SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported) August 30, 1999
COMMISSION FILE NO.: 0-23126
RELIANCE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-3187176
(State or other Jurisdiction of Incorporation (IRS Employer or
organization) Identification No.)
585 Stewart Avenue, Garden City, New York 11530
(Address of principal executive officer) (Zip Code)
Registrant's telephone number, including area code: (516) 222-9300
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Item 5. Other Events
On August 30, 1999, Reliance Bancorp, Inc., a Delaware corporation,
("Reliance") announced that it had signed a definitive Agreement and Plan of
Merger, dated as of August 30, 1999 (the "Merger Agreement"), with North Fork
Bancorporation, Inc., a Delaware corporation ("NFB"). NFB is the bank holding
company parent of North Fork Bank and Trust Company, a New York State chartered
stock commercial bank. The Merger Agreement provides, among other things, that
Reliance will merge with and into NFB, with NFB being the surviving corporation
("Merger"). A copy of the Merger Agreement is attached hereto as Exhibit 2.1.
Capitalized terms which are used but not defined herein shall have the meanings
ascribed to such terms in the Merger Agreement.
Pursuant to the Merger Agreement, each share of Reliance common stock, par
value $0.01 per share ("Reliance Common Stock"), issued and outstanding
immediately prior to the Effective Time will be converted into and become the
right to receive 2.0 shares of NFB common stock, par value $2.50 per share ("NFB
Common Stock"). The exchange ratio was based upon the price of NFBs stock
utilizing its closing price on August 27, 1999 of $19.06 for a total value to
Reliance shareholders of $38.12 per share.
The Merger will be structured as a tax-free reorganization and will be
accounted under the purchase method of accounting. Consummation of the Merger is
subject to the satisfaction of certain customary conditions, including approval
of the Merger Agreement by the stockholders of Reliance and approval of the
appropriate regulatory agencies.
Reliance has the right to terminate the Merger Agreement if should the
closing price of NFB's shares decline beyond a specified price and index, unless
NFB elects to increase the Merger Consideration to be received by Reliance's
stockholders as set forth in the Merger Agreement.
The Merger Agreement also provides that options to purchase shares of
Reliance Common Stock under Reliance's stock option plans that are outstanding
at the Effective Time shall be converted into options to purchase shares of NFB
Common Stock in accordance with the procedure set forth in the Merger Agreement.
In connection with the Merger Agreement, Reliance granted to NFB a stock option
pursuant to a Stock Option Agreement, dated as of August 30, 1999, which, under
certain defined circumstances, would enable NFB to purchase up to 19.9% of
Reliance's issued and outstanding shares of common stock. The Stock Option
Agreement provides that the total profit receivable thereunder may not exceed
$17.4 million plus reasonable out-of-pocket expenses. A copy of the Stock Option
Agreement is attached hereto as Exhibit 4.1.
Following consummation of the Merger, Mr. Raymond A. Nielsen will be
appointed to the Board of Directors of NFB. Apart from Mr. Nielsen, those
persons who are members of the Board of Directors of Reliance and Gerald M.
Sauvigne, as of the consummation of the Merger, will be invited to become
members of the NFB Advisory Board.
Reliance and NFB publicly announced the Merger in a press release dated
August 30, 1999, a copy of which is attached hereto as Exhibit 99.1.
The press release incorporated by reference herein may contain certain
forward-looking statements with respect to the financial condition, results of
operations and business of NFB following the consummation of the Merger,
including statements relating to (a) the expected cost savings and revenue
enhancements to be realized from the Merger and (b) projected 2000 pro forma
earnings per share. Factors that may cause actual results to differ materially
from those contemplated by such forward-looking statements include, among
others, the following possibilities: (1) expected cost savings or revenue
enhancements from the Merger cannot be fully realized; (2) deposit attrition,
customer loss or revenue loss following the Merger is greater than expected; (3)
competitive pressure in the banking and financial services industry increases
significantly; (4) changes in the interest rate environment reduce margins; (5)
general economic conditions, either nationally or in the State of New York, are
less favorable than expected; (6) changes in real estate values; (7) changes in
accounting principles; (8) changes in legislation; (9) changes in other
economic, governmental, regulatory and technological factors affecting each
company's operations, pricing, products and services; and (10) the impact of the
Year 2000.
The summaries of the Merger Agreement and the Option Agreement are not
complete and are qualified in their entirety by reference to the complete texts
of such documents filed as exhibits herewith and incorporated herein by
reference.
Item 7 (c). Exhibits
Exhibit 2.1 Agreement and Plan of Merger, dated as of August 30, 1999, by and
between North Fork Bancorporation, Inc. and Reliance Bancorp, Inc.
Exhibit 4.1 Stock Option Agreement, dated August 30, 1999, by and between North
Fork Bancorporation, Inc. and Reliance Bancorp, Inc.
Exhibit 99.1 Press Release dated August 30, 1999 announcing definitive merger
agreement whereby North Fork Bancorporation, Inc. would acquire Reliance
Bancorp, Inc.
Exhibit 99.2 Press Release dated July 22, 1999 reporting the Company's fourth
quarter and fiscal year end 1999 results.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
By: /s/ Raymond A. Nielsen
------------------------
Raymond A. Nielsen
President and Chief Executive Officer
Dated: August 31, 1999
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Between
NORTH FORK BANCORPORATION, INC.
and
RELIANCE BANCORP, INC.
Dated as of August 30, 1999
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TABLE of CONTENTS
Page
ARTICLE I
THE MERGER.............................................................1
1.1. The Merger ......................................................1
1.2. Effective Time ..................................................2
1.3. Effects of the Merger........................................... 2
1.4. Conversion of Company Common Stock ..............................2
1.5. Stock Options................................................... 3
1.6. Buyer Common Stock.............................................. 5
1.7. Certificate of Incorporation.....................................5
1.8. By-Laws..........................................................5
1.9. Directors and Officers...........................................5
1.10. Tax Consequences ...............................................5
ARTICLE II
EXCHANGE OF SHARES.....................................................5
2.1. Buyer to Make Shares Available...................................5
2.2. Exchange of Shares ..............................................6
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES.....................................9
3.1. Disclosure Schedules..............................................9
3.2. Standards.........................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................10
4.1. Corporate Organization..........................................11
4.2. Capitalization .................................................12
4.3. Authority; No Violation.........................................13
4.4. Consents and Approvals .........................................15
4.5. Reports.........................................................16
4.6. Financial Statements............................................16
4.7. Broker's Fees...................................................18
4.8. Absence of Certain Changes or Events ...........................18
4.9. Legal Proceedings...............................................19
4.10. Taxes..........................................................19
4.11. Employees .....................................................21
4.12. SEC Reports....................................................23
4.13. Company Information............................................23
4.14. Compliance with Applicable Law.................................24
4.15. Certain Contracts..............................................24
4.16. Agreements with Regulatory Agencies............................25
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4.17. Investment Securities..........................................25
4.18 State Takeover Laws; Business Combination Provision.............25
4.19. Environmental Matters .........................................26
4.20. Derivative Transactions........................................27
4.21. Opinion........................................................27
4.22. Approvals......................................................28
4.23. Loan Portfolio.................................................28
4.24. Property.......................................................29
4.25. Reorganization.................................................30
4.26. Company Rights Agreement.......................................30
4.27. Equity and Real Estate Investments.............................30
4.28. Year 2000 Matters..............................................30
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER .............................................................31
5.1. Corporate Organization .........................................31
5.2. Capitalization..................................................32
5.3. Authority; No Violation.........................................33
5.4. Consents and Approvals..........................................34
5.5. Reports.........................................................35
5.6. Financial Statements............................................35
5.7. Broker's Fees...................................................36
5.8. Absence of Certain Changes or Events............................37
5.9. Legal Proceedings...............................................37
5.10. Taxes..........................................................37
5.11. Employees......................................................38
5.12. SEC Reports....................................................40
5.13. Buyer Information .............................................41
5.14. Compliance with Applicable Law.................................41
5.15. Ownership of Company Common Stock..............................41
5.16. Agreements with Regulatory Agencies............................42
5.17. Approvals......................................................42
5.18. Tax Treatment for the Merger;
Reorganization...............................................42
5.19. Environmental Matters .........................................42
5.20. Loan Portfolio.................................................43
5.21. Property.......................................................44
5.22. Derivative Transactions........................................45
5.23. Year 2000 Matters..............................................45
5.24. Insurance......................................................45
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of the Company........................................46
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6.2. Covenants of Buyer..............................................50
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters..............................................51
7.2. Access to Information...........................................53
7.3. Stockholder Meetings ...........................................55
7.4. Legal Conditions to Merger......................................55
7.5. Affiliates .....................................................56
7.6. Stock Exchange Listing..........................................56
7.7. Employee Benefit Plans; Existing Agreements.....................56
7.8. Indemnification.................................................58
7.9. Additional Agreements...........................................61
7.10. Advice of Changes .............................................61
7.11. Current Information............................................61
7.12. Execution and Authorization of Bank Merger Agreement...........62
7.13. Coordination of Dividends......................................62
7.14. Directorship...................................................63
7.15. Accountants' Letter ...........................................63
7.16. Certain Revaluations, Changes and Adjustments..................63
7.17. Year 2000 .....................................................64
7.19. Advisory Board.................................................64
ARTICLE VIII
CONDITIONS PRECEDENT..................................................64
8.1. Conditions to Each Party's Obligation To Effect the Merger......64
8.2. Conditions to Obligations of Buyer..............................65
8.3. Conditions to Obligations of the Company .......................67
ARTICLE IX
TERMINATION AND AMENDMENT.............................................68
9.1. Termination.....................................................68
9.2. Effect of Termination; Expenses.................................73
9.3. Amendment.......................................................73
9.4. Extension; Waiver...............................................74
ARTICLE X
GENERAL PROVISIONS....................................................74
10.1. Closing .......................................................74
10.2. Alternative Structure..........................................75
10.3. Nonsurvival of Representations, Warranties and Agreements......75
10.4. Expenses.......................................................75
10.5. Notices........................................................75
10.6. Interpretation ...............................................77
10.7. Counterparts...................................................77
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10.8. Entire Agreement...............................................77
10.9. Governing Law..................................................77
10.10. Enforcement of Agreement .....................................77
10.11. Severability..................................................78
10.12. Publicity.....................................................78
10.13. Assignment; No Third Party Beneficiaries .....................78
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 30, 1999 (this
"Agreement"), by and between North Fork Bancorporation, Inc., a Delaware
corporation ("Buyer"), and Reliance Bancorp, Inc., a Delaware corporation (the
"Company"). Buyer and the Company are sometimes collectively referred to herein
as the "Constituent Corporations".
WHEREAS, the Boards of Directors of Buyer and the Company have
determined that it is in the best interests of their respective companies and
their stockholders to consummate the business combination transaction provided
for herein in which the Company will, subject to the terms and conditions set
forth herein, merge (the "Merger") with and into Buyer; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to
be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time (as defined in Section 1.2 hereof), the Company
shall merge with and into Buyer. Buyer shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") in the Merger, and
shall continue its corporate existence under the laws of the State of Delaware.
The name of the Surviving Corporation shall continue to be North Fork
Bancorporation, Inc. Upon consummation of the Merger, the separate corporate
existence of the Company shall terminate.
1.2. Effective Time. The Merger shall become effective as set forth
in the certificate of merger (the "Certificate of Merger") which shall be filed
with the Secretary of State of the State of Delaware (the "Secretary") on the
Closing Date (as defined in Section 10.1 hereof). The term "Effective Time"
shall be the date and time when the Merger becomes effective, as set forth in
the Certificate of Merger.
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1.3. Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Sections 259 and 261 of the DGCL.
1.4. Conversion of Company Common Stock. (a) At the Effective Time,
subject to Section 2.2(e) and Section 9.1(h) hereof, each share of the common
stock, par value $0.01 per share, of the Company (the "Company Common Stock")
issued and outstanding immediately prior to the Effective Time (other than (x)
shares of Company Common Stock held in the Company's treasury, (y) shares of
Company Common Stock held directly or indirectly by Buyer or the Company or any
of their respective Subsidiaries (as defined below) (except for Trust Account
Shares and DPC shares, as such terms are defined in Section 1.4(b) hereof), or
(z) unallocated shares of Company Common Stock held in the Company's
Recognition and Retention Plans) together with the related Company Rights
issued pursuant to the Company Rights Agreement (each as defined in Section
4.2(a) hereof) shall, by virtue of this Agreement and without any action on the
part of the holder thereof, be converted into and exchangeable for 2 (two)
shares (the "Exchange Ratio") of the common stock, par value $2.50 per share,
of Buyer ("Buyer Common Stock"). All of the shares of Company Common Stock
converted into Buyer Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist, and
each certificate (each a "Certificate") previously representing any such shares
of Company Common Stock shall thereafter only represent the right to receive
(i) the number of whole shares of Buyer Common Stock and (ii) the cash in lieu
of fractional shares into which the shares of Company Common Stock represented
by such Certificate have been converted pursuant to this Section 1.4(a) and
Section 2.2(e) hereof. Certificates previously representing shares of Company
Common Stock shall be exchanged for certificates representing whole shares of
Buyer Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in accordance
with Section 2.2 hereof, without any interest thereon. If, between the date of
this Agreement and the Effective Time, the shares of Buyer Common Stock shall
be changed into a different number or class of shares by reason of any
reclassification, recapitalization, spilt-up, combination, exchange of shares
or readjustment, or a stock dividend thereon shall be declared with a record
date within said period, the Exchange Ratio shall be adjusted accordingly.
(b) At the Effective Time, all shares of Company Common Stock
that are owned by the Company as treasury stock, all shares of
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Company Common Stock that are owned directly or indirectly by Buyer or the
Company or any of their respective Subsidiaries (other than shares of Company
Common Stock (x) held directly or indirectly in trust accounts, managed
accounts and the like or otherwise held in a fiduciary capacity for the benefit
of third parties (any such shares, and shares of Buyer Common Stock which are
similarly held, whether held directly or indirectly by Buyer or the Company, as
the case may be, being referred to herein as "Trust Account Shares") and (y)
held by Buyer or the Company or any of their respective Subsidiaries in respect
of a debt previously contracted (any such shares of Company Common Stock, and
shares of Buyer Common Stock which are similarly held, whether held directly or
indirectly by Buyer or the Company, being referred to herein as "DPC Shares")
and all unallocated shares of Company Common Stock that are held in the
Company's Recognition and Retention Plans) shall be cancelled and shall cease
to exist and no stock of Buyer or other consideration shall be delivered in
exchange therefor. All shares of Buyer Common Stock that are owned by the
Company or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become treasury stock of Buyer.
1.5. Stock Options. At the Effective Time, each option granted by the
Company to purchase shares of Company Common Stock (a "Company Option") which
is outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of Company Common Stock and shall be
converted automatically into an option to purchase shares of Buyer Common Stock
in an amount and at an exercise price determined as provided below (and
otherwise subject to the terms of the Company's Amended and Restated 1996
Incentive Stock Option Plan, 1994 Incentive Stock Option Plan or Amended and
Restated 1994 Stock Option Plan for Outside Directors (collectively, the
"Company Option Plans"), the agreements evidencing grants thereunder, and any
other agreements between the Company and an optionee regarding Company
Options):
(1) the number of shares of Buyer Common Stock to be subject to
the new option shall be equal to the product of the number of shares of
Company Common Stock subject to the original option and the Exchange
Ratio, provided that any fractional share of Buyer Common Stock resulting
from such multiplication shall be rounded down to the nearest whole share;
and
(2) the exercise price per share of Buyer Common Stock under the
new option shall be equal to the exercise price per share of Company
Common Stock under the original option divided by the Exchange Ratio,
provided that such exercise price shall be
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rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are intended
to be "incentive stock options" (as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) shall be and is intended to be
effected in a manner which is consistent with Section 424(a) of the Code, and
to the extent it is not so consistent, such Section 424(a) shall override such
adjustment. The duration and other terms of the new option shall be the same as
the original option, except that all references to the Company shall be deemed
to be references to Buyer, it being understood that any option that is intended
to be an incentive stock option and which is exercised by the option holder
more than 3 (three) months from the date of the option holder's termination of
employment from the Company or its Subsidiaries or from Buyer or its
Subsidiaries shall be treated as a non-statutory option.
1.6. Buyer Common Stock. Except for shares of Buyer Common Stock
owned by the Company or any of its Subsidiaries (other than Trust Account
Shares and DPC Shares), which shall be converted into treasury stock of Buyer
as contemplated by Section 1.4 hereof, the shares of Buyer Common Stock issued
and outstanding immediately prior to the Effective Time shall be unaffected by
the Merger and such shares shall remain issued and outstanding.
1.7. Certificate of Incorporation. At the Effective Time, the
Restated Certificate of Incorporation of Buyer, as in effect at the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation.
1.8. By-Laws. At the Effective Time, the By-Laws of Buyer, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.9. Directors and Officers. Except as provided in Section 7.14
hereof, the directors and officers of Buyer immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
1.10. Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the
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Code, and that this Agreement shall constitute a "plan of reorganization" for
the purposes of Section 368 of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1. Buyer to Make Shares Available. At or prior to the Effective
Time, Buyer shall deposit, or shall cause to be deposited, with a bank or trust
company (which may be a Subsidiary of Buyer) (the "Exchange Agent") selected by
Buyer and reasonably satisfactory to the Company, for the benefit of the
holders of Certificates, for exchange in accordance with this Article II,
certificates representing the shares of Buyer Common Stock and the cash in lieu
of fractional shares (such cash and certificates for shares of Buyer Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding
shares of Company Common Stock.
2.2. Exchange of Shares. (a) As soon as practicable after the
Effective Time, and in no event more than three business days thereafter, the
Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing the shares of Buyer Common Stock and the cash in lieu
of fractional shares into which the shares of Company Common Stock represented
by such Certificate or Certificates shall have been converted pursuant to this
Agreement. Upon surrender of a Certificate for exchange and cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor
(x) a certificate representing that number of whole shares of Buyer Common
Stock to which such holder of Company Common Stock shall have become entitled
pursuant to the provisions of Article I hereof and (y) a check representing the
amount of cash in lieu of fractional shares, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on the cash in lieu
of fractional shares and unpaid dividends and distributions, if any, payable to
holders of Certificates.
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(b) No dividends or other distributions declared after the
Effective Time with respect to Buyer Common Stock and payable to the holders of
record thereof shall be paid to the holder of any unsurrendered Certificate
until the holder thereof shall surrender such Certificate in accordance with
this Article II. After the surrender of a Certificate in accordance with this
Article II, the record holder thereof 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 Buyer Common Stock
represented by such Certificate. No holder of an unsurrendered Certificate
shall be entitled, until the surrender of such Certificate, to vote the shares
of Buyer Common Stock into which his Company Common Stock shall have been
converted.
(c) If any certificate representing shares of Buyer Common Stock
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to
the Exchange Agent in advance any transfer or other taxes required by reason of
the issuance of a certificate representing shares of Buyer Common Stock in any
name other than that of the registered holder of the Certificate surrendered,
or required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common Stock which
were issued and outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be cancelled and exchanged for
certificates representing shares of Buyer Common Stock as provided in this
Article II.
(e) Notwithstanding anything to the contrary contained herein,
no certificates or scrip representing fractional shares of Buyer Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Buyer Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of
Buyer. In lieu of the issuance of any such fractional share, Buyer shall pay to
each former stockholder of the Company who otherwise would be entitled to
receive a fractional share
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of Buyer Common Stock an amount in cash determined by multiplying (i) the
average of the closing sale prices of Buyer Common Stock on the New York Stock
Exchange (the "NYSE") as reported by The Wall Street Journal for the five
trading days immediately preceding the date on which the Effective Time shall
occur by (ii) the fraction of a share of Buyer Common Stock to which such
holder would otherwise be entitled to receive pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by
the stockholders of the Company for six months after the Effective Time shall
be paid to Buyer. Any stockholders of the Company who have not theretofore
complied with this Article II shall thereafter look only to Buyer for payment
of their shares of Buyer Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions on the Buyer Common Stock deliverable in
respect of each share of Company Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Buyer, the Company, the
Exchange Agent or any other person shall be liable to any former holder of
shares of Company Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Buyer, the
posting by such person of a bond in such amount as Buyer may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Buyer Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1. Disclosure Schedules. Prior to the execution and delivery of
this Agreement, the Company has delivered to Buyer, and Buyer has delivered to
the Company, a schedule (in the case of the Company, the "Company Disclosure
Schedule," and in the case of Buyer, the "Buyer Disclosure Schedule") setting
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an
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express disclosure requirement contained in a provision hereof or as an
exception to one or more of such party's representations or warranties
contained in Article IV, in the case of the Company, or Article V, in the case
of Buyer, or to one or more of such party's covenants contained in Article VI;
provided, however, that notwithstanding anything in this Agreement to the
contrary (a) no such item is required to be set forth in the Disclosure
Schedule as an exception to a representation or warranty (other than a
representation or warranty contained in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6,
4.7, 4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27,
with respect to the Company Disclosure Schedule, or Sections 5.2, 5.3(a),
5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a) 5.12 and 5.15, with respect to
the Buyer Disclosure Schedule) if its absence would not result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 3.2, 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 material fact, event or circumstance or that such item has had or
is reasonably likely to have a Material Adverse Effect (as defined herein) with
respect to either the Company or Buyer, respectively.
3.2. Standards. (a) No representation or warranty of the Company
contained in Article IV (other than the representations and warranties
contained in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6, 4.7, 4.8(a)(ii), 4.8(b),
4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27) or of Buyer contained in
Article V (other than the representations and warranties contained in Sections
5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a), 5.12 and 5.15)
shall be deemed untrue or incorrect for any purpose under this Agreement, and
no party hereto shall be deemed to have breached any such representation or
warranty for any purpose under this Agreement, in any case as a consequence of
the existence or absence of any fact, circumstance or event unless such fact,
circumstance or event, individually or when taken together with all other
facts, circumstances or events inconsistent with any representations or
warranties contained in Article IV, in the case of the Company, or Article V,
in the case of Buyer, has had or is reasonably likely to have a Material
Adverse Effect with respect to the Company or Buyer, respectively.
(b) As used in this Agreement, the term "Material Adverse
Effect" means, with respect to Buyer or the Company, as the case may be, a
material adverse effect on (i) the business, assets, liabilities, results of
operations or financial condition of such party and its Subsidiaries taken as a
whole, other than any such effect attributable to or resulting
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from (x) any change in banking or similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental authorities,
(y) any change in GAAP (as defined herein) or regulatory accounting principles,
in each case which affects banks, thrifts or their holding companies generally,
except to the extent any such condition or change affects the referenced party
to a materially greater extent than banks, thrifts or their holding companies
generally, or (z) any change in interest rates, provided, that any such change
in interest rates shall not affect the referenced party to a materially greater
extent than banks, thrifts or their holding companies generally, and provided
further, that any such change shall not have a materially adverse effect on the
credit quality of such party's assets, or (ii) the ability of such party and
its Subsidiaries to consummate the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III hereof and except as set forth in the Company
Disclosure Schedule, the Company hereby represents and warrants to Buyer as
follows:
4.1. Corporate Organization. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. The Company is duly registered as a
non-diversified unitary savings and loan holding company under the Home Owners'
Loan Act of 1933, as amended. The Restated Certificate of Incorporation and
By-laws of the Company, copies of which have previously been made available to
Buyer, are true and correct copies of such documents as in effect as of the
date of this Agreement. As used in this Agreement, the word "Subsidiary" when
used with respect to any party means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated
with such party for financial reporting purposes.
(b) Reliance Federal Savings Bank (the "Company Bank") is a
stock savings bank duly organized, validly existing and in good standing under
the laws of the United States of America. The deposit accounts of
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the Company Bank are insured by the Federal Deposit Insurance Corporation (the
"FDIC") through the Savings Association Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due. Each of the Company's other
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
Each of the Company's Subsidiaries has the corporate power and authority to own
or lease all of its properties and assets and to carry on its business as it is
now being conducted and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or the location of the properties and assets owned or leased by it
makes such licensing or qualification necessary. The articles of incorporation,
by-laws and similar governing documents of each Subsidiary of the Company,
copies of which have previously been made available to Buyer, are true and
correct copies of such documents as in effect as of the date of this Agreement.
(c) The minute books of the Company and each of its Subsidiaries
contain true and correct records of all meetings and other corporate actions
held or taken since December 31, 1996 of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors).
4.2. Capitalization. (a) The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and 4,000,000 shares of
preferred stock, par value $.01 per share (the "Company Preferred Stock"). As
of the date of this Agreement, there are (x) 8,584,410 shares of Company Common
Stock outstanding and 2,166,410 shares of Company Common Stock held in the
Company's treasury, (y) no shares of Company Common Stock reserved for issuance
upon exercise of outstanding stock options or otherwise except for (i)
1,080,876 shares of Company Common Stock reserved for issuance pursuant to the
Company Option Plans and described in Section 4.2(a) of the Company Disclosure
Schedule, (ii) 1,708,297 shares of Company Common Stock reserved for issuance
upon exercise of the option issued to Buyer pursuant to the Stock Option
Agreement, dated August 30, 1999, between Buyer and the Company (the "Option
Agreement") and (iii) approximately 25,000 shares of Company Common Stock
issuable pursuant to an agreement between the Company and Continental Bank and
(z) no shares of Company Preferred Stock issued or outstanding, held in the
Company's treasury or reserved for issuance upon exercise of outstanding stock
options or otherwise, except for [150,000] shares of Company Series A Junior
Participating Preferred Stock reserved for issuance upon exercise of the rights
(the "Company Rights") distributed to holders of Company Common
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Stock pursuant to the Stockholder Protection Rights Agreement, dated September
18, 1996 between the Company and Registrar and Transfer Co., as Rights Agent
(the "Company Rights Agreement"). All of the issued and outstanding shares of
Company Common Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as referred to above or reflected in
Section 4.2(a) of the Company Disclosure Schedule, and except for the Option
Agreement, the Company does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Company Common
Stock or Company Preferred Stock or any other equity security of the Company or
any securities representing the right to purchase or otherwise receive any
shares of Company Common Stock or any other equity security of the Company. The
names of the optionees, the date of each option to purchase Company Common
Stock granted, the number of shares subject to each such option, the expiration
date of each such option, and the price at which each such option may be
exercised under the Company Option Plans are set forth in Section 4.2(a) of the
Company Disclosure Schedule.
(b) Section 4.2(b) of the Company Disclosure Schedule sets forth
a true and correct list of all of the Subsidiaries of the Company. Except as
set forth in Section 4.2(b) of the Company Disclosure Schedule, the Company
owns, directly or indirectly, all of the issued and outstanding shares of the
capital stock of each of such Subsidiaries, free and clear of all liens,
charges, encumbrances and security interests whatsoever, and all of such shares
are duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. No Subsidiary of the Company has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of capital
stock or any other equity security of such Subsidiary or any securities
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Subsidiary. Assuming compliance by
Buyer with Section 1.5 hereof, at the Effective Time, there will not be any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character by which the Company or any of its Subsidiaries will be bound
calling for the purchase or issuance of any shares of the capital stock of the
Company or any of its Subsidiaries.
4.3. Authority; No Violation. (a) The Company has full
corporate power and authority to execute and deliver this Agreement and the
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Option Agreement (this Agreement and the Option Agreement, collectively, the
"Company Documents") and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of each of the Company Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of the Company. The Board of
Directors of the Company has directed that this Agreement and the transactions
contemplated hereby be submitted to the Company's stockholders for approval at
a meeting of such stockholders and, except for the approval and adoption of
this Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of the Company Common Stock, no other corporate proceedings
on the part of the Company are necessary to approve the Company Documents and
to consummate the transactions contemplated hereby and thereby. Each of the
Company Documents has been duly and validly executed and delivered by the
Company, and (assuming due authorization, execution and delivery by Buyer) this
Agreement constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 4.3(b) of the Company
Disclosure Schedule, neither the execution and delivery of the Company
Documents by the Company, nor the consummation by the Company of the
transactions contemplated hereby, nor compliance by the Company with any of the
terms or provisions hereof, will (i) violate any provision of the Certificate
of Incorporation or By-Laws of the Company or the certificate of incorporation,
by-laws or similar governing documents of any of its Subsidiaries, or (ii)
assuming that the consents and approvals referred to in Section 4.4 hereof are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Company or any of
its Subsidiaries, or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of the Company or any of its Subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is a party, or by which they or
any of their
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respective properties or assets may be bound or affected.
4.4. Consents and Approvals. Except for (a) the filing of an
application with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHC Act") and approval of such application, (b) the filing of an
application with the FDIC under the Bank Merger Act and approval of such
application, in the event the parties enter into the Bank Merger Agreement (as
defined in Section 7.12) (c) the filing of applications and notices, as
applicable, with the Office of Thrift Supervision (the "OTS") and approval of
such applications and notices, (d) the filing of an application with the New
York State Banking Department (the "Banking Department") and the approval of
such application, (e) the filing with the Securities and Exchange Commission
(the "SEC") of a proxy statement in definitive form relating to the meeting of
the Company's stockholders to be held in connection with this Agreement and the
transactions contemplated hereby (the "Proxy Statement") and the filing and
declaration of effectiveness of the registration statement on Form S-4 (the
"S-4") in which the Proxy Statement will be included as a prospectus, (f) the
approval of this Agreement by the requisite vote of the stockholders of the
Company, (g) the filing of the Certificate of Merger with the Secretary
pursuant to the DGCL, (h) such filings and approvals as are required to be made
or obtained under the securities or "Blue Sky" Laws of various states in
connection with the issuance of the shares of Buyer Common Stock pursuant to
this Agreement, (i) approval of the listing of the Buyer Common Stock to be
issued in the Merger on the NYSE, and (j) such filings, authorizations or
approvals as may be set forth in Section 4.4 of the Company Disclosure
Schedule, no consents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with the execution and delivery by the Company of the
Company Documents or the consummation by the Company of the Merger and the
other transactions contemplated hereby and thereby.
4.5. Reports. The Company and each of its Subsidiaries have 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
December 31, 1996 with (i) the OTS, (ii) the FDIC, (iii) any state banking
commissions or any other state regulatory authority (each a "State Regulator")
and (iv) any other self-regulatory organization ("SRO") (collectively, with the
Federal Reserve Board, the "Regulatory Agencies"), and have paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a
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Regulatory Agency in the regular course of the business of the Company and its
Subsidiaries, and except as set forth in Section 4.5 of the Company Disclosure
Schedule, no Regulatory Agency has initiated any proceeding or, to the
knowledge of the Company, investigation into the business or operations of the
Company or any of its Subsidiaries since December 31, 1996. There is no
unresolved violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of the Company
or any of its Subsidiaries.
4.6. Financial Statements. The Company has previously made available
to Buyer copies of (a) the consolidated statements of condition of the Company
and its Subsidiaries as of June 30 for the fiscal years 1997 and 1998, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1996 through 1998, inclusive, as reported in
the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1998 filed with the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), in each case accompanied by the audit report of KPMG LLP,
independent public accountants with respect to the Company, (b) the unaudited
consolidated statements of condition of the Company and its Subsidiaries as of
March 31, 1998 and March 31, 1999 and the related unaudited consolidated
statements of income, cash flows and changes in stockholders' equity for the
nine-month periods then ended as reported in the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1999 filed with the SEC under the
Exchange Act, and (c) the consolidated statements of condition of the Company
and its Subsidiaries as of June 30 for the fiscal years 1998 and 1999, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1997 through 1999, inclusive, as reported in
the draft of the Company's Annual Report for the fiscal year ended June 30,
1999 to be filed with the SEC (the "Draft Financials"). The June 30, 1998 and
June 30, 1999 consolidated statements of condition of the Company (including
the related notes, where applicable) fairly present the consolidated financial
position of the Company and its Subsidiaries as of the dates thereof, and the
other financial statements referred to in this Section 4.6 (including the
related notes, where applicable) fairly present, and the financial statements
to be filed by the Company with the SEC after the date of this Agreement will
fairly present (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial position of the Company and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed by the Company
with the SEC after
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the date of this Agreement will comply, with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto;
and each of such statements (including the related notes, where applicable) has
been, and the financial statements to be filed by the Company with the SEC
after the date of this Agreement will be, prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved, except as indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q. The books and records of the Company and
its Subsidiaries have been, and are being, maintained in accordance with GAAP
and any other applicable legal and accounting requirements and reflect only
actual transactions.
Section 4.6 of the Company Disclosure Schedule sets forth a true and
correct description of the Company's "Borrowed Funds" as reflected in the Draft
Financials.
4.7. Broker's Fees. Neither the Company nor any Subsidiary of the
Company nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions
or finder's fees in connection with any of the transactions contemplated by the
Company Documents, except that the Company has engaged, and will pay a fee or
commission to, Sandler, O'Neill & Partners, L.P. ("Sandler O'Neill") in
accordance with the terms of a letter agreement between Sandler O'Neill and the
Company, a true and correct copy of which has been previously delivered by the
Company to Buyer.
4.8. Absence of Certain Changes or Events. (a) Except as may be set
forth in Section 4.8(a) of the Company Disclosure Schedule or as disclosed in
any Company Report filed with the SEC prior to the date of this Agreement,
since June 30, 1998, (i) neither the Company nor any of its Subsidiaries has
incurred any liability, except in the ordinary course of their business
consistent with their past practices, and (ii) there has been no change or
development or combination of changes or developments which has had, or is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
(b) Except as set forth in Section 4.8(b) of the Company
Disclosure Schedule or as disclosed in any Company Report filed with the SEC
prior to the date of this Agreement, since June 30, 1998, the Company and its
Subsidiaries have carried on their respective businesses in the ordinary course
consistent with their past practices.
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(c) Except as set forth in Section 4.8(c) of the Company
Disclosure Schedule, since June 30, 1999, neither the Company nor any of its
Subsidiaries has (i) increased the wages, salaries, compensation, pension, or
other fringe benefits or perquisites payable to any executive officer,
employee, or director from the amount thereof in effect as of June 30, 1999
(which amounts have been previously disclosed to Buyer), granted any severance
or termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus, (ii) suffered any strike, work stoppage,
slow-down, or other labor disturbance, (iii) been a party to a collective
bargaining agreement, contract or other agreement or understanding with a labor
union or organization, or (iv) had any union organizing activities.
4.9. Legal Proceedings. (a) Except as set forth in Section 4.9 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to any, and there are no pending or, to the Company's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against the
Company or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by any of the Company Documents.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon the Company, any of its Subsidiaries or the
assets of the Company or any of its Subsidiaries.
4.10. Taxes. (a) Except as set forth in Section 4.10(a) of the
Company Disclosure Schedule, each of the Company and its Subsidiaries has (i)
duly and timely filed (including applicable extensions granted without penalty)
all Tax Returns (as hereinafter defined) required to be filed at or prior to
the Effective Time, and such Tax Returns are true and correct, and (ii) paid in
full or made adequate provision in the financial statements of the Company (in
accordance with GAAP) for all Taxes (as hereinafter defined). No deficiencies
for any Taxes have been proposed, asserted, assessed or, to the knowledge of
the Company, threatened against or with respect to the Company or any of its
Subsidiaries. Except as set forth in Section 4.10(a) of the Company Disclosure
Schedule, (i) there are no liens for Taxes upon the assets of either the
Company or its Subsidiaries except for statutory liens for current Taxes not
yet due, (ii) neither the Company nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, (iii) with respect to each
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taxable period of the Company and its Subsidiaries, the federal and state
income Tax Returns of the Company and its Subsidiaries have been audited by the
Internal Revenue Service or appropriate state tax authorities or the time for
assessing and collecting income Tax with respect to such taxable period has
closed and such taxable period is not subject to review, (iv) neither the
Company nor any of its Subsidiaries has filed or been included in a combined,
consolidated or unitary income Tax Return other than one in which the Company
was the parent of the group filing such Tax Return, (v) neither the Company nor
any of its Subsidiaries is a party to any agreement providing for the
allocation or sharing of Taxes (other than the allocation of federal income
taxes as provided by Regulation 1.1552-1(a)(1) under the Code), (vi) neither
the Company nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Section 481(a) of the Code (or any similar or
corresponding provision or requirement of state, local or foreign income Tax
law), by reason of the voluntary change in accounting method (nor has any
taxing authority proposed any such adjustment or change of accounting method),
(vii) neither the Company nor any of its Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code, and (viii) neither the Company nor any
of its Subsidiaries has made any payment or provided any benefit or may be
obligated to make any payment or provide any benefit (by contract or otherwise)
which will not be deductible by reason of Section 280G or Section 162(m) of the
Code.
(b) Except as set forth in Section 4.10(b) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries owns,
directly or indirectly (including, without limitation, through partnerships,
corporations, trusts or other entities), interests in real property ("Real
Property Interests") situated in (A) New York State, which by reason of the
Merger would be subject to either (i) the New York State Real Property Transfer
Tax, or (ii) the New York City Real Property Transfer Tax (collectively, the
"New York Transfer Taxes"), or (B) any state other than New York State which by
reason of the Merger would be subject to any tax similar to the New York
Transfer Taxes. For purposes of this Section 4.10(b), Real Property Interests
include, without limitation, titles in fee, leasehold interests, beneficial
interests, encumbrances, developments rights or any other interests with the
right to use or occupy real property or the right to receive rents, profits or
other income derived therefrom, or any options or contracts to purchase real
property.
(c) For the purposes of this Agreement, "Taxes" shall mean all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to income, excise, property, sales, transfer,
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franchise, payroll, withholding, social security or other taxes, including any
interest, penalties or additions attributable thereto. For purposes of this
Agreement, "Tax Return" shall mean any return, report, information return or
other document (including any related or supporting information) with respect
to Taxes.
4.11. Employees. (a) Section 4.11(a) of the Company Disclosure
Schedule sets forth a true and correct list of each deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan, fund or
program (within the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to (the "Plans") by the Company,
any of its Subsidiaries or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), all of which together with the Company
would be deemed a "single employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the
benefit of any employee or former employee of the Company or any Subsidiary.
(b) The Company has heretofore made available to Buyer true and
correct copies of each of the Plans and all related documents, including but
not limited to (i) the actuarial report for such Plan (if applicable) for each
of the last two years, and (ii) the most recent determination letter from the
Internal Revenue Service (if applicable) for such Plan.
(c) Except as set forth in Section 4.11(c) of the Company
Disclosure Schedule, (i) each of the Plans has been operated and administered
in all material respects in accordance with its terms and applicable law,
including but not limited to ERISA and the Code, (ii) each of the Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code
either (1) has received a favorable determination letter from the IRS, or (2)
is or will be the subject of an application for a favorable determination
letter, and the Company is not aware of any circumstances likely to result in
the revocation or denial of any such favorable determination letter, (iii) with
respect to each Plan which is subject to Title IV of ERISA, the present value
of accrued benefits under such Plan, based upon the actuarial assumptions used
for funding purposes in the most recent actuarial report prepared by such
Plan's actuary with respect to such Plan, did not, as of its latest valuation
date, exceed the then current value of the assets of such Plan allocable to
such accrued benefits, (iv) no Plan provides benefits, including without
limitation
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death or medical benefits (whether or not insured), with respect to current or
former employees of the Company, its Subsidiaries or any ERISA Affiliate beyond
their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of the
Company, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost
of which is borne by the current or former employee (or his beneficiary), (v)
no liability under Title IV of ERISA has been incurred by the Company, its
Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the Company, its Subsidiaries
or an ERISA Affiliate of incurring a material liability thereunder, (vi) no
Plan is a "multiemployer pension plan," as such term is defined in Section
3(37) of ERISA, (vii) all contributions or other amounts payable by the
Company, its Subsidiaries or any ERISA Affiliates as of the Effective Time with
respect to each Plan in respect of current or prior plan years have been paid
or accrued in accordance with generally accepted accounting practices and
Section 412 of the Code, (viii) neither the Company, its Subsidiaries nor any
ERISA Affiliate has engaged in a transaction in connection with which the
Company, its Subsidiaries or any ERISA Affiliate could be subject to either a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code, (ix) there are no
pending, or, to the best knowledge of the Company, threatened or anticipated
claims or proceedings (other than routine claims for benefits) by, on behalf of
or against any of the Plans or any trusts related thereto and (x) the
consummation of the transactions contemplated by this Agreement will not (y)
entitle any current or former employee or officer of the Company or any ERISA
Affiliate to severance pay, termination pay or any other payment or benefit,
except as expressly provided in this Agreement or (z) accelerate the time of
payment or vesting or increase the amount or value of compensation or benefits
due any such employee or officer.
4.12. SEC Reports. The Company has previously made available to Buyer
a true and correct copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1997 by
the Company with the SEC pursuant to the Securities Act of 1933, as amended
(the "Securities Act") or the Exchange Act (the "Company Reports") and (b)
communication mailed by the Company to its stockholders since January 1, 1997,
and no such registration statement, prospectus, report, schedule, proxy
statement or communication contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances in which
they were made, not misleading. The Company has timely filed all Company
Reports and other
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documents required to be filed by it under the Securities Act and the Exchange
Act, and, as of their respective dates, all Company Reports complied with the
published rules and regulations of the SEC with respect thereto.
4.13. Company Information. The information relating to the Company
and its Subsidiaries which is provided to Buyer by the Company or any of its
affiliates or representatives for inclusion in the Proxy Statement and the S-4,
or in any other document filed with any other regulatory agency in connection
herewith, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to Buyer or any of its
Subsidiaries) will comply with the provisions of the Exchange Act and the rules
and regulations thereunder.
4.14. Compliance with Applicable Law. The Company and each of its
Subsidiaries hold, and have at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries knows of, or has received notice of, any violations of any of the
above.
4.15. Certain Contracts. (a) Except as set forth in Section 4.15(a)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) with respect to the employment of
any directors, officers, employees or consultants, (ii) which, upon the
consummation of the transactions contemplated by this Agreement, will (either
alone or upon the occurrence of any additional acts or events) result in any
payment or benefits (whether of severance pay or otherwise) becoming due, or
any increase in the amount of or acceleration or vesting of any rights to any
payment or benefits, from Buyer, the Company, the Surviving Corporation or any
of their respective Subsidiaries to any director, officer, employee or
consultant thereof, (iii) which is a material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the Company
Reports, (iv) which is a consulting agreement (including data processing,
software programming and licensing contracts) not terminable on 60 days or less
notice involving the payment of more than $100,000 per annum, or (v) which
materially restricts
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the conduct of any line of business by the Company or any of its Subsidiaries.
Each contract, arrangement, commitment or understanding of the type described
in this Section 4.15(a), whether or not set forth in Section 4.15(a) of the
Company Disclosure Schedule, is referred to herein as a "Company Contract." The
Company has previously delivered or made available to Buyer true and correct
copies of each Company Contract.
(b) Except as set forth in Section 4.15(b) of the Company
Disclosure Schedule, (i) each Company Contract is valid and binding and in full
force and effect, (ii) the Company and each of its Subsidiaries has performed
all obligations required to be performed by it to date under each Company
Contract, (iii) no event or condition exists which constitutes or, after notice
or lapse of time or both, would constitute, a default on the part of the
Company or any of its Subsidiaries under any Company Contract, and (iv) no
other party to such Company Contract is, to the knowledge of the Company, in
default in any respect thereunder.
4.16. Agreements with Regulatory Agencies. Except as set forth in
Section 4.16 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is subject to any cease-and-desist or other order issued by,
or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not set forth on Section 4.16
of the Company Disclosure Schedule, a "Regulatory Agreement"), any Regulatory
Agency or other Governmental Entity that restricts the conduct of its business
or that in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has the Company or any of its Subsidiaries been
advised by any Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.
4.17. Investment Securities. Section 4.17 of the Company Disclosure
Schedule sets forth the book and market value as of July 31, 1999 of the
investment securities, mortgage backed securities and securities held for sale
of the Company and its Subsidiaries. Section 4.17 of the Company Disclosure
Schedule sets forth, with respect to such securities, descriptions thereof,
CUSIP numbers, pool face values and coupon rates.
4.18. State Takeover Laws; Business Combination Provision. The Board
of Directors of the Company has approved the transactions contemplated by this
Agreement and the Option Agreement such that the provisions of Section 203 of
the DGCL and Article VIII of the Company's
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Certificate of Incorporation will not, assuming the accuracy of the
representations contained in Section 5.15 hereof, apply to this Agreement or
the Option Agreement or any of the transactions contemplated hereby or thereby.
4.19. Environmental Matters. Except as set forth in Section
4.19 of the Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries and, to the
knowledge of the Company, each of the Participation Facilities and the Loan
Properties (each as hereinafter defined) are and have been in compliance with
all applicable federal, state and local laws including common law, regulations
and ordinances and with all applicable decrees, orders and contractual
obligations relating to pollution or the discharge of, or exposure to Hazardous
Materials (as hereinafter defined) in the environment or workplace
("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or,
to the knowledge of the Company, threatened, before any Governmental Entity or
other forum in which the Company, any of its Subsidiaries, any Participation
Facility or any Loan Property, has been or, with respect to threatened
proceedings, may be, named as a defendant (x) for alleged noncompliance
(including by any predecessor), with any Environmental Laws, or (y) relating to
the release, threatened release or exposure to any Hazardous Material whether
or not occurring at or on a site owned, leased or operated by the Company or
any of its Subsidiaries, any Participation Facility or any Loan Property;
(c) During the period of (x) the Company's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) the Company's or any of its Subsidiaries' participation
in the management of any Participation Facility, or (z) to the knowledge of the
Company, the Company's or any of its Subsidiaries' interest in a Loan Property,
there has been no release of Hazardous Materials in, on, under or affecting any
such property. To the knowledge of the Company, prior to the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) the Company's or any of its Subsidiaries' interest in a Loan Property,
there was no release or threatened release of Hazardous Materials in, on, under
or affecting any such property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this
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Section 4.19: (x) "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or other regulated substances
or materials, (y) "Loan Property" means any property in which the Company or
any of its Subsidiaries holds a security interest, and, where required by the
context, said term means the owner or operator of such property; and (z)
"Participation Facility" means any facility in which the Company or any of its
Subsidiaries participates in the management and, where required by the context,
said term means the owner or operator of such property.
4.20. Derivative Transactions. Except as set forth in Section 4.20 of
the Company Disclosure Schedule, since June 30, 1998, neither Company nor any
of its Subsidiaries has engaged in transactions in or involving forwards,
futures, options on futures, swaps or other derivative instruments except (i)
as agent on the order and for the account of others, or (ii) as principal for
purposes of hedging interest rate risk on U.S. dollar-denominated securities
and other financial instruments. None of the counterparties to any contract or
agreement with respect to any such instrument is in default with respect to
such contract or agreement and no such contract or agreement, were it to be a
Loan (as defined below) held by the Company or any of its Subsidiaries, would
be classified as "Other Loans Specially Mentioned", "Special Mention",
"Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk
Assets", "Concerned Loans" or words of similar import. The financial position
of the Company and its Subsidiaries on a consolidated basis under or with
respect to each such instrument has been reflected in the books and records of
the Company and such Subsidiaries in accordance with GAAP consistently applied,
and no open exposure of the Company or any of its Subsidiaries with respect to
any such instrument (or with respect to multiple instruments with respect to
any single counterparty) exceeds $250,000.
4.21. Opinion. Prior to the execution of this Agreement, the Company
has received an opinion from Sandler O'Neill to the effect that as of the date
thereof and based upon and subject to the matters set forth therein, the
Exchange Ratio is fair to the stockholders of the Company from a financial
point of view. Such opinion has not been amended or rescinded as of the date of
this Agreement.
4.22. Approvals. As of the date of this Agreement, the Company knows
of no reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby should not be obtained.
4.23. Loan Portfolio. (a) Except as set forth in Section 4.23
of the Company Disclosure Schedule, neither the Company nor any of its
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Subsidiaries is a party to any written or oral (i) loan agreement, note or
borrowing arrangement (including, without limitation, leases, credit
enhancements, commitments, guarantees and interest-bearing assets)
(collectively, "Loans"), other than any Loan the unpaid principal balance of
which does not exceed $100,000, under the terms of which the obligor was, as of
June 30, 1999, over 90 days delinquent in payment of principal or interest or
in default of any other provision, or (ii) Loan with any director, executive
officer or five percent or greater stockholder of the Company or any of its
Subsidiaries, or to the knowledge of the Company, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. Section 4.23 of the Company Disclosure Schedule sets forth (i) all
of the Loans in original principal amount in excess of $100,000 of the Company
or any of its Subsidiaries that as of June 30, 1999, were classified by any
bank examiner (whether regulatory or internal) as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans", "Watch List" or words of
similar import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower thereunder, (ii) by
category of Loan (i.e., commercial, consumer, etc.), all of the other Loans of
the Company and its Subsidiaries that as of June 30, 1999, were classified as
such, together with the aggregate principal amount of and accrued and unpaid
interest on such Loans by category and (iii) each asset of the Company that as
of June 30, 1999, was classified as "Other Real Estate Owned" and the book
value thereof. The Company shall promptly inform Buyer in writing of any Loan
that becomes classified in the manner described in the previous sentence, or
any Loan the classification of which is changed, at any time after the date of
this Agreement.
(b) Each Loan in original principal amount in excess of $250,000
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected
and (iii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
4.24. Property. Each of the Company and its Subsidiaries has good and
marketable title free and clear of all liens, encumbrances, mortgages, pledges,
charges, defaults or equitable interests to all of the properties and assets,
real and personal, tangible or intangible, which are reflected on the
consolidated statement of financial condition of the Company as of June 30,
1999 or acquired after such date, except (i) liens
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for taxes not yet due and payable or contested in good faith by appropriate
proceedings, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of business, (iii) such imperfections of title, easements and
encumbrances, if any, as do not interfere with the use of the property as such
property is used on the date of this Agreement, (iv) for dispositions and
encumbrances of, or on, such properties or assets in the ordinary course of
business or (v) mechanics', materialmen's, workmen's, repairmen's,
warehousemen's, carrier's and other similar liens and encumbrances arising in
the ordinary course of business. All leases pursuant to which the Company or
any Subsidiary of the Company, as lessee, leases real or personal property are
valid and enforceable in accordance with their respective terms and neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
other party thereto is in default thereunder.
4.25. Reorganization. As of the date of this Agreement, the Company
has no reason to believe that the Merger will fail to qualify as a
reorganization under Section 368(a) of the Code.
4.26. Company Rights Agreement. The Company has (a) duly entered into
an appropriate amendment to the Company Rights Agreement and (b) taken all
other action necessary or appropriate, in each case so that the execution of
this Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby (including, without limitation,
the Merger) do not and will not result in the ability of any person to exercise
any rights under the Company Rights Agreement or enable or require the Company
Rights to separate from the shares of Company Common Stock to which they are
attached or to be triggered or become exercisable.
4.27. Equity and Real Estate Investments. Except as set forth in
Section 4.27 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries has (i) equity investments other than investments in wholly
owned Subsidiaries or (ii) investments in real estate or real estate
development projects, other than assets classified as "other real estate
owned."
4.28. Year 2000 Matters. Section 4.28 of the Company Disclosure
Schedule contains a true and correct copy of the Company's plan for addressing
year 2000 computer issues (the "Year 2000 Plan"). The Company is in material
compliance with the Company's Year 2000 Plan. The Company has been examined by
the OTS with respect to being "Year 2000 Compliant" and the Company's Year 2000
Plan has been reviewed by the OTS and the Company has received a "satisfactory"
rating in connection therewith, and neither the Company nor the Company Bank
has received any written
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communication from the OTS commenting adversely with respect to the ability of
the Company to become Year 2000 compliant.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Subject to Article III hereof and except as set forth in the Buyer
Disclosure Schedule, Buyer hereby represents and warrants to the Company as
follows:
5.1. Corporate Organization. (a) Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. Buyer is duly registered as a bank
holding company under the BHC Act. The Restated Certificate of Incorporation
and By-laws of Buyer, copies of which have previously been made available to
the Company, are true and correct copies of such documents as in effect as of
the date of this Agreement.
(b) North Fork Bank ("Buyer Bank") is a commercial bank duly
organized, validly existing and in good standing under the laws of the State of
New York. The deposit accounts of Buyer Bank are insured by the FDIC through
the Bank Insurance Fund to the fullest extent permitted by law, and all
premiums and assessments required in connection therewith have been paid when
due. Each of Buyer's other Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Subsidiary of Buyer has the corporate power and authority
to own or lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to do business
in each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. The articles of organization and
by-laws of Buyer Bank, copies of which have previously been made available to
the Company, are true and correct copies of such documents as in effect as of
the date of this Agreement.
(c) The minute books of Buyer and each of its Subsidiaries
contain true and correct records of all meetings and other corporate
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actions held or taken since December 31, 1996 of their respective stockholders
and Boards of Directors (including committees of their respective Boards of
Directors).
5.2. Capitalization. (a) As of the date of this Agreement, the
authorized capital stock of Buyer consists of 200,000,000 shares of Buyer
Common Stock and 10,000,000 shares of preferred stock, par value $1.00 per
share ("Buyer Preferred Stock"). As of August 23, 1999, (i) 135,802,670 shares
of Buyer Common Stock were issued and outstanding, (ii) no shares of Buyer
Preferred Stock were issued and outstanding, (iii) no shares of Buyer Common
Stock were reserved for issuance, except that 2,000,000 shares of Buyer Common
Stock were reserved for issuance pursuant to the Buyer Dividend Investment and
Stock Purchase Plan, 1,973,140 shares of Buyer Common Stock were reserved for
issuance pursuant to the Buyer 1985 Incentive Stock Option Plan, the Buyer 1987
Long-Term Incentive Plan, the Buyer 1989 Executive Management and Compensation
Plan, the Buyer 1994 Key Employee Stock Plan, the Buyer 1997 Non-Officer Stock
Plan and the Buyer 1998 Stock Compensation Plan (the "Buyer Stock Plans"), and
31,000,000 shares of Buyer Common Stock were reserved for issuance pursuant to
the Agreement and Plan of Merger, dated as of August 16, 1999, between Buyer
and JSB Financial, Inc., (iv) no shares of Buyer Preferred Stock were reserved
for issuance and (v) 9,323,852 shares of Buyer Common Stock were held by Buyer
in its treasury or by Buyer's Subsidiaries. All of the issued and outstanding
shares of Buyer Common Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. As of the date of this Agreement,
except as referred to above or reflected in Section 5.2(a) of the Buyer
Disclosure Schedule, Buyer does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Buyer Common
Stock or Buyer Preferred Stock or any other equity securities of Buyer or any
securities representing the right to purchase or otherwise receive any shares
of Buyer Common Stock or Buyer Preferred Stock or any other equity security of
the Buyer. The shares of Buyer Common Stock to be issued pursuant to the Merger
will be duly authorized and validly issued and, at the Effective Time, all such
shares will be fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof.
(b) Section 5.2(b) of the Buyer Disclosure Schedule sets forth a
true and correct list of all of the Subsidiaries of the Buyer as of the date of
this Agreement. Except as set forth in Section 5.2(b) of the Buyer Disclosure
Schedule, as of the date of this Agreement, Buyer owns, directly or indirectly,
all of the issued and outstanding shares of capital
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<PAGE>
stock of each of the Subsidiaries of Buyer, free and clear of all liens,
charges, encumbrances and security interests whatsoever, and all of such shares
are duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, no Subsidiary of Buyer has
or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character with any party that is not a direct
or indirect Subsidiary of Buyer calling for the purchase or issuance of any
shares of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares
of capital stock or any other equity security of such Subsidiary.
5.3. Authority; No Violation. (a) Buyer 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 approved by the Board of Directors of Buyer, and no other corporate
proceedings on the part of Buyer are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Buyer and (assuming due authorization,
execution and delivery by the Company) this Agreement constitutes a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 5.3(b) of the Buyer
Disclosure Schedule, neither the execution and delivery of this Agreement by
Buyer nor the consummation by Buyer of the transactions contemplated hereby,
nor compliance by Buyer with any of the terms or provisions hereof, will (i)
violate any provision of the Restated Certificate of Incorporation or By-Laws
of Buyer, or the articles of incorporation or by-laws or similar governing
documents of any of its Subsidiaries or (ii) assuming that the consents and
approvals referred to in Section 4.4 are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Buyer or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective
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properties or assets of Buyer or any of its Subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Buyer or any of its Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected.
5.4. Consents and Approvals. Except for (a) the filing of an
application with the Federal Reserve Board under the BHC Act, and approval of
such application, (b) the filing of an application with the FDIC under the Bank
Merger Act and approval of such application, in the event the parties enter
into the Bank Merger Agreement (as defined in Section 7.12), (c) the filing of
applications and notices, as applicable, with the OTS and approval of such
applications and notices, (d) the State Banking Approvals, (e) the filing with
the SEC of the Proxy Statement and the filing and declaration of effectiveness
of the S-4, (f) the approval of this Agreement by the requisite vote of the
stockholders of the Company, (g) the filing of the Certificate of Merger with
the Secretary, (h) such filings and approvals as are required to be made or
obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of the shares of Buyer Common Stock pursuant to
this Agreement, (i) approval of the listing of the Buyer Common Stock to be
issued in the Merger on the NYSE, and (j) such filings, authorizations or
approvals as may be set forth in Section 5.4 of the Buyer Disclosure Schedule,
no consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary in connection with the execution
and delivery by Buyer of this Agreement or the consummation by Buyer of the
Merger and the other transactions contemplated hereby.
5.5. Reports. Buyer and each of its Subsidiaries have 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
December 31, 1996 with any Regulatory Agency, and have paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of Buyer and its Subsidiaries, and except as set forth in Section 5.5
of the Buyer Disclosure Schedule, no Regulatory Agency has initiated any
proceeding or, to the knowledge of Buyer, investigation into the business or
operations of Buyer or any of its Subsidiaries since December 31, 1996. There
is no unresolved violation, criticism, or exception by any Regulatory Agency
with respect to any report or statement relating to any examinations of Buyer
or any of its Subsidiaries.
5.6. Financial Statements. Buyer has previously made available
to the Company copies of (a) the consolidated statements of financial
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condition of Buyer and its Subsidiaries as of December 31 for the fiscal years
1997 and 1998 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1996 through 1998,
inclusive, as reported in Buyer's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 filed with the SEC under the Exchange Act, in each
case accompanied by the audit report of KPMG LLP, independent public
accountants with respect to Buyer, and (b) the unaudited consolidated
statements of financial condition of Buyer and its Subsidiaries as of March 31,
1998 and March 31, 1999 and the related unaudited consolidated statements of
income, changes in stockholder's equity and cash flows for the three-month
periods then ended as reported in Buyer's Quarterly Report on Form 10-Q for the
period ended March 31, 1999 filed with the SEC under the Exchange Act. The
December 31, 1998 consolidated statements of financial condition of Buyer
(including the related notes, where applicable) fairly presents the
consolidated financial position of Buyer and its Subsidiaries as of the date
thereof, and the other financial statements referred to in this Section 5.6
(including the related notes, where applicable) fairly present, and the
financial statements to be filed by Buyer with the SEC after the date of this
Agreement will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount), the
results of the consolidated operations and changes in stockholders' equity and
consolidated financial position of Buyer and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth; each
of such statements (including the related notes, where applicable) complies,
and the financial statements to be filed by Buyer with the SEC after the date
of this Agreement will comply, with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto; and each
of such statements (including the related notes, where applicable) has been,
and the financial statements to be filed by Buyer with the SEC after the date
of this Agreement will be, prepared in accordance with GAAP consistently
applied during the periods involved, except as indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q. The books
and records of Buyer and its Subsidiaries have been, and are being, maintained
in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
5.7. Broker's Fees. Neither Buyer nor any Subsidiary of Buyer, nor
any of their respective officers or directors, has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement
or the Option Agreement, except that Buyer has engaged, and will pay a fee or
commission to, Donaldson, Lufkin & Jenrette Securities Corporation.
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5.8. Absence of Certain Changes or Events. (a) Except as may be set
forth in Section 5.8(a) of the Buyer Disclosure Schedule or as disclosed in any
Buyer Report filed with the SEC prior to the date of this Agreement, since
December 31, 1998, (i) neither Buyer nor any of its Subsidiaries has incurred
any liability, except in the ordinary course of their business consistent with
their past practices, and (ii) there has been no change or development or
combination of changes or developments which has had, or is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Buyer.
(b) Except as disclosed in any Buyer Report filed with the SEC
prior to the date of this Agreement, since December 31, 1998, the Buyer and its
Subsidiaries have carried on their respective businesses in the ordinary course
consistent with prudent banking practices.
(c) Since December 31, 1998, neither the Buyer nor any of its
Subsidiaries has (i)suffered any strike, work stoppage, slow-down, or other
labor disturbance, (ii) been a party to a collective bargaining agreement,
contract or other agreement or understanding with a labor union or
organization, or (iii) had any union organizing activities.
5.9. Legal Proceedings. (a) Except as set forth in Section 5.9 of the
Buyer Disclosure Schedule, neither Buyer nor any of its Subsidiaries is a party
to any and there are no pending or, to Buyer's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against Buyer or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Buyer, any of its Subsidiaries or the
assets of Buyer or any of its Subsidiaries.
5.10. Taxes. Except as set forth in Section 5.10 of the Buyer
Disclosure Schedule, each of Buyer and its Subsidiaries has (i) duly and timely
filed (including applicable extensions granted without penalty) all Tax Returns
required to be filed at or prior to the Effective Time, and such Tax Returns
are true and correct, and (ii) paid in full or made adequate provision in the
financial statements of Buyer (in accordance with GAAP) for all Taxes. No
deficiencies for any Taxes have been proposed, asserted, assessed or, to the
best knowledge of Buyer, threatened against or with respect to Buyer or any of
its Subsidiaries. Except as set forth in Section 5.10 of the Buyer Disclosure
Schedule, (i) there are no liens for Taxes upon the assets of either Buyer or
its Subsidiaries except for
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statutory liens for current Taxes not yet due, (ii) neither Buyer nor any of
its Subsidiaries has requested any extension of time within which to file any
Tax Returns in respect of any fiscal year which have not since been filed and
no request for waivers of the time to assess any Taxes are pending or
outstanding, (iii) with respect to each taxable period of Buyer and its
Subsidiaries, the federal and state income Tax Returns of Buyer and its
Subsidiaries have been audited by the Internal Revenue Service or appropriate
state tax authorities or the time for assessing and collecting income Tax with
respect to such taxable period has closed and such taxable period is not
subject to review, (iv) neither Buyer nor any of its Subsidiaries has filed or
been included in a combined, consolidated or unitary income Tax Return other
than one in which Buyer was the parent of the group filing such Tax Return, (v)
neither Buyer nor any of its Subsidiaries is a party to any agreement providing
for the allocation or sharing of Taxes (other than the allocation of federal
income taxes as provided by Regulation 1.1552-1(a)(1) under the Code), (vi)
neither Buyer nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Section 481(a) of the Code (or any similar or
corresponding provision or requirement of state, local or foreign income Tax
law), by reason of the voluntary change in accounting method (nor has any
taxing authority proposed in writing any such adjustment or change of
accounting method), and (vii) neither Buyer nor any of its Subsidiaries has
filed a consent pursuant to Section 341(f) of the Code.
5.11. Employees. (a) Section 5.11(a) of the Buyer Disclosure Schedule
sets forth a true and correct list of each deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(1) of the ERISA); "pension" plan, fund
or program (within the meaning of section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to as of the date of this
Agreement (the "Buyer Plans") by Buyer, any of its Subsidiaries or by any trade
or business, whether or not incorporated (a "Buyer ERISA Affiliate"), all of
which together with Buyer would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of Buyer, any Subsidiary or any Buyer ERISA Affiliate.
(b) Except as set forth in Section 5.11(b) of the Buyer Disclosure
Schedule, (i) each of the Buyer Plans has been operated and administered in
accordance with its terms and applicable law, including but not limited to
ERISA and the Code, (ii) each of the Buyer Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has either (1) received a
favorable determination letter from the IRS, or (2) is or
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will be the subject of an application for a favorable determination letter, and
Buyer is not aware of any circumstances likely to result in the revocation or
denial of any such favorable determination letter, (iii) with respect to each
Buyer Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such Buyer Plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such Buyer
Plan's actuary with respect to such Buyer Plan, did not, as of its latest
valuation date, exceed the then current value of the assets of such Buyer Plan
allocable to such accrued benefits, (iv) no Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees of Buyer, its Subsidiaries or any Buyer
ERISA Affiliate beyond their retirement or other termination of service, other
than (w) coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in Section
3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the
books of Buyer, its Subsidiaries or the ERISA Affiliates or (z) benefits the
full cost of which is borne by the current or former employee (or his
beneficiary), (v) no liability under Title IV of ERISA has been incurred by
Buyer, its Subsidiaries or any Buyer ERISA Affiliate that has not been
satisfied in full and no condition exists that presents a material risk to the
Buyer, its Subsidiaries or an ERISA Affiliate of incurring a material liability
thereunder, (vi) no Buyer Plan is a "multiemployer pension plan," as such term
is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts
payable by Buyer, its Subsidiaries or any ERISA Affiliate as of the Effective
Time with respect to each Plan in respect of current or prior plan years have
been paid or accrued in accordance with generally accepted accounting practices
and Section 412 of the Code, (viii) neither Buyer, its Subsidiaries nor any
Buyer ERISA Affiliate has engaged in a transaction in connection with which
Buyer, its Subsidiaries or any Buyer ERISA Affiliate could be subject to either
a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code, (ix) there are no
pending, or, to the best knowledge of Buyer, threatened or anticipated claims
or proceedings (other than routine claims for benefits) by, on behalf of or
against any of the Buyer Plans or any trusts related thereto and (x) the
consummation of the transactions contemplated by this Agreement will not (y)
entitle any current or former employee or officer of Buyer or any Buyer ERISA
Affiliate to severance pay, termination pay or any other payment or benefit,
except as expressly provided in this Agreement or (z) accelerate the time of
payment or vesting or increase in the amount or value of compensation or
benefits due any such employee or officer.
5.12. SEC Reports. Buyer has previously made available to the Company
a true and correct copy of each (a) final registration statement,
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prospectus, report, schedule and definitive proxy statement filed since January
1, 1997 by Buyer with the SEC pursuant to the Securities Act or the Exchange
Act (the "Buyer Reports") and (b) communication mailed by Buyer to its
stockholders since January 1, 1997, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Buyer has timely filed all Buyer Reports and other documents required to be
filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all Buyer Reports complied with the published rules and
regulations of the SEC with respect thereto.
5.13. Buyer Information. The information relating to Buyer and its
Subsidiaries to be contained in the Proxy Statement and the S-4, or in any
other document filed with any other regulatory agency in connection herewith,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The S-4 will comply with
the provisions of the Securities Act and the rules and regulations thereunder.
5.14. Compliance with Applicable Law. Buyer and each of its
Subsidiaries hold, and have at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to
Buyer or any of its Subsidiaries, and neither Buyer nor any of its Subsidiaries
knows of, or has received notice of violation of, any violations of any of the
above.
5.15. Ownership of Company Common Stock. (a) Except for the Option
Agreement and 55,000 shares of Company Common Stock beneficially owned by
Buyer, neither Buyer nor any of its affiliates or associates (as such terms are
defined under the Exchange Act), (i) beneficially owns, directly or indirectly,
or (ii) is a party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each case, any shares
of capital stock of the Company (other than Trust Account Shares and DPC
Shares).
(b) Neither Buyer nor any of its Subsidiaries is an "affiliate"
(as such term is defined in DGCL section 203(c)(1)) or an "associate" (within
the meaning of DGCL section 203(c)(2)) of the Company or an "Interested
Stockholder" (as such term is defined in Article VIII of
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the Company's Certificate of Incorporation).
5.16. Agreements with Regulatory Agencies. Neither Buyer nor any of
its Subsidiaries is subject to any cease-and-desist or other order issued by,
or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not set forth in Section 5.16
of the Buyer Disclosure Schedule, a "Buyer Regulatory Agreement"), any
Regulatory Agency or other Governmental Entity that restricts the conduct of
its business or that in any manner relates to its capital adequacy, its credit
policies, its management or its business, nor has Buyer or any of its
Subsidiaries been advised by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any Regulatory Agreement.
5.17. Approvals. As of the date of this Agreement, Buyer knows of no
reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby should not be obtained.
5.18. Tax Treatment for the Merger; Reorganization. As of the date of
this Agreement, Buyer has no reason to believe that the Merger will fail to
qualify as a reorganization under Section 368(a) of the Code.
5.19. Environmental Matters. Except as set forth in Section
5.19 of the Buyer Disclosure Schedule:
(a) Each of Buyer and its Subsidiaries and, to the knowledge of
the Buyer, each of the Participation Facilities and the Loan Properties (each
as hereinafter defined) are and have been in compliance with all Environmental
Laws;
(b) There is no suit, claim, action or proceeding, pending or,
to the knowledge of Buyer, threatened, before any Governmental Entity or other
forum in which Buyer, any of its Subsidiaries, any Participation Facility or
any Loan Property, has been or, with respect to threatened proceedings, may be,
named as a defendant (x) for alleged noncompliance (including by any
predecessor) with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by Buyer or any of its
Subsidiaries, any Participation Facility or any Loan Property. As used in this
Section 5.19, "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or other regulated substances
or materials;
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(c) During the period of (x) Buyer's or any of its Subsidiaries'
ownership or operation of any of their respective current or former properties,
(y) Buyer's or any of its Subsidiaries' participation in the management of any
Participation Facility, or (z) to the knowledge of the Buyer, Buyer's or any of
its Subsidiaries' interest in a Loan Property, there has been no release of
Hazardous Materials in, on, under or affecting any such property. To the
knowledge of the Buyer, prior to the period of (x) Buyer's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Buyer's or any of its Subsidiaries' participation in the
management of any Participation Facility, or (z) Buyer's or any of its
Subsidiaries' interest in a Loan Property, there was no release of Hazardous
Materials in, on, under or affecting any such property, Participation Facility
or Loan Property; and
(d) The following definitions apply for purposes of this Section
5.19: (x) "Loan Property" means any property in which Buyer or any of its
Subsidiaries holds a security interest, and, where required by the context,
said term means the owner or operator of such property; and (y) "Participation
Facility" means any facility in which Buyer or any of its Subsidiaries
participates in the management and, where required by the context, said term
means the owner or operator of such property.
5.20. Loan Portfolio. Section 5.20 of the Buyer Disclosure Schedule
sets forth, by category, the aggregate book value amount of (i) all of the
Loans in original principal amount in excess of $100,000 of the Buyer or any of
its Subsidiaries that as of July 31, 1999, were classified by any bank examiner
(whether regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized",
"Credit Risk Assets", "Concerned Loans", "Watch List" or words of similar
import, together with the principal amount of and accrued and unpaid interest
on each such Loan and the identity of the borrower thereunder and (ii) all
assets of the Buyer that as of June 30, 1999, were classified as "Other Real
Estate Owned".
(b) Each Loan in original principal amount in excess of $250,000
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected
and (iii) is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
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5.21. Property. Each of the Buyer and its Subsidiaries has good and
marketable title free and clear of all liens, encumbrances, mortgages, pledges,
charges, defaults or equitable interests to all of the properties and assets,
real and personal, tangible or intangible, which are reflected on the
consolidated statement of financial condition of the Buyer as of June 30, 1999
or acquired after such date, except (i) liens for taxes not yet due and payable
or contested in good faith by appropriate proceedings, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of business, (iii)
such imperfections of title, easements and encumbrances, if any, as do not
interfere with the use of the property as such property is used on the date of
this Agreement, (iv) for dispositions and encumbrances of, or on, such
properties or assets in the ordinary course of business or (v) mechanics',
materialmen's, workmen's, repairmen's, warehousemen's, carrier's and other
similar liens and encumbrances arising in the ordinary course of business. All
leases pursuant to which the Buyer or any Subsidiary of the Buyer, as lessee,
leases real or personal property are valid and enforceable in accordance with
their respective terms and neither the Buyer nor any of its Subsidiaries nor,
to the knowledge of the Buyer, any other party thereto is in default
thereunder.
5.22. Derivative Transactions. Except as set forth in Section 5.22 of
the Buyer Disclosure Schedule, since December 31, 1998, neither Buyer nor any
of its Subsidiaries has engaged in transactions in or involving forwards,
futures, options on futures, swaps or other derivative instruments except (i)
as agent on the order and for the account of others, or (ii) as principal for
purposes of hedging interest rate risk on U.S. dollar-denominated securities
and other financial instruments. None of the counterparties to any contract or
agreement with respect to any such instrument is in default with respect to
such contract or agreement and no such contract or agreement, were it to be a
Loan (as defined below) held by the Buyer or any of its Subsidiaries, would be
classified as "Other Loans Specially Mentioned", "Special Mention",
"Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk
Assets", "Concerned Loans" or words of similar import. The financial position
of Buyer and its Subsidiaries on a consolidated basis under or with respect to
each such instrument has been reflected in the books and records of Buyer and
such Subsidiaries in accordance with GAAP consistently applied, and no open
exposure of Buyer or any of its Subsidiaries with respect to any such
instrument (or with respect to multiple instruments with respect to any single
counterparty) exceeds $250,000.
5.23. Year 2000 Matters. Section 5.23 of the Buyer Disclosure
Schedule contains a true and correct copy of the Buyer's plan for
addressing year 2000 computer issues (the "Year 2000 Plan"). The Buyer is
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in material compliance with the Buyer's Year 2000 Plan.
5.24. Insurance. The Buyer and its Subsidiaries are presently
insured, and since December 31, 1998, have been insured, for reasonable amounts
with financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by the Buyer and its Subsidiaries are in full force and effect, the
Buyer and its Subsidiaries are not in default thereunder and all material
claims thereunder have been filed in due and timely fashion.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of the Company. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or the Option Agreement or with the
prior written consent of Buyer, the Company and its Subsidiaries shall carry on
their respective businesses in the ordinary course consistent with past
practice and consistent with prudent banking practice. The Company will use its
best efforts to (x) preserve its business organization and that of its
Subsidiaries intact, (y) keep available to itself and Buyer the present
services of the employees of the Company and its Subsidiaries and (z) preserve
for itself and Buyer the goodwill of the customers of the Company and its
Subsidiaries and others with whom business relationships exist. Without
limiting the generality of the foregoing, and except as set forth in Section
6.1 of the Company Disclosure Schedule or as otherwise contemplated by this
Agreement or consented to in writing by Buyer, the Company shall not, and shall
not permit any of its Subsidiaries to:
(a) solely in the case of the Company, declare or pay any
dividends on, or make other distributions in respect of, any of its capital
stock, other than normal quarterly dividends not in excess of $0.21 per share
of Company Common Stock;
(b) (i) split, combine or reclassify any shares of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, (ii)
repurchase, redeem or otherwise acquire (except for the acquisition of Trust
Account Shares and DPC Shares, as such terms are defined in Section 1.4(b)
hereof) any shares of the capital stock of the Company or any Subsidiary of the
Company, or any securities convertible
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into or exercisable for any shares of the capital stock of the Company or any
Subsidiary of the Company; or (iii) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock or
any securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with respect
to any of the foregoing, except, in the case of clauses (i) and (iii), for the
issuance of Company Common Stock upon the exercise or fulfillment of rights or
options issued or existing pursuant to employee benefit plans, programs or
arrangements, all to the extent outstanding and in existence on the date of
this Agreement and in accordance with their present terms;
(c) amend its Certificate of Incorporation, By-laws or other
similar governing documents;
(d) authorize any of its officers, directors, or agents to
directly or indirectly solicit, initiate or encourage any inquiries relating
to, or the making of any proposal which constitutes, a "takeover proposal" (as
defined below), or recommend or endorse any takeover proposal, or participate
in any discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal or otherwise facilitate
any effort or attempt to make or implement a takeover proposal; provided,
however, that the Company may communicate information about any such takeover
proposal to its stockholders if, in the judgment of the Company's Board of
Directors, based upon the advice of outside counsel, such communication is
required under applicable law; provided further, however, that nothing
contained in this Section 6.1(d) shall prohibit the Company from furnishing
information to, or entering into discussions or negotiations with, any person
or entity that makes an unsolicited, bona fide takeover proposal that
constitutes a Superior Proposal (as defined below) in each case if, and only to
the extent that (A) such actions occur at a time prior to approval of the
Merger Agreement by the Company's stockholders, (B) the Board of Directors of
the Company concludes in good faith, after consultation with and based upon the
advice of outside counsel, that it is required to do so in order to comply with
its fiduciary duties to the Company's stockholders under applicable law, and
(C) prior to taking such action, the Company receives from such person or
entity an executed confidentiality agreement and an executed standstill
agreement, each in reasonably customary form (provided that such agreements
shall contain terms that are no less restrictive than the terms of any such
agreement between Buyer and the Company). For purposes of this Agreement,
"Superior Proposal" means any bona fide written takeover proposal for or in
respect of all of the outstanding shares of Company Common Stock, (i) on terms
that the Board of Directors of the Company determines in its good faith
judgment (after consultation with a
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financial advisor of nationally recognized reputation and taking into account
all the terms and conditions of the takeover proposal deemed relevant by such
Board of Directors, including the consideration to be paid pursuant thereto,
any break-up fees, expense reimbursement provisions, conditions to
consummation, and the ability of the party making such proposal to obtain
financing therefor) are more favorable from a financial point of view to its
stockholders than the Merger, and (ii) that constitutes a transaction that, in
such Board of Directors' good faith judgment, is reasonably likely to be
consummated on the terms set forth, taking into account all legal, financial,
regulatory and other aspects of such proposal. The Company will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations previously conducted with any parties other than Buyer with
respect to any of the foregoing. The Company will take all actions necessary or
advisable to inform the appropriate individuals or entities referred to in the
first sentence hereof of the obligations undertaken in this Section 6.1(d). The
Company will notify Buyer immediately if any such inquiries or takeover
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, the
Company, and the Company will promptly inform Buyer in writing of all of the
relevant details with respect to the foregoing. As used in this Agreement,
"takeover proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving the Company or
any Subsidiary of the Company or any proposal or offer to acquire in any manner
a substantial equity interest in, or a substantial portion of the assets of,
the Company or any Subsidiary of the Company other than the transactions
contemplated or permitted by this Agreement and the Option Agreement;
(e) make any capital expenditures other than those which (i) are
made in the ordinary course of business or are necessary to maintain existing
assets in good repair and (ii) in any event are in an amount of no more than
$500,000 in the aggregate;
(f) enter into any new line of business;
(g) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire any assets, which would be material,
individually or in the aggregate, to the Company, other than in connection with
foreclosures, settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business consistent with prudent
banking practices;
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(h) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Article VIII not being satisfied;
(i) change its methods of accounting in effect at June 30, 1998
except as required by changes in GAAP or regulatory accounting principles as
concurred to by the Company's independent auditors;
(j) (i) except as required by applicable law or as required to
maintain qualification pursuant to the Code, adopt, amend, renew or terminate
any employee benefit plan (including, without limitation, any Plan) or any
agreement, arrangement, plan or policy between the Company or any Subsidiary of
the Company and one or more of its current or former directors, officers or
employees or (ii) except for normal increases in the ordinary course of
business consistent with past practice or except as required by applicable law,
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Plan or agreement as
in effect as of the date hereof (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares);
(k) take or cause to be taken any action which would disqualify
the Merger as a tax free reorganization under Section 368(a) of the Code;
(l) other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements;
(m) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity;
(n) file any application to relocate or terminate the operations
of any banking office of it or any of its Subsidiaries;
(o) make any equity investment or commitment to make such
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an investment in real estate or in any real estate development project, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with prudent banking practices;
(p) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective properties is bound;
(q) other than in prior consultation with Buyer, restructure or
materially change its investment securities portfolio, through purchases, sales
or otherwise, or the manner in which the portfolio is classified or reported;
or
(r) agree to do any of the foregoing.
6.2. Covenants of Buyer. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or the Option Agreement or with the
prior written consent of the Company, Buyer and its Subsidiaries shall carry on
their respective businesses in the ordinary course consistent with prudent
banking practice. Except as set forth in Section 6.2 of the Buyer Disclosure
Schedule or as otherwise contemplated by this Agreement or consented to in
writing by the Company, Buyer shall not, and shall not permit any of its
Subsidiaries to:
(a) solely in the case of Buyer, declare or pay any
extraordinary or special dividends on or make any other extraordinary or
special distributions in respect of any of its capital stock; provided,
however, that nothing contained herein shall prohibit Buyer from increasing the
quarterly cash dividend on the Buyer Common Stock;
(b) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Article VIII not being satisfied;
(c) change its methods of accounting in effect at December 31,
1998, except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by Buyer's independent auditors;
(d) take or cause to be taken any action which would
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disqualify the Merger as a tax free reorganization under Section 368(a) of
the Code; or
(e) change any provisions of the Certificate of Incorporation of
the Buyer, other than as disclosed in Section 6.2(e) of the Buyer Disclosure
Schedule;
(f) agree to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters. (a) The Company shall promptly prepare and
file with the SEC the Proxy Statement and Buyer shall promptly prepare and file
with the SEC the S-4, in which the Proxy Statement will be included as a
prospectus. Each of the Company and Buyer shall use all reasonable efforts to
have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing, and the Company shall thereafter mail the Proxy
Statement to its stockholders. Buyer shall also 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 Agreement, and the
Company shall furnish all information concerning the Company and the holders of
Company Common Stock as may be reasonably requested in connection with any such
action.
(b) The parties hereto shall cooperate with each other and use
their reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement. The Company and Buyer shall have the right to review in advance, and
to the extent practicable each will consult the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
relating to the Company or Buyer, as the case may be, and any of their
respective Subsidiaries, which appears in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals
and authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party
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will keep the other apprised of the status of matters relating to completion of
the transactions contemplated herein.
(c) Buyer and the Company shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries,
directors, officers and stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Proxy Statement, the
S-4 or any other statement, filing, notice or application made by or on behalf
of Buyer, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement.
(d) Buyer and the Company shall promptly furnish each other with
copies of written communications received by Buyer or the Company, as the case
may be, or any of their respective Subsidiaries, Affiliates or Associates (as
such terms are defined in Rule 12b-2 under the Exchange Act as in effect on the
date of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
7.2. Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Company shall, and
shall cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of Buyer, access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments, records, officers, employees,
accountants, counsel and other representatives and, during such period, the
Company shall, and shall cause its Subsidiaries to, make available to Buyer (i)
a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
Federal securities laws or Federal or state banking laws (other than reports or
documents which the Company is not permitted to disclose under applicable law)
and (ii) all other information concerning its business, properties and
personnel as Buyer may reasonably request. Neither the Company nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of the
Company's customers, jeopardize any attorney-client privilege or contravene any
law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties hereto
will make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(b) Upon reasonable notice and subject to applicable laws
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relating to the exchange of information, Buyer shall, and shall cause its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Company, access, during normal business hours
during the period prior to the Effective Time, to such information regarding
Buyer and its Subsidiaries as shall be reasonably necessary for the Company to
fulfill its obligations pursuant to this Agreement to assist in the preparation
of the Proxy Statement or which may be reasonably necessary for the Company to
confirm that the representations and warranties of Buyer contained herein are
true and correct and that the covenants of Buyer contained herein have been
performed in all material respects. Neither Buyer nor any of its Subsidiaries
shall be required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of Buyer's
customers, jeopardize any attorney-client privilege or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(c) All information furnished by either party to the other party
or its representatives pursuant hereto shall be treated as the sole property of
the delivery party and, if the Merger shall not occur, the receiving party and
its representatives shall return to the delivering party all of such written
information and all documents, notes, summaries or other materials containing,
reflecting or referring to, or derived from, such information. The receiving
party shall, and shall use its best efforts to cause its representatives to,
keep confidential all such information, and shall not directly or indirectly
use such information for any competitive or other commercial purpose. The
obligation to keep such information confidential shall continue for ten years
from the date the proposed Merger is abandoned and shall not apply to (i) any
information which (x) was already in the receiving party's possession prior to
the disclosure thereof by the delivering party; (y) was then generally known to
the public; or (z) was disclosed to the receiving party by a third party not
bound by an obligation of confidentiality or (ii) disclosures made as required
by law. It is further agreed that, if in the absence of a protective order or
the receipt of a waiver hereunder the receiving party is nonetheless, in the
opinion of its counsel, compelled to disclose information concerning delivering
party to any tribunal or governmental body or agency or else stand liable for
contempt or suffer other censure or penalty, the receiving party may disclose
such information to such tribunal or governmental body or agency without
liability hereunder.
(d) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
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covenants or agreements of the other set forth herein.
7.3. Stockholder Meetings. The Company shall take all steps necessary
to duly call, give notice of, convene and hold a meeting of its stockholders to
be held as soon as is reasonably practicable after the date on which the S-4
becomes effective for the purpose of voting upon the approval of this Agreement
and the consummation of the transactions contemplated hereby. The Company will,
through its Board of Directors, recommend to its stockholders approval of this
Agreement and the transactions contemplated hereby and such other matters as
may be submitted to its stockholders in connection with this Agreement;
provided, however, that nothing shall prohibit the Board of Directors of the
Company from withdrawing or modifying in a manner adverse to Buyer such
recommendation to the Company's stockholders if (a) the Company is not in
breach of, and has not breached, any of the provisions of Section 6.1(d), (b)
the Company receives an unsolicited, bona fide written takeover proposal which
constitutes a Superior Proposal (each as defined in Section 6.1(d)), and (c)
the Board of Directors of the Company determines in good faith that it is
required to take such action, but only after consultation with outside counsel
and only if such outside counsel concludes and advises the Board that the
failure to take such action would result in a violation of its fiduciary duties
under applicable law.
7.4. Legal Conditions to Merger. Each of Buyer and the Company shall,
and shall cause its Subsidiaries to, use their reasonable best efforts (a) to
take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or its Subsidiaries with respect to the Merger and, subject to the conditions
set forth in Article VIII hereof, to consummate the transactions contemplated
by this Agreement and (b) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party which is required to be
obtained by the Company or Buyer or any of their respective Subsidiaries in
connection with the Merger and the other transactions contemplated by this
Agreement, and to comply with the terms and conditions of such consent,
authorization, order or approval.
7.5. Affiliates. The Company shall use its reasonable best efforts to
cause each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act) of the Company to deliver
to Buyer, as soon as practicable after the date of this Agreement, a written
agreement, in the form of Exhibit 7.5 hereto.
7.6. Stock Exchange Listing. Buyer shall use all reasonable
efforts to cause the shares of Buyer Common Stock to be issued in the
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Merger to be approved for listing on the NYSE, subject to official notice of
issuance, as of the Effective Time.
7.7. Employee Benefit Plans; Existing Agreements. (a) As soon as
practicable following the Effective Time, the employees of the Company and its
Subsidiaries (the "Company Employees") shall be eligible to participate in
Buyer's employee benefit plans in which similarly situated employees of Buyer
or Buyer Bank participate, to the same extent as similarly-situated employees
of Buyer or Buyer Bank (it being understood that inclusion of Company Employees
in Buyer's employee benefit plans may occur at different times with respect to
different plans) provided, however, that Buyer shall continue the comparable
plans of Company and its Subsidiaries for the exclusive benefit of Company
Employees until such time Company Employees become eligible to participate in
the plans of Buyer or Buyer Bank. Company's ESOP shall terminate as of the
Effective Time and prior to such time Company shall make contributions to the
ESOP sufficient to enable the trustee of the plan to repay in full all
outstanding acquisition loans of the plan. If Company cannot make contributions
sufficient to enable the trustee to repay such loans in full by reasons of the
operation of Section 415(c) of the Code then, in accordance with the terms of
the ESOP, the trustee shall sell a number of shares sufficient to repay the
remaining portion of the loan. All shares of stock and cash held by the plan as
of the Effective Time shall be allocated to participants of the ESOP in
accordance with its terms.
(b) With respect to each Buyer Plan that is an "employee benefit
plan," as defined in Section 3(3)of ERISA, for purposes of determining
eligibility to participate, vesting, and entitlement to benefits, including for
severance benefits and vacation entitlement (but not for accrual of pension
benefits), service with the Company and its Subsidiaries shall be treated as
service with Buyer; provided however, that such service shall not be recognized
to the extent that such recognition would result in a duplication of benefits.
Such service also shall apply for purposes of satisfying any waiting periods,
evidence of insurability requirements, or the application of any preexisting
condition limitations. Company Employees shall be given credit for amounts paid
under a corresponding benefit plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the Buyer
Plan.
(c) Buyer shall honor and shall cause the appropriate Subsidiaries of
Buyer to honor and Company shall pay at the Closing Date, in accordance with
their terms all employment, severance and other compensation agreements and
arrangements existing prior to the execution of this Agreement which are
between the Company or any of its Subsidiaries and
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any director, officer or employee thereof and which have been disclosed in the
Company Disclosure Schedule and previously have been delivered to Buyer. All
payments under employment and change in control agreements, identified in
Section 4.15(a) of the Company Disclosure Schedule between the Company or its
Subsidiaries and individual officers and employees of the Company or its
Subsidiaries shall be paid by the Company at the Closing Date regardless of
whether or not such individual continues in employment with Buyer or its
Subsidiaries. The Company Disclosure Schedule sets forth the reasonable, good
faith estimates of amounts payable under employment and severance agreements
between the Company or its Subsidiaries and certain individuals and the amounts
shown and methodology used in preparing such estimates shall be followed in
determining the actual amounts payable under such agreements.
(d) Employees of the Company and its Subsidiaries shall be entitled
to receive payment for accrued but unused vacation days and any accrued but
unused vacation days of employees of the Company or its Subsidiaries as of the
Closing Date shall, at the employee's option, either be paid immediately prior
to the Closing Date or taken as vacation as soon as practicable following the
Closing Date; provided, however, that the Company shall deliver to Buyer, not
later than fifteen (15) business days after the date of this Agreement, a
schedule of employees indicating their accrued but unused vacation days as of
the most recent date practicable.
(e) The Company or its Subsidiaries shall pay bonuses in accordance
with its past practices through December 31, 1999, and the compensation with
respect to which bonuses are paid for any individual shall be for the period of
time that has elapsed since the payment of the last bonus. At the Closing Date
each Company Employee shall be entitled to receive a bonus equal to the bonus
received by such Company Employee for the period ended as of December 31, 1999,
multiplied by a fraction, the numerator of which shall be the number of days
from December 31 through the date on which the Closing Date occurs and the
denominator of which is 366 (in the case of employees who were paid annual
bonuses as of December 31) and 180 days (in the case of employees who received
semi annual bonuses as of both June 30 and December 31), as the case may be.
7.8. Indemnification. (a) In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior to the Effective
Time, a director or officer of the Company or any of its Subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part
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out of, or pertaining to (i) the fact that he is or was a director or officer
of the Company, any of the Subsidiaries of the Company or any of their
respective predecessors or (ii) this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before or after
the Effective Time, the parties hereto agree to cooperate and use their best
efforts to defend against and respond thereto. It is understood and agreed that
after the Effective Time, Buyer shall indemnify and hold harmless, as and to
the extent permitted by law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them
after consultation with Buyer; provided, however, that (1) Buyer shall have the
right to assume the defense thereof with counsel reasonably acceptable to the
Indemnified party and upon such assumption Buyer shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if Buyer elects not to assume such defense or counsel for
the Indemnified Parties reasonably advises that there are issues which raise
conflicts of interest between Buyer and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Buyer, and Buyer shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (2) Buyer shall in all cases be
obligated pursuant to this paragraph to pay for only one firm of counsel with
respect to any claim, action or suit for all Indemnified Parties, (3) Buyer
shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld) and (4) Buyer shall
have no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim Indemnification under this Section 7.8, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify promptly Buyer thereof, provided that the failure to so notify shall not
affect the obligations of Buyer under this Section 7.8 except to the extent
such failure to notify prejudices Buyer. Buyer's obligations under this Section
7.8 shall continue in full force and effect for a period of six (6) years from
the Effective Time; provided, however, that all rights to
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indemnification in respect of any claim (a "Claim") asserted or made within
such period shall continue until the final disposition of such Claim.
(b) Buyer shall cause the persons serving as officers and
directors of the Company immediately prior to the Effective Time to be covered
for a period of six (6) years from the Effective Time by the directors' and
officers' liability insurance policy maintained by the Company (provided that
Buyer may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are not less advantageous than
such policy) with respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in their capacity as
such; provided, however, that in no event shall Buyer be required to expend on
an annual basis more than 175% of the current amount expended by the Company
(the "Insurance Amount") to maintain or procure insurance coverage, and further
provided that if Buyer is unable to maintain or obtain the insurance called for
by this Section 7.8(b) Buyer shall use all reasonable efforts to obtain as much
comparable insurance as is available for the Insurance Amount.
(c) In the event Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Buyer
assume the obligations set forth in this section.
(d) The provisions of this Section 7.8 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
7.9. Additional Agreements. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by Buyer.
7.10. Advice of Changes. Buyer and the Company shall promptly advise
the other party of any change or event having a Material Adverse Effect on it
or which it believes would or would be reasonably likely to cause or constitute
a material breach of any of its representations, warranties or covenants
contained herein. From time to time prior to the
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Effective Time (and on the date prior to the Closing Date), each party will
supplement or amend its Disclosure Schedules delivered in connection with the
execution of this Agreement to reflect any matter which, if existing, occurring
or known at the date of this Agreement, would have been required to be set
forth or described in such Disclosure Schedules or which is necessary to
correct any information in such Disclosure Schedules which has been rendered
inaccurate thereby. No supplement or amendment to such Disclosure Schedules
shall have any effect for the purpose of determining satisfaction of the
conditions set forth in Sections 8.2(a) or 8.3(a) hereof, as the case may be,
or the compliance by the Company or Buyer, as the case may be, with the
respective covenants and agreements of such parties contained herein.
7.11. Current Information. (a) During the period from the date of
this Agreement to the Effective Time, the Company will cause one or more of its
designated representatives to confer on a regular and frequent basis (not less
than monthly) with representatives of Buyer and to report the general status of
the ongoing operations of the Company and its Subsidiaries. The Company will
promptly notify Buyer of any material change in the normal course of business
or in the operation of the properties of the Company or any of its Subsidiaries
and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the
institution or the threat of significant litigation involving the Company or
any of its Subsidiaries, and will keep Buyer fully informed of such events.
(b) During the period from the date of this Agreement to the
Effective Time, Buyer shall inform the Company of any proposed acquisition or
merger transaction involving Buyer.
7.12. Execution and Authorization of Bank Merger Agreement. As soon
as reasonably practicable following a request made by Buyer, (a) Buyer shall
(i) cause the Board of Directors of Buyer Bank to approve an Agreement and Plan
of Merger providing for the merger of Company Bank into Buyer Bank (the "Bank
Merger Agreement"), (ii) cause Buyer Bank to execute and deliver the Bank
Merger Agreement, and (iii) approve the Bank Merger Agreement as the sole
stockholder of Buyer Bank, and (b) the Company shall (i) cause the Board of
Directors of the Company Bank to approve the Bank Merger Agreement, (ii) cause
the Company Bank to execute and deliver the Bank Merger Agreement, and (iii)
approve the Bank Merger Agreement as the sole stockholder of the Company Bank.
The Bank Merger Agreement shall contain terms that are normal and customary in
light of the transactions contemplated hereby and such additional terms as are
necessary to carry out the purposes of this Agreement.
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7.13. Coordination of Dividends. From the date of this Agreement to
the Effective Time, each of Buyer and the Company shall coordinate with the
other the declaration, record and payment dates with respect to dividends in
respect of the Buyer Common Stock and the Company Common Stock and the record
dates and payments dates relating thereto, it being the intention of the
parties that the holders of Buyer Common Stock or Company Common Stock shall
not receive more than one dividend, or fail to receive one dividend, for any
single calendar quarter with respect to their shares of Buyer Common Stock
and/or Company Common Stock and any shares of Buyer Common Stock any holder of
Company Common Stock receives in exchange therefor in the Merger.
7.14. Directorship. Effective as of the Effective Time, Buyer shall
cause its Board of Directors to be expanded by one member and shall appoint
Raymond A. Nielsen to fill the vacancy on Buyer's Board of Directors created by
such increase as of the Effective Time and shall cause Mr. Nielsen to be
nominated for election to the Board of Directors for a period not less than
three (3) years.
7.15. Accountants' Letter. The Company shall use its reasonable
efforts to cause to be delivered to Buyer a letter of its independent public
accountants dated (i) the date on which the S-4 shall become effective and (ii)
a date shortly prior to the Effective Time, and addressed to Buyer, in form and
substance customary for "comfort" letters delivered by independent accountants
in accordance with Statement of Financial Accounting Standards No. 72.
7.16. Certain Revaluations, Changes and Adjustments. At or before the
Effective Time, upon the request of Buyer, the Company shall, consistent with
GAAP, modify and change its loan, litigation and real estate valuation policies
and practices (including loan classifications and levels of reserves) so as to
be applied consistently on a mutually satisfactory basis with those of Buyer
and establish such accruals and reserves as shall be necessary to reflect
Merger-related expenses and costs incurred by the Company, provided, however,
that the Company shall not be required to take such action unless Parent
acknowledges in writing that all conditions to closing set forth in Article
VIII have been satisfied or waived (other than those conditions relating to
delivery of documents on the Closing Date); provided further, however, that no
accrual or reserve made by the Company or any Company Subsidiary pursuant to
this Section 7.16 shall constitute or be deemed to be a breach, violation of or
failure to satisfy any representation, warranty, covenant, condition or other
provision of this Agreement or otherwise be considered in determining whether
any such breach, violation or failure to satisfy shall have occurred.
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7.17. Year 2000. Each of Buyer and the Company shall use its
commercially reasonable efforts to implement its respective Y2K Plan. At the
request of the other party, each of Buyer and the Company shall periodically
update the other party regarding its process with respect to its Y2K Plan.
7.18. It is understood by the parties that the Merger shall be
accounted for under the Purchase Method of accounting. Accordingly, the parties
agree to use all reasonable efforts to cause the Effective Time to occur prior
to the consummation of the Merger of Buyer with JSB Financial, Inc. pursuant to
the Agreement and Plan of Merger between such parties dated as of August 16,
1999.
7.19. Advisory Board. Buyer shall, as of the Effective Time, invite
Gerald M. Sauvigne and all of the members of the Company's Board of Directors
as of the date of this Agreement, other than Mr. Nielsen, who are willing to
serve to be appointed as members of Buyer's advisory board (the "Advisory
Board"). The members of the Advisory Board who are willing to so serve shall be
elected to a term of three (3) years beginning on the Closing Date and shall
receive an annual retainer fee in the amount set forth in Section 7.19 of the
Buyer Disclosure Schedule.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the holders of the outstanding
shares of Company Common Stock under applicable law.
(b) NYSE Listing. The shares of Buyer Common Stock which shall
be issued to the stockholders of the Company upon consummation of the Merger
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
(c) Other Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby (including the Merger) shall
have been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired (all such
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approvals and the expiration of all such waiting periods being referred to
herein as the "Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the S-4 shall
have been issued and no proceedings for that purpose shall have been initiated
or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
8.2. Conditions to Obligations of Buyer. The obligation of Buyer to
effect the Merger is also subject to the satisfaction or waiver by Buyer at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2,
the representations and warranties of the Company set forth in this Agreement
(other than those set forth in Sections 4.2, 4.3(a), 4.3(b)(i), 4.6, 4.7,
4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18, 4.21, 4.26 and 4.27) shall be
true and correct as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; and (ii) the
representations and warranties of the Company set forth in Sections 4.2,
4.3(a), 4.3(b)(i), 4.6, 4.7, 4.8(a)(ii), 4.8(b), 4.11(a), 4.12, 4.15(a), 4.18,
4.21, 4.26 and 4.27 of this Agreement shall be true and correct in all material
respects (without giving effect to Section 3.2 of this Agreement) as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made
on and as of the Closing Date. Buyer shall have received a certificate signed
on behalf of the Company by the Chief Executive Officer and the Chief Financial
Officer of the Company to the foregoing effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Buyer
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such
effect.
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(c) Consents Under Agreements. The consent, approval or waiver
of each person (other than the Governmental Entities referred to in Section
8.1(c)) whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of the Company or any Subsidiary of the Company
under any loan or credit agreement, note, mortgage, indenture, lease, license
or other agreement or instrument shall have been obtained, except where the
failure to obtain such consent, approval or waiver would not have a Material
Adverse Effect on the Company.
(d) No Pending Governmental Actions. No proceeding
initiated by any Governmental Entity seeking an Injunction shall be
pending.
(e) Federal Income Tax Opinion. Buyer shall have received an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Buyer ("Buyer's
Counsel"), dated the Effective Date, in form and substance reasonably
satisfactory to Buyer, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinion, Buyer's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Buyer, the Company and others reasonably satisfactory in form and
substance to such counsel.
8.3. Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2,
the representations and warranties of Buyer (other than those set forth in
Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a), 5.12 and
5.15) set forth in this Agreement shall be true and correct as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date; and (ii) the representations and warranties of Buyer set
forth in Sections 5.2, 5.3(a), 5.3(b), 5.3(c)(i), 5.6, 5.7, 5.8(ii), 5.11(a),
5.12 and 5.15 of this Agreement shall be true and correct in all material
respects (without giving effect to Section 3.2 of this Agreement) as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made
on and as of the Closing Date. The Company shall have received a certificate
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signed on behalf of Buyer by the Chief Executive Officer and the Chief
Financial Officer of Buyer to the foregoing effect.
(b) Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Buyer by the Chief Executive
Officer and the Chief Financial Officer of Buyer to such effect.
(c) Consents Under Agreements. The consent, approval or waiver
of each person (other than the Governmental Entities referred to in Section
8.1(c)) whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument to which
Buyer or any of its Subsidiaries is a party or is otherwise bound shall have
been obtained, except where failure to obtain such consents and approvals would
not, individually or in the aggregate, have a Material Adverse Effect on Buyer
and its Subsidiaries taken as a whole (after giving effect to the transactions
contemplated hereby).
(d) No Pending Governmental Actions. No proceeding
initiated by any Governmental Entity seeking an Injunction shall be
pending.
(e) Federal Income Tax Opinion. The Company shall have received
an opinion of Muldoon, Murphy & Faucette LLP (the "Company's Counsel"), in form
and substance reasonably satisfactory to the Company, dated the Effective Date,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, the Company's Counsel may require and rely upon representations
and covenants, including those contained in certificates of officers of Buyer,
the Company and others, reasonably satisfactory in form and substance to such
counsel.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company:
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(a) by mutual consent of the Company and Buyer in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Buyer or the Company upon written notice to the
other party (i) 60 days after the date on which any request or application for
a Requisite Regulatory Approval shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must grant such
Requisite Regulatory Approval, unless within the 60-day period following such
denial or withdrawal a petition for rehearing or an amended application has
been filed with the applicable Governmental Entity, provided, however, that no
party shall have the right to terminate this Agreement pursuant to this Section
9.1(b)(i) if such denial or request or recommendation for withdrawal shall be
due to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein or (ii)
if any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either Buyer or the Company if the Merger shall not have
been consummated on or before June 30, 2000, unless the failure of the Closing
to occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements of
such party set forth herein;
(d) by either Buyer or the Company (provided that the
terminating party shall not be in material breach of any of its obligations
under Section 7.3) if any approval of the stockholders of the Company required
for the consummation of the Merger shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of such
stockholders or at any adjournment or postponement thereof;
(e) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the representations or warranties set forth in
this Agreement on the part of the other party, which breach is not cured within
thirty days following written notice to the party committing such breach, or
which breach, by its nature, cannot be cured prior to the Closing; provided,
however, that neither party shall have the right to terminate this Agreement
pursuant to this Section 9.1(e) unless the breach of representation or
warranty, together with all other such breaches, would entitle the party
receiving such representation not to consummate the transactions contemplated
hereby under Section 8.2(a) (in the case of a breach of representation or
warranty by the Company) or Section 8.3(a) (in
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the case of a breach of representation or warranty by Buyer);
(f) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which breach shall not have been
cured within thirty days following receipt by the breaching party of written
notice of such breach from the other party hereto, or which breach, by its
nature, cannot be cured prior to the Closing;
(g) by Buyer, if the Board of Directors of the Company does not
publicly recommend in the Proxy Statement that the Company's stockholders
approve and adopt this Agreement or if, after recommending in the Proxy
Statement that stockholders approve and adopt this Agreement, the Board of
Directors of the Company shall have withdrawn, modified or amended such
recommendation in any manner adverse to Buyer; or
(h) by the Company at any time during the five business-day
period commencing on the first business day after the Determination Date (as
defined below), if both of the following conditions are satisfied:
(1) the Average Closing Price (as defined below) shall be less than
$16.20 and
(2) (i) the number obtained by dividing the Average Closing Price by
the Starting Price (such number being referred to herein as the "Buyer
Ratio") shall be less than (ii) the number obtained by dividing the Index
Price on the Determination Date by the Index Price on the Starting Date
and subtracting 0.15 from such quotient (such number being referred to
herein as the "Index Ratio"),
subject to the following provisions. If the Company elects to exercise its
termination right pursuant to the immediately preceding sentence, it shall give
prompt written notice to Buyer; provided that such notice of election to
terminate may be withdrawn at any time within the aforementioned five
business-day period. During the five business-day period commencing with its
receipt of such notice, Buyer shall have the option of adjusting the Exchange
Ratio to equal the lesser of (i) a number equal to a quotient (rounded to the
nearest one-ten-thousandth), the numerator of which is the product of 0.85, the
Starting Price and the Exchange Ratio (as then in effect) and the denominator
of which is the Average Closing Price, and (ii) a number equal to a quotient
(rounded to the nearest one-ten-thousandth), the numerator of which is the
Index Ratio multiplied by the Exchange Ratio (as then in effect) and the
denominator of which is the Buyer Ratio. If
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Buyer makes the election contemplated by the preceding sentence, within such
five business-day period, it shall give prompt written notice to the Company of
such election and the revised Exchange Ratio, whereupon no termination shall
have occurred pursuant to this Section 9.1(h) and this Agreement shall remain
in effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified), and any references in this Agreement to "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant
to this Section 9.1(h). For purposes of this Section 9.1(h), the following
terms shall have the meanings indicated:
"Average Closing Price" means the average of the last reported sale
prices per share of Buyer Common Stock as reported on NYSE (as reported in The
Wall Street Journal or, if not reported therein, in another mutually agreed
upon authoritative source) for the 20 consecutive trading days on the NYSE
ending at the close of trading on the Determination Date.
"Determination Date" means the business day prior to the date on
which the last of the Requisite Regulatory Approvals shall have been received,
without regard to any requisite waiting periods in respect thereof.
"Index Group" means the group of each of the twenty-one (21) bank
holding companies listed below, the common stock of each of which shall be
publicly traded and as to which there shall not have been, since the Starting
Date and before the Determination Date, an announcement of a proposal for such
company to be acquired or for such company to acquire another company or
companies in transactions with a value exceeding 25% of the acquiror's market
capitalization as of the Starting Date. In the event that, on or prior to the
date immediately preceding the Determination Date, the common stock of any such
company ceases to be publicly traded or any such announcement is made with
respect to any such company, such company will be removed from the Index Group,
and the weights (which have been determined based on the number of outstanding
shares of common stock) redistributed proportionately for purposes of
determining the Index Price. The twenty-one (21) bank holding companies and the
weights attributed to them are as follows:
Company Symbol Weighting
Astoria Financial Corporation ASFC 5.67%
CCB Financial Corporation CCB 5.71%
Charter One Financial, Inc. COFI 12.05%
Chittenden Corporation CHZ 2.25%
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Commerce Bancorp, Inc./NJ CBH 3.53%
Dime Bancorp, Inc. DME 6.52%
First Commonwealth Financial Corporation FCF 2.01%
FirstMerit Corporation FMER 7.00%
Fulton Financial Corporation FULT 4.04%
GreenPoint Financial Corp. GPT 9.27%
Independence Community Bank Corp. ICBC 2.62%
Keystone Financial, Inc. KSTN 3.86%
M & T Bank Corporation MTB 10.89%
Peoples Heritage Financial Group, Inc. PHBK 5.33%
Queens County Bancorp, Inc. QCSB 1.70%
Richmond County Financial Corp. RCBK 1.88%
Roslyn Bancorp, Inc. RSLN 3.91%
Staten Island Bancorp, Inc. SIB 2.14%
Susquehanna Bancshares, Inc. SUSQ 1.81%
Valley National Bancorp VLY 4.77%
Webster Financial Corporation WBST 3.03%
-------
99.99%
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices of the
companies comprising the Index Group.
"Starting Date" means August 27, 1999.
"Starting Price" shall mean the last reported sale price per share of
Buyer Common Stock on the Starting Date, as reported by NYSE (as reported in
The Wall Street Journal or, if not reported therein, in another mutually agreed
upon authoritative source).
If Buyer of any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting
Date and the Determination Date, the prices for the common stock of such
company or Buyer shall be appropriately adjusted for the purposes of applying
this Section 9.1(h).
9.2. Effect of Termination; Expenses. In the event of termination of
this Agreement by either Buyer or the Company as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect except that (i)
Sections 7.2(c), 9.2 and 10.4 shall survive any termination of this Agreement,
and (ii) notwithstanding anything to the contrary contained in this Agreement,
no party shall be relieved or released from
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any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
9.3. Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before or after approval
of the matters presented in connection with the Merger by the stockholders of
the Company; provided, however, that after any approval of the transactions
contemplated by this Agreement by the Company's stockholders, there may not be,
without further approval of such stockholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration to be
delivered to the Company stockholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective Time, each
of the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance by
the other party with any of its agreements contained herein, or waive
compliance with any of the conditions to its obligations hereunder. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party, but such extension or waiver or failure to insist on strict compliance
with an obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1. Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") will take place at 10:00 a.m. on the
first day which is (a) the last business day of a month and (b) at least two
business days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Article VIII hereof (other
than those conditions which relate to actions to be taken at the Closing)(the
"Closing Date"), at the offices of Buyer's Counsel unless another time, date or
place is agreed to in writing by the parties hereto.
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10.2. Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, Buyer shall be
entitled to revise the structure of the Merger and the related transactions
contemplated hereby (including, without limitation, (x) substituting a
subsidiary of Buyer as a Constituent Corporation in the Merger, (y) providing
that a different entity shall be the Surviving Corporation in the Merger, and
(z) providing for the merger of Company Bank into Buyer Bank in accordance with
a Bank Merger Agreement), provided that each of the transactions comprising
such revised structure shall (i) fully qualify as, or fully be treated as part
of, one or more tax-free reorganizations within the meaning of Section 368(a)
of the Code, (ii) not change the amount of consideration to be received by the
stockholders of the Company, and (iii) be capable of consummation in as timely
a manner as the structure contemplated herein. This Agreement and any related
documents shall be appropriately amended in order to reflect any such revised
structure.
10.3. Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement (other than pursuant
to the Option Agreement which shall terminate in accordance with its terms)
shall survive the Effective Time, except for those covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time.
10.4. Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense, provided, however, that the costs and expenses of
printing and mailing the Proxy Statement to the stockholders of the Company and
Buyer, and all filing and other fees paid to the SEC or any other Governmental
Entity in connection with the Merger and the other transactions contemplated
hereby, shall be borne equally by Buyer and the Company, provided further,
however, that nothing contained herein shall limit either party's rights to
recover any liabilities or damages arising out of the other party's willful
breach of any provision of this Agreement.
10.5. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Buyer, to:
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North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Facsimile: (516) 844-1471
Attention: Mr. John Adam Kanas
Chairman, President and
Chief Executive Officer
with a copy to:
William S. Rubenstein, Esq.
Skadden, Arps Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2000
and
(b) if to the Company, to:
Reliance Bancorp, Inc.
585 Stewart Avenue
Garden City, New York 11530
Facsimile: (516) 222-1805
Attention: Mr. Raymond A. Nielsen
President and Chief
Executive Officer
with a copy to:
Lawrence M.F. Spaccasi
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile: (202) 966-9409
10.6. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed
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to be followed by the words "without limitation". The phrases "the date of this
Agreement", "the date hereof" and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to August 30, 1999.
10.7. Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
10.8. Entire Agreement. This Agreement (including the documents and
the instruments referred to herein), together with the Option Agreement,
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
10.9. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York, without regard to any
applicable conflicts of law.
10.10. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained in
and Section 7.2(c) of this Agreement were not performed in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of Section 7.2(c) of this Agreement and to enforce specifically the terms and
provisions thereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.12. Publicity. Except as otherwise required by law or by the rules
of the NYSE or The NASDAQ Stock Market, so long as this Agreement is in effect,
neither Buyer nor the Company shall, or shall permit any of its Subsidiaries
to, issue or cause the publication of any press release or other public
announcement with respect to, or otherwise make any public
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statement concerning, the transactions contemplated by this Agreement without
the consent of the other party, which consent shall not be unreasonably
withheld.
10.13. Assignment; No Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise expressly provided herein, this Agreement
(including the documents and instruments referred to herein) is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
NORTH FORK BANCORPORATION, INC.
By: /s/ John Adam Kanas
--------------------------
John Adam Kanas
Chairman of the Board,
President and Chief Executive Officer
RELIANCE BANCORP, INC.
By: /s/ Raymond A. Nielsen
----------------------------
Raymond A. Nielsen
President and Chief Executive
Officer
65
Exhibit 4.1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated August 30, 1999, between Reliance
Bancorp, Inc., a Delaware corporation ("Issuer"), and North Fork
Bancorporation, Inc., a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan
of Merger of even date herewith (the "Merger Agreement"), which agreement has
been executed by the parties hereto immediately prior to this Stock Option
Agreement (this "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 1,708,297
fully paid and nonassessable shares of Issuer's Common Stock, par value $0.01
per share ("Common Stock"), at a price of $29.00 per share (the "Option
Price"); provided, however, that in no event shall the number of shares of
Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's
issued and outstanding shares of Common Stock without giving effect to any
shares subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) 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,
such number equals 19.9% of the number of shares of Common Stock
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then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, and from time to time, 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) and the Holder is not in material
beach of the agreements or covenants contained in this Agreement or the Merger
Agreement, provided that the Holder shall have sent the written notice of such
exercise (as provided in subsection (e) of this Section 2) within six months
following such Subsequent Triggering Event (or such longer period as provided
in Section 10), provided further, however, that if the Option cannot be
exercised on any day because of any injunction, order or similar restraint
issued by a court of competent jurisdiction, the period during which the Option
may be exercised shall be extended so that the Option shall expire no earlier
than on the tenth business day after such injunction, order or restraint shall
have been dissolved or when such injunction, order or restraint shall have
become permanent and no longer subject to appeal, as the case may be. Each of
the following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 9.1(f) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional); or (iii) the passage of 15 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 9.1(f) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional). Notwithstanding any other provision of this
Agreement, in no event shall any of Issuer's obligations under this Agreement
continue six months beyond an Exercise Termination Event. The term "Holder"
shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term
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"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 shall have recommended
that the stockholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or a Subsidiary of Grantee.
For purposes of this Agreement, "Acquisition Transaction" shall mean (w) a
merger or consolidation, or any similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (x) a purchase, lease or other acquisition or assumption of all or
a substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) 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
(z) any substantially similar transaction; provided, however, that in no
event shall any merger, consolidation, purchase or similar transaction
involving only the Issuer and one or more of its Subsidiaries or involving
only two or more of such Subsidiaries, be deemed to be an Acquisition
Transaction, provided that any such transaction is not entered into in
violation of the terms of the Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, an Acquisition Transaction with any person other than Grantee or
a Grantee Subsidiary, or the Board of Directors of Issuer shall have
publicly withdrawn or modified, or publicly announced its intent to
withdraw or modify, in any manner adverse to Grantee, its recommendation
that the stockholders of Issuer approve the transactions contemplated by
the Merger Agreement;
(iii) Any person, other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business, shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
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shall have made a bona fide proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the
subject of public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement
and (y) shall not have been cured prior to the Notice Date (as defined
below); or
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with the
Federal Reserve Board, the Office of Thrift Supervision or any other
federal or state bank regulatory authority for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20%
or more of the then outstanding shares of Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal Reserve Board, the
Office of Thrift Supervision (the "OTS") or any other regulatory agency is
required in connection with such purchase, the Holder shall promptly file the
required notice or application for approval and shall expeditiously process the
same and the period of time that
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otherwise would run pursuant to this sentence shall run instead from the date
on which any required notification periods have expired or been terminated or
such approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to Issuer this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions to
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares
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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; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended, the Change in Bank Control Act of 1978, as amended, or any
other federal or state banking law, prior approval of or notice to the Federal
Reserve Board, the OTS or to any state regulatory authority is necessary before
the Option may be exercised, cooperating fully with the Holder in preparing
such applications or notices and providing such information to the Federal
Reserve Board, the OTS or such state regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
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4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
of this Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, 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. 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, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
(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)
delivered within six months of such Subsequent Triggering Event (or such longer
period as provided in Section 10), promptly prepare, file and keep current a
shelf registration statement under the 1933 Act covering this Option and any
shares issued
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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 this Option and any shares of
Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such registration
statement first 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 foregoing notwithstanding, if, at the time of any
request by Grantee for registration of the Option or Option Shares as provided
above, Issuer is in registration with respect to an underwritten public
offering 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 inclusion of the Holder's
Option or 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 the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur.
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 secondary
offering underwriting agreements for the 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
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event
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(as defined below) and prior to twelve months thereafter, (i) following a
request of the Holder, delivered prior to an Exercise Termination Event, Issuer
(or any successor thereto) shall repurchase the Option from the Holder at a
price (the "Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered within 90 days of such occurrence (or such longer period as provided
in Section 10), Issuer shall repurchase such number of the Option Shares from
the Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the Market/Offer Price multiplied by the number of Option
Shares so designated. The term "Market/Offer Price" shall mean the highest of
(i) the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or
a substantial portion of Issuer's assets, the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally recognized investment banking firm
selected by the Holder 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, 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.
Within the latter to occur of (x) five business days after the surrender of the
Option and/or certificates representing Option Shares and the receipt of such
notice or notices relating thereto and (y) the time that is immediately prior
to the occurrence of a Repurchase Event, 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
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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 five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation 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 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 or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price 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 Stock Option 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 Stock Option
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, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger, consolidation
or similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer, other than
any such transaction which would not constitute an Acquisition Transaction
pursuant to the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then outstanding
shares of Common Stock, provided that no such event shall constitute a
Repurchase Event unless a Subsequent Triggering Event shall have occurred prior
to an Exercise Termination Event. The parties hereto agree that Issuer's
obligations to repurchase
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the Option or 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 the occurrence of 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 one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting
shares and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the Market/ Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of Substitute
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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, which shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, 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 is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
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 or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
(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.
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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 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 right 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
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, in either case, 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
following a request for repurchase pursuant to this Section 9 shall immediately
so notify the Substitute Option Holder
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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 Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five 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 best efforts to receive
all required regulatory and legal approvals as promptly as practicable in order
to accomplish such repurchase), the Substitute Option Holder 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 the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day or six-month period for exercise of certain rights
under Sections 2, 6, 7 and 14 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, and for the
expiration of all statutory waiting periods; and (ii) to the extent necessary
to avoid liability under Section 16(b) of the 1934 Act by reason of such
exercise.
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
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of the transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of Issuer and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all
of the Rights or amending or terminating the Rights Agreement) so that the
entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any person under the Rights Agreement
or enable or require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Grantee. This Agreement has been duly executed and delivered by
Grantee.
(b) 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.
13. (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
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exchange for a cash fee equal to the Surrender Price (as defined below);
provided, however, that Grantee may not exercise its rights pursuant to this
Section 13 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
$13,880,000 (i) plus, if applicable, Grantee's purchase price with respect to
any Option Shares and (ii) minus, if applicable, the sum of (A) the excess of
(1) 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 (2)
Grantee's purchase price of such Option Shares and (B) the net cash amounts, if
any, received by Grantee pursuant to an arms' length sale of a portion of the
Option to any unaffiliated party.
(b) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 13 by surrendering to Issuer, at its
principal office, 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 13 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second
business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited, provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 13 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall
(A) use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions
with any relevant regulatory or other third party reasonably related to the
same and (ii) Grantee may revoke such notice of surrender by delivery of a
notice of revocation to Issuer and, upon delivery of such notice of revocation,
the Exercise Termination Date shall
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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
13(c) (during which period Grantee may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 13).
14. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such longer period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board or the OTS, as
applicable, approves 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 or the OTS, as applicable.
15. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the National Association of
Securities Dealers Automated Quotation/National Market Securities (NASDAQ/NMS)
upon official notice of issuance and applying to the Federal Reserve Board
and/or the OTS, as applicable, 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.
16. (a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$17,350,000 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer, or (iv)
any combination thereof, so that Grantee's actually realized Total Profit shall
not exceed $17,350,000 after taking
82
<PAGE>
into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than
$17,350,000; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7 of this Agreement, (ii)(x) the amount received by Grantee pursuant
to Issuer's repurchase of Option Shares pursuant to Section 7, less (y) the
Grantee's purchase price for such Option Shares, (iii)(x) the net cash amounts
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option (or
any portion thereof) to any unaffiliated party, and (v) any equivalent amount
with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of such proposed exercise
assuming that this Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
17. 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.
18. 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
83
<PAGE>
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 1(a)
hereof (as adjusted pursuant to Section 1(b) or 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.
19. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
20. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
21. This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and
the same agreement.
22. 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.
23. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and permitted assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided herein.
24. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
84
<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.
RELIANCE BANCORP, INC.
By: /s/ Raymond A. Nielsen
--------------------------------
Raymond A. Nielsen
President and Chief Executive
Officer
NORTH FORK BANCORPORATION, INC.
By: /s/ John Adam Kanas
--------------------------------
John Adam Kanas
Chairman of the Board, President
and Chief Executive Officer
85
EXHIBIT 99.1
RELIANCE BANCORP, INC.
585 STEWART AVENUE (516) 222-9300
GARDEN CITY, NY 11530 FAX: (516) 222-1997
NEWS RELEASE
For Information Contact:
Reliance Bancorp, Inc. North Fork Bancorporation
Paul D. Hagan Daniel M. Healy
Senior Vice President and CFO Executive Vice President & CFO
(516) 222-9308 extension 215 (516) 844-1258
NORTH FORK BANCORPORATION, INC. TO PURCHASE
RELIANCE BANCORP, INC.
IN A COMMON STOCK TRANSACTION VALUED AT APPROXIMATELY
$352 MILLION
Melville, N.Y. - August 30, 1999 - Reliance Bancorp, Inc. (NASDAQ/NMS:
RELY) and North Fork Bancorporation, Inc. (NYSE: NFB) jointly announced today
that they have signed a definitive merger agreement whereby North Fork
Bancorporation, Inc. ("North Fork") would acquire Reliance Bancorp, Inc.
("Reliance") in a stock-for-stock merger valued at approximately $352 million.
Reliance Bancorp, Inc. is the holding company for Reliance Federal Savings Bank,
a savings institution with banking locations in the Queens, Nassau and Suffolk
counties of New York, all of which are located within North Fork's existing
marketplace. Under the terms of the agreement, each share of Reliance will be
converted into North Fork common stock at a fixed exchange ratio of 2 shares of
North Fork for each share of Reliance. In connection with this transaction,
North Fork simultaneously announced that its Board of Directors approved the
purchase of up to fifty percent (50%) of the common shares issuable in the
acquisition or 8.5 million North Fork shares. Purchases will be made from time
to time in open market or in privately negotiated transactions preceding the
closing of the Reliance transaction which is expected to occur in the first
quarter of 2000. The acquisition will be treated as a purchase for financial
reporting purposes and will be a tax-free reorganization for Reliance
shareholders. Approximately 17 million common shares of North Fork will be
issued. The exchange ratio was based upon the price of North Fork's stock
utilizing its closing price on August 27, 1999 of $19.06 for a total value to
Reliance shareholders of $38.12 per share. The closing price of Reliance stock
on that date was $33.88. The merger is subject to customary regulatory
approvals, the approval from Reliance shareholders and will close immediately
preceding North Fork's pending acquisition of JSB Financial, Inc. (NYSE: JSB),
the parent of Jamaica Savings Bank, FSB, that was announced on August 16, 1999.
Due diligence by both companies has been completed. The agreement provides that
North Fork receives an option to acquire up to 19.9% of Reliance's outstanding
shares at $29.00 per share should certain events occur. Also, Reliance
86
<PAGE>
has a right to terminate the agreement should the closing price of North Fork's
shares decline beyond a specified price and index, unless North Fork elects to
increase the exchange ratio.
At June 30, 1999, Reliance, with 29 banking offices, had total assets of
$2.5 billion, deposits of $1.6 billion and shareholders' equity of $172 million.
Raymond A. Nielsen, President and Chief Executive Officer of Reliance will join
North Fork's Board of Directors. "Our primary motivation has always been
directed toward building shareholder value. The opportunity to merge with North
Fork, a company dedicated to creating and building shareholder value, was a
compelling reason for our decision to merge with North Fork. We see nothing but
greater opportunities for our shareholders, customers and the communities we
serve," said Mr. Nielsen.
On a pro forma basis the combined companies will have total assets of $15.5
billion, deposits of $9.2 billion and shareholders' equity of $1.2 billion. The
pro forma stated and tangible book value will be approximately $7.22 and $5.17,
respectively which assumes the 50% share repurchase in the Reliance transaction.
The pro forma leverage ratio will be approximately 7.43%. At June 30, 1999,
North Fork on a separate company basis had total assets of $11.5 billion,
deposits of $6.5 billion and shareholders' equity of $804 million. On that date,
its stated and tangible book value and leverage ratio were 5.79%, 5.20% and
8.50%, respectively. North Fork indicated the accretion from the Reliance
transaction is expected to be earnings per share ("EPS") accretive for North
Fork in excess of the previously announced estimates of accretion in the JSB
acquisition from both a generally accepted accounting principal or GAAP basis
and from a cash basis of reporting EPS. North Fork has also indicated that the
accretion from the Reliance merger will come from anticipated cost savings and
revenue enhancements without giving effect to leveraging any excess of the pro
forma capitalization and a number of branch closures are expected.
Reliance Bancorp, Inc. and Reliance Federal Savings Bank are headquartered
in Garden City, New York. Reliance Federal is a community bank specializing in
providing deposit and credit services for its consumer and commercial customers.
Additional information on the Company and Bank can be found on our Internet web
site at www.reliance-federal.com.
This release may contain certain forward-looking statements and may be
identified by the use of such words as "believe," "expect," "anticipate,"
"should," "planned," "estimated," and "potential." Examples of forward looking
statements include, but are not limited to, estimates with respect to the
financial condition, results of operations and business of the Company that are
subject to various factors which could cause actual results to differ materially
from these estimates. These factors include, but are not limited to, general
economic conditions, changes in interest rates, deposit flows, loan demand, real
estate values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products, and services.
87
Exhibit 99.2
RELIANCE BANCORP, INC.
585 STEWART AVENUE (516) 222-9300
GARDEN CITY, NY 11530 FAX: (516) 222-1997
FOR IMMEDIATE RELEASE: July 22, 1999
For Information Contact:
Paul D. Hagan
Senior Vice President and CFO
(516) 222-9308 extension 215
RELIANCE BANCORP, INC. REPORTS FOURTH QUARTER AND
FISCAL YEAR END 1999 RESULTS
Garden City, New York, July 22, 1999
Reliance Bancorp, Inc. (NASDAQ/NMS:RELY), the holding company for Reliance
Federal Savings Bank, today reported net income of $5.1 million for the quarter
ended June 30, 1999, an increase of $642,000, or 14.4%, from $4.4 million for
the prior year quarter ended June 30, 1998. On a diluted earnings per share
basis, earnings rose 28.3% to $0.59 for the quarter ended June 30, 1999 from
$0.46 for the prior year quarter ended June 30, 1998. Return on average tangible
equity increased 19.2% to 16.36% for the quarter ended June 30, 1999 from 13.72%
for the quarter ended June 30, 1998. Net income for the fiscal year ended June
30, 1999 was $20.2 million, an increase of $1.4 million, or 7.6%, from $18.7
million for the fiscal year ended June 30, 1998. On a diluted earnings per share
basis, earnings rose 13.6% to $2.26 for the year ended June 30, 1999 from $1.99
for the prior year ended June 30, 1998.
Cash earnings for the quarter ended June 30, 1999 were $6.7 million, an increase
of $330,000, or 5.1% from $6.4 million recorded in the prior year quarter. On a
diluted cash earnings per share basis, earnings rose 18.2% to $0.78 per diluted
cash earnings per share from $0.66 recorded in the prior year quarter. Cash
earnings for the year ended June 30, 1999 were $27.2 million, an increase of
$1.3 million, or 4.9% from $25.9 million recorded in the prior fiscal year. On a
diluted cash earnings per share basis, earnings rose 10.9% to $3.05 per diluted
cash earnings per share from $2.75 recorded in the prior fiscal year. The
Company's cash earnings are determined by adding back to reported earnings the
non-cash expenses related to the allocation of ESOP ("Employee Stock Ownership
Plan") stock and the earned portion of RRP ("Recognition and Retention Plan")
stock, net of associated tax benefits, and amortization of excess of cost over
fair value of net assets acquired ("goodwill").
As of June 30, 1999, total assets were $2.5 billion, deposits were $1.5 billion
and total stockholders' equity was $171.7 million. At June 30, 1999, the Company
had 8,586,210 common shares outstanding with a tangible book value per common
share of $13.66.
On June 16, 1999, the Board of Directors declared a regular cash dividend of
$0.21 per common share for the quarter ending June 30, 1999. The dividend was
paid on July 16, 1999 to stockholders of record on July 2, 1999.
<PAGE>
Net income was $5.1 million for the quarter ended June 30, 1999, which
represents an annualized return on average assets and average tangible equity of
0.83% and 16.36%, respectively. Net interest income increased to $17.0 million
for the quarter ended June 30, 1999, an increase of $253,000, or 1.5%, from
$16.8 million for the quarter ended June 30, 1998. The increase in net interest
income was attributable to the growth in average interest-earning assets to $2.4
billion for the quarter ended June 30, 1999 from $2.2 billion for the quarter
ended June 30, 1998. The growth in average interest-earning assets resulted from
increased investments in mortgage-backed securities. As a result of a lower
interest rate environment, coupled with accelerated loan and securities
prepayments, partially offset by an overall decline in deposit and borrowing
costs, and the leveraging of the proceeds from the trust preferred securities,
the Bank's net interest spread declined to 2.59% from 2.79% and its net interest
margin declined to 2.89% from 3.09%, respectively, for the quarters ended June
30, 1999 and 1998. For the quarter ended June 30, 1999, the yield on
interest-earning assets was 6.89% and the cost of interest-bearing liabilities
was 4.30% as compared to 7.36% and 4.57%, respectively, for the quarter ended
June 30, 1998.
For the quarter ended June 30, 1999, the Company had no provision for loan
losses as compared to $150,000 in the prior fiscal year quarter. The decrease in
the provision is due to the lower level of non-performing loans.
Non-interest income increased $493,000, or 24.9%, to $2.5 million in the quarter
ended June 30, 1999 from $2.0 million in the prior year quarter. The increase is
mainly the result of additional fee income from annuity sales, ATM transactions,
money center fees and loan prepayment penalties. In addition, the Company
recognized $100,000 in securities gains during the quarter ended June 30, 1999
primarily from the sale of debt and equity securities.
Non-interest expense totaled $10.3 million for the quarter ended June 30, 1999,
a decrease of $122,000, or 1.2% from $10.4 million recorded in the prior year
quarter. As a result of an increased asset base and limited expense growth, the
general and administrative expenses to average assets ratio improved to 1.49%
from 1.60% in the prior year period. The slight decrease in non-interest expense
is mainly due to lower compensation and benefits expense offset by increases in
advertising and other general and administrative costs. Compensation and
benefits expense decreased $600,000, or 10.8%, to $4.9 million for the quarter
ended June 30, 1999 from $5.5 million in the prior year quarter. The decrease in
compensation and benefits is due to reduced costs associated with employee
benefit plans. Advertising increased $181,000, or 62.4%, for the quarter ended
June 30, 1999 as a result of the Bank promoting its new call center for home
equity lending and other consumer loans.
Fiscal year ended Results
Net income for the fiscal year ended June 30, 1999 was $20.2 million which
represents an annualized return on average assets and average tangible equity of
0.81% and 16.40%, respectively. Net interest income increased to $69.3 million
for the fiscal year ended June 30, 1999, an increase of $2.3 million, or 3.5%,
from $67.0 million for the fiscal year ended June 30, 1998. The increase in net
interest income was attributable to the growth in average interest-earning
assets to $2.3 billion for the fiscal year ended June 30, 1999 from $2.0 billion
for the fiscal year ended June 30, 1998. The growth in interest-earning assets
resulted from assets acquired from the Continental Bank acquisition and
increased purchases of mortgage-backed and debt securities. As a result of a
lower interest rate environment, coupled with accelerated loan and securities
prepayments, partially offset by an slight decline in deposit and borrowing
costs, and the leveraging of the $50 million of proceeds from the trust
preferred securities that were issued in April 1998,
<PAGE>
the net interest rate spread declined to 2.67% from 2.98% and the net interest
margin declined to 2.95% from 3.28%, respectively, for the fiscal year ended
June 30, 1999 and 1998. The yield on interest-earning assets was 7.13% for the
fiscal year ended June 30, 1999 and the cost of interest-bearing liabilities was
4.46% as compared to 7.52% and 4.54%, respectively, for the fiscal year ended
June 30, 1998.
For the year ended June 30, 1999, the Company provision for loan losses was
$650,000 as compared to $1.7 million in the prior fiscal year. The decrease in
the provision is due to the lower level of non-performing loans.
Non-interest expense totalled $41.0 million for the fiscal year ended June 30,
1999 as compared to $39.7 million for the fiscal year ended June 30, 1998, an
increase of $1.3 million, or 3.3%. Occupancy and equipment expense increased
$533,000, or 8.2%, from $6.5 million for the fiscal year ended June 30, 1998 to
$7.1 million for the fiscal year ended June 30, 1999 primarily due to costs
associated with the full year operation of two new banking offices and five
check cashing facilities which were acquired from Continental Bank.
For the fiscal year ended June 30, 1999, real estate operations, net was
$111,000 as compared to $218,000 in the prior fiscal year. The decrease is
mainly the result of a lower provision for REO losses and lower expenses due to
faster disposition of properties during the fiscal year ended June 30, 1999.
During the fiscal year ended June 30, 1999, the Bank established a provision for
REO losses of $34,500 as compared to $93,000 in the prior fiscal year.
Financial Condition
As of June 30, 1999, total assets were $2.5 billion, a decrease of $34.0 million
from June 30, 1998. Investment securities decreased $24.1 million, or 13.8%,
from $175.1 million at June 30, 1998 to $151.0 million at June 30, 1999 as a
result of sales and calls of debt securities.
Deposits decreased $78.9 million, or 4.8%, during the fiscal year ended June 30,
1999 as a result of a reduction in certificate of deposit products while
borrowings increased $72.2 million, or 11.5%, from $630.2 million at June 30,
1998 to $702.4 million at June 30, 1999 as a result of additional FHLB advances.
Treasury stock increased from $24.0 million at June 30, 1998 to $50.6 million at
June 30, 1999 as a result of 1.0 million shares repurchased net of stock options
exercised during the fiscal year ended. During the quarter ended June 30, 1999,
the Company repurchased 110,000 shares at an aggregate cost of $3.1 million.
Non-performing assets
Non-performing loans totaled $6.6 million, or 0.67% of total loans at June 30,
1999 as compared to $9.3 million, or 0.95% of total loans, at June 30, 1998.
Non-performing loans at June 30, 1999 were comprised of $4.0 million of loans
secured by one- to four-family residences, $1.9 million of commercial real
estate loans, $433,000 of commercial loans and $255,000 of guaranteed student
and other loans.
For the quarter ended June 30, 1999, the Company had no provision for loan
losses due to the improved level of non-performing loans. For the fiscal year
ended June 30, 1999, the Company's loan loss provision was $650,000. Net
charge-offs were $203,000 and $471,000, respectively, for the quarter and fiscal
year ended June 30, 1999. The Company's allowance for loan losses totalled $9.1
million at June 30, 1999 as
<PAGE>
compared to $8.9 million at June 30, 1998 which represents a ratio of allowance
for loan losses to non-performing loans and to total loans of 139.08% and 0.93%
at June 30, 1999 compared to 96.12% and 0.91% at June 30, 1998, respectively.
Management believes the allowance for loan losses at June 30, 1999 is adequate
and sufficient reserves are presently maintained to cover losses on
non-performing loans.
Reliance Bancorp, Inc. and Reliance Federal Savings Bank are headquartered in
Garden City, New York. Reliance Federal is a community bank specializing in
providing deposit and credit services for its consumer and commercial customers.
Reliance Federal Savings Bank serves its customers from 29 banking offices
located in the New York counties of Queens, Nassau and Suffolk. Additional
information on the Company and Bank can be found on our Internet web site at
www.reliance-federal.com.
This release may contain certain forward-looking statements and may be
identified by the use of such words as "believe," "expect," "anticipate,"
"should," "planned," "estimated," and "potential." Examples of forward looking
statements include, but are not limited to, estimates with respect to the
financial condition, results of operations and business of the Company that are
subject to various factors which could cause actual results to differ materially
from these estimates. These factors include, but are not limited to, general
economic conditions, changes in interest rates, deposit flows, loan demand, real
estate values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products, and services.
<PAGE>
RELIANCE BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Condition
(Unaudited)
(Dollars in thousands, except share and per share data)
<TABLE>
June 30, June 30,
Assets 1999 1998
- ------ -------- -------
<S> <C> <C>
Cash and due from banks........................................................... $ 33,255 $ 37,596
Money market investments.......................................................... -- 9,500
Debt and equity securities available-for-sale..................................... 122,168 134,907
Debt and equity securities held-to-maturity (with estimated
market values of $28,840 and $40,509, respectively)............................ 28,835 40,189
Mortgage-backed securities available-for-sale..................................... 935,038 940,347
Mortgage-backed securities held-to-maturity (with estimated
market values of $252,233 and $252,332, respectively).......................... 255,917 249,259
Loans receivable:
Mortgage loans............................................................... 810,894 790,951
Commercial loans............................................................. 44,949 49,887
Consumer and other loans..................................................... 127,350 137,900
Less allowance for loan losses............................................. (9,120) (8,941)
--------- ---------
Loans receivable, net................................................ 974,073 969,797
Accrued interest receivable, net.................................................. 13,095 14,958
Office properties and equipment, net.............................................. 16,368 15,436
Prepaid expenses and other assets................................................. 16,960 11,732
Mortgage servicing rights......................................................... 1,514 2,317
Excess of cost over fair value of net assets acquired............................. 54,373 58,936
Real estate owned, net............................................................ 177 755
------- -----------
Total assets......................................................... $ 2,451,773 $ 2,485,729
========= =========
Liabilities and Stockholders' Equity
Deposits.......................................................................... $ 1,549,419 $ 1,628,298
Borrowed Funds.................................................................... 702,434 630,206
Advance payments by borrowers for taxes and insurance............................. 6,399 9,806
Accrued expenses and other liabilities............................................ 21,854 22,555
-------- ---------
Total liabilities.................................................... 2,280,106 2,290,865
--------- ---------
Commitments Stockholders' Equity
Preferred Stock, $.01 par value, 4,000,000 shares
authorized; none issued......................................................... -- --
Common stock, $.01 par value, 20,000,000 shares
authorized; 10,750,820 shares issued; 8,586,210 and 9,564,988
outstanding, respectively..................................................... 108 108
Additional paid-in capital........................................................ 121,037 117,909
Retained earnings, substantially restricted....................................... 115,976 102,305
Accumulated other comprehensive income:
Net unrealized (depreciation) appreciation on securities
available-for-sale, net of taxes.............................................. (10,546) 4,212
Less:
Unallocated common stock held by ESOP............................................. (3,726) (4,554)
Unearned common stock held by RRP................................................. (66) (713)
Common stock held by SERP (at cost)............................................... (550) (373)
Treasury stock, at cost (2,164,610 and 1,185,832 shares, respectively)............ (50,566) (24,030)
--------- --------
Total stockholders' equity................................................... 171,667 194,864
-------- -------
Total liabilities and stockholders' equity............................ $ 2,451,773 $ 2,485,729
========= =========
<PAGE>
RELIANCE BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended Fiscal Year Ended
June 30, June 30,
---------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- ------
Interest income:
<S> <C> <C> <C> <C>
First mortgage loans........................................ $15,274 $ 15,880 $ 62,182 $ 63,573
Commercial loans............................................ 1,102 1,392 4,892 3,916
Consumer and other loans.................................... 2,513 2,958 10,730 12,130
Mortgage-backed securities.................................. 19,369 16,996 78,948 67,185
Money market investments.................................... 30 277 284 615
Debt and equity securities.................................. 2,341 2,421 10,274 6,400
------ ------ -------- --------
Total interest income.................................... 40,629 39,924 167,310 153,819
------ ------ ------- -------
Interest expense:
Deposits.................................................... 14,176 16,279 61,972 63,432
Borrowed funds.............................................. 9,433 6,878 36,034 23,396
------ ------- ------ ------
Total interest expense................................... 23,609 23,157 98,006 86,828
------ ------ ------ ------
Net interest income before provision for loan losses..... 17,020 16,767 69,304 66,991
Provision for loan losses................................... -- 150 650 1,650
-------- ------- ------- -------
Net interest income after provision for loan losses...... 17,020 16,617 68,654 65,341
------ ------ ------ ------
Non-interest income:
Loan fees and service charges............................... 505 329 1,352 1,047
Other operating income...................................... 1,150 978 4,279 3,452
Income from Money Centers................................... 720 675 2,650 1,882
Condemnation award on joint venture......................... -- -- -- 1,483
Net gain (loss) on securities............................... 100 -- 119 (5)
------ ------- ------ ---------
Total non-interest income................................ 2,475 1,982 8,400 7,859
----- ----- ----- -----
Non-interest expense:
Compensation and benefits................................... 4,933 5,533 20,373 20,297
Occupancy and equipment..................................... 1,782 1,746 7,064 6,531
Federal deposit insurance premiums.......................... 232 231 930 921
Advertising................................................. 471 290 1,247 1,202
Other operating expenses.................................... 1,762 1,475 6,675 6,274
----- ----- ----- -----
Total general and administrative expenses................ 9,180 9,275 36,289 35,225
Real estate operations, net................................. 21 48 111 218
Amortization of excess of cost over fair value
of net assets acquired.................................... 1,141 1,141 4,563 4,218
------ ------- ------ -------
Total non-interest expense.................................. 10,342 10,464 40,963 39,661
------ ------ ------ ------
Income before income taxes..................................... 9,153 8,135 36,091 33,539
Income tax expense ............................................ 4,068 3,692 15,940 14,810
----- ----- ------ ------
Net income..................................................... $ 5,085 $ 4,443 $ 20,151 $ 18,729
====== ===== ====== ======
Net income per common share:
Basic......................................... $ 0.62 $ 0.48 $ 2.38 $ 2.11
==== ==== ==== ====
Diluted....................................... $ 0.59 $ 0.46 $ 2.26 $ 1.99
==== ==== ==== ====
<PAGE>
RELIANCE BANCORP, INC. and SUBSIDIARY
Selected Financial Ratios
(Unaudited)
At or for the At or for the
Three Months Ended Fiscal Year Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- ------- ------
Performance ratios:
<S> <C> <C> <C> <C>
Return on average assets....................................... 0.83% 0.77% 0.81% 0.86%
Cash return on average assets.................................. 1.09% 1.11% 1.10% 1.19%
Return on average equity (2)................................... 11.34% 9.39% 11.22% 10.42%
Cash return on average equity (2).............................. 15.04% 13.56% 15.13% 14.42%
Return on average tangible equity (2).......................... 16.36% 13.72% 16.40% 15.14%
Average equity to average assets.............................. 7.14% 8.36% 7.30% 8.45%
Equity to total assets......................................... 7.00% 7.84% 7.00% 7.84%
Tangible equity to tangible assets............................. 4.89% 5.60% 4.89% 5.60%
Core deposits to total deposits................................ 39.94% 36.91% 39.94% 36.91%
Net interest spread............................................ 2.59% 2.79% 2.67% 2.98%
Net interest margin............................................ 2.89% 3.09% 2.95% 3.28%
General and administrative expenses to average assets.......... 1.49% 1.60% 1.47% 1.62%
Cash general and administrative
expenses to average assets.................................. 1.39% 1.43% 1.34% 1.45%
Operating income to average assets (1)......................... 0.39% 0.34% 0.33% 0.29%
Average interest-earning assets to average
interest-bearing liabilities................................ 1.07X 1.07X 1.07X 1.07X
Cash net income per diluted common share....................... $ 0.78 $ 0.66 $ 3.05 $ 2.75
At At
June 30, June 30,
1999 1998
--------- ------
Assets quality ratios:
<S> <C> <C>
Non-performing loans to total loans............................................... 0.67% 0.95%
Non-performing loans to total assets.............................................. 0.27% 0.37%
Non-performing assets to total assets............................................. 0.27% 0.40%
Allowance for loan losses to total loans.......................................... 0.93% 0.91%
Allowance for loan losses to non-performing loans................................. 139.08% 96.12%
(1) Operating income represents non-interest income less (plus) net gain (loss)
on securities and condemnation award from joint venture.
(2) For purposes of these calculations, average equity and average tangible
equity exclude the effect of changes in the net unrealized appreciation
(depreciation) on securities available for sale, net of taxes.
</TABLE>
