EXHIBIT 99.1
------------
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WEBSTER FINANCIAL CORPORATION
AND
FIRSTFED AMERICA BANCORP, INC.
DATED AS OF OCTOBER 6, 2003
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..........................................................1
SECTION 1.1 THE MERGER.....................................................1
SECTION 1.2 CLOSING........................................................1
SECTION 1.3 EFFECTIVE TIME.................................................2
SECTION 1.4 EFFECTS OF THE MERGER..........................................2
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
SURVIVING CORPORATION..........................................2
SECTION 1.6 DIRECTORS AND OFFICERS.........................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.............................3
SECTION 2.1 EFFECT ON CAPITAL STOCK...............................3
SECTION 2.2 PRORATION.............................................4
SECTION 2.3 COMPANY STOCK OPTIONS.................................5
SECTION 2.4 ELECTION AND EXCHANGE PROCEDURES......................6
SECTION 2.5 CERTAIN ADJUSTMENTS..................................10
SECTION 2.6 SHARES OF DISSENTING STOCKHOLDERS....................10
ARTICLE III REPRESENTATIONS AND WARRANTIES...................................11
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........11
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PARENT.............38
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.........................47
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY...................47
SECTION 4.2 ADVICE OF CHANGES....................................53
SECTION 4.3 NO SOLICITATION BY THE COMPANY.......................53
SECTION 4.4 TRANSITION...........................................55
SECTION 4.5 NO FUNDAMENTAL CHANGES IN THE CONDUCT OF BUSINESS
BY PARENT............................................56
ARTICLE V ADDITIONAL AGREEMENTS..............................................56
SECTION 5.1 PREPARATION OF THE FORM S-4, PROXY STATEMENT;
STOCKHOLDERS MEETING.................................56
SECTION 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY...............58
SECTION 5.3 REASONABLE BEST EFFORTS..............................59
SECTION 5.4 RULE 16B-3 ACTIONS...................................60
SECTION 5.5 INDEMNIFICATION, EXCULPATION AND INSURANCE...........61
SECTION 5.6 FEES AND EXPENSES....................................62
SECTION 5.7 PUBLIC ANNOUNCEMENTS.................................62
SECTION 5.8 AFFILIATES...........................................62
SECTION 5.9 STOCK EXCHANGE LISTING...............................62
SECTION 5.10 STOCKHOLDER LITIGATION...............................62
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SECTION 5.11 STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS....62
SECTION 5.12 EMPLOYEE BENEFITS....................................63
SECTION 5.13 TAX MATTERS..........................................64
SECTION 5.14 BOARD OF DIRECTORS...................................64
SECTION 5.15 ADVISORY BOARD OF PARENT.............................64
ARTICLE VI CONDITIONS PRECEDENT..............................................65
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER...........................................65
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PARENT..................65
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY.............66
SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS....................67
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................67
SECTION 7.1 TERMINATION..........................................67
SECTION 7.2 EFFECT OF TERMINATION................................70
SECTION 7.3 AMENDMENT............................................72
SECTION 7.4 EXTENSION; WAIVER....................................72
ARTICLE VIII GENERAL PROVISIONS..............................................73
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES........73
SECTION 8.2 NOTICES..............................................73
SECTION 8.3 DEFINITIONS..........................................74
SECTION 8.4 INTERPRETATION.......................................75
SECTION 8.5 COUNTERPARTS.........................................76
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.......76
SECTION 8.7 GOVERNING LAW........................................76
SECTION 8.8 ASSIGNMENT...........................................76
SECTION 8.9 CONSENT TO JURISDICTION..............................76
SECTION 8.10 HEADINGS.............................................77
SECTION 8.11 SEVERABILITY.........................................77
SECTION 8.12 ENFORCEMENT..........................................77
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INDEX OF DEFINED TERMS
TERM PAGE
Affiliate....................................................................73
Affiliated Person............................................................73
Agreement.....................................................................1
Average Closing Price........................................................69
Bank Combination.............................................................59
BHC Act......................................................................15
Business Day.................................................................69
Cash Consideration............................................................3
Cash Election.................................................................3
Cash Election Shares..........................................................3
Certificate of Merger.........................................................2
Change in the Company Recommendation.........................................54
Closing.......................................................................2
Closing Date..................................................................2
Closing Parent Share Value...................................................73
Code..........................................................................1
Company.......................................................................1
Company Acquisition Agreement................................................70
Company Bank.................................................................11
Company Common Stock..........................................................1
Company Designee..............................................................2
Company Disclosure Schedule..................................................11
Company Filed SEC Documents..................................................18
Company Insiders.............................................................60
Company Material Contracts...................................................17
Company Permitted Liens......................................................12
Company Plan.................................................................25
Company Preferred Stock......................................................12
Company Recommendation.......................................................57
Company Regulatory Agreement.................................................20
Company SEC Documents........................................................15
Company Section 16 Information...............................................60
Company Stockholder Approval.................................................32
Company Stockholders Meeting..................................................6
Company Stock Certificates....................................................6
Company Stock Options........................................................13
Company Stock Plans..........................................................12
Company Takeover Proposal....................................................54
Continuing Employees.........................................................62
Controlled Group Liability ..................................................27
Conversion Applications......................................................38
Credit Facilities............................................................49
Derivative Transactions......................................................33
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DGCL..........................................................................1
Determination Date...........................................................69
Disclosing Party.............................................................58
Dissenting Shares............................................................10
Effective Time................................................................2
Election......................................................................6
Election Deadline.............................................................6
Employee.....................................................................17
Employer Securities .........................................................28
Employment Agreement.........................................................25
Environmental Claims.........................................................29
ERISA........................................................................25
ERISA Affiliate..............................................................27
ESOP.........................................................................28
Exchange Act.................................................................13
Exchange Agent................................................................6
Exchange Fund.................................................................7
Exchange Ratio................................................................3
FDIC.........................................................................12
Federal Reserve..............................................................15
Fill Option..................................................................68
Final Index Price............................................................69
Final Price..................................................................69
Finance Laws.................................................................21
Form of Election..............................................................6
Form S-4.....................................................................15
GAAP.........................................................................16
Governmental Entity..........................................................15
HOLA.........................................................................15
Holder........................................................................6
Indebtedness.................................................................18
Indemnified Parties..........................................................61
Index Group..................................................................69
Initial Index Price..........................................................70
Instruments of Indebtedness..................................................16
Intellectual Property........................................................30
IRS..........................................................................23
knowledge....................................................................74
Leased Properties............................................................36
Leases.......................................................................35
Letter of Transmittal.........................................................9
Liens........................................................................12
Loan.........................................................................28
Major Company Stockholder....................................................13
Material Adverse Change......................................................74
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Material Adverse Effect......................................................74
Material Employment Agreement................................................26
Merger........................................................................1
Merger Consideration..........................................................4
Mutliemployer Plan...........................................................27
Multiple Employer Plan.......................................................26
Non-Election Shares...........................................................4
NYSE.........................................................................73
OCC..........................................................................15
OREO.........................................................................37
Other Company Documents......................................................20
Other Parent Documents.......................................................44
OTS..........................................................................11
Owned Properties.............................................................35
Parent........................................................................1
Parent Adjustment Event......................................................10
Parent Advisory Board........................................................64
Parent Authorized Preferred Stock............................................39
Parent Bank..................................................................38
Parent Common Stock...........................................................3
Parent Convertible Securities................................................39
Parent Disclosure Schedule...................................................38
Parent ERISA Affilaite.......................................................46
Parent Filed SEC Documents...................................................45
Parent Permits...............................................................43
Parent Plans.................................................................45
Parent Regulatory Agreement..................................................43
Parent Rights Agreement.......................................................3
Parent SEC Documents.........................................................41
Parent Preferred Stock.......................................................39
Parent Starting Price........................................................70
Parent Stock Certificate......................................................8
Parent Stock Options.........................................................39
Parent Stock Plans...........................................................39
Parent Title IV Plans........................................................45
Permits......................................................................19
Person.......................................................................74
Plan.........................................................................26
Policies, Practices and Procedures...........................................34
Pre-Termination Takeover Proposal Event......................................70
Proxy Statement..............................................................15
Qualified Plans..............................................................26
Receiving Party..............................................................58
Representatives..............................................................58
Requisite Regulatory Approvals...............................................64
v
Restraints...................................................................65
SAIF.........................................................................12
SEC..........................................................................74
Securities Act...............................................................15
Shortfall Number..............................................................4
Software.....................................................................30
Stock Consideration...........................................................3
Stock Conversion Number.......................................................4
Stock Election................................................................3
Stock Election Number.........................................................4
Stock Election Shares.........................................................3
Subsidiary...................................................................74
Surviving Corporation.........................................................1
Tax..........................................................................25
Tax Return...................................................................25
Taxes........................................................................25
Third Party Leases...........................................................36
Unlawful Gains...............................................................21
Withdrawal Liability.........................................................27
Wachtell, Lipton..............................................................2
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AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of October
6, 2003, by and between Webster Financial Corporation, a Delaware corporation
("PARENT"), and FIRSTFED AMERICA BANCORP, INC., a Delaware corporation (the
"COMPANY").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, each of Parent and the Company desire to enter into a
transaction whereby the Company will merge with and into Parent (the "MERGER"),
with Parent being the surviving corporation, upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $0.01 per share, of the Company ("COMPANY
COMMON STOCK") will be converted into the right to receive the Merger
Consideration (as defined in Section 2.1(c));
WHEREAS, the respective Boards of Directors of Parent and the Company
have each approved this Agreement and the Merger (as defined below) in
accordance with the provisions of the Delaware General Corporation Law (the
"DGCL") and determined that the Merger is advisable;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Parent and the Company are entering into employment arrangements with
Robert F. Stoico and Edward A. Hjerpe, III; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "CODE"), and
that this Agreement be, and is hereby, adopted as a plan of reorganization for
purposes of Sections 354 and 361 of the Code.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, the Company shall
be merged with and into Parent at the Effective Time. Following the Effective
Time, Parent shall be the surviving corporation (the "SURVIVING CORPORATION")
and shall succeed to and assume all of the rights and obligations of the Company
in accordance with the DGCL.
SECTION 1.2 CLOSING. Subject to the satisfaction or waiver of all of
the conditions to closing contained in Article VI hereof, the closing of the
Merger (the "CLOSING") will take place at 9:00 a.m. on a date to be specified by
the parties (the "CLOSING DATE"), which date shall be no later than the fifth
business day after satisfaction or waiver of the conditions set forth in Article
VI (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions), unless
another time or date
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is agreed to by the parties hereto. The Closing will be held at the offices of
Wachtell, Lipton, Rosen & Katz ("WACHTELL, LIPTON"), 51 West 52nd Street, New
York, New York 10019 or at such other location as is agreed to by the parties
hereto.
SECTION 1.3 EFFECTIVE TIME. Subject to the provisions of this
Agreement, at the Closing, the parties shall cause the Merger to be consummated
by filing a certificate of merger in accordance with the DGCL (the "CERTIFICATE
OF MERGER") and shall make all other filings or recordings required under the
DGCL to effectuate the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of the State
of Delaware, or at such subsequent date or time as Parent and the Company shall
agree and specify in the Certificate of Merger (the time the Merger becomes
effective being hereinafter referred to as the "EFFECTIVE TIME").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Sections 259 and 261 of the DGCL.
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION. The certificate of incorporation and the by-laws of Parent, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation and the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
SECTION 1.6 DIRECTORS AND OFFICERS.
(a) From and after the Effective Time, the directors of Parent
and Parent Bank, respectively, shall consist of the directors of Parent and
Parent Bank in office immediately prior to the Effective Time, together with
Robert F. Stoico (the "COMPANY DESIGNEE") as provided in Section 5.14, until
their successors shall have been duly elected, appointed or qualified or until
their earlier death, resignation or removal in accordance with the certificate
of incorporation and the bylaws of Parent and Parent Bank.
(b) From and after the Effective Time, the officers of Parent
shall become the officers of the Surviving Corporation until their successors
shall have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the certificate of
incorporation and the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof:
(a) CANCELLATION OF TREASURY STOCK. Each share of Company Common
Stock that is owned by the Company or Parent (in each case other than shares
held in a fiduciary or agency capacity or in satisfaction of debts previously
contracted) shall automatically be
2
cancelled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(b) CONVERSION OF COMPANY COMMON STOCK OWNED BY SUBSIDIARIES OF
PARENT OR OF THE COMPANY. Each share of Company Common Stock owned by a
Subsidiary (as defined under Section 8.3) of Parent or of the Company shall be
converted pursuant to the Merger as provided in Section 2.1(c) and Section 2.2.
Notwithstanding anything to the contrary contained in Section 2.1(c) and Section
2.2, each share of Company Common Stock owned by a Subsidiary of Parent or of
the Company (other than shares held in a fiduciary or agency capacity) shall be
converted solely into Parent Common Stock (as defined below). If any shares of
Company Common Stock owned by a Subsidiary of Parent or of the Company (other
than shares held in a fiduciary or agency capacity) are converted into Parent
Common Stock as a result of the preceding sentence, the Stock Conversion Number
shall be proportionately adjusted so that the foregoing provisions do not
prejudice the Company stockholders in their ability to receive the form of
Merger Consideration (as defined in Section 2.1(c)) elected by them in
accordance herewith.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to the provisions
of this Article II, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares cancelled and retired
pursuant to Section 2.1(a) hereof, and other than Dissenting Shares (as defined
in Section 2.6)) shall be converted, at the election of the holder thereof, in
accordance with the procedures set forth in Section 2.4 below and subject to
Sections 2.2 and 2.5, into the right to receive the following, without interest:
(i) for each share of Company Common Stock with respect to
which an election to receive cash has been effectively made and not
revoked or lost, pursuant to Section 2.4 (a "CASH ELECTION"), the
right to receive in cash from Parent, without interest, an amount
equal to $24.50 (the "CASH CONSIDERATION") (collectively, "CASH
ELECTION SHARES");
(ii) for each share of Company Common Stock with respect to
which an election to receive common stock, par value $0.01 per share,
of Parent (together with the rights attached thereto issued pursuant
to that certain Rights Agreement, dated as of February 5, 1996, as
amended, as it may be further amended, supplemented, restated or
replaced from time to time (the "PARENT RIGHTS AGREEMENT"), between
Parent and American Stock Transfer & Trust Company, as rights agent,
"PARENT COMMON STOCK") has been effectively made and not revoked or
lost, pursuant to Section 2.4 (a "STOCK ELECTION"), the right to
receive from Parent 0.5954 (the "EXCHANGE RATIO") of a share of Parent
Common Stock (the "STOCK CONSIDERATION") (collectively, the "STOCK
ELECTION SHARES"); and
(iii) for each share of Company Common Stock other than
shares as to which a Cash Election or a Stock Election has been
effectively made and not revoked or lost, pursuant to Section 2.4
(collectively, "NON-ELECTION SHARES"), the right to receive from
Parent such Stock Consideration and/or Cash Consideration as is
determined in accordance with Section 2.2(b).
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The Cash Consideration and Stock Consideration are sometimes referred
to herein collectively as the "MERGER CONSIDERATION."
SECTION 2.2 PRORATION.
(a) Notwithstanding any other provision contained in this
Agreement, the total number of shares of Company Common Stock to be converted
into Stock Consideration pursuant to Section 2.1(c) (the "STOCK CONVERSION
NUMBER") shall be equal to the product obtained by multiplying (x) the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time by (y) 0.60. All of the other shares of Company Common Stock shall be
converted into Cash Consideration (in each case, excluding shares of Company
Common Stock to be canceled as provided in Section 2.1(a) and Dissenting
Shares).
(b) Within five business days after the Effective Time (as
defined in Section 1.3), Parent shall cause the Exchange Agent (as defined in
Section 2.4) to effect the allocation among holders of Company Common Stock of
rights to receive the Cash Consideration and the Stock Consideration as follows:
(i) If the aggregate number of shares of Company Common
Stock with respect to which Stock Elections shall have been made (the
"STOCK ELECTION NUMBER") exceeds the Stock Conversion Number, then all
Cash Election Shares and all Non-Election Shares of each holder
thereof shall be converted into the right to receive the Cash
Consideration, and Stock Election Shares of each holder thereof will
be converted into the right to receive the Stock Consideration in
respect of that number of Stock Election Shares equal to the product
obtained by multiplying (x) the number of Stock Election Shares held
by such holder by (y) a fraction, the numerator of which is the Stock
Conversion Number and the denominator of which is the Stock Election
Number, with the remaining number of such holder's Stock Election
Shares being converted into the right to receive the Cash
Consideration; and
(ii) If the Stock Election Number is less than the Stock
Conversion Number (the amount by which the Stock Conversion Number
exceeds the Stock Election Number being referred to herein as the
"SHORTFALL NUMBER"), then all Stock Election Shares shall be converted
into the right to receive the Stock Consideration and the Non-Election
Shares and Cash Election Shares shall be treated in the following
manner:
(A) If the Shortfall Number is less than or equal
to the number of Non-Election Shares, then all Cash Election
Shares shall be converted into the right to receive the Cash
Consideration and the Non-Election Shares of each holder
thereof shall convert into the right to receive the Stock
Consideration in respect of that number of Non-Election
Shares equal to the product obtained by multiplying (x) the
number of Non-Election Shares held by such holder by (y) a
fraction, the numerator of which is the Shortfall Number and
the denominator of which is the total number of Non-Election
Shares, with the remaining number of such
4
holder's Non-Election Shares being converted into the right
to receive the Cash Consideration; or
(B) If the Shortfall Number exceeds the number of
Non-Election Shares, then all Non-Election Shares shall be
converted into the right to receive the Stock Consideration
and Cash Election Shares of each holder thereof shall
convert into the right to receive the Stock Consideration in
respect of that number of Cash Election Shares equal to the
product obtained by multiplying (x) the number of Cash
Election Shares held by such holder by (y) a fraction, the
numerator of which is the amount by which (1) the Shortfall
Number exceeds (2) the total number of Non-Election Shares
and the denominator of which is the total number of Cash
Election Shares, with the remaining number of such holder's
Cash Election Shares being converted into the right to
receive the Cash Consideration.
SECTION 2.3 COMPANY STOCK OPTIONS. As of the Effective Time, each
Company Stock Option representing a right to receive Company Common Stock upon
exercise of such Company Stock Option outstanding at the Effective Time,
including shares awarded pursuant to Section 10 of the Company's 1998 Stock
Option Plan, whether or not exercisable or vested, shall be canceled and
converted into the right to receive from the Company, subject to required
withholding taxes, a lump sum cash payment in an amount equal to the excess, if
any, of the Cash Consideration less the per share exercise price of such Company
Stock Option for each share of Company Common Stock subject to such Company
Stock Option. Prior to the Effective Time, the Company shall take any and all
actions necessary to effectuate this Section 2.3, including any action pursuant
to the Company's 1997 Stock-Based Incentive Plan, as amended, and the Company's
1998 Stock Option Plan to provide for the termination of such plans as of the
Effective Time, the cancellation of the Company Stock Options and the payments
contemplated by the preceding sentence of this Section 2.3.
SECTION 2.4 ELECTION AND EXCHANGE PROCEDURES. Each holder of record of
shares of Company Common Stock (other than Dissenting Shares) ("HOLDER") shall
have the right, subject to the limitations set forth in this Article II, to
submit an election in accordance with the following procedures:
(a) Each Holder may specify in a request made in accordance with
the provisions of this Section 2.4 (herein called an "Election") (x) the number
of shares of Company Common Stock owned by such Holder with respect to which
such Holder desires to make a Stock Election and (y) the number of shares of
Company Common Stock owned by such Holder with respect to which such Holder
desires to make a Cash Election.
(b) Parent shall prepare a form reasonably acceptable to the
Company (the "FORM OF ELECTION") which shall be mailed to the Company's
stockholders entitled to vote at the meeting of the stockholders of the Company
at which the stockholders of the Company consider and vote on this Agreement
(the "COMPANY STOCKHOLDERS MEETING") so as to permit
5
the Company's stockholders to exercise their right to make an Election prior to
the Election Deadline.
(c) Parent shall make the Form of Election initially available at
the time that the Proxy Statement (as defined herein) is made available to the
stockholders of the Company, to such stockholders, and shall use all reasonable
efforts to make available as promptly as possible a Form of Election to any
stockholder of the Company who requests such Form of Election following the
initial mailing of the Forms of Election and prior to the Election Deadline. In
no event shall the Form of Election be made available less than twenty (20) days
prior to the Election Deadline.
(d) Any Election shall have been made properly only if the Person
(as defined under Section 8.3) authorized to receive Elections and to act as
Exchange Agent under this Agreement, which Person shall be designated by Parent
and not reasonably objected to by the Company (the "EXCHANGE AGENT"), pursuant
to an agreement entered into prior to Closing and not reasonably objected to by
the Company, shall have received, by 5:00 p.m. local time in the city in which
the principal office of such Exchange Agent is located, on the date of the
Election Deadline, a Form of Election properly completed and signed and
accompanied by certificates of the shares of Company Common Stock (the "COMPANY
STOCK CERTIFICATES") to which such Form of Election relates or by an appropriate
customary guarantee of delivery of such certificates, as set forth in such Form
of Election, from a member of any registered national securities exchange or a
commercial bank or trust company in the United States; provided, that such
certificates are in fact delivered to the Exchange Agent by the time required in
such guarantee of delivery. Failure to deliver shares of Company Common Stock
covered by such a guarantee of delivery within the time set forth on such
guarantee shall be deemed to invalidate any otherwise properly made Election,
unless otherwise determined by Parent, in its sole discretion. As used herein,
"ELECTION DEADLINE" means 5:00 p.m. on the date that is the day prior to the
date of the Company Stockholder Meeting. The Company and Parent shall cooperate
to issue a press release reasonably satisfactory to each of them announcing the
date of the Election Deadline not more than fifteen (15) business days before,
and at least five (5) business days prior to, the Election Deadline.
(e) Any Company stockholder may, at any time prior to the
Election Deadline, change or revoke his or her Election by written notice
received by the Exchange Agent prior to the Election Deadline accompanied by a
properly completed and signed, revised Form of Election. If Parent shall
determine in its reasonable discretion that any Election is not properly made
with respect to any shares of Company Common Stock, such Election shall be
deemed to be not in effect, and the shares of Company Common Stock covered by
such Election shall, for purposes hereof, be deemed to be Non-Election Shares,
unless a proper Election is thereafter timely made.
(f) Any Company stockholder may, at any time prior to the
Election Deadline, revoke his or her Election by written notice received by the
Exchange Agent prior to the Election Deadline or by withdrawal prior to the
Election Deadline of his or her Company Stock Certificate, or of the guarantee
of delivery of such certificates, previously deposited with the Exchange Agent.
All Elections shall be revoked automatically if the Exchange Agent
6
is notified in writing by Parent or the Company that this Agreement has been
terminated in accordance with Article VII.
(g) If any portion of the Merger Consideration is to be paid to a
Person other than the Person in whose name a Company Stock Certificate so
surrendered is registered, it shall be a condition to such payment that such
Company Stock Certificate shall be properly endorsed or otherwise be in proper
form for transfer and the Person requesting such payment shall pay to the
Exchange Agent any transfer or other similar Taxes (as defined in Section
3.1(j)(xix)) required as a result of such payment to a Person other than the
registered holder of such Company Stock Certificate, or establish to the
reasonable satisfaction of the Exchange Agent that such Tax has been paid or is
not payable. The Exchange Agent (or, subsequent to the six-month anniversary of
the Effective Time, Parent) shall be entitled to deduct and withhold from the
Merger Consideration (including cash in lieu of fractional shares of Parent
Common Stock) otherwise payable pursuant to this Agreement to any holder of
Company Common Stock such amounts as the Exchange Agent or Parent, as the case
may be, is required to deduct and withhold under the Code, or any provision of
state, local or foreign Tax law, with respect to the making of such payment. To
the extent the amounts are so withheld by the Exchange Agent or Parent, as the
case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of shares of Company Common Stock in
respect of whom such deduction and withholding was made by the Exchange Agent or
Parent, as the case may be.
(h) After the Effective Time there shall be no further
registration or transfers of shares of Company Common Stock. If, after the
Effective Time, Company Stock Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for the Merger Consideration
in accordance with the procedures set forth in this Article II.
(i) At any time following the six-month anniversary of the
Effective Time, Parent shall be entitled to require the Exchange Agent to
deliver to it any remaining portion of the Merger Consideration not distributed
to Holders of shares of Company Common Stock that was deposited with the
Exchange Agent at the Effective Time (the "EXCHANGE FUND") (including any
interest received with respect thereto and other income resulting from
investments by the Exchange Agent, as directed by Parent), and Holders shall be
entitled to look only to the Parent (subject to abandoned property, escheat or
other similar laws) with respect to the Merger Consideration, any cash in lieu
of fractional shares of Parent Common Stock and any dividends or other
distributions with respect to Parent Common Stock payable upon due surrender of
their Company Stock Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Parent nor the Exchange Agent shall be liable to any
Holder of a Company Stock Certificate for Merger Consideration (or dividends or
distributions with respect thereto) or cash from the Exchange Fund in each case
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(j) In the event any Company Stock Certificates shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Company Stock Certificate(s) to be lost, stolen or
destroyed and, if required by Parent or the Exchange Agent, the posting by such
Person of a bond in such sum as Parent may reasonably direct as indemnity
against any claim that may be made against it or the Surviving Corporation
7
with respect to such Company Stock Certificate(s), the Exchange Agent will issue
the Merger Consideration deliverable in respect of the shares of Company Common
Stock represented by such lost, stolen or destroyed Company Stock Certificates.
(k) No dividends or other distributions with respect to Parent
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Company Stock Certificate with respect to the shares
of Parent Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to subsection (l)
below, and all such dividends, other distributions and cash in lieu of
fractional shares of Parent Common Stock shall be paid by Parent to the Exchange
Agent and shall be included in the Exchange Fund, in each case until the
surrender of such Company Stock Certificate in accordance with subsection (l)
below. Subject to the effect of applicable abandoned property, escheat or
similar laws, following surrender of any such Company Stock Certificate there
shall be paid to the Holder of a certificate for Parent Common Stock (a "PARENT
STOCK CERTIFICATE") representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such Holder is entitled pursuant to subsection (l),
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock. Parent shall make available
to the Exchange Agent cash for these purposes, if necessary.
(l) No Parent Stock Certificates representing fractional shares
of Parent Common Stock shall be issued upon the surrender for exchange of
Company Stock Certificates; no dividend or distribution by Parent shall relate
to such fractional share interests; and such fractional share interests will not
entitle the owner thereof to vote or to any rights as a stockholder of Parent.
In lieu of any such fractional shares, each Holder of a Company Stock
Certificate who would otherwise have been entitled to receive a fractional share
interest in exchange for such Company Stock Certificate shall receive from the
Exchange Agent an amount in cash equal to the product obtained by multiplying
(A) the fractional share interest to which such Holder (after taking into
account all shares of Company Common Stock held by such holder at the Effective
Time) would otherwise be entitled by (B) the Closing Parent Share Value.
Notwithstanding any other provision contained in this Agreement, funds utilized
to acquire fractional shares as aforesaid shall be furnished by Parent on a
timely basis and shall in no event be derived from or diminish the Cash
Consideration available for distribution as part of the Merger Consideration.
(m) Parent, in the exercise of its reasonable discretion, shall
have the right to make all determinations, not inconsistent with the terms of
this Agreement, governing (A) the validity of the Forms of Election and
compliance by any Company Stockholder with the Election procedures set forth
herein, (B) the manner and extent to which Elections are to be taken into
account in making the determinations prescribed by Section 2.4, (C) the issuance
and delivery of Parent Stock Certificates into which shares of Company Common
Stock are converted in the Merger and (D) the method of payment of cash for
shares of Company Common Stock converted into the right to receive the Cash
Consideration and cash in lieu of fractional
8
shares of Parent Common Stock where the holder of the applicable Company Stock
Certificate has no right to receive whole shares of Parent Common Stock.
(n) Prior to the Effective Time, Parent will deposit with the
Exchange Agent certificates representing shares of Parent Common Stock
sufficient to pay in a timely manner, and the Parent shall instruct the Exchange
Agent to timely pay, the aggregate Stock Consideration. In addition, prior to
the Effective Time, Parent shall deposit with the Exchange Agent sufficient cash
to permit prompt payment of the Cash Consideration and cash in lieu of
fractional shares of Parent Common Stock, and Parent shall instruct the Exchange
Agent to timely pay the Cash Consideration and cash in lieu of fractional shares
of Parent Common Stock where the holder of the applicable Company Stock
Certificate has no right to receive whole shares of Parent Common Stock.
(o) As soon as reasonably practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a Company Stock
Certificate(s) which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 2.1 and any cash
in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor who did not complete an Election Form, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Company Stock Certificate(s) shall pass, only upon
delivery of the Company Stock Certificate(s) (or affidavits of loss in lieu of
such certificates)) (the "LETTER OF TRANSMITTAL") to the Exchange Agent and
shall be substantially in such form and have such other provisions as shall be
determined by Parent and (ii) instructions for use in surrendering the Company
Stock Certificate(s) in exchange for the Merger Consideration and any cash in
lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.4(k) and any dividends or distributions to which such holder is
entitled pursuant to Section 2.4(j).
(p) Upon surrender to the Exchange Agent of its Company Stock
Certificate or Company Stock Certificates, accompanied by a properly completed
Form of Election or a properly completed Letter of Transmittal a Holder of
Company Common Stock will be entitled to receive promptly after the Effective
Time the Merger Consideration (elected or deemed elected by it, subject to
Sections 2.1 and 2.2) in respect of the shares of Company Common Stock
represented by its Company Stock Certificate. Until so surrendered, each such
Company Stock Certificate shall represent after the Effective Time, for all
purposes, only the right to receive the Merger Consideration and any cash in
lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.4(l) and any dividends or distributions to which such holder is
entitled pursuant to Section 2.4(k).
SECTION 2.5 CERTAIN ADJUSTMENTS. If after the date hereof and on or
prior to the Effective Time the outstanding shares of Parent Common Stock shall
be changed into a different number of shares by reason of any reclassification,
recapitalization or combination, stock split, reverse stock split, stock
dividend or rights issued in respect of such stock, or any similar event shall
occur (any such action, a "PARENT ADJUSTMENT EVENT"), the Exchange Ratio
9
shall be proportionately adjusted to provide to the holders of Company Common
Stock the same economic effect as contemplated by this Agreement prior to such
Parent Adjustment Event;
SECTION 2.6 SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding
anything in this Agreement to the contrary, any shares of Company Common Stock
that are issued and outstanding as of the Effective Time and that are held by a
stockholder who has properly exercised his appraisal rights under the DGCL (the
"DISSENTING SHARES") shall not be converted into the right to receive the Merger
Consideration unless and until the holder shall have failed to perfect, or shall
have effectively withdrawn or lost, his right to dissent from the Merger under
the DGCL and to receive such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to and subject to the requirements of
the DGCL. If any such holder shall have so failed to perfect or have effectively
withdrawn or lost such right after the Election Deadline, each share of such
holder's Company Common Stock shall thereupon be deemed to have been converted
into and to have become, as of the Effective Time, the right to receive, without
any interest thereon, the Stock Election Consideration or the Cash Election
Consideration, or a combination thereof, as determined by Parent in its sole
discretion. The Company shall give Parent (i) prompt notice of any notice or
demands for appraisal or payment for shares of Company Common Stock received by
the Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands or notices. The
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth on the Disclosure Schedule delivered by the Company to Parent prior to
the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE") and making
reference to the particular subsection of this Agreement to which exception is
being taken, the Company represents and warrants to Parent as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER.
(i) Each of the Company and its Subsidiaries is a
corporation or other legal entity duly organized, validly existing and
in good standing (with respect to jurisdictions which recognize such
concept) under the laws of the jurisdiction in which it is organized
and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted. Each of
the Company and its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified, or licensed
or to be in good standing would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the
Company. The Company is duly registered as a savings and loan holding
company with the Office of Thrift Supervision (the "OTS") under the
Home Owners' Loan Act of 1933 (the "HOLA"), and First Federal Savings
Bank Of America
10
("COMPANY BANK") is a federally chartered savings bank duly organized,
validly existing and in good standing under the laws of the United
States.
(ii) The Company has delivered or made available to Parent
prior to the execution of this Agreement complete and correct copies
of the certificate of incorporation and by-laws or other
organizational documents, as amended to date, of the Company and its
Subsidiaries.
(iii) Except as set forth in Section 3.1(a) of the Company
Disclosure Schedule, the minute books of the Company and its
Subsidiaries, in all material respects, contain accurate records of
all meetings and accurately reflect all other material actions taken
by the stockholders of the Company and its Subsidiaries, the boards of
directors of the Company and its Subsidiaries and all standing
committees of the boards of directors of the Company and its
Subsidiaries.
(b) SUBSIDIARIES. Section 3.1(b) of the Company Disclosure
Schedule lists all the Subsidiaries of the Company, whether consolidated or
unconsolidated, and sets forth the issued and outstanding securities of each of
such Subsidiaries and its jurisdiction of incorporation. Except as set forth in
Section 3.1(b) of the Company Disclosure Schedule, and other than the trust
preferred securities issued by People's Bancshares Capital Trust II, all
outstanding shares of capital stock of, or other equity interests in, each such
Subsidiary: (i) have been validly issued and are fully paid and nonassessable;
(ii) are owned directly or indirectly by the Company, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever, other than those imposed generally on similar entities
under applicable law (collectively, "LIENS"), and other than Company Permitted
Liens (as defined in this Section 3.1(b)); and (iii) other than Company
Permitted Liens, are free of any other material restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests) that would prevent the operation by the
Surviving Corporation of such Subsidiary's business as currently conducted.
Neither the Company nor any of its Subsidiaries conducts any operations outside
of the United States or conducts any operations that are subject to any
regulatory oversight by Governmental Entities (as defined below in Section
3.1(d)) outside of the United States. Other than the Subsidiaries of the
Company, the Company does not own or control, directly or indirectly, a 5% or
greater equity interest in any corporation, company, association, partnership,
joint venture or other entity. For purpose of this Section 3.1(b) (except as
indicated) and elsewhere through this Agreement: (i) "COMPANY PERMITTED LIENS"
shall mean (A) Liens described in Section 3.1(b) of the Company Disclosure
Schedule; (B) restrictions on transferability pursuant to federal and state
securities laws; and (C) Liens for Taxes not yet due or delinquent or being
contested in good faith and for which reserves appropriate in all material
respects have been established in accordance with GAAP (as defined in Section
3.1(e)(ii)). The deposit accounts of the Company Bank are insured by the Federal
Deposit Insurance Corporation (the "FDIC") through the Savings Association
Insurance Fund (the "SAIF") to the fullest extent permitted by law, and all
premiums and assessments required in connection therewith have been paid by the
Company Bank.
(c) CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 25,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $0.01 per share, of the Company ("COMPANY
PREFERRED STOCK"). As of
11
October 2, 2003: (i) 17,412,663 shares of Company Common Stock were issued and
outstanding, of which 3,728 shares are restricted shares of Company Common Stock
issued pursuant to the Company Stock Plans (as defined in this Section 3.1(c));
(ii) 4,568,946 shares of Company Common Stock were held by the Company in its
treasury and no shares of Company Common Stock were held by Subsidiaries of the
Company; (iii) no shares of Company Preferred Stock were issued and outstanding;
(iv) no shares of Company Preferred Stock were held by the Company in its
treasury or were held by any Subsidiary of the Company; and (v) 2,198,214 shares
of Company Common Stock were reserved for issuance pursuant to all plans,
agreements or arrangements providing for equity-based compensation to any
director, Employee (as defined in Section 3.1(f)), consultant or independent
contractor of the Company or any of its Subsidiaries (collectively, the "COMPANY
STOCK PLANS"), of which 1,845,408 shares are subject to outstanding Company
Stock Options (as defined in this Section 3.1(c)) and 352,806 shares are
required to be awarded pursuant to Section 10 of the Company's 1998 Stock Option
Plan upon completion of the Merger. All outstanding shares of capital stock of
the Company are, and all shares thereof which may be issued prior to the Closing
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. The Company has delivered to
Parent a true and complete list, as of the close of business on October 2, 2003,
of all outstanding stock options to purchase or receive Company Common Stock and
all other rights to purchase or receive Company Common Stock granted under the
Company Stock Plans (collectively, the "COMPANY STOCK OPTIONS"), the number of
shares subject to each such Company Stock Option, the grant dates, the vesting
schedule and the exercise prices of each such Company Stock Option and the names
of the holders thereof. The Company has not awarded or authorized the award of
any Company Stock Options since October 2, 2003, except that Company Stock
Options with respect to 352,806 shares of Company Common Stock are required to
be granted to holders of Company Stock Options pursuant to Section 10 of the
Company's 1998 Stock Option Plan upon completion of the Merger. Except as set
forth in this Section 3.1(c) and except for changes since October 2, 2003
resulting from (i) the issuance of shares of Company Common Stock pursuant to
and in accordance with Company Stock Options outstanding prior to October 2,
2003, (ii) as expressly contemplated hereby, including pursuant to Section 10 of
the Company's 1998 Stock Option Plan, (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or voting securities or
other ownership interests of the Company, (B) any securities of the Company or
any Subsidiary of the Company convertible into or exchangeable or exercisable
for shares of capital stock or voting securities or other ownership interests of
the Company, or (C) any warrants, calls, options or other rights to acquire from
the Company or any Subsidiary of the Company, or any obligation of the Company
or any of its Subsidiaries to issue, any capital stock, voting securities or
other ownership interests in, or securities convertible into or exchangeable or
exercisable for, capital stock or voting securities or other ownership interests
of the Company, and (y) there are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities, other than pursuant to any "cashless exercise"
provision of any Company Stock Options. Except as set forth in Section 3.1(c) of
the Company Disclosure Schedule, there are no outstanding (A) securities of the
Company or any of its Subsidiaries convertible into or exchangeable or
exercisable for shares of capital stock or voting securities or other ownership
interests in any Subsidiary of the Company, (B) warrants, calls, options or
other rights to acquire from the Company or any of its
12
Subsidiaries, or any obligation of the Company or any of its Subsidiaries to
issue, any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable or exercisable for, any capital
stock, voting securities or other ownership interests in, any Subsidiary of the
Company or (C) obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any such outstanding securities of
Subsidiaries of the Company or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. Neither the Company nor any of its
Subsidiaries is a party and, to the knowledge of the Company as of the date
hereof, no other Person having beneficial ownership (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"))
of 5% or more of the outstanding Company Common Stock (a "MAJOR COMPANY
STOCKHOLDER") is a party to any agreement restricting the transfer of, relating
to the voting of, requiring registration of, or granting any preemptive or
antidilutive rights with respect to any of the securities of the Company or any
of its Subsidiaries. There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party or, to
the knowledge of the Company as of the date hereof, any Major Company
Stockholder is a party with respect to the voting of the capital stock of the
Company or any of the Subsidiaries.
(d) AUTHORITY; NONCONTRAVENTION. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject, in the
case of the Merger, to the Company Stockholder Approval (as defined in Section
3.1(r)) to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of the Merger,
to the Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Parent, constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
that (i) such enforceability may be subject to applicable bankruptcy, insolvency
or other similar laws now or hereafter in effect affecting creditors' rights
generally and (ii) the availability of the remedy of specific performance or
injunction or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought. Except as set forth in Section 3.1(d) of the
Company Disclosure Schedule, the execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby (including the
Bank Combination (as defined in Section 5.3)) and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation,
forfeiture or termination of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of forfeiture, termination,
cancellation or acceleration (with or without notice or lapse of time, or both)
of any obligation or loss of a benefit or, in the case of clause (iii) below,
any material obligation or loss of a material benefit, under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries under, (i) the certificate of incorporation or by-laws of
the Company, (ii) the certificate of incorporation or by-laws or the comparable
organizational documents of any of its Subsidiaries, (iii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, vendor agreement, software
agreement or other agreement, instrument, Intellectual Property (as defined in
Section 3.1(n)) right, permit, concession, franchise, license or similar
authorization applicable to the Company or any of its Subsidiaries or their
respective properties or assets that is material to the operations of the
Company and its Subsidiaries, taken as a whole, or (iv) subject to the
governmental filings and
13
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries or their respective properties or assets, other than, in
the case of clauses (iii) and (iv) only, any such conflicts, violations,
defaults, rights, losses or Liens that would not, individually or in the
aggregate (x) reasonably be expected to result in a Material Adverse Effect on
the Company or (y) reasonably be expected to materially impair or materially
delay the ability of the Company to perform its obligations under this
Agreement. Except as set forth in Section 3.1(d) of the Company Disclosure
Schedule, no consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any (i) Federal, state,
local, municipal or foreign government, (ii) governmental, quasi-governmental
authority (including any governmental agency, commission, branch, department or
official, and any court or other tribunal) or body exercising, or entitled to
exercise, any governmentally-derived administrative, executive, judicial,
legislative, police, regulatory or taxing authority, or (iii) any
self-regulatory organization, administrative or regulatory agency, commission or
authority (each, a "GOVERNMENTAL ENTITY") is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (1) the filing with the SEC of (A)
a registration statement on Form S-4 to be prepared and filed in connection with
the issuance of Parent Common Stock in the Merger, including the proxy statement
and other proxy solicitation materials of the Company constituting a part
thereof (the "PROXY STATEMENT") (as it may be amended from time to time, the
"FORM S-4"), and the declaration of effectiveness thereof by the SEC, and (B)
such reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement; (2) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and such filings with Governmental Entities to satisfy the applicable
requirements of the laws of states in which the Company and its Subsidiaries are
qualified or licensed to do business or state securities or "blue sky" laws; (3)
the approval of the Board of Governors of the Federal Reserve (the "FEDERAL
RESERVE") under the Bank Holding Company Act of 1956, as amended (the "BHC ACT")
or the approval of the OTS under the HOLA, as applicable; (4) the approval of
the Officer of the Comptroller of the Currency (the "OCC") in connection with
the acquisition of control of FIRSTFED TRUST COMPANY, N.A. and the Bank
Combination (as defined in Section 5.3) or in the case of the Bank Combination,
the approval of the OTS, as applicable; and (5) filings required as a result of
the particular status of Parent.
(e) COMPANY DOCUMENTS; UNDISCLOSED LIABILITIES.
(i) Since January 1, 2001, the Company has filed all
required reports with the SEC and all required schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the SEC (collectively, the
"COMPANY SEC DOCUMENTS"). As of their respective filing dates, (i)
except as set forth in Section 3.1(e) of the Company Disclosure
Schedule, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Documents, and (ii) no Company SEC Document, as of
its date, except as amended or supplemented by a subsequent Company
Filed SEC Document (as defined in Section 3.1(g)), contained any
untrue statement of a material fact or omitted to state a
14
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and no Company SEC Document filed
subsequent to the date hereof will contain as of its date, any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(ii) The financial statements of the Company and its
consolidated Subsidiaries included in Company SEC Documents (including
the related notes) complied as to form, as of their respective dates
of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles in the United States ("GAAP")
(except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject in the case of unaudited
statements, to recurring year-end audit adjustments normal in nature
and amount).
(iii) Except (A) as reflected in the Company's unaudited
balance sheet as of June 30, 2003 or liabilities described in any
notes thereto (or liabilities for which neither accrual nor footnote
disclosure is required pursuant to GAAP) or (B) for liabilities
incurred in the ordinary course of business consistent with past
practice since June 30, 2003 or in connection with this Agreement or
the transactions contemplated hereby, the Company and its
Subsidiaries, taken as a whole, do not have any material liabilities
or obligations of any nature, whether absolute, accrued, contingent or
otherwise.
(iv) The Company's and its Subsidiaries' books and records
fairly reflect in all material respects the transactions to which each
of the Company and its Subsidiaries are a party or by which its or its
Subsidiaries properties or assets are subject or bound. Such books and
records have been properly kept and maintained and are in compliance
with all applicable legal and accounting requirements.
(f) CERTAIN CONTRACTS. Except as set forth in the exhibit index
for the Company's Annual Report on Form 10-K for the year ended March 31, 2003
or as permitted pursuant to Section 4.1 or as set forth on Section 3.1(f) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to or bound by (i) any agreement relating to the incurring of
Indebtedness (as defined in this Section 3.1(f)) by the Company or any of its
Subsidiaries in an amount in excess in the aggregate of $250,000, including any
such agreement which contains provisions that restrict, or may restrict, the
conduct of business of the issuer thereof as currently conducted (collectively,
"INSTRUMENTS OF INDEBTEDNESS"), (ii) any "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) any
non-competition or exclusive dealing agreement, or any other agreement or
obligation which purports to limit or restrict in any respect (A) the ability of
the Company or its businesses
15
to solicit customers or (B) the manner in which, or the localities in which, all
or any portion of the business of the Company and its Subsidiaries or, following
consummation of the transactions contemplated by this Agreement, Parent and its
Subsidiaries, is or would be conducted, (iv) any agreement providing for the
indemnification by the Company or a Subsidiary of the Company of any Person
other than customary agreements relating to the indemnity of directors, officers
and employees of the Company or its Subsidiaries, (v) any joint venture or
partnership agreement, (vi) any agreement that grants any right of first refusal
or right of first offer or similar right or that limits or purports to limit the
ability of the Company or any of its Subsidiaries to own or operate any business
or own, operate, sell, transfer, pledge or otherwise dispose of any material
amount of assets or business, (vii) any contract or agreement providing for any
material (individually or in the aggregate) payments that are conditioned, in
whole or in part, on a change of control of the Company or any of its
Subsidiaries, (viii) any collective bargaining agreement, (ix) any employment
agreement with, or any agreement or arrangement that contains any severance pay
or post-employment liabilities or obligations (other than as required by law)
to, any employee or former employee of the Company or its Subsidiaries (any such
Person, hereinafter, an "EMPLOYEE"), (x) any agreement regarding any agent bank
or other similar relationships with respect to lines of business, (xi) any
agreement that contains a "most favored nation" clause or other term providing
preferential pricing or treatment to a third party, (xii) any agreement material
to the Company pertaining to the use of or granting any right to use or practice
any rights under any Intellectual Property, whether the Company is the licensee
or licensor thereunder, (xiii) any material agreements pursuant to which the
Company or any of its Subsidiaries leases any real property, (xiv) any contract
or agreement material to the Company providing for the outsourcing or provision
of servicing of customers, technology or product offerings of the Company or its
Subsidiaries, and (xv) any contract or other agreement not made in the ordinary
course of business consistent with past practice which (A) is material to the
Company or (B) which would reasonably be expected to materially delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement (the agreements, contracts and obligations of the type described in
clauses (i) through (xv) being referred to herein as "COMPANY MATERIAL
CONTRACTS"). Each Company Material Contract is valid and binding on the Company
(or, to the extent a Subsidiary of the Company is a party, such Subsidiary) and,
to the knowledge of the Company, any other party thereto and is in full force
and effect. Neither the Company nor any of its Subsidiaries is in breach or
default under any Company Material Contract except where any such breach or
default would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Company. Neither the Company nor any
Subsidiary of the Company knows of, or has received notice of, any violation or
default under (nor, to the knowledge of the Company, does there exist any
condition which with the passage of time or the giving of notice or both would
result in such a violation or default under) any Company Material Contract by
any other party thereto except where any such violation or default would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company. Prior to the date hereof, the Company has made
available to Parent true and complete copies of all Company Material Contracts.
There are no provisions in any Instrument of Indebtedness that provide any
restrictions on the repayment of the outstanding Indebtedness thereunder, or
that require that any financial payment (other than payment of outstanding
principal and accrued interest) be made in the event of the repayment of the
outstanding Indebtedness thereunder prior to expiration. For purposes of this
Section 3.1(f) and elsewhere through this Agreement, "INDEBTEDNESS" of a Person
shall mean (i) all obligations
16
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes and similar instruments, (iii) all leases of such
Person capitalized in accordance with GAAP, and (iv) all obligations of such
Person under sale-and-lease back transactions, agreements to repurchase
securities sold and other similar financing transactions.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, and except as set forth in Section 3.1(g) of the Company Disclosure
Schedule, or as disclosed in the Company SEC Documents filed and publicly
available prior to the date hereof (as amended to the date hereof, "COMPANY
FILED SEC DOCUMENTS"), since June 30, 2003, the Company and its Subsidiaries
have conducted their respective businesses, in all material respects only in the
ordinary course of business consistent with past practice and there has not
been:
(i) any Material Adverse Change in the Company,
(ii) any issuance of Company Stock Options or restricted
shares of Company Common Stock, or any other equity-based award, to
any directors, officers, Employees or consultants of the Company or
any of its Subsidiaries (in any event identifying in Section
3.1(g)(ii) of the Company Disclosure Schedule the issue date, exercise
price and vesting schedule, as applicable, for issuances thereto since
June 30, 2003),
(iii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property)
with respect to any of the capital stock of the Company or its
Subsidiaries, other than regular quarterly cash dividends not in
excess of $0.13 per share on the Company Common Stock, and other than
dividends paid by any wholly owned Subsidiary of the Company to the
Company or any other wholly owned Subsidiary of the Company,
(iv) any split, combination or reclassification of any of
the Company's capital stock, except for the Company's two-for-one
stock split paid July 17, 2003, or any issuance or the authorization
of any issuance of any other securities in respect of, in lieu of or
in substitution for shares of the Company's capital stock, except for
issuances of Company Common Stock pursuant to the Company Stock Plans
or upon the exercise of Company Stock Options awarded prior to the
date hereof in accordance with their present terms,
(v) (A) any granting by the Company or any of its
Subsidiaries to any current or former directors, executive officers,
Employees or consultants any increase in compensation, bonus or other
benefits, except for (x) increases to Employees who are not current or
former directors or officers that were made in the ordinary course of
business consistent with past practice, (y) as required from time to
time by applicable law affecting wages and (z) as required by the
terms of plans or arrangements existing prior to such date and
described in Section 3.1(k) of the Company Disclosure Schedule, (B)
any granting by the Company or any of its Subsidiaries to any such
current or former directors, executive officers, Employees or
consultants of any increase in severance or termination pay, or (C)
any entry by the
17
Company or any of its Subsidiaries into, or any amendment of, any
employment, deferred compensation, consulting, severance, termination
or indemnification agreement with any such current or former
directors, officers, Employees or consultants, except as required from
time to time by applicable law,
(vi) other than as described in the Company's Filed SEC
Documents, any change in any material respect in accounting methods,
principles or practices by the Company affecting its assets,
liabilities or business, including any reserving, renewal or residual
method, or estimate of practice or policy, other than changes after
the date hereof to the extent required by a change in GAAP or
regulatory accounting principles, (vii) any Tax election or change in
or revocation of any Tax election, amendment to any Tax Return (as
defined in Section 3.1(j)), closing agreement with respect to Taxes,
or settlement or compromise of any Tax liability by the Company or its
Subsidiaries, except as would be permitted under Section 4.1(ix),
(viii) any material change in investment policies, or
(ix) any agreement or commitment (contingent or otherwise)
to do any of the foregoing.
(h) LICENSES; COMPLIANCE WITH APPLICABLE LAWS.
(i) Section 3.1(h) of the Company Disclosure Schedule sets
forth a true and complete listing of all states in which the Company
and its Subsidiaries are licensed to conduct business. The Company,
its Subsidiaries and Employees hold all material permits, licenses,
variances, authorizations, exemptions, orders, registrations and
approvals of all Governmental Entities (the "PERMITS") that are
required for the operation of the respective businesses of the Company
and its Subsidiaries as presently conducted. Each of the Company and
its Subsidiaries is, and for the last five years has been, in
compliance in all respects with the terms of such Permits and all such
Permits are in full force and effect and no suspension modification or
revocation of any of them is pending or, to the knowledge of the
Company, threatened nor, to the knowledge of the Company, do grounds
exist for any such action, except where non-compliance or such
suspension modification or revocation would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Effect on the Company.
(ii) Except where failure to comply would not, individually
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company, each of the Company and its
Subsidiaries is, and for the last five years has been, in compliance
with all applicable statutes, laws, regulations, ordinances, Permits,
rules, judgments, orders, decrees or arbitration awards of any
Governmental Entity applicable to the Company or its Subsidiaries.
(iii) Neither the Company nor any of its Subsidiaries is
subject to any outstanding order, injunction or decree or is a party
to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any
18
commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any supervisory letter
from or has adopted any resolutions at the request of, any
Governmental Entity that restricts in any respect the conduct of its
business or that in any respect relates to its capital adequacy, its
policies, its management or its business (each, a "COMPANY REGULATORY
AGREEMENT"), nor has the Company or any of its Subsidiaries or
Affiliates (as defined in Section 8.3(a)) (A) to the Company's
knowledge, been advised since January 1, 2000 by any Governmental
Entity that it is considering issuing or requesting any such Company
Regulatory Agreement or (B) have knowledge of any pending or
threatened investigation by any Governmental Entity. Neither the
Company nor any of its Subsidiaries is in breach or default under any
Company Regulatory Agreement in any material respect. Prior to the
date hereof, the Company has made available to Parent true and
complete copies of all Company Regulatory Agreements.
(iv) Except for filings with the SEC, which are the subject
of Section 3.1(e), since January 1, 2001, the Company and each of its
Subsidiaries have timely filed all regulatory reports, schedules,
forms, registrations and other documents, together with any amendments
required to be made with respect thereto, that they were required to
file with any Governmental Entity (the "OTHER COMPANY DOCUMENTS"), and
have timely paid all fees and assessments due and payable in
connection therewith, except where the failure to make such payments
and filings would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company. There
is no material unresolved violation or exception by any of such
Governmental Entities with respect to any report or statement relating
to any examinations of the Company or any of its Subsidiaries. The
Company has delivered or made available to Parent a true and complete
copy of each material Other Company Document requested by Parent.
(v) Neither the Company nor any of its Subsidiaries, nor any
of their respective directors, officers or Employees has been the
subject of any disciplinary proceedings or orders of any Governmental
Entity arising under applicable laws or regulations which would be
required to be disclosed in any Other Company Document except as
disclosed therein, and no such disciplinary proceeding or order is
pending, nor to the knowledge of the Company threatened, except where
non-disclosure, or such preceding or order, would not, individually or
in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company.
(vi) The Company Bank is "well-capitalized" and "well
managed" under applicable regulatory definitions, and its examination
rating under the Community Reinvestment Act of 1977 is "satisfactory."
(vii) Neither the Company or any of its Affiliates, nor, to
the knowledge of the Company, any "affiliated person" (as defined in
the Investment Company Act) of the Company or any of its Affiliates,
is ineligible pursuant to Section 9(a) or 9(b) of the Investment
Company Act of 1940 to act as, or subject to any disqualification
which would form a reasonable basis for any denial, suspension or
revocation of the registration of or licenses or for any limitation on
the activities of the
19
Company or any of its Affiliates as, an investment advisor (or in any
other capacity contemplated by said Act) to a registered investment
company. Neither the Company or any of its Affiliates, nor to the
knowledge of the Company, any "associated person of a broker or
dealer" (as defined in the Exchange Act) of the Company or any of its
Affiliates, is ineligible pursuant to Section 15(b) of the Exchange
Act to act as a broker-dealer or as an associated person to a
registered broker-dealer or is subject to a "statutory
disqualification" as defined in Section 3(a)(39) of the Exchange Act
or otherwise ineligible to serve as a broker-dealer or as an
associated person to a registered broker-dealer.
(viii) The business and operations of the Company and of
each of the Company's Subsidiaries through which the Company conducts
its finance activities have been conducted in compliance with all
applicable statutes and regulations regulating the business of
consumer lending, including state usury laws, the Truth in Lending
Act, the Real Estate Settlement Procedures Act, the Consumer Credit
Protection Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Homeowners Ownership and Equity Protection Act, the
Fair Debt Collections Act and other Federal, state, local and foreign
laws regulating lending ("FINANCE LAWS"), and have complied with all
applicable collection practices in seeking payment under any loan or
credit extension of such Subsidiaries, except where non-compliance
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Company. In addition, there
is no pending or, to the knowledge of the Company, threatened charge
by any Governmental Entity that the Company or any of its Subsidiaries
has violated any applicable Finance Laws, except insofar as would not,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect on the Company.
(ix) Since January 1, 2001, neither the Company nor any of
its Subsidiaries, nor to the knowledge of the Company any other Person
acting on behalf of the Company or any of its Subsidiaries that
qualifies as a "financial institution" under the U.S. Anti-Money
Laundering laws has knowingly acted, by itself or in conjunction with
another, in any act in connection with the concealment of any
currency, securities, other proprietary interest that is the result of
a felony as defined in the U.S. Anti-Money Laundering laws ("UNLAWFUL
GAINS"), nor knowingly accepted, transported, stored, dealt in or
brokered any sale, purchase or any transaction of other nature for
Unlawful Gains, except insofar as would not individually or in the
aggregate reasonably be expected to result in a Material Adverse
Effect on the Company. The Company and each of its Subsidiaries that
qualifies as a "financial institution" under the U.S. Anti-Money
Laundering laws has, during the past three years, implemented such
anti-money laundry mechanisms and kept and filed all material reports
and other necessary material documents as required by, and otherwise
complied with, the U.S. Anti-Money Laundering laws and the rules and
regulations issued thereunder, except insofar as would not,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect on the Company.
(i) LITIGATION. Except as set forth in Section 3.1(i) of the
Company Disclosure Schedule, which contains a true and current (as of the date
hereof) summary
20
description of any pending and, to the Company's knowledge, threatened
litigation, action, suit, proceeding, investigation or arbitration, the forum,
the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedies requested, no action, demand, charge, requirement or
investigation by any Governmental Entity and no litigation, action, suit,
proceeding, investigation or arbitration by any Person or Governmental Entity,
in each case with respect to the Company or any of its Subsidiaries or any of
their respective properties or Permits, is pending or, to the knowledge of the
Company, threatened, except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company.
(j) TAXES. For purposes of this Section 3.1(j) any reference to
the Company or the Company's Subsidiaries shall be deemed to include a reference
to the Company's predecessors or the Company's Subsidiaries' predecessors,
respectively, except where inconsistent with the language of this Section
3.1(j).
(i) Each of the Company and each of its Subsidiaries has (A)
timely filed (or there have been timely filed on its behalf) with the
appropriate Governmental Entities all Tax Returns required to be filed
by it (giving effect to all extensions) and such Tax Returns are true,
correct and complete in all material respects; (B) timely paid in full
(or there has been timely paid in full on its behalf) all material
Taxes and (C) made adequate provision in all material respects (or
adequate provision in all material respects has been made on its
behalf) for all accrued Taxes not yet due. The accruals and reserves
for Taxes reflected in the Company's audited consolidated balance
sheet as of March 31, 2003 (and the notes thereto) and the most recent
quarterly financial statements (and the notes thereto) are adequate in
all material respects to cover all Taxes accrued or accruable through
the date thereof.
(ii) There are no material Liens for Taxes upon any property
or assets of the Company or any Subsidiary of the Company, except for
Company Permitted Liens for Taxes not yet due.
(iii) Each of the Company and its Subsidiaries has complied
in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has,
within the time and in the manner prescribed by law, withheld and paid
over to the proper Governmental Entities all amounts required to be so
withheld and paid over under applicable laws.
(iv) Except as set forth in Section 3.1(j)(iv) of the
Company Disclosure Schedule, no Federal, state, local or foreign
audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of the
Company or any of its Subsidiaries, and neither the Company nor any
Subsidiary of the Company has received a written notice of any pending
or proposed claims, audits or proceedings with respect to Taxes that
are material to the Company.
(v) Neither the Company nor any of its Subsidiaries has
granted in writing any power of attorney which is currently in force
with respect to any Taxes or Tax Returns.
21
(vi) Other than in the ordinary course of business
consistent with past practice, neither the Company nor any of its
Subsidiaries has requested an extension of time within which to file
any Tax Return which has not since been filed and no currently
effective waivers, extensions, or comparable consents regarding the
application of the statute of limitations with respect to Taxes or Tax
Returns has been given by or on behalf of the Company or any of its
Subsidiaries.
(vii) Neither the Company nor any of its Subsidiaries is a
party to any agreement providing for the allocation, sharing or
indemnification of Taxes (other than such an agreement exclusively
between or among the Company and any of its Subsidiaries).
(viii) None of the Federal or other material income Tax
Returns of the Company or any of its Subsidiaries has been examined by
the Internal Revenue Service (the "IRS") or other applicable tax
authority, and there are no pending disputes with the IRS or such
other tax authority regarding the Federal or other material income Tax
Returns of the Company or any of its Subsidiaries.
(ix) Neither the Company nor any of its Subsidiaries has
been included in any "consolidated," "unitary" or "combined" Tax
Return (other than Tax Returns which include only the Company and any
of its Subsidiaries) provided for under the laws of the United States,
any foreign jurisdiction or any state or locality.
(x) No election under Section 341(f) of the Code has been
made by the Company or any of its Subsidiaries.
(xi) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code)
in a distribution of stock to which Section 355 of the Code (or so
much of Section 356 of the Code as relates to Section 355 of the Code)
applies and which occurred within five years of the date of this
Agreement.
(xii) Neither the Company nor any of its Subsidiaries have
agreed, or is required, to make any adjustment under Section 481 of
the Code affecting any taxable year.
(xiii) There have not been, within two years of the date of
this Agreement, any (i) redemptions by the Company or any of its
Subsidiaries, (ii) transfers or dispositions of property by the
Company or any of its Subsidiaries for which the Company or its
Subsidiary did not receive adequate consideration, or (iii)
distributions to the holders of Company Common Stock with respect to
their stock other than distributions of cash in the ordinary course of
business consistent with past practice.
(xiv) No material claim has been made by any Governmental
Entities in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that any such entity is, or may
be, subject to taxation by that jurisdiction.
22
(xv) Each of the Company and each of its Subsidiaries has
made available to Parent correct and complete copies of (i) all Tax
Returns filed within the past three years (ii) all audit reports,
letter rulings, technical advice memoranda and similar documents
issued by a Governmental Entity within the past three years relating
to the Federal, state, local or foreign Taxes due from or with respect
to the Company or any of its Subsidiaries, and (iii) any closing
letters or agreements entered into by the Company or any of its
Subsidiaries with any Governmental Entities within the past three
years with respect to Taxes.
(xvi) Neither the Company nor any of its Affiliates or
Subsidiaries has taken or agreed to take any action, has failed to
take any action or knows of any fact, agreement, plan or other
circumstance that could reasonably be expected to prevent the Merger
from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
(xvii) Neither the Company nor any of its Subsidiaries has
received any notice of deficiency or assessment from any Governmental
Entity for any amount of Tax that has not been fully settled or
satisfied, and to the knowledge of the Company and its Subsidiaries no
such deficiency or assessment is proposed.
(xviii) Neither the Company nor any of its Subsidiaries has
been a party to a "listed transaction" or other "reportable
transaction" within the meaning of Treasury Regulations Section
1.6011-4(b)(2).
(xix) For purposes of this Agreement (A) "TAX" or "TAXES"
shall mean (x) any and all taxes, customs, duties, tariffs, imposts,
charges, deficiencies, assessments, levies or other like governmental
charges, including income, gross receipts, excise, real or personal
property, ad valorem, value added, estimated, alternative minimum,
stamp, sales, withholding, social security, occupation, use, service,
service use, license, net worth, payroll, franchise, transfer and
recording taxes and charges, imposed by the IRS or any other taxing
authority (whether domestic or foreign including any state, county,
local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such
term shall include any interest, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to, any such
amounts, (y) any liability for the payment of any amounts described in
(x) as a result of being a member of an affiliated, consolidated,
combined, unitary, or similar group or as a result of transferor or
successor liability, and (z) any liability for the payment of any
amounts as a result of being a party to any tax sharing agreement or
as a result of any obligation to indemnify any other Person with
respect to the payment of any amounts of the type described in (x) or
(y), and (B) "TAX RETURN" shall mean any report, return, document,
declaration, election or other information or filing required to be
supplied to any taxing authority or jurisdiction (foreign or domestic)
with respect to Taxes, including information returns and any documents
with respect to or accompanying payments of estimated Taxes or
requests for the extension of time in which to file any such report,
return, document, declaration or other information.
23
(k) EMPLOYEE BENEFIT PLANS.
(i) Section 3.1(k)(i) of the Company Disclosure Schedule
includes a complete list of all material Company Plans and all
Material Employment Agreements. As used herein, (A) "COMPANY PLAN"
means any employee benefit plan, program, policy, practices, or other
arrangement providing benefits to any current or former employee,
officer or director of the Company or any of its subsidiaries or any
beneficiary or dependent thereof that is sponsored or maintained by
the Company or any of its subsidiaries or to which the Company or any
of its subsidiaries contributes or is obligated to contribute, whether
or not written, including without limitation any employee welfare
benefit plan within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), any
employee pension benefit plan within the meaning of Section 3(2) of
ERISA (whether or not such plan is subject to ERISA) and any bonus,
incentive, deferred compensation, vacation, stock purchase, stock
option, severance, employment, change of control or fringe benefit
plan, program or policy, (B) "EMPLOYMENT AGREEMENT" means a contract,
offer letter or agreement of the Company or any of its subsidiaries
with or addressed to any individual who is rendering or has rendered
services thereto as an employee or consultant pursuant to which the
Company or any of its subsidiaries has any actual or contingent
liability or obligation to provide compensation and/or benefits in
consideration for past, present or future services and (C) "MATERIAL
EMPLOYMENT AGREEMENT" means an Employment Agreement pursuant to which
the Company or any of its subsidiaries has or could have any
obligation to provide compensation and/or benefits (including without
limitation severance pay or benefits).
(ii) With respect to each Plan, the Company has delivered or
made available to Parent a true, correct and complete copy of each of
the following documents: (A) each Plan, and any amendments thereto (or
if the Plan is not a written plan, a description thereof); (B) the
most recent Annual Report (Form 5500 Series) and accompanying
schedule, if any; (C) the most recent Summary Plan Description
(required under ERISA); (D) the most recent annual financial report,
if any; (E) the most recent actuarial report, if any; and (F) the most
recent determination letter from the IRS, if any. The Company has
delivered or made available to Parent a true, correct and complete
copy of each Material Employment Agreement. Except as specifically
provided in the foregoing documents delivered to Parent or as
contemplated by the transactions under the Agreement, there are no
amendments to any Plan or Material Employment Agreement that have been
adopted or approved nor has the Company or any of its subsidiaries
undertaken to make any such amendments or to adopt or approve any new
Plan or Material Employment Agreement. As used herein, (A) "PLAN"
means any Company Plan other than a Multiemployer Plan and (B)
"MULTIEMPLOYER PLAN" means any "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA.
(iii) Section 3.1(k)(iii) of the Company Disclosure Schedule
identifies each Plan that is intended to be a "qualified plan" within
the meaning of Section 401(a) of the Code ("QUALIFIED PLANS"). The
Internal Revenue Service has issued a favorable determination letter
with respect to each Qualified Plan and the related trust that has not
been revoked, and the Company knows of no existing circumstances
24
and no events have occurred that could adversely affect the qualified
status of any Qualified Plan or the related trust. No trust funding
any Plan is intended to meet the requirements of Code Section
501(c)(9).
(iv) All contributions required to be made with respect to
any Plan by applicable law or regulation or by any plan document or
other contractual undertaking, and all premiums due or payable with
respect to insurance policies funding any Plan, for any period through
the date hereof have been timely made or paid in full or, to the
extent not required to be made or paid on or before the date hereof,
have been fully reflected on the Company Filed SEC Documents. Each
Company Plan that is an employee welfare benefit plan under Section
3(1) of ERISA either (A) is funded through an insurance company
contract and is not a "welfare benefit fund" with the meaning of
Section 419 of the Code or (B) is unfunded.
(v) With respect to each Company Plan, the Company and its
subsidiaries have complied, and are now in compliance, in all material
respects, with all provisions of ERISA, the Code and all laws and
regulations applicable to such Company Plans. Each Plan has been
administered in all material respects in accordance with its terms.
There is not now, nor do any circumstances exist that could give rise
to, any requirement for the posting of security with respect to a Plan
or the imposition of any lien on the assets of the Company or any of
its subsidiaries under ERISA or the Code.
(vi) No Plan is subject to Title IV or Section 302 of ERISA
or Section 412 or 4971 of the Code.
(vii) No Company Plan is a Multiemployer Plan or a plan that
has two or more contributing sponsors at least two of whom are not
under common control, within the meaning of Section 4063 of ERISA (a
"MULTIPLE EMPLOYER PLAN"). None of the Company and its subsidiaries
nor any of their respective ERISA Affiliates has, at any time during
the last six years, contributed to or been obligated to contribute to
any Multiemployer Plan or Multiple Employer Plan. None of the Company
and its subsidiaries nor any ERISA Affiliates has incurred any
Withdrawal Liability that has not been satisfied in full. As used
herein, (A) "ERISA AFFILIATE" means, with respect to any entity, trade
or business, any other entity, trade or business that is, or was at
the relevant time, a member of a group described in Section 414(b),
(c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that
includes or included the first entity, trade or business, or that is,
or was at the relevant time, a member of the same "controlled group"
as the first entity, trade or business pursuant to Section 4001(a)(14)
of ERISA and (B) "WITHDRAWAL LIABILITY" means liability to a
Multiemployer Plan or a Multiple Employer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan or
Multiple Employer Plan, as those terms are defined in Subtitle D and
in Part I of Subtitle E of Title IV of ERISA.
(viii) There does not now exist, nor do any circumstances
exist that could result in, any Controlled Group Liability that would
be a liability of the Company or any of its subsidiaries following the
Closing. As used herein, "CONTROLLED GROUP LIABILITY" means any and
all liabilities (i) under Title IV of ERISA, (ii) under
25
Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code,
(iv) as a result of a failure to comply with the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the
Code, and (v) under corresponding or similar provisions of foreign
laws or regulations. Without limiting the generality of the foregoing,
neither the Company nor any of its subsidiaries, nor any of their
respective ERISA Affiliates, has engaged in any transaction described
in Section 4069 or Section 4204 or 4212 of ERISA.
(ix) The Company and its subsidiaries have no liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof, except for health continuation
coverage as required by Section 4980B of the Code or Part 6 of Title I
of ERISA and at no expense to the Company and its subsidiaries. The
Company and each of its subsidiaries has reserved the right to amend,
terminate or modify at any time all plans or arrangements providing
for retiree health or life insurance coverage.
(x) Section 3.1(k)(x) of the Company Disclosure Schedule
sets forth (A) an accurate list of any Plan or Employment Agreement
under which the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby could (either
along or in conjunction with any other event) result in, cause the
accelerated vesting, funding or delivery of, or increase the amount or
value of, any payment or benefit to any Employee, officer or director
of the Company or any of its subsidiaries, or could limit the right of
the Company or any of its subsidiaries to amend, merge, terminate or
receive a reversion of assets from any Company Plan or related trust
or any Material Employment Agreement or related trust, and (B) a
reasonable estimate of the amount of the "excess parachute payments"
within the meaning of Section 280G of the Code that could become
payable by the Company or any of its subsidiaries in connection with
the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
(xi) None of the Company and its subsidiaries nor any other
person, including any fiduciary, has engaged in any "prohibited
transaction" (as defined in Section 4975 of the Code or Section 406 of
ERISA), which could subject any of the Company Plans or their related
trusts, the Company, any of its subsidiaries or any person that the
Company or any of its subsidiaries has an obligation to indemnify, to
any material tax or penalty imposed under Section 4975 of the Code or
Section 502 of ERISA.
(xii) There are no pending or threatened claims (other than
claims for benefits in the ordinary course), lawsuits or arbitrations
which have been asserted or instituted, and, to Company's knowledge,
no set of circumstances exists which may reasonably give rise to a
claim or lawsuit, against the Plans, any fiduciaries thereof with
respect to their duties to the Plans or the assets of any of the
trusts under any of the Plans which could reasonably be expected to
result in any material liability of the Company or any of its
subsidiaries to the Pension Benefit Guaranty Corporation, the
Department of Treasury, the Department of Labor, any Multiemployer
Plan, any Plan, any participant in a Plan, or any other party.
26
(xiii) The Company, its subsidiaries and each member of
their respective business enterprises has complied with the Worker
Adjustment and Retraining Notification Act and all similar state,
local and foreign laws.
(xiv) The FIRST FEDERAL SAVINGS BANK OF AMERICA Employee
Stock Ownership Plan (the "ESOP") is an "employee stock ownership
plan" within the meaning of Section 4975(e)(7) of the Code. Section
3.1(k)(xiv) of the Company Disclosure Schedule identifies (A) each
loan under which the ESOP is a borrower (each, a "LOAN"), (B) the
lender and guarantor (if any) of each Loan, and (C) the securities of
the Company that were acquired with such Loan (the "EMPLOYER
SECURITIES"). Each loan meets the requirements of Section 4975(d)(3)
of the Code. The Employer Securities are in each case pledged as
collateral for the Loan with which they were acquired, except to the
extent they have been released from such pledge and allocated to the
accounts of participants in the ESOP in accordance with the
requirements of Treasury Regulations Sections 54.4985-7 and
54.4975-11.
(xv) Each individual who renders services to the Company or
any of its subsidiaries who is classified by the Company or such
subsidiary, as applicable, as having the status of an independent
contractor or other non-employee status for any purpose (including for
purposes of taxation and tax reporting and under Company Plans) is
properly so characterized.
(xvi) With respect to each Company Plan that is a Multiple
Employer Plan, except as set forth in Section 3.1(k)(vii) of the
Company Disclosure Schedule: (i) none of the Company or any of its
Subsidiaries, nor any of their respective ERISA Affiliates, has
received any notification, nor has any actual knowledge, that if the
Company or any of its subsidiaries or any of their respective ERISA
Affiliates were to experience a withdrawal or partial withdrawal from
such plan, it would incur Withdrawal Liability that would be
reasonably likely to have a Material Adverse Effect on the Company;
and (ii) none of the Company and its subsidiaries, nor any of their
respective ERISA Affiliates has received any notification, nor has any
reason to believe, that any such Company Plan is in reorganization,
has been terminated, is insolvent, or may reasonably be expected to be
in reorganization, to be insolvent, or to be terminated.
(l) LABOR MATTERS. There are no labor or collective bargaining
agreements to which the Company or any Subsidiary of the Company is a party.
There is no union organizing effort pending or, the Company's knowledge,
threatened against the Company or any Subsidiary of the Company. There is no
labor strike, labor dispute (other than routine Employee grievances that are not
related to union Employees), work slowdown, stoppage or lockout pending or, to
the Company's knowledge, threatened against the Company or any Subsidiary of the
Company. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary of the Company (other than routine Employee grievances that are
not related to union Employees) which would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the Company.
The Company and its Subsidiaries are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not, to the knowledge of the Company,
engaged in
27
any unfair labor practice, except insofar as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect on the
Company.
(m) ENVIRONMENTAL LIABILITY. There are no pending or threatened
legal, administrative, arbitral or other proceedings, claims, actions, causes of
action, notices, private environmental investigations or remediation activities
or governmental investigations of any nature (including claims of alleging
potential liability for investigating costs, cleanup costs, governmental
response costs, natural resources damage, property damages, personal injuries or
penalties) by any Person (collectively, "ENVIRONMENTAL CLAIMS"), or any
conditions or circumstances that could form the basis of any Environmental
Claim, in each case seeking to impose on the Company or any of its Subsidiaries,
or that reasonably would be expected to result in the imposition on the Company
or any of its Subsidiaries of, any liability or obligation that would reasonably
be expect to result in a Material Adverse Effect on the Company arising under
applicable common law standards relating to pollution or protection of the
environment, human health or safety, or under any local, state or Federal
environmental statute, regulation, ordinance, decree, judgment or order relating
to pollution or protection of the environment, human health or safety including
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended.
(n) INTELLECTUAL PROPERTY.
(i) Section 3.1(n)(i) of the Company Disclosure Schedule
sets forth, for the Intellectual Property (as defined below) owned by
the Company or any of its Subsidiaries, a complete and accurate list
of all U.S. and foreign (A) patents and patent applications, (B)
trademark or service mark registrations and applications, (C)
copyright registrations and applications, and (D) Internet domain
names, material to the Company and its Subsidiaries, taken as a whole.
The Company or one of its Subsidiaries owns or has the valid right to
use all such patents and patent applications, trademarks, service
marks, trademark or service mark registrations and applications, trade
names, logos, designs, Internet domain names, slogans and general
intangibles of like nature, together with all goodwill related to the
foregoing, copyrights, copyright registrations, renewals and
applications, Software (as defined in this Section 3.1(n)), hardware,
technology, trade secrets and other confidential information,
know-how, proprietary processes, formulae, algorithms, models and
methodologies, licenses, agreements and other proprietary rights
material to the Company and its Subsidiaries, taken as a whole
(collectively, the "INTELLECTUAL PROPERTY"), used in the business of
the Company as it currently is conducted. "SOFTWARE" means any and all
(A) computer programs, including any and all software implementations
of algorithms, models and methodologies, whether in source code or
object code, (B) databases and compilations, including any and all
data and collections of data, whether machine readable or otherwise,
(C) descriptions, flow-charts and other work product used to design,
plan, organize and develop any of the foregoing, (D) the technology
supporting and content contained on any owned or operated Internet
site(s), and (E) all documentation, including user manuals and
training materials, relating to any of the foregoing.
(ii) All of the material Intellectual Property owned by the
Company or one of its Subsidiaries is free and clear of all Liens
other than Company
28
Permitted Liens. The Company or one of its Subsidiaries is listed in
the records of the appropriate United States, state or foreign agency
as, the sole owner of record for each application and registration
listed in Section 3.1(n)(i) of the Company Disclosure Schedule.
(iii) All of the registrations listed in Section 3.1(n)(i)
of the Company Disclosure Schedule are valid, subsisting, enforceable,
in full force and effect, and have not been cancelled, expired,
abandoned or otherwise terminated and all renewal fees in respect
thereof have been duly paid, except insofar as non-payment would not,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect on the Company. There is no pending or, to
the Company's knowledge, threatened opposition, interference or
cancellation proceeding before any court or registration authority in
any jurisdiction against the registrations and applications listed in
Section 3.1(n)(i) of the Company Disclosure Schedule or, to the
Company's knowledge, against any other Intellectual Property used by
the Company or its Subsidiaries, other than any such proceeding which
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Company.
(iv) To the Company's knowledge, the conduct of the
Company's and its Subsidiaries' business as currently conducted or
planned by the Company to be conducted does not, in any respect,
infringe upon (either directly or indirectly such as through
contributory infringement or inducement to infringe), dilute,
misappropriate or otherwise violate any Intellectual Property owned or
controlled by any third party, except insofar as would not,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect on the Company, and neither the Company nor
its Subsidiaries have received written notice alleging such
infringement, dilution, misappropriation or violation.
(v) To the Company's knowledge, no third party is
misappropriating, infringing, diluting, or violating any material
Intellectual Property owned by or licensed to or by the Company or its
Subsidiaries and no such claims have been made against a third party
by the Company or its Subsidiaries.
(vi) Each item of Software that is material to and used by
the Company or its Subsidiaries in connection with the operation of
their businesses as currently conducted, is either (A) owned by the
Company or its Subsidiaries, (B) currently in the public domain or
otherwise available to the Company without the need of a license,
lease or consent of any third party, or (C) used under rights granted
to the Company or its Subsidiaries pursuant to a written agreement,
license or lease from a third party.
(vii) Except in the ordinary course of business consistent
with past practice, neither the Company nor its Subsidiaries have
agreed to indemnify any Person for or against any infringement,
misappropriation or other conflict with respect to any Intellectual
Property.
29
(O) INSURANCE MATTERS. Except as set forth in Section 3.1(o) of
the Company Disclosure Schedule, the Company and its Subsidiaries have all
material primary, excess and umbrella policies of general liability, fire,
workers' compensation, products liability, completed operations, employers,
liability, health, bonds, earthquake and other forms of insurance providing
insurance coverage that is customary in amount and scope for other companies in
the industry in which they operate. Each of such policies and other forms of
insurance is in full force and effect on the date hereof and shall (or
comparable replacements or substitutions therefor) be kept in full force and
effect by the Company through the Effective Time. All such policies, considered
collectively with other such policies providing the same type of coverage, are
sufficient for compliance with all requirements of law and of all requirements
under contracts or leases to which the Company is a party, except where
non-compliance would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company. All premiums
currently payable or previously due and payable with respect to all periods up
to and including the Effective Time have been paid to the extent such premiums
are due and payable on or prior to the date hereof and, with respect to premiums
not due or payable at or prior to the date hereof, all premiums due and payable
prior to the Effective Time, will have been paid prior to the Effective Time and
no notice of cancellation or termination has been received with respect to any
such policy material to the Company and its Subsidiaries, taken as a whole.
(p) INFORMATION SUPPLIED. None of the information supplied or to
be supplied by the Company in writing specifically for inclusion or
incorporation by reference in the Form S-4 will, at the time the Form S-4
becomes effective under the Securities Act, at the date it is first mailed to
the Company's stockholders or at the time of the Company Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent specifically for inclusion or incorporation by
reference in the Form S-4.
(q) TRANSACTIONS WITH AFFILIATES. Except as set forth in Section
3.1(q) of the Company Disclosure Schedule there are no outstanding amounts
payable to or receivable from, or advances by the Company or any of its
Subsidiaries to, and neither the Company nor any of its Subsidiaries is
otherwise a creditor or debtor to, any Affiliated Person (as defined in Section
8.3) of the Company other than as part of the normal, customary terms of such
person's employment or service as a director or Employee with the Company or any
of its Subsidiaries. Except as set forth in Section 3.1(q) or Section 3.1(k) of
the Company Disclosure Schedule neither the Company nor any Subsidiary of the
Company is a party to any transaction or agreement with any Affiliated Person of
the Company.
(r) VOTING REQUIREMENTS. The affirmative vote at the Company
Stockholders Meeting (the "COMPANY STOCKHOLDER APPROVAL") of a majority of the
outstanding shares of Company Common Stock issued and outstanding and entitled
to vote at the Company Stockholders Meeting to approve and adopt this Agreement
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve and adopt this Agreement and the transactions
contemplated hereby, including the Merger.
30
(s) OPINIONS OF FINANCIAL ADVISOR. The Company has received the
opinion of each of Keefe, Bruyette & Woods, Inc. and Sandler O'Neill & Partners,
L.P., dated the date hereof, to the effect that, as of such date, the Merger
Consideration is fair from a financial point of view to the stockholders of the
Company.
(t) BROKERS. Except for Keefe, Bruyette & Woods, Inc. and Sandler
O'Neill & Partners, L.P., whose fees in connection with the transactions
contemplated hereby shall not exceed the amounts set forth on Section 3.1(t) of
the Company Disclosure Schedule, no broker, investment banker, financial advisor
or other Person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of the Company.
The Company has delivered to Parent complete and correct copies of such
arrangements set forth on Section 3.1(t) of the Company Disclosure Schedule.
(u) TAKEOVER LAWS. The Company and the Board of Directors of the
Company have taken all action required to be taken by it in order to exempt this
Agreement and the transactions contemplated hereby from, and this Agreement and
the transactions contemplated hereby are exempt from, the requirements of (i)
any "moratorium," "control share," "fair price," "supermajority," "affiliate
transactions," "business combination" or other state antitakeover laws and
regulations, including Section 203 of the DGCL, and (ii) Article Eighth of the
Company's certificate of incorporation.
(v) DERIVATIVE TRANSACTIONS.
(i) Except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the
Company, all Derivative Transactions (as defined in this Section
3.1(v)) entered into by the Company or any of its Subsidiaries were
entered into in accordance with applicable rules, regulations and
policies of all regulatory authorities, and in accordance with the
investment, securities, commodities, risk management and other
Policies, Practices and Procedures (as defined in Section 3.1(w))
employed by the Company and its Subsidiaries, and were entered into
with counter parties believed at the time to be financially
responsible and able to understand (either alone or in consultation
with their advisers) and to bear the risks of such Derivative
Transactions; and the Company and each of its Subsidiaries have duly
performed their obligations under the Derivative Transactions to the
extent that such obligations to perform have accrued, and, to the
Company's knowledge, there are no material breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
(ii) For purposes of this Agreement, "DERIVATIVE
TRANSACTIONS" means any swap transaction, option, warrant, forward
purchase or sale transaction, futures transaction, cap transaction,
floor transaction or collar transaction relating to one or more
currencies, commodities, bonds, equity securities, loans, interest
rates, credit-related events or conditions or any indexes, or any
other similar transaction or combination of any of these transactions,
including collateralized mortgage obligations or other similar
instruments or any debt or equity instruments evidencing or embedding
31
any such types of transactions, and any related credit support,
collateral or other similar arrangements related to such transactions.
(w) INVESTMENT SECURITIES AND COMMODITIES.
(i) Except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the
Company, each of the Company and its Subsidiaries has good title to
all securities and commodities owned by it (except those sold under
repurchase agreements or held in any fiduciary or agency capacity),
free and clear of any Lien, except for Company Permitted Liens and
except to the extent such securities or commodities are pledged in the
ordinary course of business consistent with past practice to secure
obligations of the Company or its Subsidiaries. Such securities and
commodities are valued on the books of the Company in accordance with
GAAP in all material respects.
(ii) The Company and its Subsidiaries and their respective
businesses employ investment, securities, commodities, risk management
and other policies, practices and procedures (the "POLICIES, PRACTICES
AND PROCEDURES") which the Company believes are prudent and reasonable
in the context of such businesses. Prior to the date hereof, the
Company has made available to Parent the material Policies, Practices
and Procedures.
(x) LOAN PORTFOLIO; SERVICING.
(i) All loans owned by the Company or any Subsidiary of the
Company, or in which the Company or any Subsidiary of the Company has
an interest, comply in all material respects with all applicable laws,
including, but not limited to, applicable usury statutes, underwriting
and recordkeeping requirements and all Finance Laws and other
applicable consumer protection statutes and the regulations
thereunder.
(ii) All loans owned by the Company or any Subsidiary of the
Company, or in which the Company or any Subsidiary of the Company has
an interest, have been made or acquired by the Company in accordance
with board of director-approved loan policies. As of the date hereof,
each of the Company and each Subsidiary of the Company holds mortgages
contained in its loan portfolio for its own benefit to the extent of
its interest shown therein; such mortgages evidence liens having the
priority indicated by the terms of such mortgages, including the
associated loan documents, subject, as of the date of recordation or
filing of applicable security instruments, only to such exceptions as
are discussed in attorneys' opinions regarding title or in title
insurance policies in the mortgage files relating to the loans secured
by real property or are not material as to the collectability of such
loans; and all loans owned by the Company and each Subsidiary of the
Company are with full recourse to the borrowers (except as set forth
at Section 3.1(x) of the Company Disclosure Schedule), and each of the
Company and any Subsidiary of the Company has taken no action which
would result in a waiver or negation of any rights or remedies
available against the borrower or guarantor, if any, on any loan. All
applicable remedies against all borrowers and guarantors are
enforceable except as may be limited by bankruptcy, insolvency,
moratorium or other similar
32
applicable laws affecting creditors' rights and except as may be
limited by the exercise of judicial discretion in applying principles
of equity. Except as set forth at Section 3.1(x) of the Company
Disclosure Schedule, all loans purchased or originated by the Company
or any Subsidiary of the Company and subsequently sold by the Company
or any Subsidiary of the Company have been sold without recourse to
the Company or any Subsidiary of the Company and without any liability
under any yield maintenance or similar obligation. True, correct and
complete copies of loan delinquency reports as of June 30, 2003
prepared by the Company and each Subsidiary of the Company, which
reports include all loans delinquent or otherwise in default, have
been furnished to Parent. True, correct and complete copies of the
currently effective lending policies and practices of the Company and
each Subsidiary of the Company also have been furnished or made
available to Parent.
(iii) Except as set forth at Section 3.1(x) of the Company
Disclosure Schedule each outstanding loan participation sold by the
Company or any Subsidiary of the Company was sold with the risk of
non-payment of all or any portion of that underlying loan to be shared
by each participant (including the Company or any Subsidiary of the
Company) proportionately to the share of such loan represented by such
participation without any recourse of such other lender or participant
to the Company or any Subsidiary of the Company for payment or
repurchase of the amount of such loan represented by the participation
or liability under any yield maintenance or similar obligation. The
Company and any Subsidiary of the Company have properly fulfilled in
all material respects its contractual responsibilities and duties in
any loan in which it acts as the lead lender or servicer and has
complied in all material respects with its duties as required under
applicable regulatory requirements.
(iv) The Company and each Subsidiary of the Company have
properly perfected or caused to be properly perfected all security
interests, liens, or other interests in any collateral securing any
loans made by it.
(v) There are no pending or, to the knowledge of Company as
of the date hereof, threatened cancellation or reduction of any loan
purchase commitment or other loan sale contract or arrangement to
which the Company or any of its Subsidiaries is a party, and the
obligations of the Company and its Subsidiaries under each such
commitment, contract or arrangement are being performed by the Company
or its applicable Subsidiaries in accordance with its terms in all
material respects.
(vi) Section 3.1(x) of the Company Disclosure Schedule sets
forth a list of all loans or other extensions of credit to all
directors, officers and employees, or any other person covered by
Regulation O of the Board of Governors of the Federal Reserve System.
(y) REAL PROPERTY.
(i) Each of the Company and its Subsidiaries has good title
free and clear of all Liens to all real property owned by such
entities (the "OWNED PROPERTIES"), except for Company Permitted Liens.
33
(ii) A true and complete copy of each agreement pursuant to
which the Company or any of its Subsidiaries leases any real property
(such agreements, together with any amendments, modifications and
other supplements thereto, collectively, the "LEASES") has heretofore
been made available to Parent, except as set forth in Section 3.1(y)
of the Company Disclosure Schedule. Each Lease is valid, binding and
enforceable against the Company or its applicable Subsidiary in
accordance with its terms and is in full force and effect, except that
(x) such enforceability may be subject to applicable bankruptcy,
insolvency or other similar laws now or hereafter in effect affecting
creditors' rights generally and (y) the availability of the remedy of
specific performance or injunction or other forms of equitable relief
may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be
brought. There are no defaults by the Company or any of its
Subsidiaries, as applicable, under any of the Leases which, in the
aggregate, would result in the termination of such Leases and a
Material Adverse Effect on the Company. The consummation of the
transactions contemplated by this Agreement will not cause defaults
under the Leases, except for any such default which would not
individually or in the aggregate, have a Material Adverse Effect on
the Company.
(iii) The Owned Properties and the properties (the "LEASED
PROPERTIES") leased pursuant to the Leases constitute all of the real
estate on which the Company and its Subsidiaries maintain their
facilities or conduct their business as of the date of this Agreement,
except for locations the loss of which would not constitute a Material
Adverse Effect on the Company. The Owned Properties and the Leased
Properties are in compliance with all laws, except where
non-compliance would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect on the Company.
Neither any agreement relating to the Owned Properties nor any of the
Leases requires consent of any third party for the consummation of the
transactions contemplated hereby except for (i) such consents which
will be obtained prior to Closing or (ii) such consents the failure of
which to obtain would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the
Company.
(iv) A true and complete copy of each agreement pursuant to
which the Company or any of its Subsidiaries leases real property to a
third party (such agreements, together with any amendments,
modifications and other supplements thereto, collectively, the "THIRD
PARTY LEASES") has heretofore been made available to Parent. Each
Third Party Lease is valid, binding and enforceable in accordance with
its terms and is in full force and effect, except that (x) such
enforceability may be subject to applicable bankruptcy, insolvency or
other similar laws now or hereafter in effect affecting creditors'
rights generally and (y) the availability of the remedy of specific
performance or injunction or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion
of the court before which any proceeding therefor may be brought.
There are no existing defaults by the tenant under any Third Party
Lease which, in the aggregate, would result in the termination of such
Third Party Leases except for any such default which would not
reasonably be expected to result in a Material Adverse Effect on the
Company. The consummation of the transactions contemplated by this
Agreement will not cause defaults under the Third Party Leases, except
for any such
34
default which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(z) ADMINISTRATION OF ACCOUNTS. The Company and each of its
Subsidiaries has properly administered all accounts for which it acts as a
fiduciary or agent, including but not limited to accounts for which it serves as
a trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law, except where the
failure to do so would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries, nor any of their directors, officers,
agents or Employees, has committed any breach of trust with respect to any such
fiduciary or agency account, and the accountings for each such fiduciary or
agency account are true and correct and accurately reflect the assets of such
fiduciary or agency account, except for such breaches and failures to be true,
correct and accurate which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the Company.
(aa) INTERNAL CONTROLS. None of the Company or its Subsidiaries'
records, systems, controls, data or information are recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of it or its
Subsidiaries or accountants except as would not, individually or in the
aggregate, reasonably be expected to result in a materially adverse effect on
the system of internal accounting controls described in the next sentence. The
Company and its Subsidiaries have devised and maintain a system of internal
accounting controls sufficient to provide reasonable assurances regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP.
(bb) RESERVES FOR LOSSES. All reserves or other allowances for
possible losses reflected in the Company's financial statements referred to in
Section 3.1(e) as of and for the year ended March 31, 2003 and the quarter ended
June 30, 2003, complied with the standards established by applicable
Governmental Entities and were adequate under GAAP. The Company has not been
notified by the OTS, the FDIC or the Company's independent auditor, in writing
or otherwise, that such reserves are inadequate or that the practices and
policies of the Company in establishing its reserves for the year ended March
31, 2003 and the quarter ended June 30, 2003, and in accounting for delinquent
and classified assets generally fail to comply with applicable accounting or
regulatory requirements, or that the OTS, the FDIC or the Company's independent
auditor believes such reserves to be inadequate or inconsistent with the
historical loss experience of the Company. The Company has previously furnished
Parent with a complete list of all extensions of credit and other real estate
owned ("OREO") that have been classified by any bank or trust examiner
(regulatory or internal) as other loans specially mentioned, special mention,
substandard, doubtful, loss, classified or criticized, credit risk assets,
concerned loans or words of similar import. The Company agrees to update such
list no less frequently than monthly after the date of this Agreement until the
earlier of the Closing Date or the date that this Agreement is terminated in
accordance with its terms. All OREO held by the Company is being carried net of
reserves at the lower of cost or net realizable value.
35
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Except as set
forth on the Disclosure Schedule delivered by Parent to the Company prior to the
execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE") and making
reference to the particular subsection of this Agreement to which exception is
being taken, Parent represents and warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER.
(i) Each of Parent and its Subsidiaries is a corporation or
other legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize such concept)
under the laws of the jurisdiction in which it is organized and has
the requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted except, as
to Subsidiaries, for those jurisdictions where the failure to be duly
organized, validly existing and in good standing would not,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect on Parent. Each of Parent and its
Subsidiaries is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business
or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions
where the failure to be so qualified or licensed or to be in good
standing would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on Parent. Parent is
duly registered as a savings and loan holding company with the OTS
under the HOLA, and Webster Bank ("PARENT BANK") is a federally
chartered savings bank duly organized, validly existing and in good
standing under the laws of the United States. On September 23, 2003,
Parent Bank filed an application with the OCC to convert to a national
bank charter, and Parent filed a draft application with the Federal
Reserve to become a financial holding company under the BHC Act (the
"CONVERSION APPLICATIONS").
(ii) The Parent has delivered or made available to the
Company prior to the execution of this Agreement complete and correct
copies of the articles of incorporation and by-laws, as amended to the
date hereof of Parent.
(b) SUBSIDIARIES. Exhibit 21 of Parent's most recent Annual
Report on Form 10-K included in the Parent Filed SEC Documents (as defined in
Section 3.2(k)) lists all the Subsidiaries of the Parent, whether consolidated
or unconsolidated, required to be listed therein in accordance with Item 601 of
Regulation S-K promulgated by the SEC. Except as set forth in said Exhibit, and
other than the preferred securities issued by Webster Preferred Capital
Corporation and the capital securities issued by each of Webster Capital Trust I
and Webster Capital Trust II, all outstanding shares of capital stock of, or
other equity interests in, each such Subsidiary: (i) have been validly issued
and are fully paid and nonassessable; (ii) are owned directly or indirectly by
Parent, free and clear of all Liens other than (A) Liens described in Section
3.2(b) of the Parent Disclosure Schedule; (B) restrictions on transferability
pursuant to federal and state securities laws; and (C) Liens for Taxes not yet
due or delinquent or being contested in good faith and for which reserves
appropriate in all material respects have been established in accordance with
GAAP; and (iii) are free of any other restriction (including any restriction on
the right to vote, sell or otherwise dispose of such capital stock or other
ownership
36
interests) that would prevent the operation by the Surviving Corporation of such
Subsidiary's business as currently conducted. The deposit accounts of the Parent
Bank are insured by the FDIC through the SAIF or the Bank Insurance Fund to the
fullest extent permitted by law, and all premiums and assessments required in
connection therewith have been paid by the Parent Bank.
(c) CAPITAL STRUCTURE. The authorized capital stock of Parent
consists of 200,000,000 shares of Parent Common Stock and 3,000,000 shares of
preferred stock, par value $0.01 per share, of Parent ("PARENT AUTHORIZED
PREFERRED STOCK"), of which, as of October 2, 2003, 14,000 shares have been
designated as Series C Preferred Stock ( "PARENT PREFERRED STOCK"). As of
October 2, 2003: (i) 45,562,492 shares of Parent Common Stock were issued and
outstanding, and 3,950,022 shares of Parent Common Stock were held by Parent in
its treasury; (ii) no shares of Parent Authorized Preferred Stock were issued
and outstanding or held by Parent in its treasury; (iii) 5,832,492 shares of
Parent Common Stock were reserved for issuance pursuant to Parent's stock-based
compensation plans and all other plans, agreements or arrangements providing for
equity-based compensation to any director, employee, consultant or independent
contractor of Parent or any of its Subsidiaries (such plans, collectively, the
"PARENT STOCK PLANS"), of which 3,187,508 shares are subject to outstanding
employee stock options or other rights to purchase or receive Parent Common
Stock granted under the Parent Stock Plans (collectively, "PARENT STOCK
OPTIONS"); (iv) no shares of Parent Common Stock are reserved for issuance
pursuant to securities convertible into or exchangeable for shares of Parent
Common Stock ("PARENT CONVERTIBLE SECURITIES"); and (v) other than as set forth
above, no other shares of Parent Authorized Preferred Stock have been
designated. All outstanding shares of capital stock of Parent are, and all
shares thereof which may be issued prior to the Closing, and all shares thereof
which may be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in this Section 3.2(b), as provided under
the Parent Rights Agreement and for changes since October 2, 2003 resulting from
the issuance of shares of Parent Common Stock pursuant to the Parent Stock
Plans, Parent Employee Stock Options or Parent Convertible Securities and other
rights referred to in this Section 3.2(b), as of the date hereof, (x) there are
not issued, reserved for issuance or outstanding (A) any shares of capital stock
or other voting securities of other ownership interests of Parent, (B) any
securities of Parent or any Subsidiary of Parent convertible into or
exchangeable or exercisable for shares of capital stock or voting securities of
other ownership interests of Parent, (C) any warrants, calls, options or other
rights to acquire from Parent or any Subsidiary of Parent, and any obligation of
Parent or any Subsidiary of Parent to issue, any capital stock, voting
securities or other ownership interests or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of other
ownership interests of Parent, and (y) there are no outstanding obligations of
Parent or any Subsidiary of Parent to repurchase, redeem or otherwise acquire
any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. As of the date hereof, there are no
outstanding (A) securities of Parent or any of its Subsidiaries convertible into
or exchangeable or exercisable for shares of capital stock or voting securities
or other ownership interests in any Subsidiary of Parent, (B) warrants, calls,
options or other rights to acquire from Parent or any Subsidiary of Parent, or
any obligation of Parent or any Subsidiary of Parent to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital stock, voting
securities or other ownership interests in, any Subsidiary of Parent or (C)
obligations of Parent or any of its
37
Subsidiaries to repurchase, redeem or otherwise acquire any such outstanding
securities of Subsidiaries of Parent or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities.
(d) AUTHORITY; NONCONTRAVENTION. Parent has all requisite
corporate power and authority to enter into this Agreement, and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate and stockholder action on the part of Parent. This Agreement has been
duly executed and delivered by Parent, and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms
except that (i) such enforceability may be subject to applicable bankruptcy,
insolvency or other similar laws now or hereafter in effect affecting creditors'
rights generally and (ii) the availability of the remedy of specific performance
or injunction or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the courts for which any
proceeding therefor may be brought. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation, forfeiture or termination of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
forfeiture, termination, cancellation or acceleration (with or without notice or
lapse of time or both) of any material obligation or loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Parent or any of its Subsidiaries under, (i) the certificate of
incorporation or by-laws of Parent, (ii) the certificate of incorporation or
by-laws or the comparable organizational documents of any of its Subsidiaries,
(iii) any loan or credit agreement, note, bond, mortgage, indenture, lease,
software agreement or other agreement, instrument, Intellectual Property, right,
permit, concession, franchise, license or similar authorization applicable to
Parent or any of its Subsidiaries or their respective properties or assets or
(iv) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (iii) and
(iv) only, any such conflicts, violations, defaults, rights, losses or Liens
that individually or in the aggregate would not (x) reasonably be expected to
result in a Material Adverse Effect on Parent or (y) reasonably be expected to
materially impair or materially delay the ability of Parent to perform its
obligations under this Agreement. No consent, approval, order or authorization
of, action by, or in respect of, or registration, declaration or filing with,
any Governmental Entity is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent or the consummation by Parent of the transactions contemplated by this
Agreement, except for (1) the filings with the SEC of (A) the Form S-4, and the
declaration of effectiveness thereof, by the SEC, and (B) such reports under the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement; (2) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware and such filings
with Governmental Entities to satisfy the applicable requirements of the laws of
states in which the Company and its Subsidiaries are qualified or licensed to do
business or state securities or "blue sky" laws; (3) the approval of the Federal
Reserve under the BHC Act or the approval of the OTS under the HOLA, as
applicable; (4) the approval of the OCC in connection with the Bank Combination
and the acquisition of
38
control of FIRSTFED TRUST COMPANY, N.A. or, in the case of the Bank Combination,
the approval of the OTS, as applicable; (5) such filings with and approvals of
the NYSE to permit the shares of Parent Common Stock to be issued in the Merger
and under the Company Stock Plan to be listed on the NYSE; and (6) filings
required as a result of the particular status of the Company or its
Subsidiaries.
(e) PARENT DOCUMENTS.
(i) Since January 1, 2001, Parent and each of its
Subsidiaries subject to reporting under Section 13 or Section 15(d) of
the Exchange Act have filed all required reports with the SEC and all
required schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC
(collectively, the "PARENT SEC Documents"). As of their respective
filing dates, (i) the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and
(ii) none of the Parent SEC Documents as of its date, except as
amended or supplemented by a subsequent Parent Filed SEC Document,
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and no Parent SEC Document filed
subsequent to the date hereof will contain as of its date, any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(ii) The financial statements of Parent and its consolidated
Subsidiaries included in the Parent SEC Documents (including the
related notes) complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position
of Parent and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for
the periods then ended (subject in the case of unaudited statements,
to recurring year-end audit adjustments normal in nature and amount).
(iii) Except (A) as reflected in Parent's unaudited
balance sheet as of June 30, 2003 or liabilities described in any
notes thereto (or liabilities for which neither accrual nor footnote
disclosure is required pursuant to GAAP) or (B) for liabilities
incurred in the ordinary course of business consistent with past
practice since June 30, 2003 or in connection with this Agreement or
the transactions contemplated hereby, Parent and its Subsidiaries,
taken as a whole, do not have any material liabilities or obligations
of any nature, whether absolute, accrued, contingent or otherwise.
39
(f) INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Parent specifically for inclusion or incorporation by reference
in the Form S-4 will, at the time the Form S-4 becomes effective under the
Securities Act and through the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, except that no
representation or warranty is made by Parent with respect to statements made or
incorporated by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference in the Form S-4.
(g) BROKERS. No broker, investment broker, financial advisor or
other Person is entitled to a broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent, except a
fee to be paid to Lehman Brothers as financial advisor to Parent.
(h) TAX MATTERS.
(i) Neither Parent nor any of its Affiliates or Subsidiaries
has taken or agreed to take any action, has failed to take any action
or knows of any fact, agreement, plan or other circumstance that could
reasonably be expected to prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
(ii) Each of Parent and each of its Subsidiaries has (A)
timely filed (or there have been timely filed on its behalf) with the
appropriate Governmental Entities all Tax Returns required to be filed
by it (giving effect to all extensions) and such Tax Returns are true,
correct and complete in all material respects; (B) timely paid in full
(or there has been timely paid in full on its behalf) all material
Taxes and (C) made adequate provision in all material respects (or
adequate provision in all material respects has been made on its
behalf) for all accrued Taxes not yet due. The accruals and reserves
for Taxes reflected in Parent's audited consolidated balance sheet as
of December 31, 2002 (and the notes thereto) and the most recent
quarterly financial statements (and the notes thereto) are adequate in
all material respects to cover all Taxes accrued or accruable through
the date thereof.
(iii) Neither Parent nor any of its Subsidiaries has
received any notice of deficiency or assessment from any Governmental
Entity for any amount of Tax that has not been fully settled or
satisfied, and to the knowledge of Parent and its Subsidiaries no such
deficiency or assessment is proposed.
(i) COMPLIANCE WITH LAWS.
(i) Parent, its Subsidiaries and their respective employees
hold all material permits, licenses, variances, authorizations,
exemptions, orders, registrations and approvals of all Governmental
Entities ("PARENT PERMITS") that are required for the operation of the
respective businesses of Parent and its Subsidiaries as presently
conducted, except insofar as would not, individually or in the
aggregate, reasonably be
40
expected to have a Material Adverse Effect on Parent. Each of Parent
and its Subsidiaries is, and for the last five years has been, in
compliance with the terms of such Parent Permits and all such Parent
Permits are in full force and effect and no suspension, modification
or revocation of any of them is pending or, to the knowledge of
Parent, threatened nor, to the knowledge of Parent, do grounds exist
for any such action, except where non-compliance or such suspension,
modification or revocation would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect on Parent.
(ii) Except where failure to comply would not, individually
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on Parent, each of Parent and its Subsidiaries is, and
for the last five years has been, in compliance with all applicable
statutes, laws, regulations, ordinances, permits, rules, judgments,
orders, decrees or arbitration awards of any Governmental Entity
applicable to Parent or its Subsidiaries.
(iii) Neither Parent nor any of its Subsidiaries is subject
to any outstanding order, injunction or decree 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 supervisory letter from or has adopted any resolutions at the
request of any Governmental Entity that restricts in any respect the
conduct of its business or, that in any manner currently relates to
its capital adequacy, its policies, its management or its business
(each, a "PARENT REGULATORY AGREEMENT"), nor has Parent or any of its
Subsidiaries or Affiliates (A) to its knowledge, been advised since
January 1, 2001 by any Governmental Entity that it is considering
issuing or requesting any Parent Regulatory Agreement or (B) have
knowledge of any pending or threatened investigation by any
Governmental Entity. Neither Parent nor any of its Subsidiaries is in
breach or default under any Parent Regulatory Agreement in any
material respect.
(iv) Except for filings with the SEC, which are the subject
of Section 3.2(e), since January 1, 2001, Parent and each of its
Subsidiaries have timely filed all regulatory reports, schedules,
forms, registrations and other documents, together with any amendments
required to be made with respect thereto, that they were required to
file with any Governmental Entity (the "OTHER PARENT DOCUMENTS"),
except where the failure to make such filings would not, individually
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on Parent. There is no material unresolved violation or
exception by any of such Governmental Entities with respect to any
report or statement relating to any examinations of Parent or any of
its Subsidiaries which would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on
Parent.
(v) Since January 1, 2001, neither Parent nor any of its
Subsidiaries, nor to the knowledge of Parent any other Person acting
on behalf of Parent or any of its Subsidiaries that qualifies as a
"financial institution" under the U.S. Anti-Money Laundering laws has
knowingly acted, by itself or in conjunction with another, in any act
in connection with the concealment of any Unlawful Gains, nor
knowingly
41
accepted, transported, stored, dealt in or brokered any sale, purchase
or any transaction of other nature for Unlawful Gains except insofar
as would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect on Parent. Parent and each of
its Subsidiaries that qualifies as a "financial institution" under the
U.S. Anti-Money Laundering laws has, during the past three years,
implemented such anti-money laundry mechanisms and kept and filed all
material reports and other necessary material documents as required
by, and otherwise complied with, the U.S. Anti-Money Laundering laws
and the rules and regulations issued thereunder, except insofar as
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on Parent.
(vi) The Parent Bank is "well-capitalized" and "well
managed" under applicable regulatory definitions, and its examination
rating under the Community Reinvestment Act of 1977 is "satisfactory."
(j) LITIGATION. Except as set forth in Section 3.2(j) of the
Parent Disclosure Schedule, no action, demand, charge, requirement or
investigation by any Governmental Entity and no litigation, action, suit,
proceeding, investigation or arbitration by any Person or Governmental Entity,
in each case with respect to Parent or any of its Subsidiaries or any of their
respective properties or Permits, is pending or, to the knowledge of Parent,
threatened, except insofar as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Parent.
(k) ABSENCE OF CERTAIN CHANGES. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby, and
except as disclosed in the Parent SEC Documents filed and publicly available
prior to the date hereof ("PARENT FILED SEC DOCUMENTS"), since June 30, 2003,
(A) there has not been any Material Adverse Change in Parent or (B) there are
not, to Parent's knowledge, any facts, circumstances or events that make it
reasonably likely that Parent will not be able to fulfill its obligations under
this Agreement in all material respects.
(l) INTERNAL CONTROLS. None of Parent or its Subsidiaries' records,
systems, controls, data or information are recorded, stored, maintained,
operated or otherwise wholly or partly dependent on or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of it or its
Subsidiaries or accountants except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect on the
system of internal accounting controls described in the next sentence. Parent
and its Subsidiaries have devised and maintain a system of internal accounting
controls sufficient to provide reasonable assurances regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.
(m) EMPLOYEE BENEFIT PLANS
(i) For purposes of this Section 3.2(m), "PARENT PLANS"
shall mean its deferred compensation and each bonus of other incentive
compensation, stock
42
purchase, stock option and other equity compensation plan or program,
or arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or
program (within the meaning of Section 3(1) of ERISA; each
profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement or arrangement with any director or
former director of the Parent or any of its Subsidiaries or any
executive officer thereof and each other employee benefit plan, fund
or program, or arrangement applicable to identified groups of
employees, in each case that is sponsored, maintained or contributed
to or required to be contributed to by Parent or any of its
Subsidiaries is a party for the benefit of any current or former
employee or director of Parent or any of its Subsidiaries; each Parent
Plan that is subject to Section 302 or Title IV of ERISA or Section
412 of the Code, being the "PARENT TITLE IV PLANS."
(ii) All contributions required to have been made with
respect to any Parent Plan have been paid when due, except insofar as
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Parent.
(iii) Each Parent Plan has been operated and administered in
accordance with its terms and applicable law, including but not
limited to ERISA and the Code, except insofar as the failure to do so
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on the Parent.
(iv) The IRS has issued a favorable determination letter
with respect to each Parent Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code that has not been revoked, and,
to the knowledge of Parent no circumstances exist that could adversely
affect the qualified status of any such plan and the exemption under
Section 501(a) of the Code of the trust maintained thereunder. Each
Parent Plan intended to satisfy the requirements of Section 510(c)(9)
of the Code has satisfied such requirements in all material respects.
(v) With respect to any Parent Title IV Plan to which Parent
or any trade or business, whether or not incorporated, that together
with Parent is a "single employer" within the meaning of Section
4001(b) of ERISA (a "PARENT ERISA AFFILIATE") made, or was required to
make, contributions on behalf of any current or former employee or
director during the five (5) year period ending on the last day of the
most recent plan year ended prior to the Closing Date, (a) no
liability under Title IV or Section 302 of ERISA has been incurred by
Parent or any Parent ERISA Affiliate that has not been satisfied in
full, except where failure to satisfy such liability would not,
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect on Parent, and (b) to the knowledge of
Parent, no condition exists that presents a risk to Parent or any
Parent ERISA Affiliate of incurring any such liability, other than
liability for premiums due to the Pension Benefit Guaranty Corporation
(which premiums have been paid when due), except insofar as would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent.
43
(vi) The Pension Benefit Guaranty Corporation has not, to
the knowledge of Parent, instituted proceedings to terminate any
Parent Title IV Plan and, to the knowledge of Parent, no condition
exists that presents a material risk that such proceedings will be
instituted, except insofar as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Parent. No Parent Title IV Plan or any trust established thereunder
has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA of Section 412 of the Code), whether or not
waived, as of the last day of the most recently ended fiscal year,
except insofar as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent.
(vii) There are no pending or, to the knowledge of Parent,
threatened or anticipated claims by or on behalf of any Parent Plan by
any employee or beneficiary covered under any such Parent Plan, or
otherwise involving any such Parent Plan (other than routine claims
for benefits), except for claims which, individually or in the
aggregate, would not reasonably be expected to result in a Material
Adverse Effect on Parent.
(n) INTEREST RATE RISK MANAGEMENT INSTRUMENTS. Except as would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on Parent, all Derivative Transactions entered into by
Parent or any of its Subsidiaries were entered into in accordance with
applicable rules, regulations and policies of all regulatory authorities, and in
accordance with the investment, securities, commodities, risk management and
other Policies, Practices and Procedures employed by Parent and its
Subsidiaries, and were entered into with counter parties believed at the time to
be financially responsible and able to understand (either alone or in
consultation with their advisers) and to bear the risks of such Derivative
Transactions; and Parent and each of its Subsidiaries have duly performed their
obligations under the Derivative Transactions to the extent that such
obligations to perform have accrued, and, to Parent's knowledge, there are no
material breaches, violations or defaults or allegations or assertions of such
by any party thereunder.
(o) ENVIRONMENTAL LIABILITY. There are no pending or threatened
Environmental Claims by any Person, or any conditions or circumstances that
could form the basis of any Environmental Claim, in each case seeking to impose
on Parent or any of its Subsidiaries, or that reasonably would be expected to
result in the imposition on Parent or any of its Subsidiaries of, any liability
or obligation that would reasonably be expect to result in a Material Adverse
Effect on Parent arising under applicable common law standards relating to
pollution or protection of the environment, human health or safety, or under any
local, state or Federal environmental statute, regulation, ordinance, decree,
judgment or order relating to pollution or protection of the environment, human
health or safety including the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
44
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY. Except (i) as set
forth in Section 4.1 of the Company Disclosure Schedule, (ii) as otherwise
expressly contemplated by this Agreement, (iii) as consented to by Parent in
writing, or (iv) as required by applicable law or regulation, during the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement and the Effective Time, the Company shall, and
shall cause its Subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course consistent with past practice and in
compliance in all material respects with all applicable laws and regulations,
pay their respective debts and Taxes when due, pay or perform their other
respective obligations when due, and, use all commercially reasonable efforts
consistent with the other terms of this Agreement to preserve intact their
current business organizations, use all commercially reasonable efforts
consistent with the other terms of this Agreement to keep available the services
of their current officers and Employees and preserve their relationships with
those Persons having business dealings with them, all with the goal of
preserving unimpaired in all material respects their goodwill and ongoing
businesses at the Effective Time. Without limiting the generality of the
foregoing, senior officers of Parent and the Company shall meet on a reasonably
regular basis to review the financial and operational affairs of the Company and
its Subsidiaries, in accordance with applicable law, and the Company shall give
due consideration to Parent's input on such matters, consistent with Section 4.4
hereof, with the understanding that, notwithstanding any other provision
contained in this Agreement, Parent shall in no event be permitted to exercise
control of the Company prior to the Effective Time. Except as (i) expressly
contemplated by this Agreement, (ii) disclosed in Section 4.1 of the Company
Disclosure Schedule, (iii) consented to by Parent in writing or (iv) except as
required by applicable law or regulation, after the date hereof the Company
shall not, and shall not permit any of its Subsidiaries to:
(i) other than dividends and distributions by a direct or
indirect wholly owned Subsidiary of the Company to its parent, (x)
declare, set aside or pay any dividends on, make any other
distributions in respect of, or enter into any agreement with respect
to the voting of, any of its capital stock (except for regular
quarterly cash dividends not to exceed $0.13 per share on the Company
Common Stock on substantially the same record and payment date
schedule as has been utilized in the past, provided that in no event
shall the Company declare, set aside or pay dividends on the Company
Common Stock if such action would result in the holders of Company
Common Stock receiving more than four cash dividend payments in any
fiscal year, or more than one cash dividend payment for any fiscal
quarter, when considered in conjunction with dividends to be paid by
Parent following the Closing), (y) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares
of its capital stock, except upon the exercise of Company Stock
Options that are outstanding as of the date hereof in accordance with
their present terms, or (z) purchase, redeem or otherwise acquire any
shares of capital stock or other securities of the Company or any of
its Subsidiaries, or any rights, warrants or options to acquire any
such shares or other securities (other than the issuance of Company
Common Stock upon the exercise of Company Stock Options that are
45
outstanding as of the date hereof in accordance with their present
terms or the award of Company Stock Option pursuant to the terms of
Section 10 of the Company's 1998 Stock Option Plan);
(ii) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien (other than Company Permitted Liens) any shares of
its capital stock, any other voting securities, including any
restricted shares of Company Common Stock, or any securities
convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities, including
any Company Stock Options (other than the issuance of Company Common
Stock upon the exercise of Company Stock Options that are outstanding
as of the date hereof in accordance with their present terms or the
award of Company Stock Options pursuant to the terms of Section 10 of
the Company's 1998 Stock Option Plan);
(iii) amend its certificate of incorporation, by-laws or
other comparable organizational documents;
(iv) (A) acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or any equity
securities of, or by any other manner, any business or any Person, or
otherwise acquire or agree to acquire any assets except in the
ordinary course of business consistent with past practice, (B) open,
close, relocate, purchase, lease, sell or acquire any banking or other
offices, or file an application with a Governmental Entity pertaining
to any such action or (C) enter into any new line of business;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien (other than Company Permitted Liens), or otherwise
dispose of any of its properties or assets other than securitizations
and other transactions in the ordinary course of business consistent
with past practices or create any security interest in such assets or
properties (other than Company Permitted Liens);
(vi) except for borrowings having a maturity of not more
than 30 days under existing credit facilities (or renewals, extensions
or replacements therefor that do not provide for any termination fees
or penalties, prohibit pre-payments or require any pre-payment
penalties, or contain any like provisions limiting or otherwise
affecting the ability of the Company or its applicable Subsidiaries or
successors from terminating or pre-paying such facilities, or contain
financial terms less advantageous than existing credit facilities,
such existing credit facilities, and as they may be so renewed,
extended or replaced, "CREDIT FACILITIES") that are incurred in the
ordinary course of business consistent with past practice and with
respect to which the Company consults with Parent on a basis not less
frequently than bi-weekly, or for borrowings under Credit Facilities
or other lines of credit or refinancing of indebtedness outstanding on
the date hereof in the ordinary course but in any event not to exceed
$50,000,000, and except for the incurring of deposit liabilities in
the ordinary course of business consistent with past practice, incur
any Indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for the
obligations of any Person (other than the Company or any wholly owned
Subsidiary thereof), or, other than in the ordinary
46
course of business consistent with past practice, make any loans,
advances or capital contributions to, or investments in, any Person
other than its wholly owned Subsidiaries and as a result of ordinary
advances and reimbursements to Employees and endorsements of banking
instruments;
(vii) change in any material respect its accounting methods
(or underlying assumptions), principles or practices affecting its
assets, liabilities or business, including any reserving, renewal or
residual method, practice or policy, in each case, in effect on the
date hereof, except as required by changes in GAAP or regulatory
accounting principles, or change any of its methods of reporting
income and deductions for Federal income tax purposes from those
employed in the preparation of the Federal income tax returns of the
Company for the taxable year ending December 31, 2002, except as
required by changes in law or regulation;
(viii) change in any material respects its investment or
risk management or other similar policies of the Company or any of its
Subsidiaries;
(ix) make, change or revoke any Tax election, file any
amended Tax Return, enter into any closing agreement, settle or
compromise any liability with respect to Taxes in amounts not to
exceed $50,000, agree to any adjustment of any Tax attribute, file any
claim for a refund of Taxes, or consent to any extension or waiver of
the limitation period applicable to any Tax claim or assessment;
(x) create, renew or amend, or take any other action that
may result in the creation, renewal, or amendment, of any agreement or
contract or other binding obligation of the Company or its
Subsidiaries containing (A) any restriction on the ability of the
Company and its Subsidiaries, taken as a whole, to conduct its
business as it is presently being conducted or (B) any restriction on
the Company or its Subsidiaries engaging in any type or activity or
business;
(xi) (A) incur any capital expenditures in excess of
$100,000 individually or $1,000,000 in the aggregate, other than
pursuant to binding commitments existing on the date hereof and listed
in Section 4.1(xi) and other expenditures necessary (following
consultation with Parent) to maintain existing assets in good repair
or to pay applicable Taxes when due, (B) enter into any agreement
obligating the Company to spend more than $100,000 individually or
$1,000,000 in the aggregate, or (C) enter into any agreement,
contract, lease or other arrangement of the type described in Section
3.1(f) or Section 3.1(y) of this Agreement except for any such
agreements, contracts, leases or other arrangements (w) of the type
described in Section 3.1(f)(i) to the extent not prohibited under
Section 4.1(vi) and to the extent not pursuant to any agreement
containing provisions that restrict, or may restrict, the conduct of
the business of the issuer thereof as currently conducted in a manner
more adverse to the Company than the current Credit Facilities, (x) of
the type described in Section 3.1(f)(ii) to the extent not prohibited
by Section 4.1(xi)(A) or (B), (y) of the type described in Section
3.1(f)(xii) or (xiv) and that is terminable on not less than 30 days'
notice without penalty, but only following prior consultation with
Parent, or (z) of the type described in Section
47
3.1(f)(xiii) to the extent required by the expiration of the term of
an existing lease unless reasonably objected to by Parent;
(xii) terminate, amend or otherwise modify, except in the
ordinary course of business consistent with past practice, or
knowingly violate the terms of, any of the Company Material Contracts,
any of the leases for the Leased Properties or the Third Party Leases
or any other material binding obligations, and except for
terminations, amendments or other modifications that would not result
in the incurrence of additional costs or expenses, or in the loss of
revenue, in excess of $100,000 on an annual basis in the aggregate,
and are not made with respect to any of the Company Material Contracts
described in Section 3.1(f)(iii), (vi), (vii), (ix), (x), (xi) or (xv)
(B);
(xiii) except as required by agreements or instruments in
effect on the date hereof, alter in any material respect, or enter
into any commitment to alter in any material respect, any interest in
any corporation, association, joint venture, partnership or business
entity in which the Company directly or indirectly holds any equity or
ownership interest on the date hereof (other than any interest arising
from any foreclosure, settlement in lieu of foreclosure or troubled
loan or debt restructuring in the ordinary course of business
consistent with past practice);
(xiv) (A) grant to any current or former director, officer,
Employee or consultant any increase in compensation, bonus or other
benefits, except for any such salary, wage, bonus or benefit increases
(x) as required from time to time by applicable law affecting wages,
(y) as required by the terms existing prior to the date hereof of
plans or arrangements described in Section 3.1(k) of the Company
Disclosure Schedule, (z) annual compensation increases to Employees
who are not executive officers undertaken in the ordinary course of
business consistent with past practice, or (aa) for bonuses awarded to
Employees who are not executive officers under the Company Bank's
Incentive Compensation Program in the ordinary course of business
consistent with past practice in such amounts as have been accrued by
the Company through the Effective Time, which shall not exceed the
amount set forth in Section 4.1(xiv) of the Company Disclosure
Schedule in the aggregate, and which awards shall be made in
consultation with Parent, (B) grant to any such current or former
director, officer, Employee or consultant any increase in severance or
termination pay, (C) enter into, or amend, or take any action to
clarify any provision of, any Plan or any employment, deferred
compensation, consulting, severance, termination or indemnification
agreement with any such current or former director, officer, Employee
or consultant, except as required by applicable law, (D) modify any
Company Stock Option, (E) make any discretionary contributions to any
pension plan, (F) hire any new employee at an annual compensation in
excess of $50,000, (G) hire or promote any employee to a new rank
having a title of vice president or other more senior rank or (H)
accelerate the vesting or payment of compensation payable or benefits
provided or to become payable or provided to any of current or former
directors, officers, Employees, consultants or service providers or
otherwise pay any amounts, grant any awards or provide any benefits
not otherwise due except to the extent expressly permitted above;
48
(xv) except for loans made on terms, generally available to
the public and otherwise in compliance with applicable law, make any
new loans to, modify the terms of any existing loan to, or engage in
any other transactions (other than routine banking transactions) with,
any Affiliate Person of the Company or of any of its Subsidiaries;
(xvi) agree or consent to any material agreement or material
modifications of existing agreements with any Governmental Entity in
respect of the operations of its business, except (i) as required by
law or (ii) to effect the consummation of the transactions
contemplated hereby;
(xvii) pay, discharge, settle or compromise any claim,
action, litigation, arbitration or proceeding, other than any such
payment, discharge, settlement or compromise in the ordinary course of
business consistent with past practice that involves solely money
damages in an amount not in excess of $100,000 individually or
$500,000 in the aggregate, and that does not create precedent for
other pending or potential claims, actions, litigation, arbitration or
proceedings;
(xviii) incur deposit liabilities, other than liabilities
incurred in the ordinary course of business consistent with past
practice (including its deposit pricing policies) that do not
materially change the risk profile of the Company and its
Subsidiaries;
(xix) make any equity investment or commitment to make such
an investment in real estate or in any real estate development
project, other than in the ordinary course of business consistent with
past practice in connection with foreclosure, settlement in lieu of
foreclosure, or troubled loan or debt restructuring;
(xx) originate (i) any loans except in accordance with
existing Company lending policies and practices, (ii) residential
mortgage loans in excess of $1,000,000, (iii) 30-year residential
mortgage loans whose interest rate, terms, appraisal, and underwriting
do not make them immediately available for sale in the secondary
market, (iv) unsecured consumer loans in excess of $50,000, (v)
commercial business loans in excess of $5,000,000 as to any loan or in
the aggregate as to any related loans or loans to related persons,
(vi) commercial real estate first mortgage loans in excess of
$5,000,000 as to any loan or in the aggregate as to any related loans
or loans to related borrowers, (vii) modifications and/or extensions
of any commercial business or commercial real estate loans in the
amounts set forth in (v) and (vi) above;
(xxi) purchase or sell any loans or any mortgage loan
servicing rights other than in the ordinary course of business
consistent with past practice; provided that sales by People's
Mortgage Corporation shall be on a servicing released basis;
(xxii) issue any broadly distributed communication of a
general nature to Employees (including general communications relating
to benefits and compensation) without prior consultation with Parent
and, to the extent relating to post-Closing employment, benefit or
compensation information without the prior consent of
49
Parent (which shall not be unreasonably delayed or withheld) or issue
any broadly distributed communication of a general nature to customers
without the prior approval of Parent (which shall not be unreasonably
delayed or withheld), except for communications in the ordinary course
of business consistent with past practice that do not relate to the
Merger or other transactions contemplated hereby;
(xxiii) create, renew, amend or permit to expire, lapse or
terminate or knowingly take any action reasonably likely to result in
the creation, renewal, amendment, expiration, lapse or termination of
any insurance policies referred to in Section 3.1(o) except that the
Company shall be permitted to take any such action without Parent's
consent in the event that Parent shall fail to reasonably consent to
such action; or
(xxiv) knowingly take any action or knowingly fail to take
any action which would result in any of the conditions of Article VI
not being satisfied; or
(xxv) authorize, or commit or agree to take, any of the
foregoing actions.
SECTION 4.2 ADVICE OF CHANGES. Except to the extent prohibited by
applicable law or regulation, the Company and Parent shall promptly advise the
other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement and
(iii) any change or event having, or which, insofar as can reasonably be
foreseen, could have a Material Adverse Effect on such party or on the truth of
their respective representations and warranties or the ability of the conditions
set forth in Article VI to be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement; provided further that a
failure to comply with this Section 4.2 shall not constitute a failure to be
satisfied of any condition set forth in Article VI unless the underlying
untruth, inaccuracy, failure to comply or satisfy, or change or event would
independently result in a failure to be satisfied of a condition set forth in
Article VI.
SECTION 4.3 NO SOLICITATION BY THE COMPANY.
(a) Except as otherwise provided in this Section 4.3, until the
earlier of the Effective Time and the date of termination of this Agreement,
neither the Company, nor any of its Subsidiaries or any of the officers,
directors, agents, or representatives of it or its Subsidiaries (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) shall (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes a Company Takeover
Proposal (as defined in this Section 4.3), (ii) participate in any discussions
or negotiations regarding any Company Takeover Proposal, (iii) enter into any
50
agreement regarding any Company Takeover Proposal or (iv) make or authorize any
statement, recommendation or solicitation in support of any Company Takeover
Proposal. If and only to the extent that (i) the Company Stockholders Meeting
shall not have occurred, (ii) the Board of Directors of the Company determines
in good faith, after consultation with outside counsel, that it is necessary to
do so in order to comply with its fiduciary duties to the Company's stockholders
under applicable law in light of a bona fide Company Takeover Proposal that has
not been withdrawn, (iii) such Company Takeover Proposal was not solicited by it
and did not otherwise result from a breach of this Section 4.3(a), and (iv) the
Company provides prior written notice to Parent of its decision to take such
action, the Company shall be permitted to (A) furnish information with respect
to the Company and any of its Subsidiaries to such Person pursuant to a
customary confidentiality agreement, (B) participate in discussions and
negotiations with such Person and (C) effect a Change in the Company
Recommendation (as defined below).
For purposes of this Agreement, "COMPANY TAKEOVER PROPOSAL" means any
proposal or offer from any Person (other than from Parent and its Affiliates)
relating to (A) any direct or indirect acquisition or purchase of (x) assets of
the Company and its Subsidiaries that generate 20% or more of the net revenues
or net income, or that represent 20% or more of the total assets, of the Company
and its Subsidiaries, taken as a whole, or (y) 20% or more of any class of
equity securities of the Company, (B) any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 20% or more of any
class of any equity securities of the Company, or (C) any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company (or any one or more Subsidiaries of the
Company, individually or taken together, whose business constitutes 20% or more
of the net revenues, net income or total assets of the Company and its
Subsidiaries, taken as a whole), other than the transactions contemplated by
this Agreement.
(b) Except as expressly permitted by this Section 4.3 or Section
5.1(d), neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw, modify or qualify, or propose publicly to withdraw, modify
or qualify, in a manner adverse to Parent, the approval of the Agreement, the
Merger or the Company Recommendation (as defined in Section 5.1(d)) or take any
action or make any statement in connection with the Company Stockholders Meeting
inconsistent with such approval or Company Recommendation (collectively, a
"CHANGE IN THE COMPANY RECOMMENDATION"), or (ii) approve or recommend, or
propose publicly to approve or recommend, or fail to recommend against, any
Company Takeover Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.3, the Company shall promptly (and in
any event within 24 hours) advise Parent orally and in writing of any request
for information relating to a Company Takeover Proposal, or of any Company
Takeover Proposal, the material terms and conditions of such request or Company
Takeover Proposal and the identity of the person making such request or Company
Takeover Proposal, and shall promptly (and in any event within 24 hours) provide
a copy of any written request or Company Takeover Proposal to Parent. The
Company will keep Parent promptly informed of the status and details (including
amendments or proposed amendments) of any such request or Company Takeover
Proposal.
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(d) Nothing contained in this Section 4.3 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure if, in the good faith judgment of the Board of Directors of the
Company, after consultation with outside counsel, failure so to disclose would
violate its obligations under applicable law; provided, however, any such
disclosure relating to a Company Takeover Proposal shall be deemed to be a
Change in the Company Recommendation unless the Board of Directors of the
Company reaffirms the Company Recommendation in such disclosure.
SECTION 4.4 TRANSITION.
(a) Commencing following the date hereof, Parent and the Company
shall, and shall cause their respective Subsidiaries to, use their reasonable
best efforts to facilitate the integration of the Company and its Subsidiaries,
including the Company Bank, with the businesses of Parent and its Subsidiaries
to be effective as of the Closing Date or such later date as may be determined
by Parent. Without limiting the generality of the foregoing, from the date
hereof through the Closing Date and consistent with the performance of their
day-to-day operations and the continuous operation of the Company and its
Subsidiaries in the ordinary course of business consistent with past practice,
the Company shall cause the Employees and officers of the Company and its
Subsidiaries, including the Bank, to use their reasonable best efforts to
provide support, including support from its outside contractors, and to assist
Parent in performing all tasks, including equipment installation, reasonably
required to result in a successful integration at the Closing or such later date
as may be determined by Parent.
(b) Parent and the Company agree to consult with respect to their
loan, litigation and real estate valuation policies and practices (including
loan classifications and levels of reserves) and the Company shall make such
modifications or changes to its policies and practices, if any, and at such date
prior to the Effective Time, as Parent shall reasonably request. Parent and the
Company shall also consult with respect to the character, amount and timing of
restructuring charges to be taken by each of them in connection with the
transactions contemplated hereby, and shall take such charges as Parent shall
reasonably request. The Company shall not be required to take any action
required by this Section 4.4(b) (i) prior to the date on which all regulatory
and stockholder approvals required to consummate the transactions contemplated
by this Agreement are received, (ii) until after receipt of written confirmation
from Parent that it is not aware of any fact or circumstance that would prevent
completion of the Merger, and (iii) if any such action is prohibited by GAAP or
any applicable laws and regulations. No party's representations, warranties and
covenants contained in this Agreement shall be deemed to be untrue or breached
in any respect for any purpose as a consequence of any modifications or changes
to such policies and practices which may be undertaken on account of this
Section 4.4(b).
SECTION 4.5 NO FUNDAMENTAL CHANGES IN THE CONDUCT OF BUSINESS BY
PARENT. Except (i) as set forth in Section 4.5 of the Parent Disclosure
Schedule, (ii) as consented to by the Company in writing or required by
applicable law or regulation or (iii) as otherwise expressly contemplated by
this Agreement, Parent shall not, and shall not permit any of it Subsidiaries
to:
52
(i) except as contemplated hereby, amend its certificate of
incorporation or by-laws in any manner that would adversely affect the
economic benefits of the Merger to the holders of Company Common
Stock; provided that the authorization or issuance of preferred stock
in a manner that would not require Parent stockholder approval shall
not be deemed to violate this clause (i);
(ii) knowingly take any action or knowingly fail to take any
action which would result in any of the conditions of Article VI not
being satisfied;
(iii) knowingly take or cause to be taken any action which,
individually or in the aggregate, would reasonably be expected to
prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code; or
(iv) authorize, or commit or agree to take, any of the
foregoing actions or any other action that would be reasonably likely
to prevent Parent from performing or would be reasonably likely to
cause Parent not to perform its covenants hereunder in all material
respects.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 PREPARATION OF THE FORM S-4, PROXY STATEMENT; STOCKHOLDERS
MEETING.
(a) As promptly as practicable following the date of this
Agreement, Parent and the Company shall prepare, and Parent shall file with the
SEC, the Form S-4, in which the Proxy Statement will be included as a
prospectus. Each of Parent and the Company shall use all reasonable efforts to
have the Form S-4 declared effective under the Securities Act, and for the Proxy
Statement to be cleared under the Exchange Act, as promptly as practicable after
such filing. Without limiting any other provision hereinabove contained, the
Form S-4 and the Proxy Statement will contain, without limitation, such
information and disclosure reasonably requested by either Parent or the Company
so that (i) the Form S-4 conforms in both form and substance to the requirements
of the Securities Act, and (ii) the Proxy Statement conforms in both form and
substance to the requirements of the Exchange Act. The Company shall use
reasonable best efforts to cause the Proxy Statement to be mailed to holders of
Company Common Stock as promptly as practicable after the Form S-4 is declared
effective.
(b) If at any time prior to the Effective Time there shall occur
(i) any event with respect to the Company or any of its Subsidiaries, or with
respect to other information supplied by Company for inclusion in the Form S-4
or the Proxy Statement or (ii) any event with respect to Parent, or with respect
to information supplied by Parent for inclusion in the Form S-4 or the Proxy
Statement, in either case, which event is required to be described in an
amendment of, or a supplement to, the Form S-4 or the Proxy Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
Company.
53
(c) Each of the Company and Parent shall promptly notify the
other of the receipt of any comments from the SEC or its staff or any other
appropriate government official and of any requests by the SEC or its staff or
any other appropriate government official for amendments or supplements to any
of the filings with the SEC in connection with the Merger and the other
transactions contemplated hereby or for additional information and shall supply
the other with copies of all correspondence between the Company or any of its
representatives, or Parent or any of its representatives, as the case may be, on
the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. The Company and Parent shall
use their respective reasonable best efforts to respond to any comments of the
SEC with respect to the Form S-4 and the Proxy Statement as promptly as
practicable. The Company and Parent shall cooperate with each other and provide
to each other all information necessary in order to prepare the Form S-4 and the
Proxy Statement, and shall provide promptly to the other party any information
such party may obtain that could necessitate amending any such document.
(d) The Company shall, as promptly as practicable after the Form
S-4 is declared effective under the Securities Act, duly call, give notice of,
convene and hold the Company Stockholders Meeting in accordance with the DGCL
for the purpose of obtaining the Company Stockholder Approval and subject to
Section 4.3, the Board of Directors of the Company shall recommend to the
Company's stockholders the approval and adoption of this Agreement, the Merger
and the other transactions contemplated hereby (the "COMPANY RECOMMENDATION");
provided, however, that the Company's Board of Directors shall not be required
to make such Company Recommendation to the extent that it is permitted to effect
a Change in the Company Recommendation pursuant to Section 4.3. Without limiting
the generality of the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 5.1(d) shall not be affected by
the commencement, public proposal, public disclosure or communication to the
Company of any Company Takeover Proposal. Notwithstanding any Change in the
Company Recommendation, unless otherwise directed in writing by Parent, this
Agreement and the Merger shall be submitted to the stockholders of the Company
at the Company Stockholders Meeting for the purpose of approving the Agreement
and the Merger and nothing contained herein shall be deemed to relieve the
Company of such obligation, provided, however, that if the Board of Directors of
the Company shall have effected a Change in the Company Recommendation in
accordance with this Agreement, then in submitting this Agreement to the
Company's stockholders, the Board of Directors of the Company may submit this
Agreement to the Company's stockholders without recommendation (although the
resolutions adopting this Agreement and the Plan of Merger as of the date hereof
may not be rescinded or amended), in which event the Board of Directors of the
Company may communicate the basis for its lack of a recommendation to the
Company's stockholders in the Proxy Statement or an appropriate amendment or
supplement thereto to the extent required by law.
(e) The Company shall coordinate and cooperate with Parent with
respect to the timing of the Company Stockholders Meeting.
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SECTION 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to applicable law, each party shall, and shall cause
its Subsidiaries to, afford each other party and to the officers, employees,
accountants, counsel, financial advisors and other representatives of each other
party, reasonable access during normal business hours during the period prior to
the Effective Time to all its respective properties, books, contracts,
commitments, personnel and records and, during such period, each party shall,
and shall cause each of its Subsidiaries to, furnish promptly to each other
party all other information concerning its business, properties and personnel as
such other party may reasonably request. In addition, the Company shall, and
shall cause each of its Subsidiaries to, furnish promptly to Parent (a) a copy
of each material report, schedule, registration statement and other document
filed by it with any Governmental Entity and (b) the internal or external
reports prepared by it and/or its Subsidiaries in the ordinary course that are
reasonably required by Parent promptly after such reports are made available to
the Company's personnel. No review pursuant to this Section 5.2 shall affect any
representation or warranty given by any party.
(b) Each party will keep, and will cause its Subsidiaries,
Affiliates, directors, officers, employees, agents and advisors (collectively,
such party's "REPRESENTATIVES") to keep, all information and documents obtained
from the other party or its Representatives pursuant to Section 5.2(a) or during
the investigations leading up to the execution of this Agreement confidential
unless such information (i) was already in the possession of the party receiving
the information (the "RECEIVING PARTY"), provided that such information is not
known by the Receiving Party to be subject to another confidentiality agreement
with, or other direct or indirect obligation of secrecy to, the party disclosing
the information or documents (the "DISCLOSING PARTY"), (ii) becomes generally
available to the public other than as a result of a disclosure by the Receiving
Party or its Representatives or (iii) becomes available to the Receiving Party
from a source other than the Disclosing Party or its Representatives, provided
that such source is not known by the Receiving Party to be bound by a
confidentiality agreement with, or other direct or indirect obligation of
secrecy to, the Disclosing Party. In the event that this Agreement is terminated
or the transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or extracts
thereof containing information and data as to another party hereto to be
returned to the Disclosing Party which furnished the same or, with respect to
information contained in analyses, compilations, studies or other documents or
records prepared by the Receiving Party, destroyed (such destruction to be
confirmed in writing if requested by the Disclosing Party). In the event that
the Receiving Party or any of its Representatives become legally compelled to
disclose any such information or documents, the Receiving Party agrees to
provide, if practicable, the Disclosing Party with reasonable advance notice
under the circumstances prior to any such disclosure to enable the Disclosing
Party to seek a protective order or other appropriate remedy. In addition, each
party may, at any time, with notice (in advance, if practicable) to the other
party, make disclosures of such information and documents as may be required or
requested by such party's applicable regulatory authorities. This Agreement
shall not be construed to limit in any way either party's ability to consult any
tax advisor regarding the tax treatment or tax structure of the Merger or the
Bank Combination (as defined in Section 5.3). These provisions are meant to be
interpreted so as to prevent the Merger or the Bank Combination from being
treated as offered under "conditions of confidentiality" within the meaning of
the Code and the Treasury Regulations thereunder.
55
SECTION 5.3 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions set forth in this
Agreement, each of the parties hereto shall use its reasonable best efforts
(subject to, and in accordance with, applicable law) to take promptly, or cause
to be taken, all actions, and to do promptly, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the Merger and the other transactions contemplated by this Agreement, including
(i) obtaining all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) obtaining all necessary consents, approvals or waivers
from third parties, (iii) defending any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated by this Agreement, (iv) publicly
supporting this Agreement and the Merger and (iv) executing and delivering any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
(b) In connection with and without limiting the foregoing, the
Company shall (i) use its reasonable best efforts to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable to
this Agreement or the Merger or any of the other transactions contemplated
hereby, and (ii) if any state takeover statute or similar statute or regulation
becomes applicable to this Agreement or the Merger or any other transaction
contemplated hereby, take all action necessary to ensure that the Merger and the
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated hereby and otherwise to minimize the
effect of such statute or regulation on the Merger and the other transactions
contemplated hereby.
(c) In connection with and without limiting the foregoing, Parent
shall use its reasonable best efforts to cause the Conversion Applications to be
processed as promptly as practicable. In addition, Parent and the Company shall
use their respective reasonable best efforts prior to the Effective Time to
effect subsequent to the Effective Time the combination (the "BANK COMBINATION")
of the Company Bank with the Parent Bank, including causing such banks to enter
into a customary plan of bank merger, obtaining all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities
(including the OCC and/or the OTS as applicable) and making all necessary
registrations and filings and taking all steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including the OCC and/or the OTS as applicable), with such
Bank Combination to be effective immediately following the Effective Time or at
such later time as Parent may determine.
SECTION 5.4 RULE 16B-3 ACTIONS. Parent and the Company agree that, in
order to most effectively compensate and retain the Company Insiders (as defined
below) in connection with the Merger, both prior to and after the Effective
Time, it is desirable that the Company Insiders not be subject to a risk of
liability under Section 16(b) of the Exchange Act to the fullest extent
permitted by applicable law in connection with the conversion of shares of
Company Common Stock and Company Stock Options in connection with the Merger,
and for
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that compensatory and retentive purpose agree to the provisions of this Section
5.4. Prior to the Effective Time, the Company shall take all such steps as may
be required to cause any dispositions of Company Common Stock or acquisitions of
Parent Common Stock (including derivative securities with respect to Company
Common Stock or Parent Common Stock) resulting from the transactions
contemplated by Article I and II of this Agreement by each Company Insider to be
exempt under Section 16(b) under the Exchange Act to the fullest extent
permitted by applicable law. Assuming that the Company delivers to Parent the
Company Section 16 Information (as defined below) in a timely fashion prior to
the Effective Time, the Board of Directors of Parent, or a committee of
non-employee directors thereof (as such term is defined for purposes of Rule
16b-3(d) under the Exchange Act), shall reasonably promptly thereafter and in
any event prior to the Effective Time adopt a resolution providing in substance
that the receipt by the Company Insiders (as defined below) of Parent Common
Stock in exchange for shares of Company Common Stock pursuant to the
transactions contemplated hereby, and to the extent such securities are listed
in the Company Section 16 Information, are intended to be exempt from liability
pursuant to Section 16(b) under the Exchange Act to the fullest extent permitted
by applicable law. "COMPANY SECTION 16 INFORMATION" shall mean information
accurate in all material respects regarding the Company Insiders, the number of
shares of Company Common Stock held by each such Company Insider and expected to
be exchanged for Parent Common Stock in the Merger. "COMPANY INSIDERS" shall
mean those officers and directors of the Company who are subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect to the
Company and, in with respect to the foregoing obligations of Parent, who are
listed in the Company Section 16 Information and who will be subject to the
reporting requirements of Section 16(a) of the Exchange Act, immediately
following the Effective Time, with respect to Parent.
SECTION 5.5 INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) All rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors or officers of the
Company and its Subsidiaries as provided in their respective certificates of
incorporation or by-laws (or comparable organizational documents) and any
existing indemnification agreements or arrangements of the Company and its
Subsidiaries shall survive the Merger and shall continue in full force and
effect in accordance with their terms, and shall not be amended, repealed or
otherwise modified for a period of six years after the Effective Time in any
manner that would adversely affect the rights thereunder of such individuals for
acts or omissions occurring at or prior to the Effective Time.
(b) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including any such claim, action suit, proceeding or investigation in which any
individual 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 out of, or pertaining to (i) the fact that he is or was a director,
officer or employee of the Company or any of its Subsidiaries or 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
57
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto.
(c) For six years after the Effective Time, the Surviving
Corporation shall maintain in effect the Company's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
Effective Time with respect to those Persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable to the Company's directors
and officers currently covered by such insurance than those of such policy in
effect on the date hereof; provided, that the Surviving Corporation may
substitute therefor policies of Parent or its Subsidiaries (including self
insurance) containing terms with respect to coverage and amount no less
favorable to such directors or officers; provided, further, that in no event
shall the Surviving Corporation be required to pay aggregate premiums for
insurance under this Section 5.5(c) in excess of 200% of the aggregate premiums
paid by the Company in 2003 on an annualized basis for such purpose and, if the
annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to use its reasonable best efforts obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
(d) The provisions of this Section 5.5 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and other Person named herein and his or
her heirs and representatives.
SECTION 5.6 FEES AND EXPENSES. Except as otherwise provided in Section
7.2, all fees and expenses incurred in connection with the Merger, this
Agreement, and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated, except that the filing and other fees paid to the SEC in connection
with this Agreement and printing fees in connection with the Proxy Statement and
the Form S-4 shall be borne by Parent.
SECTION 5.7 PUBLIC ANNOUNCEMENTS. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with and use reasonable efforts to agree on, any
press release or other public statements and any broadly distributed internal
communications with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement or broadly distributed internal communications prior to
such consultation, except as either party may in good faith determine is
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange and except for any
discussions with rating agencies. The parties agree that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement shall be in a form heretofore agreed to by the parties.
SECTION 5.8 AFFILIATES. Concurrently with the execution of this
Agreement (or to the extent not practicable, as soon as practicable and in any
event within 10 business days after the date hereof), the Company shall deliver
to Parent a written agreement substantially in the form attached as Exhibit A
hereto of all of the Persons who are "affiliates" of the Company for purposes of
Rule 145 under the Securities Act; all of such affiliates, who are affiliates as
of the date of this Agreement, are identified in Section 5.8 of the Company
Disclosure Schedule.
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Section 5.8 of the Company Disclosure Schedule shall be updated by the Company
as necessary to reflect changes from the date hereof and the Company shall use
reasonable best efforts to cause each Person added to such schedule after the
date hereof to deliver a similar agreement.
SECTION 5.9 STOCK EXCHANGE LISTING. Parent shall use best efforts to
cause the Parent Common Stock issuable under Article II to be approved for
issuance on the NYSE, in each case subject to official notice of issuance, as
promptly as practicable after the date hereof, and in any event on or prior to
the Closing Date.
SECTION 5.10 STOCKHOLDER LITIGATION. Each of the Company and Parent
shall give the other the reasonable opportunity to participate in the defense of
any stockholder litigation against the Company or Parent, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
SECTION 5.11 STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS. During
the period from the date of this Agreement through the Effective Time, the
Company shall not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its respective
Subsidiaries is a party and which relates to the confidentiality or information
regarding the Company or its Subsidiaries or which relate to securities of the
Company, other than client and customer agreements entered into by the Company
or its Subsidiaries in the ordinary course of business consistent with past
practice. During such period, the Company shall use reasonably best efforts to
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreement, including by using reasonable best efforts to obtain
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court having jurisdiction.
SECTION 5.12 EMPLOYEE BENEFITS.
(a) The Surviving Corporation and its Subsidiaries and/or Parent
shall employ as of the Closing Date those Employees who are employed by the
Company and its Subsidiaries as of the Effective Time (the "CONTINUING
EMPLOYEES") provided that no Continuing Employee shall be, or have the authority
of, an officer of such Person unless elected or appointed as such by such
Person.
(b) The Company shall amend its severance plan, a copy of which
is included in Section 5.12 of the Company Disclosure Schedule, to provide that
all employees of Company or its Subsidiaries, regardless of service, are
eligible to receive severance benefits in the event they are displaced as a
result of the merger (other than employees covered by a specific employment or
change in control agreement that is binding upon Parent or Surviving
Corporation). The Company severance plan, as amended, shall also provide a
minimum of 13 weeks' severance pay to eligible employees. Parent shall provide
outplacement services to any Employee who is displaced as a result of the Merger
or otherwise within one year from the Effective Time, provided that in no event
shall Parent be required to expend more than $75,000, in the aggregate, with
respect to such services.
(c) Parent shall, or shall cause the Surviving Corporation and
its Subsidiaries to, give Continuing Employees full credit for purposes of
eligibility, vesting and
59
benefit accruals under any employee benefit plans, programs, or arrangements
maintained by Parent, the Surviving Corporation or any Subsidiary of Parent or
the Surviving Corporation (other than any defined benefit pension plan, retiree
medical plan or retiree life insurance plan) for such Continuing Employees'
service with the Company or any Subsidiary of the Company (or any predecessor
entity) to the same extent recognized by the Company and its Subsidiaries,
except as may result in duplication of benefits.
(d) Parent shall, or shall cause the Surviving Corporation and
its Subsidiaries to, waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Continuing Employees under any welfare plan that
such employees may be eligible to participate in after the Effective Time, other
than limitations or waiting periods that are already in effect with respect to
such employees and that have not been satisfied as of the Effective Time under
any welfare plan maintained for the Continuing Employees immediately prior to
the Effective Time, and provide, for the year in which the Effective Time
occurs, credit under any such welfare plan for any co-payments, deductibles and
out-of-pocket expenditures for the remainder of the coverage period during which
any transfer of coverage occurs to the extent credited by the Company for such
Continuing Employees as of immediately prior to the Effective Time.
(e) Except as otherwise provided in Article V of this Agreement,
Parent and Surviving Corporation shall honor all obligations under the
employment and change-in-control agreements set forth in Company Disclosure
Schedule 5.12(e), in each case except to the extent superseded by agreements
entered into in connection with entering into this Agreement.
(f) Prior to December 1, 2003, the Company agrees that it shall
pay all deferred compensation accounts of the individuals listed on Schedule
5.12(f) to such individuals.
SECTION 5.13 TAX MATTERS. Parent and the Company shall use reasonable
best efforts to cause the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code and to obtain the Tax opinions described
in Sections 6.2(c) and 6.3(c) hereof. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Treas. Reg. Sec. 1.368-2(g).
Officers of Parent and the Company shall execute and deliver to Muldoon Murphy &
Faucette LLP, counsel to the Company, and Wachtell, Lipton, counsel to Parent,
certificates containing appropriate representations at such time or times as may
be reasonably requested by such law firms, including the effective date of the
Form S-4 and the Closing Date, in connection with their respective deliveries of
opinions, pursuant to Sections 6.2(c) and 6.3(c) hereof, with respect to the Tax
treatment of the Merger.
SECTION 5.14 BOARD OF DIRECTORS. Effective as of the Closing, Parent
shall cause the Company Designee to be appointed to the Boards of Directors of
Parent and of the Parent Bank and will cause the Company Designee to be
nominated for election or appointed to such Boards, as the case may be, for the
class of directors with a term expiring in 2007.
SECTION 5.15 ADVISORY BOARD OF PARENT. Parent shall establish an
advisory board (the "PARENT ADVISORY BOARD") and, prior to the Closing Date,
shall offer to each of the members of the Board of Directors of the Company as
of the Closing Date an opportunity to
60
become a member of the Parent Advisory Board (other than the Company Designee),
subject to entering into a customary non-competition/non-solicitation agreement
with Parent, with service on the Parent Advisory Board to commence immediately
following the Closing Date. The Parent Advisory Board shall be maintained for a
period ending no sooner than two years following the Closing Date. For two years
following the Effective Time, the members of the Parent Advisory Board appointed
pursuant to this Section 5.15 who are not employees of the Company or its
Subsidiaries and who continue to serve shall receive, as compensation for
service on the Parent Advisory Board, Parent Advisory Board member's fees
(annual retainer and attendance fees) equal in amount each year (prorated for
any partial year) to the annual retainer and schedule of attendance fees for
members of the Board of Directors of the Company in effect on the date hereof.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver by each of Parent and the Company on or prior to
the Closing Date of the following conditions:
(a) STOCKHOLDER APPROVAL. The Company Stockholder Approval shall
have been obtained.
(b) GOVERNMENTAL AND REGULATORY APPROVALS. Other than the filing
provided for under Section 1.3, all consents, approvals and actions of, filings
with and notices to any Governmental Entity required by the Company, Parent or
any of their Subsidiaries under applicable law or regulation to consummate the
Merger and the other transactions contemplated hereby, shall have been obtained
or made and shall remain in full force and effect, including approval of the
Merger and, if so determined by Parent, the Bank Combination, by the applicable
regulatory authorities (all such approvals and the expiration of all such
waiting periods, the "REQUISITE REGULATORY APPROVALS").
(c) OTHER THIRD PARTY APPROVALS. All other notices, consents or
waivers from third parties (other than Governmental Employees) with respect to
the transactions contemplated by this Agreement shall have been made or obtained
except as would not reasonably be expected to have a Material Adverse Effect on
the Company or on Parent.
(d) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"RESTRAINTS") shall be in effect preventing the consummation of the Merger or
the Bank Combination.
(e) FORM S-4; BLUE SKY LAWS. The Form S-4 shall have become
effective under the Securities Act and no stop order or proceedings seeking a
stop order shall
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have been entered or be pending by the SEC, and Parent shall have received all
approvals required under state securities or "blue sky" laws with respect to the
Merger.
(f) STOCK EXCHANGE LISTING. The shares of Parent Common Stock
issuable to the Company's stockholders as contemplated by Article II shall have
been approved for listing on the NYSE, subject to official notice of issuance.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PARENT. The obligation of
Parent to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth herein shall be true and correct at and as
of the date hereof and at and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in which
case as of such date), provided that no representation or warranty of the
Company shall be deemed untrue or incorrect for purposes hereunder as a
consequence of the existence of any fact, event or circumstance inconsistent
with such representation or warranty, unless such fact, event or circumstance,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty of the Company, has had or
would reasonably be expected to result in a Material Adverse Effect on the
Company, disregarding for these purposes (x) any qualification or exception for,
or reference to, materiality in any such representation or warranty and (y) any
use of the terms "material," "materially," "in all material respects," "Material
Adverse Change," "Material Adverse Effect" or similar terms or phrases in any
such representation or warranty; and Parent shall have received a certificate,
dated the Closing Date, signed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company, to such 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 at or prior to the Closing Date under this Agreement; and Parent shall
have received a certificate, dated the Closing Date, signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company, to such effect.
(c) TAX OPINION. Parent shall have received the opinion of
Wachtell, Lipton, in form and substance reasonably satisfactory to Parent, dated
the Closing Date, rendered on the basis of facts, representations and
assumptions set forth in such opinion and certificates obtained from officers of
Parent and the Company, all of which are consistent with the state of facts
existing as of the Effective Time, to the effect that the Merger will qualify as
a reorganization within the meaning of Section 368(a) of the Code. In rendering
the tax opinion described in this Section 6.2(c), Wachtell, Lipton may require
and rely upon representations contained in certificates of officers of Parent
and the Company.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the Merger is further subject to satisfaction or waiver
of the following conditions:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent set forth herein shall be true and correct at and as of the
date hereof and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), provided that no representation or warranty of Parent shall be
deemed untrue or incorrect for purposes hereunder as a consequence of the
existence of any fact, event or circumstance inconsistent with such
representation or warranty, unless such fact, event or circumstance,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty of Parent, has had or would
result in a Material Adverse Effect on Parent, disregarding for these purposes
(x) any qualification or exception for, or reference to, materiality in any such
representation or warranty and (y) any use of the terms "material,"
"materially," "in all material respects," "Material Adverse Change," "Material
Adverse Effect" or similar terms or phrases in any such representation or
warranty; and the Company shall have received a certificate, dated the Closing
Date, signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent, to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have
performed in all material respects all obligations required to be performed by
it at or prior to the Closing Date under this Agreement; and the Company shall
have received a certificate, dated the Closing Date, signed on behalf of Parent
by the Chief Executive Officer and the Chief Financial Officer of Parent, to
such effect.
(c) TAX OPINION. The Company shall have received the opinion of
Muldoon Murphy & Faucette LLP, in form and substance reasonably satisfactory to
the Company, dated the Closing Date, rendered on the basis of facts,
representations and assumptions set forth in such opinion and the certificates
obtained from officers of Parent and the Company, all of which are consistent
with the state of facts existing as of the Effective Time, to the effect that
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code. In rendering the tax opinion described in this Section 6.3(c),
Muldoon Murphy & Faucette LLP may require and rely upon representations
contained in certificates of officers of Parent and the Company.
(d) DEPOSIT OF MERGER CONSIDERATION. Parent shall have deposited
with the Exchange Agent sufficient cash to pay the aggregate Cash Consideration.
SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS. Neither Parent nor the
Company may rely on the failure of any condition set forth in Section 6.1, 6.2
or 6.3, as the case may be, to be satisfied if such failure was caused by such
party's failure to use reasonable best efforts to consummate the Merger and the
other transactions contemplated by this Agreement, as required by and subject to
Section 5.3.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, and whether before or after the Company Stockholder
Approval (the
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party desiring to terminate this Agreement pursuant to clause (b), (c), (d), (e)
or (f) below shall give written notice of such termination to the other party in
accordance with Section 8.2, specifying the provision hereof pursuant to which
such termination is effected):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by the
date that is ten months following the date hereof; provided, however,
that the right to terminate this Agreement pursuant to this Section
7.1(b) shall not be available to any party whose failure to perform
any of its obligations under this Agreement results in the failure of
the Merger to be consummated by such time;
(ii) if the Company Stockholder Approval shall not have been
obtained at the Company Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof;
(iii) if any Restraint having any of the effects set forth
in Section 6.1(d) shall be in effect and shall have become final and
nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(b)(iii) shall have used
reasonable best efforts to prevent the entry of and to remove such
Restraint; or (iv) if any Governmental Entity that must grant a
Requisite Regulatory Approval required to complete the Merger has
denied the applicable Requisite Regulatory Approval and such denial
has become final and nonappealable;
(c) by Parent, if (i) the Company shall have failed to make the
Company Recommendation in the Proxy Statement, (ii) the Company shall have
effected a Change in the Company Recommendation or (iii) the Company shall have
breached its obligations under this Agreement by reason of a failure to call or
convene the Company Stockholders Meeting in accordance with Section 5.1(d);
(d) by Parent, if the Company shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (A) would give rise to the failure of a condition set
forth in Section 6.2(a) or (b), and (B) is incapable of being cured by the
Company or is not cured within 30 days of written notice thereof; or
(e) by the Company, if Parent shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (A) would give rise to the failure of a condition set
forth in Section 6.3(a) or (b), and (B) is incapable of being cured by Parent or
is not cured within 30 days of written notice thereof.
(f) by the Company, if the Company Board so determines by the
vote of a majority of all of its members, by giving written notice to Parent not
later than the end of the
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second Business Day next following the Determination Date, in the event that, as
of the Determination Date, both of the following conditions are satisfied:
(i) the Average Closing Price shall be less than 80% of the
Parent Starting Price; and
(ii) (A) the number obtained by dividing the Average Closing
Price by the Parent Starting Price (such number, the "PARENT Ratio")
is less than (B) the number obtained by dividing the Final Index Price
by the Initial Index Price and subtracting 0.20 from such quotient
(such number, the "INDEX RATIO").
If the Company elects to exercise its termination right pursuant to
this Section 7.1(f), it shall give written notice to Parent. During the
five-business-day period commencing with its receipt of such notice, Parent may,
at its option (the "FILL OPTION"), adjust 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 0.80, the Parent 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 Parent
Ratio. If Parent makes an election contemplated by the preceding sentence within
such five-day period, it shall give prompt written notice to the Company of such
election and the revised Stock Consideration, whereupon no termination shall
have occurred pursuant to this Section 7.1(f) 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 7.1(f).
If the outstanding shares of common stock of Parent or any company
belonging to the Index Group shall be changed into a different number of shares
by reason of any stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the date of the
Agreement and the Determination date, the prices for the common stock of such
company will be appropriately adjusted.
For purposes of this Section 7.1(f), the following terms shall have
the meanings set forth below:
"AVERAGE CLOSING PRICE" of the Parent Common Stock shall mean the
arithmetic mean of the daily closing sales prices per share of Parent Common
Stock reported on the NYSE Composite Transaction Tape (as reported by the WALL
STREET JOURNAL or, if not reported thereby, another authoritative source) for
the five consecutive NYSE trading days ending at the close of trading on the
Determination Date.
"BUSINESS DAY" means Monday through Friday of each week, except a
legal holiday recognized as such by the U.S. Government or any day on which
banking institutions in the Commonwealth of Massachusetts are authorized or
obligated to close.
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"DETERMINATION DATE" means the date on which the last required
approval of a Governmental Authority is obtained with respect to the Merger,
without regard to any requisite waiting period.
"FINAL INDEX PRICE" means the sum of the Final Prices for each company
comprising the Index Group multiplied by the weight set forth on Exhibit B
opposite the name of the applicable company, as they may be adjusted in
accordance herewith.
"FINAL PRICE," with respect to any company belonging to the Index
Group, means the arithmetic average of the daily closing sales prices of a share
of common stock of such company, as reported on the consolidated transaction
reporting system for the market or exchange on which such common stock is
principally traded (as reported by the WALL STREET JOURNAL or, if not reported
thereby, another authoritative source) for the same trading days used in
calculating the Average Closing Price.
"INDEX GROUP" means the twenty (20) financial institution holding
companies listed on Annex B attached hereto, the common stock of all of which
shall be publicly traded and as to which there shall not have been a publicly
announced proposal for the acquisition of any such company or as to which any
such company shall have made a proposal to acquire another company in which 20%
or more of its outstanding shares would be issued, in each case at any time
during the period beginning on the date of this Agreement and ending on the
Determination Date. In the event that, at any time during the period beginning
on the date of this Agreement and ending on the Determination Date, the common
stock of any such company ceases to be publicly traded, a proposal to acquire
any such company is announced, or such company announces an acquisition proposal
in which 20% or more of such company's outstanding shares are to be issued
(other than the acquisition of Roslyn Bancorp, Inc. by New York Community
Bancorp, Inc.), 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) attributed to the remaining companies will be adjusted
proportionately for purposes of determining the Final Index Price and the
Initial Index Price. The twenty (20) financial institution holding companies and
the weights attributed to them are listed on Annex B.
"INITIAL INDEX PRICE" means $31.98.
"PARENT STARTING PRICE" means $41.15.
SECTION 7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either the
Company or Parent as provided in Section 7.1, this Agreement shall forthwith
become void and have no effect, without any liability or obligation on the part
of Parent or the Company, other than that the provisions of Section 5.2 (other
than the first sentence thereof) shall survive such termination for a period of
two years thereafter and the provisions of Section 5.6, this Section 7.2 and
Article VIII shall survive such termination indefinitely or otherwise in
accordance with their terms, provided, however, that nothing herein shall
relieve any party from any liability for any willful breach by a party of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
66
(b) (i) In the event that (A) a Company Pre-Termination Takeover
Proposal Event (as defined below) shall occur after the date of this Agreement
and thereafter this Agreement is terminated by either Parent or the Company
pursuant to Section 7.1(b)(ii), by Parent pursuant to Section 7.1(c) or by
Parent pursuant to Section 7.1(d) as a result of a willful breach by the Company
and (B) prior to the date that is twelve (12) months after the date of such
termination the Company consummates a Company Takeover Proposal or enters into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, a "COMPANY ACQUISITION AGREEMENT") related to any
Company Takeover Proposal, then the Company shall: (x) in the case of a
termination pursuant to Section 7.1(b)(ii), 7.1(c)(i) or 7.1(c)(ii), on the date
such Company Acquisition Agreement is entered into, pay Parent a fee equal to
$8.5 million by wire transfer of same day funds, and on the date such Company
Takeover Proposal is consummated, pay Parent a fee equal to $17 million (less
any fee previously paid to Parent under this clause (x)) by wire transfer of
same day funds; (y) in the case of a termination pursuant to Section 7.1(c)(iii)
or 7.1(d) as a result of a willful breach by the Company, on the date such
Company Takeover Proposal is consummated or such Company Acquisition Agreement
is entered into, pay Parent a fee equal to $17 million by wire transfer of same
day funds.
(ii) For purposes of this Section 7.2(b), a "PRE-TERMINATION
TAKEOVER PROPOSAL EVENT" shall be deemed to occur if, prior to the event giving
rise to the right to terminate this Agreement, a bona fide Company Takeover
Proposal shall have been made known to the Company or any of its Subsidiaries or
has been made directly to its stockholders generally or any person shall have
publicly announced an intention (whether or not conditional) to make a Company
Takeover Proposal, and such Company Takeover Proposal or public announcement
shall not have been irrevocably withdrawn not less than five business days prior
to the Company Stockholders Meeting. The Company acknowledges that the
agreements contained in this Section 7.2(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if the Company fails
promptly to pay the amount due pursuant to this Section 7.2(b), and, in order to
obtain such payment, Parent commences a suit which results in a judgment against
the Company for the fee set forth in this Section 7.2(b), the Company shall pay
to Parent its costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amount of the fee at
the rate on six-month U.S. Treasury obligations plus 300 basis points in effect
on the date such payment was required to be made.
(c) In the event of termination of the Agreement by either the
Company or Parent pursuant to Sections 7.1(b)(i) or 7.1(b)(iv) because Parent
has not received, or because the applicable Governmental Entity has denied, the
Requisite Regulatory Approvals required to be obtained by Parent from the
Federal Reserve, the OCC or the OTS, as the case may be, in order to complete
the Merger, except to the extent such failure or denial resulted principally
from the failure of the Company to perform any of its obligations under this
Agreement or any inaccuracy of the representations and warranties of the Company
made hereunder, then Parent shall pay the Company a fee equal to $7 million by
wire transfer of same day funds, within two business days following a written
request by the Company. In the event that any third party acquires (either
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
sale, lease, exchange, transfer or other disposition (including a contribution
to a joint venture),
67
dissolution or similar transaction, for consideration consisting of cash and/or
securities) a majority of the combined voting power of the shares of the
Company's capital stock then outstanding or a majority of the revenues or total
assets of the Company and its Subsidiaries, taken as a whole (other than any
transaction that results in the Company's stockholders immediately prior to such
transaction owning fifty percent or more of the stock of the resulting entity or
the publicly traded corporation thereof immediately after such transaction and
the members of the Company's Board of Directors immediately prior to such
transaction constituting at least a majority of the board of directors of such
resulting entity or publicly traded corporation immediately after such
transaction) within twelve months of such termination date, the Company will
reimburse Parent all funds paid to the Company under this Section 7.2(c) by wire
transfer of same day funds, within two business days following completion of
such acquisition; provided that such reimbursement obligation shall be reduced
by an amount equal to the difference (if positive) between (x) 17,412,663
multiplied by $24.50 and (y) 17,412,663 (proportionately adjusted if the Company
Common Stock shall have hereafter been changed into a different number of shares
by reason of any reclassification, recapitalization or combination, stock split,
reverse stock split, stock dividend or rights issued in respect of such stock,
or any similar event) multiplied by the Implied Value of the Alternative
Consideration. "IMPLIED VALUE OF THE ALTERNATIVE CONSIDERATION" shall mean (i)
if such transaction is an all-cash transaction or is a transaction in which not
less than 40% of the aggregate consideration is paid in cash, the cash price per
share to be paid in the transaction, (ii) if such transaction is an all-stock
transaction or is a transaction in which not more than 40% of the aggregate
consideration is paid in cash, an amount equal to the applicable exchange ratio
multiplied by the arithmetic mean of the daily closing sales prices per share of
the applicable stock for the five consecutive trading days ending on the day
prior to the date of completion of the acquisition or (iii) if neither of the
foregoing clauses shall apply, the value of the per share consideration as of
the completion of the acquisition as the parties shall reasonably agree in good
faith.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties at
any time before or after the Company Stockholder Approval; provided, however,
that after such approval, there shall not be made any amendment that by law
requires further approval by the stockholders of the Company without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
SECTION 7.4 EXTENSION; WAIVER. At any time prior to the Effective
Time, a party may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.3, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
68
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time, and shall expire at
the Effective Time and be of no further effect thereafter. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) 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 Parent, to
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
Attention: Harriet Wolfe, Executive Vice President,
General Counsel and Secretary
Telecopy No.: (203) 755-5539
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
Attention: Craig M. Wasserman, Esq.
if to the Company, to
FIRSTFED AMERICA BANCORP, INC.
ONE FIRSTFED PARK
Swansea, Massachusetts 02777
Telecopy No.: (508) 235-1800
Attention: Robert F. Stoico
with a copy to:
Muldoon Murphy & Faucette LLP
5101 Wisconsin Avenue N.W.
Washington, D.C. 20016
Telecopy No.: (202) 966-9409
Attention: Doug Faucette, Esq.
69
SECTION 8.3 DEFINITIONS. For purposes of this Agreement:
(a) an "AFFILIATE" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person, where
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a person, whether through
the ownership of voting securities, by contract, as trustee or executor, or
otherwise; provided, that (x) any investment account advised or managed by such
Person or one of its Subsidiaries or Affiliates on behalf of third parties, or
(y) any partnership, limited liability company, or other similar investment
vehicle or entity engaged in the business of making investments of which such
Person acts as the general partner, managing member, manager, investment
advisor, principal underwriter or the equivalent shall not be deemed an
Affiliate of such Person.
(b) "AFFILIATED PERSON" means any director, officer or 5% or
greater stockholder of the referenced Person, spouse or other person living in
the same household of such director, officer or stockholder, or any company,
partnership or trust in which any of the foregoing persons is an officer, 5% or
greater stockholder, general partner or 5% or greater trust beneficiary.
(c) "CLOSING PARENT SHARE VALUE" means the arithmetic average of
the 4:00 p.m. Eastern Time closing sales prices of Parent Common Stock reported
on the New York Stock Exchange (the "NYSE") Composite Tape for the five
consecutive trading days immediately preceding but not including the trading day
prior to the Closing Date; provided, however, if necessary to comply with any
requirements of the Securities and Exchange Commission (the "SEC"), the term
Closing Parent Share Value shall be deemed to mean the date which is the closest
in time but prior to the Closing Date which complies with such rules and
regulations.
(d) "KNOWLEDGE" means, (i) with respect to the Company, the
knowledge of the individuals listed on Section 8.3(f) of the Company Disclosure
Schedule and (ii) with respect to Parent, the knowledge of Parent's executive
officers.
(e) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means,
when used in connection with the Company or Parent, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected to be,
materially adverse to the business, financial condition or results of operations
of such party and its consolidated subsidiaries taken as a whole, other than (i)
any change, effect, event or occurrence relating to the United States economy or
financial or securities markets in general, (ii) any change, effect, event or
occurrence relating to the financial services industry to the extent not
affecting such Person to a materially greater extent than it affects other
Persons in industries in which such Person competes, (iii) any change, effect,
event or occurrence relating to the announcement hereof, (iv) any change in
banking, savings association and similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental authorities
and (v) any change in GAAP or regulatory accounting requirements applicable to
banks, savings associations or their holding companies generally.
70
(f) "PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(g) a "SUBSIDIARY" of any Person means another Person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person.
SECTION 8.4 INTERPRETATION. When a reference is made in this Agreement
to an Article, Section or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit 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 to be followed by the words "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means, in the case of any agreement or instrument, such agreement or
instrument as from time to time amended, modified or supplemented, including by
waiver or consent and, in the case of statutes, such statutes as in effect on
the date of this Agreement. References to a person are also to its permitted
successors and assigns. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local or
foreign statute or law shall be deemed to also refer to any amendments thereto
and all rules and regulations promulgated thereunder, unless the context
requires otherwise.
SECTION 8.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties. A facsimile copy of a
signature page shall be deemed to be an original signature page.
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein) (a)
constitutes the entire agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement (including the Confidentiality Agreement dated
as of August 6, 2003 between Parent and the Company) and (b) except for the
provisions of Section 5.5, which shall inure to the benefit of and be
enforceable
71
by the Persons referred to therein, is not intended to confer upon any Person
other than the parties any rights or remedies.
SECTION 8.7 GOVERNING LAW. 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 conflict of
laws thereof.
SECTION 8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, provided, however, that Parent may
assign its rights and obligations, in whole or in part, under this Agreement to
Parent or any wholly-owned, direct subsidiary of Parent. Any assignment in
violation of the preceding sentence shall be void. Subject to the preceding two
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.9 CONSENT TO JURISDICTION. Each of the parties hereto (a)
consents to submit itself to the exclusive personal jurisdiction of any Federal
court located in the State of Connecticut or any court of the State of
Connecticut in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, and (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court.
SECTION 8.10 HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.12 ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
72
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
WEBSTER FINANCIAL CORPORATION
ATTEST:
By: ____________________________ By: ____________________________
Name: Name:
Title: Title:
FIRSTFED AMERICA BANCORP, INC.
ATTEST:
By: ____________________________ By: ____________________________
Name: Name:
Title: Title:
73
EXHIBIT A
FORM OF AFFILIATE LETTER
______________, 2003
Webster Financial Corporation
Webster Plaza
Waterbury, Connecticut 06702
Attention: General Counsel
Ladies and Gentlemen:
I have been advised that I may be deemed to be an "affiliate" of FIRSTFED
AMERICA BANCORP, INC., a Delaware corporation (the "COMPANY"), as that term is
defined in Rule 145 promulgated by the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "SECURITIES ACT"). I
understand that pursuant to the terms of the Agreement and Plan of Merger dated
as of October 6, 2003 (the "MERGER AGREEMENT"), by and between Webster Financial
Corporation, a Delaware corporation ("PARENT"), and the Company, the Company
plans to merge with and into Parent (the "MERGER") with Parent being the
surviving corporation. Capitalized terms used herein but not otherwise defined
shall have the meanings given to such terms in the Merger Agreement.
I further understand that, as a result of the Merger, in exchange for
shares of common stock, par value $0.01 per share, of the Company ("COMPANY
COMMON STOCK") I may receive common stock, par value $0.01 per share, of Parent
("PARENT COMMON STOCK").
I have read this letter and discussed the requirements hereof to the extent
I felt necessary with my counsel or counsel for the Company.
I represent, warrant and covenant with and to Parent that in the event I
receive any Parent Common Stock as a result of the Merger:
1. I shall not make any sale, transfer, or other disposition of such Parent
Common Stock unless (i) such sale, transfer or other disposition has been
registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of Rule 145 under the
Securities Act (as such rule may be amended from time to time), (iii) in the
opinion of counsel in form and substance reasonably satisfactory to Parent, or
under a "no-action" letter or interpretive letter from the staff of the SEC,
such sale, transfer or other disposition will not violate or is otherwise exempt
from registration under the Securities Act, or (iii) I have the right to have
the legend set forth in Sections 3 and 4 below removed pursuant to Section 4
below.
2. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of Parent Common Stock by me or on my behalf under
the Securities Act or, other than as set forth below, to take any other action
necessary in order to make compliance with an exemption from such registration
available.
3. I understand that stop transfer instructions will be given to Parent's
transfer agent with respect to the Parent Common Stock issued to me as a result
of the Merger and that there will be placed on the certificates, if any, for
such shares, or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933 applies. The shares represented by this certificate may be
transferred only in accordance with the terms of a letter agreement
between the registered holder hereof and Webster Financial
Corporation, a copy of which agreement is on file at the principal
offices of Webster Financial Corporation."
4. I understand that, unless the transfer by me of the Parent Common Stock
issued to me as a result of the Merger has been registered under the Securities
Act or such transfer is made in conformity with the provisions of Rule 145(d)
under the Securities Act, Parent reserves the right, in its sole discretion, to
place the following legend on the certificates, if any, issued to my transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person who
received such shares in a transaction to which Rule 145 under the
Securities Act of 1933 applies. The shares may not be sold,
transferred or otherwise disposed of except pursuant to an effective
registration statement under, or in accordance with an exemption from
the registration requirements of, the Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs (3)
and (4) above shall be removed by delivery of substitute certificates without
such legend and/or any stop transfer instructions will be lifted (A) if one year
(or such other period as may be required by Rule 145(d)(2) or any successor
thereto) shall have elapsed from the date I acquired the Parent Common Stock
received in the Merger and the provisions of Rule 145(d)(2) (or any successor
thereto) are then available to me, (B) if two years (or such other period as may
be required by Rule 145(d)(3) or any successor thereto) shall have elapsed from
the date I acquired the Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(3) (or any successor thereto) are then available to me
or (C) if I shall have delivered to Parent (i) a copy of a "no-action" letter or
interpretative letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Parent, to the effect that such
legend is not required for purposes of the Securities Act or (ii) a written
statement from me representing that that the Parent Common Stock represented by
such certificates are being or have been sold in conformity with the provisions
of Rule 145(d) or pursuant to an effective registration statement under the
Securities Act.
Execution of this letter should not be considered an admission on my part
of "affiliate" status as described in the first paragraph of this letter
agreement, or as a waiver of any rights I may have to object to any claim that I
am such an affiliate on or after the date of this letter.
By acceptance hereof, Parent agrees, for a period of two years after the
Effective Time that, so long as it is obligated to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, that it will use its reasonable best efforts to timely
file such reports so that the public information requirements of Rule 144(c)
promulgated under the Securities Act are satisfied and the resale provisions of
Rule 145(d)(1) and (2) are therefore available to me if I desire to transfer
Parent Common Stock issued to me in the Merger.
Very truly yours,
By: _______________________
Name:
Accepted this ____ day of
________________, 2003.
WEBSTER FINANCIAL CORPORATION
By: _____________________________
Name:
Title:
EXHIBIT B
INDEX GROUP AND INITIAL INDEX PRICE
-----------------------------------
SHARES WTD. BY
OUTSTANDING SHARE CLOSING SHARES
TICKER COMPANY (000) WEIGHTING PRICE OUTSTANDING
HBCB Hudson City Bankcorp, Inc. (MHC) 191,499.8 12.04% $31.45 $3.79
HIB Hibernia Corporation 155,896.2 9.80% 21.40 2.10
NYB New York Community Bancorp, Inc. 138,679.2 8.72% 32.10 2.80
CNB Colonial BancGroup, Inc. 124,256.0 7.81% 14.75 1.15
SKYF Sky Financial Group Inc. 89,849.2 5.65% 23.22 1.31
FMER FirstMerit Corporation 84,488.6 5.31% 25.07 1.33
BXS BancorpSouth, Inc. 77,988.0 4.90% 22.70 1.11
ASBC Associated Banc-Corp 73,735.9 4.64% 38.81 1.80
TCB TCF Financial Corporation 71,593.9 4.50% 48.52 2.18
CBH Commerce Bancorp, Inc. 69,634.3 4.38% 48.65 2.13
MRBK Mercantile Bankshares 69,093.3 4.34% 40.10 1.74
Corporation
CBSH Commerce Bancshares, Inc. 65,849.4 4.14% 44.32 1.83
PBCT People's Bank (MHC) 61,640.0 3.88% 31.11 1.21
BOKF BOK Financial Corporation 57,032.3 3.59% 38.90 1.39
CFR Cullen/Frost Bankers, Inc. 51,464.0 3.24% 37.85 1.22
PFGI Provident Financial Group, Inc. 48,782.9 3.07% 29.25 0.90
CYN City National Corporation 48,156.8 3.03% 51.78 1.57
CFB Commercial Federal Corporation 43,940.2 2.76% 25.10 0.69
WES Westcorp 39,240.1 2.47% 35.60 0.88
DSL Downey Financial Corp. 27,928.7 1.76% 47.91 0.84
WEIGHTED INDEX SHARE PRICE $31.98