches.......... 5,850 -- 5,850
-------- ------- ------- --------
Total non-interest income....... 43,065 68,471 111,536
-------- ------- ------- --------
Non-interest expense:
Salaries and benefits............. 68,569 20,799 89,368
ESOP and stock plans expense...... 14,462 -- 14,462
Premises and equipment expense.... 35,941 3,941 39,882
F.D.I.C. premiums................. 2,192 -- 2,192
Other administrative expenses..... 46,271 8,320 54,591
ORE operating income, net......... (1,267) -- (1,267)
Amortization and impairment of
originated servicing rights...... -- 3,599 3,599
Goodwill amortization............. 34,873 -- 34,873
Restructuring charge.............. 2,500 -- 2,500
-------- ------- ------- --------
Total non-interest expense...... 203,541 36,659 240,200
-------- ------- ------- --------
Income before income taxes........ 183,085 38,279 221,364
Income taxes related to earnings.. 72,192 1,342 73,534
-------- ------- ------- --------
Net income........................ $110,893 $36,937 $ -- $147,830
======== ======= ======= ========
Basic earnings per share.......... $ 1.44 $ 1.73
======== ========
Diluted earnings per share........ $ 1.37 $ 1.65
======== ========
Pro Forma Information
Income before income taxes........ $183,085 $38,279 $ -- $221,364
Provision for pro forma income
taxes............................ 72,192 16,077 88,269
-------- ------- ------- --------
Pro forma net income............ $110,893 $22,202 $ $133,095
======== ======= ======= ========
Basic pro forma earnings per
share............................ $ 1.44 $ 1.56
======== ========
Diluted pro forma earnings per
share............................ $ 1.37 $ 1.49
======== ========
</TABLE>
77
<PAGE>
PRO FORMA CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-----------------------------------------
Pro Forma
GreenPoint Headlands Adjustments Combined
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Net interest income................. $474,975 $12,524 $ -- $487,499
Less: provision for loan losses..... (18,885) (3,588) (22,473)
-------- ------- -------- --------
Net interest income after provision
for loan losses.................... 456,090 8,936 -- 465,026
-------- ------- -------- --------
Non-interest income:
Income from fees and commissions.. 45,663 10,078 55,741
Other income...................... 564 295 859
Net gain on securities............ 2,051 -- 2,051
Net loss (gain) on sale of loans.. (261) 62,445 62,184
Net unrealized gain in valuation
of retained interests in
securitizations.................. -- 668 668
Gain from sale of mortgage
servicing rights................. -- 9,420 9,420
Gain on sale of assets............ 2,416 -- 2,416
Gain on sale of branches.......... 5,850 -- 5,850
-------- ------- -------- --------
Total non-interest income....... 56,283 82,906 -- 139,189
-------- ------- -------- --------
Non-interest expense:
Salaries and benefits............. 93,701 29,835 123,536
ESOP and stock plans expense...... 19,666 -- 19,666
Premises and equipment expense.... 47,333 5,542 52,875
F.D.I.C. premiums................. 2,839 -- 2,839
Other administrative expenses..... 59,601 12,030 71,631
ORE operating income, net......... (1,813) -- (1,813)
Amortization and impairment of
originated servicing rights...... -- 5,813 5,813
Goodwill amortization............. 46,459 -- 46,459
Restructuring charge.............. 2,500 -- 2,500
-------- ------- -------- --------
Total non-interest expense...... 270,286 53,220 -- 323,506
-------- ------- -------- --------
Income before income taxes........ 242,087 38,622 280,709
Income taxes related to earnings.. 94,439 1,354 95,793
-------- ------- -------- --------
Net income........................ $147,648 $37,268 $ -- $184,916
======== ======= ======== ========
Basic earnings per share.......... $ 1.96 $ 2.20
======== ========
Diluted earnings per share........ $ 1.86 $ 2.10
======== ========
Pro Forma Information
Income before income taxes........ $242,087 $38,622 $ $280,709
Provision for pro forma income
taxes............................ 94,439 16,221 110,660
-------- ------- -------- --------
Pro forma net income............ $147,648 $22,401 $ -- $170,049
======== ======= ======== ========
Basic pro forma earnings per
share............................ $ 1.96 $ 2.02
======== ========
Diluted pro forma earnings per
share............................ $ 1.86 $ 1.93
======== ========
</TABLE>
78
<PAGE>
PRO FORMA CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
-----------------------------------------
Pro Forma
GreenPoint Headlands Adjustments Combined
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Net interest income................. $446,487 $ 5,624 $ -- $452,111
Less: provision for loan losses..... (15,675) (3,641) (19,316)
-------- ------- -------- --------
Net interest income after provision
for loan losses.................... 430,812 1,983 -- 432,795
-------- ------- -------- --------
Non-interest income:
Income from fees and commissions.. 42,375 11,120 53,495
Other income...................... 1,903 246 2,149
Net gain on securities............ 887 -- 887
Net gain on sale of loans......... 2,897 31,183 34,080
Gain from sale of mortgage
servicing rights................. -- 11,084 11,084
Gain on sale of branches.......... 8,876 -- 8,876
-------- ------- -------- --------
Total non-interest income....... 56,938 53,633 -- 110,571
-------- ------- -------- --------
Non-interest expense:
Salaries and benefits............. 86,753 20,545 107,298
ESOP and stock plans expense...... 14,724 -- 14,724
Premises and equipment expense.... 46,639 5,208 51,847
F.D.I.C. premiums................. 5,183 -- 5,183
Other administrative expenses..... 65,811 9,470 75,281
ORE operating income, net......... (776) -- (776)
Amortization and impairment of
originated servicing rights...... -- 2,093 2,093
Goodwill amortization............. 46,511 -- 46,511
Restructuring recovery............ (1,600) -- (1,600)
-------- ------- -------- --------
Total non-interest expense...... 263,245 37,316 -- 300,561
-------- ------- -------- --------
Income before income taxes........ 224,505 18,300 242,805
Income taxes related to earnings.. 92,054 640 92,694
-------- ------- -------- --------
Net income........................ $132,451 $17,660 $ -- $150,111
======== ======= ======== ========
Basic earnings per share.......... $ 1.56 $ 1.60
======== ========
Diluted earnings per share........ $ 1.51 $ 1.56
======== ========
Pro Forma Information
Income before income taxes........ $224,505 $18,300 $ -- $242,805
Provision for pro forma income
taxes............................ 92,054 7,686 99,740
-------- ------- -------- --------
Pro forma net income............ $132,451 $10,614 $ -- $143,065
======== ======= ======== ========
Basic pro forma earnings per
share............................ $ 1.56 $ 1.52
======== ========
Diluted pro forma earnings per
share............................ $ 1.51 $ 1.48
======== ========
</TABLE>
79
<PAGE>
PRO FORMA CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
-----------------------------------------
Pro Forma
GreenPoint Headlands Adjustments Combined
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Net interest income................. $350,738 $ 1,814 $ -- $352,552
Less: provision for loan losses..... (9,494) (3,113) (12,607)
-------- ------- -------- --------
Net interest income after provision
for loan losses.................... 341,244 (1,299) -- 339,945
-------- ------- -------- --------
Non-interest income:
Income from fees and commissions.. 30,734 13,427 44,161
Other income...................... 3,854 201 4,055
Net (loss) on securities.......... (610) -- (610)
Net gain on sale of loans......... 1,809 15,938 17,747
Gain from sale of mortgage
servicing rights................. -- 8,836 8,836
-------- ------- -------- --------
Total non-interest income....... 35,787 38,402 -- 74,189
-------- ------- -------- --------
Non-interest expense:
Salaries and benefits............. 68,645 15,515 84,160
ESOP and stock plans expense...... 15,087 -- 15,087
Premises and equipment expense.... 23,575 5,918 29,493
F.D.I.C. premiums................. 9,162 -- 9,162
Other administrative expenses..... 43,692 7,489 51,181
ORE operating income, net......... (3,414) -- (3,414)
Amortization and impairment of
originated servicing rights...... -- 958 958
Goodwill amortization............. 13,837 -- 13,837
Restructuring charge.............. 8,000 -- 8,000
-------- ------- -------- --------
Total non-interest expense...... 178,584 29,880 -- 208,464
-------- ------- -------- --------
Income before income taxes........ 198,447 7,223 205,670
Income taxes related to earnings.. 90,978 252 91,230
-------- ------- -------- --------
Net income........................ $107,469 $ 6,971 $ -- $114,440
======== ======= ======== ========
Basic earnings per share.......... $ 1.16 $ 1.13
======== ========
Diluted earnings per share........ $ 1.14 $ 1.12
======== ========
Pro Forma Information
Income before income taxes........ $198,447 $ 7,223 $ -- $205,670
Provision for pro forma income
taxes............................ 90,978 3,034 94,012
-------- ------- -------- --------
Pro forma net income............ $107,469 $ 4,189 $ -- $111,658
======== ======= ======== ========
Basic pro forma earnings per
share............................ $ 1.16 $ 1.10
======== ========
Diluted pro forma earnings per
share............................ $ 1.14 $ 1.09
======== ========
</TABLE>
80
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(1) The unaudited pro forma financial information presented herein is not
necessarily indicative of the results of operations or the combined
financial position that would have resulted had the acquisitions been
consummated at the beginning of the applicable periods presented, nor is
it necessarily indicative of the results of operations in future periods
or the future financial position of the combined entities.
(2) The Headlands acquisitions will be accounted for on a pooling of interests
accounting basis, and accordingly the related pro forma adjustments herein
reflect, where applicable, an exchange ratio of 0.62 shares of GreenPoint
Financial Corp. Common Stock for each of the 19,743,134 shares of
Headlands common stock which were outstanding at September 30, 1998.
(3) As a result, information was adjusted for the acquisitions by (1) the
reissuance of 12,240,743 shares of Treasury Stock of GreenPoint Financial
Corp. amounting to $407,172; (ii) the elimination of 19,743,134 shares of
Headlands common stock; and (iii) recording the difference of $315,020 as
a decrease to additional paid in capital.
As of September 30, 1998, GreenPoint and Headlands had 9,155,776 and
1,197,325 shares of common stock reserved for issuance, primarily for stock
option plans, respectively, which are not included in the unaudited pro
forma financial information presented herein.
(4) In connection with the Merger, the companies expect to incur certain
restructuring charges and merger-related costs, including investment
banking, legal, accounting and other related transaction costs and fees.
In addition, the companies expect to incur other restructuring costs and
merger-related costs associated with the integration of the separate
companies and institution of efficiencies anticipated as a result of the
Merger. The amount of these costs cannot be estimated at this time and
therefore is not included in the unaudited pro forma financial
information.
(5) Basic earnings per share ("EPS") is calculated by dividing net income by
the weighted average number of common shares outstanding, with no
consideration of potential outstanding shares. Diluted EPS is calculated
using the same method as basic EPS, but reflects the potential dilution
that would occur if stock options or other contracts were exercised and
converted into common stock. Common stock equivalents are computed using
the treasury stock method. ESOP shares that have been allocated to
participants' accounts or are committed to be released for allocation are
considered outstanding for EPS calculations.
(6) Certain insignificant reclassifications have been included herein to
conform statement presentations.
(7) GreenPoint Financial Corp. expects to realize certain revenue enhancements
and costs savings from the Headlands acquisition. The pro forma financial
information, which does not reflect any revenue enhancements or potential
savings from the consolidation of operations of GreenPoint and Headlands,
is not indicative of future operations. No assurance can be given with
respect to the ultimate level of revenue enhancements or cost savings. As
indicated by the foregoing pro forma financial information and based
solely on the foregoing assumptions, the Merger would have diluted
GreenPoint's historical net income per diluted common share for the nine
months ended September 30, 1998, and the years ended December 31, 1996 and
1995 by 7%, 2% and 4%, respectively. See "Additional Information--
Cautionary Statement Concerning Forward Looking Information" on page 72.
81
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of this 8th day of December, 1998
(this "Plan"), by and among HEADLANDS MORTGAGE COMPANY, a California
corporation ("Headlands"), GREENPOINT FINANCIAL CORP., a Delaware corporation
("GreenPoint"), and GF ACQUISITION CORP., a Delaware corporation and wholly-
owned subsidiary of GreenPoint ("Merger Sub").
RECITALS
WHEREAS, the respective Boards of Directors of each of Headlands, GreenPoint,
and Merger Sub have determined that the merger of Merger Sub with and into
Headlands upon the terms and subject to the conditions set forth in this Plan
(the "Merger") is in the best interests of their respective companies and their
stockholders;
WHEREAS, as an inducement and condition to the willingness of GreenPoint and
Merger Sub to pursue the transactions contemplated by this Plan, immediately
prior to the execution hereof Headlands and GreenPoint entered into and
delivered a stock option agreement in the form attached hereto as Exhibit A
(the "Stock Option Agreement");
WHEREAS, as an inducement and condition to the willingness of GreenPoint and
Merger Sub to pursue the transactions contemplated by this Plan, immediately
prior to the execution hereof certain of Headlands' directors (and/or related
trusts) entered into and delivered support agreements in the form attached
hereto as Exhibit B (the "Support Agreements");
WHEREAS, immediately prior to the execution hereof, GreenPoint entered into
employment and restrictive covenant agreements (the "Employee Agreements") with
each of the following officers of Headlands providing, among other things, for
their employment by GreenPoint and/or Headlands, as the case may be, effective
upon consummation of the Merger: Peter T. Paul, Gilbert J. MacQuarrie, Becky S.
Poisson and Steven M. Abreu;
WHEREAS, it is the intention of the parties to this Plan that the business
combination contemplated hereby be treated as a "reorganization" under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and be
accounted for as a "pooling of interests" under generally accepted accounting
principles ("GAAP");
WHEREAS, it is the intention of the parties to this Plan that the stock of
the surviving corporation in the Merger be contributed by GreenPoint to
GreenPoint Bank, a New York State chartered savings bank and wholly-owned
subsidiary of GreenPoint ("GreenPoint Bank"); and
WHEREAS, Headlands, GreenPoint and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Plan;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants,
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
A-1
<PAGE>
ARTICLE I.
CERTAIN DEFINITIONS
1.1. Certain Definitions. The following terms are used in this Plan with the
meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving Headlands or
its Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of,
Headlands or its Subsidiaries, other than the transactions contemplated by
this Plan.
"Affiliate" or "affiliate" as applied to any Person, means any Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with the aforementioned Person,
whether such control is through stock ownership, contract or otherwise.
"Agency" has the meaning set forth in Section 4.1(n).
"CGCL" means the General Corporation Law of the State of California.
"Code" has the meaning set forth in the Recitals to this Plan.
"Compensation and Benefit Plans" has the meaning set forth in Section
5.3(l)(i).
"Consultants" has the meaning set forth in Section 5.3(l)(i).
"Contribution" has the meaning set forth in Section 2.2.
"DGCL" means the General Corporation Law of the State of Delaware.
"Directors" has the meaning set forth in Section 5.3(l)(i).
"Disclosure Schedule" has the meaning set forth in Section 5.1.
"DOL" means the Department of Labor.
"Effective Date" has the meaning set forth in Section 2.3.
"Effective Time" has the meaning set forth in Section 2.3.
"Employee Agreements" has the meaning set forth in the Recitals to this
Plan.
"Employees" has the meaning set forth in Section 5.3(l)(i).
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water
Act, the Federal Clean Air Act, and the Occupational Safety and Health Act,
each as amended, regulations promulgated thereunder, and state
counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.3(l)(iii).
"ERISA Affiliate Plan" has the meaning set forth in Section 5.3(l)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.4.
A-2
<PAGE>
"Exchange Ratio" has the meaning set forth in Section 3.1(b).
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System.
"FHA" has the meaning set forth in Section 4.1(n).
"FHLMC" has the meaning set forth in Section 4.1(n).
"FNMA" has the meaning set forth in Section 4.1(n).
"GAAP" has the meaning set forth in the Recitals to this Plan.
"GNMA" has the meaning set forth in Section 4.1(n).
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"GreenPoint" has the meaning set forth in the preamble to this Plan.
"GreenPoint Bank" has the meaning set forth in the Recitals to this Plan.
"GreenPoint Common Stock" means the common stock, par value $0.01 per
share, of GreenPoint.
"Headlands" has the meaning set forth in the preamble to this Plan.
"Headlands Affiliate" has the meaning set forth in Section 6.7(a).
"Headlands Board" means the Board of Directors of Headlands.
"Headlands Bylaws" means the Bylaws of Headlands.
"Headlands Certificate" means the Articles of Incorporation of Headlands.
"Headlands Common Stock" means the common stock, without par value, of
Headlands.
"Headlands Meeting" has the meaning set forth in Section 6.2.
"Headlands Preferred Stock" means the preferred stock, without par value,
of Headlands.
"Headlands Stock Option" has the meaning set forth in Section 3.6.
"Headlands Stock Plans" means the 1997 Executive and Non-Employee Director
Stock Option Plan and the 1998 Employee Stock Purchase Plan.
"HMSI" means Headlands Mortgage Securities, Inc. and any predecessor
thereto.
"HSR Act" means the Hart-Scott-Rodino Anti-trust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"HUD" has the meaning set forth in Section 4.1(n).
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Insurance Policies" has the meaning set forth in Section 5.3(s).
"Insurer" has the meaning set forth in Section 5.3(u)(iii).
"Investor" has the meaning set forth in Section 5.3(u)(iii).
"IRS" means the Internal Revenue Service.
"Liens" means any charge, mortgage, pledge, security interest, restriction,
claim, lien, or encumbrance.
A-3
<PAGE>
"Loan" has the meaning set forth in Section 5.3(u)(ii).
"Loan Servicing Agreement" has the meaning set forth in Section 5.3(u)(v).
"Material Adverse Effect" means, with respect to GreenPoint or Headlands,
any effect that (i) is, or is reasonably likely to be, material and adverse
to the financial position, results of operations or business of GreenPoint
and its Subsidiaries taken as a whole or Headlands and its Subsidiaries
taken as a whole, respectively, or (ii) would, or is reasonably likely to,
materially impair the ability of either GreenPoint or Headlands to perform
its obligations under this Plan or otherwise materially threaten or
materially impede the consummation of the Merger and the other transactions
contemplated by this Plan other than to the extent such effect results from
changes in (i) U.S. or global economic or industry conditions generally,
(ii) the U.S. or global financial markets generally, (iii) the general
levels of interest rates, (iv) any generally applicable law, rule or
regulation or interpretation thereof by any Governmental Authority or (v)
GAAP or regulatory accounting requirements of general applicability.
"Merger" has the meaning set forth in the Recitals to this Plan.
"Merger Consideration" has the meaning set forth in Section 2.1.
"Merger Sub" has the meaning set forth in the preamble to this Plan.
"Merger Sub Common Stock" means the common stock, par value $0.01 per
share, of Merger Sub.
"New Certificate" has the meaning set forth in Section 3.4(a).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning set forth in Section 3.4.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 5.3(l)(ii).
"Person" means any individual, bank, corporation, partnership, association,
joint-stock company, business trust or unincorporated organization.
"Plan" has the meaning set forth in the preamble to this Plan, as amended
or modified from time to time in accordance with Section 9.2.
"Pool" has the meaning set forth in Section 5.3(u)(xi).
"Previously Disclosed" by a party shall mean information set forth in the
correspondingly enumerated section of its Disclosure Schedule.
"Proxy Statement" has the meaning set forth in Section 6.3(a).
"Registration Statement" has the meaning set forth in Section 6.3(a).
"Regulatory Authority" has the meaning set forth in Section 5.3(g)(ii).
"Replacement Option" has the meaning set forth in Section 3.6.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any Person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value
of which is determined in whole or in part by reference to the market price
or value of, shares of capital stock of such Person.
"SEC" means the Securities and Exchange Commission.
A-4
<PAGE>
"SEC Documents" has the meaning set forth in Section 5.3(g)(i).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Securitization Instruments" has the meaning set forth in Section
5.3(u)(xii).
"Securitization Servicer" has the meaning set forth in Section 5.3(u)(xii).
"Securitization Transaction" has the meaning set forth in Section
5.3(u)(xii).
"Serviced Loans" has the meaning set forth in Section 5.3(u)(iii).
"SRO" has the meaning set forth in Section 5.3(g).
"Stock Option Agreement" has the meaning set forth in the Recitals to this
Plan.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule 1-02 of Regulation S-X of the SEC.
"Support Agreements" has the meaning set forth in the Recitals to this
Plan.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Takeover Laws" has the meaning set forth in Section 5.3(n).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
"Tax Agreement" has the meaning set forth in Section 5.3(p)(iii).
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.
"Warehouse Loans" has the meaning set forth in Section 5.3(u)(ii).
ARTICLE II.
THE MERGER
2.1. The Merger. At the Effective Time, Merger Sub shall merge with and into
Headlands in accordance with, and having the effects specified in, this Plan,
the CGCL and the DGCL. Headlands shall be the surviving corporation in the
Merger and shall become a wholly-owned subsidiary of GreenPoint and, after the
Contribution, shall become a wholly-owned subsidiary of GreenPoint Bank
(Headlands, as the surviving corporation in the Merger, sometimes referred to
as the "Surviving Corporation"). The separate corporate existence of Merger Sub
shall cease upon consummation of the Merger. GreenPoint may at any time prior
to the Effective Time change the method of effecting the combination with
Headlands (including, without limitation, the provisions of this Article II) if
and to the extent it deems such change to be necessary, appropriate or
desirable; provided, however, that no such change shall (i) alter or change the
amount or kind of consideration to be issued to
A-5
<PAGE>
holders of Headlands Common Stock or to holders of Headlands Stock Options as
provided for in this Plan (the "Merger Consideration"), (ii) adversely affect
the tax treatment of Headlands' stockholders as a result of receiving the
Merger Consideration or (iii) be reasonably likely to materially impede or
delay consummation of the transactions contemplated by this Plan.
(a) Effectiveness of the Merger. Subject to the satisfaction or waiver of
the conditions set forth in Article VII, the Merger shall become effective
upon the occurrence of the valid filing with the Secretary of State of the
State of California of an agreement of merger and an appropriate officer's
certificate in accordance with Section 1108 of the CGCL and the valid
filing with the Secretary of State of the State of Delaware of a
certificate of merger in accordance with Section 252 of the DGCL or such
later date and time as may be set forth in such documents.
(b) Articles of Incorporation and Bylaws. The articles of incorporation
and bylaws of the Surviving Corporation initially shall be those of
Headlands as in effect immediately prior to the Effective Time.
(c) Directors and Officers of the Surviving Corporation. The directors
and officers of the Surviving Corporation immediately after the Merger
initially shall be the directors and officers of Headlands immediately
prior to the Effective Time, until such time as their successors shall be
duly elected and qualified.
2.2. The Contribution. No sooner than following the Effective Time,
GreenPoint intends to contribute all of the issued and outstanding capital
stock of the Surviving Corporation to GreenPoint Bank and the Surviving
Corporation shall thereafter cease to be a direct Subsidiary of GreenPoint and
shall become a wholly-owned operating subsidiary of GreenPoint Bank (the
"Contribution").
2.3. Effective Date and Effective Time. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Merger (the "Effective Date") to occur on (i) the fifth
business day to occur after the last of the conditions set forth in Article
VII shall have been satisfied or waived in accordance with the terms of this
Plan (or, at the election of GreenPoint, on the last business day of the month
in which such day occurs or, if such last business day occurs on one of the
last five business days of such month, on the last business day of the
succeeding month; provided, however, that if GreenPoint elects to continue the
Effective Date until the last business day of either such month, the shares of
GreenPoint Common Stock to be issued to holders of Headlands Common Stock
shall include the right to receive dividends or other distributions declared
on GreenPoint Common Stock having a record date occurring after such fifth
business day) or (ii) such other date to which the parties may agree in
writing. The time on the Effective Date when the Merger shall become effective
is referred to as the "Effective Time."
ARTICLE III.
CONSIDERATION; EXCHANGE PROCEDURES
3.1. Merger Consideration. Subject to the provisions of this Plan, at the
Effective Time, automatically by virtue of the Merger and without any action
on the part of any Person:
(a) Outstanding Common Stock of Merger Sub. Each share of Merger Sub
Common Stock issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into one share of
Headlands Common Stock.
A-6
<PAGE>
(b) Outstanding Headlands Common Stock. Each share of Headlands Common
Stock issued and outstanding immediately prior to the Effective Time (other
than shares of Headlands Common Stock held directly or indirectly by
Headlands or GreenPoint or any of their respective Subsidiaries (except for
shares held by Headlands or GreenPoint or any of their respective
Subsidiaries in a fiduciary capacity for the benefit of third parties or in
respect of a debt previously contracted)) shall, by virtue of the Merger,
automatically and without any action on the part of the holder thereof,
become and be converted into the right to receive 0.620 (the "Exchange
Ratio") shares of GreenPoint Common Stock. The Exchange Ratio will be
subject to adjustment as set forth in Section 3.5.
(c) Outstanding GreenPoint Common Stock. Each share of GreenPoint Common
Stock issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and shall not be affected by the Merger.
3.2. Rights as Stockholders; Stock Transfers. At the Effective Time, holders
of Headlands Common Stock shall cease to be, and shall have no rights as,
stockholders of Headlands, other than the right to receive the Merger
Consideration. After the Effective Time, there shall be no transfers on the
stock transfer books of Headlands or the Surviving Corporation of shares of
Headlands Common Stock.
3.3. Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of GreenPoint Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, GreenPoint shall pay to each holder of Headlands Common Stock who
would otherwise be entitled to a fractional share of GreenPoint Common Stock
(after taking into account all Old Certificates delivered by such holder) an
amount in cash (without interest) determined by multiplying such fraction by
the average of the last sale prices of GreenPoint Common Stock, as reported by
the NYSE Composite Transactions Reporting System (as reported in The Wall
Street Journal or, if not reported therein, in another authoritative source),
for the five consecutive NYSE trading days immediately preceding the Effective
Date.
3.4. Exchange Procedures.
(a) As promptly as practicable after the Effective Date, but in no event
later than 5 Business Days thereafter, GreenPoint shall send or cause to be
sent to each former holder of record of shares of Headlands Common Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such stockholder's certificates formerly representing shares of
Headlands Common Stock (the "Old Certificates") for the Merger
Consideration. GreenPoint shall cause the certificates representing the
shares of GreenPoint Common Stock (the "New Certificates") and/or any check
in respect of any fractional share interests or dividends or distributions
which such stockholder shall be entitled to receive to be delivered to
ChaseMellon Shareholder Services L.L.C., as exchange agent (the "Exchange
Agent"), at the Effective Time, for delivery by the Exchange Agent to each
such stockholder upon delivery by such stockholder to the Exchange Agent of
Old Certificates representing such shares of Headlands Common Stock (or
indemnity reasonably satisfactory to GreenPoint and the Exchange Agent, if
any of such certificates are lost, stolen or destroyed) owned by such
stockholder. No interest will be paid on any such cash to be paid in lieu
of fractional share interests or in respect of dividends or distributions
which any such person shall be entitled to receive pursuant to this Article
III upon such delivery.
(b) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Headlands Common Stock
for any amount
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properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(c) At the election of GreenPoint, no dividends or other distributions
with respect to GreenPoint Common Stock with a record date occurring after
the Effective Time (or dividends or other distributions accruing pursuant
to Section 2.3) shall be paid to the holder of any unsurrendered Old
Certificate representing shares of Headlands Common Stock converted in the
Merger into the right to receive shares of such GreenPoint Common Stock
until the holder thereof shall be entitled to receive New Certificates in
exchange therefor in accordance with the procedures set forth in this
Section 3.4. After becoming so entitled in accordance with this Section
3.4, the record holder thereof also shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of GreenPoint Common
Stock such holder had the right to receive upon surrender of the Old
Certificate.
3.5. Anti-Dilution Provisions. In the event GreenPoint changes (or
establishes a record date for changing) the number of shares of GreenPoint
Common Stock issued and outstanding prior to the Effective Date as a result of
a stock split, stock dividend, recapitalization, reclassification or exchange
or readjustment of shares or similar transaction with respect to the
outstanding GreenPoint Common Stock and the record date therefor shall be
prior to the Effective Date, the Exchange Ratio shall be proportionately
adjusted.
3.6. Options. At the Effective Time, each outstanding option to purchase
shares of Headlands Common Stock under the Headlands Stock Plans (each, a
"Headlands Stock Option"), whether vested or unvested, shall be converted into
an option to acquire, on the same terms and conditions as were applicable
under such Headlands Stock Option, the number of shares of GreenPoint Common
Stock equal to (a) the number of shares of Headlands Common Stock subject to
the Headlands Stock Option, multiplied by (b) the Exchange Ratio (such product
rounded to the nearest whole number) (a "Replacement Option"), at an exercise
price per share (rounded to the nearest whole cent) equal to (y) the aggregate
exercise price for the shares of Headlands Common Stock which were purchasable
pursuant to such Headlands Stock Option divided by (z) the number of full
shares of GreenPoint Common Stock subject to such Replacement Option in
accordance with the foregoing. At or prior to the Effective Time, GreenPoint
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of GreenPoint Common Stock for delivery upon exercise of the
Headlands Stock Options assumed by it in accordance with this Section 3.6. As
soon as reasonably practicable after the Effective Time, GreenPoint shall file
a registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form (or shall
cause such Headlands Stock Options to be deemed to be an option issued
pursuant to a GreenPoint stock option or compensation plan for which a
sufficient number of shares of GreenPoint Common Stock have previously been
registered pursuant to an appropriate registration form) with respect to the
shares of GreenPoint Common Stock subject to such Headlands Stock Options, and
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement(s) (and maintain the current status of the
prospectus(es) contained therein) for so long as such Headlands Stock Options
remain outstanding. Notwithstanding the foregoing, each Headlands Stock Option
which is intended to be an "incentive stock option" (as defined in Section 422
of the Code) shall be adjusted in accordance with the requirements of Section
424 of the Code. At or prior to the Effective Time, Headlands shall take all
action, if any, necessary with respect to the Headlands Stock Plans to permit
the replacement of the outstanding Headlands Stock Options by GreenPoint
pursuant to this Section 3.6. At the
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Effective Time, GreenPoint shall assume the 1997 Executive and Non-Employee
Director Stock Option Plan; provided, that such assumption shall be only in
respect of the Replacement Options and that GreenPoint shall have no obligation
with respect to any awards under the Headlands Stock Plans other than the
Replacement Options and shall have no obligation to make any additional grants
or awards under such assumed Headlands Stock Plans.
(b) With respect to the 1998 Employee Stock Purchase Plan, no new purchase
periods will begin after December 31, 1998.
ARTICLE IV.
ACTIONS PENDING ACQUISITION
4.1. Forebearances of Headlands. From the date hereof until the Effective
Time, except as expressly contemplated by this Plan or as Previously Disclosed,
without the prior written consent of GreenPoint, Headlands will not, and will
cause its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Headlands and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any action
reasonably likely to have an adverse affect upon Headlands' ability to
perform any of its material obligations under this Plan.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed and
outstanding on the date hereof, (i) issue, sell or otherwise permit to
become outstanding (including pursuant to any Compensation and Benefit Plan
qualified under Section 401(k) of the Code to the extent such Compensation
and Benefit Plan offers Headlands Common Stock as an investment option), or
authorize the creation of, any additional shares of Headlands Common Stock
or any Rights, (ii) enter into any agreement with respect to the foregoing,
or (iii) permit any additional shares of Headlands Common Stock to become
subject to new grants of employee or director stock options, other Rights
or similar stock-based employee rights.
(c) Dividends, Etc. (a) Make, declare, pay or set aside for payment any
dividend (other than dividends from Headlands' Subsidiaries to Headlands)
on or in respect of, or declare or make any distribution on, any shares of
Headlands Common Stock or (b) directly or indirectly adjust, split,
combine, redeem, reclassify, purchase or otherwise acquire, any shares of
its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer, employee or consultant of
Headlands or its Subsidiaries, or grant any salary or wage increase or
increase any employee benefit (including incentive or bonus payments),
except (i) for normal individual increases in compensation to employees in
the ordinary course of business consistent with past practice or Previously
Disclosed bonus payments to be paid to employees in the ordinary course of
business consistent with past practice, (ii) for other changes that are
required by applicable law, or (iii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof.
(e) Benefit Plans. Enter into, establish, adopt, terminate or amend, any
bonus, incentive, deferred compensation, pension, retirement, profit-
sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option,
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severance, welfare and fringe benefit plans, group insurance or other
employee benefit, compensation, incentive or welfare benefit contract, plan
or arrangement, or any trust agreement (or similar arrangement) related
thereto, in respect of any current or former director, officer, employee or
consultant of Headlands or its Subsidiaries, or take any action to
accelerate the vesting or exercisability of stock options, restricted stock
or other compensation or benefits payable thereunder, except, in each case
as may be required by applicable law or to satisfy Previously Disclosed
contractual obligations existing as of the date hereof.
(f) Dispositions. Except as Previously Disclosed, (i) sell, transfer,
mortgage, lease, encumber or otherwise dispose of or discontinue any
material portion of its assets, business or properties, (ii) sell, assign
or otherwise transfer any rights to service loans, other than servicing
rights in respect of first mortgage loans held by Headlands or its
Subsidiaries (a) on a retail basis or (b) on a wholesale basis where such
wholesale loans are jumbo loans, adjustable rate mortgage loans, or other
wholesale mortgage loans registered with private investors, in each case
where such sales are in a manner consistent with past practice, or (iii)
except in the ordinary course of business and in a manner consistent with
past practice, sell, transfer, lease or encumber any loan.
(g) Acquisitions. Except as Previously Disclosed, (i) acquire (other than
by way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith,
in each case in the ordinary and usual course of business consistent with
past practice) all or any portion of, the assets, business, deposits or
properties of any other entity except in the ordinary course of business
and in a transaction that is not material to it and its Subsidiaries taken
as a whole, or (ii) acquire any servicing right in a "bulk" transaction.
(h) Governing Documents. Amend the Headlands Certificate, Headlands
Bylaws or the certificate of incorporation or by-laws (or similar governing
documents) of any of Headlands' Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(j) Tax Matters. Make any material Tax elections or compromise any
material Tax liability.
(k) Contracts. Amend or modify in any material respect, or, except in the
ordinary course of business consistent with past practice, enter into or
terminate, any material contract (as defined in Section 5.3(k)).
(l) Claims. Settle any claim, action or proceeding, except for any claim,
action or proceeding involving solely money damages in an amount,
individually or in the aggregate for all such settlements, that is not
material to Headlands and its Subsidiaries, taken as a whole.
(m) Adverse Actions. (i) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from
qualifying (A) for "pooling of interests" accounting treatment or (B) as a
reorganization within the meaning of Section 368(a) of the Code; or (ii)
knowingly take any action that is intended or is reasonably likely to
result in (A) any of its representations and warranties set forth in this
Plan being or becoming untrue in any material respect at any time at or
prior to the Effective Time, (B) a material breach of any of its covenants
herein, (C) any of the conditions to the Merger set forth in Article VII
not being satisfied, (D) any material
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impediment to or delay in consummation of the transactions contemplated
hereby, or (E) a material violation of any provision of this Plan except,
in each case, as may be required by applicable law or regulation.
(n) Risk Management. Except (x) as Previously Disclosed, (y) as required
by applicable law or regulation to comply with modifications of rules,
regulations or requirements imposed by means of the United States
Department of Housing and Urban Development ("HUD"), the Federal Housing
Administration ("FHA"), the VA, the Federal National Mortgage Association
("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), the
Government National Mortgage Association ("GNMA") or any state agency with
authority to regulate the business of Headlands, determine the investment
or servicing requirements with regard to loans originated, purchased or
serviced by Headlands, or otherwise participate in or promote mortgage
lending, as applicable (each of the above, an "Agency"), or (z) after prior
consultation with GreenPoint, for changes required by Headlands' or its
Subsidiaries's traditional conduits for the sale of non-conventional loans,
(i) implement or adopt any material change in its interest rate and other
risk management policies, procedures or practices; (ii) fail to follow its
existing policies or practices with respect to managing its exposure to
interest rate and other risk; (iii) fail to use commercially reasonable
means to avoid any material increase in its aggregate exposure to interest
rate risk or (iv) materially alter its methods or policies of underwriting,
pricing, originating, warehousing, selling and servicing, or buying or
selling rights to service loans.
(o) Indebtedness. Incur any indebtedness for borrowed money other than in
the ordinary course of business.
(p) Loans. Make, renegotiate, renew, increase, extend or purchase any
loan, lease (credit equivalent), advance, credit enhancement or other
extension of credit, or make any commitment or guarantee in respect of any
of the foregoing, except (i) in the ordinary course of business consistent
with past practice and (ii) loans or advances as to which Headlands has a
legally binding obligation to make such loan or advance as of the date
hereof and which has been disclosed by Headlands in writing to GreenPoint
prior to the execution of this Plan; provided, however, that Headlands may
take (or permit any subsidiary of Headlands to take) any such action if,
within five business days after Headlands requests in writing (which
request shall include information and analyses sufficient for GreenPoint to
assess the proposed action) that GreenPoint consent to the taking of such
action, GreenPoint has approved such request in writing or has not
responded in writing to such request.
(q) Commitments. Agree or commit to do any of the foregoing.
4.2. Forebearances of GreenPoint. From the date hereof until the Effective
Time, except as expressly contemplated by this Plan, without the prior written
consent of Headlands, GreenPoint will not:
(a) Extraordinary Dividends. Make, declare, pay or set aside for payment
any extraordinary dividend; provided, however, the foregoing shall not
apply to increases in the quarterly dividend rate payable on GreenPoint
Common Stock in the ordinary course of business consistent with past
practices.
(b) Adverse Actions. (a) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the Code; or (b)
knowingly take any action that is intended or is reasonably likely to
result in (i) any of its representations and warranties set forth in this
Plan
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being or becoming untrue in any material respect at any time at or prior to
the Effective Time, (ii) a material breach of any of its covenants herein,
(iii) any of the conditions to the Merger set forth in Article VII not
being satisfied, (iv) a material violation of any provision of this Plan or
(v) any material impediment to or delay in consummation of the transactions
contemplated hereby except, in each case, as may be required by applicable
law or regulation; provided, however, that nothing contained herein shall
limit the ability of GreenPoint to exercise its rights under the Stock
Option Agreement.
(c) Make any amendment to GreenPoint's certificate of incorporation that
changes any material term or provision of the GreenPoint Common Stock.
(d) Make any material changes to Merger Sub's certificate of
incorporation.
(e) Agree or commit to do any of the foregoing.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
5.1. Disclosure Schedules. On or prior to the date hereof, GreenPoint has
delivered to Headlands a schedule and Headlands has delivered to GreenPoint a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either (i)
in response to an express disclosure requirement contained in a provision
hereof or (ii) as an exception to one or more representations or warranties
contained in Section 5.3 or 5.4 or to one or more of its covenants contained
in Article IV or VI; provided, that (a) no such item is required to be set
forth in a Disclosure Schedule as an exception to a representation or warranty
if its absence would not be reasonably likely to result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 5.2, and (b) the mere inclusion of an item in a
Disclosure Schedule as an exception to a representation or warranty shall not
be deemed an admission by a party that such item represents a material
exception or fact, event or circumstance or that such item is reasonably
likely to result in a Material Adverse Effect.
5.2. Standard. No representation or warranty of Headlands or GreenPoint
contained in Section 5.3 or 5.4 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as
a consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or
warranty contained in Section 5.3 or 5.4 has had or is reasonably likely to
have a Material Adverse Effect on the party making such representation or
warranty (provided that such determination of Material Adverse Effect shall be
made without regard to any qualifications regarding materiality or knowledge
contained in any single representation or warranty).
5.3. Representations and Warranties of Headlands. Subject to Sections 5.1
and 5.2 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, Headlands hereby
represents and warrants to GreenPoint:
(a) Organization, Standing and Authority. Headlands is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California. Headlands is duly qualified to do business and is in
good standing in the states of the United States and any foreign
jurisdictions where its ownership or leasing of property or assets or the
conduct of its business requires it to be so qualified.
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(b) Headlands Stock. As of the date hereof, the authorized capital stock
of Headlands consists solely of (i) 50,000,000 shares of Headlands Common
Stock, of which no more than 19,746,634 shares were issued and outstanding
as of November 30, 1998 and (ii) 5,000,000 shares of Headlands Preferred
Stock, of which no shares are outstanding. As of the date hereof, no shares
of Headlands Common Stock and no shares of Headlands Preferred Stock are
held in treasury by Headlands or otherwise owned by Headlands or its
Subsidiaries. The outstanding shares of Headlands Common Stock have been
duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof, there are no
shares of Headlands Common Stock authorized and reserved for issuance,
Headlands does not have any Rights issued or outstanding with respect to
Headlands Common Stock, and Headlands does not have any commitment to
authorize, issue or sell any Headlands Common Stock or Rights, except
pursuant to this Plan and the Stock Option Agreement or Stock Purchase
Agreement. The number of shares of Headlands Common Stock which are
issuable and reserved for issuance upon exercise of Headlands Stock Options
as of the date hereof are Previously Disclosed.
(c) Subsidiaries.
(i) (A) Headlands only direct or indirect subsidiaries are HMSI and
the subsidiaries set forth on Schedule 5.3(c) of the Headlands
Disclosure Schedule, all of the issued and outstanding equity
securities of which are owned directly by Headlands, (B) no equity
securities of Headlands' Subsidiaries are or may become required to be
issued (other than to Headlands) by reason of any Right or otherwise,
(C) there are no contracts, commitments, understandings or arrangements
by which Headlands is or may be bound to sell or otherwise transfer any
equity securities of its Subsidiaries, (D) there are no contracts,
commitments, understandings, or arrangements relating to its rights to
vote or to dispose of such securities and (E) all the equity securities
of Headlands' Subsidiaries are fully paid and nonassessable and are
owned by Headlands free and clear of any Liens.
(ii) Headlands does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person, or any interest
in a partnership or joint venture of any kind, other than its
Subsidiaries.
(iii) Headlands' Subsidiaries have been duly organized and is validly
existing in good standing under the laws of the State of Delaware, and
are duly qualified to do business and in good standing in the
jurisdictions where their ownership or leasing of property or the
conduct of their business requires them to be so qualified.
(d) Corporate Power. Each of Headlands and HSMI has the corporate power
and authority to carry on its business as it is now being conducted and to
own all its properties and assets; and Headlands has the corporate power
and authority to execute, deliver and perform its obligations under this
Plan and the Stock Option Agreement, and to consummate the transactions
contemplated hereby and thereby.
(e) Corporate Authority. Subject in the case of this Plan to receipt of
the requisite approval of the agreement of merger set forth in this Plan by
the holders of a majority of the outstanding shares of Headlands Common
Stock entitled to vote thereon (which is the only shareholder vote required
thereon), this Plan, the Stock Option Agreement and the transactions
contemplated hereby and thereby have been authorized by all necessary
corporate action of Headlands. This Plan and the Stock Option Agreement are
valid and legally binding obligations of Headlands, enforceable in
accordance with their terms (except as enforceability may be limited by
applicable bankruptcy, insolvency,
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reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles). The Headlands Board has received the written opinion of
NationsBanc Montgomery Securities LLC to the effect that as of the date
hereof the consideration to be received by the holders of Headlands Common
Stock in the Merger is fair to the holders of Headlands Common Stock from a
financial point of view.
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or filings or registrations with, any
Governmental Authority or with any third party are required to be made
or obtained by Headlands or its Subsidiaries in connection with the
execution, delivery or performance by Headlands of this Plan or the
Stock Option Agreement or to consummate the Merger except for (A)
filings with the SEC and state securities authorities, (B) the approval
of this Plan by the stockholders of Headlands, (C) filing of notice
pursuant to the HSR Act and the expiration or termination of the
applicable waiting period thereunder, (D) filings of applications or
notices with Previously Disclosed mortgage banking licensing or
supervisory authorities, and (E) the filing of an agreement of merger
and an appropriate officer's certificate in accordance with Section 1108
of the CGCL. As of the date hereof, Headlands is not aware of any reason
why the approvals set forth in Section 7.1(b) will not be received
without the imposition of a condition, restriction or requirement of the
type described in Section 7.1(b).
(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Plan and the Stock Option Agreement and
the consummation of the transactions contemplated hereby and thereby do
not and will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture
or instrument of Headlands or of its Subsidiaries or to which Headlands
or its Subsidiaries or either of their properties is subject or bound,
(B) constitute a breach or violation of, or a default under, the
Headlands Certificate or the Headlands Bylaws, or (C) require any
consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, agreement, indenture or
instrument.
(g) Financial Reports and SEC Documents.
(i) Headlands' Annual Reports on Form 10-K for the fiscal year ended
December 31, 1997, and all other reports, registration statements,
definitive proxy statements or information statements filed or to be
filed by it or its Subsidiaries subsequent to December 31, 1996 under
the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, in the form filed or to be filed (collectively, "SEC
Documents") with the SEC, as of the date filed, (A) complied or will
comply as to form with the applicable requirements under the Securities
Act or the Exchange Act, as the case may be, and (B) did not and will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and each of the balance sheets contained in
or incorporated by reference into any such Headlands SEC Document
(including the related notes and schedules thereto) fairly presents, or
will fairly present, the
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financial position of Headlands and its Subsidiaries as of its date,
and each of the statements of income and changes in stockholders'
equity and cash flows or equivalent statements in such Headlands SEC
Documents (including any related notes and schedules thereto) fairly
presents, or will fairly present, the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of
Headlands and its Subsidiaries for the periods to which they relate, in
each case in accordance with GAAP consistently applied during the
periods involved, except in each case as may be noted therein, subject
to normal year-end audit adjustments in the case of unaudited
statements.
(ii) Headlands and its Subsidiaries have each timely filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to
file since January 1, 1996 with any federal or state Governmental
Authority charged with the supervision or regulation of financial
institutions or issuers of securities or the supervision or regulation
of Headlands or its Subsidiaries (collectively, the "Regulatory
Authorities") or any self-regulatory organization (an "SRO"), and all
other material reports and statements required to be filed by them
since such date, including, without limitation, any report or statement
required to be filed pursuant to the laws, rules or regulations of the
United States, any state regulatory authority or SRO and have paid all
fees and assessments due and payable in connection therewith; all such
reports and filings comply in all material respects with applicable
requirements and do not contain any untrue or misleading statement of
material fact or omit to make any statement of material fact required
to be stated or necessary to make the statements therein not
misleading.
(iii) Since December 31, 1997, Headlands and its Subsidiaries have
not incurred any liability other than in the ordinary course of
business consistent with past practice.
(iv) Since December 31, 1997, (A) Headlands and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses
related to this Plan and the transactions contemplated hereby) and (B)
no event has occurred or fact or circumstance arisen that, individually
or taken together with all other facts, circumstances and events
(described in any paragraph of Section 5.3 or otherwise), has had or is
reasonably likely to have a Material Adverse Effect with respect to
Headlands.
(v) Litigation. No litigation, claim or other proceeding before any
Governmental Authority is pending against Headlands or its Subsidiaries
and, to Headlands' knowledge, no such litigation, claim or other
proceeding has been threatened in each case, except for those that are
not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect with respect to Headlands or prevent or
materially delay or materially impair the ability of Headlands to
consummate the transactions contemplated by this Agreement or by the
Stock Option Agreement.
(h) Regulatory Matters.
(i) Neither Headlands nor any of its Subsidiaries nor their
respective properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or
a commitment letter or similar submission to, or extraordinary
supervisory letter from, any Regulatory Authority.
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(ii) Neither Headlands nor any of its Subsidiaries has been advised by
any Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing
or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar
submission.
(iii) Headlands has filed all reports required to be filed with HUD
pursuant to the Home Mortgage Disclosure Act, and the information
contained in such reports was true and correct in all material respects
when filed.
(i) Compliance with Laws. Each of Headlands and its Subsidiaries:
(i) in the conduct of its business, is in compliance in all material
respects with all applicable federal, state, local and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such businesses,
including, without limitation, the Truth in Lending Act and Regulation Z
promulgated thereunder, the Equal Credit Opportunity Act of 1974, as
amended, and the regulations promulgated thereunder, the Real Estate
Settlement Procedures Act, the Fair Debt Collection Practices Act and
all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to
own or lease their properties and to conduct their businesses in all
material respects as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and
effect and, to Headlands' knowledge, no suspension or cancellation of
any of them is threatened; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that
Headlands or its Subsidiaries (or any other subsidiary then-existing) is
not in compliance with any statute, regulation, or ordinance or (B)
threatening to revoke any license, franchise, permit, or governmental
authorization (nor, to Headlands' knowledge, do any grounds for any of
the foregoing exist).
(j) Material Contracts; Defaults. Except for those agreements and other
documents filed as exhibits to its SEC Documents, and except as
contemplated by this Plan, neither Headlands nor any of its Subsidiaries
are a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (i) that
is a "material contract" within the meaning of Item 601(b)(10) of the SEC's
Regulation S-K (without giving effect to the Aordinary course@ exception
set forth therein) or (ii) that materially restricts the conduct of
business by Headlands or its Subsidiaries. Neither Headlands nor any of its
Subsidiaries is in default under any material contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to
which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective
assets, business, or operations receives benefits, and there are no events
or conditions arising as a result of actions or omissions of Headlands or
its Subsidiaries which, with the passing of time or notice, or both, would
constitute a default or breach thereunder, and with respect to the
counterparty or counterparties to each such contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to the
knowledge of Headlands' or any of its Subsidiaries there exists or is
threatened thereunder no default, breach or other event or condition, which
with the passage of time or notice, or both, would
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constitute a default or breach thereunder. None of Headlands nor any of its
Subsidiaries is subject to, or bound by, any contract containing covenants
which (i) limit the ability of it to compete in any line of business or
with any person, or (ii) involve any restriction of geographical area in
which, or method by which, it may carry on its business (other than as may
be required by law or any applicable Regulatory Authority).
(k) No Brokers. No action has been taken by Headlands that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Plan, excluding a Previously Disclosed
fee to be paid to NationsBanc Montgomery Securities, LLC.
(l) Employee Benefit Plans.
(i) Section 5.3(l)(i) of Headlands' Disclosure Schedule contains a
complete and accurate list of all existing material bonus, incentive,
deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase,
restricted stock, stock option, severance, welfare and fringe benefit
plans, group insurance, employment, consulting or severance agreements
and all similar practices, policies and arrangements maintained or
contributed to by Headlands or its Subsidiaries in which any employee
or former employee (the "Employees"), consultant or former consultant
(the "Consultants") or director or former director (the "Directors") of
Headlands or its Subsidiaries participates or to which any such
Employees, Consultants or Directors are a party (the "Compensation and
Benefit Plans"). Neither Headlands nor any of its Subsidiaries has any
commitment to create any additional Compensation and Benefit Plan or to
amend, modify or change any existing Compensation and Benefit Plan.
Except as set forth in Section 5.3(e)(i) of Headlands' Disclosure
Schedule, Headlands or its Subsidiaries has reserved the right to
amend, modify, change or terminate any Compensation and Benefit Plan.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and
with ERISA and the Code, or any regulations or rules promulgated
thereunder. Each Compensation and Benefit Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter
(including a determination that the related trust under such
Compensation and Benefit Plan is exempt from tax under Section 501(a)
of the Code) from the IRS for "TRA" (as defined in Section 1 of Rev.
Proc. 93-39), or will file for such determination letter prior to the
expiration of the remedial amendment period for such Compensation and
Benefit Plan, and Headlands is 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 Headlands, threatened legal
action, suit or claim relating to any Compensation and Benefit Plan,
and to the knowledge of Headlands, no set of circumstances exists which
may reasonably give rise to a claim or lawsuit, against any
Compensation and Benefit Plan, any fiduciaries thereof with respect to
their duties to any Compensation and Benefit Plan or the assets of any
of the trusts under any Compensation and Benefit Plan which could
reasonably be expected to result in a material liability of Headlands
or its Subsidiaries to the PBGC, the Department of Treasury, the DOL,
any Compensation and Benefit Plan or any current or former participant
in any Compensation and Benefit Plan. Neither Headlands nor any of its
Subsidiaries has engaged in a transaction, or omitted to take any
action, with respect to any Compensation and Benefit Plan that would
reasonably be expected to subject Headlands or its Subsidiaries to a
tax or penalty imposed by either
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Section 4975 of the Code or Section 502 of ERISA, assuming for purposes
of Section 4975 of the Code that the taxable period of any such
transaction expired as of the date hereof.
(iii) No Compensation and Benefit Plan is subject to Title IV or
Section 302 of ERISA or Sections 412 or 4971 of the Code. No liability
under Title IV or Section 302 of ERISA or Sections 412 or 4971 of the
Code has been or is expected to be incurred by Headlands or its
Subsidiaries with respect to any frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or any single-employer plan of any
entity (an "ERISA Affiliate") which is considered one employer with
Headlands or its Subsidiaries under Section 4001(a)(14) of ERISA or
Section 414(b)(c)(m) or (o) of the Code (an "ERISA Affiliate Plan").
None of Headlands, any of its Subsidiaries or any ERISA Affiliate has
contributed, or has been obligated to contribute, to a Multiemployer
Plan within the meaning of Subtitle E of Title IV of ERISA or a plan
that has two or more contributing sponsors at least two of whom are not
under common control within the meaning of Section 4063 of ERISA, at any
time since September 26, 1980. To the knowledge of Headlands, there is
no pending investigation or enforcement action by the PBGC, the DOL or
IRS or any other governmental agency with respect to any Compensation
and Benefit Plan.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan have been timely made or have been
reflected on Headlands' financial statements to the extent required by
generally accepted accounting principles. None of Headlands, any of its
Subsidiaries or any ERISA Affiliate (x) has provided, or would
reasonably be expected to be required to provide, security to any
Pension Plan or to any ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code, and (y) has taken any action, or omitted to take
any action, that has resulted, or would reasonably be expected to
result, in the imposition of a lien under Section 412(n) of the Code or
pursuant to ERISA.
(v) Neither Headlands nor any of its Subsidiaries has any obligations
to provide retiree health and life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code. Except as set forth in Schedule
5.3(l)(i) of Headlands' Disclosure Schedule, there has been no
communication to Employees by Headlands or its Subsidiaries that would
reasonably be expected to promise or guarantee such Employee retiree
health or life insurance or other retiree death benefits on a permanent
basis.
(vi) Headlands and its Subsidiaries do not maintain any Compensation
and Benefit Plans covering current or former foreign employees of
either.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, Headlands has provided or made available to GreenPoint, true
and complete copies of its most recent (A) Compensation and Benefit Plan
documents and amendments thereto, (B) trust instruments and insurance
contracts and amendments thereto, (C) Annual Report (Form 5500 Series)
and accompanying schedules, if any, (D) summary plan description and any
material modifications thereto, if any (in each case, whether or not
required to be furnished under ERISA), and (E) actuarial report, if any.
(viii) The consummation of the transactions contemplated by this Plan
would not, directly or indirectly (including, without limitation, as a
result of any
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termination of employment prior to or following the Effective Time)
reasonably be expected to (A) entitle any Employee, Consultant or
Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in the
vesting or acceleration of any benefits under any Compensation and
Benefit Plan or (C) result in any material increase in benefits payable
under any Compensation and Benefit Plan.
(ix) Neither Headlands nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which
are not reasonably expected to be deductible as a result of the
limitations under Section 162(m) of the Code and the regulations issued
thereunder.
(x) As a result, directly or indirectly, of the transactions
contemplated by this Plan (including, without limitation, as a result
of any termination of employment prior to or following the Effective
Time), none of GreenPoint, Headlands or the Surviving Corporation, or
any of their respective Subsidiaries will be obligated to make a
payment that would be characterized as an "excess parachute payment" to
an individual who is a "disqualified individual" (as such terms are
defined in Section 280G of the Code), without regard to whether such
payment is reasonable compensation for personal services performed or
to be performed in the future.
(m) Labor Matters. Neither Headlands nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization,
nor is Headlands or its Subsidiaries the subject of a proceeding asserting
that Headlands or its Subsidiaries has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to
compel Headlands or its Subsidiaries to bargain with any labor organization
as to wages or conditions of employment, nor is there any strike or other
labor dispute involving Headlands or its Subsidiaries pending or, to
Headlands' knowledge, threatened, nor is Headlands aware of any activity
involving its or its Subsidiaries's employees seeking to certify a
collective bargaining unit or engaging in other organizational activity.
(n) Takeover Laws; Dissenters Rights. Headlands has taken all action
required to be taken by it in order to exempt this Plan, the Stock Option
Agreement and the transactions contemplated hereby and thereby from, and
this Plan, the Stock Option Agreement and the transactions contemplated
hereby and thereby are exempt from, the requirements of any "moratorium",
"control share", "fair price", "affiliate transaction", "business
combination" or other anti-takeover laws and regulations of any state
(collectively, "Takeover Laws"), including, without limitation, the State
of California. Holders of Headlands Common Stock do not have dissenters or
appraisal rights in connection with the execution of this Plan or the
consummation of any of the transactions contemplated hereby.
(o) Environmental Matters. Neither the conduct nor operation of Headlands
or its Subsidiaries (or any other subsidiary of Headlands existing prior to
the date hereof) nor any condition of any property presently or previously
owned, leased or operated by any of them (including, without limitation, in
a fiduciary or agency capacity), or on which any of them holds a Lien,
violates or violated Environmental Laws and no condition has existed or
event has occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely to result
in liability under Environmental Laws. Neither Headlands nor any of its
Subsidiaries (or any other subsidiary of Headlands existing prior to the
date hereof) has received any notice from any Governmental Authority, or to
its knowledge, any other person, that Headlands or
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<PAGE>
its Subsidiaries (or any other subsidiary of Headlands existing prior to
the date hereof) or the operation or condition of any property ever owned,
leased, operated, or held as collateral or in a fiduciary capacity by any
of them are or were in violation of or otherwise are alleged to have
liability under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such
property.
(p) Tax Matters.
(i) (A) All Tax Returns that are required to be filed (taking into
account any extensions of time within which to file) by or with respect
to Headlands and its Subsidiaries (and any other subsidiary of Headlands
existing prior to the date hereof) have been duly filed and such filed
Tax Returns are true, correct and complete in all material respects, (B)
all Taxes shown to be due on the Tax Returns referred to in clause (A)
have been paid in full, (C) the federal and state income Tax Returns
referred to in clause (A) have been examined by the IRS or the
appropriate state taxing authority or the period for assessment of the
Taxes in respect of which such Tax Returns were required to be filed has
expired, (D) all deficiencies asserted or assessments made as a result
of such examinations have been paid in full or are being contested in
good faith by appropriate proceedings and have been reserved against in
accordance with GAAP, (E) no issues that have been raised by the
relevant taxing authority in connection with the examination of any of
the Tax Returns referred to in clause (A) are currently pending, and (F)
no waivers of statutes of limitation have been given by or requested
with respect to any Taxes of Headlands or its Subsidiaries. Headlands
has made available to GreenPoint true and correct copies of the United
States federal income Tax Returns filed by Headlands and its
Subsidiaries for each of the three most recent fiscal years ended on or
before December 31, 1997. Neither Headlands nor any of its Subsidiaries
has any liability with respect to Taxes that accrued on or before the
end of the most recent period covered by Headlands' SEC Documents filed
prior to the date hereof in excess of the amounts accrued with respect
thereto that are reflected in the financial statements included in
Headlands' SEC Documents filed on or prior to the date hereof except for
the liability under the Tax Agreement. As of the date hereof, neither
Headlands nor any of its Subsidiaries (or any other subsidiary of
Headlands existing prior to the date hereof) has any reason to believe
that any conditions exist that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
(ii) No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transfer contemplated by this Plan.
(iii) Headlands is not a party to any tax sharing, allocation or
indemnification agreement, other than the Tax Indemnification Agreement
dated as of October 15, 1997 by and between the Company and Headlands'
shareholders prior to termination of S corporation status (the "Tax
Agreement"). No amounts are currently due and payable by Headlands under
the Tax Agreement and, to the best knowledge of Headlands, no
adjustments have been asserted or proposed by any taxing authority that
could reasonably be expected to result in an obligation of Headlands to
pay any amounts under the Tax Agreement.
(iv) Headlands (and any predecessor thereof) made a valid election to
be an S corporation for federal income tax purposes effective for the
first taxable year during its corporate existence and such election
remained in effect for each subsequent
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taxable year until January 31, 1998, and, where required to obtain
similar treatment for state and local tax purposes, Headlands (and any
predecessor thereof) made valid elections or took other action to
obtain such treatment. With the consent of the shareholders whose
consent is required by Section 1362(d)(1) of the Code and Treas. Reg.
(S) 1.1362-2(a), Headlands revoked its S corporation election in the
manner prescribed in Treas. Reg. (S) 1.1362-6 and such revocation was
effective on January 31, 1998. With the consent of the shareholders
whose consent is required by Section 1362(e)(3) of the Code and Treas.
Reg. (S) 1.1362-3(b)(1), Headlands elected in the manner prescribed by
Treas. Reg. (S) 1.1362-6 to allocate its income for the "S termination
year" (as defined in Section 1362(e)(4) of the Code) between the
"S short year" described in Section 1362(e)(1)(A) of the Code and the
"C short year" described in Section 1362(e)(1)(B) of the Code on the
basis of the Company's normal tax accounting method.
(v) Headlands has not agreed to and is not required to make any
adjustment under Section 481(a) of the Code by reason of a change in
method of accounting or otherwise.
(q) Risk Management Instruments. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for Headlands' own account,
or for the account of its Subsidiaries or their customers (all of such
material arrangements are listed on Section 5.3(q) of Headlands' Disclosure
Schedule), were entered into (i) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory
policies and (ii) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and legally
binding obligation of Headlands or any of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles), and are in full force
and effect. Neither Headlands nor any of its Subsidiaries, nor to
Headlands' knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
(r) Books and Records. The books and records of Headlands and its
Subsidiaries have been properly and accurately maintained, and there are no
material inaccuracies or discrepancies of any kind contained or reflected
therein, and they fairly present the financial position of Headlands and
its Subsidiaries.
(s) Insurance. Section 5.3(s) of Headlands' Disclosure Schedule sets
forth all of the insurance policies, binders, or bonds maintained by
Headlands or its Subsidiaries ("Insurance Policies"). Headlands and its
Subsidiaries are insured with reputable insurers against such risks and in
such amounts as the management of Headlands reasonably has determined to be
prudent in accordance with industry practices. All the Insurance Policies
are in full force and effect; Headlands and its Subsidiaries are not in
default thereunder; and all claims thereunder have been filed in due and
timely fashion.
(t) Accounting Treatment. As of the date hereof, Headlands is aware of no
reason why the Merger will fail, or could reasonably be expected to fail,
to qualify for "pooling of interests" accounting treatment.
(u) Mortgage Banking Business. (i) Licenses and Qualifications. Headlands
(the only Headlands entity that services or originates loans) (A) is an
approved (1) HUD mortgagee and servicer for FHA-insured loans, (2) lender
and servicer for VA-insured
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loans, (3) seller/servicer of one-to-four-family first and second mortgages
for FNMA and FHLMC, and (4) GNMA issuer and servicer of GNMA-guaranteed
mortgage-backed securities, (B) has all other certifications,
authorizations, licenses, permits and other approvals necessary to conduct
its current business, (C) is in good standing under all applicable federal,
state and local laws and regulations thereunder as a lender and servicer
and (D) is in good standing with all authorities and servicers for the
state bond programs in which it participates. As of the date hereof, there
is no pending or, to Headlands' knowledge, threatened cancellation or
reduction of any loan purchase commitment or other loan sale contract to
which Headlands is a party, and the obligations of Headlands under each
such contract are being performed by Headlands in accordance with its
terms. Headlands has no reason to believe that the underwriting waivers
from FNMA and FHLMC, under current agreements with Headlands, will be
restricted or rescinded, or that the guarantee fees payable to FNMA and
FHLMC will be increased as a result of Headlands' credit performance, or
that Headlands will suffer a forced reduction of the master commitment
amount relating to FNMA or FHLMC purchases or swaps of loans, nor has any
such restriction, rescission, increase or reduction occurred at any time
since January 1, 1997.
(ii) Title to Loans. All loans held for Headlands' account, whether or
not for future sale or delivery to an investor (the "Warehouse Loans"), are
owned by Headlands free and clear of any Lien, other than Liens in favor of
Headlands' lender banks pursuant to warehouse lines of credit and forward
sale commitments or similar agreements to sell any such loans to investors
in the ordinary course, and all Warehouse Loans meet all requirements for
sale to the intended investors. Each mortgage or deed of trust securing a
Warehouse Loan has been duly recorded or submitted for recordation in due
course in the appropriate filing office in the name of Headlands as
mortgagee. Headlands has not released any security for any Warehouse Loan,
except upon receipt of reasonable consideration for such release (as
documented in the applicable Loan file), or accepted prepayment of any such
Warehouse Loan which has not been promptly applied to such Warehouse Loan.
(iii) Compliance. Each Warehouse Loan and each loan which is being
serviced by Headlands for the account of others (the "Serviced Loans", and
together with the Warehouse Loans, the "Loans") was underwritten and
originated, and the loan documents and loan files maintained by Headlands
with respect thereto are being maintained by Headlands in compliance with
all applicable laws and regulations and, if applicable, the requirements of
the "Investor" (which term means (x) FHLMC, FNMA, GNMA, or any other
person, as the case may be, that owns any of the Loans or any portion of a
Pool of loans or holds beneficial title to the Loans or any portion of a
Pool of loans, but shall not mean the holder of mortgage-backed securities
or mortgage pass-through securities except to the extent that the consent
of such holder may be required in order for Headlands to continue to have
servicing rights with respect to the Loans related thereto and (y) any
person who owns servicing rights for loans serviced or master serviced by
Headlands pursuant to a Loan Servicing Agreement) acquiring such Loan (or,
if there is no such Investor, in accordance with Headlands' underwriting
standards then in effect) and the requirements of each person who insures
or guarantees all or any portion of the risk of loss upon borrower default
on any of the Loans, including, without limitation, the FHA, the VA and any
private mortgage insurer, and providers of life, hazard, flood, disability,
title or other insurance with respect to any of the Loans or the collateral
therefor (each, an "Insurer"), if any, in effect and applicable at the time
such insurance was obtained. Headlands has not done or failed to do, or
caused to be done or omitted to be done, any act, the effect of which would
operate to invalidate or materially
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impair (i) any approvals of any Agency or the FHA to insure, (ii) any VA
guarantee or commitment of the VA to guarantee, (iii) any private mortgage
insurance or commitment of any private mortgage insurer to insure, (iv) any
title insurance policy, (v) any hazard insurance policy, (vi) any flood
insurance policy, (vii) any fidelity bond, direct surety bond, errors and
omissions or other insurance policy required by any Agency, Investor or
Insurer, (viii) any surety or guaranty agreement, (ix) any guaranty issued
by GNMA, FNMA or FHLMC to Headlands respecting mortgage backed securities
issued by Headlands and other like guarantees or (x) the rights of
Headlands under any Loan Servicing Agreement or loan purchase commitment.
No Agency, Investor or Insurer has (i) notified Headlands, or to the
knowledge of Headlands claimed, that Headlands has violated or has not
complied on a recurring basis with the applicable underwriting standards
with respect to Loans sold by Headlands to an Investor or (ii) imposed
restrictions on the activities (including commitment authority) of
Headlands.
(iv) Loan Files. The loan documents relating to a Loan maintained in the
loan files of Headlands were in compliance with all applicable laws and
regulations at the time of the origination, assumption or modification of
such Loan, as the case may be. The loan files maintained by Headlands
contain originals (or, where necessitated by the terms of the applicable
mortgage servicing agreements, contain true, correct and complete copies)
of the documents relating to each Loan and the information contained in
such loan files with respect to each such Loan is true, complete and
accurate and in compliance with all applicable laws and regulations. Except
as set forth in the loan documents relating to a Loan maintained in the
loan files of Headlands, the terms of the note, bond, deed of trust and
mortgage for each such Loan have not been impaired, waived, altered or
modified in any respect from the date of their origination except by a
written instrument which written instrument has been recorded, or submitted
for recordation in due course, if recordation is necessary to protect the
interests of the owner thereof. The substance of any such waiver,
alteration or modification has been communicated to and approved by (A) the
relevant Investor and Insurer (if any), to the extent required by the
relevant Investor and Insurer requirements, and (B) the title Insurer, to
the extent required by the relevant policies, and the terms of any such
waiver, alteration or modification are reflected in the loan documents.
Except as set forth in the loan documents maintained in the loan files by
Headlands, no mortgagor has been released from such mortgagor's obligations
with respect to the applicable Loan.
(v) Loan Servicing Agreements. All of the contracts pursuant to which
Headlands has the right and/or obligation to service loans (each, a "Loan
Servicing Agreement") are (A) valid and binding obligations of Headlands,
and to the knowledge of Headlands, of all the other parties thereto, (B) in
full force and effect, (C) enforceable in accordance with their terms
(except where enforcement thereof may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights
generally and by general equity principles) and (D) owned by Headlands free
and clear of any Lien, except pursuant to the loan and security agreements
Previously Disclosed. There is no default by Headlands or claim of default
against Headlands by any party under any such Loan Servicing Agreement,
and, except for the consummation of the transactions contemplated by this
Plan, no event has occurred which with the passage of time or the giving of
notice or both would constitute a default by any party under any such Loan
Servicing Agreement or would result in any such mortgage servicing
agreement being terminable by any party thereto. There is no pending or, to
the knowledge of Headlands, threatened cancellation of any Loan Servicing
Agreement and the obligations of Headlands under each Loan Servicing
Agreement are being performed by Headlands in accordance with the terms of
such Agreement and applicable rules or regulations. Headlands is not a
subservicer with respect to any of the Serviced Loans.
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(vi) No Recourse. None of Headlands' servicing rights is subject to
recourse against the servicer, and Headlands is not subject to recourse in
connection with any Loans sold by it, in each case for losses on
liquidation of a loan, borrower defaults or repurchase obligations upon the
occurrence of non-payment or other events, other than events entitling
Investors to request a repurchase of a loan because of alleged breaches of
customary representations and warranties relating to the origination or
servicing thereof.
(vii) Escrow Account. Unless otherwise prohibited by law or an executed
escrow waiver, Headlands collects all escrows related to the Loans, and all
escrow accounts have been maintained by Headlands and, to Headlands'
knowledge, all prior servicers in accordance with the related loan
documents, all applicable laws, rules, regulations, and requirements of
Investors, Insurers and governmental authorities, and in accordance with
the applicable Loan Servicing Agreements. Headlands has credited to the
account of borrowers all interest required to be paid on any escrow account
in accordance with applicable law and the terms of such agreements and loan
documents. All escrow, custodial, and suspense accounts related to the
Loans are held in Headlands' name or the investor's name by Headlands.
(viii) Advances. There are no servicing or other contracts to which
Headlands is a party which obligates it to make servicing advances for
principal and interest payments with respect to defaulted or delinquent
Loans other than in a manner as provided in standard and customary
agreements with FNMA, FHLMC or GNMA. To the extent made, any such advances
are valid and subsisting amounts owing to Headlands, subject to the terms
of the applicable Loan Servicing Agreement.
(ix) Single Family Loans. All of the Loans are secured by single family
(i.e., one to four family) residential real property or, to the extent that
a Loan is secured by property other than a single family residential
property, such Loan is not a Warehouse Loan and has not been sold to any
person where Headlands has any recourse obligation.
(x) ARM Adjustments. With respect to each Loan for which the interest
rate is not fixed for the entire term of the loan, Headlands has, since the
date it commenced servicing such loan and, to Headlands' knowledge, all
prior servicers have (A) properly and accurately entered into its system
all data required to service the loan in accordance with the related loan
documents and all regulations, (B) properly and accurately adjusted the
monthly payment on each payment adjustment date, (C) properly and
accurately calculated the amortization of principal and interest on each
payment adjustment date, in each case in compliance with all applicable
laws, rules and regulations and the related loan documents, and (D)
executed and delivered any and all necessary notices required under, and in
a form that complies with, all applicable laws, rules and regulations and
the terms of the related loan documents regarding the interest rate and
payment adjustments.
(xi) Pools. Each Loan included in a pool of Loans originated, acquired or
serviced by Headlands (a "Pool") meets all eligibility requirements
(including, without limitation, all applicable requirements for obtaining
mortgage insurance certificates and loan guaranty certificates) for
inclusion in such Pool. All of such Pools have been finally certified or,
if required, recertified in accordance with all applicable laws, rules and
regulations, except where the time for certification or recertification has
not expired. To the knowledge of Headlands, no Pools have been improperly
certified. The loan file for each Loan included in a certified Pool
contains all documents and instruments necessary for the final
certification or recertification of such Pool. No Loan has been bought out
of a Pool without all required prior written approvals of the applicable
Investors. Neither
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the execution, delivery or performance of this Plan by Headlands nor the
consummation by Headlands of the transactions contemplated hereby will
require any Pool to be recertified. The aggregate unpaid principal balance
outstanding of the Loans in each Pool equals or exceeds the amount owing to
the applicable Investors.
(xii) Securitization Transactions.
(A) Headlands and its Subsidiaries, as servicer under the applicable
Loan Servicing Agreement (the "Securitization Servicer") of each
outstanding transaction under which Headlands or its Subsidiaries have
sold or pledged Loans in a securitization, whether sold under the
Securities Act or otherwise (a "Securitization Transaction"), has
complied in all material respects with all contracts, including the
Loan Servicing Agreements, and all conditions to be performed or
satisfied by them with respect to all agreements and arrangements
pursuant to which such person is bound under such Securitization
Transaction (collectively, "Securitization Instruments").
(B) No Securitization Servicer or, to Headlands' knowledge, no
trustee or issuer with respect to any Securitization, has taken any
action which would reasonably be expected to adversely affect the
characterization or tax treatment for federal, state or local income or
franchise tax purposes of the issuer or any securities issued in a
Securitization Transaction, and all required federal, state and local
tax and information returns relating to any Securitization Transaction
have been properly filed.
(C) Each representation and warranty made by Headlands or its
Subsidiaries in each "Purchase Agreement," "Pooling and Servicing
Agreement," "Placement Agency Agreement," "Servicer's Indemnification
Agreement" and any other Securitization Instrument to which any of them
was a party in any Securitization Transaction was true and correct in
all material respects whenever made or reaffirmed by any of them and
Headlands and its Subsidiaries have each fully performed and carried
out each covenant and agreement made by any of them in any such
Securitization Instrument.
(D) No rating agency has downgraded, or given Headlands or its
Subsidiaries any indication that it is considering a downgrading of any
securities issued in any Securitization Transaction, or of its rating
of any Securitization Servicer.
(xiii) Mortgage Insurance. Each Loan which is indicated in the related
loan documents to have FHA insurance is insured under the National Housing
Act or qualifies for such insurance. Each Loan which is indicated in the
related loan documents to be guaranteed by the VA is guaranteed under the
provisions of Chapter 37 of Title 38 of the United States Code to the
extent required by the applicable Investor or qualifies for such guarantee.
As to each FHA insurance certificate, each VA guarantee certificate, and
each Loan which is indicated in the related loan file to be insured by
private mortgage insurance, Headlands has complied with applicable
provisions of the insurance or guarantee contract and applicable laws and
regulations, the insurance or guarantee is in full force and effect with
respect to each such Loan, and to the knowledge of Headlands, there does
not exist any event or condition which, but for the passage of time or the
giving of notice or both, can result in a revocation of any such insurance
or guarantee or constitute adequate grounds for the applicable Insurer to
refuse to provide insurance or guarantee payments thereunder.
(xiv) Taxes and Insurance. Each Loan has been covered by a policy of
hazard insurance and flood insurance, to the extent required by the Loan
Servicing Agreements
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relating thereto or any laws, rules, regulations or Investor or Insurer
requirements applicable to such Loan, all in a form usual and customary in
the industry and each of which is in full force and effect and all amounts
due and payable under each policy have been paid prior to the date such
payments were due; and all taxes, assessments, ground rents or other
applicable charges or fees due and payable as to each Loan have been paid
prior to the date such payments was due. Any and all claims under such
insurance policies have been submitted and processed in accordance with the
applicable Investor's and Insurer's requirements. Such insurance policies
name Headlands and its successors and assigns as mortgagee.
(xv) Title Insurance. To the extent required by the applicable Investor,
each Loan is covered by an ALTA lender's title insurance policy or other
generally acceptable form of policy of insurance or opinion of title
acceptable to the relevant Investor, and each such title insurance policy
is issued by an Insurer acceptable to the applicable Investor and qualified
to do business in the jurisdiction where the collateral securing such Loan
is located, and insures the originator and its successors and assigns as to
the first priority lien of the mortgage in the original principal amount of
the Loan (or, in the case of a second mortgage, the second priority lien).
The applicable Investor, as assignee of the originator's rights, is an
insured of such lender's title insurance policy, and such lender's policy
is in full force and effect. Headlands has not, nor, to Headlands'
knowledge, has any prior servicer, performed any act or omission which
would impair the coverage of such lender's policy.
(xvi) Condemnation. Neither Headlands nor any of its Subsidiaries has
received notice of or has knowledge of any proceeding pending or threatened
for the partial or total condemnation of any of the collateral securing any
of the Loans, and neither Headlands nor any of its Subsidiaries has
received notice or has knowledge that all or any part of such collateral
has been or will be condemned.
(xvii) Tape. Headlands has previously delivered to GreenPoint a tape
(magnetic media) on which certain information regarding the servicing
portfolio of Headlands as of September 30, 1998 is recorded. Such tape
accurately contains the list of serviced loans as of such date. The loan
characteristics recorded on such tape have been Previously Disclosed, and
the information contained on such tape is accurate.
(v) Disclosure. The representations and warranties contained in this
Section 5.3 do not contain any untrue statement of a material fact.
(w) Material Adverse Change. Since December 31, 1997, no event has
occurred or circumstances arisen that, individually or taken together with
all other events and circumstances, has had or is reasonably likely to have
a Material Adverse Effect on Headlands.
(x) Year 2000 Compliance. Headlands has adopted and implemented a
commercially reasonable plan (a complete and correct copy of which has been
provided to GreenPoint) to provide (x) that the change of the year from
1999 to the year 2000 will not materially and adversely affect the
information and business systems of Headlands or its Subsidiaries and (y)
that the impacts of such change on the vendors and customers of Headlands
and its Subsidiaries will not have a Material Adverse Effect on Headlands
or its Subsidiaries. In Headlands' reasonable best estimate, no
expenditures materially in excess of currently budgeted items will be
required in order to cause the information and business systems of
Headlands and its Subsidiaries to operate properly following the change of
the year 1999 to the year 2000. Headlands reasonably expects that it will
resolve any issues related to such change of the year in accordance with
the timetable
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set forth in such plan (and in any event on a timely basis in order to be
resolved before the year 2000). Between the date of this Agreement and the
Effective Time, Headlands shall continue to use commercially reasonable
efforts to implement such plans.
(y) Transactions With Related Parties. There have been no transactions
involving amounts in excess of $250,000 individually and $750,000 in the
aggregate during the two years prior to the Effective Date between
Headlands or its Subsidiaries, on the one hand, and any affiliate of
Headlands or its Subsidiaries or any director, officer or employee of
Headlands or its Subsidiaries or any affiliate of any such person, on the
other hand. All such transactions involving related parties have been
entered into on an arms-length basis and on commercially reasonable terms
and conditions.
5.4. Representations and Warranties of GreenPoint. Subject to Sections 5.1
and 5.2 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, GreenPoint hereby
represents and warrants to Headlands as follows:
(a) Organization, Standing and Authority. Each of GreenPoint and its
Significant Subsidiaries is duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization.
Each of GreenPoint and its Significant Subsidiaries is duly qualified to do
business and is in good standing in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or assets
or the conduct of its business requires it to be so qualified. Each of
GreenPoint and its Significant Subsidiaries has in effect all federal,
state, local, and foreign governmental authorizations necessary for it to
own or lease its properties and assets and to carry on its business as it
is now conducted.
(b) GreenPoint and Merger Sub Stock.
(i) As of the date hereof, the authorized capital stock of GreenPoint
consists solely of 220,000,000 shares of GreenPoint Common Stock, of
which no more than 94,650,000 shares are outstanding as of the date
hereof, and none of which are subject to any preemptive rights (and
were not issued in violation of any preemptive rights), 50,000,000
shares of preferred stock, par value $0.01 per share, of GreenPoint, of
which no shares were outstanding as of the date hereof. As of the date
hereof, the authorized capital stock of Merger Sub consists of 1,000
shares of Merger Sub Common Stock, all of which are validly issued and
outstanding, fully paid and nonassessable and are owned by GreenPoint
free and clear of any Lien and are not subject to any preemptive right
(and were not issued in violation of any preemptive rights) and 1,000
shares of preferred stock, par value $0.01, none of which are
outstanding as of the date hereof.
(ii) The shares of GreenPoint Common Stock to be issued in exchange
for shares of Headlands Common Stock in the Merger, when issued in
accordance with the terms of this Plan, will be duly authorized,
validly issued, fully paid and nonassessable and subject to no
preemptive rights (and will not be issued in violation of any
preemptive rights).
(c) Corporate Power. Each of GreenPoint and Merger Sub has the corporate
power and authority to execute, deliver and perform its obligations under
this Plan and the Stock Option Agreement, and to consummate the
transactions contemplated hereby and thereby.
(d) Corporate Authority. This Plan, the Stock Option Agreement and the
transactions contemplated hereby and thereby have been authorized by all
necessary
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corporate action of each of GreenPoint and Merger Sub. This Plan is a valid
and legally binding agreement of each of GreenPoint and Merger Sub
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to
or affecting creditors' rights or by general equity principles).
(e) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or filings or registrations with, any
court, administrative agency or commission or other Governmental
Authority or with any third party are required to be made or obtained by
GreenPoint or any of its Subsidiaries in connection with the execution,
delivery or performance by GreenPoint of this Plan, the Stock Option
Agreement, the Contribution or to consummate the Merger except for (A)
the filing of applications and notices, as applicable, with federal and
state banking authorities, receipt of approval thereof and expiration of
related waiting periods; (B) approval of the listing on the NYSE of
GreenPoint Common Stock to be issued in the Merger; (C) the filing and
declaration of effectiveness of the Registration Statement; (D) filings
with the Federal Trade Commission and the United States Department of
Justice pursuant to the HSR Act and the expiration or termination of the
applicable waiting period thereunder, and (E) the filing of the
agreement of merger and an appropriate officer's certificate in
accordance with Section 1108 of the CGCL and the filing of a certificate
of merger in accordance with Section 252 of the DGCL, (F) such filings
as are required to be made or approvals as are required to be obtained
under the securities or "Blue Sky" laws of various states in connection
with the issuance of GreenPoint Stock in the Merger; and (G) receipt of
the approvals set forth in Section 7.1(b). As of the date hereof,
GreenPoint is not aware of any reason why the approvals set forth in
Section 7.1(b) will not be received without the imposition of a
condition, restriction or requirement of the type described in Section
7.1(b).
(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Plan and the Stock Option Agreement and
the consummation of the transactions contemplated hereby and thereby do
not and will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture
or instrument of GreenPoint or of any of its Subsidiaries or to which
GreenPoint or any of its Subsidiaries or properties is subject or bound,
(B) constitute a breach or violation of, or a default under, the
articles of incorporation or bylaws (or similar governing documents) of
GreenPoint or any of its Subsidiaries, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(f) Litigation. Other than as set forth in its SEC Documents filed on or
before the date hereof, no litigation, claim or other proceeding before any
Governmental Authority is pending against GreenPoint or any of its
Subsidiaries and, to GreenPoint's knowledge, no such litigation, claim or
other proceeding has been threatened, in each case, except for those that
are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect with respect to GreenPoint or prevent or materially
delay or materially impair the ability of GreenPoint or Merger Sub to
consummate the transactions contemplated by this Agreement or by the Stock
Option Agreement.
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(g) Financial Reports and SEC Documents.
(i) GreenPoint's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, and all other reports, registration statements,
definitive proxy statements or information statements filed or to be
filed by it or any of its Significant Subsidiaries subsequent to
December 31, 1996 under the Securities Act, or under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, in the form filed or to be
filed (collectively, "SEC Documents") with the SEC, as of the date
filed, (A) complied or will comply as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case
may be, and (B) did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and each
of the balance sheets contained in or incorporated by reference into
any such GreenPoint SEC Document (including the related notes and
schedules thereto) fairly presents, or will fairly present, the
financial position of GreenPoint and its consolidated Subsidiaries as
of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such
GreenPoint SEC Documents (including any related notes and schedules
thereto) fairly presents, or will fairly present, the results of
operations, changes in stockholders' equity and changes in cash flows,
as the case may be, of GreenPoint and its consolidated Subsidiaries for
the periods to which they relate, in each case in accordance with GAAP
consistently applied during the periods involved, except in each case
as may be noted therein, subject to normal year-end audit adjustments
in the case of unaudited statements.
(ii) GreenPoint and its Significant Subsidiaries have each timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since January 1, 1996 with any Regulatory Authorities
or any SRO, and all other material reports and statements required to
be filed by them since such date, including, without limitation, any
report or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state regulatory authority or SRO
and have paid all fees and assessments due and payable in connection
therewith; all such reports and filings comply in all material respects
with applicable requirements and do not contain any untrue or
misleading statement of material fact or omit to make any statement of
material fact required to be stated or necessary to make the statements
therein not misleading.
(h) Regulatory Matters.
(i) Neither GreenPoint nor any of its Significant Subsidiaries nor
their respective properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or extraordinary
supervisory letter from, any Regulatory Authority.
(ii) Neither GreenPoint nor any of its Significant Subsidiaries has
been advised by any Regulatory Authority that such Regulatory Authority
is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
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(i) Compliance with Laws. GreenPoint and each of its Subsidiaries:
(i) in the conduct of its business, is in compliance with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto or to the current or former employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to
own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to
GreenPoint's knowledge, no suspension or cancellation of any of them is
threatened; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that any of
them is not in compliance with any statute, regulation, or ordinance or
(B) threatening to revoke any license, franchise, permit, or
governmental authorization (nor, to GreenPoint's knowledge, do any
grounds for any of the foregoing exist).
(j) No Brokers. No action has been taken by GreenPoint that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Plan, excluding a fee to be paid to
Keefe, Bruyette & Woods Inc.
(k) Tax Treatment. As of the date hereof, neither GreenPoint nor any of
its Subsidiaries has any reason to believe that any conditions exist that
might prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(l) Accounting Treatment. As of the date hereof, GreenPoint is aware of
no reason why the Merger will fail, or could reasonably be expected to
fail, to qualify for "pooling of interests" accounting treatment.
(m) Disclosure. The representations and warranties contained in this
Section 5.4 do not contain any untrue statement of a material fact.
(n) Material Adverse Change. Since December 31, 1997, no event has
occurred or circumstances arisen that, individually or taken together with
all other events and circumstances, has had or is reasonably likely to have
a Material Adverse Effect on GreenPoint or any of its Subsidiaries, taken
as a whole.
(o) Year 2000 Compliance. None of GreenPoint or any of its Significant
Subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March
4, 1998). GreenPoint has disclosed to Headlands a complete and correct copy
of GreenPoint's plan for addressing the issues set forth in the statements
of the Federal Financial Institutions Examination Council, dated May 5,
1997, entitled "Year 2000 Project Management Awareness," and December 1997,
entitled "Safety and Soundness Guidelines Concerning the Year 2000 Business
Risk," as such issues affect GreenPoint and its Significant Subsidiaries,
and such plan will provide so that (x) the change of the year form 1999 to
the year 2000 will not materially and
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adversely affect the information and business systems of GreenPoint or any
of its Significant Subsidiaries and (y) that the impacts of such change on
the vendors and customers of GreenPoint and its Significant Subsidiaries
will not have a Material Adverse Effect on GreenPoint and its Significant
Subsidiaries. Neither GreenPoint nor any of its Significant Subsidiaries
has received, and has no reason to believe that it will receive, regulatory
criticism of such plan that could jeopardize such plan's approval.
ARTICLE VI.
COVENANTS
6.1. Reasonable Best Efforts. Subject to the terms and conditions of this
Plan, each of Headlands and GreenPoint agrees to use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
6.2. Stockholder Approval. Headlands agrees to take, in accordance with
applicable law, NASDAQ rules and its articles of incorporation and bylaws, all
action necessary to convene an appropriate meeting of its stockholders to
consider and vote upon the approval and adoption of this Plan and any other
matters required to be approved by Headlands' stockholders for consummation of
the Merger (including any adjournment or postponement, the "Headlands
Meeting"), as promptly as practicable after the Registration Statement is
declared effective. The Headlands Board shall recommend such approval, and
Headlands shall (subject to compliance with its fiduciary duties under the law
as reasonably determined in good faith) take all reasonable, lawful action to
solicit such approval by its stockholders.
6.3. Registration Statement.
(a) As soon as reasonably practicable after the date hereof, GreenPoint
agrees to prepare a registration statement on Form S-4 or other applicable
form (the "Registration Statement") to be filed by GreenPoint with the SEC
in connection with the issuance of GreenPoint Common Stock in the Merger
(including the proxy statement and prospectus and other proxy solicitation
materials of GreenPoint and Headlands constituting a part thereof (the
"Proxy Statement") and all related documents). Headlands agrees to
cooperate, and to cause its Subsidiaries to cooperate, with GreenPoint, its
counsel and its accountants, in GreenPoint's preparation of the
Registration Statement and the Proxy Statement; and provided that Headlands
and its Subsidiaries have cooperated as required above, GreenPoint agrees
to file the Proxy Statement in preliminary form with the SEC as promptly as
reasonably practicable, and to file the Registration Statement with the SEC
as soon as reasonably practicable after any SEC comments with respect to
the preliminary Proxy Statement are resolved. Each of Headlands and
GreenPoint agrees to use all reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
reasonably practicable after filing thereof. GreenPoint also agrees to use
all reasonable efforts to obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Plan. Headlands agrees to furnish to GreenPoint all
information concerning Headlands, its Subsidiaries, officers, directors and
stockholders required to be included in the Registration Statement or Proxy
Statement under the Securities Act as may be reasonably requested by
GreenPoint in connection with the foregoing.
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(b) Each of Headlands and GreenPoint agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement and each amendment
or supplement thereto, if any, becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Proxy Statement and any
amendment or supplement thereto will, at the date of mailing to
stockholders and at the time of the Headlands Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading or any statement which, in the light of the circumstances under
which such statement is made, is false or misleading with respect to any
material fact, or omits to state any material fact necessary in order to
make the statements therein not false or misleading or necessary to correct
any statement in any earlier statement in the Proxy Statement or any
amendment or supplement thereto, and (iii) any other documents (and any
supplements or amendments to such documents) to be filed with any
Regulatory Authority in connection with the transactions contemplated
hereby will, when filed with any such Regulatory Authority, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading. Each of Headlands and GreenPoint further agrees that if it
shall become aware prior to the Effective Date of any information furnished
by it that would cause any of the statements in the Proxy Statement to be
false or misleading with respect to any material fact, or to omit to state
any material fact necessary to make the statements therein not false or
misleading, to promptly inform the other party and to take the necessary
steps to correct the Proxy Statement.
(c) GreenPoint agrees to advise Headlands, promptly after GreenPoint
receives notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of
GreenPoint Common Stock for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any
request by the SEC for the amendment or supplement of the Registration
Statement or for additional information.
6.4. Press Releases. Each of Headlands and GreenPoint agrees that it will
not, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NYSE or NASDAQ rules.
6.5. Access; Information.
(a) Each of Headlands and GreenPoint agrees that upon reasonable notice
and subject to applicable laws relating to the exchange of information, it
shall afford the other party and the other party's officers, employees,
counsel, accountants and other authorized representatives, such access
during normal business hours throughout the period prior to the Effective
Time to the books, records (including, without limitation, tax returns and
work papers of independent auditors), properties, personnel and to such
other information as any party may reasonably request and, during such
period, it shall furnish promptly to such other party (i) a copy of each
material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and (ii) all
other information concerning the business, properties and personnel of it
as the other may reasonably request.
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(b) Each agrees that it will not, and will cause its representatives not
to, use any information obtained pursuant to this Section 6.5 (as well as
any other information obtained prior to the date hereof in connection with
the entering into of this Plan) for any purpose unrelated to the
consummation of the transactions contemplated by this Plan. Subject to the
requirements of law, each party will keep confidential, and will cause its
representatives to keep confidential, all information and documents
obtained pursuant to this Section 6.5 (as well as any other information
obtained prior to the date hereof in connection with the entering into of
this Plan) unless such information (i) was already known to such party,
(ii) becomes available to such party from other sources not known by such
party to be bound by a confidentiality obligation, (iii) is disclosed with
the prior written approval of the party to which such information pertains
or (iv) is or becomes readily ascertainable from published information or
trade sources. In the event that this Plan is terminated or the
transactions contemplated by this Plan 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
to be returned to the party which furnished the same.
(c) No investigation by either party of the business and affairs of the
other shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Plan, or the conditions to either
party's obligation to consummate the transactions contemplated by this
Plan.
6.6. Acquisition Proposals. Headlands agrees that it shall not, and shall
cause its Subsidiaries and its Subsidiaries's officers, directors, agents,
advisors and affiliates not to, solicit or encourage inquiries or proposals
with respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any Acquisition Proposal; provided, however, that Headlands may, and may
authorize and permit its officers, directors, employees or agents to, furnish
or cause to be furnished confidential information and may participate in such
discussions and negotiations if Headlands' Board of Directors, after having
consulted with and considered the advice of outside counsel has determined that
the failure to provide such information or participate in such negotiations and
discussions would cause the members of such Board of Directors to breach their
fiduciary duties under applicable laws. Headlands agrees that it shall
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Plan with any parties other
than GreenPoint with respect to any of the foregoing and shall use its
reasonable best efforts to enforce any confidentiality or similar agreement
relating to an Acquisition Proposal. Headlands shall promptly (within 24 hours)
advise GreenPoint following the receipt by Headlands of any Acquisition
Proposal and the substance thereof (including the identity of the person making
such Acquisition Proposal), and advise GreenPoint of any developments with
respect to such Acquisition Proposal immediately upon the occurrence thereof.
6.7. Affiliate Agreements.
(a) Not later than the 15th day prior to the mailing of the Proxy
Statement, (i) Headlands shall deliver to GreenPoint a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to
be, as of the date of the Headlands Meeting, deemed to be an "affiliate" of
Headlands (each, a "Headlands Affiliate") as that term is used in Rule 145
under the Securities Act or SEC Accounting Series Releases 130 and 135.
(b) Each of Headlands and GreenPoint shall use its reasonable best
efforts to cause each person who may be deemed to be a Headlands Affiliate
to execute and deliver to
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GreenPoint on or before the date of mailing of the Proxy Statement an
agreement in the form attached hereto as Exhibit C. Such Headlands
Affiliates will not receive New Certificates until such agreement is
delivered to GreenPoint.
6.8. Takeover Laws. No party hereto shall take any action that would cause
the transactions contemplated by this Plan or the Stock Option Agreement to be
subject to requirements imposed by any Takeover Law and each of them shall
take all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Plan from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as
now or hereafter in effect.
6.9. Certain Modifications; Restructuring Charges.
(a) Headlands and GreenPoint shall consult with respect to their loan,
litigation, risk management, accounting and real estate valuation policies
and practices and Headlands shall make such modifications or changes to its
policies and practices, if any, and at such date prior to the Effective
Time, as may be mutually agreed upon. Headlands and GreenPoint shall also
consult with respect to the character, amount and timing of restructuring
charges to be taken by each of them in connection with the transactions
contemplated hereby and shall take such charges in accordance with GAAP, as
may be mutually agreed upon. No party's representations, warranties and
covenants contained in this Plan shall be deemed to be untrue or breached
in any respect for any purpose as a consequence of any modifications or
changes to such policies and practices which may be undertaken on account
of this Section 6.9.
(b) In the case of Headlands, it agrees to amend any Compensation and
Benefit Plan qualified under Section 401(k) of the Code which offers
Headlands Common Stock as an investment option, as soon as reasonably
practicable after the execution of this Plan, so that no original issue
shares of Headlands Common Stock will be issued under such Compensation and
Benefit Plan thereafter.
6.10. NYSE Listing. GreenPoint agrees to use its reasonable best efforts to
list, prior to the Effective Date, on the NYSE, subject to official notice of
issuance, the shares of GreenPoint Common Stock to be issued to the holders of
Headlands Common Stock in the Merger.
6.11. Regulatory Applications; Consents.
(a) GreenPoint and Headlands and their respective Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare all
documentation, to effect all filings as soon as reasonably practicable, but
in no event later than 45 days from the date hereof, and to obtain all
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions
contemplated by this Plan. Each of GreenPoint and Headlands shall have the
right to review in advance, and to the extent practicable each will consult
with the other, in each case subject to applicable laws relating to the
exchange of information, with respect to all material written information
submitted to any third party or any Governmental Authority in connection
with the transactions contemplated by this Plan. In exercising the
foregoing right, each of the parties hereto agrees to act reasonably and as
promptly as practicable. Each party hereto agrees that it will consult with
the other party hereto with respect to the obtaining of all material
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Plan and each party will keep the
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other party appraised of the status of material matters relating to
completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or
on behalf of such other party or any of its Subsidiaries to any third party
or Governmental Authority.
(c) Headlands agrees that it shall use its reasonable best efforts to
obtain the consents and approvals required to be made or obtained by
Headland as set forth in Sections 5.3(f)(i), 5.3(f)(ii) and 5.3(j) prior to
the Effective Time.
6.12. Indemnification.
(a) Following the Effective Date and for a period of six years
thereafter, GreenPoint shall indemnify, defend and hold harmless the
present directors of Headlands and its Subsidiaries (each, an "Indemnified
Party") against all costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of
actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this Plan)
to the extent that Headlands is authorized to indemnify (and advance
expenses to) its directors under the laws of the State of California, the
Headlands Certificate and the Headlands Bylaws as in effect on the date
hereof; provided that any determination required to be made with respect to
whether an officer's or director's conduct complies with the standards set
forth under California law, the Headlands Certificate and the Headlands
Bylaws shall be made by independent counsel (which shall not be counsel
that provides material services to GreenPoint) selected by GreenPoint and
reasonably acceptable to such officer or director; and provided, further,
that in the absence of applicable California judicial precedent to the
contrary, such counsel, in making such determination, shall presume such
officer's or director's conduct complied with such standard and GreenPoint
shall have the burden to demonstrate that such officer's or director's
conduct failed to comply with such standard.
(b) Any Indemnified Party wishing to claim indemnification under Section
6.12(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify GreenPoint thereof;
provided that the failure so to notify shall not affect the obligations of
GreenPoint under Section 6.12(a) unless and to the extent that GreenPoint
is actually prejudiced as a result of such failure.
(c) If GreenPoint or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or
surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any other entity, then and in each case,
proper provision shall be made so that the successors and assigns of
GreenPoint shall assume the obligations set forth in this Section 6.12.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
6.12A. D&O Insurance. For six years after the Effective Time, the Surviving
Corporation (or an Affiliate thereof) shall maintain in effect Headlands'
current directors' and officers' liability insurance covering acts or omissions
occurring prior to the Effective Time with respect to those persons who are
currently covered by Headlands' directors' and
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officers' liability insurance policy on terms with respect to such coverage
and amount no less favorable than those of such policy in effect on the date
hereof so long as the annual premium therefor is not in excess of 150% of the
aggregate premiums paid by Headlands in 1998 on an annualized basis for such
purpose (which aggregate premium on an annualized basis has been Previously
Disclosed by Headlands), but if the annual premium therefor so exceeds such
amount, the Surviving Corporation (or an Affiliate thereof) will obtain as
much directors' and officers' liability insurance as can be obtained for the
remainder of such period for a premium not in excess of 150% of the aggregate
premiums paid by Headlands in 1998 on an annualized basis for such purpose;
provided that the Surviving Corporation (or an Affiliate thereof) may
substitute therefor policies of the Surviving Corporation or its Affiliates
containing terms with respect to coverage and amount no less favorable to such
directors or officers; provided, further, that if the existing or substituted
directors' and officers' liability insurance expires, is terminated or
canceled the Surviving Corporation (or an Affiliate thereof) shall obtain
directors' and officers' liability insurance with respect to coverage and
amounts no less favorable than those of such policy in effect on the date
hereof for the remainder of the six-year period so long as the annual premium
therefor is not in excess of 150% of the aggregate premiums paid by Headlands
in 1998 on an annualized basis for such purpose, but if the Surviving
Corporation (or an Affiliate thereof) cannot obtain such coverage for a
premium not in excess of such amount, the Surviving Corporation (or an
Affiliate thereof) shall obtain as much directors' and officers' liability
insurance as can be obtained for the remainder of such period for a premium
not in excess of 150% of the aggregate premiums paid by Headlands in 1998 on
an annualized basis for such purpose.
6.13. Benefit Plans.
(a) Following the Effective Time, employees of Headlands and its
Subsidiaries shall continue to be provided with benefits under employee
benefit plans that are substantially comparable in the aggregate to those
currently provided by Headlands and its Subsidiaries to such employees. In
the event that following the Effective Time an employee of Headlands or its
Subsidiaries is eligible to be covered under a GreenPoint or GreenPoint
Subsidiary medical insurance plan, such employee (or his or her eligible
dependents) shall not be excluded from coverage under such plan on the
basis of a pre-existing condition that was not also excluded under
Headlands medical insurance plans. In the event that following the
Effective Time an employee of Headlands or its Subsidiaries is eligible to
be covered under an employee benefit plan of GreenPoint, then for all
purposes under each employee benefit plan to be provided by GreenPoint to
employees of Headlands or its Subsidiaries, GreenPoint shall recognize such
employee's prior service with Headlands or its Subsidiaries (to the same
extent such service was recognized under a similar plan of Headlands or its
Subsidiaries), except that such prior service shall not be counted for the
following purposes: (i) eligibility or vesting for purposes of the non-
401(k) and (m) related portions of GreenPoint's Employee Stock Ownership
Plan, (ii) the rate of accrual under GreenPoint's cash balance defined
benefit plan and (iii) eligibility to participate in GreenPoint's retiree
medical and life insurance coverage programs.
(b) Prior to the Effective Time, Headlands shall take or cause to be
taken any and all such reasonable actions as may be necessary such that
each outstanding Headlands Stock Option, dividend equivalent right, stock
appreciation right, limited stock appreciation right, restricted stock,
deferred stock and performance share award is not cashed out (whether by
payment in cash or other property) and does not become vested and
exercisable or distributable as a result of the transactions contemplated
hereby.
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(c) From and after the Effective Time, GreenPoint shall, and shall cause
its Subsidiaries to, credit any deductibles and out-of-pocket expenses that
are applicable and/or covered under the Compensation and Benefit Plans, and
are incurred by the employees and their beneficiaries during the portion of
the calendar year prior to participation in the benefit plans provided by
GreenPoint, the Surviving Corporation and the GreenPoint subsidiaries.
(d) From and after the Effective Time, GreenPoint shall honor, and shall
cause the Surviving Corporation to honor, in accordance with their terms
all benefits vested as of the date hereof under the Compensation and
Benefit Plans or under other Previously Disclosed agreements,
understandings or arrangements except to the extent any such agreements,
understandings or arrangements are superseded pursuant to any agreements
entered into on or after the date hereof. Nothing herein shall prevent
GreenPoint from terminating any Compensation and Benefit Plan in accordance
with its terms and subject to applicable law.
(e) From the date hereof, any employee communications relating to the
Compensation and Benefit Plans to be distributed by Headlands or its
Subsidiaries shall be subject to GreenPoint's prior review and approval,
which approval shall be processed timely and shall not be unreasonably
denied.
6.14. Notification of Certain Matters. Each of Headlands and GreenPoint shall
give prompt notice to the other of any fact, event or circumstance known to it
that (i) is reasonably likely, individually or taken together with all other
facts, events and circumstances known to it, to result in any Material Adverse
Effect with respect to it or (ii) would cause or constitute a material breach
of any of its representations, warranties, covenants or agreements contained
herein.
6.15. Directors. GreenPoint agrees to cause Peter T. Paul to be appointed as
a director on the GreenPoint Board and Vice Chairman of GreenPoint (which is an
officer position, not a Board of Directors position) as of the Effective Time
(such appointment to be subject to prior execution of, and the terms and
conditions of, the Employee Agreement of Mr. Paul).
6.16. Merger Sub Vote. GreenPoint shall vote (or consent with respect to) or
cause to be voted (or a consent to be given with respect to) any shares of
Merger Sub Common Stock beneficially owned by it or any of its affiliates or
with respect to which it or any of its affiliates has the power (by agreement,
proxy or otherwise) to cause to be voted (or to provide a consent), in favor of
the adoption and approval of this Plan at any meeting of the stockholders of
Merger Sub at which this Plan and the Stock Option Agreement shall be submitted
for adoption and approval and at all adjournments or postponements thereof (or,
if applicable, by any action of stockholders of Merger Sub by consent in lieu
of a meeting).
6.17. Publication of Combined and Financial Results. GreenPoint agrees to use
its reasonable best efforts to publish, as soon as reasonably practicable after
the Effective Date (and in no event later than 60 days after the end of the
month immediately following the month in which the Effective Date occurred),
30-day combined financial statements as contemplated by and in accordance with
the terms of SEC Accounting Series Release No. 35.
6.18. Surviving Corporation Name. GreenPoint agrees to cause the name of the
Surviving Corporation initially to be Headlands Mortgage Company.
6.19. 1998 Employee Stock Purchase Plan. Headlands agrees to take all such
actions as may be necessary to terminate the 1998 Employee Stock Purchase Plan
as of December 31, 1998.
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6.20. Founders Registration Rights Agreement. Headlands agrees to take all
such actions as may be necessary to terminate the Founders Registration Rights
Agreement, dated as of December , 1997, by and among Headlands and certain
stockholders of Headlands, prior to the Effective Date.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGERS
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of GreenPoint, Merger Sub and Headlands to
consummate the Merger is subject to the fulfillment or written waiver by
GreenPoint and Headlands prior to the Effective Time of each of the following
conditions:
(a) Stockholder Approvals. This Plan and the Merger shall have been duly
adopted by the requisite vote of the stockholders of Headlands.
(b) Regulatory Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby (other than the Contribution), shall
have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired and no such
approvals shall contain any conditions, restrictions or requirements which
would, following the Effective Time, have a Material Adverse Effect on the
Surviving Corporation.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Plan.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) Blue Sky Approvals. All permits and other authorizations under state
securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of GreenPoint Common Stock to be issued in
the Merger shall have been received and be in full force and effect.
(f) Listing. The shares of GreenPoint Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
7.2. Conditions to Obligation of Headlands. The obligation of Headlands to
consummate the Merger is also subject to the fulfillment or written waiver by
Headlands prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of
GreenPoint set forth in this Plan shall be true and correct (subject to the
standard set forth in Section 5.2 and disregarding, for purposes of this
provision, any qualifications regarding materiality or knowledge contained
in any single representation or warranty) as of the date of this Plan and
as of the Effective Date as though made on and as of the Effective Date
(except that representations and warranties that by their terms speak as of
the date of this Plan or some other date shall be true and correct only as
of such date), and Headlands shall have received a certificate, dated the
Effective Date, signed on
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behalf of GreenPoint by the Executive Vice President, Finance of GreenPoint
to such effect.
(b) Performance of Obligations of GreenPoint. GreenPoint shall have
performed in all material respects all obligations required to be performed
by it under this Plan at or prior to the Effective Time, and Headlands
shall have received a certificate, dated the Effective Date, signed on
behalf of GreenPoint by the Executive Vice President, Finance of GreenPoint
to such effect.
(c) Opinion of Headlands' Counsel. Headlands shall have received an
opinion of Sullivan & Cromwell, special counsel to Headlands, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, (i) the Merger constitutes a
"reorganization" within the meaning of Section 368(a) of the Code and (ii)
no gain or loss will be recognized by stockholders of Headlands who receive
shares of GreenPoint Common Stock in exchange for shares of Headlands
Common Stock, except with respect to cash received in lieu of fractional
share interests. In rendering its opinion, Sullivan & Cromwell may require
and rely upon representations contained in letters from Headlands,
GreenPoint and stockholders of Headlands.
(d) Accounting Treatment. Headlands shall have received a letter from
KPMG Peat Marwick LLP addressed to Headlands to the effect that the Merger
will qualify for "pooling of interests" accounting treatment.
7.3. Conditions to Obligation of GreenPoint and Merger Sub. The obligation of
GreenPoint and Merger Sub to consummate the Merger is also subject to the
fulfillment or written waiver by GreenPoint prior to the Effective Time of each
of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Headlands set forth in this Plan shall be true and correct (subject to the
standard set forth in Section 5.2 and disregarding, for purposes of this
provision, any qualifications regarding materiality or knowledge contained
in any single representation or warranty) as of the date of this Plan and
as of the Effective Date as though made on and as of the Effective Date
(except that representations and warranties that by their terms speak as of
the date of this Plan or some other date shall be true and correct only as
of such date) and GreenPoint shall have received a certificate, dated the
Effective Date, signed on behalf of Headlands by the Chief Executive
Officer of Headlands to such effect.
(b) Performance of Obligations of Headlands. Headlands shall have
performed in all material respects all obligations required to be performed
by it under this Plan at or prior to the Effective Time, and GreenPoint
shall have received a certificate, dated the Effective Date, signed on
behalf of Headlands by the Chief Executive Officer of Headlands to such
effect.
(c) Opinion of GreenPoint's Counsel. GreenPoint shall have received an
opinion of Wachtell, Lipton, Rosen & Katz, counsel to GreenPoint, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, (i) the Merger constitutes a
reorganization under Section 368(a) of the Code and (ii) no gain or loss
will be recognized by stockholders of Headlands who receive shares of
GreenPoint Common Stock in exchange for shares of Headlands Common Stock,
except with respect to cash received in lieu of fractional share interests.
In rendering its opinion, Wachtell, Lipton, Rosen & Katz may require and
rely upon representations contained in letters from Headlands, GreenPoint
and stockholders of Headlands.
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(d) Employee Agreements. The Employee Agreements shall have been executed
and delivered, shall be in full force and effect, and no event or condition
shall have occurred or exist (other than as a result of any action or
omission of GreenPoint or Merger Sub) which, with the passage of time or
notice or both, would constitute a breach or default under any Employee
Agreement.
(e) Accounting Treatment. GreenPoint shall have received a letter from
PricewaterhouseCoopers addressed to GreenPoint to the effect that the
Merger will qualify for "pooling of interests" accounting treatment.
ARTICLE VIII.
TERMINATION
8.1. Termination. This Plan may be terminated, and the Merger may be
abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of GreenPoint and Headlands, if the Board of Directors of
each so determines by vote of a majority of the members of its entire
Board.
(b) Breach. At any time prior to the Effective Time, by GreenPoint or
Headlands, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event of either: (i) a breach by
the other party of any representation or warranty contained herein (subject
to the standard set forth in Section 5.2 and disregarding, for purposes of
this provision, any qualifications regarding materiality or knowledge
contained in any single representation or warranty), which breach cannot be
or has not been cured within 30 days after the giving of written notice to
the breaching party of such breach; or (ii) a material breach by the other
party of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach.
(c) Delay. At any time prior to the Effective Time, by GreenPoint or
Headlands, 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 July 31, 1999, except to the extent that the failure of the
Merger to be consummated by such date arises out of or results from the
knowing action or inaction of the party seeking to terminate pursuant to
this Section 8.1(c).
(d) No Approval. By Headlands or GreenPoint, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in
the event (i) the approval of any Governmental Authority required for
consummation of the Merger and the other transactions contemplated by this
Plan shall have been denied by final nonappealable action of such
Governmental Authority or (ii) any stockholder approval required by Section
7.1(a) herein is not obtained at the Headlands Meeting.
(e) Failure to Recommend, Etc. At any time prior to the Headlands
Meeting, by GreenPoint if the Headlands Board shall have failed to make its
recommendation referred to in Section 6.2, withdrawn such recommendation or
modified or changed such recommendation in a manner adverse in any respect
to the interests of GreenPoint.
8.2. Effect of Termination and Abandonment. In the event of termination of
this Plan and the abandonment of the Merger pursuant to this Article VIII, no
party to this Plan shall have any liability or further obligation to any other
party hereunder except (i) as set forth in Section 9.1 and (ii) that
termination will not relieve a breaching party from liability for any willful
breach of this Plan giving rise to such termination.
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ARTICLE IX.
MISCELLANEOUS
9.1. Survival. No representations, warranties, agreements and covenants
contained in this Plan shall survive the Effective Time (other than Section
6.12 (Indemnification), 6.12A (D&O Insurance) and this Article IX which shall
survive the Effective Time) or the termination of this Plan if this Plan is
terminated prior to the Effective Time (other than Sections 6.5(b) (Access;
Information) and 8.2 (Effect of Termination and Abandonment), and this Article
IX which shall survive such termination).
9.2. Waiver; Amendment. Prior to the Effective Time, any provision of this
Plan may be (i) waived by the party benefited by the provision, or (ii) amended
or modified at any time, by an agreement in writing between the parties hereto
executed in the same manner as this Plan, except that after the Headlands
Meeting, this Plan may not be amended if it would violate the CGCL or reduce
the consideration to be received by Headlands stockholders in the Merger.
9.3. Counterparts. This Plan may be executed in one or more counterparts,
each of which shall be deemed to constitute an original.
9.4. Governing Law. This Plan shall be governed by, and interpreted in
accordance with, the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.
9.5. Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Plan and the transactions contemplated hereby, except that
printing expenses and SEC fees shall be shared equally between Headlands and
GreenPoint, except that GreenPoint shall pay any filing fees pursuant to the
HSR Act.
9.6. Notices. All notices, requests and other communications hereunder to a
party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to such party at its address set forth below or such
other address as such party may specify by notice to the parties hereto.
If to Headlands, to:
Headlands Mortgage Company
1100 Larkspur Landing Circle
Suite 101
Larkspur, California 94939
Attention: Chief Financial Officer
Facsimile: (415) -
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: H. Rodgin Cohen, Esq.
Facsimile: (212) 558-3588
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If to GreenPoint, to:
GreenPoint Financial Corp.
90 Park Avenue
New York, New York 10016
Attention: Howard C. Bluver
Senior Vice President and General Counsel
Facsimile: (212) 834-1404
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Craig M. Wasserman, Esq.
Facsimile: (212) 403-2000
9.7. Entire Understanding; No Third Party Beneficiaries. This Plan and the
Stock Option Agreement represent the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and thereby and
this Plan supersedes any and all other oral or written agreements heretofore
made (other than the Stock Option Agreement). Except for Section 6.12, Section
6.12A and Section 6.15, nothing in this Plan expressed or implied, is intended
to confer upon any person, other than the parties hereto or their respective
successors, any rights, remedies, obligations or liabilities under or by
reason of this Plan.
9.8. Interpretation; Effect. When a reference is made in this Plan to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Plan unless otherwise indicated. The headings
contained in this Plan are for reference purposes only and are not part of
this Plan. Whenever the words "include," "includes" or "including" are used in
this Plan, they shall be deemed to be followed by the words "without
limitation". No provision of this Plan shall be construed to require
Headlands, GreenPoint or any of their respective Subsidiaries, affiliates or
directors to take any action which would violate applicable law (whether
statutory or common law), rule or regulation.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan to be executed
in counterparts by their duly authorized officers, all as of the day and year
first above written.
Headlands Mortgage Company
/s/ Peter T. Paul
By: __________________________________
Name: Peter T. Paul
Title: President
Greenpoint Financial Corp.
/s/ Howard C. Bluver
By: __________________________________
Name: Howard C. Bluver
Title: Senior Vice President,
General Counsel and Secretary
GF Acquisition Corp.
/s/ Howard C. Bluver
By: __________________________________
Name: Howard C. Bluver
Title: President and Assistant
Secretary
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Exhibit B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 8, 1998, between GreenPoint
Financial Corp., a Delaware corporation ("Grantee"), and Headlands Mortgage
Company, a California corporation ("Issuer").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan of Merger (the
"Merger Agreement").
B. As an inducement to the willingness of Grantee to continue to pursue the
transactions contemplated by the Merger Agreement, Issuer has agreed to grant
Grantee the Option (as hereinafter defined).
C. The Board of Directors of Issuer has approved the grant of the Option and
the Merger Agreement prior to the date hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to that number of
fully paid and nonassessable shares of the common stock, without par value, of
Issuer ("Common Stock") equal to 19.9% of the Common Stock issued and
outstanding as of the date hereof at a price per share equal to $16.125 (as
adjusted, the "Option Price"). The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any shares of Common Stock are either (i) issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof) or (ii) redeemed, repurchased, retired or otherwise cease
to be outstanding after the date of this Agreement, the number of shares of
Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance or such redemption, repurchase,
retirement or other action, such number together with any shares of Common
Stock previously issued pursuant hereto, equals 19.9% of the number of shares
of Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this Section
l(b) or elsewhere in this Agreement shall be deemed to authorize Issuer to
issue shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole
or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within six (6) months following such Subsequent Triggering Event (or such later
period as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time (as defined in the Merger Agreement);
(ii) termination of the Merger Agreement in
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accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event except a termination by Grantee
pursuant to Section 8.1(b) (unless the breach giving rise to such termination
was not willful) or Section 8.1(e) of the Merger Agreement or by Grantee or
Issuer pursuant to Section 8.1(d)(ii) of the Merger Agreement (each, a "Listed
Termination"); or (iii) the passage of fifteen (15) months (or such longer
period as provided in Section 10) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event or is a
Listed Termination. The term "Holder" shall mean the holder or holders of the
Option. Notwithstanding anything to the contrary contained herein, (i) the
Option may not be exercised at any time when Grantee shall be in material
breach of any of its representations, warranties, covenants or agreements
contained in the Merger Agreement such that Issuer shall be entitled to
terminate the Merger Agreement pursuant to Section 8.1(b) thereof and (ii)
this Agreement shall automatically terminate upon the proper termination of
the Merger Agreement by Issuer pursuant to Section 8.1(b) thereof as a result
of the material breach by Grantee of its representations, warranties,
covenants or agreements contained in the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or Headlands Mortgage Securities, Inc. (which Issuer
represents is its only subsidiary) (the "Issuer Subsidiary"), without
having received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes of this Agreement having
the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer (the
"Issuer Board") shall have recommended that the shareholders of Issuer
approve or accept any Acquisition Transaction other than as contemplated by
the Merger Agreement. For purposes of this Agreement, (a) "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or the Issuer Subsidiary (other than mergers,
consolidations or similar transactions involving solely Issuer and/or one
or more wholly-owned Subsidiaries of the Issuer, provided, any such
transaction is not entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other acquisition of all or any
substantial part of the assets of Issuer or the Issuer Subsidiary, or (z) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 10% or more of the
voting power of Issuer or the Issuer Subsidiary and (b) "Subsidiary" shall
have the meaning set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary shall
have acquired after the date hereof beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to approve
the Merger Agreement and the Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall have
been cancelled prior to termination of the Merger Agreement if, prior to
such meeting (or if such meeting shall not have been held or shall have
been cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have
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made, or disclosed an intention to make, a bona fide proposal to engage in
an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in any
respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer or
the Issuer Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any person other than Grantee or any Grantee Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the
SEC with respect to a potential vote by its shareholders to approve the
issuance of shares to be offered in such an exchange offer);
(vii) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(viii) Any person other than Grantee or any Grantee Subsidiary shall have
filed an application or notice with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") or other federal or state bank
regulatory or antitrust authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction with Issuer.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 20% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in clause
(i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the Option
(or any portion thereof), it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 90 days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided,
that if prior notification to or approval of the Federal Reserve Board or any
other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have
been
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obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and
(ii) present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such
a bank account or accept surrender of this Agreement shall not preclude the
Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement, dated as of December 8, 1998, between
the registered holder hereof and Headlands Mortgage Company and to resale
restrictions arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Headlands Mortgage
Company and will be provided to the holder hereof without charge upon
receipt by Headlands Mortgage Company of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the
opinion of Counsel to the Holder, in form and substance reasonably
satisfactory to Issuer, and (iii) the legend shall be removed in its entirety
if the conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds on
the Closing Date, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all
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other options, warrants, convertible securities and other rights to purchase
Common Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of
any of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the event, under
the Bank Holding Company Act of 1956, as amended (the "BHCA"), or the Change in
Bank Control Act of 1978, as amended, or any state or other federal banking
law, prior approval of or notice to the Federal Reserve Board or to any state
or other federal regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications or
notices and providing such information to the Federal Reserve Board or such
state or other federal regulatory authority as they may require) in order to
permit the Holder to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the reasonable request of the Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Agreements and related Options for which this Agreement
(and the Option granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement executed and delivered
shall constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall at
any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock that
are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to adjustment from time to
time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof
shall be appropriately adjusted and proper provision shall be made so that, in
the event that any additional shares of Common Stock are issued or otherwise
become outstanding as a result of any such change (other than pursuant to an
exercise of the Option), the number of shares of Common Stock that remain
subject to the Option shall be increased so that, after such issuance and
together with shares of Common Stock previously issued pursuant to the exercise
of the Option (as adjusted on account of any of the foregoing changes in the
Common Stock), it equals 19.9% of the number of shares of Common Stock then
issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon exercise
hereof is adjusted as provided in this Section 5, the Option Price shall be
adjusted by multiplying the Option Price by a fraction, the numerator of which
shall be equal to the number of shares
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<PAGE>
of Common Stock purchasable prior to the adjustment and the denominator of
which shall be equal to the number of shares of Common Stock purchasable after
the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a registration statement under the 1933 Act covering any shares
issued and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of
Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any reasonable plan of disposition requested by
Grantee. Issuer will use its reasonable best efforts to cause such
registration statement promptly to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The Issuer shall bear the
costs of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees, except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto). The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of Option Shares as provided
above, Issuer is in registration with respect to an underwritten public
offering by Issuer of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none,
the sole underwriter or underwriters, of such offering the offer and sale of
the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction
pursuant to this Section 6 shall be permitted or occur and the Holder shall
thereafter be entitled to one additional registration and the twelve (12)
month period referred to in the first sentence of this section shall be
increased to twenty-four (24) months. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
Issuer. Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies. Notwithstanding anything to the contrary
contained herein, in no event shall the number of registrations that Issuer is
obligated to effect be increased by reason of the fact that there shall be
more than one Holder as a result of any assignment or division of this
Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the
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Option from the Holder at a price (the "Option Repurchase Price") equal to the
amount by which (A) the market/offer price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this Option may then
be exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered prior to an Exercise Termination Event (or such
later period as provided in Section 10), Issuer (or any successor thereto)
shall repurchase such number of the Option Shares from the Owner as the Owner
shall designate at a price (the "Option Share Repurchase Price") equal to the
market/offer price multiplied by the number of Option Shares so designated.
Anything to the contrary notwithstanding, the Option Share Repurchase Price
shall not be less than $13.93 million in the aggregate. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the three month period immediately preceding the date the Holder gives notice
of the required repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or (iv) in the event
of a sale of all or any substantial part of Issuer's assets or deposits, the
sum of the net price paid in such sale for such assets or deposits and the
current market value of the remaining net assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the market/offer price, the value of consideration other
than cash shall be determined by a nationally recognized investment banking
firm selected by the Holder or Owner, as the case may be, and reasonably
acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office,
a copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the
Owner, as the case may be, elects to require Issuer to repurchase this Option
and/or the Option Shares in accordance with the provisions of this Section 7.
As promptly as practicable, and in any event within fifteen calendar days after
the surrender of the Option and/or certificates representing Option Shares and
the receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within fifteen calendar days after the date on which Issuer is
no longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option and/or the Option Shares whether in whole or to the
extent of the prohibition,
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whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price
and/or the Option Share Repurchase Price that Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock
for which the surrendered Agreement was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the Holder
and the denominator of which is the Option Repurchase Price, and/or (B) to the
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to
the date of the notice by Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the Holder
shall nonetheless have the right to exercise the Option until the expiration
of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed to
have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in Section
2(b)(i) hereof, except that the percentage referred to in clause (z) shall
be 50%.
The parties agree that Issuer's obligation to repurchase the Option and/or the
Option Shares under this Section 7 shall not terminate upon the occurrence of
an Exercise Termination Event unless no Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or a Grantee Subsidiary, or engage in a plan of
exchange with any person, other than Grantee or a Grantee Subsidiary and
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquirer in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with such
merger or plan of exchange, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger or plan of exchange represent less than 50% of the
outstanding shares and share equivalents of the merged or acquiring company,
or (iii) to sell or otherwise transfer all or a substantial part of its or the
Issuer Subsidiary's assets or deposits to any person, other than Grantee or a
Grantee Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
person of a consolidation or merger with Issuer (if other than Issuer),
(ii) the acquiring person in a plan of exchange in which Issuer is
acquired, (iii) the Issuer in a merger or plan of
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exchange in which Issuer is the continuing or surviving or acquiring
person, and (iv) the transferee of all or a substantial part of Issuer's
assets or deposits (or the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(iv) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option, provided
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect
for such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to Holder equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. a) At the request of the holder of the Substitute Option (the "Substitute
Option Holder"), the Substitute Option Issuer shall repurchase the Substitute
Option from the Substitute Option Holder at a price (the "Substitute Option
Repurchase Price") equal to
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the amount by which (i) the Highest Closing Price (as hereinafter defined)
exceeds (ii) the exercise price of the Substitute Option, multiplied by the
number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant
to this Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute Option (or,
in the absence of such an agreement, a copy of this Agreement) and/or
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as
the case may be, elects to require the Substitute Option Issuer to repurchase
the Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable and in any event
within five business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice or
notices relating thereto, the Substitute Option Issuer shall deliver or cause
to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or
the Substitute Shares in part or in full, the Substitute Option Issuer shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Option Repurchase Price and/or the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five (5) business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of
a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall use its
reasonable best efforts to receive all required regulatory and legal approvals
as promptly as practicable in order to accomplish such repurchase), the
Substitute Option Holder and/or Substitute Share Owner may revoke its notice
of repurchase of the Substitute Option or the Substitute Shares either in
whole or to the extent of prohibition, whereupon, in the latter case, the
Substitute Option Issuer shall promptly (i) deliver to the Substitute Option
Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price
that the Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained
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by multiplying the number of shares of the Substitute Common Stock for which
the surrendered Substitute Option was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, and/or (B) to the Substitute Share Owner, a
certificate for the Substitute Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to the
date of the notice by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for exercise
of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be extended: (i)
to the extent necessary to obtain all regulatory approvals for the exercise of
such rights (for so long as the Holder, Owner, Substitute Option Holder or
Substitute Share Owner, as the case may be, is using commercially reasonable
efforts to obtain such regulatory approvals), and for the expiration of all
statutory waiting periods; (ii) during the pendency of any temporary
restraining order, injunction or other legal bar to exercise of such rights;
and (iii) to the extent necessary to avoid liability under Section 16(b) of the
1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Issuer Board
prior to the date hereof and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer as follows:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
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13. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event an Initial Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may
assign in whole or in part its rights and obligations hereunder; provided,
however, that until the date that is five days following the date on which the
Federal Reserve Board has approved an application by Grantee to acquire the
shares of Common Stock subject to the Option, Grantee may not assign its
rights under the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the right to purchase
in excess of 2% of the voting shares of Issuer, (iii) an assignment to a
single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf or (iv)
any other manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its reasonable best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board under the BHCA for approval to acquire the shares
issuable hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do so.
15. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option
Shares issued to and then owned by Grantee) to Issuer in exchange for a cash
fee equal to the Surrender Price (as hereinafter defined); provided, however,
that Grantee may not exercise its rights pursuant to this Section 14 if Issuer
has repurchased the Option (or any portion thereof) or any Option Shares
pursuant to Section 7. The "Surrender Price" shall be equal to $13.93 million
(i) plus, if applicable, Grantee's purchase price with respect to any Option
Shares and (ii) minus, if applicable, the excess of (B) the net cash amounts,
if any, received by Grantee pursuant to the arms' length sale of Option Shares
(or any other securities into which such Option Shares were converted or
exchanged) to any unaffiliated party, over (B) Grantee's purchase price of
such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 15 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 15 and (ii) the Surrender Price. The Surrender
Price shall be payable in immediately available funds on or before the second
business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver or cause to be delivered,
from time to time, to Grantee, the portion of the Surrender Price that it is
no longer prohibited from paying, within five business days after the date on
which Issuer is no longer so prohibited; provided, however, that if Issuer at
any time after delivery of a notice of surrender pursuant to paragraph (b) of
this Section 15 is prohibited under applicable law or regulation from paying
to Grantee the Surrender Price in full, (i) Issuer shall (A) use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to make
such payments, (B) within five days of the submission or receipt of any
documents relating
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to any such regulatory and legal approvals, provide Grantee with copies of the
same, and (c) keep Grantee advised of both the status of any such request for
regulatory and legal approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same and (ii) Grantee
may revoke such notice of surrender by delivery of a notice of revocation to
Issuer and, upon delivery of such notice of revocation, the Exercise
Termination Date shall be extended to a date six months from the date on which
the Exercise Termination Date would have occurred if not for the provisions of
this Section 15(c) (during which period Grantee may exercise any of its rights
hereunder, including any and all rights pursuant to this Section 15).
16. The parties hereto acknowledge that damages would be an inadequate remedy
for a breach of this Agreement by either party hereto and that the obligations
of the parties hereto shall be enforceable by either party hereto through
injunctive or other equitable relief. In connection therewith both parties
waive the posting of any bond or similar requirement.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section l(a) hereof (as adjusted pursuant to Section
l(b) or Section 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications hereunder
shall be deemed to have been duly given when delivered in person, by fax,
telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) at the respective addresses of the parties set forth in the Merger
Agreement.
19. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of Federal law or of
the CGCL are applicable).
20. This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and
the same agreement.
21. Except as otherwise expressly provided herein, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger Agreement,
this Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted
assignees. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors except as assignees, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
HEADLANDS MORTGAGE COMPANY
By: /s/ Peter T. Paul
Name: Peter T. Paul
Title: President
GREENPOINT FINANCIAL CORP.
By: /s/ Howard C. Bluver
Name: Howard C. Bluver
Title: Senior Vice President, General Counsel
and Secretary
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<PAGE>
Exhibit C
[LETTER HEAD OF NATIONSBANC MONTGOMERY SECURITIES LLC]
February 17, 1999
Board of Directors
Headlands Mortgage Company
900 Larkspur Landing Circle
Larkspur, CA 94939
Gentlemen:
We understand that Headlands Mortgage Company, a California corporation
("Headlands"), and GreenPoint Financial Corp., a Delaware corporation ("GPT"),
have entered into an Agreement and Plan of Reorganization dated December 8,
1998 (the "Merger Agreement"), pursuant to which a wholly-owned subsidiary of
GPT will be merged with and into Headlands, which will be the surviving entity
and which will become a wholly-owned subsidiary of GPT (the "Merger"). Pursuant
to the Merger, as more fully described in the Merger Agreement and as further
described to us by management of Headlands, we understand that each outstanding
share of the common stock, no par value per share ("Headlands Common Stock"),
of Headlands (other than certain shares held by Headlands, GPT and their
respective affiliates) will be converted into and exchangeable for 0.62 of a
share of the common stock, $0.01 par value per share ("GPT Common Stock"), of
GPT (the "Consideration"). The terms and conditions of the Merger are set forth
in more detail in the Merger Agreement.
We have previously delivered to you an opinion dated December 8, 1998, (the
"Prior Letter") which stated, subject to the limitations and conditions
contained therein, our opinion as investment bankers that the Consideration to
be received by the shareholders of Headlands pursuant to the Merger is fair to
such shareholders from a financial point of view, as of the date thereof. You
have asked us to reconfirm the opinion expressed in the Prior Letter, and asked
further for our opinion as investment bankers as to whether the Consideration
to be received by the shareholders of Headlands pursuant to the Merger was fair
to such shareholders from a financial point of view as of the date hereof. As
you are aware, we were not retained to, nor did we, advise Headlands with
respect to alternatives to the Merger. Further, we were not requested to nor
did we solicit or assist Headlands in soliciting indications of interest from
third parties for all or any part of Headlands.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Headlands
and GPT, including the consolidated financial statements for recent years and
certain other relevant financial and operating data relating to Headlands and
GPT made available to us from published sources and, in the case of Headlands,
from the internal records of Headlands; (ii) reviewed the financial terms and
conditions of the Merger Agreement; (iii) reviewed certain publicly available
information concerning the trading of, and the trading market for, Headlands
Common Stock and GPT Common Stock; (iv) compared Headlands and GPT from a
financial point of view with certain other companies in the mortgage banking
and thrift industries which we deemed to be relevant; (v) considered the
financial terms, to the extent publicly available, of selected recent business
combinations of companies in the mortgage industry which we deemed to be
comparable, in whole or in part, to the Merger; (vi) reviewed and discussed
with representatives of the management of Headlands certain information of a
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business and financial nature regarding Headlands, furnished to us by them,
including financial forecasts and related assumptions of Headlands; (vii)
reviewed certain third party analysts' estimates regarding Headlands and GPT;
(viii) made inquiries regarding and discussed the Merger and the Merger
Agreement and other matters related thereto with Headlands' counsel; and (ix)
performed such other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for Headlands and GPT, we have assumed with your consent that third
party analysts' estimates as to the future financial performance of Headlands
and GPT provide a reasonable basis upon which we can form our opinion. We also
have assumed that there have been no material changes in Headlands' or GPT's
assets, financial condition, results of operations, business or prospects
since the respective dates of their last financial statements made available
to us. We have relied on advice of counsel and independent accountants to
Headlands as to all legal and financial reporting matters with respect to
Headlands, the Merger and the Merger Agreement. We have assumed that the
Merger will be consummated in a manner that complies in all respects with the
applicable provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934 and all other
applicable federal and state statutes, rules and regulations. We are not
experts in the evaluation of loan portfolios for purposes of assessing the
adequacy of the allowances for losses with respect thereto and have assumed,
with your consent, that such allowances for GPT are in the aggregate adequate
to cover such losses. In addition, we have not assumed responsibility for
reviewing any individual credit files, or making an independent evaluation,
appraisal or physical inspection of any of the assets or liabilities
(contingent or otherwise) of Headlands or GPT, nor have we been furnished with
any such appraisals. You have informed us, and we have assumed, that the
Merger will be recorded as a pooling of interests under generally accepted
accounting principles. Finally, our opinion is based on economic, monetary and
market and other conditions as in effect on, and the information made
available to us as of, the date hereof. Accordingly, although subsequent
developments may affect this opinion, we have not assumed any obligation to
update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any further amendments thereto, and without waiver by Headlands of any
of the conditions to its obligations thereunder.
We have acted as financial advisor to Headlands in connection with the
Merger and will receive a fee for our services, including rendering this
opinion, a significant portion of which is contingent upon the consummation of
the Merger. In the ordinary course of our business, we actively trade the
equity securities of Headlands and GPT for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities. We have also acted as an underwriter in
connection with offerings of securities of Headlands and GPT and performed
various investment banking services for Headlands and GPT.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the stockholders
of Headlands pursuant to the Merger is fair to such stockholders from a
financial point of view, as of the date hereof.
This opinion is directed to the Board of Directors of Headlands in its
consideration of the Merger and is not a recommendation to any stockholder as
to how such stockholder should
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vote with respect to the Merger. Further, this opinion addresses only the
financial fairness of the Consideration to the stockholders and does not
address the relative merits of the Merger and any alternatives to the Merger,
Headlands' underlying decision to proceed with or effect the Merger, or any
other aspect of the Merger. This opinion may not be used or referred to by
Headlands, or quoted or disclosed to any person in any manner, without our
prior written consent, which consent is hereby given to the inclusion of this
opinion in any proxy statement or prospectus filed with the Securities and
Exchange Commission in connection with the Merger. In furnishing this opinion,
we do not admit that we are experts within the meaning of the term "experts" as
used in the Securities Act and the rules and regulations promulgated
thereunder, nor do we admit that this opinion constitutes a report or valuation
within the meaning of Section 11 of the Securities Act.
Very truly yours,
/s/ NATIONSBANC MONTGOMERY SECURITIES LLC
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Exhibit D
Dissenters' Rights under the California General Corporation Law
CHAPTER 13: DISSENTERS' RIGHTS
1300 [SHORT FORM MERGER; PURCHASE OF SHARES AT FAIR MARKET VALUE; "DISSENTING
SHARES" AND DISSENTING SHAREHOLDER].
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) only or (f) of Section 1201, each shareholder of the corporation entitled
to vote on the transaction and each shareholder of a subsidiary corporation in
a short-form merger may, by complying with this chapter, require the
corporation in which the shareholder holds shares to purchase for cash at their
fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split,
reverse stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either 1 (A) listed on any national securities exchange certified by the
Commissioner of Corporations under subdivision (o) of Section 25100 or 2 (B)
listed on the list of OTC margin stocks issued by the Board of Governors of the
Federal Reserve System, and the notice of meeting of shareholders to act upon
the reorganization summarizes this section and Sections 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any shares with
respect to which there exists any restriction on transfer imposed by the
corporation or by any law or regulation; and provided, further, that this
provision does not apply to any class of shares described in 3 subparagraph (A)
or 2 (B) if demands for payment are filed with respect to 5 percent or more of
the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of shareholders
entitled to vote on the reorganization and 1 (A) were not voted in favor of the
reorganization or, 2 (B) if described in 3 subparagraph (A) or 2 (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that 3 subparagraph (A) rather than
4 subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record. (Last amended by Ch.
543, L. '93, eff. 1-1-94.)
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1301 [DISSENTER'S RIGHTS; DEMAND ON CORPORATION FOR PURCHASE OF SHARES].
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision
(b) of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or shortform merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such
price.
1302 [DISSENTING SHARES, STAMPING OR ENDORSING].
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting or to be exchanged for certificates of appropriate denomination so
stamped or endorsed or (b) if the shares are uncertificated securities,
written notice of the number of shares which the shareholder demands that the
corporation purchase. Upon subsequent transfers of the dissenting shares on
the books of the corporation the new certificates, initial transaction
statement, and other written statements issued therefor shall bear a like
statement, together with the name of the original dissenting holder of the
shares.
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1303 [DISSENTING SHAREHOLDER ENTITLED TO AGREED PRICE WITH INTEREST; TIME OF
PAYMENT].
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractural
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
1304 [DISSENTERS ACTIONS; JOINDER; CONSOLIDATION; APPOINTMENT OF APPRAISERS].
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market values of
the shares, then the shareholder demanding purchase of such shares as
dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152) or
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
1305 [APPRAISERS DUTY AND REPORT; COURT JUDGEMENT; PAYMENT; APPEAL; COST OF
ACTION].
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed
by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court consideres relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further times
as may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which
any dissenting shareholder who is a party, or who has intervened, is entitled
to require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
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(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for
the shares described in the judgment. Any party may appeal from the judgment.
(e) The cost of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witness and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than
125 percent of the price offered by the corporation under subdivision (a) of
Section 1301).
1306 [DISSENTING SHAREHOLDERS: EFFECT OF PREVENTION OF PAYMENT OF FAIRMARKET
VALUE].
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
1307 [DISSENTING SHARES, DISPOSITION OF DIVIDENDS].
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
1308 [DISSENTING SHARES, RIGHTS AND PRIVILEGES].
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
1309 [DISSENTING SHARES, LOSS OF STATUS].
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys'
fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months
D-4
<PAGE>
after the date on which notice of the approval by the outstanding shares or
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
1310 [SUSPENSION OF CERTAIN PROCEEDINGS WHILE LITIGATION IS PENDING].
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
1311 [CHAPTER INAPPLICABLE TO CERTAIN CLASSES OF SHARES].
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
1312 [VALIDITY OF REORGANIZATION OR SHORT FORM MERGER, ATTACK ON; SHAREHOLDERS'
RIGHTS; BURDEN OF PROOF].
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganizaton or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-
form merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganizaton or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days, prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or
D-5
<PAGE>
short-form merger shall have the burden of proving that the transaction is
just and reasonable as to the shareholders of the controlled party, and (2) a
person who controls two or more parties to a reorganization shall have the
burden of proving that the transaction is just and reasonable as to the
shareholders of any party so controlled.
D-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
GreenPoint Financial Corp. ("GreenPoint") is a Delaware corporation
subject to the applicable provisions of the Delaware General Corporation Law
(the "DGCL") related to the limitation of director liability, indemnification of
directors and officers and insurance against director and officer liability
maintained by a corporation on behalf of directors and officers.
The DGCL permits a corporation's certificate of incorporation to
eliminate or limit the personal liability of a director to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
provided that the relevant provision does not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts of omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payment of a dividend or approval of an unlawful stock purchase or
redemption or (iv) for any transaction from which the director derived an
improper personal benefit. GreenPoint's certificate of incorporation, as amended
(the "GreenPoint Certificate"), provides for the elimination of liability of
directors to the fullest extent permitted by the DGCL.
The DGCL permits a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
the relevant conduct was unlawful.
In any threatened, pending or completed action or suit by or in the
right of a corporation, the DGCL permits a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any such action or
suit by reason of the fact that such person acted in any of the capacities set
forth above against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification may be made in respect of any claim or issue as
to which such person shall have been adjudged liable to the corporation unless
and only to the extent that the Court of Chancery or the court in which such
action was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
Court of Chancery or such other court deems proper.
II-1
<PAGE>
The DGCL requires a corporation to indemnify a director or officer who
has been successful on the merits or otherwise in the defense of any action,
suit or proceeding referred to in the previous two paragraphs or in defense of
any claim, issue or matter therein against expenses actually and reasonably
incurred by such person in connection therewith. Corporations may pay expenses
incurred by an officer or director in defending any proceeding in advance of the
final disposition of such matter upon receipt of an undertaking by or on behalf
of such person to repay such amount if it is ultimately determined that such
person is not entitled to indemnity. The indemnification provided for by the
DGCL is not exclusive of any other rights to which the indemnified party may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
The GreenPoint Certificate provides for indemnification of directors and
officers (among others) who are made parties or are threatened to be made
parties to or are otherwise involved in any actions, suits or proceedings,
whether civil, criminal, administrative or investigative by reason of his or her
role as such or service in such a role at GreenPoint's request for another
corporation or a partnership, joint venture, trust or other enterprise (each, a
"GreenPoint Indemnitee"), to the fullest extent authorized by the DGCL against
all expense, liability and loss (including attorneys' fees) reasonably incurred
or suffered. The GreenPoint Certificate provides that expenses incurred or
suffered shall be paid by GreenPoint in advance of the final disposition
thereof, and that if required by the DGCL, such advancement of expenses incurred
by a GreenPoint Indemnitee in his or her capacity as a director or officer will
be made only upon delivery of an undertaking by or on behalf of the GreenPoint
Indemnitee to repay such amount unless it is ultimately determined that the
GreenPoint Indemnitee is entitled to indemnification.
The DGCL permits a corporation to purchase and maintain insurance on
behalf of any person who was or is a director, officer, employee or agent of the
corporation or was or is serving in such a capacity at the request of the
corporation with another business entity against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify such person against such liability. GreenPoint maintains an
insurance policy insuring the directors and officers of the Corporation against
certain acts and omissions arising while serving or acting in their official
capacities.
Item 21. Exhibits and Financial Statement Schedules
The following Exhibits are filed herewith or incorporated herein by
reference:
<TABLE>
<CAPTION>
Number Exhibit
<C> <S>
2.1 Agreement and Plan of Merger, dated as of December 8, 1998, by and among
GreenPoint Financial Corp., GF Acquisition Corp. and Headlands Mortgage
Company, included as Exhibit A to the accompanying Proxy
Statement-Prospectus.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
3.1 Certificate of Incorporation of GreenPoint Financial Corp. (incorporated
herein by reference to Exhibit 3.1 of GreenPoint's Quarterly Report on Form
10-Q, dated March 31, 1998).
3.2 Bylaws of GreenPoint Financial Corp. (incorporated herein by reference to
Exhibit 3.2 of GreenPoint's Annual Report on Form 10-K, dated December 31,
1997).
5.1 Opinion of Wachtell, Lipton, Rosen & Katz (with respect to the validity
of the common stock of GreenPoint to be issued).
8.1 Opinion of Wachtell, Lipton, Rosen & Katz (with respect to certain tax
matters).
8.2 Opinion of Sullivan & Cromwell (with respect to certain tax matters).
23.1 Consent of KPMG LLP (with respect to GreenPoint Financial Corp.).
23.2 Consent of PricewaterhouseCoopers LLP (with respect to GreenPoint
Financial Corp.).
23.3 Consent of KPMG LLP (with respect to Headlands Mortgage Company).
23.4 Consent of NationsBanc Montgomery Securities LLC (included in the
fairness opinion attached as Exhibit C to the accompanying Proxy
Statement-Prospectus)
23.5 Consent of Wachtell, Lipton, Rosen & Katz (contained in Exhibits 5.1 and
8.1).
23.6 Consent of Sullivan & Cromwell (contained in Exhibit 8.1)
24.1 Power of Attorney (set forth on the signature pages hereto).
99.1 Stock Option Agreement, dated as of December 8, 1998, by and between
Headlands Mortgage Company and GreenPoint Financial Corp., included as
Exhibit B to the accompanying Proxy Statement-Prospectus.
99.2 Form of Proxy for Special meeting of Shareholders of Headlands Mortgage
Company.
99.3 Consent of Peter T. Paul.
</TABLE>
II-3
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement
(notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement); and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
(c) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(d) The undersigned registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (5) above, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to this registration statement and will not be used
until such amendment has become effective, and that for the purpose of
determining liabilities under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the undersigned registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, GreenPoint
Financial Corp. has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on February 17, 1999.
GreenPoint Financial Corp.
(Registrant)
By /s/ Thomas S. Johnson
----------------------------------------
Thomas S. Johnson
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Thomas S. Johnson and Bharat B.
Bhatt, and each and either of them, such individual's true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for such
person and in such person's name, place and stead, in any and all capacities, to
sign this Registration Statement and any and all amendments thereto, and to file
the same with the Securities and Exchange Commission, with all exhibits thereto
and other documents in connection therewith, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent or either of them or any substitute therefor, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on February 17, 1999.
/s/ Thomas S. Johnson
- ---------------------------------------------------
Thomas S. Johnson,
Chairman and Chief
Executive Officer
(Principal Executive Officer)
/s/ Bharat B. Bhatt
- ---------------------------------------------------
Bharat B. Bhatt
Member of the Board, President
and Chief Operating Officer
/s/ Dan F. Huebner
- ---------------------------------------------------
II-6
<PAGE>
Dan F. Huebner, Director
/s/ William M. Jackson
- ---------------------------------------------------
William M. Jackson, Director
/s/ Susan J. Kropf
- ---------------------------------------------------
Susan J. Kropf, Director
/s/ Robert M. McLane
- ---------------------------------------------------
Robert M. McLane, Director
/s/ Charles B. McQuade
- ---------------------------------------------------
Charles B. McQuade, Director
/s/ Alvin N. Puryear
- ---------------------------------------------------
Alvin N. Puryear, Director
/s/ Robert P. Quinn
- ---------------------------------------------------
Robert P. Quinn, Director
- ---------------------------------------------------
Edward C. Schmults, Director
/s/ Wilfred O. Uhl
- ---------------------------------------------------
Wilfred O. Uhl, Director
- ---------------------------------------------------
Robert F. Vizza, Director
- ---------------------------------------------------
Jules Zimmerman, Director
II-7
<PAGE>
/s/ Charles P. Richardson
- ---------------------------------------------------
Charles P. Richardson
Executive Vice President
/s/ Jeffrey R. Leeds
- ---------------------------------------------------
Jeffrey R. Leeds
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
/s/ Mary Beth Farrell
- ---------------------------------------------------
Mary Beth Farrell
Senior Vice President and Comptroller
(Principal Accounting Officer)
II-8
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
------ -------
2.1 Agreement and Plan of Merger, dated as of December 8, 1998, by and among
GreenPoint Financial Corp., GF Acquisition Corp. and Headlands Mortgage
Company, included as Exhibit A to the accompanying Proxy Statement-
Prospectus.
3.1 Certificate of Incorporation of GreenPoint Financial Corp. (incorporated
herein by reference to Exhibit 3.1 of GreenPoint's Quarterly Report on
Form 10-Q, dated March 31, 1998).
3.2 Bylaws of GreenPoint Financial Corp. (incorporated herein by reference to
Exhibit 3.2 of GreenPoint's Annual Report on Form 10-K, dated December
31, 1997).
5.1 Opinion of Wachtell, Lipton, Rosen & Katz (with respect to the validity
of the common stock of GreenPoint to be issued).
8.1 Opinion of Wachtell, Lipton, Rosen & Katz (with respect to certain tax
matters).
8.2 Opinion of Sullivan & Cromwell (with respect to certain tax matters).
23.1 Consent of KPMG LLP (with respect to GreenPoint Financial Corp.).
23.2 Consent of PricewaterhouseCoopers LLP (with respect to GreenPoint
Financial Corp.).
23.3 Consent of KPMG LLP (with respect to Headlands Mortgage Company).
23.4 Consent of NationsBanc Montgomery Securities LLC (included in the
fairness opinion attached as Exhibit C to the accompanying Proxy
Statement-Prospectus).
23.5 Consent of Wachtell, Lipton, Rosen & Katz (contained in Exhibits 5.1 and
8.1).
23.6 Consent of Sullivan & Cromwell (contained in Exhibit 8.1)
24.1 Power of Attorney (set forth on the signature pages hereto).
II-9
<PAGE>
99.1 Stock Option Agreement, dated as of December 8, 1998, by and between
Headlands Mortgage Company and GreenPoint Financial Corp., included as
Exhibit B to the accompanying Proxy Statement-Prospectus.
99.2 Form of Proxy for Special meeting of Shareholders of Headlands Mortgage
Company.
99.3 Consent of Peter T. Paul
II-10
<PAGE>
EXHIBIT 5.1
-----------
[Letterhead of Wachtell, Lipton, Rosen & Katz]
February 17, 1998
GreenPoint Financial Corp.
90 Park Avenue
New York, New York 10016
RE: Registration Statement on Form S-4
-----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to GreenPoint Financial Corp., a Delaware
corporation (the "Company"), in connection with the preparation and filing of a
Registration Statement on Form S-4 (as it may be amended from time-to-time, the
"Registration Statement") relating to the up to 13,010,000 shares (the "Shares")
of the Company's common stock, par value $0.01 per share, to be issued by the
Company in connection with the merger of a wholly-owned subsidiary of the
Company with and into Headlands Mortgage Company ("Headlands"), with Headlands,
as the surviving corporation in such merger, becoming a wholly-owned subsidiary
of the Company as a result thereof.
In rendering this opinion, we have examined such corporate records and
other documents, and have reviewed such matters of law, as we have deemed
necessary or appropriate. Based on the foregoing, we are of the opinion that
the Shares are legally authorized and, when the Registration Statement has been
declared effective by order of the Securities and Exchange Commission and the
Shares have been issued and paid for upon the terms and conditions set forth in
the Registration Statement, the Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to be named in the Registration Statement and in the
related Proxy Statement-Prospectus contained therein as the attorneys who passed
upon the legality of the Shares and to the filing of a copy of this opinion as
Exhibit 5.1 to the Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
1
<PAGE>
EXHIBIT 8.1
-----------
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
February 17, 1999
GreenPoint Financial Corp.
90 Park Avenue
Fourth Floor
New York, New York 10016
Ladies and Gentlemen:
We have acted as special counsel to GreenPoint Financial Corp., a
Delaware corporation ("GreenPoint"), in connection with the proposed merger (the
"Merger") of GF Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of GreenPoint ("Merger Sub"), with and into Headlands Mortgage
Company, a California corporation ("Headlands"), pursuant to the Agreement and
Plan of Merger, dated as of December 8, 1998, by and among GreenPoint, Merger
Sub and Headlands (the "Agreement"). At your request, and in connection with
the filing of the Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission in connection with the
Merger, we are rendering our opinion concerning certain federal income tax
consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of GreenPoint and the consent of Headlands, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the representation letters of GreenPoint and Headlands dated
the date hereof, and have assumed that such statements and representations will
be complete and accurate as of the Effective Time and that all representations
made to the knowledge of any person or entity or with similar qualification are
and will be true and correct as if made without such qualification. We have
also relied upon the accuracy of the Registration Statement and the Proxy
Statement-Prospectus contained therein (the "Proxy Statement-Prospectus"). Any
capitalized term used but not defined herein has the meaning given to it in the
Proxy Statement-Prospectus or the exhibits thereto (including the Agreement).
We have also assumed that the transactions contemplated by the Agreement
will be consummated in accordance therewith and as described in the Proxy
Statement-Prospectus (and no transaction or condition stated therein and
material to this opinion will be waived by any party) and that the Merger will
qualify as a statutory merger under the applicable laws of the States of
California and Delaware.
Based upon and subject to the foregoing, it is our opinion, under currently
applicable United States federal income tax law, that: (i) the Merger will
constitute a reorganization within
1
<PAGE>
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"); and (ii) no gain or loss will be recognized by the holders of
Headlands Common Stock who receive shares of GreenPoint Common Stock in exchange
for shares of Headlands Common Stock in the Merger, except with respect to cash
received in lieu of a fractional share interest in GreenPoint Common Stock.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "THE MERGER -- Federal Income Tax
Consequences." In giving such consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
This opinion relates solely to certain United States federal income tax
consequences of the Merger and no opinion is expressed as to the tax
consequences under any foreign, state or local tax law or under any federal tax
law other than those pertaining to the income tax. Further, no opinion is
expressed with respect to the United States federal income tax consequences to
Headlands shareholders subject to special treatment under United States federal
income tax law (including, for example, non-United States persons, financial
institutions, dealers in securities, insurance companies, tax-exempt entities,
dissenting stockholders, holders who acquired their Headlands Common Stock
pursuant to the exercise of an employee stock option or right or otherwise as
compensation, and holders who hold Headlands Common Stock as part of a hedge,
straddle or conversion transaction).
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
2
<PAGE>
EXHIBIT 8.2
-----------
[LETTERHEAD OF SULLIVAN & CROMWELL]
February 17, 1999
Headlands Mortgage Company
1100 Larkspur Landing Circle
Larkspur, California 94939
Ladies and Gentlemen:
We have acted as special counsel to Headlands Mortgage Company
("Headlands"), a California corporation, in connection with the merger of GF
Acquisition Corp. ("Merger Sub"), a Delaware corporation and wholly-owned
subsidiary of GreenPoint Financial Corp. ("GreenPoint"), a Delaware corporation,
with and into Headlands, pursuant to the Agreement and Plan of Merger (the
"Agreement"), dated as of December 8, 1988, by and among Headlands, GreenPoint
and Merger Sub. We render this opinion to you, in part, pursuant to Section
7.2(c) of the Agreement. All capitalized terms used and not otherwise defined
herein have the meanings given to such terms in the Agreement.
For purposes of this opinion, we have reviewed the Agreement and such
other documents and matters of law and fact as we have considered necessary or
appropriate, and we have assumed, with your consent, the following:
(i) The Merger will be completed in the manner set forth in the
Agreement and the Registration Statement on Form S-4 of GreenPoint (the
"Registration Statement'), including the Proxy Statement/Prospectus
contained therein.
(ii) The representations contained in the letters of representation from
Headlands and GreenPoint to us, both dated February 16, 1999, will be
true and complete at the Effective Time.
On the basis of the foregoing, and our consideration of such other matters of
fact and law as we have deemed necessary or appropriate, it is our opinion,
under presently applicable federal income tax law, that:
1. The Merger will constitute a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended;
2. No gain or loss will be recognized by Headlands Shareholders who
receive shares of GreenPoint Common Stock in exchange for shares of
Headlands Common Stock, except with respect to cash received in lieu of
a fractional share interest in GreenPoint Common Stock.
The tax consequences described above may not be applicable to Headlands
Shareholders that acquired the stock of Headlands pursuant to the exercise of an
employee stock option or
<PAGE>
right or otherwise as compensation; that hold Headlands Shares as part of a
"straddle" or "conversion" transaction; or that are insurance companies,
securities dealers, financial institutions, persons required to use a mark-to-
market method of accounting with respect to shares of Headlands Common Stock or
foreign persons.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and all amendments thereto. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Sullivan & Cromwell
2
<PAGE>
EXHIBIT 23.1
------------
Independent Accountant's Consent
The Shareholders and Board of Directors of GreenPoint Financial Corp.:
We consent to the incorporation by reference in this registration statement on
Form S-4 of GreenPoint Financial Corp. of our report dated January 19, 1996,
relating to the consolidated statements of income, changes in stockholders'
equity and cash flows of GreenPoint Financial Corp. and Subsidiaries for the
year ended December 31, 1995, which report is included in the December 31, 1997
annual report on Form 10-K of GreenPoint Financial Corp., and to the reference
to our firm under the heading "Experts" in the Proxy Statement/Prospectus which
is a part of this registration statement.
/s/ KPMG LLP
New York, New York
February 16, 1999
1
<PAGE>
EXHIBIT 23.2
------------
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of our report dated January 20, 1998, except as to paragraph four of Note 1,
which is as of March 4, 1998, which appears on page 45 of the 1997 Annual
Report to Stockholders of GreenPoint Financial Corp., which is incorporated by
reference in GreenPoint Financial Corp.'s Annual Report on Form 10-K for the
year ended December 31, 1997. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 16, 1999
1
<PAGE>
EXHIBIT 23.3
------------
Independent Auditors' Consent
The Board of Directors of Headlands Mortgage Company:
We consent to the incorporation by reference in this registration statement on
Form S-4 of GreenPoint Financial Corp. of our report dated February 13, 1998,
relating to the consolidated balance sheets of Headlands Mortgage Company and
subsidiary as of December 31, 1997 and 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three year period ended December 31, 1997, which report appears in
the December 31, 1997 annual report on Form 10-K of Headlands Mortgage Company.
Such report reflects the adoption of the Financial Accounting Standards Board's
Statement of Financial Accounting Standard No. 125, "Accounting for Transfers"
and Servicing of Financial Assets and "Extinguishments of Liabilities." We also
consent to the reference to our firm under the caption "Experts."
/s/ KPMG LLP
San Francisco, California
February 16, 1999
1
<PAGE>
EXHIBIT 99.2
HEADLANDS MORTGAGE COMPANY
REVOCABLE PROXY
FOR THE SPECIAL MEETING OF SHAREHOLDERS ON MARCH 23, 1999.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Peter T. Paul, Becky S. Poisson, Gilbert J.
MacQuarrie and Steven M. Abreu, and each of them, with full powers of
substitution, to act as attorneys and proxies for the undersigned to vote, as
designated on the reverse side of this proxy, all shares of the Common Stock of
Headlands Mortgage Company (the "Company") which the undersigned is entitled to
vote at the Company's Special Meeting of Shareholders to be held at Courtyard by
Marriott, Larkspur, California 94939, on Tuesday, March 23, 1999 at 10:00 A.M.,
Pacific Time, and at any and all adjournments thereof.
BY SIGNING AND DATING THIS CARD, YOU AUTHORIZE THE PROXIES TO VOTE EACH
PROPOSAL, AS MARKED, OR IF NOT MARKED TO VOTE "FOR" THE PROPOSAL, AND TO USE
THEIR DISCRETION TO VOTE ON ANY OTHER MATTER AS MAY PROPERLY COME BEFORE THE
MEETING. PLEASE COMPLETE AND MAIL THIS CARD AT ONCE IN THE ENVELOPE PROVIDED. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
THIS PROXY IS REVOCABLE AND THE UNDERSIGNED MAY REVOKE IT AT ANY TIME PRIOR TO
ITS EXERCISE. ATTENDANCE OF THE UNDERSIGNED AT SAID MEETING OR ANY ADJOURNED OR
POSTPONED SESSION THEREOF WILL NOT BE DEEMED TO REVOKE THIS PROXY UNLESS THE
UNDERSIGNED SHALL INDICATE AFFIRMATIVELY THEREAT THE INTENTION OF THE
UNDERSIGNED TO VOTE SAID SHARES IN PERSON. IF THE UNDERSIGNED HOLD(S) ANY SHARES
OF THE COMPANY IN A FIDUCIARY, CUSTODIAL OR JOINT CAPACITY OR CAPACITIES, THIS
PROXY IS SIGNED BY THE UNDERSIGNED IN EVERY SUCH CAPACITY AS WELL AS
INDIVIDUALLY.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
PLEASE MARK
VOTES AS IN [X]
THIS EXAMPLE
Your Board of Directors recommends a vote "FOR" Item 1
Item 1 -- Approval and Adoption of the principal terms of the merger pursuant to
the Agreement and Plan of Merger, dated as of December 8, 1998, by and among
GreenPoint Financial Corp., a Delaware corporation, GF Acquisition Corp., a
Delaware corporation, and the Company.
FOR [_] AGAINST [_] ABSTAIN [_]
Item 2 -- The undersigned hereby authorizes the proxies to vote in their
discretion on any other business that may properly be brought before the meeting
or any adjournment thereof.
FOR [_] AGAINST [_] ABSTAIN [_]
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEM 1 AND IN THE
DISCRETION OF THE PROXY HOLDERS ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF THE
SPECIAL MEETING OF SHAREHOLDERS OF THE COMPANY AND A PROXY STATEMENT FOR THE
SPECIAL MEETING PRIOR TO THE SIGNING OF THIS PROXY.
Date: _________________, 1999
_____________________________
Signature
_____________________________
Signature
(Please sign exactly as name appears on stock certificate. Where stock is
registered jointly, all owners must sign. Corporate owners should sign full
corporate name by an authorized person. Executors, administrators, trustees or
guardians should indicate their status when signing.) Please complete, sign and
date this proxy and return it in the enclosed envelope.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
EXHIBIT 99.3
February 16, 1999
GreenPoint Financial Corp.
90 Park Avenue
New York, New York 10016
To the Board of Directors:
I hereby consent to being named as a person about to become a director
of GreenPoint Financial Corp., a Delaware corporation ("GreenPoint"), in
connection with the consummation of the merger (the "Merger") of a wholly-owned
subsidiary of GreenPoint ("Merger Sub") with and into Headlands Mortgage
Company, a California corporation ("Headlands"), pursuant to which Headlands
will become a wholly-owned subsidiary of GreenPoint, in the Registration
Statement on Form S-4 filed by GreenPoint with the Securities and Exchange
Commission in connection with the Merger (the "Registration Statement"), and to
the filing of this consent as an exhibit to the Registration Statement.
Sincerely,
/s/ Peter T. Paul
Peter T. Paul
